SC Summary: Strategy & Change PDF
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Summary
This document provides a summary of strategy and change topics, focusing on innovation, entrepreneurship, and corporate venturing. It covers different models, case studies, and important takeaways. It's written for undergraduate students.
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lOMoARcPSD|32021228 - Over-reliance on nancial metrics Stage-Gate Innovaon vs. Discovery-Driven Planning o Focus SG focuses on management of innovaon process, from idea generaon to launch and involves a series of gates DD focuses on early stages of innovaon, where there is high uncertaint...
lOMoARcPSD|32021228 - Over-reliance on nancial metrics Stage-Gate Innovaon vs. Discovery-Driven Planning o Focus SG focuses on management of innovaon process, from idea generaon to launch and involves a series of gates DD focuses on early stages of innovaon, where there is high uncertainty and ambiguity and aims to idenfy and manage key assumpons and risks associated with a project o Flexibility DD is more exible than SG, as it allows for more iteraon and learning during the innovaon projects DD recognizes that innovaon is an uncertain process and inial assumpons may need to be revised once new informaon becomes available o Risk Management DD places greater emphasis on risk management by idenfying and tesng assumpons early in the innovaon process and adjusng plans accordingly SG focuses on managing risk at specic decision points Case Study 3: HBR Case – Intrapreneurship at Alcatel-Lucent - - What about? o Eorts of Alcatel-Lucent to foster innovaon and entrepreneurship within its own organizaon o Challenges Alcatel-Lucent faced in the highly compeve telecommunicaons industry o The strategies Alcatel-Lucent developed to encourage intrapreneurship Takeaways o Create an internal venture capital program o Build a culture of innovaon o Encourage risk-taking and experimentaon o Measure and track progress o Empower employees Endterm Material Week 4 – External Corporate Venturing Article 9: Chesbrough (2003) – The Era of Open Innovation - Why not Internal R&D? o Fundamental shi in how companies generate new ideas and bring them to the market - Closed Innovaon Downloaded by Rishi Srinivasan ([email protected]) lOMoARcPSD|32021228 - - o Generate your own ideas and then develop, manufacture, market, distribute and service themselves Open Innovaon: o Firms commercialize external (as well as internal) ideas by deploying outside (as well as in-house) pathways to the market o Companies can generate value for the organizaon by commercializing internal ideas through channels outside of their current business Modes of Innovaon o Funding Innovaon Innovaon investors and benefactors Focused primarily on supplying fuel for innovaon re Innovaon Investor Used to be R&D budget, now VC, angel investor, etc. Can supply valuable advice to startups and business ideas Innovaon benefactors Provide new sources of research funding Focus on early stages of research discovery o Generang Innovaon Innovaon Explorers Specialize in performing discovery research Innovaon Merchants Acvies are focused on narrow set of technologies that are then codied into intellectual property and aggressively sold to others Innovate, but with commercial goal in mind Innovaon Architects Provide valuable service in complicated technology worlds Develop architectures that paron this complexity Downloaded by Rishi Srinivasan ([email protected]) lOMoARcPSD|32021228 Innovaon Missionaries Consist of people and organizaons that create and advance technologies to serve a cause Do not seek nancial prots o Commercializing Innovaon Bringing innovaon to the market Innovaon Marketers & Innovaon One-Stop Centers Marketers o Keen ability to protably market ideas o Focus on developing an understanding of the current and potenal needs in the market One-Stop Centers o Provide comprehensive products and services o Take the best ideas and deliver those oers to their customers at compeve prices Article 10: Miles & Covin (2002) – Exploring the Practice of Corporate Venturing: Some Common Forms and Their Organizational Implications - Corporate Venturing o Direct Investment Larger rm invests in smaller rm o Indirect Corporate Venturing Larger rm invests in a venture capital fund that serves as a nancial intermediary between the corporaon and the entrepreneurial ventures Presence of investment intermediaon depends on (1) Level of commitment to entrepreneurial iniaves (2) Preferred degree of control over the iniaves (3) Ability to accept and manage entrepreneurial risks (4) Desired level of market diversicaon Intermediaries add value by (1) Pooling funds from various sources, resulng in diversicaon and the amelioraon of risks faced by corporate investors (2) Minimizing the costs to the corporaon of due diligence assessments (3) Subjecng the venture to objecve, market-based assessments - Direct-Internal o Simplest form of corporate venturing o Employees with a business idea are