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Including the Innovation Management, Project Management, and New Business Models & Design Thinking

Study Program: M.Sc. International Management
Module: Innovation Competence
Topic for term paper for the module
Innovation Competence
Winter semester 2020 / 2021
First Examination Date
This assignment for the module “Innovation Competence” is a written homework covering the three
courses innovation management, project management and new business models & design thinking. When
answering the questions, please use and refer to models and frameworks discussed in the lecture. You
will also be required to do your own desk research beyond the information provided to you in the attached
case study.
The term paper should encompass about 7,000 words (+/-10%) and needs to be written in English. The
individual parts of the assignment pertaining to the individual lectures are equally weighted and hence
the overall grade will be an average of the individual results. If you have questions regarding the
assignment please contact the individual lecturer directly.
Please upload your paper to the ISM intranet as a Word and pdf upload no later than 26.03.2021. Please
refer to the ISM guidelines for writing term papers. The term paper is and individual examination.
Conspicuous similarities with term papers of other students and plagiarism will be evaluated with 0 points.
When answering the questions of the individual parts please refer to
ï‚·
ï‚·
the case study on Walt Disney
your own proprietary desk research beyond the information provided in this case study
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Questions for the course Innovation Management:
1. Please explain, how Disney has been using different approaches to be/remain
innovative over the years using models and approaches from the lecture. Please use
approximately two thirds of the allocated word count for this section on this question
(~ 1,600 words, +/- 10%)
2. Please describe, how corporate culture and organization as well as the cultural
aspects and consequences of the approaches described in your first question can
foster innovation at Disney. Please use approximately one third of the allocated word
count for this section for this question (~ 800 words, +/- 10%).
Questions for the course Project Management:
You are an employee of Disney’s strategic management department. Your management
realizes that cooperation, alliances, joint ventures and merger & acquisitions are the new
norm. It is not clear for Disney when, how, why and were the next partnership will be
established. Therefore management asked you to provide a full and detailed project plan for
a merger & acquisition situation between Disney and a fictions company which can be used
as a template for future, real project.
1. Define a project background and rationale
2. Define potential project options for targets to be taken over (you might use a
brainstorming or a mind map)
3. Determine at least two SMART objectives of the project (and target) you propose
4. Evaluate the use of agile methods for the scope development of a project. How do
you set up the agile team?
5. Define an aims break down and define which aims you will deliver with your project
6. Develop a Work Breakdown Structure (WBS) – including at least four branches and at
least four levels (including the root level)
7. Develop a detailed project charter including all related elements
8. Establish a project activity network (AON method)
9. Establish a Gantt chart displaying at least 4 milestone entries (in addition to kick-off
meeting and final presentation) and the project activities.
10. Generate an appropriate project organization
11. Develop the risk management instruments (risk assessment matrix, risk portfolio, and
potential actions)
12. Identify potential stakeholders, develop the stakeholder matrix, and a stakeholder
management strategy
NOTE: Objectives, Work Breakdown Structure, Gantt chart, Project Organization, and all
other documents need to be consistent and must not contradict each other. You are free to
extend your product documentation by additional documents or descriptions. Make sure
that for any figure you use, there is an appropriate reference. All PM documents can be
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inserted as figure and the additional text must provide the background and additional
explanation.
Questions for the course New Business Models & Design Thinking:
1. Please describe the busines model of Disney and indicate how it has adapted due to
the rise of streaming services in the last years using models and approaches from the
lecture. Please use approximately two thirds of the allocated word count for this
section on this question (~ 1,600 words, +/- 10%)
2. Please construct a persona for a typical user of Disney’s streaming services. Please
use approximately one third of the allocated word count for this section for this
question (~ 800 words, +/- 10%) and also use graphical illustrations
Case Study Walt Disney
The history – Animated early days
Walt Disney arrived in California in 1923 with a cartoon he made in Kansas City about a little girl in a
cartoon world, called Alice’s Wonderland. Soon after arriving in California, he was successful in using
this pilot film to sell a series of these “Alice Comedies” to a distributor. A distributor in New York, M. J.
Winkler, contracted to distribute the Alice Comedies on October 16th, 1923, and this date became the
start of the Disney company. Originally known as the Disney Brothers Cartoon Studio, with Walt Disney
and his brother, Roy, as equal partners, the company soon changed its name, at Roy’s suggestion, to
the Walt Disney Studio.
In 1926, Walt Disney designed the Mickey Mouse. When Disney offered MGM studios the opportunity
to distribute Mickey Mouse films in 1927, he was told though that the idea would not work because a
giant mouse on the screen would terrify women and children. As the first two cartoons were silent
films, and sound was revolutionizing the movie industry, Disney was unable to sell the cartoons at first.
The third – fully synchronized – Mickey Mouse cartoon named Steamboat Willie opened in New York
November 18th, 1928 very successfully. The new character was immediately popular, and a lengthy
series of Mickey Mouse cartoons followed. While the cartoons were gaining popularity in movie
houses, the Disney staff found that merchandising the characters was an additional source of revenue.
A man in New York offered Walt $300 for the license to put Mickey Mouse on some pencil tablets he
was manufacturing which was the start of Disney merchandising and in 1930 the first Mickey Mouse
book and newspaper comic strip were published.
In 1934, Walt announced his plans to make a full-length animated feature film using the story of Snow
White and the Seven Dwarfs. There were some skeptics in the group, and the film took more than
three years but as it debuted on December 21st, 1937 it became a spectacular hit, earning over $8
million on its initial release and winning eight Academy Awards. More animated feature films were
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made and release but with the advent of WWII the movies became two expansive in their production
given the drastically reduces demand. Disney became successful again in 1950 with the life-action
movie Treasure Island, the classical animated features Cinderella, and the first Disney television show
at Christmas time. This success continued throughout the 50’s and 60’s with a number of animated
classics as well as comedies and series and in 1996 with the start of the educational subsidiary
producing educational films.
On July 17th, 1955 Disneyland opened as the first Disney theme park after several years of planning
and building followed by Disney World on October 1st, 1971 and the EPCOT Center, on October 1st,
1982. Tokyo Disneyland opened on April 15th, 1983 and was an immediate success.
The history – Diversification in the 80’s and 90’s
Moviemaking was changing in America in the early 1980s with audiences diminishing for the traditional
family films that had been the core for Disney in the past and the company had difficulties meeting the
competition for films that attracted the huge teenage and adult market. To reverse that trend, Disney
established a new label, Touchstone Pictures, and Michael Eisner and Frank Wells became chairman
and president, respectively. The new management team immediately saw ways for Disney to maximize
its assets. The Company had left network television in 1983 to prepare for the launch of a cable
network, The Disney Channel. While the pay-TV service was successful, Eisner and Wells felt Disney
should have a strong network presence as well, so in 1985 Disney’s Touchstone division began the
immensely successful Golden Girls, followed in 1986 by a return to Sunday night television with the
Disney Sunday Movie. Films from the Disney library were selected for the syndication market, and
some of the classic animated films were released on video cassette. Using the sell-through technique,
Disney classics soon reached the top of the all-time best-seller lists.
The late 1980s brought new innovations to the Parks with new attractions and rides due to the new
collaborations with filmmakers George Lucas and Francis Coppola and a number of resort openings
between 1988 and 1991 as well as gated attractions such as the Disney-MGM Studios Theme Park,
Pleasure Island, and Typhoon Lagoon. Filmmaking hit new heights in 1988 with Disney reaching
revenues of more than USD 100 million per movie. Disney moved into new areas by starting Hollywood
Pictures and acquiring the Wrather Corp. (owner of the Disneyland Hotel) and television station KHJ
(Los Angeles), which was renamed KCAL. In merchandising, Disney purchased Childcraft and opened
numerous highly successful and profitable Disney Stores. By 1996, there were more than 450 Disney
Stores worldwide, and by 1999 that number was up to 725.
Disney animation began reaching even greater audiences in the early 90’s and Hollywood Records was
formed to offer a wide selection of recordings ranging from rap to movie soundtracks. New television
shows expanded Disney’s television base and in 1991 Disney moved into publishing, forming Hyperion
Books, Hyperion Books for Children, and Disney Press, which released books on Disney and non-Disney
subjects. Disney purchased Discover magazine, the leading consumer science monthly. As a totally new
venture, Disney was awarded in 1993 the franchise for a National Hockey League team, the Mighty
Ducks of Anaheim. In 1996 Disney acquired the California Angels baseball team but sold it again in
2003.
Disneyland Paris opened on April 12th, 1992 and in 1998 the Disney Magic, the first of two luxury cruise
ships, made its maiden voyage to the Caribbean, stopping at Disney’s own island paradise, Castaway
Cay. In 1994, Disney ventured onto Broadway with a very successful stage production of Beauty and
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the Beast, followed in 1997 by a unique staging of a show based on The Lion King and in 2000 by Aida.
Early in 1996, Disney completed its acquisition of Capital Cities/ABC. The USD19 billion transaction,
second-largest in U.S. history, brought the country’s top television network to Disney, in addition to
10 TV stations, 21 radio stations, seven daily newspapers, and ownership positions in four cable
networks. Disney regional entertainment expanded with DisneyQuest and the ESPN Zone in 1998.
The history – Growth and acquisitions after 2000
In 2001 Disney opened two new theme parks: In February, Disney’s California Adventure was opened
in Anaheim and Tokyo DisneySea in September. These were followed by Walt Disney Studios adjacent
to Disneyland Paris in March 2002 and Hong Kong Disneyland in September 2005. In 2008 Disney
reacquired ownership of the Disney Stores’ retail locations from The Children’s Place, and the first
Disney-operated language training center, Disney English, opened in China. In 2011 the second cruise
ship, the Disney Dream was launched and Disney purchased the rights to the Avatar franchise for
theme parks, Aulani, A Disney Resort & Spa opened in Hawai‘i. After several years of construction, the
Shanghai Disney Resort opened on June 16th 2016.
