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Business Strategy: Innovation and Strategic Entrepreneurship

Business Strategy: Innovation and Strategic Entrepreneurship. Joe Mahoney. Innovation Funnel. The Technology Transfer Process. Research. Disclosure. IP Decision. $29.5 billion. 13,039 disclosures. 6,375 patent applications. IP Protection. 4,362 licenses 454 new companies.

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Business Strategy: Innovation and Strategic Entrepreneurship

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  1. Business Strategy: Innovation and Strategic Entrepreneurship Joe Mahoney

  2. InnovationFunnel

  3. The Technology Transfer Process Research Disclosure IP Decision $29.5 billion 13,039disclosures 6,375 patentapplications IP Protection 4,362licenses454 new companies 3,764 issuedpatents Licensing Commercialization Strategy Source: AUTM Licensing Survey: FY 2000

  4. Competition Driven by Innovation • Invention is discovery of new ideas/products • Wright brothers – airplane flight • Innovation is the commercialization of invention • Boeing & Airbus – selling the airplanes • Schumpeter’s “gale of creative destruction” • Encyclopedias to Wikipedia… • Typewriters to PCs to ??? • Pharmaceuticals to custom treatments (individualized medicine)

  5. Innovation: A Novel and Useful Idea that is Successfully Implemented Innovation is an invention that is implemented in the marketplace

  6. The Industry Life Cycle and Consumer- Adoption Categories

  7. Innovation and the Industry Life Cycle • Innovations create new industries • Big box retailing • Express delivery • Nanotechnology still evolving • Four stages of industry development • Introduction • Early adopters will pay a premium • Only a few innovators in the market – differentiated • Strategy here — market acceptance & seeds for growth • Network effects helpful • Positive effects ONE user has for other users

  8. Apple Leverages Network Effects to Propel Growth • Apple launched iPhone in summer ‘07 • Launched app store a year later • Small programs but BIG business! • Over $4 billion in 2012 • Virtuous cycle of 10 billion Apple apps downloaded by 2011 • Apps increase value of the iPhone (& iPad too!) • More devices sold, incentivizes software developers • Recent iBook store likely to grow the network effects still more 1–21

  9. Leveraging Network Economies: Apple’s iPhone Virtuous Cycle for iPhone (& iPad)

  10. Innovation and the Industry Life Cycle • Four stages of industry development (cont'd) 2. Growth Stage • Early majority buyers increase growth rapidly • Dominant design is set • IBM PC: Wintel • Government influence – GSM standard for mobile phones • QWERTY keyboards • Core competencies move to manufacturing & marketing • An example of growth stage • Women’s shapeware industry • Spanx started in 1998 • Sold over 5M units & over $750 million in sales by 2008 • Maidenform, Body Wrap, & Miraclesuit are competitors

  11. Product and Process Innovation and the Emergence of an Industry Standard After an industry standard is established, process innovations become more important.

  12. Some Standards Die Hard: QWERTY vs. DSK • QWERTY introduced in 1870s • Slowed down typing to avoid jamming keys • Dvorak introduced in 1930s • Minimized finger reach to speed up typing

  13. Innovation and the Industry Life-Cycle • Four stages of industry development (cont'd) 3. Maturity • Late majority buyers & more limited market growth • Increased competitive rivalry • Cost leadership firms tend to drive industry • Weaker firms will exit • Oligopoly is dominant industry structure in this stage 4. Decline • Laggards are buyers and market size shrinks • Four strategic options: • Exit – get out of the industry • Harvest – stay with limited investments (Olivetti) • Maintain – stay & continue marketing (Marlboro) • Consolidate – buy rivals, near monopoly (IBM mainframes)

  14. Features of the Industry Life Cycle Not all industries emerge through these stages and some can rejuvenate such as the steel industry with mini-mills.

  15. Strategic Entrepreneurship • Entrepreneurs are the change agents for creativedestruction. • Create new opportunities and exploit them • Jeff Bezos – Amazon.com • Saw growth of Internet in 1994 • Chose books as the first product for online sales • Oprah Winfrey – Harpo Productions • Rose from abuse & poverty to over $2 billion net worth • Ended talk show to devote time to OWN TV channel • Jeff Hawkins – Palm Computing (founded in 1992) • PalmPilot and Treo products • How to combine entrepreneurial with strategic actions? • Example: P&G continued innovations in detergent

  16. Types of Innovation: Combining Markets and Technologies GPS to handheld consumer devices MRI radiology Intel 386 to 486 processors Digital photography Categorizing according to technology and markets yields 4 quadrants

  17. From King Gillette to King of Incremental Innovation • Gillette invented the safety razor in 1903 • A radical innovation at the start • Innovative business model • Make money from the blades NOT the razors • Incremental innovation • Moved from 1 to six blades (so far…) • Top selling blades today! Over $1 billion in sales • Prices steady to higher for the blades! 1–30

  18. Disruptive Innovation Invading Different Market Segments from the Bottom Up Google’s Chrome OS could be a disruptor of traditional Microsoft operating systems for computers…

  19. GE’s Reverse Innovation: Disrupt Yourself! • GE Healthcare – global leader in diagnostics • Ultrasound machine for research hospitals – $230,000 • Limited market for these in developing countries • 2002 local team at GE China – developed portable US • Laptop-based technology – Under $30,000 for U.S. rollout • 2009 introduced a handheld US – about $10,000 • Vscan - large cell phone – shaped device 1–32

  20. The Internet as Disruptive Force: The Long Tail • Long tail in a digital world • Both opportunity and threat • 80% sales in a given category are NOT “hits” • Pareto principle • Technology enables easier access to the ‘tail’ • Selling “less of more” • Online firms can gain a large share of revenue from selling a small number of nearly unlimited choices • Short head is the mainstream • Available at brick & mortar stores • Significant inventory costs

  21. The Short Head and the Long Tail The Internet and inventory management software drive down costs to match customer demand, increasing the tail to the black dotted line.

  22. The Long-Tail Consequences: Selling Less of More 25% to 45% of sales for online retailers is from products NOT available in traditional retail stores.

  23. Discontinuities: Periods of Paradigm Change • Periods when underlying standard changes • Paradigm shift • New technology revolutionizes existing industries • New standard is established • Technology “S-curve” • Physical limits nearing or reached • Incumbents need absorptive capacity • Existing firms must place “good bets” on new technologies • Examples of Discontinuities • Airplanes: propellers to jets • Cameras: film to digital • TV screens: vacuum tube to flat panel • Music storage: vinyl to CDs to MP3 storage

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