Tuesday, February 28

A common vocabulary

There's no doubt about it: people interested in innovation need a common vocabulary. At the moment there isn't one. Gatignon et al. (2002) state that after 30 years of research into innovation and business performance, key concepts and measures are often ambiguous and, consequently, there is substantial empirical confusion on the effects of different kinds of innovation on firm performance and competitive superiority.

In firms that are active internationally, this problem is particularly acute. Here are some of the terms that I think need to be defined clearly in firms wishing to improve their innovation activities:

- Innovation
- Technology
- Sustaining innovation strategy
- Disruptive innovation strategy
- Radical innovation (Is it different from a disruptive innovation? Yes)
- Incremental innovation (Is this the same as continuous/evolutionary? Yes)
- Success and its measurement (i.e. is it market performance (future); financial performance (now); or both?


This is just a start. I'm thinking of making a wee handbook with these terms in it, along with a definition. If anybody can think of more essential terms, please feel free to add to this list!










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Saturday, February 25

The central contribution of the small

Eric von Hippel, author of Democratizing Innovation, puts it this way:

" . . . to say an innovation is minor is not the same as saying it is trivial: minor innovations are cumulatively responsible for much or most technical progress."

This is why it is important to manage the numerous ideas that emerge from the chaos in business, and anybody can be a source of these ideas: Respect.

There's room for improvement everywhere, both on the value side and the efficency side. Improving the value side involves adding "something," but it can also require "removing" stuff that isn't particlarly valued. Challenge number 1: What is it that is really valued by customers? And what don't they care about? (deep customer insight)

Easier said than done of course, but at least we're thinking about it! Innovation: "The profitable implementation of ideas" or, if you don't like the p-word: "The implementation of ideas that are valued."

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Wednesday, February 22

Intended versus realized strategy

The following quote from Burgelman and Rosenbloom (1989) is one of my all-time favourites:

"The reality of strategy lies in its enactment, not in those pronouncements that appear to assert it." (p. 19)

I used to work in a company that was a great example of this: the boss (husband) would have in his mind what the company was doing, what it wasn't doing, and where it was going. This was the intended strategy. This was great, and he would take great pride in sharing this with all of his staff. The problem was, though, it was the company secretary (his wife) who was pulling all the strings and in control of what was really happening on a day-to-day basis. As you can imagine, her ideas and the boss's ideas were very different, although she kept this to herself. She was by far the quietest employee at the firm, yet she was the real strategy maker.

Her policy was: "No objections or confrontation from me, but I'll be darned if I'm going to comply, buddy boy!"



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Friday, February 17

Ballet dancers and sumo wrestlers

There is always a lot of discussion on the Net about "disruptive innovation strategies," a term first coined by Clayton Christensen, co-author of The Innovator's Solution and author of The Innovator's Dilemma.

Within this broad discussion on disruptive innovation strategies, there seems to be a lot of conflicting views as to what a disruptive innovation actually is. There is also confusion between disruptive innovation and radical innovation. Here's my attempt to contribute to the discussion:

Clayton Christensen distinguishes between disruptive innovation strategies and sustaining innovation strategies. A firm pursuing a sustaining innovation strategy along a performance (technological) trajectory can introduce an incremental ("small") or radical ("large") innovation as a means of satisfying its most demanding/high-margin customers, as dictated by its cost structure. So a sustaining innovation strategy involves both inremental and radical innovations. Looking at it this way, a disruptive innovation is not the same as a radical innovation.

In contrast to a sustaining innovation strategy, a disruptive innovation strategy involves dimensions of a product offering that encumbent firms' customers don't particularly value. Encumbent firms are therefore not interested in shifting their attention to this area. Most of the time firms' staff ignore it, even if they realize the innovation's potential. They're constrained by their firms' cost structure, reward mechanism and pressures to meet targets.

In other words, the firm will struggle to be an excellent sumo wrestler and a world-class ballet dancer at the same time.

