strategy-and-change-summary-weeks-1-3-3636f3f4-9cb2-40a1-a9a4-b06df07c306f.docx

The S-Curve Model shows that tchnology changes when an emerging technology takes over another existing technology. Introduction/Birth - Slow increase in popularity Growth - Fast increase Maturity - Growth slows down Decline - Growth declines ? New technologies take over = innovation Adaptations to t...

The S-Curve Model shows that tchnology changes when an emerging technology takes over another existing technology. Introduction/Birth - Slow increase in popularity Growth - Fast increase Maturity - Growth slows down Decline - Growth declines ? New technologies take over = innovation Adaptations to the S-Curve Model by Clay Christensen and Jim Utterback look at performance of the technologies over time. They describe the period between the two innovations as a chaotic period of transition with uncertainty in stability for both innovations. Relates to the Cyclical Model. TECHNOLOGICAL DISCONTINUITIES AND ORGANIZATIONAL ENVIRONMENTS - Tushman & Anderson (1986) This paper specifically investigates patterns of technological change and their impact on environmental conditions. Technology can be defined as those tools, devices and knowledge that mediate between inputs and outputs and that create new products or services. Technology can be the knowledge of techniques/processes or it can be embedded in machines (as a system) to allow for operation in which an input is taken to produce an outcome. Technological breakthroughs are often triggered by individual genius and follow a pattern Technological Discontinuity - Revolutionary/radical/breakthrough or innovation, this is a relatively rare occasion Era of Ferment - Discontinuities trigger a short period of technological ferment in which alternative product firms compete for dominance. Dominant Design - A dominant design reflects the emergence of product-class standards and ends the period of technological ferment. One dominant design emerges Era of Incremental Change - As the dominant design emerges a long period of retention/incremental innovations follows. This enhances and extends the underlying technology How do technology changes affect the competency of existing firms? The major technological shifts can be classified as competence-destroying and competence enhancing Because they either destroy or enhance the competing/existing firms in an industry. A competence-destroying discontinuity either creates a new product class or substitutes for an existing product. Competence-destroying process discontinuities represent a new way of making a given product. This requires new skills, abilities, and knowledge in both the development and production of the product. A competence-enhancing discontinuity are improvements in price/performance that build on existing know-how in a product class. These innovations substitute older technologies, but do not require new skills to master the technologies. How do technology changes change the organizational environments? Technological breakthroughs are strategically important because it can help with the creation and capture of value. It also changes the competition structure of the industry (Porters Five Forces). Both competence-enhancing and competence-destroying technological discontinuities generate uncertainty as firms struggle to master an incompletely understood product or process. Breakthroughs trigger a period of technological ferment. However, the effects on competitive advantage are different: Competence-enhancing advances permit existing firms to exploit their competence and expertise and thereby gain competitive advantage over smaller or newer firms. This increases barrier to entry and minimum scale requirements. Competence-destroying discontinuities break the existing order. Barriers to entry are lowered as new firms enter previously undiscovered markets exploiting the new technology TECHNOLOGICAL DISCONTINUITIES AND DOMINANT DESIGNS - Anderson & Tushman (1990) How do technologies change over time? Which pattern does this paper propose? This paper build on the sociocultural evolutionary ideas from Tushman & Anderson (1986) by exploring the punctuating event in the evolution of a technology: the emergency of a dominant design after technological discontinuity. Figure 1. The technology cycle. The paper hypothesizes that the number of new designs introduced during the era of ferment is greater than during the era of incremental change. It also states that the era of ferment for competence-destroying discontinuity is longer than the era of ferment for competenceenhancing discontinuity. THE INNOVATORS' DILEMMA - (Christensen (2013) What is the Innovators' Dilemma exactly? The Innovators Dilemma is about well-managed companies that have their competitive antennae up, listen astutely to their customers, invest aggressively in new technologies, and yet still lose market dominance. There are two ways to resolve this paradox. One might be to conclude that firms such as Digital, IBM, Apple, Sears, Xerox, and Bucyrus Erie must never have been well managed. An alternative explanation, is that these failed firms were as wellrun as one could expect a firm managed by mortals to be - but that there is something about the way decisions get made in successful organizations that sows the seeds of eventual failure. The Innovator's Dilemma is intended to help a wide range of managers, consultants, and academics