Transcript Innovation Management Creating Competitive Advantage

The Management of Knowledge Creation
and Innovation Through an Intellectual
Capital Lens
Prof. Göran Roos
Context
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Interest in innovation and R&D performance has
been rising on the back of a wide range of
successful products and services
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Remember Innovation is not only based on natural
sciences
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What do companies think about innovation?
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What is the real situation?
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Booz Allen Hamilton Global
Innovation 1,000 Study 2006:
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Innovation can lead to higher
performance, but the process isn’t
automatic and it does not
necessarily require above average
levels of investment. The most
successful companies combine an
integrated process and a
supportive culture to create a
sustainable competitive advantage
Money simply cannot buy effective
innovation.
Patents generally don’t drive
profits
Less than 10% of companies are
High-Leverage Innovators and
distinguish themselves not by the
money they spend, but in having a
very good innovation management
system
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Innovation Network Survey, fall
2004 [same result from 2005], new
innovation leaders in medium to
large companies:
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71% said they had no metrics for
their position
60% of them have innovation as
part of their mission/job objectives
67% are allowed to work on “new”
concepts for their company (“new”
is not defined)
68% have no well defined
innovation process within their
company
54% have no working definition of
innovation
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Research vs Innovation – What is the relationship?
Research
Creativity
Innovation
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EXPANDING THE INNOVATION HORIZON
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Innovation can be ignited by business and technology
integration.
Technology can enable and drive innovation. But to truly
capitalize on technology’s potential and unleash an
organization’s creative energy, technology know-how must be
combined with its business and marketing insights. CEOs
view consistent business and technology integration as
crucial to innovation
Source: Dr.V.S.R.Krishnaiah, Sr.Technical Director, NIC
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Business Model Innovation is key
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A Value Proposition is an overall view of a company's bundle of
products and services that are of value to the customer.
The Target Customer is a segment of customers a company wants to
offer value to.
A Distribution Channel is a means of getting in touch with the
customer.
The Relationship describes the kind of link a company establishes
between itself and the customer.
The Value Configuration describes the arrangement of activities and
resources that are necessary to create value for the customer. Nornally
these are expressed in IC-Navigator form and using the (Stabell and
Fjeldstad 1998) Value Logics
The identified Resources that can be deployed by the firm to create
value including those that form the basis for a competitive advantage
A Partnership is a voluntarily initiated cooperative agreement between
two or more companies in order to create value for the customer
The Cost Structure is the representation in money of all the means
employed in the business model.
The Revenue Model describes the way a company makes money
through a variety of revenue flows.
Value Proposition
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Target Customer
Truly understand your customers and your
customer’s customers [consumers]
Customers are trading both up and down within categories, demanding
differentiated value from businesses
Seeking “good
enough” quality
at rock-bottom
prices when
they perceive no
differentiated
value
Historical Demand
Emerging Demand
Price Positioning
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Willing to pay
large premiums
for “new
luxury” brands
when they
deliver
differentiated
value
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Growth
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Source: IBM Institute for Business Value analysis
Value Proposition
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Target Customer
What drives the B2B relationship?
Situational Importance of Different Perceived Value Driver Categories
Functionality
Distinctness
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Price
Mental Proximity
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Functionality
Low
Price
Importance to Buyer
High
≥ Seller
Distinctness
< Seller
Perceived Knowledge of Buyer
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Value Proposition
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Target Customer
Value
and knowledge distance
+
Potential Value
to be extracted
from the relationship
by the supplier
Knowledge
distance
Known by
nobody
Known by
everybody
Known by the
Supplier
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Known by the
Customer
Value Configuration
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Value Chain
Infrastructure
Support
Activities
Human Resource Management
Technology development
Procurement
Primary
Activities
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Source:
Inbound
logistics
Operations
Outbound
logistics
Marketing
&
Service
Sales
Porter, M.E. 1985: Competitive Advantage; Creating and Sustaining Superior Performance, The Free Press
Value Configuration
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Value Shop
Infrastructure
Human Resource Management
Technology development
Procurement
Support
Activities
Find
someone
with a
problem
Acquire
the right
to address
the
problem
Develop
alternative
solutions
Primary
Activities
Control/Evaluation
Execute
Source:
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Co-select
with client
one
solution
Stabel, . B., Fjeldstad,Ø. D.: Configuring Value for Competitive Advantage: On chains, shops, and networks, SMJ, Vol 19, No 5, 1998
Value Configuration
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Value Network
Support
Activities
Infrastructure
Human Resource Management
Technology development
Procurement
Promote Network
Primary
Activities
Manage Member Contracts
Service Provisioning
Infrastructure Operation
& Maintenance
Source:
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Stabel, . B., Fjeldstad,Ø. D.: Configuring Value for Competitive Advantage: On chains, shops, and networks, SMJ, Vol 19, No 5, 1998
Resources
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The presence of resources with different behaviour
Owned or Controlled
By the Firm
Owned or Controlled
By the Firm
Additive
Additive
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Owned or Controlled
by the Other Party
Owned or Controlled
By the Firm
Owned or Controlled
By the Employee
Resources
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The utilisation of resources with different behaviour
Industrial
Economics
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Network
Economics
Knowledge
Economics
Resources
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Examples of Resource Transformations
HUMAN
ORG.
REL.
PHYSICAL
MONETARY
Training
Knowledge
codification,
new IP
Building &
developing
relationships
Developing
prototypes
Sales of
man-hours
Developing
competence
through use
Systems
generate
IP
Market
intelligence
Produce
By
numbers
Sales of IP,
processes &
knowledge
Chance to
build skills in
relationship
handling
Importing IP,
processes,
association
with brands
Networking
Use of other
company’s
assets
Relationship
selling,
preferential
deals
PHYSICAL
Facilities to
train with
Possible
new products
& know-how
Facilities
build
relationships
Equipment
generates
products
Sales of
products
MONETARY
Recruitment
training,
conditions
Investment
in brands,
image and
systems
Investment
in building
links
Investment
in assets
Investment
In financial
instruments
HUMAN
ORGANISATIONAL
RELATIONAL
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Revenue Model
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Revenue Logics
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Effort-based pricing
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Value-based pricing
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Vendor charges for carrying information relating to other goods
in/on its primary product/offering
Membership fee
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Vendor sells/leases ad space or information [space] based on
customer relationship
Channel charging
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Creating customer base (for later revenue) or supporting sales of
other parts of the product/service offering
Hybrid/Media model
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Charging on copyright (the right to use the IP)
Loss Leader-pricing
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Revenue-sharing contract with primary customers
Licensing
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A value-based (or perception-driven) pricing model
Profit Sharing
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A cost-based (or effort-driven) pricing model
Vendor charges for the right to take part in an activity
Negative Working capital
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Vendor generates financial returns on the capital held as a
consequence of getting paid by its customers before paying its
suppliers
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Innovation does not happen by itself
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It is the result of hard work,
well planned and executed
and is no happening
Innovation is work rather
than genius,…and very much
a matter of discipline (Peter F
Drucker, 1985)
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Summary
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Innovation does make a difference at the bottom line
Few companies do it well
There is a difference between research and innovation and
especially in their management
Innovation is more than technology
Innovation Management is Key and is facilitated by applying
the IC lens
We know how good innovation management looks
It will become even more important in the future