The dimensions of willingness to innovation: a closer look at the barrier to breakthrough innovation

1. The dimensions of willingness to innovation: a closer look at the barrier to breakthrough innovation Lecturer: Hao Yu Assistant Professor of Zhejiang University of Technology Ph.D. Candidate of Zhejiang University Mobil phone: 13777882978 E-mail：yuhao@zjut.edu.cn 9th WLICSMB

2. 1. Introduction • The importance of radical innovations can hardly be overstated. They potentially offer great rewards in terms of sales, profitability and market share (Kleinschmidt & Cooper, 1991). • Also, radical innovations may destroy markets and create new ones (Wieandt, 1994). • Organizations may drastically make products of competitors obsolete and dominating the market with a new standard by radical innovation (Edwin J. Nijssen et al. 2005). • Many leading companies will fail to come up with radical innovations (e.g. Takayama et al., 2002). Even in the face of a good idea for a new product, many organizations refuse to take it up and bring it to the market. • For example, Polaroid (Tripsas & Gavetti 2000) 9th WLICSMB

3. Self-innovation: National strategic orientation of P.R.China • Because of self-innovation having been become the one choice of Chinese strategic orientation, much of the research focus on how to increase the firm’s competence of innovation, but the literature neglects attitudinal and organizational factors that may influence self-product-innovation in firms. 9th WLICSMB

4. Thus the overlooked role of willingness to cannibalize (Chandy and Tellis, 1998) can be considered the first predictor of the firm’s innovative performance (Montalvo, 2006). Following this thought, the mechanism of interaction approach be adopted to explain and predict the innovative performance of the firm is based on the different strategic competence, cognitive attitude and the interaction relationship. This will be very important to Chinese SMEs when they want to update their product categories and renew their competence in international competition. 9th WLICSMB

5. SME Importance (Michael Barbalas, 2007) • Harmonious Society • SMEs create the majority of jobs and majority of new jobs in both China and the USA • SMEs are a major driver of economic and job growth • Innovation Society • SMEs are often leaders in high technology fields • SMEs allow R&D and innovation to proceed at a good pace for large companies • SMEs become large companies (Microsoft, Dell, Yahoo, Google) 9th WLICSMB

6. 2. Literature review • 2.1 Why used “breakthrough” terminology? • Breakthrough innovation, discontinuous innovation and disruptive innovation • Radical innovation, major innovation, original innovation, really new innovation and architecture innovation （Salomo, S., Gemünden, H. G. & Leifer, R., 2004） • What is breakthrough innovation? • DeTienne & Koberg (2002) define “discontinuous innovations” as major changes or innovations in basic products or services or programs offered or markets served, or the creation of new major product/service programs leading to new or expansion of current markets. 9th WLICSMB

7. Figure 1. Innovation and technological trajectories. Reworked and updated acc. to Olofsson (2003: 21). 9th WLICSMB

8. Radicalness can be construed as a multidimensional construct • Radical innovations could be • (1) controversial with respect to contemporary ideological beliefs and practices (e.g., condoms in a traditional catholic society) or with regard to the dominant values and norms in a society (e.g., male contraceptives or genetically modified food); • (2) rebellious in terms of being counter to the established preferences in the marketplace (e.g., Mac vs. IBM computers); • or (3) discontinuous, as per the conventional definition, in terms of the novelty of features and usage (e.g., digital cameras). (Saad, Gill & Nataraajan, 2005) 9th WLICSMB

9. 2.2 The concept of cannibalization • Cannibalization • When a firm’s sales of one product (or at one location) diminish its sales of another of its products (or at another of its location). • Nintendo, 8-bit system; Saga, 16 8-bit system • Why choose cannibalization to start our research? • Chinese have no terminology to match “Cannibalization”, so we want to introduce it. • We use Chinese phase by “互搏”. 9th WLICSMB

10. Willingness to cannibalize • Chandy and Tellis (1998) argued that a company’s willingness to cannibalize is the key variable explaining why some companies develop more radically new products than others do. They define willingness to cannibalize as ‘the extent to which a firm is prepared to reduce the actual or potential value of its investments’ (Chandy and Tellis, 1998: 475). • In other words, it refers to the organizational disposition to forego its investments and current competencies. • Willingness to cannibalize, Willingness to change, Willingness to innovation 9th WLICSMB

11. The effects of cannibalization 9th WLICSMB

12. 3. Case study of willingness to cannibalize Apple Inc. 9th WLICSMB

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14. iPhone Specifications Display 3.5 inches 320 by 480 pixels (163 ppi) Input method Multi-touch Operating system OS X Storage 8GB GSM Quad-band (850, 900, 1800, 1900MHz) Camera 2.0 megapixels Wireless data Wi-Fi (802.11b/g) / EDGE / Bluetooth 2.0+EDR Power and Battery Talk time: Up to 8 hoursStandby: Up to 250 hoursInternet use: Up to 6 hoursVideo playback: Up to 7 hoursAudio playback: Up to 24 hours Dimensions 4.5 x 2.4 x 0.46 inches / 115 x 61 x 11.6 mm Weight 4.8 ounces / 135 grams iPod( touch, classic, nano, shuffle) Specifications Display 3.5-inch 320 by 480 pixels (163 ppi) Capacity 8GB or 16GB flash drive1 Holds up to 1,750 or 3,500 songs in 128-Kbps AAC format2 Holds up to 10,000 or 20,000 iPod-viewable photos3 Holds up to 10 hours or 20 hours of video4 Wireless data5 Wi-Fi (802.11b/g) Power and battery Built-in rechargeable lithium ion battery Playback time Music playback time: Up to 22 hours when fully charged Video playback time: Up to 5 hours when fully charged Dimensions Size and weight 4.3 x 2.4 x 0.31 inch/110 x 61.8 x 8 mm Weight 4.2 ounces (120 grams) iPod touch: $299.00 (8GB) iPhone: $399.00 (8GB) iPod touch versus iPhone 9th WLICSMB