in manufacturing and service businesses - high tech or low—in slowly evolving or rapidly changing environments. There are three criteria for an innovation to be disruptive: The innovation originates from low-end or new-market footholds. Entrants may target over-looked low-end segments of the market with a product that is considered to be inferior by the incumbent's most demanding consumers Entrants may also create new markets where no market exists yet and turn non-consumers into consumers. The innovation does not catch on with mainstream customers until quality catches up to their standards. It takes a while for a disruptive technology to adapt to the required quality of the market. To be disruptive an innovation must represent a business model innovation. The innovation must go beyond technology alone but rather the combination of technologies and business model innovation. There are three reasons why good management can lead to failure: Technologies can progress faster than market demand. Suppliers often overshoot their market. They give customers more than they are willing to pay for How is the disruptive vs. sustaining distinction different from the radical vs. Not differentiating between sustaining and disruptive technologies. Sustaining technologies foster improved product performance, disruptive technologies bring to market a different value proposition than had been available previously causing failure for the industry's leading firms. Sustaining technologies can be both incremental (movement along the S-Curve) or radical (jumping to another S-Curve) The conclusion by established companies that investing aggressively in disruptive technologies is not a rational financial decision. Therefore, companies are rarely able to build a case for investing in disruptive technologies until it is too late. There are five principles for disruptive innovations: 1. Companies Depend on Customers and Investors for Resources The implication of this principle for managers is that, when faced with a threatening disruptive technology, people and processes in a mainstream organization cannot be expected to allocate freely the critical financial and human resources needed to carve out a strong position in the small, emerging market. It is very difficult for a company whose cost structure is tailored to compete in high-end markets to be profitable in low-end markets as well. Creating an independent organization, with a cost structure honed to achieve profitability at the low margins characteristic of most disruptive technologies, is the only viable way for established firms to harness this principle. 2. Small Markets Don't Solve the Growth Needs of Large Companies Those large established firms that have successfully seized strong positions in the new markets enabled by disruptive technologies have done so by giving responsibility to commercialize the disruptive technology to an organization whose size matched the size of the targeted market. Small organizations can most easily respond to the opportunities for growth in a small market. The evidence is strong that formal and informal resource allocation processes make it very difficult for large organizations to focus adequate energy and talent on small markets, even when logic says they might be big someday. 3. Markets that Don't Exist Can't Be Analyzed Companies whose investment processes demand quantification of market sizes and financial returns before they can enter a market get paralyzed or make serious mistakes when faced with disruptive technologies. They demand market data when none exists and make judgments based upon financial projections when neither revenues or costs can, in fact, be known. Using planning and marketing techniques that were developed to manage sustaining technologies in the very different context of disruptive ones is an exercise in flapping wings. 4. An Organization's Capabilities Define Its Disabilities Processes and values are not flexible. A process that is effective at managing the design of a minicomputer, for example, would be ineffective at managing the design of a desktop personal computer. Similarly, values that cause employees to prioritize projects to develop high-margin products, cannot simultaneously accord priority to low-margin products. The very processes and values that constitute an organization's capabilities in one context, define its disabilities in another context. Technology Supply May Not Equal Market Demand In their efforts to stay ahead by developing competitively superior products, many companies don't realize the speed at which they are moving up-market, over-satisfying the needs of their original customers as they race the competition toward higherperformance, higher-margin markets. In doing so, they create a vacuum at lower price points into which competitors employing disruptive technologies can enter. Only those companies that carefully measure trends in how their mainstream customers use their products can catch the points at which the basis of competition will change in the markets they serve. Week 2 - How to adopt and create value from technological changes: Ambidexterity Introduction to Ambidexterity This week presents a general solution to the environmental forces presented in the previous week How can we organize the company such that we retain our revenue stream from an existing technology, as well as anticipate new technology rising form a possible