permied or encouraged to develop and then commercially exploit that idea within the corporate structure o Idea was generated within the organizaon and funded, developed and commercialized ulizing internal resources o Advantages Can create real opons by developing the organizaon´s capabilies, tangible resources, and intangible resources Downloaded by Rishi Srinivasan ([email protected]) lOMoARcPSD|32021228 Innovave acvies associated with venturing can help make autonomous entrepreneurial behavior acceptable and bring about desirable cultural change and human resource development within the organizaon These advantages can help a rm to beer recognize and exploit entrepreneurial opportunies o Disadvantages Costliest form in terms of managerial involvement Resource commitments tend to be high Intrapreneurs might leave Can contribute to intra- and interdepartmental conicts Direct-External o Takes place when, without using a dedicated new venture fund, a corporaon acquires or purchases equity in an external entrepreneurial rm, oen with the objecve of facilitang the transfer of technology, resources, capabilies between the business enes o Advantages Access to new markets, innovave technologies, and other forms of learning Enhanced reputaon Potenal tax benets Enhanced potenal for nancial gain Enhanced access to acquision candidates o Disadvantages Potenal damage to corporaon´s reputaon Possibility of legal liability if there are dierences in social, environmental or ethical conduct Internal stakeholders perceive they are not obtaining their fair share of resources Corporate governance and level of diversicaon corporate stakeholders prefer Most eecve when used to create mutually benecial long-term strategic relaonships between organizaons with complementary capabilies and resources - - Indirect-Internal o When the corporaon invests in a venture capital fund designed to encourage employees to develop internal ventures o Typically originates and operates within the corporaon and managed by corporate employees o Advantages Can encourage “boom-up” or emergent entrepreneurial behavior Funds provided by the investment intermediary can somemes be used to buy venture teams me back from their former business units, allowing the teams to devote all their eorts to the entrepreneurial project o Disadvantages Same as direct-internal Downloaded by Rishi Srinivasan ([email protected]) lOMoARcPSD|32021228 Possible involvement of an external equity partner will typically necessitate the sharing of nancial rewards, which can create resentment among company insiders Forced objecvity of an “independent” third-party assessment of the feasibility of the venture and its value in the market Indirect-External o Corporaon invests in a venture capital fund that targets external ventures in specic industries or technology sectors o Two variants VC may originate outside and be managed by non-corporate employees VC may originate within the corporaon and be managed by corporate employees o Advantages Create and expand markets for the corporaon´s products and technologies In case of external venture fund with mulple investors, corporaon´s due diligence costs per screened venture may be reduced Corporaon may be privy to venture-specic informaon allowing the corporaon to acquire tacit knowledge about new markets o Disadvantages Limited to the corporaon´s nancial investment Benets are also limited to nancial investment - Downloaded by Rishi Srinivasan ([email protected]) lOMoARcPSD|32021228 Case Study 4: HBR Case – Corporate Venture at Eli Lilly - - - - What about? o Eli Lilly´s use of corporate venture capital to invest in external startups and technologies in order to drive innovaon and growth within the company Corporate Venture Capital o primarily goal is to nurture and develop start-ups for the parent company, and the payo is typically strategic, such as access to innovaon or support for the viability of the parent´s business objecve How CVC diers to tradional VC o Oering more complementary assets o Being less focused on nancial returns o Having invesng interests that may be viewed as less aligned with start-ups o They are able to make investments that are earlier stage than regular VCs Takeaways o Provide CVC with dedicated resources and support o Align corporate strategy with innovaon iniaves Week 5 – Digital Change: the Pace of Change, the Impact of Technology, & its Trends Article 11: Porter & Heppelmann (2015) – How Smart, Connected Products are Transforming Companies - Smart, Connected Products o All SCPs share physical, smart and connecvity components o Require a whole new supporng technology infrastructure, which provides a gateway for data exchange between the product and user and integrates data from business systems, external sources, etc. o Serves as a plaorm for data storage and analycs o Enable new product capabilies - Ideas in Brief o Radical Shi SCPs force companies to redene their industries and rethink nearly everything they do, beginning with their strategies Downloaded by Rishi Srinivasan ([email protected]) lOMoARcPSD|32021228 - - o New Relaonships Unprecedented data and capabilies that SCP provide are changing the way rms interact with their customers Relaonships are becoming connuous and open-ended o New Processes New product capabilies and infrastructure and the data they generate are reshaping the work of virtually every funcon in the value chain Far more intense coordinaon among funcons is now required o New Structures New forms of cross-funconal collaboraon and enrely new funcons are emerging Unied Data Organizaons; units to connuously improve products post sale; groups charged with opmizing customer relaonships Changes o Products can monitor and report on their own condion and environment, helping to generate previously unavailable insights into their performance and use monitoring data o Complex product operaons can be controlled by users through numerous remote-access opons remote control by users o Combinaon of monitoring data and remote-control capability creates new opportunies for opmizaon algorithms o Combinaon of monitoring data, remote control, and opmizaon algorithms allows autonomy Transforming the Value Chain: o Shi from mechanical engineering towards soware engineering o Product design principles Low-Cost variability In convenon products costly, in SCPs much cheaper Evergreen design SCPs are connuously upgraded via soware New user interfaces and augmented reality Less costly to implement and easier to modify Ongoing quality management SCPs enable connuous monitoring of real-world performance data, allowing companies to idenfy and address design problems that tesng failed to expose Connected service Product designs need to incorporate addional instrumentaon, data collecon capability, and diagnosc soware features Support for new business models Products are increasingly delivered as services; these must capture data so that customers are appropriately charged System interoperability As products become components of broader systems, the opportunies for design opmizaon mulply o Manufacturing Downloaded by Rishi Srinivasan ([email protected]) lOMoARcPSD|32021228 SCP create new producon requirements & opportunies Smart factories: Industry 4.0 & smart manufacturing Simplied components: as physical complexity decreases, quanty of sensors and soware rises Connuous product operaons: SCPs cannot operate without a cloudbased technology stack Logiscs SCPs take tracking to a new level Rich informaon about locaon, condion & environment Markeng & Sales Focus is shied from company´s customer relaonship from selling to maximizing customer´s value New ways to segment and customize Data provides much sharper picture of product use New customer relaonships New business models Goal of salespeople becomes customer success over me rather than just making the sale A focus on systems, to discrete products Partnerships may be necessary Aer-Sale Service SCPs improve service and eciency and enable fundamental shi from reacve service to prevenve, proacve, and remote service One-Stop Service Diagnose problems remotely, so parts needed for repair can be in their trucks at arrival Remote Service SCPs make delivering service via connecvity feasible Prevenve Service Using predicve analycs, organizaons can ancipate problems and take acon Augmented-reality-supported Service Data creates new ways for service personnel to work individually, together and with customers Security IT security spreads among all funcons of the value chain Human Resources Manufacturer of SCP is a cross between a soware company & tradional product company New experse needed New skills needed to design, sell and service SCPs New cultures needed More coordinaon across funcons New compensaon models needed How to aract and movate talent Implicaons for Organizaonal Structure Collaboraon between IT and R&D must assume a more central role Unied Data Organizaon o o o o o o Downloaded by Rishi Srinivasan ([email protected]) lOMoARcPSD|32021228 Dedicated data groups must be created that make data insights available across all funcons and units DEV-OPS New funconal group, responsible for managing and opmizing ongoing performance of connected products aer they have le the factory Customer Success Management Third new organizaonal unit responsible for managing the customer experience and ensuring that customers get the most from the product Shared responsibility for security o Making the Transion Stand-alone business unit Unit aggregates talent and mobilizes technology and assets needed to bring such new oerings to market Center of Excellence Separate corporate unit houses key experse on SCPs Cross-business-unit steering commiee Involves convening a commiee of thought leaders across various business units, who champion opportunies, share experse and facilitate collaboraon Article 12: Porter & Heppelmann (2014) – How Smart, Connected Products are Transforming Competition - History o 1st IT Wave (1960-1970): automated individual acvies in the value chain; producvity of acvies dramacally increases; led