In the beginning of the 2000’s DVD releases became increasingly popular. In 2001, the new cable
network, SoapNet, was launched and was replaced by The Disney Junior cable channel in 2012. In May
2006 Disney finally acquired Pixar Animation Studios after several years of cooperation with Pixar
delivered creativity and technology while Disney handled distribution. With accelerating innovation
and major companies such as DreamWorks and Fox competing to create the best content, Disney had
been struggling to find its own DNA and rejuvenate itself. With the acquisition of Pixar in 2006, Robert
Iger ended a public feud between the previous Disney CEO, Michael Eisner, and Apple-innovator and
major shareholder of Pixar, Steve Jobs. This reconciliation was vital for Disney. The company lacked
innovation and was desperate for commercial success: Both things Pixar had been very successful at
doing for the past decade, in contrast to Disney. In 2007 Disney had its first co-production in China
followed by the first Disney film locally produced in Russia in 2009. In 2009 Disney acquired Marvel
Entertainment and in 2012 Disney finalized the acquisition of Lucasfilm with “Star Wars – The force
awakens” released in 2015.
In June of 2014, Disney also expanded its innovation activities by creating the Disney Accelerator in
collaboration with Techstars which accepts 10 growth-stage startups for a three-month mentorship
program that provides access to the creativity, imagination and expertise of Disney, including unique
access to Disney’s leadership team. Companies in the accelerator get space in Disney’s Glendale, Calif.
campus and a small amount of investment capital. Accelerator graduates include Epic Games, the
creator of Fortnite, the programmable robot manufacturer Sphero, StatMuse, a voice and text-based
search for sports stats and information, and the game-based learning platform Kahoot!.
In 2018, Disney intensified the shift towards personalized, on-demand entertainment by establishing
a central technology and distribution platform – Disney Direct-to-Consumer and International – to
launch its streaming services. This started with the launch of ESPN+ in April 2018 which quickly signed
up more than 1 million subscribers. ESPN+ leveraged the technology of BamTech’s in which Disney had
invested in for several years and which it finally acquired. Key functionalities were video streaming,
the commerce engine, dynamic ad insertion technology, and the data collection needed to personalize
consumer experiences.
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In 2019, Disney completed its acquisition of 21st Century Fox. This acquisition in combination with the
previous ones gave Disney access to a vast library at its disposal as well as the rights to premium titles
such as Avatar, X-Men, and National Geographic. Disney also obtained a majority stake in Hulu, which
already has 25 million subscribers for its streaming and live TV services.
Streaming services on the rise
Streaming services have become increasingly popular over the last decade with established
competitors such as Netflix and amazon prime already having millions of active subscribers. In
November 2019, Disney launched its streaming service Disney+, giving customers access to content
such as Star Wars, Pixar, the Marvel superhero movies, National Geographic, and all of the Disney
classics collected in one place. As contracts made with other streaming services expire, Disney is
expected to pull all of their own content under their own roof.
With an abundance of content being created at an unprecedented pace, consumers will start to
prioritize which streaming services they want to subscribe to. Besides Disney+, other players have
entered the arena of streaming in 2020. These include NBC and Universal’s service Peacock, CBS All
Access, Apple TV+, and HBO. While brand may be a decisive factor for customers also signaling trust in
the choice of contents offered most players in the market have a good reputation and brand name in
the market. The second decision factor could therefore be the range and quality of original content
offered.
In October 2020, Disney announced a strategic reorganization of its media and entertainment
businesses. Under the new structure, Disney’s will focus on developing and producing original content
for the company’s streaming services, as well as for legacy platforms, while distribution and
commercialization activities is centralized into a single, global Media and Entertainment Distribution
organization which is responsible for all monetization of content—both distribution and ad sales—and
will oversee operations of the Company’s streaming services. The creation of content will be managed
in three distinct group: Studios, General Entertainment, and Sports.
2019 – the impact of COVID 19
The Covid-19 outbreak cost Disney’s parks, experiences and products segment around $2.4 billion in
lost operating income in the fourth quarter. In the second quarter, the company had reported it lost
$1 billion in operating income due to the pandemic, and in the third quarter, the pandemic cut its
operating income by $3.5 billion. The parks, experiences and consumer products segment is a vitally
important part of Disney’s business. In 2019, it accounted for 37% of the company’s $69.6 billion in
total revenue. While Disney’s theme parks in Florida, Paris, Shanghai, Japan and Hong Kong have been
able to reopen with limited capacity, both California theme parks have remained shuttered in the last
quarter of 2020. With its California parks unable to open, Disney laid off 28,000 workers across the
parks division in September. Then in November, the company announced that additional workers at
its California theme parks, including executive, salaried and hourly employees, will face furloughs.
Disney had lost an estimated $500 million for every two weeks the attractions were shuttered, Chief
Financial Officer Christine McCarthy said in May of 2020.
COVID-19 and measures to prevent its spread impacted Disney’s segments in a number of ways, most
significantly at Parks, Experiences and Products where the theme parks were closed or operating at
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significantly reduced capacity for a significant portion of the year, cruise ship sailings and guided tours
were suspended since late in the second quarter and retail stores were closed for a significant portion
of the year. The company also experienced an adverse impact on its merchandise licensing business.
In addition, at Studio Entertainment Disney had to delay, or in some cases, shorten or cancel, theatrical
releases, and stage play performances had been suspended since late in the second quarter. Disney
also saw adverse impacts on advertising sales at Media Networks and Direct-to-Consumer &
International. Since March 2020, the company had experienced significant disruptions in the
production and availability of content, including the shift of key live sports programming from the third
quarter to the fourth quarter and into the fiscal year 2021 as well as the suspension of production of
most film and television content since late in the second quarter, although some film and television
production resumed in the fourth quarter.
The most significant adverse impact in the fourth quarter and year from COVID-19 was approximately
$2.4 billion and $6.9 billion, respectively, on operating income at the Parks, Experiences and Products
segment due to revenue lost as a result of the closures or reduced operating capacities. The impacts
at Media Networks, Studio Entertainment and Direct-to-Consumer & International were less
significant. Media Networks had an adverse impact in the current quarter from higher sports
programming cost, partially offset by higher advertising revenue, reflecting the shift of sports
programming from prior quarters to the current quarter. For the year, Media Networks had a modest
benefit reflecting the deferral of sports programming costs into fiscal 2021, partially offset by lower
advertising revenue. At Studio Entertainment, lower revenues due to the deferral or cancellation of
significant film releases as a result of theater closures were partially offset by lower amortization,
marketing and distribution costs for both the quarter and year. At Direct-to-Consumer & International
for the quarter and year, lower advertising revenue was partially offset by lower costs including the
deferral of sports programming costs into fiscal 2021. In total, Disney estimates the net adverse impact
of COVID-19 on the fourth quarter and full year segment operating income across all businesses to be
approximately $3.1 billion and $7.4 billion, respectively, inclusive of the impact at Parks, Experiences
and Products.
Sources: Excerpts from Walt Disney History, Walt Disney Annual Report, Techcrunch, VentureBeat,
CNBC
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Supporting material and data:
Source: Disney
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Master International Management
Innovation Management
Script
WS 2020/2021
ISM 2020 · S. Finken
1
Impressum
Eine Nutzung des Skriptes, auch in Teilen, ist ohne vorherige Freigabe durch die Hochschule außerhalb
der ISM und der von ihr durchgeführten Veranstaltungen untersagt.
Verantwortlich für den Inhalt des vorliegenden Skriptes ist der Autor (bzw. die Autoren).
Skripten sind in wissenschaftlichen Arbeiten nicht zitierfähig.
ISM International School of Management
GmbH
Otto-Hahn-Str. 19
44227 Dortmund
www.ism.de
ISM 2020 · S. Finken
2
Innovation Management
Course Content
01 Introduction to innovation management
04 Culture and organization
1.1 What is innovation?
4.1 Organization
1.2 What is innovation management?
4.2 Culture and Climate
02 Innovation strategy
2.1 Classical aspects of innovation strategies
05 Innovation in emerging countries
06 Cases
2.2 Disruptive innovation
2.3 Blue ocean
2.4 The impact of new technologies
07 Appendix
7.1 Checklists etc.
03 Innovation management process
3.1 Search
3.2 Deep dive: Open innovation
3.3 Select
3.4 Implement
3.5 Capture
ISM 2020 · S. Finken
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Innovation Management
Expectation management
• This class aims at teaching you the fundamentals of innovation management – ranging from
strategy to processes and tools as well as an outlook to latest trends
• The lecture has three main aims:
 First it should teach you the fundamentals of innovation management as innovation is becoming more
and more critical for the success as well as the long-term survival of companies
 Second, it should provide you with a set of tools and skills that you will be able to apply in a wider
range of professional settings such as in a strategy department, in business development, in product
development and management, sales, …
 Third it should help you to hone your analytical and problem-solving skill by applying them in a new
context
• The script contains a lot of material and should partly serve as a reference – as the
examination is a homework and not a written exam you do not need to memorize anything for
the examination
• The benefit you get from the lecture also depends on your level of participation – so be active,
ask questions and contribute to the discussion
ISM 2020 · S. Finken
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Innovation Management
Literature
• Tidd, J.; Bessant, J. (2018): Managing innovation. Integrating
technological market and organizational change. 6th edition.
New York : Wiley
• Tidd, J.; Bessant, J. (2014): Strategic Innovation Management.
New York: Wiley.
