Corporate

Strategy
Dr Jonathan Lean
Associate Professor of Strategic Management
Dr Jonathan Moizer
Associate Professor of Business Operations &
Strategy

Session 7:
Innovation Strategy
Session Objectives & Activities
Part 1: innovation, technology & strategy
 innovation, types and sources
 technological innovation strategy
 the context for technological innovation
 strategic choices
Part 2: workshop activity
Part 1: Innovation, technology &
strategy
 Nature & importance of
innovation
“innovation is ...the means by which the
entrepreneur either creates new wealth-
producing resources or endows existing
resources with enhanced potential for
creating wealth”
Peter Drucker,
1985
important as can deliver:
– potential for product development & business growth
– competitive advantage
– ability to quickly leapfrog the competition
 Types of Innovation
• invention
– totally new, base technology - eg Edison’s
lightbulb
• extension
– new use of existing technology or concept -
eg CDs
• duplication
– same thing, different flavour - eg theme park
• synthesis
– combining existing concepts for new
formulation - eg Sainsbury’s Bank; multi-
functional PCs & mobiles Kuratko & Hodgetts (2004)
“Invention is the creation of a new idea,
but innovation is more encompassing &
includes the process of developing &
implementing the new idea”
(Venuvinod, 2011).
 Examples: Sinclair C5 & 3M Post Its
Sinclair C5 3M’s Post It Notes

• Brainchild of British inventor • Invented by 3M’s Spence

& scientist Sir Clive Sinclair Silver and Art Fry
• C5 electric car • Silver invented glue that didn’t
• engine manufactured by glue, e.g. sticky notice board
Hotpoint • No immediate application
• max speed 15mph • Art Fry’s book marks
• pedal up hill • Bisociation / synthesis: the
• open top & no boot connection of two unrelated
• ceased production after only a ideas
few years, a few thousand sold • One of the company’s most
• Was the C5 an innovation? successful and imitated
products
• See • Was the Post It an innovation?
https://www.youtube.com/watc
h?v=0EQetm_qWDg

Read more about this in Henry, J. & Walker, D, 1991 Chs 19&27
 Sources of Innovation
Two broad categories:
• market-pull
– identification of new market opportunities or neglected
market segments
– focus on market needs & developing products to meet
them
• technology-push
– new technology developed to address narrow need -
but wider commercial applications not initially
recognised
– innovative companies therefore need to scan for
developing technologies, not just market need, &
assess relevance to own industry
 An Interactive Model of Innovation
The linear models of technology push & market pull can be
linked to show the complex and integrated nature of innovation
occurring as a result of marketplace interaction, science base &
organizational capabilities

Advances in science & technology

Technology push

Idea R&D Manufacturing Marketing Product

Market pull

Needs in society & the market place

Adapted from Trott, 2017
As an innovator, you need to be aware of both market needs and new emerging technologies…

a new technology that does not address a

market need will not have potential for
wealth creation
therefore not truly innovative according to
Drucker’s definition

But, being first to address a market need

does not necessarily ensure success
WHY?

‘s’ shaped pattern of diffusion/adoption...

 • biggest profits made in
rising part of ‘S’ curve
• to be a ‘fast second’
Cumulative adopters

Laggards (16%) may therefore be best

– growing market
– original innovator not yet
Late majority (34%) dominant
– lower R & D effort: 2/3
the time & cost of
Early majority (34%) originator
• but still have to decide
Early adopters (13.5%)
which innovation to
Innovators (2.5%) ‘copy’
– & be flexible enough to
time move fast

Are there any advantages to being a ‘first-mover’?

Specific sources of innovation
Drucker, P. (1985)
• the unexpected - eg IBM mainframes
• incongruities - eg overnight delivery
– discrepancy between ‘what is’ & ‘what ought to be’
• process need - eg sugar free products
– process link leading to better product
• industry & market changes - eg mkt decline
• demographics - eg baby boomers
• changes in perception - eg health foods
• new knowledge - eg robotics
– technology driven
 Innovation Strategy:
Different Perspectives
• innovation as a discipline: Fred Gluck
– a purposeful, analytical process: planned / prescriptive
– big firms should focus on major environmental changes
then apply resources / functional skills to develop ‘big
bang’ innovations

• innovation as emergent process: James Quinn

– ‘controlled chaos’ - free, random generation of ideas
– should aim to act like entrepreneurial small firms
 Context for Technological Innovation
• shorter product life-cycles
• Computer Software: 4-12 months
• Computer Hardware: 12-24 months
• Large home appliances: 18-36 months
• the ‘technology cycle’ (Anderson & Tushman, 1990)

