Innovation Strategy Management Lecture 5

Programme Part 1 – The basis of Innovation Part 1 – The basis of Innovation Part 2 – Innovation and New Product Development Part 2 – Innovation and New Product Development Part 3 – Innovation and Technology development Part 3 – Innovation and Technology development Part 4 – Innovation and Intellectual Property Part 4 – Innovation and Intellectual Property Part 5 – EU Green paper of Innovation Part 5 – EU Green paper of Innovation Part 6 – Innovation policies in different countries Part 6 – Innovation policies in different countries

Part 1 The Basis of innovation

Lecture 5: Business strategy and organizational knowledge I Strategic innovation Strategic innovation The strategic planning process The strategic planning process Uncovering innovative capability Uncovering innovative capability The knowledge base of an organization The knowledge base of an organization

Business strategy is concerned with an organizations basic direction for the future! Business strategy is concerned with an organizations basic direction for the future!

Strategic innovation How strategy affects the management of innovation? How strategy affects the management of innovation? Example: Example: The battle of TrafalgarThe battle of Trafalgar 1805 – Technological development1805 – Technological development Nelson French + Spanish fleetsNelson French + Spanish fleets Hammer – action ignition system for cannonsHammer – action ignition system for cannons Shooting was 2 – 3 times fasterShooting was 2 – 3 times faster

An overview of the strategic management literature: The beginning of 20 th century The beginning of 20 th century Scientific managementScientific management technology – pushtechnology – push The middle of the century The middle of the century Market knowledgeMarket knowledge Customers requirementsCustomers requirements market – pullmarket – pull

The end of the century The end of the century Adaptation of changing environmentAdaptation of changing environment Learning from experienceLearning from experience Market considerations interact with the organizations science and technology baseMarket considerations interact with the organizations science and technology base interactive model of innovationinteractive model of innovation

The strategic planning process 1 The organizations and senior management; s long-term aspirations which will clearly have a significant impact on the eventual strategy 2 The organizations capabilities and heritage, that is, the skills acquired and developed over its history. In addition, this will include analysis of the organizations resources in terms of finance, people etc. 3 The operating environment in which the organization competes. The analysis here will need to take account of technological developments, strategies of competitors, changing market conditions etc.

The key elements in the process of formulating business strategy

Innovative capability Experience curves Experience curves Growth – share matrices Growth – share matrices Industry structures Industry structures Game theory Game theory

The dynamic competence – based theory of the firm The dynamic competence – based theory of the firm the external + internal the external + internal environments dynamic A companys ability to compete in the future is dependent on its past activities A companys ability to compete in the future is dependent on its past activities absorptive capacity absorptive capacity Prior knowledge driven by prior R&D investment Prior knowledge driven by prior R&D investment receptivity receptivity external linkages external linkages competitive capability competitive capability

Tacit knowledge

The knowledge base of an organization Success over many years Success over many years Organizational learning Organizational learning

What is an organizational knowledge? An organization have knowledge itself An organization have knowledge itself The whole can be more than the sum of the parts The whole can be more than the sum of the parts

How the whole can be viewed as more than the sum of the parts

Organizational heritage Technical knowledge + Technical knowledge + + commercial knowledge + more = = organizational knowledge

People (individuals) can leave organizations routines will stay People (individuals) can leave organizations routines will stay The performance of the organization is greater than the ability of individuals The performance of the organization is greater than the ability of individuals

Knowledge embedded in relationships

Characterizing the knowledge base of an organization These capabilities will be defined and constrained by the skills, experience, and knowledge of the personnel in the R&D department, the nature of the extant teams and procedures for forming new ones, the character of the decision making process, the links between R&D and production and marketing, etc. These capabilities will be defined and constrained by the skills, experience, and knowledge of the personnel in the R&D department, the nature of the extant teams and procedures for forming new ones, the character of the decision making process, the links between R&D and production and marketing, etc. (Nelson, 1991)

Organizations knowledge base is made up of several dimensions: Individual assets Individual assets Technological assets Technological assets Administration assets Administration assets External assets External assets Projects Projects

Projects Individual assets Administration assets Technology assets Organization External assets External environment The knowledge base of an organization