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Innovation Management
Other interesting reads:
• Harvard Business Review:
HBR’s 10 Must Reads on Innovation, HBR, 2013
• Gassmann, O., Frankenberger, K. and M. Csik:
The business model navigator, Pearson, 2014
• Govindarajan, V. and C. Trimble:
The other side of innovation, HBR, 2010
• Osterwalder, A. and Y. Pigneur:
Business Model Generation: A Handbook for Visionaries, Game
Changers, and Challengers, Wiley, 2010
ISM 2020 · S. Finken
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Innovation Management
Examination
• The exam in this class is a case study based homework assignment
• To fulfill the assignment, you will have to conduct additional desk research beyond the content
of the case study
• When writing the case study, please also use models and frameworks discussed in the lecture
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Innovation Management
01
Introduction to innovation management
1.1 What is innovation?
1.2 What is innovation management?
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What is innovation?
What is innovation?
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What is innovation?
Is this innovation?
~ 1970
2014
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What is innovation?
… and this?
1890
Source: Heinz website
2002
2010
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What is innovation?
… and this?
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What is innovation?
… and this?
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What is innovation?
… and this?
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What is innovation?
What is innovation? – some definitions
“Innovation is the successful exploitation of new ideas.”
Innovation Unit, UK Department of Trade and Industry (2004)
“Innovation is “new combinations” of existing resources. Examples are new products, new methods of
production, new sources of supply, the exploitation of new markets, and new ways to organize business.”
Schumpeter (1934)
“Innovation is the specific tools 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 (1985), Innovation and Entrepreneurship
“Companies achieve competitive advantage through acts of innovation. They approach innovation in
the broadest sense, including both new technologies and new ways of doing things.”
Michael Porter (1990) The competitive advantage of nations
“An innovation is the implementation of a new or significantly improved product (good/service),
or process, a new marketing method, or a new organizational method in business practices,
workplace organization or external relations.”
Oslo Manual (2005)
“An innovative business is one which lives and breathers “outside the box”. It is not just good ides, it is a
combination of good ideas, motivated staff and an instinctive understanding of what the customer wants”.
Richard Branson (1998) DTI Innovation Lecture
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What is innovation?
Innovation can manifest itself in various forms
• Identifying or creating opportunities – driven by the ability to see
connections, to spot opportunities, and to take advantage of them
• Growing new markets
• New ways of serving existing markets
• Rethinking services
• Improving operations – doing what we do but better
• …
Source: Tidd/Bessant (2018)
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What is innovation?
Note: Invention versus innovation
• Invention can be defined as the creation of a product or introduction of a
process for the first time. It can be planned or unplanned.
• The invention is a necessary preliminary stage of innovation
• Innovation on the other hand is (the process of) the commercial
exploitation of the invention for the first time. Goal is the market
introduction and (in the wider sense) the diffusion of the invention.
• Innovation also occurs if someone improves on or makes a significant
contribution to an existing product, process or service.
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What is innovation?
How would you classify different types
of innovation?
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What is innovation?
There are various ways to classify innovation – each providing different
insights into the nature and challenges of innovation management
Innovations can be classified for example by
• The degree of “newness” (incremental versus radical)
• The reference object (products, process, business model)
• Drivers/Causes of innovation (customer demand versus
technology development, …)
• Scope of the implied change
• …
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What is innovation?
Degree of newness leads from incremental improvement to radical
innovations of completely new products, processes or business models …
+
Degree of newness
Explanations
new to world
entirely new to the world
radical
new to market
new to relevant market, e.g. country or
target customer group
new to firm
known in general, but new to firm
product line extension
additions to current products
substantial
product improvements … of current products
incremental

product repositioning
Source: adapted from Ahmed /Shepherd (2010)
… for new segments or uses
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What is innovation?
… where incremental versus radical often is distinguished by choice of
technology and market
Future options,
dealing with disruption
Technology
pacemaker
technology
radical
innovation
Expanding capabilities
and markets in new and
related areas
key
technology
incremental
innovation
existing
technology
Operational
efficiencies,
continuous
improvement
existing
adjacent
unknown
Market
Source: based on Vahs/Brem (2015) and The Oxford Handbook of Innovation Management (2014)
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What is innovation?
Note: Degree of newness also significantly determines success probability
of innovation projects
Source: risk matrix by Day (2007); degree of newness calculated using six (market) respectively seven (product/technology) indicators which can take on a
ISM 2020 · S. Finken
score between one and five.
22
What is innovation?
Innovation mainly refers to product, process or business model/strategy,
though other reference objects exist as well
Political
innovation
Social
innovation
Business model/
strategic
innovation
Organizational
innovation*
Marketing
innovation*
Product
innovation
• Product: Changes in the products/
services an organization offers
• Process: Changes in the way in which
they are created and delivered
• Business model/strategic:
Process
innovation
 Changes in the context in which the
products/ services are introduced
 Changes in the underlying mental
models which frame what the
organization does
Philosophical innovation
* Organizational and Marketing innovation can very often be subsumed in process and /or strategic innovation
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What is innovation?
Product innovation usually precedes process innovation – the latter often
used to prolong the life cycle/secure market share of the product/service
Source: Tidd/Bessant (2013) based on Abernathy/Utterback (1975)
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What is innovation?
Examples for product and process innovation
Process
Product
incremental
radical
• Windows 10 and 8 replacing Vista and XP by
improving existing software
• First OCR and speech recognition software,
apps
• New versions of existing car models, e.g.
Golf 6 versus Golf 5
• Hybrid engines, electrical cars
• Higher storage capacity on hard drives
• Cloud-based data storage
• Improved fixed line telephone services
• VOIP systems
• Broader/improved range of banking
services delivered at ATMs
• Online and mobile banking serviced by retail
banks
• Improved factory operations efficiency
through upgraded equipment
• Toyota Production System and other ‘lean’
approaches
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What is innovation?
Examples for business model/strategic innovation
Business model/strategic
incremental
radical
• Banks offering services targeted at specific
ethnic groups (e.g. Bankamiz)
• Payment services for large unbanked
population in Africa (e.g. M-Pesa)
• On line support for traditional higher
education courses
• MOOCs by commercial providers or networks
of leading universities (e.g. edX)
• IBM from being a hardware producer to a
consultancy company offering services
• Amazon, Google– redefining industries like
retailing and advertising through online
models
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What is innovation?
Innovation can be driven by different underlying changes in markets/
customer needs/behavior, technology, design and meaning and regulation
Design-driven
Market-/customer-driven
(market-pull)
• Changes in customer
needs/behavior/tastes, …
• Emerging megatrends
• Demographic changes
• Changes in(social) norms and
values
• Globalization
• Radically changes the meaning of products
• Pushed by firm’s vision of meaning people
would love
• If successful might trigger changes in sociocultural regimes
Innovation
Regulatory-driven
Technology-driven
(technology-push)
• (breakthrough) changes in
underlying technology
• Result of basic or applied
research as well as
experimental development
• Completely new technology or
new combination of existing
technology
• Changes in the regulatory, legal or
political environment
• Can be pro-active or defensive
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What is innovation?
Example: Megatrends shape and change customer need and behavior
Digitalization
Connectivity
New learning
New work
models
Mobilization
Urbanization
Health and
wellness
Ecology and
sustainability
Source: FutureManagement Group, Zukunftsinstitut, …
Individualization
Globalization
Generation
silver
Female shift
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What is innovation?
Backup: Innovation has positive influence on financial performance and
productivity of companies through various levers …
• Results from the Profit-Impact-of-Market-Strategy (PIMS) study show that1
 Relative and absolute market share have highest positive correlation with RoI and cash flow
which in times of highly saturated markets can only be achieved through continuously
successful product innovation
 Productivity also shows significant and above average positive correlation with RoI and
cash flow which in turn is closely related to implementation of process innovations which
continuously improve efficiency of (production) processes
 Comparatively higher number of patents also displays positive correlation with key financial
indicators
 Increased product differentiation also positively affects competitive position for companies
which are in a strong market position
• Other empirical studies also show significant positive correlations between innovation activity
and labor productivity for SMEs and large corporations in several countries2
Source: 1 Tidd/Bessant (2013) based on PIMS-Study by HBS; 2 Hall (2011)
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What is innovation?
Backup: … and strategic advantages through innovation management
provide competitive advantage – especially in fast-moving markets
• Product/service innovations help to capture and retain market share and eventually increase
profitability in these markets. Hence research usually suggests a strong correlation between
performance and new products
• Process innovation, enabling companies to service customers faster, cheaper, with better quality or
more customized is often the source of competitive advantage over competitors and helps to
capture market share
• Both product and process innovations can extend the range of competitive factors and e.g. move
the basis of competition from price to quality
• Due to shortening of product life cycles in almost all industries, constant innovation with short time
to market to replace existing products with new and improved versions faster than competitors do
becomes increasingly important
• Legal protection of intellectual property for first movers can ensure “stickiness” of customers and
consequently market share during lifetime of patents
Source: Hauschildt/Salomo (2011), Tidd/Bessant (2013), The Oxford Handbook of Innovation Management (2014)
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What is innovation?
Backup: Some stylized facts on innovation from recent research
1. Innovation plays a major role in productivity growth
2. Most innovation involves new combinations of existing elements, bodies of knowledge or technology
3. Innovation is pervasive throughout the economic system. Most change brought about through innovation
is evolutionary, incremental adaption of existing elements, products, and technologies
4. Radical and revolutionary changes are rare and largely unknowable
5. Innovation is relational and usually involves collaboration between two or more parties
6. Creativity is as critical to invention, as invention is to innovation, but these concepts are separate and
distinct elements of the innovation process
7. Most innovators fail to capture returns from their innovative efforts and capturing returns from innovation
requires different skills from creating innovations
8. There is a vast array of different types of innovation
9. There are “regular” patterns in innovation activity over time, and strong complementarities between
different types of innovation
10. Innovation is a “sticky” activity in which location matters
11. There is a clear set of organizational routines that can help organizations to better manage the innovation
process
Source: Saler/Alexy (2014), The Ofxord Handbook of Innovation Management
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What is innovation?
