Global Strategic Analysis: Innovation and Change

Changing The Business Model

1)      Customer Value Proposition

n  Who are your target customers?

n  What is the problem or need you will help them with?

n  How will you meet their needs?

2)      Key Resources (needed to deliver the CVP)

3)      Key Processes (Porter’s Value Chain activities)

4)      Profit Formula (costs and revenues)

Managers look at how these factors will vary

n  as the SCALE of output rises

n  over TIME – lead times, throughput, cash flows

n  over SPACE – do you need to adapt the business model when you move beyond your home market?

(Johnson, M.W., Christensen, C.M. and Kagermann, H. (2008) Reinventing Your Business Model. Harvard Business Review. 86/12 p: 50)

Innovation within the Product Life Cycle (Frynas & Mellahi 2011: Ch 11)

Product innovation: the development of a new or enhanced product

Process innovation: the implementation of a new or improved production or delivery method

The Strategic Management Process:
Supports Innovation and Change

n  Strategic management is “the process of strategic decision-making that sets the long-term direction for the organisation” (Frynas & Mellahi, 2011: 8)

n  The central thrust of strategic management is achieving a sustainable competitive advantage

n  The strategy-making process involves ‘key decisions’ made by negotiation within the organization and with its business partners and other interested parties (stakeholders - Week 8)

n  Many MNEs are in fact business groups with interlocking shareholdings and a complex network of relationships linking subsidiaries incorporated separately in each location – this complicates negotiations further

Capabilities and Competitive Advantage

n  Competitive advantage: The ability to use resources effectively and to deliver

n  a combination of price and performance valued by the target group of buyers

n  better than the competition

n  generating superior profit levels for the firm

n  Distinctive capabilities: a wide range including innovation, flexibility and reputation (Week 4)

n  Must create value for customers, be rare and hard to copy

n  If they are valuable but not rare, they are necessary or threshold – rather than distinctive or core – resources

n  Innovation as a capability: springs from an organisation’s ability to manage change and to learn from experience and from environmental cues

Three Models of Innovation
(Bartlett et al 2011: Ch 5)

n  Central: pursuing efficiency

n  Global strategy, centralised hub configuration, strong product (business) managers

n  Local: building responsiveness

n  Multinational strategy, decentralised federation configuration, strong geographic (area) managers

n  Transnational: sharing learning

n  Transnational strategy, integrated network configuration, locally leveraged and globally linked

n  Remember Week 6? A complex organisational form, governed by simple rules (Sull and Eisenhardt 2012)

n  Functional managers scan globally for new ideas, both inside and outside the organisation - and champion new ideas within the MNE

n  Geographic managers identify the need for new ideas, develop their own and implement others locally

MNEs: Motives, Strategies and Organizational Configurations

Central Innovation (Japan 1980s)

 Local Innovation 

(Europe since 1930s)

Transnational Innovation: 

Two Emerging Processes

n  Locally leveraged

n  Local opportunity sensed – and responded to – by subsidiary

n  Implementation carried out worldwide

n  Globally linked

n  Shares the resources and capabilities of many operations

n  New activity is jointly created and managed

The Integrated Network:
Locally Leveraged and Globally Linked

Managing Global R&D Networks (Frynas & Mellahi 2011: 370)

Networking Beyond the Boundaries of the Organisation

n  The learning organisation has its limits: tends to adopt

n  evolutionary (small-step, or continuous) rather than

n  revolutionary (episodic, disruptive) patterns of change

n  Experience of Procter and Gamble (Huston and Sakkab 2006)

n  example of Pringles potato crisps: application of radically new printing technology to add words and pictures

n  P&G had adopted the integrated network configuration in late 1980s, but couldn’t make this leap alone

n  Networking with outsiders (entrepreneurial SMEs) supported cutting-edge new product development

n  Markides C. And Geroski P. (2005) Fast Second. Wiley ebook: suggests that

n  SMEs are best at creating radical new markets

n  Established corporations are best at scaling up and consolidation - so both sides can gain from alliances 

Connection to our core text:
Frynas & Mellahi (2011) Ch 10

n  Evolutionary, continuous change is also known as incremental change (pp. 318-9)

n  Revolutionary, disruptive change is also known as transformational change (pp. 319-20)

n  Our core text authors have referenced their table on this (p. 319) to UHBS’ own Professor Ralph Stacey – but beware...

n  In Stacey’s view, transformational change (in products and delivery methods: top down) is different from transformational management processes (interactions which change people’s way of thinking through conversation)

Differences between Incremental and Transformational Change

Transformational Conversations and Organisational Learning

De Wit & Meyer (2010: Ch 9, The Organizational Context)

n  The organizational leadership perspective (Kotter 1990: What Leaders Really Do. Harvard Business Review, 68, 3: 103-111): organizations thrive when a strong leader runs them well

n  Develops a distinctive vision and decides what to do: proposes transformational change

n  Inspires others and uses central control to ensure compliance

n  The organizational dynamics perspective (Stacey 2007): whether leaders like it or not, they are involved in an interdependent relationship with their followers: they struggle to make a difference and on a good day, they engage in transformational conversations

n  Through the interplay of intentions, people change their thinking

n  Leaders help order to emerge by setting simple rules, influencing the way followers think when solving problems: people use their learning to make better business decisions

n  Emergent strategy develops as organized chaos (Brown and Eisenhardt 1998: Competing on the edge : strategy as structured chaos . Harvard Business School Press)

Maybe it depends on their style… (Frynas & Mellahi 2011: 331-333)

Or maybe it depends on the skills of the change agents
who work for them...

Change Agents: Key skills

                                (Frynas and Mellahi 2011: 325-331)

n  Clear understanding of top management objectives including how and why these change

n  Political awareness – ability to mediate conflict

n  Sensitivity to the views of employees including classic phases of the coping cycle (denial, defence, discarding, adaptation, internalization)

n  Communication and negotiation

n  Team-building and leadership

n  Individual characteristics: energy, enthusiasm, high tolerance of ambiguity and risk