Strategic Innovation - Summary, Dispense di Strategia E Innovazione

Scarica Strategic Innovation - Summary e più Dispense in PDF di Strategia E Innovazione solo su Docsity! A.Y. 23/24 Strategic innovation MANAGEMENT ENGINEERING – POLITECNICO DI MILANO PROF. LUCA MANELLI 1 Agenda 0.Introduction to Strategic Innovation .............................................................................................. 2 1.Overcoming Inertia and Adaptation for Strategic Innovation ............................................................ 3 2.Business Model Innovation and Strategic Innovation ...................................................................... 8 3.Venturing for Strategic Innovation ................................................................................................. 14 4. Culture & Strategic Innovaton ..................................................................................................... 20 5.Goals & Strategic Innovation ........................................................................................................ 27 6.Identity, Branding & Strategic Innovation ...................................................................................... 32 7.Strategy Implementation & Strategic Innovation ........................................................................... 37 4 and boundary decisions, market timing decisions)? External fit: how should the focal firm, and its new business model, be embedded into its ecosystem? For example, which specific external stakeholders (e.g., customers, partners, suppliers) should be enlisted, and how can positive relationships with them be created, managed, and maintained? Internal fit: how should the firm be (re-)organized internally? Which are the enablers and the obstacles to the strategic innovation? The S-curve The S-curve provides an intuitive instrument to think about how companies start, grow, and either fail or engage in strategic innovation over time. During their lifecycle, companies face four phases: early stage, growth, maturity and decline. Strategic innovation enables mature incumbent companies to renew themselves. Strategic innovation is crucial for several reasons, as it helps organizations stay competitive, adapt to changing environments, and foster long-term growth. Organizational Inertia : causes Structures of organizations have high inertia when the speed of reorganization is much lower than the rate at which environmental conditions Change. There are four main causes of inertia in established companies: • Organizational routines : Organizational routines are “patterns of coordinated interaction among organizational members that develop through continual repetition”. The routines are the social processes through which companies coordinate actions to achieve their objectives and form the foundation of companies' strategic capabilities. However, routines can also become a source of inertia, meaning resistance to change, when the external environment demands strategic innovation. This situation is called “core competencies - core rigidities” paradox, or competency trap. Esempio : POLAROID Polaroid had the expertise to develop digital cameras but was constrained by its routines that prioritized product quality and a business model based on film sales. This prevented Polaroid from competing with new entrants like Sony, which offered more affordable, portable, and energy-efficient products Organizational routine is related to other concepts :  The path dependence : it is an element that contributes to the resistance to change of organizational routines;Path dependence refers to the history-dependent and sometimes lock-in the possible courses of future action , because they might become too costly to reverse or they might become integral part of the cognitive schemas of the manager. Srategic innovation is often a process of path-breaking.  The managerial overconfidence : Managerial overconfidence refers to the leader’s perception that he or she can predict the future easily, alter the status quo easily and quickly, and overcome any 5 resistance to required changes ; this leads to underestimating the problems of changing existing routines to support strategic innovation Esempio : RCA RCA is a company that was among the founders of the industry of consumer electronics. When Sony, a startup, embraced the transistor technology disrupted RCA's established business model. Despite recognizing the strategic shift, RCA's attempts to acquire Sony as a preventive measure failed. This initiated a downward spiral of restructuring decisions, ultimately leading to RCA's buyback acquisition by GE in 1985. The example highlights how a failure to adapt to technological changes and a misjudgment of competitive threats contributed to RCA's decline. • Political systems : Directors and managers are resistant to alter the status quo, because this might change the checks and balances of power within the company. • Conformity : While the mantra of strategic management (since Michael Porter) is “differentiation”, most of the time companies try to be similar to other companies that they consider their peers. Behind this idea of conformity there is the concept of institutional isomorphism, which prescribes that, due to external or internal pressures, companies in a social system tend to imitate each other and become similar to one another over time. • Local search : it refers to organizations looking for solutions or ideas in their immediate surroundings or existing knowledge. This can lead to a narrow focus on familiar strategies and practices, preventing the exploration of more innovative and adaptive approaches.Local search is not considered as a process that grants success in strategic innovation because it often entails solutions that are familiar to the company. The renewal of capabilities and resources in strategic innovation requires a more distant search. Types of inertia: cognitive vs. action Cognitive inertia shows about when the strategy-makers think about strategic aspects of the company, such as its competitive position, its industry membership, its core capabilities, the most important factors that will affect the future of the company, and so on. In particular, this happens when strategists are in the option generation phase of the strategy Process. Cognitive inertia might take three forms, linked to cognitive biases: • framing lock-ins • incorrect analogies • emotional traps Action inertia involves resistance to the implementation of a new strategy, thus it occurs during the strategy implementation phase of the strategy process. Action inertia might take three forms: • sticky routines • ingrained culture • leadership failures To overcome cognitive and action inertia, organizations must adopt a series of strategies, such as forming coalitions of innovators, creating an environment of continuous learning, promoting a culture of innovation, etc. 6 Innovation Streams: Innovation streams are portfolios of innovation that include both incremental and substantial innovation.  