FOBI Summary Final (Eigen) PDF

The word ‘innovation’ comes from the Latin word ‘innovare’, and is all about change. Innovation is the process of creating value from ideas. Innovation can be done through many ways. We can change the products and services that we offer, the ways we create and deliver these offerings, the markets we...

The word ‘innovation’ comes from the Latin word ‘innovare’, and is all about change. Innovation is the process of creating value from ideas. Innovation can be done through many ways. We can change the products and services that we offer, the ways we create and deliver these offerings, the markets we offer them to and the underlying models about how we do what we do. Novelty can either be incremental or radical, and we can either make changes on a ‘component’ level or ‘systems’ level. An innovation can also be implemented by a recombination of earlier innovations, products or inventions. There are three main dimensions for innovation, which are the value creation (the implementation of an innovation), direction of change and degree of novelty. It is possible to both have an invention without innovation or an invention without innovation. This is because an invention can be created, but if it is never produced, marketed or adopted by consumers, the implementation is missing. Innovation can be very incremental, which means you don’t have to invent the wheel to think of a new way to create value. There are different types of innovations. There is process innovation that gives a new way how a product or service is developed. Then there are new or improved services/products, like Tesla. Thirdly there is marketing innovation that provides new ways of communicating value to a customer. Lastly, there is organizational innovation. This focuses on finding new ways for an organization to operate. Innovation is important to factor-driven economies (third-world economies, those least developed) (institutions, infrastructure, macroeconomic environment, health and primary education), efficiency-driven economies (the economies above factor-driven economies) (higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, market size) and innovation-driven economies (the richest economies) (business sophistication and innovation). Innovation also provides an edge over the competition. Competition, however, can take many forms: a company, a disease, a natural disaster or the law. Innovations are driven by a quest for opportunity or as a response to a threat. In general, there is a mixture of occasional radical change and long periods of incremental change. Knowledge is crucial in innovation. Innovation matters to organizations and individuals, but also the following policy agents (organizations that have a broader concern with innovation): governments (economic growth, jobs, etc.), trade and sector bodies (increase sector health and drive competition) and supply chain owners. There is organizational innovation that focuses on changes within a single organization. Secondly, there is systematic innovation that goes beyond individual organizations. It is about changing entire sectors, industries or even further. The risk for businesses is that they are so busy with their own issues that they fail to see the required innovation. Sometimes, change comes from outside the industry and not from inside, so these companies might miss it. Innovation processes will also differ greatly per company. The process of a small business can be informal, but that of a giant pharmaceutical company will be very complicated. Innovation in new sectors tends to focus more on product/service, while in more mature sectors it shifts to the way the offerings are delivered and created. When we are talking about dynamic capabilities, it is about learning and building capability to not just organize and manage innovation, but also to step back and review how we do this. Having taken a step back to review, implementing changes is the way to make innovation happen. Innovation is driving entrepreneurship. At its heart, innovation is the creative human spirit, the urge to make change in our environment. The core process of innovation involves four steps: recognizing opportunities, finishing resources, developing the ventures, and capturing value. The challenge comes in doing this in an organized fashion and in being able to repeat the trick. Central in innovation management is a clear sense of direction: where and how is innovation going to help us move forward? Another reason to have good innovation management is to allocate your resources well, because resources are scarce. An innovation strategy has three phases: analysis (what could we do?), selection (what are we going to do and why?), and implementation (how are we going to make it happen?). A good place to start your strategic analysis is by analyzing current threats and opportunities, and analyzing the likely changes to these in the future. Other questions are: What are the relative strengths and weaknesses of the company and how can the company build and sustain a competitive advantage? When analyzing opportunities, you should look at improving your current offerings and which markets can be served. There are four dimensions of innovation: product, process, position and paradigm. Product changes are changes in the offerings. Process changes are changes in the way those offerings are created and delivered. Position changes are changes in the way products/services are introduced. Paradigm changes change the mental models which frame what the organization does. We can only select innovations based on path dependency, which means we cannot innovate with resources we do not have. This is a ‘resource-based’ view. The resource-based view asks: ‘Could my capabilities and resources turn this opportunity into a product or service?’. There are four approaches: The first is simple ‘gut feel’ intuition. The advantage is that it is fast, but lacks evidence and analysis. It also emphasizes biases. It can be useful, especially in highly uncertain circumstances where further data gathering and analysis won’t sway you one way or another.The second is financial measures (e.g. return on investment or payback time). This is fast and uses simple measurement, but doesn’t take into account other benefits of innovation. The multidimensional measures approach compares on several dimensions to build an overall score for attractiveness. This allows for multiple considerations of different benefits, but the level of analysis may be limited. The portfolio business case provides a richly detailed analysis on many dimensions, but this takes a long time to prepare and present. Competences are either competition destroying or enhancing. When looking at strategic selection, we focus on three things: strategic competencies and capabilities, strategic positioning and strategic posture. For the strategic positioning, we can use Porter’s model of Five Forces. What are the key competitive forces? What are the barriers to entry? What is the threat of substitution? What is the relative power of key players (customers, suppliers, regulators)? The final phase of the innovation strategy is the strategic implementation, where we ask ourselves what we are going to need and where we’ll get these sources, who we may need to partner with, what likely roadblocks may be in the way. It is critical to communicate clearly within the company what the vision for the innovations will be. If you do this successfully, the commitment of everyone is guaranteed. Another reason why clear communication is important, is because the big vision will be implemented through a series of smaller projects, and it is crucial that these projects are aligned. The outcome of this is ‘kaizen’, the process of continuous incremental innovation that engages the vast majority of the workforce. It is crucial to provide the lower levels within the company with power to drive innovation. Dynamic capability sees three components of innovation strategy: competitive and national position (technology and IP, as well as its customer base and upstream relations with suppliers), technological paths (strategic alternatives available for the firm and the attractiveness of the opportunities ahead) and organizational and managerial processes (the set of routines that define the way the company operates). Strategic innovation management is all about the constant review of routines, while asking three questions: Which should we do more of, enhance and develop? Which should we do less of. or even stop? Which new routines do we need to learn and embed to cope with new features of our innovation environment? The resource-based view is concerned with leveraging the uniqueness of the business to its advantage. The basic ideas can be summarized as follows: the sustainable competitive advantage of firms resides not in their products but in their core competencies. Core competencies feed into more than the core product, which in turn feed into more than the business unit. Dynamic capabilities include abilities to improve, adapt and innovate. A technique for analyzing tangible and intangible resources is the following. First, identify the key attributes of the most successful products and services