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1 Introduction to the world of radical innovation Book Summary / 2014.

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1 1 Introduction to the world of radical innovation Book Summary / 2014

2 1. Innovation terminology Innovation Innovation is a commercialized invention. Typical types of innovation are product innovation, service innovation and business model innovation. Differences between incremental, discontinuous, and radical innovation? They differ in novelty, uncertainty, and risk. Discontinuous or radical innovation can be a product, a service, or a combination. Also, a new business model or a process may fulfill the characteristicts of discontinuous or radical innovation. 2

3 Book Summary / 2014 Comparison between incremental and radical innovation 3 Leifer et al. (2000)

4 Book Summary / 2014 Comparison between incremental and radical innovation 4 Leifer et al. (2000)

5 Book Summary / 2014 2. Identify changes in business environment and barriers to renewal Barriers Organizations tend to have several barriers to renewal, regarding absorptive capacity, established mindsets, and risk-taking, to mention a few. Changes in the business environment create room for radical innovations, but require abilities to overstep the barriers. 5 IDENTIFY.

6 Book Summary / 2014 Five barriers of birth and progress of radical innovations in organizations 6 1. Nascent Barrier Senior management turnover Personnel changes 2. Structural Barrier Lack of mandatory infrastructure Lack of adequate follow-through 3. Mindset Barrier Inability to unlearn Learning trap Lack of distinctive competencies Obsolete mental models Theories in use Not-invented-here Assink (2006)

7 Book Summary / 2014 Five barriers of birth and progress of radical innovations in organizations 7 4. Adoption Barrier Dominant designs Path dependency Successful concepts Organizational dualism Excessive bureaucracy Stifling of the status quo 5. Risk Barrier High risks and uncertainty Lack of realistic revenue and ROI expectation Risk-averse climate Unwillingness to cannibalize Assink (2006)

8 Book Summary / 2014 3. Ensure that strategy supports radical innovations Strategic flexibility Triggering radical innovations requires strategic flexibility and renewal. In a changing business environment strategy needs to stretch and constant renewal is a demand. The renewal must be justified even when the markets change irrationally. Adding creativity to strategy work, breaking traditional boundaries and bringing new insights to decision making can give rise to strategic flexibility. 8 ENSURE.

9 Book Summary / 2014 Best practices to create strategic flexibility 9 1. Renewing the composition of people taking part in strategy work 2. Bringing new ideas systematically to strategy process. 3. Idea competitions and foresight practices 4. Proactivity 5. Creating alternative strategies 6. Exploiting new user and customer driven approaches 7. Breaking routines

10 Book Summary / 2014 4. Develop enabling innovation culture Creative development Moving towards culture of radical innovations requires new management approaches, new practices, and new competences. Innovativeness always calls for creativity, but even more crucial is to ensure the implementation of radical ideas. Make sure that abilities to implement exist. 10 DEVELOP.

11 Book Summary / 2014 Analyzing innovation culture 11 1. How much attention radical innovations currently get and how they are communicated? How are their selection and development supported? 2. How is the personnel encouraged to think outside-the-box? 3. Are issues of trust and feeling safe given special notice? 4. What kind of practices does current decision making culture carry? 5. How are the abilities of making decisions and executing radical innovations preserved?

12 Book Summary / 2014 5. Renew search and selection practices Importance of foresight Radical innovations require new search and selection practices to identify and take advantage of new opportunities. Foresight work has been recognized as a key practice to foster the renewal of Finnish companies. 12 RENEW.

13 Book Summary / 2014 Practices for finding and identifying new opportunities 13 Bessant & von Stamm (2007)

14 Book Summary / 2014 Examples of search strategies 14 Webasto, an automotive supplier, has an in-official, ‘idea hunter’, an enthusiastic long-term employee who has created this job for himself. He provides varied input into the company’s pre-development and product management. In addition they have trend scouts who go to trade fairs regularly and capture latest developments in the industry Webasto supplies and parts competitors produce. Webasto At Bang & Olufsen, the audio and video company, a number of ‘inspiration clubs’ have been formed, each with a chair who has the role of facilitator and driver. The setup ensures that ideas from the whole organisation are identified and elaborated. Bang & Olufsen Bessant & von Stamm (2007)

15 Book Summary / 2014 Selection practices for making the right choices 15 Bessant et al. (2009)

16 Book Summary / 2014 Examples of selection practices 16 BBC Backstage tries to do with new media development what the open source community did with software development. The model is deceptively simple – developers are invited to make free use of various elements of the BBC’s site, such as live news feeds, weather, TV listings and so on, to integrate and shape innovative applications. The strap line is ‘use our stuff to build your stuff. BBC Backstage For example, one basic element of British Telecoms’ Wakaba programme (Japanese for ‘green shoots’), designed to support innovative ideas within the company, is the creation of partnerships. Each project has a senior management mentor associated with it. Every eight weeks on-going innovation projects are reviewed by a jury of top executives. The mentors represented at these sessions provide advice and guidance to help shape and take ideas forward. This process ensures that top management is both aware and involved in the innovation activities British Telecom Bessant et al. (2009)