Summary
• Innovation can be incremental or radical – potentially changing the entire economics and
business model for whole industries
• Innovation can impact products, processes as well as entire business models (position and
paradigm)
• Innovation can address existing or new markets and customer groups
• Innovation can be driven by changing customer demands and lifestyles as well as technological
advances
• Innovation appears to be beneficial to firm performance and survival
Innovation is highly complex and uncertain – so how do we manage it?
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Innovation Management
01
Introduction to innovation management
1.1 What is innovation?
1.2 What is innovation management?
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What is innovation management?
Only few innovation projects are truly successful – various sources of risk
have to be managed throughout the entire process
Of a total of 100 R&D projects
…
57 lead to technical
success,
31 are
introduced to
the market,
12 are
successful
Source: Vahs/Brem (2015)
Technical risk
Market risk
Economic risk
ISM 2020 · S. Finken
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What is innovation management?
What is innovation management? – guideline for the lecture
The process of creating values from ideas
ISM 2020 · S. Finken
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What is innovation management?
Innovation management encompasses all activities of the value chain from
the search for ideas to the market launch of a product
Innovation strategy and goals
Chapter 2
Organization and Culture
Strategic
dimension
Chapter 4
(Basic) research (technology and market)
Portfolio management and controlling of innovation initiatives
Operational
dimension
Chapter 3
Search for ideas
Selection of ideas
Implementation
(including
prototyping,
development of
business
plan/model, …)
Market launch
Innovation
process
Focus of the lecture
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What is innovation management?
Sidenote: Technology and R&D management are usually considered part of
innovation management
Basic research
Applied research
Predevelopment/
prototyping
Technology
management
R&D
management
Innovation
management
Development
Production, business
model and market
launch
Source: based on Vahs/Brem (2015)
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Innovation Management
02
Innovation strategy
2.1 Aspects of innovation strategies
2.2 Disruptive and radical innovation and blue ocean
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Aspects of innovation strategies
Most innovative companies in 2019 according to BCG
Source: Boston Consulting Group 2019
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Aspects of innovation strategies
What is strategy?
ISM 2020 · S. Finken
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Aspects of innovation strategies
What is strategy?
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Aspects of innovation strategies
In theory there are two basic views on strategy:
 Strategy as a rationally planned courses of action
 the determination of the long-run goals and objectives of an enterprise
 the adoption of rationally planned and coordinated courses of action to achieve these goals and
 the allocation of resource necessary for carrying out these goals
Traditionally predominant view
 Strategy as a pattern in a stream of decisions
 Strategy seen as a consistent pattern which emerges over time in the stream of decisions and
actions of a corporation
 This view is based on the perception that the increasing speed and discontinuity of changes in a
corporation‘s environment increasingly aggravate the formulation of long-term strategies in the
sense of rationally planned courses of action based on long-term goals
Source: based on Macharzina/Wolf (2012) and Mintzberg (1998)
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Aspects of innovation strategies
The innovation strategy is part of the overall corporate strategy
• The innovation strategy is a part of the overall corporate strategy and encompasses aspects of
 Product/market strategies
 technology strategies,
 process strategies and
 timing strategies
• The innovation strategy determines in which areas (markets, business units, products, processes, …)
and when innovation should be realized to achieve the overall long-run goals of the corporation
Source: based on Vahs/Brem (2015) and Tidd/Bessant (2013)
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Aspects of innovation strategies
The innovation strategy must cope with …
• … an external environment that is complex and constantly changing,
• … considerable uncertainties about future developments in technology,
• … competitive pressure and behavior,
• … (emerging) market demands as well as
• … social and political pressures
Source: based on Vahs/Brem (2015) and Tidd/Bessant (2013)
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Aspects of innovation strategies
Sidenote: Innovation strategies can be viewed as functional strategy or as
meta-strategy
• Innovation strategy can be viewed as an individual functional strategy or as a meta-strategy across
several functional strategies
 In the case of an individual functional strategy, it is often limited to an F&E strategy only
 In the case of a meta-strategy it involves all other functional units and their resources in the innovation
strategy process and fosters the awareness for innovative activities
F&E
HR
Finance
Production
Innovation
strategy as purely
functional strategy
Marketing
Functional strategies
F&E
HR
Finance
Production
Marketing
Functional strategies
Innovation
strategy as
meta-strategy
Innovation strategy
Source: based on Vahs/Brem (2015)
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Aspects of innovation strategies
Innovation strategies can have different focus areas – the most important
are …
1
2
Competitive
position:
Product/ market
4
3
Time-based:
Mindset regarding:
Market entry/
Timing aspect
Opportunity/ risk
Technology strategy
&
5
Source: based on Vahs/Brem (2015), Tidd/Bessant (2013), Ahmed/Sheperd (2010)
…
Process strategy
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Aspects of innovation strategies
1 The product/market dimension covers where and how to compete and
should be aligned with the overall corporate strategy
(Internal and external)
Strategic analysis
Traditional product/market positioning
Expanding beyond the existing model though blue ocean,
business model and disruptive innovation, …
See separate lecture
Business Model Innovation
existing
existing
A
Cost leadership
B
Differentiation Cost leadership
C
Concentration on niches
Increasingly new customers
Entire market
Focused on
niche market
Strategic scope/market
Differentiation from
the customer‘s view
Market
new
Strategic advantage
Market
development/ Diversification
-expansion
Market
penetration
Blue Ocean
New product
development
existing
existing
Product/service
new
Increasingly new technologies
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Aspects of innovation strategies
2 One of the key component of innovation strategies is the market
entry/timing aspect
Sales,
revenues,
contribution
margin,
profits
Introduction Growth
Early
followers
Late
followers
Maturity
Saturation
Decline
Me-too
Sales
Pioneer
Contribution margin
Initial idea
Market launch
Development
period
Source: based on Vahs/Brem (2015)
Elimination
Time
Market period
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Aspects of innovation strategies
What could be advantages and disadvantages of
first-to-market versus early follower strategies?
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Aspects of innovation strategies
2 Pioneer-strategy: Advantages and disadvantages
• Pioneer is not necessarily the inventor of a technology but rather the firm that introduces the
innovation to the market/ the first to commercialize the innovation, aiming at innovative leadership
despite high uncertainty regarding development of technology and cost as well as market demand
• Three sources of first-mover advantages: technological leadership, pre-emption of assets/scare
resources and buyers switching cost
• Allows for temporary “monopoly”, hence reaping consumers’ surplus, potentially setting industry
standards, creating stickiness though use of patents and IP, creating cost advantages in production,
marketing, … through economies of scale and improving the company’s image
• Requires very high intensity of and investment in R&D, strong technology competencies and close
cooperation between product development and production
• Danger of winner’s curse, overestimation of market potential/demand, risking brand/image due to
problems with technology still being in it’s infancy, higher cost due to hidden cost of accelerated
development, required investments in technology, more thorough concept and prototype testing,
potential lock-in on first-generation technology
Source: based on Vahs/Brem (2015) and Tidd/Bessant (2013)
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Aspects of innovation strategies
2 Increases in time to market have highest impact on revenues and return
on equity
• Increases in development time and
time to market has the highest
impact on revenues of new
products followed by production
costs and development costs
• First movers can generally expect a
return on equity of 22.8% over four
years followers can only expect
about 17% after introducing new
products to markets
Development
time
Production
costs
Exceedance
of …
Development
costs
+50%
+10%
+10%
– 5 to 10%
Revenue
impact
– 15 to 20%
– 25 to 30%
Source: Vahs/Brem (2015), based on Sommerlatte (1991)
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Aspects of innovation strategies
Unit cost and price
2 Pioneer’s advantages and speed to market can have significant impact
on cost and process …
Pioneer‘s
premium
Pioneer‘s cost
advantage over
follower
Market price
Follower‘s cost
Pioneer‘s cost
Pioneer enters
market
Source: adapted from Ahmed/Sheperd (2010)
Follower enters
market
time
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Aspects of innovation strategies
2 … but imitators often close the gap quickly and free-ride to a certain
extend on the development efforts of pioneers
• Competitors often obtain detailed information about innovative products and services
within the first year
• An empirical study of 48 innovations from different industry for example showed, that 60%
of the patented innovations where imitated after four years and the cost of imitation were
at about 65% of the original development cost
Source: Vahs/Brem (2015)
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Aspects of innovation strategies
2 Example for failed pioneers: Adam Goldberg and Wayne Ting with
Campus Network
• In 2003 Wayne Ting and Adam Goldberg launched a website
called “CU community” at Columbia University and soon
~75% of the students were using it. It was a rather
sophisticated network including photo-sharing and blogging.
By 2004 they went to work full-time on what they were now
calling Campus Network to expand to other campuses.
• Facebook though launched early 2004, had 90% of Harvard
students using it within days of its launch and then very
quickly started moving to other campuses
• The two main reasons for Facebook to overtake Campus
Network were the speed at which Facebook moved, and the
very simplicity of its early format
• “The network effect is incredibly powerful. It takes a lot of
time to create and look after a profile – you will always
choose the network with more people.“ (W. Ting, 2010)
Source: Johnson, Whittngton et al. (2014), BBC (2010) “Wayne Ting, nearly a billionaire. Or how Facebook won”
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Aspects of innovation strategies
2 Early followers
• Reduced risk of development and market launch compared to pioneer strategy
• Exploitation of innovation spillover if value proposition and technical solution of pioneer can be
closely duplicated
• Benefits/approaches can include: reduced market uncertainty, learning from pioneer’s experiences
(successes and failures), introducing superior manufacturing processes, introducing products with
superior technology or design features and fine-tuning the marketing-mix
• Since customer preferences are usually already influenced by pioneer, early followers must
therefore meet these preferences or deliver superior value respectively lower price
• Improvement compared to product/service offered by pioneer still demands high R&D intensity and
short time to market to capture sufficient market share and minimize time of monopoly position of
pioneer. Hence, a close corporation between production and marketing is necessary
Source: based on Vahs/Brem (2015) and Tidd/Bessant (2013)
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Aspects of innovation strategies
2 Examples of successful early followers
• Video recorders by JVC: Though Philips had introduced their video cassette recorder in 1972 it did
not generate sufficient market demand. JVC managed with intensive marketing and a significantly
lower price to take over the market leadership and establish VHS system as market standard. Even
though Philips and Grundig later developed the superior system Video 2000, it could not replace
VHS as standard due to the already achieved stickiness
• Pampers disposable nappies by P&G: Though CHUX first introduces disposable nappies in 1949, the
breakthrough only came from 1961 onwards when Pampers were introduces by Procter & Gamble.