offered by the organization. Secondly, map these attributes to the resources or competencies of the organization, including tangible and intangible resources. Thirdly, you assess the potential for sustaining, protecting and exploiting these resources, including knowledge management. Any company which is making repeat sales in a competitive market must enjoy an advantage in the eyes of the customer. For a sustainable competitive advantage to exist, three conditions must apply. First, customers must perceive a consistent difference in important attributes between the producer and the competitor(s). Second, this difference is the direct consequence of a capability gap between the producer and its competitors. Last, both the difference in important attributes and the capability gap can be expected to endure over time. There would be four, and only four, types of resource capabilities: regulatory (the possession of legal entities, like patents or trademarks), positional (the results of previous endeavors, like brand reputation), business systems (the ability to do things well) and organizational characteristics (e.g. the ability to manage change). The important characteristics of strategic competencies are: they are responsible for delivering a significant benefit to the customers, they are idiosyncratic (personal) to the firm, they take time to acquire, they are sustainable because they are difficult and time-consuming to imitate, they comprise configurations of resources and they have a strong tacit content and are socially complex - they are the product of experiential learning. Functional capabilities are all about resources which are either individual skills and know-how or team skills and know-how within the company, at suppliers, at distributors, etc. Cultural capability comprises resources which are the characteristics of the organization. For example, perception of quality standards, tradition of customer service, ability to manage change and ability to innovate, ability to work in a team, ability to develop staff, suppliers and distributors, and automatic response mechanisms. There are two factors that determine whether the capabilities of a firm will translate into a competitive advantage. The first is the firm’s capacity to translate its capabilities into commercially viable products or processes. The second is the firm’s capacity to defend its advantage against imitators. There are nine factors which influence a firm’s capacity to benefit commercially from its capabilities: secrecy, accumulated tacit knowledge, leads times and after-sales service, the learning curve, complementary assets, product complexity, standards, pioneering radical new products and strength of patent protection. Companies must be aware that core competencies can become core rigidities, when established competencies become too dominant. In conclusion, capabilities are more functional than resources. According to the behavioral theory, a firm makes economic decisions as a coalition of participants, each with distinct objectives. The first step for coming up with actual decision processes within a firm, is defining the goals of the organization. ‘Bounded rationality’ involves decision making that takes into account cognitive and informational limitations. This is according to behavioral theory, but microeconomics sees players as unlimitedly rational. In the end, what will really determine a participant’s continuous involvement in an organization is the balance between inducements and contributions. Participants can be employees, investors or consumers, anyone with stake in the organization. If employees hear about higher pay somewhere else, their aspiration levels rise slowly. The aspiration level is the minimum level of satisfaction the employee has to stay with the company. The higher the level, the more eager they are to leave. Their aspiration level also increases slowly over time, if employees get paid more than they deserve. Each participant tries to have a bigger inducement than contribution, instead of trying to optimize their aspiration level. A fundamental difference between microeconomics and behavioral theory is that microeconomics uses perfect information rather than aspiration levels. Firms that do not reach their aspiration levels experience an increase in risk tolerance and are more likely to engage in problemistic search. If the gap between the current pay and aspiration level is too big, they will start looking for a new job. This gap can be present for a long time because most employees are unaware. Behavioral theory views the labor market as non-competitive with significant information asymmetry. Behavioral theory also assumes that consumers have an aspiration level for both price and quality, which is different from the model of perfect competition. According to behavioral theory, to ensure the firm’s survival managers must take care of the stake of all stakeholders. Behavioral theory focuses not on competition between firms, but on the process of decision-making within the firm. In standard microeconomics, firms are assumed to have a single goal, typically, profit maximization. However, behavioral theory views firms as coalitions of diverse stakeholders, each with unique goals that often conflict. Behavioral theory suggests that a firm’s goals are established through a bargaining’s process where each participant’s bargaining power depends on their unique contribution. Aspiration levels adjust over time to reflect actual rewards and external opportunities, resulting in organizational slack. These are resources that exceed the minimum necessary to keep the coalition intact. Unlike in a perfectly competitive market, information on alternatives is imperfect, causing aspiration levels to adjust slowly. In dynamic contexts like technological change, some level of organizational slack is expected. Behavioral theory suggests that setting operational subgoals with aspiration levels for managers allows for a quasi-resolution of conflict (between stakeholder interests), but doesn’t eliminate it. Within any organization people may have access to the same data, but interpret them entirely differently. Decisions under uncertainty are often influenced by biases and heuristics, such as anchoring (sunken-cost fallacy), availability and loss aversion. To improve decision-making in organizations, four strategies are recommended. The first one is biasing, where you train individuals to recognize and reduce biases. The second one is nudging, where you guide behavior in a beneficial direction without restraining options. The third way is to encourage dissent, where you promote open debate to counteract individual biases. The fourth way is to implement routines, like checklists, to reduce errors in decision-making. Once decisions are made, they are hard to change. Strategic management has both normative (what firms should do) and descriptive (what firms actually do) aspects. It covers process (how strategy is developed) and content (the information and choices involved in formulating strategy). Economics mainly contributes to the content. The economic foundation of industry analysis derives from industrial organization, specifically the S-C-P paradigm, which links industry structure (characteristics like firm size and barrier to entry) with conduct (firm strategy) and performance (profitability). Porter’s Five Forces, inspired by the S-C-P framework, identifies five competitive forces shaping industry profitability: the intensity of rivalry, threat of new entrants, buyer and supplier bargaining power, and threat of substitutes. Its static nature, however, makes it less suited for rapidly changing industries. The S-C-P paradigm suggests that industry structure influences firm conduct, which affects performance. Despite this, firms within the same industry often differ significantly, in strategy and profitability. Industries can be divided into strategic groups - clusters of firms with similar competitive strategies. Strategic groups tend to remain stable over time. A firm’s competitive strategy is based on the strategic dimensions of its industry, with two widely recognized approaches: cost leadership and product differentiation. In cost leadership, a firm aims to minimize unit costs, often through economies of scale and high market share. In product differentiation, firms create perceived value through unique features, enabling them to charge premium prices, with brand recognition playing a key role. However, these strategies often become sticky. Over-relying on one strategy without considering these dynamics can be risky. Competitive advantage, according to the resource-based view, is grounded in a firm’s unique resources, which must be valuable, rare, inimitable, and non-substitutable. Intangible resources often meet these criteria more easily than tangible ones. However, competitive advantage is always transient, especially in dynamic and disruptive industries. Many consider a sustainable competitive advantage as rare nowadays. The resource-based view has faced two criticisms: it’s tautological (value is defined by performance) and static (ignoring the origin and development of the resources). In response, dynamic capabilities have been introduced. Dynamic