Innovation and Its Challenges

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Questions and Answers

What percentage of revenues does AkzoNobel aim to come from breakthrough innovations in 2018?

18%

12%

20%

15% (correct)

What is one of the key mechanisms for organizing radical innovation?

Project-based management

Team-centric collaboration

Organizational separation (correct)

Flat organizational structure

Which type of team has a high risk of conflict but high quality of decision?

Leadercentric teams

Functional teams

Teamcentric teams (correct)

Management teams

What does the term 'strategic schizophrenia' refer to?

Balancing core business and new innovations Signup and view all the answers

What is identified as an innovation killer related to organizational structure?

Lack of organizational separation for radical innovation Signup and view all the answers

Which role in a leadership team focuses on connecting disparate parts?

Integrator Signup and view all the answers

What is one condition that is key for team-centric teams to be effective?

High interpersonal skills Signup and view all the answers

What is the goal of DSM regarding breakthrough innovations in 2018?

20% of revenues Signup and view all the answers

What characterizes the Fluid Phase in organizations during innovation?

Frequent redefinition of tasks Signup and view all the answers

Which type of innovation typically results in knowledge and competencies becoming obsolete?

Competence destroying innovation Signup and view all the answers

How do organizations transition from a Fluid Phase to a Specific Phase?

By establishing more hierarchy and control Signup and view all the answers

What is a key implication of digital disruption on organizations?

Acceleration of innovations Signup and view all the answers

What defines the characteristics of the Specific Phase in an organization?

Stable tasks with top-down communication Signup and view all the answers

What is an example of a 3rd Gen technology in the context of innovation discontinuities?

ChatGPT for content creation Signup and view all the answers

What organizational behavior trend is likely to occur as firms move to a Specific Phase?

Shift towards rigid processes Signup and view all the answers

Which factor represents a challenge for firms reacting to innovation?

Responding to rapid market changes Signup and view all the answers

What can be a consequence of a company culture that prioritizes inflexibility in resource allocation?

Prevents the allocation of resources toward innovative ideas Signup and view all the answers

Which cognitive barrier is associated with avoiding failures?

Action bias Signup and view all the answers

What can lead to resistance against innovation among top management team members?

Fear of lacking credibility Signup and view all the answers

What is a potential effect of conformity-driven decision-making in a company?

Suppression of willingness to challenge existing practices Signup and view all the answers

Which of the following can contribute to employees' lack of empowerment in innovation?

Strict adherence to existing practices Signup and view all the answers

What does loss aversion bias in innovation entail?

Preference for maintaining existing gains over pursuing new opportunities Signup and view all the answers

What is a significant economic cause that can lead to the failure to innovate?

Uncertainty about the impact on core business Signup and view all the answers

How can culture that prioritizes standardization negatively impact innovation?

It discourages risk-taking and experimentation Signup and view all the answers

In what type of settings does AI tend to perform better?

Structured methodologies with less interconnected tasks Signup and view all the answers

What is a primary challenge faced by incumbent firms regarding innovation?

Risk aversion due to established power dynamics Signup and view all the answers

Which of the following is a suggested solution to cognitive challenges in innovation?

Scenario planning Signup and view all the answers

What is a distinct quality of ideas generated by AI in creativity tasks?

Higher average quality with lower variability Signup and view all the answers

When referring to 'competitive demands' in a business context, this implies which of the following?

Balancing multiple tasks and priorities Signup and view all the answers

In the context of entrepreneurial challenges in Kenya, what type of tasks are more likely to fall outside the effective range of AI?

Creative brainstorming sessions Signup and view all the answers

What is highlighted as a negative aspect faced by companies during the innovation process?

Resistance to change within organizational culture Signup and view all the answers

What effect does 'shifting attention continuously' have on entrepreneurial tasks?

Complicates prioritization of tasks Signup and view all the answers

What does organizational identity primarily focus on regarding an organization's perception?

The category of organizations to which the organization belongs. Signup and view all the answers

What is an essential core question regarding organizational role identity?

What is our central and distinctive impact on our category? Signup and view all the answers

Which term best describes Volvo's identity as it shapes the automotive industry's future?

Shaper Signup and view all the answers

What is a key concern for Volvo in the realm of digital innovation?

Integration of innovations into their existing corporate structure. Signup and view all the answers

What does integration of innovations most require within an organization?

High level of cognitive integration. Signup and view all the answers

How does Volvo's Connectivity Hub relate to team structure?

It is considered a heavy weight team for focused innovation. Signup and view all the answers

What condition is NOT necessary for effective integration of innovations?

Clear individual goals for team members. Signup and view all the answers

Which aspect is crucial for achieving cognitive integration in an organization?

Exchange of knowledge flows between subunits. Signup and view all the answers

Study Notes

Why Innovate and Why So Difficult?