to standardizaon of processes across companies o 2nd Wave: rise of the internet; allowed coordinaon and integraon across individual acvies Product itself largely unaected Downloaded by Rishi Srinivasan ([email protected]) lOMoARcPSD|32021228 - - o 3rd Wave: IT is becoming integral part of the product itself; dramac improvements in product funconality and performance Technology Stack o Enrely new technology infrastructure o Includes modied hardware, soware applicaons and an operang system embedded in the product itself What can SCPs do? o Monitoring Monitoring of a product´s condion, operaon and external environment through sensors and external data sources Can alert others to changes in circumstances Allows customers/companies to track a product´s operang characteriscs o Control Can be controlled through algorithms embedded in the device or cloud These direct the product to respond to changes in its condion o Opmizaon SCPs generate rich ow of monitoring data, which, combined with control capabilies, enables companies to opmize performance in new ways o Autonomy All together, these capabilies allow SCPs full autonomy Improves safety Value grows exponenally as products become more connected Case Study 5: HBR Case – Digitization of an Industrial Giant: GE Takes on Industrial Analytics - What about? o How GE is leveraging industrial analycs to transform itself from a tradional industrial company into a digital industrial company - Creang Value: o Predicve maintenance Brings more revenue; increase output and lower unit costs; potenally extend the useful life of engines o Opmized producon Customers had high xed costs, so opmizaon increased throughput/output; in industries where companies were stuck with low or declining price power, direct cost savings or lower unit costs due to higher output represented extraordinary value - Takeaways o Embrace digital technology o Collect and analyze data o Build new capabilies o Partner with customers Downloaded by Rishi Srinivasan ([email protected]) lOMoARcPSD|32021228 Week 6 – Digital Transformation and Business Models Article 13: Porter & Heppelmann (2014) – How Smart, Connected Products Are Transforming Competition - Porter´s Five Forces and SCPs o Bargaining Power of Buyers SPCs will expand opportunies for product dierenaon, moving compeon away from price alone Knowing how customers use products allows segmentaon, customizaon and seng prices to beer capture value, and extend value-added services SCPs allow closer customer relaonships Switching costs increase through product data SCPs allow rms to reduce their dependence on distribuon or service partners SCPs can increase buyer power by giving buyers a beer understanding of true product performance, allowing them to play one manufacturer o another Product as a service business models or product sharing can increase power by reducing switching costs o Rivalry among Competors SCPs have potenal to shi rivalry, opening up numerous avenues for dierenaon and value-added services SCPs tailor oerings to more specic segments of the market and customize products for individuals SCPs broaden the value proposion beyond products Higher xed costs and lower variable costs, as there are higher upfront costs of soware development, more complex product design and high costs of developing technology stack Vulnerability to price pressure SCPs can increase rivalry as there is a broader product system o Threat of New Entrants New obstacles High xed costs, embedded technology, and mulple layers of new IT infrastructure Broadening product denions can raise barriers even higher SCPs can increase buyer loyalty and switching costs, further raising barriers Incumbents may prefer hardware-based strengths, opening the door for new compeon o Threat of Substutes SCP can oer superior performance, customizaon, and customer value relave to tradional substute products, reducing substuon threats and improving industry growth and protability Create new threats such as wider product capabilies Could reduce demand for a product overall o Bargaining Power of Suppliers Downloaded by Rishi Srinivasan ([email protected]) lOMoARcPSD|32021228 SCPs are shaking up tradional supplier relaonships and redistribung bargaining power Physical products can be replaced by soware SCPs introduce new suppliers Redening Industry Boundaries o SCPs expand industry boundaries o Basis of compeon shis from discrete products to product systems consisng of closely related products, to systems that link an array of product systems together SCPs & Compeve Advantage o Design Whole set of new product principles Hardware standardizaon through soware-based customizaon o Aer-Sale Service SCPs oer major improvements in predicve maintenance and service producvity o Markeng SCPs allow companies to form new kinds of relaonships with customers Product usage data allows gaining insights into how products create value for customers, allowing beer posioning and more eecve communicaon of product value Works best when products can be quickly and eciently tailored