capabilities refer to an organization’s capacity to purposefully create, extend or modify its resource base to achieve sustainable competitive advantage. They drive change, unlike operation capabilities (which are focused on current operations). The following factors can strengthen the potential of the competitive advantage dynamic capabilities can create: co-specialization (resources can gain unique value when used together), asset orchestration (effective coordination of assets can enhance the overall value), tacit knowledge (knowledge embedded within people is hard to replicate), firm specificity (capabilities shaped by a firm’s unique history) and isolating mechanisms. In formulating a competitive strategy, a firm should take into account how its competitors will react, especially in oligopolies. The BCG-matrix classifies firms into four categories: the question mark (low market share, high market growth), the star (high market share, high market growth), the cash cow (high market share, low market growth) and the dog (low market share, low market growth). The star has to grow to become a cash cow, the cash cow should at least try to hold its position, the question mark can grow to be a star with the right strategy and the dog should keep going as long as possible, until it starts losing. Then it should stop the business. PESTLE is another dimension on which you can see how environmental factors influence your business. Political, Economic, Social, Technological, Law, Ecological. We use PESTLE to determine where our market is. BLUE OCEAN EN RED OCEAN TOEVOEGEN, SWOT ANALYSIS TOEVOEGEN 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21 Chapter 4 An innovative organization has multiple components that each have key features. - The first component is the shared vision, leadership and will to innovate. Key features here are a clearly articulated and shared sense of purpose, a stretching strategic intent and top management commitment. - The second component is an appropriate structure. A key feature here is an organization design which enables creativity, learning and interaction. It is important here to find an appropriate balance between ‘organic and mechanistic’ options for particular contingencies. - The third component is key individuals. Key features here are promoters, champions, gatekeepers and other roles which energize or facilitate innovation. - The fourth component is effective team working. Key features here are an appropriate use of teams (at local, cross-functional and inter-organizational level) to solve problems. This will require a significant investment in team selection and building. - The fifth component is high involvement innovation. A key feature here is participation in organization-wide continuous improvement activity. - The sixth component is a creative climate. The key feature here is to have a positive approach to creative ideas, supported by relevant motivation systems. - The seventh component is an external component, with the key feature having an internal and external customer orientation. An internal customer orientation refers to a focus on the employees, departments or team within the organization. An external customer orientation refers to an external customer orientation. In general, the management team and their decisions affect roughly 50% of the day-to-day operations. Even though the following traits form no universal list of traits that all good leaders must possess under all circumstances, they do contribute to effective decision-making: - bright, alert and intelligent - seek responsibility and take charge - skillful in their task domain - administratively and socially competent - energetic, active and resilient - good communicators In general at the start of a new project, employees value it if the management takes a very proactive role with generating ideas, but as the project progresses, they prefer the management more in an evaluating role. Intellectual stimulation includes behaviors that increase other’s awareness of and interest in problems, and develops their propensity and ability to tackle problems in new ways. This has a positive effect on the organization when it comes to commitment and new challenges. When a company faces environmental uncertainty, the main contribution that is required from leadership is to solve problems and make appropriate strategic decisions, not to inspire or build confidence. It is interesting that expressing a vision has a negative effect on the follower’s confidence, unless accompanied with inspirational communication. Leadership clarity is associated with clear team objectives, high levels of participation, commitment to excellence and support for innovation. The single best predictor of group performance is the leader’s technical skill. A transformational leadership style focuses on long-term growth, change and personal development (trust, respect, empower). A transactional leadership style focuses on managing the current situation through rewards, punishments and policies. To positively influence innovation, leaders should focus on the following six factors: - An innovation policy should be established and promoted throughout the organization that rewards innovative behavior. - When forming teams, some heterogeneity is necessary. When the team is too heterogeneity is necessary, tensions may arise. When it is too low, more directive leadership is required to promote team reflection. - A team climate of emotional safety, respect and joy should be promoted through emotional support and shared decision-making. - Individuals and teams should have autonomy and space for idea generation and creative problem-solving. However, time limits for idea creation should be set. - Team leaders with expertise should engage closely in the evaluation of innovative activities. There is a difference between adaptive and innovative creativity styles. The adaptive style focuses on ideas based closely on existing ideas, while the innovative style focuses more on ideas that are much less expected. In general teams are more productive at innovation than individuals. A main characteristic that differentiates a ‘team’ from a ‘group’ is the common vision. One of the most valuable assets within an organization is a cross-functional team, which combines multiple skill sets and perspectives. Sometimes even self-managed teams can work very well. Key elements in effective high-performance team working include: - clearly defined tasks and objectives - Effective team leadership - Good balance of team roles and match to individual behavioral style - Effective conflict resolution mechanisms within the group - Continuing liaison with external organization High-performance teams show the following characteristics that promote effective teamwork: - A clear, common and elevating goal - A results-driven structure  - Competent team members - Unified commitment - Collaborative climate - Standards of excellence - External support and recognition - Principled leadership - Appropriate use of the team - Participation in decision-making - Team spirit - Embracing appropriate change (learning how to make necessary changes to procedures) The following factors contribute to a potential downfall of a team: - Group versus team (it is very important to be clear about the underlying goal and reward structure to promote unity and commitment) - Ends versus means (make sure that the goal of the team is set by higher management, but make sure to not restrict the team in the way they want to achieve the goal) - Structured freedom (if you let the team operate too freely, this will likely result in chaos. They do need some clear directions.) - Support structures and systems (the team needs access to the right tools and resources to achieve their goals) - Assumed competence (technical skills or domain-expertise are not the only skills needed to work well within a team, team skills may be even more important) The following are potential assets of using a group: - Greater availability of knowledge and information - More opportunities for cross-fertilization; increasing the likelihood of building and improving upon ideas of others - Wider range of experiences and perspective upon which to draw - Participation and involvement in problem-solving increases understanding, acceptance, commitment, and ownership of outcomes - More opportunities for group development The following are potential liabilities of using a group: - Social pressure toward uniform thought limits contributions and increases conformity - Group think: groups converge on options that have the greatest agreement, regardless of quality - Dominant individuals influence an unequal amount of impact upon outcomes - Individuals are less accountable in groups, allowing them to make riskier decisions - Conflicting biases may cause unproductive levels of competitions (if somebody’s idea proves to be right it could make them a ‘winner’, while it could make somebody else who had a different idea a ‘loser’) The ‘climate’ of an organization is defined as the recurring patterns of behavior, attitudes and feelings that characterize life in the organization. The ‘climate’ is distinct from ‘culture’ in that it is more observable at a surface level