17 Book Summary / 2014 6. Implement experimental development Testing the ideas Development based on experimentations and iterations supports radical innovations. Experimental development means new evaluation methods, implementation teams, and continuous testing of ideas in real environment. Customers’ role is central in experimental development. New approaches for commerzialization need to be found and taken into account, whether you are making a new product, service, or technology. 17 1. Systematic evaluation 2. Continuous testing and iteration 3. Cross-functional and committed implementation teams

18 Book Summary / 2014 Linear and experimental development 18 Linear development Experimental development

19 Book Summary / 2014 How to involve customer into the development process? 19 1. Analyzing the current state – what are we currently doing? 2. Objectives of customer integration – what do we want to accomplish? 3. Motivating the customer – how can we foster the interest of our customers and end-users to participate in the development? 4. Evaluating the customers’ goals - how do we ensure that the customers are satisfied? 5. Making customer integration part of R&D – how do we organize the development work with our customers? 6. How do we evaluate the results of collaboration work and the value- added for our own business?

20 Book Summary / 2014 7. Measure the right things Radical innovation projects need indicators for evaluating uncertainty and potential for success. Measurement is a part of all parts of innovation process and its management. Measurement has a significant effect on innovation culture, motivation of the employees, and the sense of safety. 20 MEASURE.

21 Book Summary / 2014 Risk-reward diagram for managing R&D portfolio 21 Cooper et al. (2001)

22 Book Summary / 2014 Five dimensions of measuring innovation 22 1. Input information about the innovation front-end. 2. Evaluating efficiency and alignment to budget and project plan at the development stage. 3. The success, payback period, and profit of a single innovation project. 4. Support from the social environment. Relevant especially for radical innovation. 5. Extent of customer involvement in R&D. 6. Support from the physical environment.

23 Book Summary / 2014 8. Organize accurately 23 Goals of radical innovation can be supported by choosing the right organization structure. The closer the radical innovation development is to incremental improvement work the more the existing business determines its direction. ORGANIZE.

24 Book Summary / 2014 Link between strategy and organizational structure in radical innovation 24

25 Book Summary / 2014 Link between strategy and organizational structure in radical innovation 25

26 Book Summary / 2014 9. Utilize your stakeholders Radical innovations have significant impacts on the stakeholders of a firm. Similarly, the stakeholders may influence the firm’s operations. Identifying relevant stakeholders is the beginning to benefiting from interacting with them. Genuine dialog with the stakeholders makes possible to acquire valuable input from them. Utilizing the acquired information requires new capabilities from the organization. 26 UTILIZE.

27 Book Summary / 2014 Establishing and maintaining a dialogue 27 1. Connecting with stakeholders First step to collaboration is identifying and establishing connections with the stakeholders. The extent of networks and the firm’s position in them are key issues here. 2. Expectations of value creation from collaboration Parties of the collaboration must come to an agreement that they are able to create new value together. 3. Motivation Parties of the collaboration must agree on how the created value is distributed between them. 4. Ability to utilize new knowledge and competences Firms must have methods to integrate new knowledge and utilize it in its business.

28 Book Summary / 2014 10. Renew your services Service innovation is one of the most potential ways to strenghten the competitiveness of industrial firms in the global markets. Top managers and their established mental models are the biggest obstacle in launching new service business. Extending to service business often requires a thorough change process which can take 2-5 years. 28 RENEW.

29 Book Summary / 2014 Solution business development process 29 1. Analysing business opportunities 2. Strenghtening the customer interface 3. Improving Back-end operations 4. Redirecting the business

30 Book Summary / 2014 30 INNOVATE.

31 31 References Assink, M. (2006). Inhibitors of disruptive innovation capability: a conceptual model. European Journal of Innovation Management, 9(2), 215–233. Bessant, J., & von Stamm, B. (2006). Twelve search strategies that could save your organization. AIM Research. Bessant, J., Möslein, K., Neyer, A.-K., Piller, F., & von Stamm, Bettina. (2009). Radical Innovation: Making the Right Bets. AIM Research. Cooper, R. G., Edgett, S. J., & Kleinschmidt, E. J. (2001). Portfolio Management for New Products. Basic Books. Leifer, R., McDermott, C. M., O’Connor, G. C., Peters, L. S., Rice, M., & Veryzer, R. W. (2000). Radical innovation: How mature companies can outsmart upstarts. Boston, Massachusetts: Harvard Business Press.

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