disruptive or radical innovation? Exploitation is the refinement of old capabilities characterized by efficiency, production, selection, execution, and process innovation. Explorative learning tends to involve singleloop learning. Exploitations uses a mechanical structure (conservative). The operating style is uniform and restricted through sophisticated controls systems with insistence on holding fast to tried-and-true management principles despite changes in business conditions Exploration is the perusing of new competences characterized by variation, experimentation, flexibility, risk-taking and product innovation. Exploration requires doubleloop learning, meaning it requires change of the underlying mental model. Explorations questions the assumption that the loyal customer and investors are always right. There is an organic structure (entrepreneurial) with a free operating style, there is loose information and control with emphasis on cooperation. And lastly there is free adaptation by the organization to changing circumstances. Ambidexterity is the combination of both exploitation and exploration in a single organization. Ambidexterity requires both double- and single-loop learning. BUILDING AMBIDEXTERITY INTO AN ORGANIZATION - BIRKINSHAW & GIBSON (2004) This paper proposes contextual ambidexterity as a solution next to structural ambidexterity. Structural ambidexterity suggests that if you want to make and ambidextrous organization you should have both mechanicaland organic organizational structures. This can be by function or location which means that a separate department explores and the rest of the firm exploits. Or either exploitation or exploration are outsourced. However, there are also difficulties with the separation solution. It is challenging for companies to keep the balance, causing them to either have too much exploitation (competency trap), or too much exploration (failure or renewal trap). There can also be cultural issues, where there is unnecessary rivalry across the exploration/exploitation units. Lastly, there can also be tension between the formal and mechanical needs of company and the informal expectations of a small R&D unit. 1. What is contextual ambidexterity? Contextual Ambidexterity is creating a context in which people do both exploration and exploitation simultaneously. Ambidexterity solutions can appear in different forms over the course of the technology lifecycle. How do you think this can be implemented? How is it different from structural ambidexterity? How is ambidexterity achieved? Alignment-focused and adaptability- focused activities are done in separate units or teams Individual employees divide their time between alignment-focused and adapt- ability-focused activities Where are decisions made about the split between alignment and adaptability? At the top of the organization On the front line - by salespeople, plant supervisors, office workers Role of top management To define the structure, to make trade-offs between alignment and adaptability To develop the organizational context in which individuals act Nature of roles Relatively clearly defined Relatively flexible Skills of employees More specialists More generalists MEETING THE CHALLENGE OF DISRUPTIVE CHANGE - CHRISTENSEN & OVERDORF (2002) What are the characteristics of disruptive innovation? What does Christensen mean by 'values'? What does a heavyweight team look like? BURGELMAN AND VALIKANGAS, "MANAGING INTERNAL CORPORATE VENTURING CYCLES" It is seen that after periods of intense Internal Corporate Venturing (ICV) activities, this is often followed by periods when such programs are shut down, to then later be followed by new initiatives. Research suggests that this is driven by the interplay between the prospects of a company's mainstream businesses and the availability of uncommitted financial resources. Resulting in four main situations of interaction: ICV Orphans - If there are enough uncommitted financial resources to start new ICV's, but the mainstream businesses are sufficient there is not enough motivation to continue with the new projects resulting in "ICV Orphans" All-Our ICV Drive - If there are enough uncommitted financial resources, and the mainstream businesses are insufficient for growth, management will invest heavily in ICV projects. ICV Irrelevance - There are few uncommitted financial resources and the mainstream business is promising enough to top management leaving ICV's irrelevant Desperately Seeking ICV - A lack of uncommitted financial resources, combines with disappointing mainstream business causes management to look desperately for reasonablelooking ICV's. Given the limited choice and desperation, likelihood of failure is high for the ICV Cyclicality often follows the ups and downs of the economy. Estimates of the length of the cycle vary. According to Burgelman this is around 1-3 years. The main driver for ending ICV programmes is their failure to deliver, though often the programmes hasn't had a proper chance to deliver. Both top and lower management fail to recognize the role of ICV in the long-term strategy this causes "weakness of will". Consolidation of "orphan" ICV projects into a new ventures group A form of insurance against insufficient prospects in core business A potential remedy to slowing growth A way to invest excess cash Imitation of other companies (a management fad often driven by consultants) One of the