within the organization and more amenable to change and improvement efforts. ‘Culture’ refers to the deeper and more enduring values, norms and beliefs within the organization. A culture is more difficult to change. Climate is more prone to quantitative data, while culture can be captured better by qualitative data. The following factors determine the climate within an organization: - Trust and openness - Challenge and involvement - Support and Space for Innovation - Conflict and Debate - Risk-taking - Freedom _________________________________________________________________________ Chapter 5 There are six key stations in the process of innovation: - searching for trigger ideas - selecting from the possibilities the one we are going to follow through - acquiring the resources to make it happen - developing the idea to a reality - managing its diffusion and take-up in our chosen market - capturing value from the process Innovation can have push or pull reasons: innovation that is driven by technological research (knowledge push) or innovation that is driven by user demand (need pull). _________________________________________________________________________ CHAPTER 6 Innovation can come from the following sources: - Shocks to the system - events that change the world and the way we think about - Accidents - Watching others - Recombination innovation - Regulation (changing rules that open new opportunities) - Advertising (uncovering and amplifying latent needs) - Inspiration (Eureka moments) - Knowledge push - Design-driven innovation - Need pull - Users as innovators - Exploring alternative future and opening up different possibilities Many innovations through a knowledge push come through extensive R&D-efforts. Just as a knowledge push model, which involves a mixture of occasional breakthroughs followed by extensive elaboration. Need pull innovation is particularly important at mature stages in industry or product life cycles when there is more than one offering to choose from. Need pull also serves as a driver for process innovation within organizations. Process innovation is particularly important in the public sector, where creating wealth is not the priority. Disruptive innovation focuses our attention on the need to look for needs which are not being met, poorly met or sometimes where there is an overshoot. Sometimes the urgency of a need can have a forcing effect on innovation. A good example of this is war times or natural disasters. Another source of innovation results from our desire for customization. This is the main driver why companies focus on offering customers a high variety of features. For example, you can choose many different options on a car. There are different types of customization: - There is distribution customization, where customers may customize product/service packaging, delivery schedule and delivery location. The actual product/service is standardized. - There is assembly customization, where customers are offered a number of pre-defined options. Products/services are made to order using standardized components. - There is fabrication customization, where customers are offered a number of pre-defined designs. products/services are manufactured to order. (Think about the car example) - WITH ASSEMBLY CUSTOMIZATION, THE COMPONENTS ARE PRE-MADE. WITH FABRICATION CUSTOMIZATION, THE COMPONENTS ARE TAILOR-MADE. - There is design customization, where customer input stretches to the start of the production process. Products do not exist until initiated by a customer order. Regulations can also trigger counter-innovation, which are solutions designed to get round existing rules or at least bend them to one’s advantage. An example is a rapid growth in speed cameras as a result of new legislation. Another way innovation occurs is through futures and forecasting. _________________________________________________________________________ CHAPTER 7 Innovations are never purely ‘pull’ or purely ‘push’, but rather a combination of both. For example, regulation both pushes in key directions and pulls innovations through in response to changed conditions. In general, mature industries will focus more on pull factors and incremental innovation, while newer companies focus on the opposite as they try to establish product market fit. Startups often focus on niches. The innovation lifecycle can be described in three stages. The first stage is fluid, where there is exploration, uncertainty and flexibility. The second stage is transitional, where a dominant design emerges which best matches market needs. These designs set the rules of the game. The third stage is specific, where there is a standardization and integration of a product or service. Diffusion, in the context of innovation, is a concept that refers to the process by which an innovation—whether it is a product, service, process, or idea—spreads through a population or social system over time. In this process, this population consists of multiple layers: - Innovators: The first to adopt, often risk-takers and willing to try new ideas. - Early Adopters: Influential within the social system, they provide critical early validation for the innovation. - Early Majority: More deliberate and pragmatic, adopting after seeing proven results. - Late Majority: Skeptical and cautious, adopting only after the majority has done so. - Laggards: The last to adopt, often resistant to change and influenced by tradition. When talking about incremental innovation, this often relates to the principle of ‘do better’. With these innovations, not a lot of risk is involved. With radical innovation, it is more about ‘do different’. These innovations often carry high amounts of risk. In innovation, companies often make a choice between exploration and exploitation. With exploitation, companies experience a high degree of path dependency; they use their experience and industry knowledge to find new opportunities. With exploration, companies dive into the unknown. It is crucial to distinguish which type of innovation your company needs to meet its goals. Incremental innovation has two phases. First you have the exploitation-phase, that is followed by a ‘re-framing’-phase. Radical innovation also has two phases. First there is the exploration phase, that is followed by a ‘co-evolution’-phase. Exploration strategies are often highly specialized, and therefore make it difficult for others in the organization to participate. As a result, there are often tense fights for resources between operating units and exploration units. There are three common strategies that successful innovators use: open innovation, networks for innovation and knowledge management. Open innovation refers to sharing challenges with your networks to generate new perspectives that boost innovation. This open innovation leads to or increases innovation networks. These networks offer a collective efficiency (multiple combined competencies), collective learning, collective risk-taking (the risk is divided over multiple stakeholders, reducing individual risk) and intersection of different knowledge sets. The third strategy, knowledge management, has multiple useful dimensions: - Mobilizing employee ideas and knowledge around incremental product and especially process innovation. - Bringing the voice of the customer into all areas of the organization - Using social networks and idea flow within and across organizations - Intrapreneurship The term ‘absorptive capability’ refers to the ability of a firm to recognize the value of new, external information, assimilate it, and apply it. These are different from dynamic capabilities, that refer to the ability of a firm to manage and react to change. The need for the term ‘absorptive capability’ signals that it takes skill to acquire and use new knowledge. Bounded exploration involves radical search within an established frame. This requires extensive resources, and it is mostly favored by established organizations. However, sometimes knowledge-rich entrepreneurs can do this as well. For mature companies, it is often difficult innovate, because it requires addressing well-established routines and beliefs. _________________________________________________________________________ CHAPTER 8 There are different methods of forecasting, each with their own uses and limitations: - Trend extrapolation. This is used for the short-term in stable environments, but relies on past data and assumes past patterns. - Product and technology roadmapping: This is used for the medium-term on a stable platform with a clear trajectory, but it is only incremental and fails to identify future uncertainties. This is used to align company goals, market needs and tech-developments over time. - Regression, econometric models and simulation: This is used for the medium-term, where we try to understand the relationship between independent and dependent variables. However, the identification and behavior of independent variables is limited. - Customer and marketing methods: This is used for the medium-term, where product attributes and market segments are understood better. The limitation is that it is very difficult to distinguish noise and information. - Benchmarking: This is also used for the medium-term, which