Innovation

Andri B Santosa,Drh,MBA
 • Innovation define as the successful
implementation on creative ideas within
organization. (A mobile et al 1996)
About
Innovation • Innovation is management process It
requires specific tools, rules, and
discipline. (Davila et all 2006)
• Innovation = creativity * risk taking (JL.
Byrd)
 1. Improved Quality
2. Creation of New Markets
3. Extension of The Product Range
Goals of 4. Reduce Labor Cost

Innovation 5. Improve Production Process

6. Reduce Materials
7. Reduce Environmental Damage
8. Reduce Energy Consumption
Failure of Innovation due to
Internal Organization/life cycle

1. Poor Leadership 2. Poor 3. Poor 4. Poor

Organization Communication Empowerment

5. Poor Knowledge
Management
 1. Poor
goal
definition

Common
cause of
failure within
the innovation
process
Eight Critical
ingredients 1. TOP
MANAGEMENT BUY
IN
2. BUDGET 3.
COMMUNICATION
4. REWARDS

for successful
corporate
innovation 5. DEDICATED 6. COLLABORATIVE 7. EFFECTIVE 8. WILLINGNESS TO
INNOVATION INNOVATION TOOLS EVALUATION INVEST IN
PEOPLE SYSTEM INNOVATIVE IDEAS
 Innovation
Incremental vs Radical Innovation
 Incremental Innovation

Build upon existing knowledge and

Based on the knowledge and
resources within a certain
resources involved
Internal company/competence - enhancing

Dimension
Radical Innovation

Requires completely new knowledge an/or resources

Competence - destroying
 Incremental involved modest
technological changes

External • The existing product on the market

Dimension will remain competitive

Radical Innovation, rendering

the existing products non-
competitive and absolute
Henderson – Clark Model

Why incumbent fail to

catch something as • Ex : Xerox failed to develop a small plain
straight forward as paper copier/leader xerography
some incremental technology
innovation.

Technological • - knowledge of the components

knowledge required to • - knowledge of the linkage between
develop new products. them (architectural knowledge)
Architectural Knowledge

High Impact on
Architectural Knowledge

Architectural Radical
Innovation Innovation
Low Impact on High Impact on
Component Knowledge Component Knowledge
Incremental Modular
Innovation Innovation

Low Impact on
Architectural Knowledge
S- Curves Model

It Illustrates the introduction, growth and maturation of

innovation as well as technological cycles that industries
experience.
Performance

Technology
Major Obstacles approaches the
area overcome physical limit
Index's

Time
Keeping up Innovation Under the S-Curve Model

Ex : super computer
industry single
microprocessor
prototypes,
Performance

microprocessor
Technology
Technology working paralel
A
B

Time
Framework
 Schumpeter (1934) Carrying out new
combinations of firm
organization: new products,
new method of production,
new market
Hoselitz (1952) Uncertainty
bearing…coordination of
What Is productive
Entrepreneurship? resources…introduction of
innovations and the provision
of capital
McClelland (1961) Moderate risk taking
 Casson (1982) Decisions and
judgements about the
What Is coordination of scarce
Entrepreneurship? resources
Gartner (1985) Creation of new
organizations
Stevenson, The pursuit of
Roberts, & opportunity without
Grousbeck regard to resources
(1989) currently controlled
Provide a Solution

1. Customer with a problem 2. What is the solution?

?
3. What product
/Which service can be
offered to achieve the
solution?
 What Is Entrepreneurship?

• Common elements
• Creativity and innovation
• Resource gathering and the founding of an economic
organization
• The chance for gain under risk and uncertainty
•
 Perspectives on • Creation of Wealth Source: Morris (1998) in
Morris, Kuratko, and Covin
the Nature of • Creation of Enterprise (2010), Corporate
Entrepreneurship &
Entrepreneurship • Creation of Innovation Innovation, 3rd Edition.