possible but limited number of new initiatives available for an incoming new CEO (driven by the pressure to be "actionoriented") Duration of the ICV Cycle Macroeconomic conditions Short-term budgetary pressures motivates all-out effort to grow big fast Time to acceptable ROI longer than normal managerial performance time horizon: ? Creates career risks for executives staying with an eventually losing venture - - Requires special efforts to secure succession planning for venture managers - - Motivates executives to focus excessively on shortterm results and move on End of the ICV Cycle   Failure to deliver Too successful (creates envy or impinges on others' strategic prerogatives) ICV's role in corporate strategy no longer viewed as important Reorganization and other resource rationalizations One way for a new CEO to "refocus" the organization (driven by the pressure to be "action-oriented") Inability to sustain corporate commitment over long periods of time ("weakness of will") Focusing on achieving growth through diversifying acquisitions has led to expensive failure and therefore ICV remains a key capability for established companies seeking to achieve renewal and growth. When ICV is not properly managed, it can cause pitfalls. To avoid this ICV should be viewed as an integrated and continuous party of the company's strategic direction. Therefore, managers should keep in mind that: There is always ICV going to on so they should manage it Even when not needed to support profitable growth objectives, ICV activity can be an important indicator for where the company's employees think future opportunities lie View ICV as a source of insights that can inform strategic direction An "all-out ICV drive" biases the process and often engenders costly mistakes, this may cause the mainstream business to lose their talent 5. If ICV Is desperately needed, it may be too late SETHI, R., & IQBAL, Z. (2008). - STAGE-GATE CONTROLS, LEARNING FAILURE, AND ADVERSE EFFECT ON NOVEL NEW PRODUCTS This article examines whether Stage-Gate evaluations adversely affects novel new products. Stage-Gate evaluation is a system that offers methodology for exerting control on a new product development. Typical Stage-Gate controls break traditional new product development process into a set of discreate and identifiable stages with each stage consisting of a set of prescribed activities. These stages are separated by gates, which serve as the control and go/no-go check points. Gates are designed in the form of meetings that take place between senior management and representatives of the product development team. There are two types of management controls: process controls (based on methods and procedures and output controls (based on output goals and standards). If not implied properly this will lead to confusion, ambiguity, and poor evaluation. Therefore, gates need to be implemented with discipline. The paper has several hypotheses: The more strictness, the objectiveness, and the frequency of the evaluation all cause greater inflexibility of the new product development project. 2. Moderating Influence of Gate Conditionality Gate conditionality means that projects are allowed to proceed further into the process of development conditional on meeting required criteria. The greater the gate conditionality, the weaker is the impact of the strictness, objectiveness, and the frequency on the inflexibility of the new product development project. 3. Effect of Project Inflexibility on Post Approval Learning Failure Learning failure refers to a team's inability to acquire and process any new information. The higher the project inflexibility, the greater is the post-approval learning failure. Moderating effect of Turbulence in the Market and Technological Environment Market turbulence is defined as the degree of instability, uncertainty, and lack of control within the market. Technological turbulence is the degree to which technology changes over time. The greater the turbulence in the market and technological environment, the stronger is the impact of the project inflexibility on post-approval learning failure. Effect of Post Approval Learning Failure on Market Performance of Novel Products The greater the product novelty, the stronger is the adverse effect of post approval learning failure on the market performance of the new product. FIGURE 1 Hypothesized Model CHRISTENSEN, KAUFMAN, & SHIH (2008) - "INNOVATION KILLERS: HOW FINANCIAL TOOLS DESTROY YOUR CAPACITY TO DO NEW THINGS" It has been seen that it is difficult for managers to innovate successfully. This is due to the misapplication of three financial analysis tools against successful innovation: What are the problems with using the stage gate method, as well as DCF, fixed/sunk 1. Discounted Cash Flow (DCF) and Net Present Value (NPV) The use of DCF and NPV to evaluate investment opportunities causes managers to underestimate the real returns and benefits of proceeding with investments in innovation. As this model assumes that an investor would be indifferent to having a dollar today or to receive some years from now + the interest. The first error is that the base case of not investing in the innovation is that the present health of the company will persist indefinitely into the future if the investment is note made, which is of course not true. The second error is that future cash flows are difficult to predict and therefore are sensitive to errors of estimation. 