focuses on product and process improvement. The difficulty here is to identify relevant benchmark candidates. - Delphi and experts: This is for the long-term and builds consensus in uncertain situations, but this is expensive. Also, experts from different domains tend to disagree with each other, or a wrong consensus is reached. - Scenarios: This is long-term, but this comes with a high uncertainty and is very time-consuming. The most appropriate choice of forecasting will depend on: - what we are trying to forecast, - the rate of technological and market change - the availability and accuracy of information - the company’s planning horizon - the resources available for forecasting You should be careful to consult your sales team about customer needs, as they may be biased. The following are the key to successful brainstorming: - A relaxed atmosphere - The right size of the team (5 to 7 is often optimal) - Choose a neutral (ideally external) chairperson. Avoid senior managers, as this may restrict idea flow  - Define the problem or objectives clearly - Do not allow any evaluation or discussion - Equal opportunity to contribute - Write down every idea clearly and where everybody can see it - When all ideas are listed, review for clarification. Remove duplicate and inappropriate ideas. - Allow ideas to incubate, give team members time. When it comes to benchmarking, this is simply the systematic comparison of something against something else. Managers who have a responsibility to improve continuously sometimes cannot do so because of a lack of knowledge. This is a major downside of benchmarking, simply not knowing what you’re up against. The benefits of benchmarking are: - establishes realistic goals - improves performance - achieves better practice - aids implementation and change Benchmarking is a complement to competitor analysis. The competitor analysis focuses on what to do, all the competitors and products and services. It is a distant analysis that depends on the credibility of secondary data. Benchmarking however, is about how to do it, focuses on the best-in-class in whatever sector and mainly focuses on performance and processes. On the contrary to a distant analysis, this will require site visits and primary data. It is crucial that the top management commitment is on point for the benchmarks. The Delphi method begins with continuous surveys that ask for the opinion of experts, until some sort of consensus is reached. The method seeks to nullify the disadvantages of face-to-face meetings, like deference to authority or reputation, a reluctance to admit error, a desire to conform or differences in persuasive ability. These factors could lead to inaccurate consensus. A pitfall of the Delphi technique is that it may rule out very legit views that are opposing from different views. The potential contribution of scenario development to strategy planning is very important, but too often under-utilized. First of all, it helps to understand complex systems by sharing information from horizon-scanning, and highlight the importance of the changing structure of the industry. Secondly, a good scenario can also grow into a dominant vision. Finally, scenarios are useful in discovering weaknesses within an organization because they can challenge assumptions of stakeholders and corporate routines. Scenario development can be either normative or explorative. The normative perspective defines a preferred vision of the future and outlines different pathways from the goal to the present. The explorative approach identifies the drivers of change, and creates the scenarios from these without explicit goals. The explorative is, in general, more consistent with developing an innovation strategy, but both are used. For scenarios to be effective, they need to be: inclusive, consistent, transparent, plausible, differentiated, communicable, practical and compelling, as well as challenging the assumptions of stakeholders. _________________________________________________________________________ Chapter 9 Frameworks for innovation projects must be flexible enough to adapt over time, but rigid enough to justify continuation or termination. A business case is a way to present an innovation project. A business case presents: - details of the product or service - assessment of the market opportunity - identification of target customers - barriers to entry and competitor analysis - experience, expertise and commitment of the management team - strategy for pricing, distribution and sales - identification and planning for key risks - cash-flow calculation, including break even points and sensitivity - financial and other resource requirements of the business In order to reduce risk as much as possible, organizations try to build a portfolio. There are four categories that classify portfolios: - Dogs, which have a low expected value and a low probability of success - Problem-child, which has a low probability of success but a high expected value - Bread and butter, which have a high probability of success but little expected value - Pearls, that have a high expected value and a high probability of success A problem in innovation is that increasing commitment of resources during the life of the project makes it increasingly difficult to change direction. A tool that can help in any innovation process is the AIM-tool, where the process that creates a product from an idea has a gate for every step. A gate is a decision point at which the project is reviewed by the gatekeepers, which are often senior managers. ________________________________________________________________________ Chapter 10 The stage gate process consists of five stages: - idea formulation - concept formulation - product development - test marketing - international marketing The development funnel looks like the following: - outline concept - detailed design - testing - launch In general, these are the four stages of innovation: - concept generation - project assessment and selection - product development - product commercialization To be successful in this process, several key factors or criteria have been identified: - product advantage (product superiority in the eyes of the costumer) - market knowledge - clear product definition (defining target markets, defining benefits, clear positioning, which resources, etc.) - risk assessment - Project organization - project resources - proficiency of execution - top management support These are the most fundamental differences between manufacturing (product) and service operations: - tangibility (goods tend to be tangible, services don’t) - perceptions of performance and quality (more important in services, because of the human contact) - simultaneity - storage - customer contact - location (the location is more important for services than for products, since products can be easily shipped) The following tools can be used for concept generation: - surveys and focus groups - latent needs analysis (which customer needs are not met currently) - lead-users (users who represent future needs; sometimes people are ahead of the market) - customer-developers - competitive analysis - industry experts or consultants - extrapolating trends - building scenarios - market experimentation The following tools can be used for project selection: - ranking  - profiles (projects are scored based on several characteristics, and ultimately a winner is picked) - stimulated outcomes (projects are picked based on a deference of their opposite outcome) - strategic clusters - Interactive (multiple projects are started and closely monitored on their initial progress) The following tools can be used for product development: - design for manufacture (customer design their products to their wishes) - rapid prototyping (this promotes quick testing) - computer-aided techniques (reduction in development lead times, increase complexity in designs) - Quality function deployment (set of planning and communications routines used to identify critical customer attributes and translating these into development needs) QFD is done as follows: 1. Identify customer requirements, primary and secondary, and any major dislikes 2. Rank their requirements according to importance 3. Translate requirements into measurable characteristics 4. Establish the relationship between the customer requirements and technical product characteristics, and estimate the strength of the relationship. 