Era of ferment:
design competition; substitution

Technological Dominant Design

Discontinuity Selection

Era of incremental change:

elaboration of dominant design
• ‘disruptive technologies’
– addressing same market need but using
completely new knowledge base
– e.g. digital rather than chemical photography, jet
rather than propeller engines
• products often easily replicated through ‘reverse
engineering’
• need more than technical competences to
succeed: brand name, sales, support, finance etc
are all important
– ‘complementary assets’
– e.g. failure of EMI CAT Scanner
 Strategic options for technological
innovation
Afuah, A.(2014) ‘Business Model Innovation’
‘Block’
– threaten low prices if new entrants move in, thereby
eroding potential for profit
– product stretching e.g. fluidized bed technologies
– try to prevent copying of competences: protect intellectual
property
– PROBLEM
• reverse-engineering makes protection of IP difficult
• radical improvements in technology render block strategies
obsolete over time - competition will eventually catch up
• e.g. IBM PC;
• Blockbuster drugs e.g. Roche – Tamiflu, GSK - Advair
‘Run’
– build new competencies & introduce new products
rapidly, well ahead of competition
– buy in new competencies through aggressive recruitment
policies - head-hunting
– should not be afraid to make own products obsolete
before competitors do
– allows you to control your own environment to some
extent
– strategy as a war of movement, not position
• thus focus on competence building and creating a flexible
organisational architecture
– e.g. Apple – iProducts
– e.g. Intel - pentium processors
‘Team-up’
– share technology
Why?
– establish your technology as the standard
• JVC development of VHS
– get access to complementary assets
• IBM & Microsoft
• Small biotech firms & large pharmaceuticals
– get access to more markets
• Apple & Twitter
• Pixar & Disney
KEY ISSUE: selecting the right team-mates
• do they have complementary assets & an innovative
track-record?
• options are not mutually exclusive e.g. Apple & iTunes facility
• flexibility in approach is required - the ‘ambidextrous
organisation’ (Tushman & O’Reilly, 1996)
– able to manage incremental and radical innovation simultaneously
– focus on efficiency in existing core products, allow inefficiency in new
innovations
– implications:
– need strategic vision across multiple time frames
– dual organisational architecture allowing creativity, experimentation,
improvisation & possible failure on one hand and efficiency &
reliability on the other
The development of ambidextrous organisations
highlights a fundamental tension in innovation
strategy …
The efficient The
day-to-day development of
operation of new products &
Efficiency

Creativity
the services
organization requires
requires creativity
stable which is usually
routines and achieved in a
controlled loose & flexible
environments environment
Part 2: Activity
Case Study Analysis: Apple &
Microsoft
• Youtube video: Jobs vs Gates
• https://www.youtube.com/watch?v=5f6z96
HWerE

• When watching the video, take notes on

the key issues. Afterwards, discuss the
questions below in small groups and take
notes for revision purposes.
 Case Questions
1. What was the nature of Microsoft’s competitive
advantage? How did it differ to that of Apple?
2. Consider the strategic importance of innovation within
the case industry. What types of innovation are most
typically seen within this industry?
3. What strategies (block, run, team-up) were used by
Microsoft & Apple during the period shown in the
video?
4. What evidence is there of run, block and team-up
strategies in today’s high-tech industries?
 References
• Drucker, P. (1985). Innovation and Entrepreneurship:
Practice and Principles. New York: Harper & Row.
• Kuratko, D. F., & Hodgetts, R. M. (2004). Entrepreneurship:
Theory, Process, Practice Mason, Ohio: Thomson South
Western.
• Venuvinod, P. K. (2011). Technology, Innovation and
Entrepreneurship, Part I: My World, My Nation (Vol. 1).
Lulu.com.
• Henry, J., & Walker, D. (1991). Managing Innovation.
London: Sage.
• Trott, P. (2017). Innovation Management and New Product
Development. London: Pearson Education.
• Afuah, A.(2014). Business Model Innovation: Concepts,
Analysis, and Cases, New York: Routledge.
• Tushman, M. L., & O'Reilly III, C. A. (1996). Ambidextrous
Organizations: Managing Evolutionary and Revolutionary
Change. California Management Review, 38(4), 8-29.
 Further Study
1. Reading: Lynch, Chapter 7, Whittington Ch.10
Sections 3.3-3.5, Afuah, A. (1999). Strategies to
turn adversity into profits. MIT Sloan
Management Review, 40(2), 99, + BBC (2021),
Apple buys a company every three to four
weeks,
https://www.bbc.co.uk/news/business-56178792
(e.g. of buying companies as a way around
block strategy and patents & considered a form
of team up).
2. Assess which techniques could be useful for
your strategic analysis poster