2. Fixed and Sunk Costs Fixed and sunk costs are considered when evaluating future investments but the way in which they are used confer an unfair advantage on challenges and shackles incumbent firms that attempt to respond to an attack. It does not differentiate between the asset's usable lifetime and the competitive lifetime. 3. Earnings Per Share (EPS) The emphasis on EPS as the primary divider of share price and value creation, to the exclusion of almost everything else, diverts resources away from investments whose payoff lies beyond the immediate horizon. What do Sethi & Iqbal mean with "learning failure" and how does a rigorous stage Discovery-driven planning is an alternative to stage gate planning, and it uses an assumption checklist with all the things that need to be proven in order to continue with the project. Instead of going through each of the stages separately and shining too much light on financial projections, discovery-driven planning uses the assumptions check-list as the basis of the project plan for that stage. HBR Case: Intrapreneurship at Alcatel-Lucent In 2012, global telecommunications equipment manufacturer Alcatel-Lucent stopped with doing boot camps in the company, however after the appointment of a new CEO in 2013 the company decided to bring back boot camps in 2014 with the aim of putting innovation back at the heart of the company and replacing legacy products with new generation products. The telecom equipment industry at the time was facing strong demand from end-users for faster and higher quality access. There was pressure to innovate. Companies from Asia were gaining market share with lower-priced products and services, and mainstream IT competitors were entering the equipment market, their standardized infrastructure and open platforms gave them a competitive advantage. Alcatel-Lucent is a telecommunications equipment company that provides a range ofAssess Alcatel-Lucent's experience with its boot camps: what went well and what could products and services related to communication networks, including network infrastructure solutions, communication services, software, and analytics, as well as professional services. The revenues of the company in 2013 were close to 14.4 billion USD of which 15% was spent on R&D. Their research focused on identifying new and disruptive market opportunities as well as transitioning product concepts to commercial offerings. The company launched a three-year strategy called the 'Shift Plan' which was made to reposition the firm to a specialist player focused on IP networking, cloud technologies and ultra-broadband access. The company had three strategic businesses, support divisions and corporate functions and was outsourcing its manufacturing. Alcatel had already launched an Innovation Boot Camp prior to the merger with Lucent in Strategic Business Support Divisions Corporate Functions 1) Core 1) Operations Finance & Legal Networking 2) Sales 2) Human Resources 2) Access 3) Others 3) Strategy & Innovation 3) Marketing These boot camps consisted of five teams of five members each, all working on the same idea. By he time of the merger 6 boot camps had been held identifying over 30 projects. Post-merger problems started to occur and the bootcamps became too autonomous. By 2012 the boot camps led to three main insights: Not only R&D was valuable for new ideas, 40% of the ideas came from Marketing, 33% from Project Management and 12% from other departments The age mix of the participants was varied Boot camps had increased the percentage of high potential employees from 48% to 66% The issues with the boot camps were: Managers were careful with spending financial resources on the boot camps as they were risky Operations managers were conditioned to securing process efficiencies through incremental improvements The organization was large, and it was hard to scale the boot camps Success for an intrapreneurial boot camp could be defined by several factors, including: Idea generation - A successful boot camp should generate a significant number of innovative ideas to address specific business challenges. Idea validation - Ideas generated in the boot camp should be validated to determine their potential impact on the organization. Employee engagement - The program should foster a culture of innovation, collaboration, and learning that motivates employees to participate and share ideas. Learning outcomes - Participants should acquire new skills and knowledge that enable them to think more creatively, solve problems more effectively, and develop new products or services. Business impact - The boot camp should result in tangible business outcomes, such as cost savings, increased revenue, or improved customer satisfaction. Sustainability - The program should be designed to foster a long-term culture of innovation within the organization, with ongoing support and resources to ensure that ideas generated during the boot camp are implemented. Overall, the success of an intrapreneurial boot camp should be measured by the degree to which it contributes to the organization's strategic goals, drives innovation, and develops employees' skills and capabilities. In general, a successful boot camp should be well-designed (with clearly defined goals and objective and a target audience), engaging, and focused on achieving measurable outcomes that support the organization's strategic priorities.