Incremental vs. Substantial Innovations: The concept of innovation streams introduces the distinction between incremental and substantial innovations. Incremental innovations involve gradual improvements to existing products, while substantial innovations encompass more transformative changes that may lead to new technical trajectories or market expansions. When discussing strategic innovation, it is crucial to understand it as a deliberate effort to integrate new innovation streams into a company's existing portfolio. This involves not only the introduction of new capabilities and entry into fresh markets but also necessitates substantial changes in the organization's operational processes. The problem is being able to manage all at the same time. Blockbuster vs. Netflix Example:  Strategic Positioning: Blockbuster's failure to adapt to emerging technological trajectories, unlike Netflix's successful navigation, underscores the importance of strategic positioning and adaptation to evolving market dynamics. Example of Innovation Streams in the Ball Corporation:  Historical Evolution: The Ball Corporation's historical evolution serves as a compelling illustration of strategic adaptation. Starting as manufacturers of kerosene-carrying tin cans, the company strategically shifted its focus to glass jars, aerospace technology, and eventually to metal containers in response to market demands and technological advancements.  Strategic Adaptations: The Ball Corporation's success is attributed to its ability to strategically adapt to changing market conditions through initiatives such as acquisitions, diversification, and a continuous pursuit of new business opportunities. Example of Strategic Innovation at Fujifilm:  Transition from Film Industry: Fujifilm's strategic transition from a leader in the film industry to a diversified technology company is highlighted. The company leveraged its expertise in chemistry to explore new markets and applications, moving beyond traditional film-based products.  Leadership Strategies: CEO Shigetaka Komori's leadership strategies, including restructuring, mergers and acquisitions, and a focus on specific technologies, exemplify the proactive measures taken to facilitate strategic innovation and adapt to market shifts. Knowledge and Knowledge Renewal: The knowledge renewal is fundamental because the knowledge can become obsolete, and it can create a threat to a company's competitive advantage. There is a need for continuous learning and adaptation to technological advancements and market shifts. The concept of "learning to learn" is a fundamental capability for companies. It involves not only accumulating knowledge but also constantly enhancing the available pool of knowledge and leveraging it to stay competitive. Search and Strategic Innovation: 9 The activity map It is a visual representation of the key activities and processes within an organization. It shows how different activities are interconnected and contribute to the company’’s objective. Innovating the business model Business model innovation is NOT: • a modified activity or exchange, increase in productivity or efficiency of the activity or the exchange (it is not a process innovation, albeit process innovation can trigger business model innovations) • product/service innovation • corporate venturing Business model replication vs Business Model Renewal Business model replication : • Aim: maintain or improve existing competitive position • Focus: improving current methods of value creation through incremental innovation of existing business model • Levers of change: perfecting and deepening existing technologies, management practices, organizational forms, and customer relations • Outcomes: 10 remaining active in existing markets, or entering similar, but geographically different markets • Risks: limited risk in the short term but very high risk in the longer term Business model renewal <--- Form of strategic innovation • Aim: reaching a new, more sustainable competitive position • Focus: new methods of value creation through radical renewal of existing business model • Levers of change: new technologies, new management practices, new organizational forms , new relationships with customers and other companies (co-creation and open innovation) • Outcomes: entering new markets, or redefining the key success factors in an existing market • Risks: very high risk for first firm in the sector, high risk for imitators Example of business model content innovation (addition of novel activities): • Bancolombia, a Colombian bank established in 1875, started to offer microfinance services (“financial services to households and micro-enterprises that are excluded from traditional commercial banking services”) in 2001. Bancolombia needed to train the whole management team, and link the new activities to its existing system Example of business model structure innovation (linking existing activities in novel ways): • Pokemon GO is an augmented reality app for digital devices, rolled out in 2016. Compared to the traditional business model of console and game manufacturers such as Nintendo, which were faced with stagnating growth amid the increasing popularity in smartphones, the business model was highly innovative. The core idea of the business stayed the same (players wandering to capture Pokemons and tools), but it broke free of the traditional gaming console, placing it in a digital ecosystem. Example of business model governance innovation (changing one or more parties that perform any of the activities) • In the early 1970s, the Japanese government implemented regulations on larger outlets, limiting their size and their opening times, in order to protect the mom-and-pop stores . Toshifumi Suzuki led an initiative to convert small independent stores to 7-Eleven convenience store franchises. Because of their smaller sizes, franchises did not face the same regulations as larger stores. This idea prompted the diffusion in Japan of a new business model governance in the area of convenience store retailing. Example of business model value logic innovation (changing how the business model helps the firm to create and capture value à in particular the revenue model) • Nespresso is a division of Nestlè. Nespresso introduced a low-cost espresso machine that uses custom Nespresso-produced capsules. After buying an affordable Nespresso machine, the customer needs to use Nespresso’s premium coffee capsules, which creates a lock-in effect. By selling consumables to espresso machine owners, Nestlè profits from both the initial sale of the machine and the ongoing use of the machine Structural ambidexterity In general terms, ambidexterity occurs when instances of exploration and exploitation are coupled together. 