Choosing Your Destiny: How to Design a Winning Innovation Strategy

Nasrin Latif Shooshtari & Sr. Blessing Okere

Choosing the Right Strategy

Decide how your firm is to play the innovation

game.

There is no menu of generic strategies available. Innovation must support business strategy.

Without a clear game plan, alignment of key

players in your firm innovation will not be successful.

Play-to-Win or Play-Not-to-lose Strategies

Dominant companies are more aggressive

innovators than non-dominant companies dominance is not a strategy, it is an outcome

Within the innovation matrix firms can choose to

channel its resources to a particular part of the matrix

Play-to-Win Strategy
Goal is to produce significant competitive advantages that its

competitors will not be able to easily or quickly match.

Market-leading strategy relies on:

semi-radical innovation to drive transformation in the firm create market-changing ideas and product. PTW firm invests in changes in technology and business models
A PTW Strategy is typical of high-technology startups

Risk involved with PTW strategy:

usually

have only one or two innovation investments do not have the strength of a strong investment portfolio

dot-com & Webvan

Amazon.com

Play-Not-to-Lose Strategy
Use PNTL strategy when: external competitive environment is extremely intense or uncertain.

if a firm has significant internal constrains. PNTL Strategy is of more incremental innovation than PTW

Johnson

& Johnson

The goal is to ensure the firm stays in the game by moving quickly,

taking calculated risk by matching or surpassing any moves by competitors. Firm using PNTL would watch for improvement in the external environment, make improvement in its internal capabilities, attempt to wear down the competition, and look for opportunity to shift to a PTW strategy at the appropriate time.

Play-Not-to-Lose Strategy cont......

Firms with PNTL are often fragmented industries where

changes in technology and business models occur quite rare. The winner are firms that consistently beat competitors in making incremental improvement to technologies and business models. Risk with PNTL: highly vulnerable to competitors that break from the pack and shift to a PTW that depends on semi-radical or radical innovation believing your PNTL is working when it does not work.

Too Much of a Good Thing

Innovate
too

or Die

many innovative ideas for firms to process clouds their judgment on which ideas are truly great. A lack of radical innovation can lead to failure
Innovate
taking

and die

the wrong kind of risk and by playing the wrong kind of strategy.

Clearly Defined Innovation Strategy Drives Change

Success in innovation requires a clearly defined

innovation strategy that matches the current realities in the firm.

Attempting to change everything at once is not a

formula for success.

Do You Select an Innovation Strategy?

Over time every business model and strategy

stale in our fast forward economy, strategies reach their sell-by date faster then ever.
Internal Factors External Factors

Hamel & Sakrzynski Factors to consider in choosing an innovation Strategy:

Technical capabilities Organizational capabilities Success of the current business model

Funding Top management vision

Capabilities in the external network Industry structure Competition Rate of technological change

Internal Factors
Technical capabilities

The current capabilities that company has internally or can access through its innovation network Shifting to a more radical innovation approach will not happen if the organizational and management capabilities are not present The greater the success, the greater the potential resistance to change

Organizational capabilities

Success of the current business model

Funding-too much funding may be a dangerous as too little Top management vision

Management talent has a very relevant role in selecting and evolving the companys innovation strategy

External Factors
Capabilities in the external network
Assesses to the relevant capabilities are crucial Collaboration with other organization that have complementary resources The ability to create sustainable alliances with partners becomes important in deciding the innovation strategy going forward

Industry structure
Industry value chain Who dominates and why The structure of the barriers to entry are important inputs to the design of innovation strategy

Competition

The Quality and speed of innovation of your competitors as well as your innovations will determine the shape of the market in the years to come
When new advance outdate your product, it is important to identify the change approaching before your product goes old.

Rate of technological change

Risk Management and Innovation Strategy

Assuming that no significant disruption occur to the

competitive arena, as we move up and right on the innovation Matrix, the level of risk that we take is higher

If a disruption has occurred:

Incremental activates that do not address there disruption could be the

risky path

If a disruption has not occurred:

Adding a greater component of radical innovation increase the risk Therefore a Play-to-Win strategy is riskier than a Play-Not-to-

Lose Strategy, why? Because it relies on a larger component of semi-radical and radical innovation, ex Appel-ipod

Innovation Strategy: The Case of the Pharmaceutical Industry

It is useful to consider a leading industry segment and

innovation challenges it faces

The Pharmaceutical Industry- a field with powerful, innovation player: Example-Lipitor

Many companies is getting harder to innovate

successfully and the flow of viable new products has been difficult to maintain 1. Attempts to Solve the Innovation Problem 2. Changing the Innovation Approach

1. Attempts to Solve the Innovation Problem

Lack of success in innovation by improving their R& D

through two methods:

First method is Use Scale: companies have acquired

other companies, thereby combining their R & D piplines to attain economics of scale

Second method: Pharmaceutical companies develop

closer ties to biotech and genome organizations in order to get better information on new molecules with the promise for use in new drugs

Changing the Innovation Approach

From an outsiders perspective:
Changing their mental model of innovation and pursuing alternate

innovation approaches

They need to solve their innovation problem by

being innovative Pharmaceutical companies:

Invest in developing technologies will produce major blockbuster

drugs Unbalanced innovation portfolio and are addicted to technology The potential gains for a successful breakthrough can be tremendous It would be careful for pharmaceutical companies to consider shifting their strategy-pursuing semi-radical technology changes to pursuing break-throughs in new business model

Changing the Innovation Approach (cont.)

The company would invest in changes to its

business models

1. 2. 3.

To create competitive advantages to the complement its technology investments Would allow it is to serve markets better than its traditional competitors The company would also maximize the return on its innovation investment Increase level of services Change in the supply chain or a similar operational breakthrough Close, better connections to the players

Innovation options:
1. 2. 3.

Strategy and the Innovation Rules

How much innovation dose my company need? What are the areas that I should focus the

innovation? What portfolio of innovation types do I need? How much business model innovation? How much technology innovation? What mix of incremental, semi-radical, and radical innovation?

Thank you!