Robert Burgelman, author of Strategy is Destiny, discusses disruptive technology (not strategy) in his discussion on Intel.





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Sunday, February 12

A tale of disruption

There is a very interesting post on the Innosight Blog. It tells the story of how the managers at Western Union failed to see the potential of the telephone.

This was the firm's managers' conclusion: "The ‘telephone’ has too many short-comings to be seriously considered as a means of communication. The device is inherently of no value to us."

The last paragraph of the Innosight post is valuable: it basically argues that you cannot "research" markets that don't exist. And the only way to really know if a product offering will succeed is to "plan to learn" using "low-risk market tests."

Dipping a toe in the water. One customer at a time. Patient for growth, impatient for profit. Find a profitable business model, quickly.

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Wednesday, February 8

Being second gettting tougher

Merle Crawford (1980) describes four types of innovation strategy in his typology:

Inventive: The firm seeks technological leadership vis-à-vis product packaging, positioning etc. It tries to be first to market with the product.

Adaptive: The firms chooses to wait and let others lead, and then to quickly adapt or modify the product. By means of “innovative imitation,” it seeks to be second but best.

Economic: The firm builds strength by producing what others have created, but by do so more economically. It tries to be the low-cost producer, particularly in the early maturity phase of the life cycle.

Innovative applications: The firm utilizes established technology, but applies it creatively to new uses.

The second one of these, Adaptive, is similar to Ansoff and Stewart's "follow-the-leader" strategy in that firms pursuing this innovation strategy generally pile into an industry when a market for a particular product is clearly present (or appears to be clearly present). Here in Taiwan, you see a lot of this. This innovation strategy must be getting more difficult, though, because product life cycles are getting shorter and shorter, reducing that window of opportunity for these firms.

Just look at the MP3 player industry for example: just the other day Apple introduced a cheaper, low-end Nano for US$149. You have to expect that Apple is subsidizing these players (the hardware) in the same way Microsoft is subsidizing its gaming machines. The real money comes from iTunes for Apple, not the players themselves.

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Thursday, February 2

The global economy: a zero-sum game?

What are people in Asia buying? French cosmetics, single-malt Scotch whisky, private education, French handbags, Aussie beef, German headphones, flights to Vienna, vacations to Rome, high-end hi-fi systems, honeymoons in Paris, iPods, a pair of Nikes, an MBA from Harvard or MIT. And those are just the obvious consumer products.

What about the less-obvious, less-glamorous business-to-business products? Windmills, surgical instruments, medical equipment, mass-rapid transport systems, Boeing jets, Rolls-Royce engines, Airbus planes, cranes, elevators, tunneling equipment, tungsten-carbide drills, the list goes on.

The following MP3 from Uncommonknowldge.org contains an interesting discussion on innovation at the national level. The title is: "Is the United States losing its competitive edge?" This was recorded in 2004, but it is still very interesting.






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Wednesday, February 1

Semi-radical innovation

Just when you thought that you knew all the different ways of describing innovation, you come across yet another term!

Yesterday I had a look at Making Innovation Work, published by Wharton School Publishing. The authors present a very useful model that describes innovation by degree on a continuum (going from incremental, semi-radical to radical) and type (Business Model and Technolgy). Businesss Model includes "Value Proposition, Value Chain, Target Customer" and Technology includes "Product and Service, Process Technology, and Enabling Technology."

The book identifies two types of "semi-radical" innovation: 1. large change in business model/small change in technology 2. small change in business model/large change in technology.

This model basically shows that innovation can occur on the product side or the process side, but it goes well beyond that (as it should) by breaking these down further. It is a very useful tool for anybody wishing to see how much innovation is occuring in your firm and where it's happening. The model also manages to clarify without oversimplifying. (Describing innovation as product or process innovation doesn't make much sense in a world increasingly dominated by services).

This book is well worth checking out!

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