11 In a structurally ambidextrous organization, exploration and exploitation occur simultaneously in structurally separated units; this is a solution for managing the contradictory pressures from explorative and exploitative innovation stream. However, separation is not just structural. Integration occurs at the level of the senior executive team, which uses its power to shelter the exploratory unit and works to remove the resistance to change due to the presence of misalignment between units. Successful ambidextrous leadership has four components: • A clear strategic intent that justifies the need for exploitation and exploration, including the explicit identification of those organizational assets and capabilities that can be used for competitive advantage by the exploratory unit (resource-sharing) • Senior management commitment and oversight to nurture and fund the new venture and protect it from those who would kill it à integration • Sufficient separation from the exploitative business so the new venture can develop its own architectural alignment and the careful design of the organizational interfaces needed to leverage the critical assets and capabilities from the mature side of the enterprise, including clear criteria to decide when to either drop the exploratory unit or integrate it back into the organization • Purpose, values, and a culture that provide for a common identity across the exploreand-exploit units that helps all involved see that they are on the same team. Other organizational design solutions : Structural ambidexterity is not the only solution to this problem. Companies can use different designs to tackle strategic innovation issues. Compared to structural ambidexterity: • spin-outs present even more separation between exploration and exploitation, are to be preferred when there are little to zero market or technology synergies with other units of the company • cross-functional teams are embedded in the existing functional organization, and are to be preferred when the resistance to change (inertia) is low. The main cause for failure of cross-functional teams is cultural, political (e.g., status, allocation of resources) and community resistance, as it is embedded within the existing organization. --> Spin-outs: Gli spin-outs sono un tipo di soluzione organizzativa in cui un'azienda decide di separare una parte della sua attività, creando una nuova entità indipendente. 14 strategy would constrain the development of the new way of competing intro a viable business for the parent company. So the two business models need to be nurtured from within the company, leveraging existing resources, and prepare them to get separated over time. • Example: Tesco and Tesco.com. Case history: IBM ---> far riassumere a qualche ai Contesto: IBM è una multinazionale che offre soluzioni tecnologiche e di consulenza a vari settori. Negli anni '90, IBM ha affrontato una crisi di competitività e redditività, dovuta alla saturazione del mercato dei mainframe e alla concorrenza dei produttori di PC e software. Sfida: IBM ha dovuto rinnovare il suo modello di business per adattarsi ai cambiamenti tecnologici e alle esigenze dei clienti, passando da una logica di vendita di prodotti a una logica di fornitura di servizi integrati e personalizzati. Soluzione: IBM ha intrapreso una trasformazione radicale della sua struttura organizzativa, della sua cultura aziendale e delle sue competenze chiave, focalizzandosi sulle aree di business consulting, cloud computing e intelligenza artificiale. IBM ha anche stabilito alleanze strategiche con altre aziende e ha acquisito nuove società per ampliare il suo portafoglio di offerte. Risultati: IBM è riuscita a recuperare la sua posizione di leader nel settore ICT, aumentando il suo fatturato, la sua quota di mercato e la sua reputazione. IBM ha anche creato valore per i suoi clienti, fornendo soluzioni innovative e su misura che hanno migliorato la loro efficienza e competitività. 3.Venturing for Strategic Innovation Corporate Venturing : It is a corporate strategy in which a company invests in or collaborates with startups or emerging businesses outside of its organization with the aim of gaining strategic advantages or innovations. Objectives of corporate venturing : - Learning: learning from start-ups new business models, processes, methods or solutions, that can be transferred or adapted to the company. - Leveraging: leveraging the resources, capabilities, networks or reputation of the company to support the start-ups, increasing their value and their likelihood of success. Types of corporate venturing tools 15 •Corporate Venturing Capital (CVC): This involves direct investments in startups or emerging companies by a large corporation. In this case, the corporation becomes a financial investor, seeking growth and innovation opportunities in its industry through acquiring stakes in startups. •Corporate Incubation: This entails creating an internal incubator or accelerator within the organization. The company provides resources, mentorship, and support to new ventures to foster their development. This model aims to promote innovation within the company itself. • Startup Program Inside Out: These are programs that companies use to encourage their employees to create and launch new entrepreneurial initiatives, leveraging internal skills and resources. The goal is to stimulate a culture of innovation and diversify the portfolio of activities. • Startup Program Outside In: These are programs that companies use to attract and engage external startups, offering them challenges, projects, or problems to solve. The objective is to benefit from innovative solutions and build long-term relationships with startups. Other corporate venturing tools: • Skunk-works: quasi-autonomous units that focus only on explorative innovation activities (“moonshots”) that will hopefully enable strategic innovation • Corporate Accelerators: like corporate incubators, but focused on startups that have a proven business model • Internal Idea Contests: challenges open to employees that collaborate in teams to propose solutions to complex innovation problems • Hackathons and Innovation Prizes: collaborative competitions taking place in a limited amount of time, where small groups of external, selected people develop a solution to an issue proposed by the corporate Toyota AI Ventures (Corporate Venture Capital): è il fondo di venture capital di Toyota dedicato alle startup che operano nei settori dell’intelligenza artificiale, dell’autonomia, della mobilità, della robotica, della cloud technology, delle smart cities, della salute digitale, della fintech e dei materiali1. Il fondo offre alle startup selezionate un accesso privilegiato alla tecnologia, alle risorse e alla rete di Toyota, oltre a un supporto strategico e operativo2. Bosch (Corporate Incubator): è l’incubatore interno di Bosch che finanzia e scala le innovazioni di business model provenienti dalle divisioni e dalle entità interne di Bosch. L’incubatore si occupa di esplorare nuovi mercati e aree di business al di fuori del core business di Bosch, contribuendo allo sviluppo e al futuro del gruppo3. L’incubatore offre alle startup interne un accesso alla piattaforma tecnologica di Bosch, a una rete globale di partner e clienti e a un supporto personalizzato4. 