• Creation of Change
• Creation of Jobs
• Creation of Value
• Creation of Growth
The Timmons Model of the Entrepreneurial Process
Communication

Opportunity Resources

Creativity Leadership

Team

Founder
Sumber: Timmons & Spinneli (2007), New Venture Creation
 History of
Intrapreneurship
• The Economist in 1976, Norman Macrae:
• "that dynamic corporations of the future
should simultaneously be trying alternative ways
of doing things in competition within
themselves".
• Gifford and Elizabeth Pinchot in1978
• Developing their concept of intra-corporate
entrepreneur
• By 1986 John Naisbett
• Citing intrapreneurship as a way for
established businesses to find new markets and
new products
 • In 1992, The American Heritage Dictionary
• "a person within a large corporation who
takes direct responsibility for turning an idea
History of into a profitable finished product through
Intrapreneurship assertive risk-taking and innovation”
 • "Intrapreneurs are employees who
behave like entrepreneurs on behalf of the
company. They are the visionaries who act.
They become the hands-on drivers of a
History of specific innovation within an organization.
Research shows that intrapreneurs are an
Intrapreneurship essential ingredient of the successful
innovation process."
• - Gifford Pinchot
 • Both involve opportunity
recognition and definition
Similarities • Both are driven by an individual
champion
between
• Both involve concepts that are most
Corporate and vulnerable in the formative stage
Start-up • Both find the entrepreneur
Entrepreneurship encounting resistance and obstacles
• Both entail risk and require risk
management strategies
 Major differences between Corporate and Start-up Entrepreneurship

Start-up Entrepreneurship Corporate entrepreneurship

Entrepreneur takes risk
Entrepreneur owns the concept/idea
One misstep can mean failure
Vulnerable to outside influence
Independence of the entrepreneur
Company assumes the risk
Company owns the concept
More room for errors
More insulated from outside influence
Interdependence of the champion with
many others
 Major differences between Corporate and Start-up Entrepreneurship

Start-up Entrepreneurship Corporate Entrepreneurship

Flexibility in changing course
Speed of decision making
Few people to talk to
No safety net
Severe resource limitation
Limitation to maneuver
Longer approval cycle
Extensive network
Dependable benefit package
Access to many
Start-up vs. Entrepreneurial Leader

Leadership
The Opportunity The Opportunity

Entrepren
The eurial
The
Entrepre Leader
Team
neur
Core
Competenci
es
Corporate
The Strategy
Resources
Network
Budget
ed Team

Culture Organization
Corporate Entrepreneurship
Organizational Characteristics
-Management support
-Work discretion Resource
-Rewards/reinforcement availability
-Time availability
-Organizational boundaries

Decision to act Business/Feasibil Ideas

Precipitating event
intraprenurially ity planning Implementation

Individual Characteristics
-Risk-taking propensity
-Desire for autonomy Ability to overcome
-Need for achievement barriers
-Goal orientation
-Internal locus of control

Source: Morris and Kuratko (2002), Corporate Entrepreneurship, p. 33

Corporate Entrepreneurship – Domain
Framework

ENVIRONMENT STRATEGIC ORGANIZATION ORGANIZATION

• Competitive LEADERS CONDUCT/FORM PERFORMANCE
• Technological • Characteristics • Strategy • Effectiveness
• Social • Values/Beliefs • Structure • Efficiency
• Political • Behavior • Process • Stakeholder
• Culture satisfaction

CORPORATE
ENTREPRENEURSHIP

Innovation/ Venturing Strategic Renewal of

within Established Established
Corporations Corporations

Source: Guth and Ginsburg (1990) in Morris, Kuratko, and Covin (2010), Corporate
Entrepreneurship & Innovation, 3rd Edition.
Why Corporate Entrepreneurship?

LEVERAGE THE CORPORATION’S DEVELOP NEW CAPABILITIES GENERATE QUICK FINANCIAL

RESOURCES IN NEW ARENA RETURNS
Types of Corporate Entrepreneurship

Corporate
Strategic
Venturing
Entrepreneurship
• Internal corporate venturing
• Strategic renewal
• Cooperative corporate
• Sustained regeneration
venturing
• Domain redefinition
• External corporate venturing
• Organizational rejuvenation
• Business model
reconstruction
 Strategic Entrepreneurship

Form Focus
Strategic Renewal Strategy of the firm
Sustained Regeneration Products offered or market
served
Domain Redefinition New competitive space
Organizational Rejuvenation Organization structure,
processes, and/or capabilities
Business Model Reconstruction Business model of the firm
Source: Morris, Kuratko, and Covin (2010), Corporate Entrepreneurship & Innovation, 3rd Edition.
Entrepreneurial Organizations
 Having CEOs that were heavily involved in fostering
innovation

Companies Defining innovation as critical to long-term company

that have success

successfully Attaching great importance to the concept of

integrated managing change

innovation and Having formal programs for idea generation and

problem solving
creativity into
their daily Placing strong emphasis on cross-functional
communications
practices:
Increasing levels of investment in R&D and a strong
focus on product development
PDMA Best Innovation Practices
76% 1 : 11
Multidisciplinary teams

58% Success rate

In 5 years
2.95 years
Develop new products
32% sales from new
product - in 5 years
76%
Formal financial criteria Insufficient resources
Obstacles

Source: Morris, Kuratko, and Covin (2010), Corporate Entrepreneurship &

Innovation, 3rd Edition.
 Unreasonable expectations

Elastic business definition

A cause, not a business

Rules for
Fostering an New voices

Innovative An open market for ideas

Organization: Create an open market for capital

Open a market for talent

Low-risk experimentation

Source: Morris, Kuratko, and Covin (2010), Corporate Entrepreneurship & Innovation, 3rd Edition.
 Idea Material Organization
creativity creativity creativity

Creativity at Relationship Event Inner

Work: creativity creativity creativity

Spontaneous
creativity

Source: Morris, Kuratko, and Covin (2010), Corporate Entrepreneurship & Innovation, 3rd Edition.
 Initiator Sponsor/Facilitator

Roles in Corporate Champion

Innovation
Entrepreneurship: Midwife

Supporter Reactor

Source: Morris, Kuratko, and Covin (2010), Corporate Entrepreneurship & Innovation, 3rd Edition.
 Visionary/inventory

Catalyst•orNegotiator
leader
• Politician
Endorser• Change manager
Responsibility • Missionary
Team player
areas: • Opportunist
Resource• provider
Critic/judge

Problem-solver

Coordinator

Source: Morris, Kuratko, and Covin (2010), Corporate Entrepreneurship & Innovation, 3rd Edition.
 New model of Nation Competitiveness
(era of Schumpeter’s creative destruction)
Economic
Model

Entrepreneurs Connectivity
(market-oriented) (data-based)

Intermediaries
(finance & knowledge)
OIL AND GAS INDUSTRY
AUTOMOTIVE/MOTORBIKE INDUSTRY
 C0NNECTIVITY

Based on quality data. Information, knowledge, (products and services)

 Broker/
interest group

Knowledge Finance

INTERMEDIARIES
PHENOMENA OF INNOVATION AND IMITATION
Is it linear or circulating relation between
imitation and innovation?
PIRATES ARE
WORLDWIDE
(not only in Asia)

Pirates in
FordMotor vs Bob Kearns
The US

The UK:
Watson & Crick
vs Rosalind Franklin

Japan:
Tempeh –
Soybean Cake
Nishi dan Inoue (Riken Vitamin Co. Ltd)
Many says and believes:
Innovation creates up-normal profits