In 2014, P&G had a global market share (over all brands of disposable nappies) of 42%
• Fast food hamburger restaurant by McDonalds: Though White Castle was the first hamburger
restaurant to open business in the US in 1921, McDonalds proved much more successful with its
very standardized approach when it opened in 1940. In 2012, McDonalds had a market share in the
US systemwide sales of top 50 fast food restaurants of 22% (rank 1) versus 0,38% for White Castle
(rank 36)
Source: Statista, QSR Magazine August 2013
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Aspects of innovation strategies
2 Pioneering versus following
• Important considerations include …
• Sustainability of product market leadership position depending on rate of innovation and ability of
firm to control it through e.g.
 Patents and trade secrets
 In-house development of product prototypes
 Vertical integration into competitor-sensitive areas
 Clearly identifying characteristics and needs of early adopters and predicting socio-economic trends
• Ability to dictate the rules of the game e.g. by creating specific competitive advantage
 Reputation for quality and service (and subsequent high brand loyalty)
 Pre-emptive positioning in most attractive market segments
 Choosing best distributors, agents and partners in market channels
 Skills and experience in manufacturing securing cost advantage
 Definition of categories/standards
Source: based on Ahmed/Sheperd (2010)
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Aspects of innovation strategies
2 Late followers/Me-too
• Late followers enter market after technical standards and customer preferences have been
established and customer demand appears sufficient, eliminating risk of market entry
• In the extreme case, companies follow me-too strategies, aiming purely at cost leadership
• Strict orientation on customer preferences and demand and (very) low R&D activities
• Since standards and preferences are already established and shaped by pioneers/early followers,
barriers to entry can be very high for late follower/me-too strategies
• Only way to gain market share is through strict concentration on cost leadership and efficient if not
aggressive marketing
• Example: Xiaomi for smartphones, overtaking Samsung
and Apple by Q4 2014 in smartphone shipments in China
with models at about half the price
Source: based on Vahs/Brem (2015) and Tidd/Bessant (2013)
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Aspects of innovation strategies
2 Characteristics of market-entry strategies for innovations
Scope of R&D
Investment need
Technologyoriented versus
market-oriented
Focus of activities
Strategic goal
Pioneer
Very high R&D
intensity
Very high
Predom.
technologyoriented
R&D
Technology
leadership
Early Follower
High R&D
intensity
Low to medium
Predom. marketoriented
Development and
sales/marketing
Customer
orientation
Late-Follower
Strongly
customer-oriented
development
Low
Market-oriented
Sales/marketing
and some
development
Customer
orientation
Me-too
Basically no R&D
activity
Very low
Market-oriented
(no technology
competences)
Production and
sales/marketing
Cost leadership
Source: based on Vahs/Brem (2015)
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Aspects of innovation strategies
3 An alternative strategic typology is based on the mindset exhibited in
the face of a changing environment and innovation opportunities (1/2)
Type
Prospectors
Explanation
•
Highly innovative and forward-looking companies, continuously searching for new market
opportunities and highly sensitive to potential opportunities
•
Regularly experiment with potential responses to emerging trends and value being “first in” to
new products and markets
•
Typically operate within broad product-market domain that undergoes periodic redefinition; very
flexible regarding technology and organizational systems
•
Risky strategy with significant share of projects not being successful; sometimes very difficult to
maximize short-run profitability
•
Operate in two types of product-market domains:


Analyzers
One secure relatively stable market-product domain in which they operate routinely und efficiently through
formalized structures and processes
On changing domain in which they always watch competitors closely for new ideas and rapidly adopt them
•
Limited stable line of products/services but move quickly to exploit promising new developments
in the industry; often “second” in the market with more cost efficient product/service
•
Often dual technological core: stable component with high efficiency for standard products and
flexible component to adapt new product designs
Source: Ahmed/Sheperd (2010) based on Miles and Snow (1978)
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Aspects of innovation strategies
3 An alternative strategic typology is based on the mindset exhibited in
the face of a changing environment and innovation opportunities (2/2)
Type
Defenders
Reactors
Explanation
•
Risk-averse
•
Defend a secure niche within a (narrow) product-market domain and do not tend to search
outside their market domain
•
Often offering limited rage of products/services but with higher quality/service and/or lower
prices
•
Tend to ignore industry changes without direct influence on their current areas of operation;
rarely make major adjustments to technology, structure and operations
•
Focus on improving efficiency of existing operations
•
Risk averse
•
Encounter change and uncertainty in their environment but are unable to respond efficiently
•
Often no consistent product-market orientation
•
Changes often forced by environmental pressures
Source: Ahmed/Sheperd (2010) based on Miles and Snow (1978)
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Aspects of innovation strategies
4 Technology changes usually follow s-curved patterns with four typical
stages
Capability/efficiency
of the technology
Technological
maturity
Technology
change
Production
scale-up
new substitution technology
Generic technology
research
old technology
Applied
research
Cumulated R&D effort
Source: adapted from Vahs/Brem (2015), based on Gerpott (2005)
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Aspects of innovation strategies
4 The movement through the S-curves along the technology life cycle also
demands different investment strategies for the respective technology
Investment strategies across the technology life cycle
Base
technology
Key/core
technology
Pacing
technology
Emerging
technology
Market
penetration
Divest
selectively
Build and
control
systematically
Invest
selectively
Monitor
carefully
Capital investment
R&D investment
Commercialization
Generic technology
research
Source: Ahmed/Sheperd (2010)
Applied
research
Production
scale-up
Technological
maturity
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Aspects of innovation strategies
Innovation strategies can also be distinguished by their orientation
3
Ecology
1 • Innovation is triggered
mainly by a technology push
(supply-push)
Environmental requirements
Societal requirements
2 • Innovation is developed due
Legal framework
1
2
to changing customer
demand and preferences
(demand-pull)
3 • Innovation is aimed at
overcoming environmental
and societal challenges
Source: based on Vahs/Brem (2015)
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Aspects of innovation strategies
Empirical studies about the top 1000 innovators show three prominent
strategy patterns: need seekers, technology drivers and market readers
100%
90%
25%
Need Seekers aim to use superior insights about customers to
generate new ideas and develop new products and services
80%
70%
60%
35%
50%
Technology Drivers depend heavily on their internal
technological capabilities and R&D activities to develop new
products and services
40%
30%
20%
40%
Market Readers focus largely on creating value through
incremental innovations to products already proven in the
market
10%
0%
Global innovation 1000
Source: based on Strategy& (2014), Global Innovation 1000 study over 10 years based on the 1000 companies with the highest R&D spending
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Aspects of innovation strategies
Need seekers are focused on superior customer insights to generate
new ideas for products and services
• Need Seekers aim to use superior insights about customers to generate new ideas and develop new
products and services. They gain this insight through direct engagement with customers and other
means, including analysis of big data.
• Their goal is to find the unstated customer needs of the future, and to be the first to address them.
Their cultures encourage openness to new ideas from customers, suppliers, competitors, and other
industries, and they prioritize directly generated consumer/customer insights and enterprise-wide
launch capabilities.
• Examples: Apple, Procter & Gamble, Tesla, … (estimated 25% of Global Innovation 1000 companies)
• Typical timing/market entry: Pioneers/early followers
• Typical tools used: Idea workout sessions. social-network data mining, focus groups with customers
and end-users, direct customer observation (e.g. Apple routinely learns from interactions at its retail
stores)
Source: Strategy& (2014), Global Innovation 1000 study
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Aspects of innovation strategies
Technology drivers aim to use their technological capabilities and
extensive R&D to develop technological superior products
• Technology Drivers depend heavily on their internal technological capabilities to develop new
products and services. They leverage their R&D investments to drive both breakthrough innovation
and incremental change. Their distinct innovation goal is to develop products of superior
technological value, and their cultures reflect reverence and respect for technical knowledge and
talent.
• Examples: Google, Bosch, Siemens, … (estimated 35% of Global Innovation 1000 companies)
• Typical timing/market entry: Pioneers/early followers
• Typical tools used: Periodic meetings of technical community, technology road mapping, external
idea scouting and technology, cross–business unit communities of practice
Source: Strategy& (2014), Global Innovation 1000 study
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Aspects of innovation strategies
Market readers focus on incremental innovations by closely monitoring
customer demand and preferences in already existing markets
• Market Readers focus largely on creating value through incremental innovations to products already
proven in the market. They use a variety of means to generate ideas; most involve closely monitoring
their markets, customers, and competitors. One of their specific innovation goals is customizing
products and services for local markets, and they seek a culture of collaboration across functions
and geographies. They prioritize capabilities for managing resource requirements and engaging
suppliers and partners.
• Examples: Samsung, Caterpillar, Visteon, … (estimated 40 %of Global Innovation 1000 companies)
• Typical timing/market entry: Early/late followers
• Typical tools used: Feedback from customer support and sales, traditional market research, seed
funding for exploratory research
Source: Strategy& (2014), Global Innovation 1000 study
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Aspects of innovation strategies
In how far do the individual strategy types
correspond respectively overlap?