16 Siemens Technology To Business (Startup Program outside-in): è il programma di Siemens che collabora con le startup esterne che sviluppano soluzioni innovative in ambiti strategici per Siemens, come l’automazione, l’elettronica, la simulazione, l’energia e la mobilità5. Il programma offre alle startup un accesso alla tecnologia e al mercato di Siemens, oltre a un finanziamento iniziale, una mentorship e una sede presso il centro di innovazione di Siemens6. SAP Startup Focus (Startup Program inside-out): è il programma di SAP che aiuta le startup che operano nel campo del big data, della predittiva e dell’analisi in tempo reale a sviluppare nuove applicazioni su SAP HANA e ad accelerare la loro penetrazione di mercato7. Il programma offre alle startup un accesso immediato alla piattaforma HANA, a una formazione e a esperti tecnici, a un supporto di marketing e vendita e a una rete di clienti e partner di SAP8  Corporate Venture Capital (CVC) Corporate venture capital (CVC) is the investment of corporate funds directly in external startup companies. CVC is defined as the practice where a large firm takes an equity stake in a small but innovative or specialist firm, to which it may also provide management and marketing expertise. In essence, CVC is a subset of venture capital whereby a company is investing, without using a third-party investment firm, in an external start-up that it does not own. This is a growing trend. Different CVC strategies exist: Sustaining the core business through CVC Through CVC investments in innovative startups, the corporate can sustain the core business by: • promoting a technological standard (Microsoft investment in .NET) • stimulating demand of complementary products and fostering of corporate ecosystem (Intel’s investments in startups whose products require the Pentium processor) • leveraging underutilized technology through investment in spinoffs (Innogy Innovation Hub and blockchain-based mobility startup Motionwerk) • renewing the technological base (Mercedes Benz investment in Sila Nanotechnologies, which became its supplier of batteries for Mercedes’ electric fleet) Pursuing strategic innovation through CVC Through CVC investments in innovative startups, an incumbent can also explore new, future businesses by: • experimenting new capabilities (Siemens investment in autonomous driving startup Deepscale) • developing innovative technologies (E.ON investment in smart thermostat startup Tado) • exploring strategic whitespace and sensing emerging technological trends (GV investment in Agritech) 19 Siemens uses an integrated approach to venturing, where multiple structures and programs operate simultaneously. The innovation ecosystem of Siemens is composed of many structures and programs, among which there are: • next47 (CVC arm and external incubator) : is the corporate venture capital arm of Siemens, and it is present in the major startup ecosystems in the world (Palo Alto, Boston, Herzliya, Munich, ...). next47 does not simply provide capital to the startup, but acts as a value-adding partner in fostering the commercialization and scalability of the solution.On one side, the startup can use the machinery across Siemens BUs to test and prototype, as well as seeking support from Siemens professionals. One the other side, there are catalyst teams, formed by Siemens employees, that function as a bridge between the startup and the corporate. Plus, each startup is assigned a Siemens “champion”, who monitors the growth of the startup, communicates with top management teams, and seeks the best opportunities for commercialization within the Siemens. network of buyers. next47 also runs the next47 Accelerator program, where internal spinoffs are selected to start a 3 months program to nurture the startup teams’ entrepreneurial skills and develop a commercially viable solution that could be profitable for Siemens. • Siemens Technology Accelerator : has the objective of creating new spin-off businesses out of inventions made by Siemens employees. • Siemens Energy Incubator (CVC arm and internal incubator) : is the incubator of the SE BU that targets both internal entrepreneurs and external entrepreneurs that provide innovative energy solutions and applications. It provides ongoing mentorship, funding and network. In Siemens Energy there is also Siemens Energy Ventures, which functions as corporate venture capital arm of the BU. Main features of Siemens corporate venturing and innovation ecosystem : • ability to leverage on highly heterogeneous and highly specialized technical skills of Siemens employees (engineers, developers, etc...), and on the high-tech machinery and technologies • being the gatekeeper to a wide market for innovative technological solutions: partners, buyers from different industries, suppliers à this is a complementary resource as of the startup! • importance of mediating actors that establish an effective relationship between the startup at the corporate, across different hierarchical levels. Learning in Companies The learning process in organizational settings involves the creation, retention, and transfer of knowledge. This is crucial for ensuring sustained competitive advantage, facilitating continuous alignment between a company's knowledge, capabilities, and the dynamically changing environment. In the context of strategic innovation, effective learning is paramount, necessitating the abandonment of outdated knowledge, retention of effective practices, and swift development of new insights. Learning Disabilities: Established organizations may exhibit learning disabilities that hinder the effectiveness of standard planning processes in the context of implementing strategic innovation. These disabilities include ignoring predictions, manipulating performance perceptions, the rigidity of predictions, and inadequate analysis of predictions and outcomes. Planning in Established Companies: The planning process in established companies follows a sequence of planning, execution, measurement of outcomes against predictions, and assessment of lessons learned. o Validated Learning: The dominant learning model in startups is "validated learning." Startups function as temporary organizations seeking scalable, repeatable, and profitable business models. The Lean Startup approach by Eric Ries emphasizes validated learning to understand customer needs, develop hypotheses about products or business models, test them with Minimum Viable Products (MVPs), gather data, and adjust strategies based on insights. The Build-Measure-Learn Cycle: 20 The Build → Measure → Learn cycle is central to validated learning in startups. Addressing Cognitive Biases with Validated Learning: Validated learning addresses cognitive biases in decision-making by applying a deductive method to strategic ideas, aiming to invalidate them and discard ineffective strategies. The effectiveness of learning depends on accurately interpreting feedback information to avoid retaining ineffective strategies or discarding effective ones. Strategic Innovation and Validated Learning: Established companies now recognize the importance of validated learning, pivoting, and experimenting in strategic innovation. This contrasts traditional views of committing resources upfront irreversibly with the need for incremental and reversible actions in contexts characterized by high uncertainty and ambiguity. o Discovery-Driven Planning: Discovery-driven planning incorporates concepts similar to "validated learning" and is a systematic learning process designed to reduce uncertainty and enhance knowledge about the key elements of a business model or strategic innovation. The process involves several conceptual steps, each serving as a learning milestone: 1. Framing: Defining the initial scope and boundaries of the strategic innovation or business model. 