15. The example of developing Macintosh • He encouraged the Macintosh team members to consider themselves renegades, and even hung a pirate’s skull-and-crossbones flag over their building. • Jobs would also take the team on regular retreats to isolated resorts and reaffirm the renegade culture with quotes like “It’s more fun to be a pirate than to join the Navy.” 9th WLICSMB

16. Stock Price of Apple INC.：1984~2007 9th WLICSMB

17. 4. The dimensions of willingness to cannibalize • Edwin J. Nijssen et al. (2005) propose that there are three distinct dimensions of willingness to cannibalize during introduction of a new product: • (1) investments, (2) capabilities, and (3) sales. • Although Chandy and Tellis suggested that the construct should be multidimensional and included items that seemed to tap various dimensions, they found and used only one single factor in their empirical work. 9th WLICSMB

18. RPVs theory • The Innovator’s Solution suggests that a new “RPV” is needed for a company to successfully commercialize a disruptive offering. But within large organizations, it can be difficult to establish a separate RPV, especially if innovations need to be championed by existing business units. • The “resources, processes, values” concept is discussed in Chapter 7 of The Innovator’s Solution. It holds that a company’s RPV determines its capabilities—and disabilities. RPVs that sustain the core business often can stand in the way of disruptive growth. 9th WLICSMB

19. Our analysis framework: W2C-RCR • Model and hypotheses • H1: A company’s willingess to cannibalize • (a) Resources, • (b) Capabilities, and • (c) Routines positively influence its commitment to innovate and innovative performance. 9th WLICSMB

20. Resources • Given the adoption of Hall’s (1992) approach, for purposes of this research, the resource constructs are conceptualized as: • (1) Tangible resources which include (a) financial assets (Grant, 1991) and (b) physical assets (Grant, 1991). • (2) Intangible resources that are assets which include (a) intellectual property assets (Hall, 1992), (b) organizational assets (Barney, 1991; Fernandez et al., 2000), and (c) reputational assets (Roberts and Dowling, 2002). • (3) Intangible resources that are skills which include capabilities (Hall, 1992; Amit and Schoemaker, 1993; Day, 1994). 9th WLICSMB

21. Capabilities (skill) • Balance of exploration and exploitation • Exploration as a learning mechanism which has the goal of experimentation with new alternatives (March , 1991). • Exploration entails activities such as search, variation, risk-taking, discovery, innovation, and research and development. • Tradeoff of learn and unlearn 9th WLICSMB

22. Routines • The resource-based view (RBV) of strategy holds that superior organizational routines can be a source of value if and only if there is an isolating mechanism preventing their diffusion throughout industry (Anne M. Knott, 2003). • Routines are described by Nelson and Winter, 1982:97, as “regular and predictable behavioural patterns” or alternatively “repetitive patterns of activity in an entire organisation”. • Gene vs. Meme • In 1976 Richard Dawkins attributed that genes have in the physical world to meme in world of organizational culture. 9th WLICSMB

23. Fig. 1. Organizational routines 9th WLICSMB

24. Data source • We collect the data by using database of Economic & Trade Commission of Zhejiang Province on pharmaceutical biotechnology industry by 2005 • Biotechnology can be defined as a body of knowledge and techniques for using live organisms in a particular productive process (Pisano, 1991). • Biotechnology is not an industry pre se, but a set of technologies used in various fields: • pharmaceuticals, therapeutic , diagnostic, chemicals, agricultures, veterinary sciences, and medicine. 9th WLICSMB

25. Figure 3： Structural path estimates of the hypothesized model 9th WLICSMB

26. 6. Recommendations • Resource Toolkit for SMEs • Human resource is most important factor to breakthrough innovation • Renew the system of education and training of employee • Design a more encouraged policy on fast depreciation of facilities and instalments • Switching costs • Government-supplied Software Purchasing • Increase Information-sharing to SMEs 9th WLICSMB

27. CapabilitiesToolkitfor SMEs • Changing Collective Cognition or Collective mind • Organizational learning or learning organization • Overcoming path dependence effect • Core competences, Dynamic competences 9th WLICSMB

28. Routines Toolkitfor SMEs • Adoption of new industrial standard • Highly threshold for start-ups • Trying to establish new process of SMEs • Increasing interior values networks • Finding out and changing the new operational systems 9th WLICSMB

29. References • Olofsson, D. Radical product innovations: A multidimensional model for identifying radical product innovations [R], IDP, 2003 • Tripsas, M., Gavetti, G., 2000. Capabilities, cognition, and inertia: evidence from digital imaging. Strategic Management Journal 21, 1147–1161. • Chandy, R.K., Tellis, G.J., 1998. Organizing for radical product innovation: the overlooked role of willingness to cannibalize. Journal of Marketing Research XXXV, 474–487. • Montalvo, C. What triggers change and innovation?[J], Technovation, 2006, 26(3): 312-323 • Jeong, E. Divisonalization, product cannibalization and product location choice evidence from the U.S. automobile industry. The Doctoral Dissertation of Texas A&M University, December 2003 • Srinivasan, S. R., Ramakrishnan, S. & Grasman, S. E. Identifying the effects of cannibalization on the product portfolio, Marketing Intelligence & Planning, 2005, 23(4): 359-371 • Christensen, C. M. 1997. The innovator’s dilemma: When new technologies cause great firms to fail. Boston, MA: Harvard Business School Press. 9th WLICSMB

30. Stay Hungry. Stay Foolish. (Steve Jobs, 2005) Thanks for your attention! 9th WLICSMB