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Innovation Management
02
Innovation strategy
2.1 Aspects of innovation strategies
2.2 Disruptive innovation
2.3 Blue ocean
2.4 The impact of new technologies
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Disruptive innovation
Disruptive, radical, discontinuous innovation – different or all the same?
Partly used interchangeably, but originally
(slightly) different notion
• Disruptive innovation as defined by Clayton
Christensen represents a new product or service
that enters at the low end of the market and
gradually moves up-market, displacing existing,
established products
• Radical innovation or discontinuous innovation
usually refers to a major technological
breakthrough or a new technology applied to
solve an existing need in a new way
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Disruptive innovation
Notations are not always used in the sense of the original author …
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Disruptive innovation
New models of disruptive and radical innovation have changed approach
to innovation – selection of key trends
Traditional theory:
Top-down innovation
• Innovators create differentiated goods for customers who are able and willing to
pay for them. Due to economies of scale, innovations trickle down to mass markets
• Example: mobile phones, luxury options in automotive such as high-end sound
systems, board computers, …
Innovator’s dilemma:
Disruptive innovation
bottom-up
• Disruptive technology less valuable and feature rich but at much lower price
• Technology improvement then threatens incumbents
• Example: hydraulic excavators
1997
Blue ocean:
Sideways innovation via new
and unmet needs to create new
markets
2005
Data-based digital business
models:
Better, cheaper and more
customized
• Understanding value customers place on different products/service feature
combinations, innovators can target new and unmet needs of particular market
segments in existing, even mature markets – basically attacking from sideways
• Example: Cirque du soleil, Yellow tail, …
• Tying products to exponential growth and falling costs of new digital and
mobile technologies, offerings can be simultaneously better, cheaper and
more customized to (almost) all consumers
• Example: Google, Apple, many fintechs, …
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Disruptive innovation
Disruptive technology initially serves low end of market cheaper but
usually with new customer value then progresses to high end of market
Product performance
Impact of sustaining and disruptive technological change
Disruptive
technological
innovation
time
Source: adapted from Chtistensen (2010)
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Disruptive innovation
Examples of established versus disruptive technologies
Established technology
Disruptive technology
Silver halide photographic film
Digital photography
Wireline telephony
Mobile telephony
Notebook computers
Hand-held digital appliances
Full-service stock brokerage
Online stock brokerage
Credit decisions by bank employees
Automated lending decisions based on credit scoring systems
Printed greeting cards
Free online cards
Brick & mortar retailing
Online retailing
Offset printing
Digital printing
Traditional manufacturing
3d-printing
Music-CDs
Mp3/downloadable music/music streaming
Printed books
E-books
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Innovation Management
02
Innovation strategy
2.1 Aspects of innovation strategies
2.2 Disruptive innovation
2.3 Blue ocean
2.4 The impact of new technologies
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Blue ocean
Blue ocean strategies create new markets by recreating the value
proposition for existing and new customers
Simultaneous pursuit of value
differentiation and low cost
Recreation of value proposition by
challenging contributing factors
reduce
Which factors should be
reduced well below the
industry‘s standard?
Cost
eliminate
Value
innovation
create
Which of the factors that the
industry takes for granted
should be eliminated?
A new
value
curve
Which factors should be
created that the industry has
never offered?
raise
Buyer value
Source: Kim/Mauborgne (2015)
Which factors should be
raised well above the
industry‘s standard?
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Blue ocean
Strategy canvas of blue ocean players show divergence of value proposition
from mainstream red ocean players
Strategy canvas of blue ocean innovator
versus red ocean player
• Capture the current state of play in the
known market space, which allows users
to clearly see the factors that the
industry competes on and where the
competition currently invests
• Trigger reorientation by refocusing from
competitors to alternatives and from
customers to noncustomers of the
industry and showing potential new
competing factors for existing and new
customer (segments)
Source: Kim/Mauborgne (2015)
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Blue ocean
Example: Cirque du Soleil (1/2)
Change of value proposition factors to
create new market for Cirque du Soleil
Eliminate
Raise
• Star performers
• Price
• Animal shows
• Unique venue
• Multiple show arenas
Reduce
• Fun and humor
Source: Kim/Mauborgne (2015)
Create
• Theme
• Refined environment
• Artistic music and
dance
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Blue ocean
Example: Cirque du Soleil (2/2)
Strategy canvas of Cirque du Soleil
Source: Kim/Mauborgne (2015)
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Blue ocean
Example: [yellow tail] (1/2)
Source: Kim/Mauborgne (2015)
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Blue ocean
Example: [yellow tail] (2/2)
Strategy Canvas of [yellowtail]
Source: Kim/Mauborgne (2015)
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Blue ocean
Create Blue Ocean strategy for ISM
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Innovation Management
02
Innovation strategy
2.1 Aspects of innovation strategies
2.2 Disruptive innovation
2.3 Blue ocean
2.4 The impact of new technologies
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The impact of new technologies
Complexity and the speed of change are increasing – being innovative is
becoming essential for survival
Deep Mind’s AlphaStar
(StarCraft II)
Google Duplex
AIVA
Waymo
Quelle: University of California, Berkeley, Education Development Center, Inc.
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The impact of new technologies
The power of exponential thinking – Exercise 1
What if you would take
30 linear steps?
… and what if you would take
30 exponential steps?
You would cover a distance of 1.073 million
kilometer and circumvent the globe more
than 26 times or cross the distance between
the earth and the moon 2.8 times
Source:
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The impact of new technologies
The power of exponential thinking – Example 2
What would you
choose: USD one million
after a month …
… or one cent on the first day, and
then double the amount you get
every day for a month?
… which would give you USD 10.7 million
Source:
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The impact of new technologies
The power of exponential thinking – Exercise 1
What if you would take
30 linear steps?
… and what if you would take
30 exponential steps?
You would cover a distance of 1.073 million
kilometer and circumvent the globe more
than 26 times or cross the distance between
the earth and the moon 2.8 times
Source:
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The impact of new technologies
The power of exponential thinking – Example 2
What would you
choose: USD one million
after a month …
… or one cent on the first day, and
then double the amount you get
every day for a month?
… which would give you USD 10.7 million
Source:
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The impact of new technologies
Business models across all industries are changing
Content and access
become digital and
customized
Machine replaces
human
Software replaces
hardware
Predictive replaces
reactive
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The impact of new technologies
Especially robotics and artificial intelligence will have disruptive effects on
society as well as the future of professions though
= Office and
administrative support
= Sales and related
= Service
Source: Ray Kurzweil and Oxford University (Carl Frey, Michael Osborne)
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The impact of new technologies
Human or machine?
Source: Google
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The impact of new technologies
Combination of robotics and IoT: Ocado’s automatisiertes Customer
Fulfillment Center (CFC) in Andover
Source: Ocado
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The impact of new technologies
2.5 quintillion bytes of data created each day
• AI-based tools such as cognitive
computing, natural language processing
and machine learning enable the
analysis of unstructured data
• Cloud computing enables the handling
and processing of large data sets
Source: Forbes, domo.com
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The impact of new technologies
Blockchain gives rise to the „Internet of Value“
“The practical consequence […is…] for the first time, a way for one Internet user to
transfer a unique piece of digital property to another Internet user, such that the
transfer is guaranteed to be safe and secure, everyone knows that the transfer has
taken place, and nobody can challenge the legitimacy of the transfer.
The consequences of this breakthrough are hard to overstate.“
Marc Andreessen,
(Andreessen Horowitz)
Source: Marc Andreessen “Why Bitcoin matters”, New York Times, January 2014
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The impact of new technologies
Adoption speed for digitally-driven disruptions is much more compressed
that traditional models of innovation adaption
Source: Downes, L. and P. Nunes (2014): Big Bang Disription
Big bang disruption
Strategy
Be better, cheaper and more
customized at the same time
Focus on one competitive
advantage, e.g. low cost,
better quality, customer
intimacy, …
Marketing
Conventional
First target small group of
early adopters and later
expand to mainstream
market
Market to all customer
segments immediately, and be
ready to scale up – and exit swiftly
Innovation
Conventional adoption pattern
versus digitally-driven
disruption
Seek innovation in low
cost, feature-poor
technologies that meet
needs of underserved
customers
Launch low-cost experiments
directly into the market.
Combine reusable components
and popular platforms rather
than design from scratch
… using scalable technology
such as mobile, cloud
computing, …
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The impact of new technologies
Radical and incremental innovation differs along many dimensions
Radical innovation
Incremental innovation
Strategic goals
Create a dramatic change that
transforms existing
markets/industries or creates new
ones
Improve competitiveness within
current markets or industries
Innovation target/ strategic focus
Products, processes, services with
unprecedented performance
features; new business models
Cost or feature improvements in
existing products. Processes,
services; optimization of existing
business models
Culture
Open externally oriented, risk
taking, agile, flexible, focus on
experimentation, intensive
collaboration and teamwork
Determined by existing procedures
and organizational set-up („stick to
the rules“); controllability as key
determinant
Risk profile
High uncertainty
Low to medium uncertainty
structure
Decentralized/network; low level
of hierarchy and formalization;
horizontal communication
Centralized; high level of hierarchy
and formalization; vertical
communication
Source: adapted from Mattes/Ohr (2013)
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The impact of new technologies
Radical innovators are deal differently with uncertainty, have different
organization for incremental and radical projects and collaborate more
Source: BCG (2014): The most innovative companies 2014
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Innovation Management
03
Innovation management process
3.1 Search
3.2 Deep dive: Open innovation
3.3 Select
3.4 Implement
3.5 Capture
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Innovation management process
The innovation process is embedded in the strategy and organization and
can be segmented in four phases
Source: Tidd/Bessant (2014)
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Innovation Management
03
Innovation management process
3.1 Search
3.2 Deep dive: Open innovation
3.3 Select
3.4 Implement
3.5 Capture
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Innovation management process – search
The first phase of the innovation process consists of generating a multitude
of innovative ideas
Source: Tidd/Bessant (2014)
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Innovation management process – search
What can trigger innovative ideas?