5. Choose appropriate units of measurement and determine target values based on customer requirements and competitor benchmarks. _________________________________________________________________________ CHAPTER 11 The disadvantage of the GATE-system is that it probably favors innovations closest to the existing strategy, markets and products. This means the system is likely to filter out potential innovations further from the company’s comfort zone. That’s why we need different mechanisms to explore further innovation. That is where intrapreneurship can play a big role, with a focus on radical innovation. The main factors that distinguish a new venture from the core business are risk, uncertainty, newness and significance. There are many motives for intrapreneurship/corporate ventures: - Grow the business - Exploit underutilized resources - Introduce pressure on internal suppliers - Divest non-core activities (selling parts of the company that are not at the core) - Satisfy managers’ ambitions - Spread the risk and cost of product development (this approach encourages innovation without overwhelming the company’s financial or operational stability) - Combat cyclical demands of mainstream activities (ice cream shops) - Learn about the process of venturing - Diversify the business - Develop new technological or market competencies The first three of those are primarily operational motives, the others more strategic. There are four ways to manage a corporate venture: - Opportunistic: the company doesn't have dedicated teams or resources for innovation but instead relies on creating a supportive environment where employees can propose ideas that are evaluated and developed on a case-by-case basis - Enabling: the company provides dedicated support, resources, and processes for innovation, even though new ventures are owned by existing divisions - Advocacy: assigns clear ownership to specific parts of the organization but provides little or no extra funding, relying instead on existing resources while addressing gaps in specialized skills or support - Producer: involves formal ownership and dedicated funding for ventures, requiring substantial resources and commitment to build entirely new businesses rather than just new products or services There are six stages in intrapreneurship, where the first three are the definition stages and the last three are the development stages: 1. Establish an environment that encourages the generation of new ideas and the identification of new opportunities, and establish a process for managing entrepreneurial activity. 2. Select and evaluate opportunities for new ventures, and select managers to implement the venturing programme. 3. Develop a business plan for the new venture, decide the best location and organization of the venture and begin operations. 4. Monitor the development of the venture and venturing process. 5. Champion the new venture as it grows and becomes institutionalized within the corporation. 6. Learn from the experience in order to improve the overall venturing process. The conceptualization stage involves generating ideas, identifying opportunities, and aligning R&D with marketing, exceeding their usual business constraints. Intrapreneurs face the following challenges: - They must establish their legitimacy within the firm by convincing others of the venture - They have little resources and have to compete against other managers of established departments - As advocates of change, they are likely to face organizational indifferences and critique A number of key roles must be filled when establishing a new venture: - technical innovator - business innovator/venture manager - product champion - executive champion/organizational champion (acts as a protector and buffer between the corporation and the venture) - high-level executive (responsible for evaluating, monitoring and authorizing resources) There are a number of design options for corporate ventures, ranked from least distant to daily operations to most distant: - direct integration: - integrated business teams: - new ventures department: - new venture division: - special business units - independent business units - nurtured divestment - complete spin-off _________________________________________________________________________ CHAPTER 12 There are three types of decision-making relevant to the adoption of an innovation: - Individual (individual makes the ultimate choice) - Collective (choices are made jointly with others, like the sorting and recycling of domestic waste) - Authoritative (decisions are taken by a few individuals within a social system, owing to their power, status or expertise. for example, not every employee in the hospital decided to work with MRI scans, only a few people made that decision) Today, adoption and their S-curve goes much faster than the earlier days. Influencers, change agents and other example figures play a big role in diffusion. In general, it is believed (the Bass model) that people (potential adopters) are influenced by two factors before they buy into an innovation. Individual independent adopters are influenced mostly by personal, private assessment and trials, while later adopters are more influenced by interpersonal communication (word of mouth), social media and mass-marketing channels. The curve of a diffusion of an innovation can be described as an S-curve. Bandwagons (people who buy an innovation because others have, think about Pokemon cards) may occur when many people already have bought the innovation. That is why the middle of the S-curve is so steep. Once a certain threshold in the curve has passed, many people will buy into the innovation. The more ambiguous the benefits of an innovation, the more significant bandwagons are on the rate of adoption. This means that better products do not necessarily result in more sales. There are many barriers to the widespread adoption of innovations, including: - economic: personal costs versus social benefits (For example EV’s might be too expensive) - behavioural: priorities, motivations, rationality (somebody doesn’t buy an EV because he likes the sound of a petrol engine) - organizational: goals, routines, power and influence (somebody doesn’t buy electric vehicles because he has invested in oil companies) - structural: infrastructure, sunk costs (for example, lack of charging stations for EV-vehicles) In general, there are five factors that predict the rate of an adoption: - relative advantage (the degree to which an innovation is perceived as better than its predecessors) - compatibility (the degree to which an innovation is perceived as consistent with existing values, experience and needs of potential adopters) - complexity (the degree to which an innovation is perceived as being difficult to understand or use) - trialability (the degree to which an innovation can be experimented with on a limited basis) - observability (the degree to which the benefits of the innovation are visible to others) While early adopters may emphasize technical performance and novelty above other factors, the mainstream mass market is more likely to be concerned with other factors such as price, quality, convenience and support. _________________________________________________________________________ CHAPTER 13 Managing knowledge involves five critical tasks: - Generating and acquiring new knowledge - Identifying and codifying existing knowledge - Storing and retrieving knowledge - Sharing and distributing knowledge across the organization - Exploiting and embedding knowledge in processes, products and services The difference between explicit knowledge and implicit knowledge (tacit knowledge) is that explicit knowledge can be codified (expressed in numerical, textual or graphical terms, and can therefore be more easily communicated) and implicit knowledge can’t. Implicit knowledge is personal, experiential, context specific and hard to formalize or communicate. The transformation of individual knowledge into organizational knowledge involves four cycles: - socialization (tacit to tacit knowledge) - externalization (tacit to explicit knowledge, where knowledge is formally put into the business operations) - combination (explicit to explicit knowledge; sources of explicit knowledge are pooled and exchanged) - internalization (explicit to tacit knowledge; individuals learning through practice) There are four types of components that form organizational memory: - intangible (off balance assets, such as patents, licenses, trademarks, contracts and protectable data) - positional (which are the result of previous endeavor, like individual or corporate reputation, processes and operating systems or networks) - functional (individual skills and know-how or team skills and know-how, within the company, at the suppliers or distributors) - cultural (quality, customer service, human resources or innovation) A community of practice tries to exchange valuable information with one another. There are some other proven mechanisms that help to transfer knowledge between two communities of practice: - an organizational translator, who is an individual that is able to express the interest of one community in terms of another community’s perspective. - a knowledge broker, who differs from a translator in that they participate in different communities rather than simply mediate between them - a boundary object or practice, which is something of interest to two or more communities (e.g. a database or a quality manual) In some cases knowledge, in particular in its more explicit or codified forms, can be commercialized by licensing or selling the IPR, rather than the more difficult and uncertain route of developing new processes, products or businesses. The first knowledge protection is a patent, that requires the following legal tests to be satisfied: - novelty - inventive step (not obvious to a person skilled in the art) - industrial application (has to be able to be applied to a machine, product or process) - patentable subject (e.g. discoveries and formulae can’t be patented) - clear