Chapter 3

Radical innovation brings drastic changes across technology, market, organization, and environment. Disruptive innovation starts as low-performing technology but eventually overtakes leaders. They often coincide but don't always occur together.gpt

Radical innovation is an innovation which drastically changes in the dimension of technology, market, organization and environment. On the other hand disruptive innovation is an innovation which starts as a low performing technology in the current/previous valued performance attributes, but then overtakes the leaders by improving. Radical and disruptive innovation often go hand in hand, but do not have to occur together

S-Curves depict technology performance against R&D investment, showing slow growth, rapid improvement, and diminishing returns. They're useful for comparing technologies but not ideal for disruptive ones, which alter performance attributes.gpt

S-Curve shows the performance of a technology relative to the accumulated investment of R&D resources (or time). It follows an S shape because technologies tend to start slow , ramp up fast and then have diminishing returns. With S-Curves you can analyze different technologies on the same performance attributes and decide when you want/should  switch. S-curves are not really applicable to disruptive technologies because they tend to switch up the performance attributes.

Network effects relate product value to user numbers, impacting market entry. Pioneers gain advantages but face challenges like user acquisition and potential suboptimal standards, requiring disruptors for innovation.gpt

Network effects describe the change in value of a product/service in relation to the number of users in that network.

Network effects are important when evaluating the timing of a market entry. As a Pioneer you can get advantages like establishing your design as the industry standard, creating lock-in effect and therefore market entry barriers, switching cost for customers through usage  and emotional anchors.  Difficulties are to obtain this network of users. Many companies will be on a user hunt and sell their offerings at a loss. The users/market can also suffer from network effects, because potentially suboptimal technologies become standard and are hard to replace → hindering innovation→ we need disruptors.

AB InBev pursued a dual approach, renovating their core business through local innovation teams and digitization, while a separate disruption department explored underutilized assets and opportunities. The two entities collaborated on mature projects, leveraging core business assets and jointly generating revenue. gpt

• Corporate strategy → plan that a company makes to achieve its goals. This plan includes important decisions about what type of business the company is in or wants to be in.

• Strategic management is a process that helps companies figure out what they are now, what they want to become, and how they will get there.(alignment → also to environment)

• Plan → guidelines for controlling a situation

• Ploy → maneuver to eliminate competition

• Pattern → .. for companies actions

• Position → .. in its environment

• Perspective → within the organization on the vision

• Vision: The long-term, aspirational statement that defines a company's purpose and what it hopes to achieve in the future. [long term, low complexity, high abstraction]

• Mission: The concise statement that outlines a company's overall purpose, including what it does, who it serves, and how it operates. [ mid to long term, medium complexity, medium abstraction]

• Strategy: The plan of action that outlines how a company will achieve its goals, including the specific tactics and resources it will use to execute its mission and vision. [mid to long term, high  complexity, low abstraction]

• Vision –to→ Mission –to→ Strategy

→ both vague and abstract and can be used to explain everything → both at the same time right and wrong

Marketbased View in detail:

Porters 5 Force model:

Resourcebased View in detail:

Dynamic capabilities view in Detail:

→ evolution of resource based → most important for innovation management

Innovation Strategy is a part of overall business strategy that determines when and where innovation is required to meet the company’s goals and lays out at a high level what to do.

Innovation Strategy consists of Market and Technology → together a self-reinforcing cycle linked via core products/platforms.

→ even research is not agreeing on one but our boi kockidykock got the answer w/ his meta study and new model

• The environment dimension also has a negative effect

• The degree of technological innovation has an indirect effect on success because it positively influences the other three dimensions; the overall influence is therefore zero, because positive and negative indirect effects are equally strong

• The cumulated influence is inverted U- shaped (there is an optimal degree of innovativeness)

__________

Implications

• Systematic evaluation of the degree of innovativeness before and during the project is essential.

• Organizational and environmental dimensions must be taken into account in project evaluations.

• A sense of proportion in selecting innovation projects is necessary à no innovation for the sake of innovation.

• Classic project success criteria are rather unsuitable for innovative projects and can lead to early project termination.

• Conscious selection of a small number of highly innovative projects in combination with incremental projects àportfolio approach to innovation is necessary

Innovation which starts at the low end segment of the market and then by improving overtakes the market leaders → rises to the top, forcing established competitors to cater to more high end segments and then catching up.

The Innovator's Dilemma: 

Why do well-managed companies that listen to their customers and invest aggressively in new technologies still lose market dominance?

Basic Logic⇒ The Managers competent decisions which ensures the companies success, is also the reason why they lose their position of leader.

1. Technology progress outpaces customers needs, the leading firms over-serve demand and leave a gap at the bottom to enter the market. 

2. Disruptive innovations doesn’t provide benefits to current customer only to different new customers

3. Leaders don’t have motivation to invest in new technology because of existing customers and profit models

→ 2 Types of Technology: 

A disruptive technology is NOT just another S-curve, because it has different performance attributes.

Disruptive innovations can originate in two types of markets.

Low-End-Market:

• Established Players → high margins, well known , adjusted processes

• Disruptors → not defined customer w/ good enough products

• E.g. Steel Industry

New Market:

• Non customers to customers, new value network 

• E.g. Sony pocket radio

Disruption is relative→ needs to be looked at from the firm's perspective can be disruptive for one but sustaining for others, e.g. Internet some retailers already did mail shipping so e-commerce wasn’t that big of a deal ⇒ No innovation is inherently disruptive

How to Deal with Disruption:

Other Options:

• Aggressively invest in current technology to slow down disruption

• Reposition to a profitable niche 

• Co-opt disruptive entrants → just buy them lol , or other forms of collaboration

• Reemergence →redefine performance criteria → swiss watches became luxurious 

• Hybrid offering

• Adjust your companies evaluation metrics so disruptive technologies are also pursued

Basically two Option Pioneer or Follower and both are valid options.

Pioneer introducing the innovation → you need to have the ability as a company but i can be wise to wait.

Follower → come later to the market when the market or technology has matured. → here is the challenge not to wait too long and enter as the last one.

Pioneer advantages & disadvantages

benefit by leading on the Technology S-Curve

Pioneers have greater marginal returns of R&D investments due to non-linear s-curve

Customer benefits trough:

• Higher performance, higher reliability, and/or higher quality of products and/or processes (i.e., Advantages typically shown on s-shaped technology curves)

• Higher flexibility and individuality (e.g., mass customization of products and/or services)

• More convenient, easier, and safer use of products and services (e.g., usability of software)

• More emotionally appealing products and services

BUT assumes that the pioneer can protect the knowledge from the followers and followers needs to follow the same curve

benefit by leading on the Experience Curve

the more you produce -> the more you learn -> the better your processes -> the cheaper the production

Lead on the experience curve implies continuous cost degression effects: Pioneer can "outprice" followers

BUT a lot of assumptions:

• Digital goods don’t have variable cost that pioneers can save

• The follower may be a better established company w/ better processes and production and can easily catch up to pioneer → pioneer may be a start-up

Network effects can be beneficial for the pioneers

1. Network can establish pioneers design as industry standard

2. Customers can establish switching cost trough usage

3.  Cognitive and emotional anchors → we google things not search the internet

Fast Followers also have an advantage: