INNOVATION

Anna Sabidussi

Some facts and figures…

29%

of new business founded in 1992

were still alive in 2002.

• Source: Shane (2008)

Some facts and figures…

1/3

of companies listed in the

FORTUNE 500 in 1970 had

disappeared by 1983.

Mapping the innovation space

DE

GR

EE

ATTRIBUTE

Mapping the innovation space

Product

Revolution

Product

Evolution

Market

Penetration

Process

Efficiency

Process

Change

Process Re-engineering Strategic

Transformation

Strategic Development

Strategic

Focus

Product-Service

Process Strategic

Ra

dic

al

Inc

rem

en

tal

Cu

rre

nt

Source: Ahmed and Shepherd, 2010

Mapping the innovation space

• Disruptive innovation (source: Clayton Christensen)

• Target overshot customers or non-customers;

• Prioritize good-enough;

• Do what established competitors don’t want to do,

can’t do or are uninterested in doing.

Source: Anthony, Johnson, Sinfield and Altman, 2008

Mapping the innovation space

• Business Model Innovation canvas (Osterwalder and Pigneur)

• NYTD’s organizational evolution

High

High

Low

LowAbility to forget

Ab

ility

to b

orr

ow

Unsopported

Integrated

(1995)

Distinct but

linked (2004)

Isolated (1999)

Source: Govindarajan and Trimble, 2005

INNOVATION NETWORK

R&D partnerships in software 1970-1979,

MERIT-CATI

Source: Cloodt et al. 2010

R&D partnerships in software 1995-1999,

MERIT-CATI

0.0 1.0 2.0 3.0 4.0 5.0

Monitoring

Knowledge

Uncertainty

Cost

Time-to-Market*

Market entry

SMEs

LARGE

Relative importance of external sourcing drivers

0.0 1.0 2.0 3.0 4.0 5.0

Monitoring**

Knowledge

Uncertainty

Cost

Time-to -market

Market entry

Large average

Large best in class

Source: Sabidussi, 2009

Source: Belderbos, Duysters and Sabidussi, 2012

Cooperation …

Performance implications of cooperation

0

10

20

30

40

50

60

70

Patents Sales/New Products Economic Indicators R&D inputs Process Innovation

positive

negative

neutral

TIME HORIZON

CO

NT

RO

L

SHORT LONG

LOW

HIGH

Acquisition

Licensing

Alliance

CVC

Joint Ventures

… and beyond …

Innovation strategy RequirementsUpsides

Recruiting andRetaining superior

Human capital

Strategic Alliances

Internal R&D Spending

Acquisitions

Downsides

-Organic growth isSlower-Challenge of Identifying and valuing superiorhuman capital.

-Potential loss of IP control-Challenge of alignment of goals-Shared returns

-Full risk exposure-Long time horizon-Uncertain returns

-Risk of overpaying-Cultural integration-Involves relying on others forinnovation

-Better control of IP-Long term growth focus-Difficult for competitorsto imitate

-Shared riskMultiple, small-scaleinvestments providestrategic options-Faster than internalinternal development

-Internalization of skillsand capabilities- Full capture of returns

-Faster than growingorganically-Acquire innovativetechnologies before startupsbecome competitors

-Astute strategic humanResource management- Organizational flexibility

Dedicated functionfor the managementof partnerships

-Culture of risk tolerance-Organizational flexibility-Long term commitment

Capability to identifyand assimilate acquisition targets

Source: Frank Rothaermel and A. Hess. MITSLoan management review spring 2010

Examples

-Google-Merk-Goldman Sachs

-IBM-Eli Lilly-Oracle-Procter & Gamble

-Apple-Intel-BMW-HP

-Cisco-GE-Microsoft

Non-Stars Stars R&D Alliances Acquisitions

Non-stars

Stars

R&D

Alliances

Acquisitions

Source: Frank Rothaermel and A. Hess. MITSLoan management review spring 2010

Technologychange

CorporateStrategy shift

Marketdevelopment

yes

Update totalportfolio

Governance choiceselection

t= t0 + ∆∆∆∆t

Mayor Evolutions ?

no

yes

Portfolio Balance

Internal sourcing

Vs. external

sourcing ?

EX

TE

RN

AL

INTERNAL

B2B ?OTHER

no

Individual GC Assessment

(risk-return profile)

Startt= t0

1

2

3

4

Source: Sabidussi et al., 2011