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Innovation management process – search
Impulses for innovative ideas can generally be exogenous or
endogenous
exogenous
• Market-pull through
 Changing customer behavior
 New offerings by competitors
• Technology-push
 New customer value due to new technology
• Regulatory-push/-pull
• Megatrends
• Growing competitive pressures
• Increased speed in changes in the corporate
environment
• …
endogenous
• (Perceived) problems with existing
products/services or …
• … (perceived) gaps between own and
competitive products/services …
• … leading to situation analysis and
identification of specific problem as
innovation impulse
• Crisis situations
• …
Requires continuous screening
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Innovation management process – search
Open innovation, Design thinking and co-creation dominate
compared to more traditional R&D
Source: PwC’s Innovation Benchmark; What operating models does your organization currently use to drive innovation? (Percentages denote the
number of companies using these innovation models.)
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Innovation management process – search
Within the search phase, there exist different steps and activities
a
Impulse for innovation
Determines the search field and
provides a guiding frame for the
search process
including analysis of initial situation
and identification of problem
b
c
d
“idea collection”
“idea generation”
Provides a long list of ideas to
address the identified
change/challenge/problem
Systematic registration and filing of innovative
ideas
Ensures the systematic
management and evaluation of all
potential ideas
Initial screening of ideas
Checks whether ideas address
initial objective and narrows list
down for more efficient process
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Innovation management process – search
Within the search phase, there exist different steps and activities
a
Impulse for innovation
Determines the search field and
provides a guiding frame for the
search process
including analysis of initial situation
and identification of problem
b
c
d
“idea collection”
“idea generation”
Provides a long list of ideas to
address the identified
change/challenge/problem
Systematic registration and filing of innovative
ideas
Ensures the systematic
management and evaluation of all
potential ideas
Initial screening of ideas
Checks whether ideas address
initial objective and narrows list
down for more efficient process
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Innovation management process – search
“Idea collection” and “idea generation” are two complementary processes
to generate a long list of innovative ideas
Idea collection
• Hypothesis: Impulses for solutions for
most problems already exist and only
need to be identified in a systematic
process
• Sources are customers, employees (R&D,
sales, customer service, …), competitors,
suppliers, (scientific) publications,
patents, general market research,
innovation portals, lead users,
innovation scouts, corporate venturing,
…
Idea generation
• Hypothesis: truly innovative ideas have to
be generated by using creative methods
• Sources are employees (R&D, sales,
customer service, …), customers, lead users,
innovation scouts, … which are involved in
some kind of creative idea generation
• Triggers for the creative idea generation
process can also stem from idea collection,
e.g. to pursue higher degree of newness or
develop business model innovation
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Innovation management process – search
What kind of tools/methodologies for idea
collection can you think of?
What would be appropriate when?
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Innovation management process – search
Example: Complaints management as source of innovative ideas
• Complaints management pinpoints the (perceived)
problems within the products and services a
corporation offers or with the communication
around the products/services
• Systematic complaints management shows the
most important areas for improvement and
potentially already incorporates impulses for
solutions (“I need/expect better/faster …”)
• Addressing customer complaints coupled with
respective follow-ups can increase customer loyalty
share of wallet and subsequently market share
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Innovation management process – search
Example: McDonalds – “Design your burger” by customers
~ 98.000
suggestions
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Innovation management process – search
Example: Tchibo: TchiboIdeas – own designs, workshops, product testing,
polls, …
• Founded in 2008
• > 10,000 members
• > 25 customer
ideas realized
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Innovation management process – search
Camping out with the customer – example Gillette in India
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Innovation management process – search
But limits to broad customer involvement are given by a certain stickiness
to current mindset and experience
“If I had asked people what they wanted,
they would have said faster horses.”
Henry Ford
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Innovation management process – search
Lead users face needs before the general market will do and benefit
significantly by obtaining a solution to those needs
• “Lead users” of a novel or enhanced product,
process or service were originally defined to
have the two following characteristics:
 Lead users face needs that will be general in a
market place – but face them months or years
before the bulk of that marketplace encounters
them and …
 Lead users are positioned to benefit significantly
by obtaining a solution to those needs
• Since lead users are familiar with conditions
which lie in the future for most others, they can
serve as a need-forecasting laboratory for
marketing research. Moreover, since lead users
often attempt to fill the need they experience,
they can provide new product concept and
design data as well.
Source: Eric von Hippel (1986), Image by MIT OpenCourseWare
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Innovation management process – search
Example: From employee suggestion schemes to high involvement
Intensity of continuously and wide-spread employee involvement
Basic employee
suggestion scheme
High involvement in
innovation
• Possibility for employees to make suggestions
for products/process improvements
• Culture of continuous improvement of processes and
products by all employees (kaizen)
• Ideally (monetary) incentive for realized
ideas
• Originally developed by Japanese companies receiving
millions of suggestions from employees; vast majority being
implemented*
 Toyota > 2 mill. suggestions p.a., ~ 35/worker and more than 50
million since introduction
 Toshiba ~ 4 mill. p.a., ~ 77/worker
 Kawasaki Heavy Industries ~ 7 mill. p.a. ~ 200/worker
 Nissan ~ 6 mill. p.a., ~ 150 per worker
• Potential savings in the order of 20% to 40% suggested by
empirical studies
• Large international surveys additionally report quality
improvements of 16%, lead time reductions of 15%, …
Source: Tidd/Bessant (2013)/(2014), * Participation rate of ~ 70% of workers, Adoption rate of suggestions of ~87%
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Innovation management process – search
Example: Kaizen at Toyota
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Innovation management process – search
Example: 3M – tapping the creative problem-solving skills of employees
• 3M encourages its employees to spend 15% of
their working time on their own projects and
to follow their own insights in pursuit of
problem-solving – continuously since 1948
• Twice a year, six to eight of the most interesting
ideas at 3M can receive Genesis Grants:
About $30,000 to $75,000 of seed money for 12 months of research to explore ideas that
don’t have the official financial backing of a business unit
• The most prominent ideas developed within the “15 Percent Time” are:
 Post-it notes: 3M scientist Art Fry used his 15 Percent Time in collaboration with other 3M innovators
to create the perfect bookmark for his church hymnal
 3M™ Trizact™ Abrasive: Self-resharpening abrasives that work like new for longer
 3M Display Film: New ways to bend and shape light affect everything from HDTVs to home lighting
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Innovation management process – search
Example: Ideas by employees – Microsoft Hackathon
Source Microsoft
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Innovation management process – search
Systematically moving outside of the cooperation: Open Innovation
See chapter 3.2 für details
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Innovation management process – search
“Idea collection” and “idea generation” are two complementary processes
to generate a long list of innovative ideas
Idea collection
• Hypothesis: Impulses for solutions for
most problems already exist and only
need to be identified in a systematic
process
• Sources are customers, employees (R&D,
sales, customer service, …), competitors,
suppliers, (scientific) publications,
patents, general market research,
innovation portals, lead users,
innovation scouts, corporate venturing,
…
Idea generation
• Hypothesis: truly innovative ideas have to
be generated by using creative methods
• Sources are employees (R&D, sales,
customer service, …), customers, lead users,
innovation scouts, … which are involved in
some kind of creative idea generation
• Triggers for the creative idea generation
process can also stem from idea collection,
e.g. to pursue higher degree of newness or
develop business model innovation
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Innovation management process – search
“Jobs to be done” Theory
Source: Christensen
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Innovation management process – search
What job does a milkshake do and what are its competitors?
