Presentation on theme: "Innovation Management"— Presentation transcript:
1 Innovation Management Kevin O’BrienStrategic Alliances
2 Learning ObjectivesUnderstand the reasons for increasing use of strategic alliancesRecognise different forms of strategic allianceIdentify factors critical to the success of strategic alliancesAppreciate the risks and limitations of strategic alliances
3 Definition of strategic alliance A strategic alliance is an agreement between two ormore partners to share knowledge or resources,which could be beneficial to all parties involved (Vyas et al., 1995).
4 Reasons for Entering a Strategic Alliance Improved access to capital and new businessGreater technical critical massShared risk and liabilityBetter relationships with strategic partnersTechnology transfer benefitsReduce R&D costsUse of distribution skillsAccess to marketing strengthsAccess to technologyStandardisationBy-product utilisationManagement training
5 Fall of the ‘go-it-alone’ strategy Increased levels of competitionIncreased complexity of products and productionWidening technology baseDramatically shortened product life-cyclesPressure to reduce npd timeNeed to manage market and technological uncertainty
6 Rise of the ‘octopus’ strategy Competitive advantage often resides in sets of firms acting together:European Airbus strategic allianceVHS alliance between JVC, Sharp, Toshiba, RCAEven IBM has forsaken go-it-alone strategy. Alliances with Toshiba, Microsoft, Siemens, HP, Cisco, Real Networks, & many more ……Octopus strategy (Vyas et al., 1995)From 1976 to 1987, the annual number of new joint ventures rose six-fold; three-quarters are in high-technology industries (Lewis, 1990).
7 JVC’s Alliance for VHS Matsushita Matsushita Marketing Product DevelopmentMatsushitaMatsushitaProduction
8 JVC’s VHS JVC with VHS (video recording format): competing with Sony’s Betamax to set industry standardVHS licensed to other Japanese video recorder manufacturersjoint ventures for marketing in Europe (Thorn-EMI, Thomson, Telefunken)supplied RCA-branded video recorders for the US market
9 European AirbusAerospatialeCASABritish AerospaceDeutsche Airbus
10 Rise of the ‘octopus’ strategy Competitive advantage often resides in sets of firms acting together:European Airbus strategic allianceVHS alliance between JVC, Sharp, Toshiba, RCAEven IBM has forsaken go-it-alone strategy. Alliances with Toshiba, Microsoft, Siemens, HP, Cisco, Real Networks, & many more ……Octopus strategy (Vyas et al., 1995)From 1976 to 1987, the annual number of new joint ventures rose six-fold; three-quarters are in high-technology industries (Lewis, 1990).
11 Benefits of strategic alliances Opportunities to learn & acquire new technologiesAccess to complementary technological resources and capabilities that reside in other firmsAccess to new marketsAccess to resources that can enhance the competitive position of the firm (e.g. through minimising costs)Opportunities to influence or control technological standards(Dyer & Singh, 2000)
12 Potential Alliance Partners SuppliersGovernmentComplementaryFirmsFirmCompetitorsFacilitatorsAcademiaCustomersStrategic Business Environment(Chan & Heide, 1993)
13 Technology alliancesStrategic alliances can occur intra-industry or inter-industry.Faulkner (1995); Conway & Stewart (1998) identify seven generic types of strategic alliance:LicensingSupplier relationsJoint ventureCollaboration (non-joint ventures)R&D ConsortiaIndustry ClustersInnovation networks
14 Evolution of alliance strategy HighLowTechnological and demand uncertaintyWindowstrategyTime optionsPositioning(Dyer & Singh, 2000)
15 Elements of an alliance WindowstrategyOptionsPositioningStrategic objectivesLearningMonitoringBuilding platformsScale-based advantagesKey success factorsEffective trackingKnowledge absorptionScalabilityAbility to evaluate technologiesScale, operational effectivenessAbility to identify complementary resourcesKey difficultiesLeakage of knowledgeValue of optionSpeed and responsiveness (partner dependence)(Dyer & Singh, 2000)
17 Movie-Making Value Chain ComplementaryInnovatorsVCR/DVDCDProjectionComputingSuppliersActressesActorsCamerasManufacturersTime WarnerMCA/UniversalDisneyParamountDistributionChannelCinemasTV networksCable TVSatellite TVVideo storesCustomersMovie viewers(Adapted from Affuah, 2003, p188)
18 Disney Acquires Pixar Disney buys Pixar in $7.4bn deal Walt Disney has agreed a $7.4bn (£4.1bn) deal to buy Pixar, the animation firm behind films including Toy Story and The Incredibles.Disney's distribution deal with Pixar was due to end this year, and it seemed the two would split after failing to agree on how to divide future profits.The loss of Pixar would have been a blow for Disney, as demand for the company's films, as well as DVDs, videos and merchandise, has proved to be very strong.Disney's earnings from Pixar's six films are estimated to be about $3.2bn.(Source: bbc.co.uk, 24th January 2006)"Disney and Pixar can now collaborate without the barriers that come from two different companies with two different sets of shareholders," Mr Jobs said."With this transaction, we welcome and embrace Pixar's unique culture, which for two decades has fostered some of the most innovative and successful films in history," Mr Iger said.
19 Critical success factors Creating knowledge sharing routinesCodifiable knowledge, ‘know-what’Tacit knowledge, ‘know-how’Choosing complementary partnersStrategic complementarityAssets, distinctive resourcesOrganisational complementarityDecision processes, information/control systems, cultureBuilding and managing co-specialised assetsNew assets created as a result of the allianceEstablishing effective governance processesFormal (legal, financial), informal (trust)(Dyer & Singh, 1998)
20 Risks of strategic alliances Can lead to:Competition rather than co-operationLoss of competitive knowledgeConflicts resulting from incompatible cultures and objectivesReduced management controlIncreased complexityLoss of autonomyInformation asymmetryMay harm a firm’s ability to innovate
21 ReferencesChan, P.S. and Heide, D. (1993) Strategic alliances in technology: key competitive weapon, Advanced Management Journal, 58(4), 9-17.Conway, S. and Stewart, F. (1998) Mapping innovation networks, International Journal of Innovation Management, 2(2),Dyer, J.H. and Singh, H. (1998) The relational view: cooperative strategy and sources of interorganizational competitive advantage, Academy of Management Review, 23(4),Dyer, J.H. and Singh, H. (2000) Using alliances to build competitive advantage in emerging technologies, in Day, G.S. and Schoemaker, P.J.H., Wharton on Managing Emerging Technologies, New York: Wiley.Faulkner, D. (1995) International Strategic Alliances, Maidenhead; McGraw-Hill.Langrish, J., Evans, W.G. and Jerans, F.R. (1982) Wealth from Knowledge, London: Macmillan.Lewis, J.D. (1990) Partnerships for Profit, New York: Free Press.Vyas, N.M., Shelburn, W.L. and Rogers, D.C. (1995) An analysis of strategic alliances: forms, functions and framework, Journal of Business and Industrial Marketing, 10(3),