Innovation is vital for survival in a dynamic environment, as per Darwin's theory of evolution.
Product and process innovations are crucial, with digitalization driving new business models in services and technology.
The Product Life Cycle (S-Curve) demonstrates the importance of innovation.
- Fluid Phase: Emphasizes frequent task redefinition, limited hierarchy, and high lateral communication.
- Specific Phase: Focuses on stable tasks, increased hierarchy for coordination and control, and top-down communication.
Innovation Discontinuities:
- Competence Enhancing: Large improvements in price/performance built on existing knowledge, introducing new products or processes.
- Competence Destroying: Large improvements in price/performance that make existing knowledge obsolete, requiring entirely different knowledge and competencies.
Digital Disruption: Rapidly accelerates innovation and invention, making "big" companies less dominant, benefiting new entrants.
AI's Impact: AI excels in structured tasks but struggles with complex or unpredictable situations, requiring human intervention for creativity and strategic thinking.
Entrepreneurs in Kenya: Field experiments revealed that AI can generate higher-quality ideas but lacks the novelty and potential for breakthroughs found in human ideas.
Strategy & Leadership:
- Positive Aspects: Responding to financial pressures for high-risk, high-return investments, embracing technological changes.
- Negative Aspects: Cognitive distance between innovation and core business, resistance to disrupting established power dynamics (social-emotional concerns), and fear of losing control.
Scenario Planning: Crucial for anticipating future disruptive changes and exploring their implications for organizational strategies and decisions.
Strategic Schizophrenia: Embracing the paradox of balancing core business needs with the pursuit of new innovations, leading to a "sweet spot of optionality."
Innovation Ambition Matrix: A framework for managing different types of innovations (breakthrough, adjacent, incremental), with corresponding organizational structures and approaches.

Managing Paradoxes in Top Management Teams

Leadercentric Teams:
- Advocate roles are assigned to different team members for specific agendas or views.
- Integrator role is typically fulfilled by the senior leader (e.g., CEO) to facilitate a balance between diverging perspectives.
- Lower risk of conflict but potentially lower quality decisions.
Teamcentric Teams:
- Each team member acts as both an advocate and integrator.
- Fosters high member-to-member interaction, leading to a higher risk of conflict but ultimately leading to potentially higher-quality decisions.
Key Conditions for Teamcentric Teams: High interpersonal skills, psychological safety, and common fate reward systems.

Innovation Killers: Strategy, Structure, and Systems

Structure:
- Lack of organizational separation for radical innovation: Radical innovation requires dedicated structures (e.g., business incubators) to flourish.
- Insufficient attention or overwhelming support from the existing organization can hinder innovation.
Economic Causes:
- Uncertainty about the attractiveness of innovation for the core business or vice versa.
- Requiring the core business to relinquish existing routines, resources, or revenues.
Cognitive Causes:
- Significant cognitive distance between innovation and the core business.
Social-Emotional Causes:
- Not Saying It:
  - Fear of undermining personal identities (ego-threatening).
  - Concern about loss of credibility.
  - Resistance to changes in leadership style.
- Not Doing It:
  - Strong local identities within both innovation teams and the core business.
  - An "us vs. them" mentality.
Culture:
- Inflexibility in resource allocation and resistance to change, prioritizing the status quo.
- Emphasis on standardization over innovation, discouraging experimentation and risk-taking.
- Conformity-driven decision-making stifles creative thinking and challenges to existing practices.
Execution:
- Avoiding Failures: Moving too quickly (lack of time) or too slowly, denying failures, and delaying upscaling and market introduction.
- Denying Failures: Escalating commitment due to sunk costs bias.
Leadership:
- Protecting Sales & Investments: Ridiculing early-stage innovations, resisting later-stage innovations, and procrastination in implementation.
- Economic Barriers: Loss aversion bias (protecting sales) and sunk costs bias (protecting investments).
- Cognitive Barriers: Failure myopia, action bias, and escalation of commitment.
- Social-Emotional Barriers: Fear of scapegoating, viewing failure as a personal fault.
People:
- Lack of empowerment for employees to contribute to innovative ideas.

Organizational Identity

Organizational Domain Identity:
- Pertains to members' perceptions of the category of organizations their company belongs to.
- Key questions: "To which category of organizations do we essentially belong?" and "What is our competitive home turf?"
Organizational Role Identity:
- Concerns members' perceptions of their organization's impact on the development of its category and its relationship to other actors.
- Key questions: "Who are we with regard to our central and distinctive impact on the overall development of our category?" and "What is our essential relation to other actors in our category?"

Volvo's Identity as a Shaper

Volvo positions itself as a "shaper" in the automotive industry, actively driving change and shaping the future of the sector, particularly during times of disruption.

Four Key Concerns for Volvo in Digital Innovation

Internal Resistance: Difficulty in balancing new initiatives with core business operations.
Legacy Mindset: Challenging outdated beliefs and habits resistant to digital transformation.
Strategic Ambiguity: Navigating the complexities of innovation strategy and aligning it with core business goals.
Organizational Structure: Adapting organizational structures to support innovation, including dedicated teams and processes.

Volvo's Approach to Integrating Innovations

Emerging Innovation Champion: Focuses on discovery, incubation, and integration of new ideas within the corporate structure.
This concept highlights the need for a balanced approach to innovation, combining exploration and development with integration and scaling.

Situational Influences on Organizational Design

Differentiation: The extent to which an organization is divided into specialized subunits.
Integration: The level of coordination and collaboration required among the various subunits.
Conditions for Integration of Innovations:
- Cognitive Integration: Effective coordination and exchange of knowledge flows.
- Economic & Social-Emotional Integration: Reducing agency conflicts between innovation teams and the organization.

Digital Innovation at Volvo: Managing Four Concerns

Connectivity Hub: Designed to manage adjacent or system-level innovations through a dedicated, heavyweight team.
Internal vs. External Partnerships: Aligning internal initiatives with external collaborations to leverage diverse expertise and capabilities.
Open Innovation Platform: Creating a platform to encourage collaboration within and outside the organization, fostering a culture of sharing ideas and solutions.
Product-Driven Culture: Shifting from a product-focused culture to a customer-centric approach, emphasizing user needs and experiences.

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Description

Explore the vital role of innovation in today's ever-changing environment. This quiz covers product and process innovations, the Product Life Cycle, and the implications of digital disruption. Delve into the complexities of competence-enhancing and competence-destroying innovations.