and complete disclosure Patents can be a good indicator of innovation within an organization, but on the other hand not because patents are usually filed at the start of a development process. This tells us nothing about the commercialization of the innovation. The most useful indicators of innovation based on patents are: - number of patents - cites per patent - current impact index (number of patent citations from the past five years divided by the average patent citations received) - Technology strength (number of patents multiplied by the current impact index) - Technology cycle time (the median age in years of the patent citations) - Science linkage (average number of science papers referenced) - Science strength (number of patents multiplied by science linkage) The next protection is copyright, which is concerned with the expression of ideas, and not the ideas themselves. A similar protector would be design rights, which would be applicable only to three-dimensional articles. Once you have either a patent, copyright or design right you can allow others to use it through licensing or you can sell the IPR outright. There are multiple benefits to licensing: - reduce or eliminate production and distribution costs and risks - reach a larger market - exploit in other applications - establish standards - gain access to complementary technology - block competing developments  - convert competitor into defender The main strategic motives for licensing are: - strategic freedom to operate - access to knowledge - entry to new markets - establish technological leadership - enhance reputation The main risks to licensing are: - cost of search, registration and renewal - need to register in various national markets - full and public disclosure of your idea - need to be able to enforce _________________________________________________________________________ CHAPTER 15 The innovation strategy is search, select, implement, capture. A good way of seeing whether your organization is innovative enough is by doing an audit. This is a way for an organization to really look into the mirror. _________________________________________________________________________ CHAPTER 16 Active and interested users are also called ‘lead users’ and they are often well ahead of the market. They are concerned with getting solutions to particular needs and prepared to experiment and tolerate failure in their search for a better solution. These people can and should be used to create innovations. Also, lead users can provide insights to forecasting the diffusion of innovations. Lead users have the following characteristics: - They recognize requirements early - They expect high level of benefits - They develop their own innovations and applications - They are perceived to be pioneering and innovative ‘Tough customers mean good designs’ is an expression that illustrates the importance of interacting with ‘extreme users’, users that have needs which are not typical of the regular user, but may provide new opportunities. When users are involved in the design of new products or services, this is called ‘co-development’. ‘Crowdsourcing’ is where an organization makes an open call to a large network to provide some voluntary input or perform some function. There are two common approaches for crowdsourcing, which are ‘peer or user communities’ and ‘competitions’. With communities, participation is driven mostly by intrinsic motivation. In competition a reward is set out. A downside of crowdsourcing is that the organizations might miss the needs of their users that don’t belong to the majority. _________________________________________________________________________ CHAPTER 17 Open innovation requires good relationships with other stakeholders and strengthens existing relationships with stakeholders. Licensing is a form of open innovation. In a co-option alliance, partners are usually drawn from the same industry, whereas in a co-specialized alliance partners are usually from different sectors. In a co-specialized alliance, partners bring together unique competencies to create opportunities to enter new markets, develop new products or build new businesses. However, there is a risk involved with co-specialization. Partners are required to commit to their partner’s technology and standards. Where technologies are emerging and uncertain and standards yet to be established, there’s a high risk a partner’s technology might become redundant. It is wise, therefore, to restrict the use of alliances to instances where the technology is tacit, expensive and time-consuming to develop. If the technology is not tacit, a license is likely to be cheaper and less risky, and if the technology is not expensive or time consuming to develop, in-house development is preferable. _________________________________________________________________________ CHAPTER 18 Discontinuous innovation is a type of innovation that introduces significant changes and often creates new markets or displaces existing ones. This is the case with radical innovations. Companies must be very careful to not listen to your customers too well, because your customers might be slowly turning into the wrong customers. Discontinuous innovation requires a very different set of capabilities for organizing and managing innovation. Companies have to search in unlikely places, building links to strange partners, allocating resources to high-risk ventures, exploring new ways of looking at the business. Discontinuity/Disruption has many sources: new technology, new market, new political rules, industry saturation, sea change in market behavior (attitude towards smoking), deregulation, business model innovation, unthinkable events (covid), shifts in techno-economic paradigm _________________________________________________________________________ CHAPTER 19 Social innovations are usually new combinations or hybrids of existing elements, rather than being wholly new in themselves. So these innovations are often not radical. Implementing social innovations involves cutting across organizational, sectoral or disciplinary boundaries. They create new social relationships between previously separate individuals and groups, contributing to the diffusion and embedding of the innovation, and increasing potential for further innovations. Social innovation is also seen as building on the inherent capacities of individuals and communities, which makes the notion of open innovation especially relevant. By engaging stakeholders directly, social ventures are also better able to avoid conflicts, or to resolve them when they arise. What makes social entrepreneurship challenging is that it is hard to generate a business that makes profit. Everybody can spot a social need, but you also need to commercialize it. The reason that established businesses operate more socially nowadays, is because stakeholders put growing pressure on them to do so. The concept of CSR (Corporate Social Responsibility) plays a huge role in this. These days, CSR greatly impacts brand reputation. A second reason why organizations become more social is to realize motivational effects from their staff, by aligning their values with the values of the company. Thirdly, companies can use social innovation as a learning ground, to eventually spot more hidden needs. CHAPTER 20 The BRIC-countries are Brazil, Russia, India and China. These countries, together with other smaller countries like Denmark, Singapore, Kazakhstan and South Africa have seen a wave of innovation expansion and contribute importantly to global innovation. In general, however, firms instead of countries carry out the majority of the R&D. _________________________________________________________________________ CHAPTER 21 Sustainability is a major driver of innovation. For example, it provides opportunities for eah of the 4 P’s: product, process, position and paradigm. SLI (Sustainability Led Changes) can either be incremental or radical. _________________________________________________________________________ OERLEMANS The document is a research article examining the relationship between alliance portfolio diversity (APPD) and innovation outcomes (incremental and radical), with a focus on the moderating role of technology management (TM) tools. Key findings include: 1. APPD (Alliance Portfolio Partner Diversity) and Innovation: There is an inverted U-shaped relationship between APPD and innovation outcomes. Moderate diversity in alliance partners enhances innovation, but excessive diversity can hinder it due to coordination complexities and knowledge overflow. 2. Incremental vs. Radical Innovation: ○ Incremental innovations benefit more from diverse alliance portfolios compared to radical innovations. ○ Radical innovation requires access to scarce, specialized knowledge, often limiting the diversity of beneficial alliances.  3. Role of TM Tools: ○ TM (Technology Management) tools, such as technology audits, forecasting, and competitive intelligence, positively moderate the APPD-innovation relationship. ○ Firms utilizing more TM tools effectively manage high levels of APPD, transforming potential negative impacts into positive outcomes. 