at low marginal cost through soware o Human Resources Need to recruit new skill sets, which are in high demand Talent must be added in soware department o Security SCPs create need for robust security management to protect the data owing to, from and between products New authencaon processes needed, as well as secure storage of data, protecon against hackers, etc. Implicaons for Strategy o 10 new strategic choices Which set of capabilies and features should the company pursue? Decide which features deliver real value Value of features will vary by market segmentaon Incorporate those capabilies that reinforce compeve posioning How much funconality should be embedded in the product and how much in the cloud? Cost is a factor Response me: quick response me -> should be in physical product Automaon: full automaon -> should be in physical product Network availability, reliability & security: embedding soware in product minimizes network dependence - - - Downloaded by Rishi Srinivasan ([email protected]) lOMoARcPSD|32021228 Locaon of product use: products operated in remote locaons can migate dangers and costs by hosng funconality in cloud Nature of user interface: complex interface -> should be in the cloud Frequency of upgrades: cloud-based applicaons allow to make product changes and upgrades easily Should the company pursue an open or closed system? Closed system o Create comp. advantage by allowing a company to control and opmize all parts of the system o Control over technology is remained o Requires signicant investment and works best when single manufacturer has dominant posion Open System o Enables end customers to assemble the parts of the soluon from dierent companies o Enables any enty to parcipate with the system o Could boost sales Should the company develop the full set of SCP capabilies and infrastructure internally or outsource to vendors and partners? Developing the technological stack for SCPs requires signicant investment Companies that develop SCPs in-house internalize key skills and infrastructure and retain control over features, funconality and product data; may also capture FMA What data must the company capture, secure, and analyze to maximize the value of its oering? Firms must consider how each type of data creates tangible value for funconality Firms must consider producon integrity, security & privacy risks How does the company manage ownership and access to rights to its product data? Companies may pursue outright ownership of product data or seek joint ownership Firms must determine their approach to transparency in data collecon and use Should the company fully or parally disintermediate distribuon channels or service networks? SCPs can enable rms to maintain direct and deep customer relaonships, which can reduce the need for distribuon channel partners Companies can also diagnose product performance problems and failures, reducing reliance on service partners Can boost margins, improve knowledge of customer needs, and strengthen brand awareness Should the company change its business model? SCPs allow radical alteraon of tradional business models Downloaded by Rishi Srinivasan ([email protected]) lOMoARcPSD|32021228 Should the company enter new businesses by monezing its product data through selling it to outside partners? Addional data can lead to new businesses / sales Should the company expand its scope? Should a company expand into related products or other parts of the system of systems? Should a company seek to provide the plaorm that connects the related products and informaon, even if it does not make or control all the parts? Case Study 6: Bock, Wiener, Gronau & Martin (2019) – Industry 4.0 Enabling Smart Air: Digital Transformation at KAESER COMPRESSORS - What about? o About the eorts of KAESER to embrace digital technologies and Industry 4.0 technologies to remain compeve o By developing a new digital plaorm, KAESER was able to improve the eciency and performance of its systems, reduce maintenance costs, and enhance customer sasfacon Case Study 7: Staykova & Damsgaard (2019) – Dual-Track´s Strategy for Incumbent´s Transformation: The Case of Danske Bank Adopting a Platform Business Model - What about? o About the digital transformaon journey of Danske Bank o How Danske Bank adopted a plaorm business model to transform its business and remain compeve in the face of changing customer demands and increasing compeon from ntech startups o Dual-track approach: transform its business while maintaining tradional banking operaons o Challenges Build new capabilies Change organizaonal structure Downloaded by Rishi Srinivasan ([email protected]) lOMoARcPSD|32021228 - Manage risks associated with introducing new digital services o How did they manage? Invesng in new talent Partnering with ntech startups Leveraging agile development methodologies Takeaways o Adopt a dual-track approach o Build new digital capabilies o Partner with ntech startups o Leverage agile development methodologies Downloaded by Rishi Srinivasan ([email protected])