WEEK 1
Gilsing – Lecture 1.1
Companies tend to outgrow the people alive, however, being a bigger company does not
guarantee your survival.
Higher survival chances because of innovation, therefore resources are necessary to fund in
research and development. Also, you have a buffer to survive longer if you follow a negative
path. On the other side, a negative effect of higher survival chances is that there is less
incentive to change things.
Money does not create successful innovations.
Firm survival rates, a Darwinian view
It’s not about
- Being big
- Being strong
- Being smart
‘’It is not the strongest of the species that survive, nor the most intelligent, but the one most
responsive to change’’ (Charles Darwin).
Adaptational renewal is the key. Companies are not designed to do this; they are in a
constant pattern, so they drive out adaptational renewal.
Conditions strategic entrepreneurship and
organizational renewal:
- Strategy and Leadership
- Structure and Systems
- Culture and People
These conditions have a direct impact on the
execution of innovation projects.
Different kinds of innovations
- Product innovations
o In goods
o In services
- Process innovations
o Technological
o Organizational
In services + technological = digitalization ➔ new
business models
,Product life cycle / S-Curve
Different phases
1) Fluid phase
- Beginning new industry, lot of uncertainty
o (e.g., meat substitutes, generative AI)
▪ ChatGPT first, then Bard (Google) and
Apple AI
Strong emphasis on:
- Frequent redefinitions of tasks
- Limited hierarchy
- High lateral communication
→ Organic structure
Brings you adaptability (high environmental uncertainty)
2) Transitional phase
3) Specific phase
Strong emphasis on:
- Stable tasks
, - More hierarchy: coordination and control
- Top-down communication
→ Mechanistic structure
Brings you predictability (low environmental uncertainty)
From fluid to specific phase
Change in:
➢ Structure: from informal to formal
➢ Organizational behavior: from flexible and responsive to rigid and predictable
➢ Power: from entrepreneurs to managers
➢ Orientation: from external to internal
Innovation discontinuities
Moving from VHS to DVD to is competence
enhancing
→ Once a company is strong in the old innovation; we
want to be strong in the next generation
innovation.
Moving from DVD to video-on-demand is
competence destroying
→ New entrants benefit, telecom provides win from
cable companies and broadcasting companies.
Competence enhancing
- Large improvements in price/performance
- Builds on existing knowledge
- New products or new processes
→ Rich get richer: established players benefit
Competence destroying
, - Large improvements in price/performance
- Existing knowledge becomes obsolete
- Entirely different knowledge and competencies
→ Rich get poorer: new entrants benefit
How can firms respond?
IMPROVEMENT VERSUS RENEWAL
Improvement / incremental (left) Renewal / radical (right)
Evolutionary; incremental Revolutionary: ‘jumps’
‘Leitmotiv’ : we can always improve (more ‘Leitmotiv ; crisis – we have to change (first
of the same; 1st order solutions) change, then improve; 2nd order)
Preventive; correctable Destructive: no way back
Focus: management of operations Focus: management of opportunities
(efficiency)
Dominant role of planning and control Focus on creativity and entrepreneurship
E.g.: (traditional) new product development E.g.: biotechnology, internet, cars, airplanes,
improved smartphone, faster computer, etc. steam engine, mobile phones, etc.
= Operational excellence → Digitalization = Big Data, IoT, AI, Robots, Nanotech, VR →
(both in services and technological) 4th Industrial Revolution
Brings you money on short term Costs you money on short term
NO guarantee for long term ESSENTIAL for continuity on long term
Both are important for different reasons, you need left to survive on the short term: no
guarantee to survive, you need right as this is the only way to finish first long term.
Examples change of industry
- Agricultural machinery
- City cleaning
- Milking cows
Amazon disrupting itself:
→ Find ‘sweet spot of optionality’
There is very low success despite many R&D and government spending. Why is it so difficult?