4. Implications: ○Strategic use of TM tools is critical, particularly for firms with diverse alliance portfolios aiming for higher innovation performance. ○ The study provides insights for firms in various industries, emphasizing the importance of structured technology management practices in leveraging alliance portfolios. 5. Context and Data: ○ The study uses data from South African firms, broadening the understanding of APPD effects in non-Western and diverse industry contexts. ○ Analysis is based on innovation surveys capturing the diversity of alliances, innovation outputs, and the deployment of TM tools. The research highlights the importance of managerial agency in maximizing the benefits of alliance diversity, providing a roadmap for firms to enhance their innovation outcomes through targeted TM practices. _________________________________________________________________________ PLOEG The document, titled "Rare Gems or Mundane Practice? Resource Constraints as Drivers of Frugal Innovation (simple products or services often born out of necessity and lack of resources, built by the people who need them the most with locally sourced materials)," examines the role of resource constraints in fostering frugal innovation. Frugal innovation is defined as resource-efficient innovation aimed at producing affordable and efficient solutions under constraints, often targeted at low-income groups. The study distinguishes between two types of frugal innovation: 1. Type 1: Internally-oriented innovations that improve firm efficiency (e.g., reducing operational costs). 2. Type 2: Customer-oriented innovations that create value for external stakeholders (e.g., affordable products for underserved markets). Key Findings: 1. Resource Constraints and Innovation: ○ Firm-level constraints (e.g., lack of resources like electricity or capital) drive internally-focused frugal innovation.  ○ External environmental constraints, such as customer needs in resource-constrained regions, have less impact on innovation compared to firm-level constraints. 2. Managerial Experience: ○ Managers with extensive experience positively influence internally-focused frugal innovation but show mixed results for customer-oriented innovation. 3. Interactions Between Constraints: ○ High resource constraints in both the firm and external environment can reduce the likelihood of frugal innovation, as managers may perceive limited agency to address these challenges. 4. Empirical Analysis: ○ Based on World Bank data from firms in emerging economies, frugal innovations were relatively common, with a prevalence of internal efficiency upgrades (Type 1) but fewer customer-oriented solutions (Type 2). ○ The prevalence of frugal innovation varied across regions and sectors, with manufacturing firms more likely to engage in Type 1 innovations. Contributions: The study provides a large-scale empirical investigation into frugal innovation, challenging prior notions that such innovations are rare "gems." Instead, it highlights their practical relevance, particularly in developing regions where resource constraints are widespread. The research emphasizes the need for tailored strategies to foster innovation under constraints and provides insights into the role of managerial decision-making and environmental conditions. _________________________________________________________________________ Powerpoints + practice questions - In medieval times, people used to kill others for IPR-protection. (Intellectual Property Rights) - Also during these times, a development of self-consciousness and individuality arose. This created a demand pull for clothing, cosmetics, biographies and portraits. - Escalation of commitment is a human behavior pattern in which an individual or group facing increasingly negative outcomes from a decision, action, or investment nevertheless continues the behavior instead of altering course. The actor maintains behaviors that are irrational but align with previous decisions and actions. This is often known as the sunk-cost argument - Hyperbolic discounting is when you weigh Present payoffs versus future payoffs. This is also known as ‘present bias’, where you pay too much attention to present payoffs instead of future payoffs. One could say it is an example of being shortsighted. - A corporate Strategy defines "where to play" (industries and markets), while a competitive Strategy defines "how to win" (within those industries or markets). - Economies of scale are Cost advantages that a company achieves due to an increase in the scale of production. As production volume increases, the cost per unit of output decreases because fixed costs are spread over a larger number of goods. - Economies of scope are cost advantages that a company achieves by producing a wider variety of products or services together rather than specializing in one product. It leverages shared resources, knowledge, or infrastructure to reduce costs. - SWOT-analysis: strengths, weaknesses, opportunities and threats. - To make your product inimitable, companies can focus on: secrecy, legal protection, lead times & learning curves and tacit knowledge. learning curves highlight the value of accumulated experience and continuous improvement. By leveraging these curves, companies can create unique efficiencies and expertise that competitors find difficult to replicate, enhancing their product’s inimitability. - Profit maximization is not always a smart move. - A high team diversity has a positive impact on team performance but is not substantive, which means there is a very low correlation between team performance and team diversity. - There are four different cultures within a company. First there is an adaptability culture. It has: fast response, high-risk decisions, autonomy, experimentation, creativity. - The second culture is an achievement culture. This focuses on specific customers, results oriented, competitive, aggressive, personal initiative. - The third culture is a clan culture. This focuses on participation, involvement, caring, family-like, cooperation, consideration for all. - The fourth culture is a bureaucratic culture, which values order, consistency, thrift, discipline and control. - A company that strives to be innovative, should provide incentives for innovation. Also it should tolerate failure on the outcome, not the process. - Speed matters in business. Many decisions are reversible, and therefore do not need extensive study. - ASML has a ‘zero repeat error’ culture, which focuses on continuous improvement, stimulates experimentation and doesn’t penalize on outcome failure. - There are six decision making tools: intuition, simple calculation, financial measures, complex return measures, decision matrix and portfolio/case analysis - There are four reasons why radical innovation favors startups when compared to mature firms. Startups have nothing to lose, no baggage history, no obstacle of network and a small market is big enough. Mature firms, on the other hand, could be destroying themselves (cannibalism), internal personnel could object, they have embedded networks and the markets may likely be too small. - An alliance is an arrangement to undertake a mutually beneficial project while each retains its independence. - The benefits of open innovation are that you have more diverse knowledge and more feedback, but the downside is that you can get information overflow, coordination costs and higher risk of opportunism. - These are Tools to identify and select externally available knowledge and match it to internally available complementary resources: (1) technological audits of the own organization, (2) core competence assessment of the own organization, (3)  intellectual property audits, (4) project portfolio management, (5) competitor analysis, (6) industry analysis, (7) market analysis, (8) technology monitoring, (9) technology forecasting, (10) competitive technological intelligence - The Business Model Canvas consists of nine parts: key partners, key activities, value propositions, key channels, customer relationships, customer segments, revenue streams and cost structure. - If your mission is to create social value, this should feed into your organizational goals and hence, every strategic decision of the company. - The upper echelons theory talks about the top management of a firm. - The advantage that small firms have over big firms is that they have more information, because they are closer to the market. - When firms maintain their internal research capacity, this will lead to the highest returns in open innovation. - A core feature of a design-driven innovation is to Go for a ‘good enough’ prototype approach. - Tesla pursues a relatively open innovation strategy in which they open source all their patents. They perceive the need for electric cars and the environment to co-evolve technologically - Kondratieff waves describe the relation between 1) general purpose technologies, 2) long run economic development - The initial performance of future disruptive innovations They start at the bottom of the performance curve, according to Clayton Christensen. - The first step towards engaging with sustainability-led innovation is often labelled as ‘operational efficiency’. Its objective can be defined as 1) Doing the same things better, 2) reduce harm