MASUKKAN FIRST ENTRY

But, …
Professor Oded Shenkar:
…savvy imitators generate
huge profits…

98%
of the value of innovation
goes to imitators
INNOVATORS IMITATORS

WHITE CASTLE McDONALD’S

DINERS CLUB VISA, MASTERCARD, AMEX

KORVETTE WALMART

SAEHAN MPMAN APPLE IPOD

Note:
Copycats are getting speedier. Imitated after:
Chrysler Minivan(9 y), CD Player (3y), GM Minivan (1y), Tablet Computer (12w)
In reality: Firms INNOVATE and IMITATE
simultaneously

Yamaha - Vino

Honda - Scoopy

Reading:
Why do firms imitate each other
(Lieberman & Asaba, 2006)
Whom is learning (copying) from who?
‘Artists create and
masters copy...’
DECISION FACTORS TO INNOVATE OR IMITATE
Appropriate/ Dominant Complementary
Protection regime Design Asset & Funding

Innovate
vs.
Imitate
THE WAY TO GO …
from copycat to be an innovator
Copycat Imitate innovatively Imitate to innovate Innovate
(Imitation) (Imovation)
Step 1: Copycat

How to do imitation/copycat strategically?

MAIN AIM : a 50% solution (features) at a 15% price
ODED SHENKAR on Copycat:
• select the right model to imitate
(e.g. the appropriate benchmark)

• avoid oversimplification of a model

• use effective imitation strategy

• prepare and execute the strategy

Imitation strategy:
-Franchise then separate (Swamitra)
-Reverse engineering (Bukaka)
-Benchmarking, pure imitation
-Licensing , Joint Venture
- Supplier OEM
-Hijacking key designers/Consultants
-etc
Another ‘innovative’ simplification

leapfrogging
Technology from
Hardware to software
DEVT COUNTRIES CAPABILITY TO COPYCATS
(Luo, Sun and Wang, 2011)

Absorptive
capability

Combinative Intellegence
capability COPYCAT’S capability
Competitive
advantage

•COST
•CHANNEL
Hardship-surviving •SPEED
Networking
capability capability
GE reverse
innovation…
Step 2:
Innovative
Imitation
 Step 3:
Imitation to
Innovation
From imitator to innovator
Invest in people, technology & system
(Global presence with
a portfolio of products)

(dominate
Domestic market)
Advanced
Early Innovation
(design & marketing capability Innovation
to penetrate domestic market)

Transformation
(production, Material, (Innovative Imitation)
Channel of marketing
Make to order)

Imitation/
Copycat
(Model of Linsu Kim, 2003)
GE: PRE-EMPTING EMERGING ‘Giant World Innovator’
Developed World
GEO-SHIFTING 1%-3%
OF GROWTH Developing World
Performance 5%-16% Price sensitive, portable,
then features easy to use

Developed World Developed World

CIRCULATING/ (GLOCALIZATION)
REVERSE
INNOVATION CIRCULATING

Developing World Developing World

ASSUMPTION OLD HAPPENING

1.Emerging economies will largerly
evolve in the same way that the wealthy are
2. Products that address dev’t countries
Special needs can’t be sold in developed
Countries because they are not good
Enough to compete there
1.Leapfrogging to a diff direction suited to their
needs and local conditions and willing to take
risk of being early adopters of hitech solutions
2.Low price & not full feature has its own markets
in developed world which then may advance to
challenge the incumbents in developed worlds
CASE: GE ULTRASOUND IN CHINA

GE GLOBAL R&D
High-End Portable
Ultrasound Ultrasound
(Made in US (Made in LGT –
or Japan) China)

Future Market
100K LOCAL
15K
CONDITION
Rural clinics, low budget
Poor infrastructure, small space
Local doctor capability

Sales 278M US Market:

-Ambulance
-Emergency room
-Operating room
4M

2002 2008
Multiplier effect of Reverse innovation
attracts
MNCs to operate
1,160 research centers in China by 2007
 and new
Global
application
Step 4: Open Innovation
Basically it means: combining innovation and imitation
 Thank You
Andri B Santosa, Drh, MBA