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“Innovation and change”
Session 8: “Innovation and change” Knut Haanæs Associate Professor Norwegian School of Management - BI Knut Haanæs
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Strategy, structure, innovation and change
Exploration vs. exploitation 3M case discussion Summary Knut Haanæs
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Questions for 3M case Describe the evolution, and the main changes that take place, in 3M during the case period? How would you characterize 3M's main sources of competitive advantage at the end of the case? In your opinion, how sustanable are their current sources of competitive advantage? Suggest a future strategy for 3M, taking into account their market situation, their core competencies, their internal culture and their vision and philosophy. Knut Haanæs
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Strategy, structure, innovation and change
Exploration vs. exploitation 3M case discussion Summary Knut Haanæs
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A fundamental trade-off
Increased innovation EXPLORATION EXPANSION “Best practice” kurve EXPLOITATION Increased efficiency Knut Haanæs
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Problems with exploration
Time problem Space problem (payoff not always in same place – or organization) Optimal level of exploration depends on time horizon. The longer the time perspective the more you should search (explore). Knut Haanæs
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Problem with exploitation
Reinforcement - It is tempting to stick to present solutions, and the only way to build competence Time problem - Over time change will make current solutions obsolete Knut Haanæs
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Explore when... Long time-horizon
Problems provide fast, reliable feed-back Low risk of catastrophe from exploration High probability of catastrophic failure with the status quo Competencies to absorb knowledge and appropriate value Rich search environment Knut Haanæs
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Innovation requirements
Time Long time perspective Persistence Willingness to take risks Technical risks Competence risk (does not fit in) Market risk (appropriated by others) Knut Haanæs
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EXPLOIT EXPAND EXPLORE Mobility of critical resources
High Operational competition EXPAND EXPLORE Contractual competition Mobility of critical resources Entrepreneurial competition Time Low Industry development over time Kilde: Haanes og Fjeldstad Knut Haanæs
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Search and environment
Both success and failure lead to search Success-induced search is risky, more distant and with lower odds of success Failure-induced search increases efficiency and decreases foolishness Outcome depends on richness of search environment In technologically young worlds, success leads to success In technologically mature worlds, success leads to failure WE NEED TO BE FOOLISH ENOUGH TO LOOK AND LUCKY ENOUGH TO FIND SOMETHING!!! March (1994) Knut Haanæs
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Confusions of adaptation
Most new ideas are bad ideas and increasingly so. Good novel ideas are indistinguishable from crazy ones (in short term) Persistence in pursuing new ideas is essential Often inadequate persistence Abandon new ideas too rapidly Focus practice on the successful alternative (success trap) Process of genius and craziness are related Knowledge destroys creativity (which is on average a good idea) March (1994) Knut Haanæs
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Project mix Derivatives Alliances Platforms Breakthrough R&D
Source: Clark and Wheelwright (1993) Knut Haanæs
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Strategy, structure, innovation and change
Exploration vs. exploitation 3M case discussion Summary Knut Haanæs
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Summary - Issues that we should (briefly) revisit!
The synergies and corporate strategy The network form organization …... Knut Haanæs
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Does this look different today?
Industry (competitive forces) TIME AND PROCESS Activities (value creation) Resources (competences) Knut Haanæs
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