Innovation Management in the Global Economy Introduction Henrik

Innovation Management in the Global Economy Introduction Henrik Dellestrand henrik. dellestrand@fek. uu. se

A bit about me… Henrik Dellestrand henrik. dellestrand@fek. uu. se A bit about you…

Agenda for today 1. Practical introduction to the course • Course structure • Rules of the game • Materials 2. Theoretical introduction to the course

Structure of the course 1. Lectures 2. Mini cases 3. Full session cases 4. Arena day I will try to keep sessions 3*45 minutes. Office hours -30/+30 minutes relative to each session.

The lectures During lectures, I will give a walk through of the chapter related to theme of the day as indicated in the course syllabus. I will not cover everything in the chapter. Please read the chapter beforehand. Also, associated with each chapter is a mini case that will be discussed during the session. It is very important that you read the case before class! Course book: Schilling, M. A. Strategic Management of Technological Innovation.

The case seminars During the course there will be 2 in-class case discussions. Everyone should hand in a case analysis (approx 500 words) at the beginning of each case seminar. Everyone have to read and prepare for the case discussion individually at home. The case discussion sessions will be evaluated on the basis of active participation and contribution to the discussion. Cases: (a) Apple case (b) Electrolux case

Grading Exam: 30% (a mix of different forms of questions) Quiz 1: 20% (multiple choice) Quiz 2: 20% (multiple choice) Case analysis 1: 10% Case analysis 2: 10% Participation: 10%

Learning outcomes 1) understand the concept of innovation 2) learn how to enhance and manage organization’s creativity, innovation-based competitiveness and superior performance in the global economy 3) know and understand the fundamentals of the innovation process 4) be aware of the various institutions that may influence the innovation process 5) learn how to manage the creation, protection, commercialization and capture of value from intellectual property rights (IPRs) and innovations 6) gain insight and competency how to lead and design innovation initiatives at international companies.

Introduction to Innovation Management

Innovation and performance What is innovation? “Companies achieve competitive advantage through acts of innovation. They approach innovation in its broadest sense, including both new technologies & new ways of doings things” - Michael Porter (emphasis added)

Innovation has to be actively managed: “Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or service. It is capable of being presented as a discipline, capable of being learned, capable of being practiced” - Peter Drucker (emphasis added)

Some ‘stylised facts’ about the relationships between innovation and performance: Relationships between R&D, patents, new products and performance are strongest at the industry level, weakest at the firm level Returns from process innovation are typically four times those from product innovation R&D expenditure stronger than patents in predicting performance At firm level, R&D and new products both associated with higher value-added and market to book values Returns from use of new technology higher than from its generation Highest variability in performance is at firm level Senior management typically accounts for 15 -50% of

Innovation has an inherent variability, but rate of success can be improved through better & different management: 85% of new ideas never reach a market 60% of R&D projects are market failures 40% of consumer products & services fail 20% of business products & services fail

Models and modes of innovation Dimensions of ‘innovation space’: product – changes in the things (products/services) which an organization offers, process – changes in the ways in which they are created and delivered position – changes in the context in which the products/services are introduced paradigm – changes in the underlying mental & business models which frame what the organization does

Creating and capturing value “lack of technological knowledge is rarely the cause of innovation failures…the main problems arise in organization and, more specifically, in coordination and control… four mechanisms identified by earlier analysts of the innovating firms: competition, cognition, co-ordination and control” - Keith Pavitt

Creating and Capturing Value Managers with ‘mature perceptions’ believe that: Managers with ‘dynamic perceptions’ believe that: the industry is stable with slow demand growth & incremental changes in technology there is potential for change, new ways of operating, & new strategies profitability is achieved by process improvement and product differentiation value is created through innovation in positions and paradigms 16

Creating and Capturing Value ‘mature’ managers view: ‘dynamic’ managers view: profitability is determined by industry, & is limited in mature industries profitability is determined by the firm. Mature industries offer many opportunities. market share is critical Market share is reward for creating value dominance demands extensive resources effectiveness, not extent of resources counts 17

Choice of strategy (& luck) are more important than industry: choice of industry 8. 35% choice of strategy 46. 4% parent company unexplained (e. g. luck)44. 5% 0. 8%

Advantages of innovation in position or paradigm: Reputation as a pioneer Early learning curve benefits Establish barriers to entry e. g. Design, patents, standards Dominate new supply & distribution networks Earn 'monopoly' profits But, beware regulatory & demand uncertainty, e. g. burden of educating users

Conclusions and implications from observation and research: Relationships between R&D, patents, new products and performance are strongest at the industry & sector level, but weakest at the firm level – but, management & strategy can make a difference Too much emphasis on technological innovation, process improvement & product differentiation produces low returns

Greater focus on a wider range of innovation e. g. positional and paradigm innovation has potential to improve returns from innovation This suggests active search for external technology ‘spill-overs’ (inputs) and exploitation of commercial ‘complementary assets’ (outputs) (Re) combination & integration of different types of innovation important – role of international alliances & corporate venturing to help identify, create & exploit new businesses and services

Mini-innovation exercises One way of looking at innovation is by being customer oriented. What does being customer oriented mean? How does this influence the innovation process of exploitation and exploration?

Served Market Definition “The market in which a business competes for target customers” It includes both the business’s and its competitors’ customers. Consider defining the market based on the served need. 23

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Defining for Innovation Narrow definition: “Articulated (expressed) needs of customers” Broad definition: ”Articulated (expressed) and unarticulated (unexpressed) needs of customers” Unarticulated represent unserved opportunities. Unarticulated are often observable from behavior. 25

Value Proposition For French families, Volvo is the family automobile that offers maximum safety Generic format for positioning statements: For (target market), (brand) is the (product category) that (benefit offered). 26

Innovation Assignment 1. What is the served need? 2. What is the value proposition? 3. What is the market definition? 4. What sort of innovation is it? 5. What will be most important with its adoption. 27

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