Week 1: Introduction to Strategic Management
Zollo, M., Minoja, M., & Coda, V. (2018) Toward an Integrated Theory of Strategy.
Pisano, G. (2015) You Need an Innovation Strategy.
Brief: This is a descriptive article on the need of an innovation strategy to attain SCA, this is a
theory-based article. It states an innovation strategy as the way to make sound trade-off decisions and
choose the best practices.
1. Introduction
o Innovations fail and don’t sustain a SCA, since they fail to execute due to lacking a
strategy.
o A strategy is nothing more than a commitment to a set of coherent, mutually reinforcing
policies or behaviors aimed at achieving a specific competitive goal. A strategy aligns
goals, objectives, priorities and focus efforts.
o Without strategy best practices become grab bag.
o The problem is that an organization’s capacity for innovation stems from an innovation
system: a coherent set of interdependent processes and structures that dictates how the
company searches for novel problems and solutions, synthesizes ideas into a business
concept and product designs, and selects which projects get funded.
o Individual changes involves trade-offs, requiring complementary changes. Strategy allows
for trade-off decisions and they vary with company. An explicit innovation strategy helps
you design a system to match your specific competitive needs.
o Without a strategy there’s conflicting needs. Diverse perspectives are critical to
successful innovation. But without a strategy to integrate and align those perspectives
around common priorities, the power of diversity is blunted or, worse, becomes
self-defeating.
o Both business and innovation strategy can drive long-term leadership.
o Corning shows the importance of a clearly articulated innovation strategy— one that’s
closely linked to a company’s business strategy and core value proposition. Without such
a strategy, most initiatives aimed at boosting a firm’s capacity to innovate are doomed to
fail.
,2. Connecting Innovation to Strategy
o Broad strategic repositioning. New business strategy requires new innovation strategy with
shift of technological capabilities.
o The process of developing an innovation strategy should start with a clear understanding
and articulation of specific objectives related to helping the company achieve a sustainable
competitive advantage. Requires going beyond common generalities.
They provide no sense of the types of innovation that might matter (and those that won’t).
Rather, a robust innovation strategy should an- swer the following questions:
1. How does a company create value for potential customers?
o To induce potential consumers, company can create value in many ways. Choosing
what kind of value your innovation will create and then sticking to that is critical,
because the capabilities required for each are quite diferent and take time to
accumulate.
2. How does a company capture a share of value from the innovations it generates?
o Value-creating innovations attract imitators as quickly as they at- tract customers.
Rarely is intellectual property alone suficient to block these rivals.
o If imitators appear in market then can reduce value of original. Firm’s are required to
deliver an innovation are dominant enough, they may have sufficient bargaining
power to capture most of the value from an innovation.
o Companies must think through what complementary assets, capabilities, products, or
services could prevent customers from defecting to rivals and keep their own position
in the ecosystem strong. A strategy helps control system and defend company against
innovator’s. Example a customer-partnerning strategy helps since the customer will
incur switching costs if it defects to another supplier.
o One of the best ways to preserve bargaining power in an ecosystem and blunt
imitators is to continue to invest in innovation.
o Another way is if business invests in early in the product life cycle, and in
sophisticated process technologies, which allow it to defend against rivals
3. What type of innovations allow the company to both create and capture values, and
what resources should each type receive?
o Certainly, technological innovation is a huge creator of economic value and a driver
of competitive ad- vantage.
o Creating business model innovation, allows for the choice on how much of their
efforts to focus on technological innovation and how much to invest in business
model innovation.
o The landscape map allows to see innovation along two dimensions: the degree to
which it involves a change in technology and the degree to which it involves a change
in business model.
, a) Disruptive innovation: requires a new business model but not necessarily a technological
breakthrough. For that reason, it also challenges, or disrupts, the business models of other
companies.
b) Routine Innovation: builds on a company’s existing technological competences and its with
its existing business model—and hence its customer base.
c) Radical innovation: is the polar opposite of disrup- tive innovation. The challenge here is
purely technological.
d) Architectural innovation: combines technological and business model disruptions. As one
might imagine, architectural innovations are the most challenging for incumbents to pursue.
A company’s innovation strategy should specify how the different types of innovation fit into the
business strategy and the resources that should be allocated to each. Radical, disruptive and
architectural are key to growth, however, routine allows for majority of profit creation. The point here
is not that companies should focus solely on routine innovation.
The diferent kinds of innovation can become complements, rather than substitutes, over time.
“What proportion of resources should be directed to each type of innovation?”
As with any strategic question, the answer will be company specific and contingent on factors such as
the rate of technological change, the magnitude of the technological opportunity, the intensity of
competition, the rate of growth in core markets, the degree to which customer needs are being met,
and the company’s strengths. Question of balance and mix.
3. Overcoming the prevailing winds
o Play to firm’s strengths to drive innovation to success.
o The root of the problem was that business units and functions had continued to make resource
al- location decisions, and each favored the projects it saw as the most pressing.
o Need to create explicit targets for different types of innovations and develop new offerings
that support long-term strategy.
o Innovation strategy matters most when an organization needs to change its prevailing
patterns: no need to focus only on routine or radical, need to balance incremental refinements
with radical changes. That, and invest in the requisite capabilities and resources, to produce
right.
, 4. Managing Trade-Off's
An explicit innovation strategy helps you understand which practices might be a good it for
your organization. It also helps you navigate the inherent trade-offs.
a) Crowdsourcing: rather than relying on few experts you open the process, to increase
novel solutions. Althought, it brings on advantages, it works best for some kind of
problems than others. Works best for highly modular systems. It is a tool whose. strenght
depends on context.
b) Customer involvement: “co-creation” to lead to novel offers or blindess of disruptive
innovation, since users don’t always express what they want. Need for calculus of
strategy: demand-pull approach vs supply-pull approach, both have pro’s and con’s. The
choice between a demand-pull and a supply-push approach involves weighing the trade-
offs.
c) Innovation processes: phase-gate to manage innovation processes in discipline but
others say it destroys creativity.
Clarity around which trade-offs are best for the company as a whole—something an innovation
strategy provides—is extremely helpful in overcoming the barriers to the kind of organizational
change innovation often requires. People don’t resist change because they have diferent
perspectives—including on how to weigh the trade-ofs in innovation practices.
Clarity around trade-offs and priorities is a critical first step in mobilizing the organization around an
innovation initiative.
5. The leadership challenge Creating a capacity to innovate starts with strategy.
o Whose job is it to set this strategy? The answer is simple: the most senior leaders of the
organization, they must orchestrate complex system.
o They must take prime responsibility for the processes, structures, talent, and behaviors that
shape how an organization searches for innovation opportunities, synthesizes ideas into
concepts and product designs, and selects what to do.
Four essential tasks in creating and implementing an innovation strategy:
1. “How are we expecting innovation to create value for customers and for our company?”
and then explain that to the organization.
2. Create a high-level plan for allocating resources to the diferent kinds of innovation.
Ultimately, where you spend your money, time, and effort is your strategy,
3. Manage trade-offs, since manager will be biases to follow own interests.
4. Challenge senior leadership: recognizing that innovation strategies must evolve. As
product designs must evolve to stay competitive, so too must innovation strategies. Like
the process of innovation itself, an innovation strategy involves continual
experimentation, learning, and adaptation.
