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Lecture given by Anna Sabidussi on the 16th of June for MBA candidates
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INNOVATION
Anna Sabidussi
Some facts and figures…
29%
of new business founded in 1992
were still alive in 2002.
• Source: Shane (2008)
Some facts and figures…
1/3
of companies listed in the
FORTUNE 500 in 1970 had
disappeared by 1983.
Mapping the innovation space
DE
GR
EE
ATTRIBUTE
Mapping the innovation space
Product
Revolution
Product
Evolution
Market
Penetration
Process
Efficiency
Process
Change
Process Re-engineering Strategic
Transformation
Strategic Development
Strategic
Focus
Product-Service
Process Strategic
Ra
dic
al
Inc
rem
en
tal
Cu
rre
nt
Source: Ahmed and Shepherd, 2010
Mapping the innovation space
• Disruptive innovation (source: Clayton Christensen)
• Target overshot customers or non-customers;
• Prioritize good-enough;
• Do what established competitors don’t want to do,
can’t do or are uninterested in doing.
Source: Anthony, Johnson, Sinfield and Altman, 2008
Mapping the innovation space
• Business Model Innovation canvas (Osterwalder and Pigneur)
• NYTD’s organizational evolution
High
High
Low
LowAbility to forget
Ab
ility
to b
orr
ow
Unsopported
Integrated
(1995)
Distinct but
linked (2004)
Isolated (1999)
Source: Govindarajan and Trimble, 2005
INNOVATION NETWORK
R&D partnerships in software 1970-1979,
MERIT-CATI
Source: Cloodt et al. 2010
R&D partnerships in software 1995-1999,
MERIT-CATI
0.0 1.0 2.0 3.0 4.0 5.0
Monitoring
Knowledge
Uncertainty
Cost
Time-to-Market*
Market entry
SMEs
LARGE
Relative importance of external sourcing drivers
0.0 1.0 2.0 3.0 4.0 5.0
Monitoring**
Knowledge
Uncertainty
Cost
Time-to -market
Market entry
Large average
Large best in class
Source: Sabidussi, 2009
Source: Belderbos, Duysters and Sabidussi, 2012
Cooperation …
Performance implications of cooperation
0
10
20
30
40
50
60
70
Patents Sales/New Products Economic Indicators R&D inputs Process Innovation
positive
negative
neutral
TIME HORIZON
CO
NT
RO
L
SHORT LONG
LOW
HIGH
Acquisition
Licensing
Alliance
CVC
Joint Ventures
… and beyond …
Innovation strategy RequirementsUpsides
Recruiting andRetaining superior
Human capital
Strategic Alliances
Internal R&D Spending
Acquisitions
Downsides
-Organic growth isSlower-Challenge of Identifying and valuing superiorhuman capital.
-Potential loss of IP control-Challenge of alignment of goals-Shared returns
-Full risk exposure-Long time horizon-Uncertain returns
-Risk of overpaying-Cultural integration-Involves relying on others forinnovation
-Better control of IP-Long term growth focus-Difficult for competitorsto imitate
-Shared riskMultiple, small-scaleinvestments providestrategic options-Faster than internalinternal development
-Internalization of skillsand capabilities- Full capture of returns
-Faster than growingorganically-Acquire innovativetechnologies before startupsbecome competitors
-Astute strategic humanResource management- Organizational flexibility
Dedicated functionfor the managementof partnerships
-Culture of risk tolerance-Organizational flexibility-Long term commitment
Capability to identifyand assimilate acquisition targets
Source: Frank Rothaermel and A. Hess. MITSLoan management review spring 2010
Examples
-Google-Merk-Goldman Sachs
-IBM-Eli Lilly-Oracle-Procter & Gamble
-Apple-Intel-BMW-HP
-Cisco-GE-Microsoft
Non-Stars Stars R&D Alliances Acquisitions
Non-stars
Stars
R&D
Alliances
Acquisitions
Source: Frank Rothaermel and A. Hess. MITSLoan management review spring 2010
Technologychange
CorporateStrategy shift
Marketdevelopment
yes
Update totalportfolio
Governance choiceselection
t= t0 + ∆∆∆∆t
Mayor Evolutions ?
no
yes
Portfolio Balance
Internal sourcing
Vs. external
sourcing ?
EX
TE
RN
AL
INTERNAL
B2B ?OTHER
no
Individual GC Assessment
(risk-return profile)
Startt= t0
1
2
3
4
Source: Sabidussi et al., 2011