2. Benchmarking: Comparing the planned innovation against existing benchmarks or industry standards. 3. Specification of Deliverables: Clearly defining the expected outcomes or deliverables of the strategic innovation. 4. Testing of Assumptions: Actively testing and validating assumptions underlying the strategic innovation. This involves questioning components, feasibility, revenues, costs, timing, and other critical aspects. 5. Managing to Milestones: Setting and managing specific milestones that act as key points for learning and decision-making throughout the process. 6. Parsimony: Emphasizing simplicity and efficiency in conceptual steps and actions, avoiding unnecessary complexity. The overarching goal is to systematically and iteratively gather information, validate assumptions, and make informed decisions at each milestone, thereby reducing uncertainty and increasing the chances of successful strategic innovation. 4. Culture & Strategic Innovaton "You can have the best strategy in the world, but culture will kill strategy" (Launi Skinner, CEO First West Credit Union) Culture in companies is the set of values, beliefs, norms, behaviors, and habits that characterize an organization and distinguish it from others. Culture in companies becomes manifest in, among the others: • Organizational stories and legends • Organizational language and communication • Rituals and ceremonies • Physical structures and symbols 21 The Schein Three-Level Model is a way to describe organizational culture based on three levels of manifestation: o observable behaviors, o Espoused beliefs and values, o Basic underlying assumptions. The model suggests that: Observable behaviors are the most visible and tangible aspects of culture, like structures, processes, symbols, language, and rituals. They are challenging to decipher without understanding the meaning attributed by the actors to their actions. Espoused beliefs and values These are the expressed ideals, goals, values, aspirations, ideologies, and rationalizations of organizational members, communicated verbally or in writing. They may or may not be congruent with actual behaviors. Basic underlying assumptionss are the unconscious and often unspoken beliefs, values, and purposes that shape the behavior, perception, thinking, and emotions of organizational members. They are the deepest and most resistant source of culture and are difficult to change. Dimensions of culture • “Intangible” culture, made of behavioral norms, incentives, routines, • “Material” culture, made of artifacts, such as logos, mottos, texts, objects, and so on : , the components of the “material” culture of a company can be helpful for distinguishing the company from its competitors, and to develop new products and services. Company artifacts have symbolic meaning, beyond their functional use: they are the observable symbols and signs of the company culture Functions of organizational culture Culture has two functions for organizations: • Internal integration means that members develop a collective identity and know how to work together effectively. Culture guides day-to-day working relationships and determines how people communicate within the organization, what behavior is acceptable or not acceptable, and how power and status are allocated • External adaptation refers to how the organization defines, measures and reaches goals and how it deals with outsiders. Culture helps guide the daily activities of workers to meet certain goals. It can help the organization respond rapidly to customer needs or the moves of a competitor. Culture embedding mechanisms 24 Organizations are complex, thus it is difficult to fit them into a specific type. Authors have shifted to a configuration perspective, where the organizational culture is the outcome of the combination of a series of elements Culture strength Culture plays a strong role in hampering or promoting change. One of the reasons is culture strength, that is the degree of acceptance of organizational culture. It has four dimensions: • Sociological penetration: the extent to which the culture is shared across the members of the organization as a whole, including across various groups or subcultures in the organization (horizontal penetration) and across layers of the organizational hierarchy (vertical integration). • Psychological penetration: how deeply individuals in the organization hold the assumptions, values, and beliefs that make up their organization’s culture. • Historical penetration: how long the culture has consistently existed within the organization (socialization). • Artifactual penetration: the extent to which the more deeply held assumptions values are manifested in the outer layers of the organization’s culture (i.e., in its artifacts). VRIN analysis : o Is organizational culture valuable? Can culture positively affect the value creation and capture mechanisms in companies? There are companies where culture enables value creation and capture (and strategic innovation), but there are other companies where culture constrains performance. o Is organizational culture rare? Sometimes they are. Companies are imprinted by the founders’ unique ideas and vision, and have a unique history, but, while the antecedents might be unique to one specific company, the final outcome (company culture) can be similar to other companies. Furthermore, cultures are not only top-down, but also bottom-up, increasing the difficulty of finding many similar cultures content wise. o Is organizational culture imperfectly imitable, or not imitable at all? Since company culture has great deal of taken-for-grantedness and unawareness, it is hard for competitors to understand it and imitate it. Incentives and formal structures and processes are important, but their observation is not exhaustive for understanding, and even less exhaustive for actually replicating, a company culture to its full extent in another company. The more the culture is tacit and hard to codify (plus valuable and rare), the harder it is for competitors to replicate it in their company 25 Does culture benefit performance? 1. When there is alignment between company culture and the external environment : If the dominant values are congruent with the environment, then employees are more likely to engage in decisions and behaviors that improve the organization’s interaction with that environment. But when the dominant values are misaligned with the environment, a strong culture encourages decisions and behaviors that can undermine the organization’s connection with its stakeholders. 2. When culture is moderately strong : Very strong company cultures can suppress dissenting subcultures. The challenge for organizational leaders is to maintain not only a strong culture but one that allows subcultural diversity. Subcultures encourage task-oriented conflict, which improves creative thinking and offers some level of ethical vigilance over the dominant culture. In the long run, a subculture’s nascent values could become important dominant values as the environment changes. Corporate cults suppress subcultures, thereby undermining these benefits. 3. When culture is an adaptive culture : An adaptive culture is an organizational culture in which employees are receptive to change, including the ongoing alignment of the organization to its environment and continuous improvement of internal processes. Below the attributes of an adaptive culture : 1. Willingness to make changes in culturally ingrained behaviors 2. Emphasis on identifying problems before they occur and rapidly implementing workable solutions 3. Focus on innovation 4. Shared feelings of confidence about managing problems and opportunities 5. Emphasis on trust 6. Willingness to take risks 7. Spirit of enthusiasm 8. Candor 9. Internal flexibility in response to external demands 10. Consistency in word and action 11. Long-term focus A Model of Culture Change This model illustrates the stages of cultural change in organizations: 26 Designing culture for supporting strategic innovation However, it is important the alignment in various dimensions within a strategic innovation project. The harmonious integration between organizational culture, individual needs, critical tasks, and organizational structure ensure the success of a strategic innovation project. Case History: Innovation and Culture in Carlsberg Carlsberg is a Danish brewing company founded in 1847 by J.C. Jacobsen. Carlsberg used the historical motto “Semper Ardens” (“Always Burning”) to perform strategic innovation in two occasions, in particular by: • re-positioning away from industrial brewing • tightening the culture of different brands and different regions 29 Personal Factors that influence Goals-Performance Relationship: 1. Goal Commitment:  Assumes commitment and determination not to lower or abandon goals.  More likely with public goals, internal locus of control, self-set goals, and those based on individual ability. 2. Task Characteristics:  Goals impact performance more strongly in simple, well-learned, and independent tasks.  Group goals are preferable for interdependent tasks. 3. National Culture:  Effects of specific, difficult goals may vary in different cultures.  In collectivistic cultures, achievable moderate goals can be more motivating than difficult ones. Considerations and Caveats:  Potential Downsides:  Overly effective goals may hinder adaptation and creativity, focusing too much on outcomes.  Task-Specific Effectiveness:  Goals rewarding quantity are highly motivating for rote tasks but may not be effective for complex thinking and personal investment.  Goal Persistence:  Individuals may persist with unattainable goals, even when letting go might be beneficial. Different Types of Goals: Organizational goals can be classified based on various criteria, including the level of construal (abstract vs. concrete), temporal orientation (long-term vs. short-term), locus (internally-sourced vs. externally- sourced), content (financial, environmental, social), and independence (how goals' outcomes affect others). Goals & Strategic Innovation: Setting goals for strategic innovation involves addressing issues such as using stretch goals appropriately and reconciling the purpose, firm-level goals, and individual-level goals. Stretch Goals: Stretch goals are intentionally challenging or nearly impossible to achieve. They can be set at different levels within a company, stimulating out-of-the-box thinking, creativity, and exploration. Stretch goals are believed to contribute to unique company cultures and a competitive advantage. The stretch goals programs are not effective for everyone? Negative Effects of Stretch Goals: While stretch goals are generally considered positive, Locke's goal-setting theory suggests that if individuals perceive the goal as unattainable, it may lead to disengagement, demoralization, burnout, and loss of motivation. Stretch Goals: It's About Learning: The key is how stretch goals are conceived and implemented. The real purpose is not necessarily achieving them but fostering a culture of long-term-oriented "disciplined creativity." Stretch goals should not replace attainable goals, and they should be generated to produce energy and commitment, avoiding impossibility. Case history : General Electric 30 The case study on Jack Welch at General Electric (GE) illustrates how the CEO introduced significant innovations in goal-setting and performance measurement within the company. Until Welch tenure, GE had a fairly standard approach to goal setting. GE taught its new managers to adhere to the “SMART” model when setting and evaluating their goals. As a way to ensure that goals were attainable, GE told its managers to use the following questions as guidelines: “Is the goal realistic? Is it feasible? Can it be completed within the time allowed with the available resources? Welch embraced ambitious goals, known as "stretch goals," using the "Bullet Train" method to stimulate creativity and elicit unconventional solutions. The "Bullet Train" method implies setting stretch goals that may initially seem unachievable. This approach aims to inspire employees to think innovatively and push the boundaries of what they believe is possible. The main takeaway from this case is that Welch recognized the importance of going beyond conventional goals, pushing employees to achieve higher benchmarks. He emphasized that ambitious goals should not replace traditional ones but rather ensure high performance in the future, contributing to the creation of a corporate culture of disciplined creativity and elevated performance. This approach helped GE address challenges and maintain its competitiveness in the long term. From the firm to the individual As highlighted before A big managerial challenge is the alignment between organizational goals and individual goals. Goal alignment has been treated through two interdependent points of view: • the first way talks about goal alignment as a matter of setting the right control mechanisms and incentive structure that aligns the goal of the company with the ones of the individual • the second way looks at the psychological aspect of goal setting for individuals in the organization, highlighting the importance of strategic leadership. Management-by-Objectives (MBO) Management-by-Objectives (MBO) is a program involving the participative definition of specific goals within an explicit time frame, with feedback on goal progress. Common characteristics of an MBO program include goal specificity, participation in decision-making (including goal setting), an explicit time frame, and performance feedback. The hierarchical model of goals in organizations follows a structure from overarching organizational goals to divisional, departmental, and individual goals. Each department, for example, translates the organization's global goals into specific goals at their level, creating a cascade of objectives. The “ideal process” of MBO would be: 1. individual discussion with the superior of the subordinate’s own job description 2. establishment of the employee’s short-term performance targets 3. meetings with the superior to discuss the employee’s progress toward targets 4. establishment of checkpoints to measure progress 5. discussion between superior and subordinate at the end of a defined period to assess the results of the subordinate’s efforts. 