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Innovation Management

Innovation Management. Kevin O’Brien. Firm Capabilities & Market Opportunities. Learning Objectives. Appreciate how competitive success is achieved by aligning firm capabilities with market opportunities Identify the role of technological and marketing capabilities

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Innovation Management

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  1. Innovation Management Kevin O’Brien Firm Capabilities & Market Opportunities

  2. Learning Objectives • Appreciate how competitive success is achieved by aligning firm capabilities with market opportunities • Identify the role of technological and marketing capabilities • Understand the concept of technology trajectories and the impact of disruptive technologies • Understand the concept of market orientation and how this impacts on innovation and new product performance

  3. Marketing and Innovation ‘There is only one valid definition of business purpose: to create a customer ….. It is the customer who determines what the business is ….. Because it is its purpose to create a customer, any business enterprise has two – and only these two – basic functions: marketing and innovation’ Peter F. Drucker, The Practice of Management

  4. Markets and Technology New technology Assets & capabilities New products New market opportunities Lower cost Improved attributes New attributes

  5. Market needs & conditions Strategy adapted to the needs and requirements of the market Organisational resources suited to the markets in which it operates Marketing strategy Organisational resources Organisational resources needed for implementation of the strategy Resource-based Marketing (Hooley et al., 1998)

  6. Millions of transistors per microprocessor (log scale) Pentium 4 processor Pentium III processor Pentium II processor Pentium processor 486 DX Processor 386 processor 286 Processor 8086 processor 8080 processor 8008 processor 4004 processor Technology Trajectories Source: Reproduced from Intel website http://www.intel.com/research/silicon/mooreslaw.htm

  7. Impact of Technological Change • Changing product life cycles • Changing product technology = shorter life cycles • Increased risk in high volume/low cost strategies • Changing market segments • Less segment stability • Increased segment fragmentation • Importance of market sensitivity/target marketing • New industries/new competitors • Shifts in product-market boundaries • Importance of competitive intelligence • Fights over ‘standards’ • Deregulation of markets • Globalisation of markets • Changing organisation (Adapted from Capon & Glazer, 1987)

  8. Core Competencies (Prahalad & Hamel, 1990)

  9. Core competencies can become obstacles to innovation Cultural norms Preferences for existing technology Established routines and procedures Status hierarchies Economics Values Skills/ knowledge Managerial systems Physical systems Core Rigidities High Relative difficulty of change Low (Leonard-Barton, 1992)

  10. Innovations • Sustaining innovations • Maintain current rate of performance improvement • Give customers something more/better in currently valued attributes • Disruptive innovations • Different attributes from those valued by mainstream customers • Often poor performance in mainstream market/applications • Used/valued in new markets or applications • Often create new markets

  11. Disruptive Innovations • Established companies: • Develop & commercialise new technologies (incremental & radical) to meet needs of current customers • Market research, technology trends, cost structure, profit assessment, resource allocation • Entrant companies: • Low cost structures • Secure a foothold in emerging market • Improve technology performance • Attack mainstream market

  12. Disruptive Innovations Performance improvement required by mainstream market Performance Expected trajectory of performance improvement Current performance of potentially disruptive technology Time (Bower & Christensen, 1995)

  13. Customer orientation Market-led organisational culture Inter-functional co-ordination Competitor orientation Focus on the long term Market Orientation Understanding customers & how to create value for them Identifying competitors and being aware of their capabilities Using all organisational resources to create value for customers Long-term shareholder value as the main business objective Kohli & Jaworski (1990), Narver & Slater (1990)

  14. Market Orientation & New Products • Strong association between market-orientation, innovative capability, and new product success • When intensity of market competition and industry hostility are high • During the early stages of life-cycle • More for incremental than radical changes • Marketing capability has most positive effect in firms with strong technical skills • Small and large firms (Atuahene-Gima, 1995)

  15. Environmental Conditions Market turbulence Technological turbulence Market Orientation Organizational Innovation Customer orientation Technical innovation Organizational performance Competitor orientation Administrative innovation Interfunctional Coordination Impact on Business Performance (Han et al., 1998)

  16. Marketing Processes • Value-defining processes • Understanding the environment • Market research, buyer behaviour, segmentation, product use etc. • Understanding resources & capabilities • Assess ‘value created’ • Value-developing processes • Value proposition for customer • Procurement, NPD, distribution, strategic alliances, pricing etc. • Value-delivering processes • Product/service delivery, customer relationships, communications, customer service etc. (Webster, 1997)

  17. Marketing Capabilities Internal Emphasis External Emphasis Outside-in processes Inside-out processes Spanning processes Market sensing Customer linking Channel bonding Technology monitoring Financial management Cost control Technology development Integrated logistics Manufacturing processes HRM Environment, H&S Customer order fulfilment Pricing Purchasing Customer service delivery New product development Strategy development (Day, 1994)

  18. Marketing Capabilities • Market sensing • Systematic gathering, interpretation & use of market information • Sensing customer & market changes ahead of competitors • Customer linking • Creating & managing close customer relationships • Purposeful cooperation • Channel bonding • Relationships with suppliers, wholesalers, retailers etc. (Day, 1994)

  19. References Atuahene-Gima, K. (1995) An exploratory analysis of the impact of market orientation on new product performance, J. Prod. Innov. Manag., 12, 275-293. Bower, J.L. & Christensen, C.M. (1995) Disruptive technologies: catching the wave, Harvard Business Review, 73(Jan-Feb), 43-53. Capon, N. & Glazer, R. (1987) Marketing and technology: a strategic coalignment, Journal of Marketing, 51(July), 1-14. Day, G.S. (1994) The capabilities of market-driven organizations, Journal of Marketing, 58(Oct), 37-52. Han, J.K., Kim, M. and Srivastava, R.K. (1998) Market orientation and organizational performance: is innovation the missing link? Journal of Marketing, 62(October), 30-45. Hooley, G., Broderick, A. & Moller, K. (1998) Competitive positioning and the resource-based view of the firm, Journal of Strategic Marketing, 6, 97-115. Kohli, A.K. and Jaworski, B.J. (1990) Market orientation: the construct, research propositions, and managerial implications, Journal of Marketing, 54(April), 1-18.

  20. References Leonard-Barton, D. (1992) Core capabilities and core rigidities: a paradox of managing new product development, Strategic Management Journal, 13, 111-125. Narver, J.C. and Slater, S.F. (1990) The effect of market orientation on business profitability, Journal of Marketing, 54(October), 20-35. Prahalad, C.K. & Hamel, G. (1990) The core competence of the corporation, Harvard Business Review, 68, (May-June), 79-91. Webster, F.E. (1997) The future role of marketing in the organization, in D.R. Lehmann and K.E. Jocz (eds) Reflections on the Futures of Marketing, Cambridge MA: Marketing Science Institute.

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