Source: Christensen
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Innovation management process – search
Dos and don’ts for idea generation
Do:
Don’t:
•
•
•
•
•
•
•
•
•
•
•
•
develop broad idea
challenge everything
re-frame problem
multiple answers
consider in-action
identify obstacles
Source: Tidd/Bessant (2014)
collect detailed data
accept assumptions
tackle given problem
find the answer
confuse action & solution
focus on objectives
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Innovation management process – search
Creativity tools and methodologies to encourage out-of-the box and
innovative thinking include …
• Brainstorming
• Reverse brainstorming
• Synectics
• Brainwriting
• De Bono’s six thinking hats
• Attribute Listing, Morphological Analysis and Matrix Analysis
• Scamper/Osborn’s check list
• Job mapping
• …
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Innovation management process – search
Example: Job Mapping (1/3)
• The basic idea is to think about products and services as means for a customer to get a certain
job done
• To systematically improve these products/services and potentially generate completely
innovative ideas to fulfill the customer needs, these jobs are broken down in discrete steps
• All jobs have distinct beginnings and endings and comprise s set of process steps along the way,
hence, breaking down the jobs in discrete steps yields a process-based job map
• All jobs have essentially the same eight process steps: defining what the job requires, identifying
and locating needed inputs, preparing the components and the physical environment, confirming
that everything is ready, executing the task, monitoring the results and the environment, making
modifications and concluding the job
• The process map is then used as a basis for brainstorming or the application of other creativity
techniques make these individual steps better, faster or simply unnecessary
Source: based on Bettencourt/Ulwick (2008)
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Innovation management process – search
Example: Job Mapping (2/3)
Step
Customers …
Companies can innovate by …
Example
1. Define
Determine their
goals and plan
resources
Simplifying planning
Weight Watchers streamlines diet planning by
offering a system that doesn‘t require calorie
counting
2. Locate
Gather items and
information needed
to do the job
Making required inputs easier
to gather and ensuring that
they‘re available when and
where needed
U-Haul provides customers with prepackaged
moving kits containing the number and types of
boxes required
3. Prepare
Set up the
environment to do
the job
Making set-up less difficult and
creating guides to ensure
proper set-up of the work area
Bosch added adjustable levers to its circular saw to
accommodate common angels used by roofers to
cut wood
4. Confirm
Verify that they are
ready to do the job
Giving customers information
they need to confirm readiness
Oracles ProfitLogic merchandising optimization
software confirms optimal timing and level of a
store‘s markdown for each product
5. Execute
Carry out the job
Preventing problems or delays
Kimberly-Clark‘s Patient Warning System
automatically circulates heated water through
thermal pads placed on surgery patients to
maintain their normal body temperature during
surgery
Source: Bettencourt/Ulwick (2008)
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Innovation management process – search
Example: Job Mapping (3/3)
Step
Customers …
Companies can innovate by …
Example
6. Monitor
Assess whether the
job is being
successfully executed
Linking monitoring with
improved execution
Nike makes a running shoe containing a sensor that
communicated audio feedback about time,
distance, pace, and calories burned to a device
worn by the runner
7. Modify
Make alterations to
improve execution
Reducing the need to make
alterations and the number of
alterations needed
By automatically downloading and installing
updates, Microsoft’s operating system removes
hassles for computer users. People don’t have to
determine which updates are necessary, find the
updates , or ensure the updates are compatible
with their operating system
8. Conclude
Finish the job or
prepare to repeat it
Designing product that simplify
the process of concluding the
job
3M makes a wound dressing that stretches and
adheres only to itself – not to patent’s skin or
sutures. It thus offers a convenient way for medical
personnel to secure dressings at the conclusion of
treatment and then remove them after a wound
has healed
Source: Bettencourt/Ulwick (2008)
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Innovation management process – search
Exercise: Job mapping for a washing machine
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Innovation management process – search
Example: Job Mapping – steps
• Defining what the job requires
 dirty laundry, identification of (nature of) stains, device to clean it with, …
• Identifying and locating needed inputs
 machine, laundry, detergent, additional supplements, …
• Preparing the components and the physical environment
 use prewash treatment if necessary, loading machine, adding detergent and additional
supplements if needed, turning water and electricity on, setting temperature, time, program, …
• Confirming that everything is ready
• Executing the task
 starting the machine, machine cleaning laundry, …
• Monitoring the results and the environment
 take laundry out of machine, check whether stains are removed, …
• Making modifications
 adjust choice of detergent, supplement, program, …, restart, …
• Concluding the job
Source: based on Bettencourt/Ulwick (2008)
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Innovation management process – search
Within the search phase, there exist different steps and activities
Impulse for innovation
Determines the search field and
provides a guiding frame for the
search process
including analysis of initial situation
and identification of problem
a
b
c
“idea collection”
“idea generation”
Provides a long list of ideas to
address the identified
change/challenge/problem
Systematic registration and filing of innovative
ideas
Ensures the systematic
management and evaluation of all
potential ideas
Initial screening of ideas
Checks whether ideas address
initial objective and narrows list
down for more efficient process
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Innovation management process – search
Which information would you want to record?
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Innovation management process – search
Systematic and comprehensive collection and filing of ideas should at least
comprise …
• Title or topic of the idea
• Running registration number
• Person or department supplying the idea
• Date of idea generation
• Impact/value generation category, e.g. revenues, quality, cost, …
• Standardizes description, e.g. functional principle, area of application/target customer group,
(customer) value added, degree of newness. estimate of (monetary) benefits and costs as far as
possible, advantages and disadvantages, major milestones, speed of implementation,
interdependencies with other product/services/entities/projects, level of maturity, planning
horizon, …
• … in electronic way in a standardized format
Source: adapted from Vahs/Brem (2015) and based on own implemented solutions
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Innovation management process – search
Within the search phase, there exist different steps and activities
Impulse for innovation
Determines the search field and
provides a guiding frame for the
search process
including analysis of initial situation
and identification of problem
a
b
c
“idea collection”
“idea generation”
Provides a long list of ideas to
address the identified
change/challenge/problem
Systematic registration and filing of innovative
ideas
Ensures the systematic
management and evaluation of all
potential ideas
Initial screening of ideas
Checks whether ideas address
initial objective and narrows list
down for more efficient process
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Innovation Management
03
Innovation management process
3.1 Search
3.2 Deep dive: Open innovation
3.3 Select
3.4 Implement
3.5 Capture
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Open innovation
Beyond the own organization: Open innovation – the model (1/2)
• Open innovation can be understood as the antithesis of the traditional vertical integration
model where internal R&D activities lead to internally developed products that are then
distributed by the firm
• Open innovation is the use of purposive inflows and outflows of knowledge to
a) accelerate internal innovation and
b) expand the markets for external use of innovation
• Open Innovation assumes that firms can use external ideas as well as internal ideas and
internal and external paths to market to generate additional value
Source: Chesbrough (2005), published in Chesbrough (2006)
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Open innovation
Beyond the own organization: Open innovation – the model (2/2)
Source: Tidd/Bessant (2014) based on Chesbrough (2006)
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Open innovation
Open innovation – outside-in, inside-out and coupled processes
Source: Gassmann/Enkel (2004)
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Open innovation
Potential benefits and challenges of applying open innovation
Motivation
Tapping into
external knowledge
and leverage value
of external R&D
through joint
endeavors
Potential benefits
•
•
•
•
Focus on use of
ideas instead of
generation
•
•
Use of other party’s
experience
(outbound)
Source: based on Tidd/Bessant (2013)
•
•
Challenges
Increase pool of knowledge
Compensate for weak R&D skills/ low
internal knowledge
Can reduce cost and uncertainty of
internal R&D and increase depth and
breadth
No need to set up proprietary R&D
infrastructure in order to profit from it
•
•
More resources available for
identification, selection,
implementation and capture of ideas
Avoiding winner’s curse as first mover
and potentially more focus on business
model innovation
•
Potentially faster time to market
No/limited negative reputational
effects on core brand
•
•
•
•
•
•
•
•
Identify relevant knowledge sources
Systematically sharing and transferring this
knowledge and managing conditions and context
Negotiation of acceptable forms of IP licensees
Less potential for distinctive
capabilities/knowledge and differentiation
External R&D also available to competitors
Unintentional knowledge outflow
Managing control and ownership of resources
Need sufficient capabilities to successfully use
and adapt R&D/technology for value-adding
offerings
Limited potential for being first-mover
Limited potential for brand differentiation
Managing the creation and capture of value for
the own organization (retaining competitive
advantages, …)
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Open innovation
Open innovation – evidence from the last fifteen years
• Outside-In Open Innovation – which involves opening up a company’s own innovation processes
to many kinds of external inputs and contributions – has received widespread attention in
academic research and industry practice and has become widely accepted
• Many large and small corporations have implemented outside-in open innovation, e.g. GE, P&G,
BMW, Cisco, Metro, Siemens, …
• Some companies even build entire business models around open innovation, e.g. InnoCentive
• Important developments now are IP management as well as the stronger integration of outsidein open innovation in the innovation process for services where the trade-off between
standardization and customization is often more difficult than for tangible products
• Inside-Out Open Innovation on the other hand requires organizations to allow unused and
under-utilized ideas to go outside the organization for others to employ in their businesses. This
portion of the model is less well understood and still at an early level of development
Source: Interview with Henry Chesbrough on “Open Innovation Past and Present” by Innovation Solutions, , Vahs/Brem (2015), Tidd/Bessant (2013)/(2014),
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Open innovation
Open innovation – special view on inside-out
• Exploitation outside the company’s boundaries means generating profits by licensing IP and/or
multiplying technology by transferring ideas to other companies and commercializing ideas in
different industries (cross industry innovation)
• The pharmaceutical industry (e.g. Norvartis Pharma, Pfizer or Roche) is specifically known for
substances that were initially aimed at one ailment, but became better known for different
applications. Examples are Viagra, initially developed to control blood pressure, Botox, developed
as a nerve toxin, and Erythropoitin (EPO), developed as a blood diluent becoming a doping
substance in professional cycling and currently being used in cancer therapy
• Companies focusing on the inside-out process are mainly basic research-driven companies with
wide applications. Also branding can be a reason to focus on the inside-out process when there
are core competencies for development and commercialization but no brand for products in the
intended market
• An example is Ascom, an international provider of services for telecommunications and
integrated voice and data communications, joining forces with sports utilities manufacturer
Mammut in order to develop the lightest and most modern avalanche search equipment. Ascom
is using Mammut distribution channels and brand in order to commercialize the product
SourceGassmann/Enkel (2014)
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Open innovation
Open innovation – Shell
Source Shell
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Open innovation
Open innovation – Adidas
Source Adidas
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Open innovation
Open innovation – GE’s ecomagination initiative as an early successful
example of open innovation (1/2)
• GE’s energy business was noticing a lot of venture investment going into the energy space
regarding small solutions and renewable energies
• GE created a process and
 committed $100 million to put out a call for proposals for ideas that could be used to start up new
ventures in green and renewable energies
 got four venture capital firms to put in another $100 million and shared evaluation and vetting
process even though each of the five parties had their own independent investment authority.
 got about 70,000 contributors over the course of the project – making comments, suggestions,
submitting ideas etc. via a dedicated website
• GE ended up with about 23 ventures getting funded. Additionally, GE decided to create a new
title – Community Innovation Manager at GE – to keep the community of 70,000
contributors alive and engaged as an active new resource for GE
Source: adapted from November 2012 interview with Henry Chesbrough on knowledge.ckgsb.edu.cn
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Open innovation
Open innovation – GE’s ecomagination initiative as an early successful
example of open innovation (2/2)
AWARDS & OPPORTUNITIES
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Source: www.geinnovationlab.com
A total prize pool of up to $35,000 USD available
in the form of a cash award (of $10,000 USD) and
developmental grant cash prize (of $25,000 USD),
which will be awarded by …
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