31 In summary, while MBO provides a clear framework for defining and monitoring goals at all levels of the organization, addressing practical challenges is crucial to ensure an effective approach that doesn't create additional organizational issues. Management-by-Missions (MBM) Shared missions are the contribution commitments at each level of an organization that is aimed at fulfilling a company’s purpose. Just as the corporate missions reflect the purpose in terms of the company’s commitments to its stakeholders, shared missions show how each unit, team and individual across the organization contributes to the fulfillment of those same commitments. Shared missions must satisfy general criteria of content, credibility and urgency, as well as three specific criteria : 1. Criterion of inclusion. Inclusion means that each shared mission must contribute to the accomplishment of the next higher-level missions and, ultimately, one of the corporate missions. If this criterion is not met, there is a risk that particular teams or individuals may establish missions that diverge from the company’s purpose. In defining a shared mission, the aim is to determine exactly how an activity contributes, how it adds value. 2. Criterion of complementarity. Complementarity ensures that there is a horizontal or process logic among the various shared missions. It is important to ensure that the shared missions adopted by the different areas or functions do not compete with one another. On the contrary, the shared missions at any given level should be complementary in every respect. 3. Criterion of consistency. Consistency ensures that shared missions are deployed throughout the company in a coordinated way. This can vary from company to company, but generally involves engaging the key stakeholders, preparing and periodically reviewing each mission and consistently communicating them once approved. When it comes to approving missions, one way to ensure consistency among missions is to deploy them from the top down, starting with the corporate missions and cascading them to teams and individuals. Management by Objectives (MBO): •Focus: Centered on specific and measurable objectives. •Process: Involves defining clear and measurable goals, assigning responsibilities, monitoring progress, and evaluating results. •Orientation: More oriented towards achieving specific short-term objectives. Management by Mission: •Focus: Concentrated on the long-term vision and mission of the organization. •Process: Involves aligning all organizational activities with the stated mission, emphasizing the importance of pursuing a broader cause or purpose. •Orientation: Places greater emphasis on long- term strategic direction and core values. 34 Steve Jobs, co-founder of Apple, left the company in 1985 due to tensions with CEO Sculley. In the following years, Apple experienced a decline, marked by failed products like the LISA computer.The policy of maintaining high profit margins did not change as technology evolved, thus Apple started to face serious competition from low-cost computers with similar functionalitie. After unsuccessful attempts to sell the company, Jobs returned as CEO in 1997, orchestrating Apple's comeback. Jobs emphasized innovation, realigned the company's strategy with its historical identity, and achieved success with products like the iMac. Identity and innovation There are three types of innovations based on how they relate to identity: 1. identity-enforcing innovations 2. identity-stretching innovations 3. identity-challenging innovations (strategic innovations are typically of this Kind) 1. identity-enforcing innovations 2. identity-stretching innovations 3. Identity-challenging innovations 35 1) Example: Alessi  Description: In the late '60s, Alessi was a technological leader in the Italian steel household industry. In 1970, Alberto Alessi steered the organization towards producing art objects in steel using industrial methods. Alessi innovated in design, production, and marketing, incorporating ideas from modern art, anthropology, and psychoanalysis. This cyclical shift influenced Alessi's organizational identity from "artistic mediator" to "crafts workshop" to "dream factory," enabling continuous innovation.  Takeaway: The alignment of organizational identity and innovation allowed Alessi to transition from a tableware manufacturer to an icon in Italian design. 2) Example: LEGO  Description: LEGO faced digital innovation threats in the toy market. Initially, they created a unit for computer games, causing identity confusion. LEGO's managers redefined their identity from a "mass-market producer" to a "premium-idea-based company dedicated to systematic creativity," enabling the pursuit of digital opportunities while maintaining continuity with the company's history.  Takeaway: Redefining identity enabled LEGO to integrate digital innovation without compromising its core identity. 3) Identity and (Open) Innovation: NASA Case  Description: NASA's Space Life Sciences Directorate (SLSD), established in 1963, aimed to lead in understanding space and life sciences for space exploration. In 2009, Jeff Davis initiated an Open Innovation initiative using platforms like Innocentive, Yet2.com, and Topcoder. This faced resistance as R&D professionals perceived it as a threat to NASA's identity as a knowledge specialist. Davis reframed the perspective, stating, "We're not here to do research; we're here to keep astronauts safe in space." This led to varied approaches, with some fully embracing openness and others adopting a mixed model.  Takeaway: Managing professional identity is critical when adopting open innovation models to align with the primary mission and address cultural barriers. 36 Frame Flexibility: Understanding Cognitive and Emotional Framing Cognitive framing is a process of thinking, providing the mental templates that individuals impose on an information environment to give it form and meaning. Frame flexibility refers to Management’s ability to expand thinking within the organization, it is important for embracing significant changes. The concept is rooted in cognitive framing, a thinking process that provides mental templates shaping information environments. Components of Cognitive Frame Flexibility: 1. Elasticity of Organizational Identity: Reflects the flexibility of the connection between the organizational identity and its actions. 2. Orientation of Capability Development: Indicates whether the organization can accommodate a broader or narrower set of capabilities. 3. Breadth of Scanning Competitive Boundaries: Refers to the broader or narrower conceptualization of competition boundaries. Emotional Framing: An emotional alignment of a frame with the audience's passions, desires, or aspirations. It positions strategic innovation within the firm's history and normative values. Emotional framing can influence the perception of an innovation as an opportunity or a threat. Purpose and Its Framing Functions: 4. Flexible Cognitive Framing: Supports an expanded role for the company within a specific market space. 