MGT 489 Strategic Management: Innovation Dynamics

Innovation for Competitive Rivalry and Dynamics

• MGT 489 Strategic Management course topic
• Focuses on innovation's role in competitive dynamics
• Explores various innovation types and their strategic implications.

Learning Objectives

• Define innovation: Describe its role in competitive processes.
• VRIO Framework: Innovation as a competitive advantage driver.
• Innovation Types: Learn about incremental, architectural, disruptive, and radical innovation.
• Discontinuities and Paradigm Shifts: Understand these dynamics.

What is Innovation?

• Definition (Baregheh et al., 2009): A novel and useful idea successfully implemented.
• Implications for Core Competencies: Mass production, first-to-market advantages, and difficulty imitating complex technologies.
• Innovation vs. Standardization: Differences in production cost, consumer perceptions, and core competencies.
• Adoptions as Standards: Market demand, lack of more effective alternatives (e.g., PC QWERTY, mobile phone GSM/CDMA).

Identifying Different Types of Innovation

• Two Dimensions: Technology and market (Thursby & Thursby, 2006).
  • Incremental: Builds on existing knowledge, steady product/service improvement (e.g., iPhones, drug improvements).
  • Radical: Novel methods/materials, new knowledge base, or recombination (e.g., Air conditioners, mobile phones).
  • Architectural: Existing parts reconfigured for new markets (e.g., flying cars, Sony Walkman).
  • Disruptive: Leveraging new technologies to attack existing markets from the bottom up (e.g., CDs, USB flash, LCDs).

Strategic Implications

• Incremental Innovation: The linear model of innovation, cost of innovation.
• Disruptive Innovation: Allows innovators to outperform incumbents, creates threats.
• Strategies for Disruptive Innovation: Reverse innovation, introducing lower cost innovations.

Innovation and its Implications for Strategy

• Industry Life Cycle: Stages relating to innovation (introduction, growth, maturity, decline).
  • Understanding timing of market entry (first mover, early follower, late mover).
• First Mover Advantages: Premium price, entry barriers, market monopolization.
• First Mover Disadvantages: Market uncertainties, high innovation costs.
• Early Follower Strategy: Strategic implications (e.g. product innovation, cost-strategy approaches).
• Case Study: Analysis of Apple TV vs Google Chromecast.
• Specific Example (e.g., Terrafugia): Evaluating first mover or standard-setter status.

Discontinuities and Paradigm Shifts

• Technological Paradigm Shifts: New technologies revolutionising industry structure and maturity stages.
• Architectural, Radical, and Disruptive Innovation: Crucial elements in paradigm shifts.
• Discontinuity Period: Underlying technological standard changes. Disruptions lead to paradigm shifts, where new technologies replace existing standards in an industry.
• Predicting Discontinuities: Technological limitations, natural resource constraints, environmental considerations (e.g. fuel price concerns).
• Strategic Implications: Discontinuities create opportunities and threats, favor new entrants through new technology, requiring technological and organizational transformation (e.g., Fuji film).

This quiz explores the critical role of innovation in competitive dynamics, covering various types of innovation and their strategic implications. It aims to enhance understanding of the VRIO framework and how innovation acts as a competitive advantage in strategic management.