5. Opportunity Emotional Framing: Creates emotional resonance among organizational members, fostering commitment. Understanding both cognitive and emotional framing, particularly the flexibility in these frames, is crucial for organizations navigating strategic innovations successfull Identity and Category Strategy: Organizational identity serves as a statement of the company's position within a market segment, industry, or strategic group. Categorical identity creates expectations for the company to behave like others in same category. Category strategy aims to gain a competitive advantage by establishing social meaning around a market category, making it easily recognized and acknowledged. Examples of Category Strategy:  Daimler-Chrysler merger failed due to categorical confusion in combining luxury and mass-market expectations.  Ford's creation of a "mobility" category to embrace ridesharing and driverless cars.  Salesforce.com used a category strategy to mainstream their outsourced model as part of the new SaaS category.  Apple's turnaround by dominating new market categories for smartphones and tablets. Key Elements in Designing a Category Strategy:  Choosing a label: The label influences perceptions of similarity or difference. 39 In the 1960s, Honda achieved success in the U.S. motorcycle market through an unintentional yet effective strategy. The company capitalized on a growing domestic market, maintained cost competitiveness, and implemented innovative manufacturing processes. Initially entering the U.S. to test sales, Honda's strategy evolved serendipitously. Executives, without predefined profit goals, strategically configured inventory with a mix of products, including smaller Supercub motorcycles. Despite expectations, these smaller bikes gained popularity in the U.S., especially in sporting goods stores. The key lesson is that Honda's success resulted from adaptability, experimentation, and the ability to seize unexpected opportunities in a dynamic market. The role of top and middle managers as strategic leaders Top managers Top managers play three main roles in promoting and leading such change: • Envisioning the future strategy and communicating it effectively • Aligning the organization towards the strategy: in terms of organizational design and political support and buy-in • Embodying change Middle managers While middle managers are often seen as mere “implementers” and “monitorers” of objectives that are formulated by the top management. In reality, their roles in leading strategic innovation can be way more important: • Championing of strategic issues (issue-selling) : Middle managers are often the closest to market or technological shifts that might signal the need for strategic change. They are also wellplaced to be able to identify likely blockages to change. Accordingly, middle managers must gain the attention of senior management for strategic issues that are less visible to the top of the organization, and win senior managers’ commitment to appropriate strategic actions. In other words, middle managers must often ‘sell’ strategic issues to top management, getting their buy-in • Strategy sense-makers : Top management may set a strategic direction, but how it is explained and made sense of in specific contexts (e.g. a region of a multinational or a functional department) may effectively be left to middle managers. If misinterpretation of that intended strategy is to be avoided, it is therefore vital that middle managers understand and feel an ownership of it. • Adapters to unforeseen events : Middle managers are uniquely qualified to reinterpret and adjust strategy because they have day-to-day responsibility for implementation. Thus, every issue that puts constraints on strategy realization is usually borne by the middle managers first, and their role is to tactically respond to these issue to move the strategy forward • Local leaders : Middle managers symbolize and embody change, just like top management, but do so at a local level. This can be particularly important in decentralized organizations, such as chains of retail stores or multinational corporations. They are the trait d’union between the official corporate culture and the multiple local cultures that are present in each branch or subsidiar This slide emphasizes that the cascading of goals within a company, from overarching objectives to team- specific and departmental goals, requires intentional management. While strategic thinking often focuses on the top management levels, this overlooks the crucial role of middle managers in strategy implementation. 40 Middle managers are vital in strategic innovation for several reasons: they serve as informational channels between top management and employees, their interpretation of change is crucial in the change process, they may resist unfair or damaging goals, and they can champion innovative projects. Strategic innovation demands an active role from middle managers, turning them into decision-makers rather than mere executors of orders from the top : • Middle managers as initiative evaluators: they function as a “socio-technical” bridge, functioning both ways, between technological demands (usually coming from the R&D department) and market demands (coming from Production, Sales and Marketing departments), addressing the potential and the feasibility of the innovative project • Middle managers as initiative sellers: they function as a “socio-attentional” bridge between the lower levels and the top managers. Middle managers can take up innovative initiative and “sell” them to the top management 4 types of Connecting Leaders (HBR Jaser) Case History : Nokia In the 2000s, Nokia, once a financially successful tech company, faced a dramatic downfall after its transition to a focused mobile telco company. Despite remarkable growth in the 1990s, Nokia struggled with technical issues, particularly the outdated Symbian operating system. The decline accelerated after 2009, as competitors like Apple and Samsung gained prominence. Nokia's attempt to catch up, including a partnership with Microsoft, proved inefficient, leading to divestment from the smartphone market in 2013. Key Decline Factors:  Excessive Pressure: Pressure from top management to achieve ambitious results quickly led to hasty and ineffective decisions.  Organizational Culture: An internal culture focused on retaining power contributed to a lack of transparency and distorted communication; in fact Middle managers feared disappointing Nokia executives, often providing overly optimistic information, contributing to a lack of awareness of real issues. The decline was fueled by ambitious yet poorly executed strategies, a culture of concealing issues, and organizational inefficiencies unable to cope with technological complexities. The failure to adapt to new market trends and the slow resolution of key technological issues contributed to Nokia's decline. In summary, the Nokia case highlights the importance of adaptability, transparent communication, and more effective decision-making to navigate changes in the technological landscape.