Where Do Innovative Strategies Come From?

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Unit 3: Discussion 2

Directions

In Dyer et al. (2020), Chapter 10: Strategy in Practice: Where Do Innovative Strategies Come From?  (p. 188), the examples are based on the actions of individuals. Is it also possible for innovation to occur at the organizational level? Justify your viewpoint using sources for support.

Also, describe a company that is doing something considered to be new or innovative. Based on the reading, do you agree that the company is innovative? Why or why not?

 

Strategy in Practice

Where Do Innovative Strategies Come From?

What makes a business innovator such as Thomas Edison, Steve Jobs, or Jeff Bezos different from a typical manager? How did they come up with the innovative ideas that helped them found General Electric, Apple, and Amazon.com, respectively? Is it genetic? Where they born intuitive and divergent thinkers?

Research by Jeff Dyer, Hal Gregersen, and Clayton Christensen reported in The Innovator’s DNA confirms others’ work that creativity skills are not simply genetic traits endowed at birth, and that they can be developed. In fact, the most comprehensive study confirming this was done by a group of researchers, Merton Reznikoff, George Domino, Carolyn Bridges, and Merton Honeymon, who studied creative abilities in 117 pairs of identical and fraternal twins. Testing twins 15 to 22 years old, they found that only about one-third of the performance of identical twins on a battery of 10 creativity tests could be attributed to genetics. In contrast, roughly 80 percent of twins’ performance on general intelligence (IQ) tests could be attributed to genetics. So general intelligence (at least the way scientists measure it) is basically a genetic endowment, but creativity is not. Nurture trumps nature as far as creativity goes. That means that about two-thirds of our innovation skills comes through learning—first, from understanding the skill, then practicing it, and ultimately gaining confidence in our capacity to create.

If innovators can be made, then how did Edison, Jobs, and Bezos come up with their great ideas? Five discovery skills distinguish innovators from typical executives.31 First and foremost, innovators count on a cognitive skill called associational thinking, or simply associating. Associating happens as the brain tries to synthesize and make sense of novel inputs. It helps innovators discover new directions by making connections across seemingly unrelated questions, problems, or ideas.

Innovative breakthroughs often happen at the intersection of diverse disciplines and fields. Author Frans Johanssen described this phenomenon as the Medici effect,32 referring to the creative explosion that occurred when the Medici family brought together creators from a wide range of disciplines—sculptors, scientist, poets, philosophers, painters, and architects—in fifteenth-century Italy. As these individuals connected, they created new ideas at the intersection of their respective fields, spawning the Renaissance, one of the most innovative eras in history. Put simply, innovative thinkers connect fields, problems, or ideas that others find unrelated.

The other four discovery skills trigger associational thinking by helping innovators increase their building-block ideas. Specifically, innovators engage the following behavioral skills more frequently.

Questioning. Innovators are consummate questioners who show a passion for inquiry. Their queries frequently challenge the status quo, or push people to think differently. One of Steve Job’s favorite questions was: “If money were no object, what kind of product would we create?” He wanted Apple engineers to imagine the perfect product—and then try to design and build it. Innovators ask questions to understand how things really work, why they are that way, and how they might be changed or disrupted. Collectively, their questions provoke new insights, connections, possibilities, and directions.

Observing. Innovators are also intense observers. They carefully watch the world around them, and their observations of customers, products, services, technologies, and companies help them gain insights into and ideas for new ways of doing things. Steve Jobs’s observation trip to Xerox’s research lab, the Palo Alto Research Center (PARC), provided the insight that was the catalyst for both Macintosh’s innovative operating system and mouse and Apple’s OSX operating system.

Networking. Innovators spend a lot of time and energy finding and testing ideas through a diverse network of individuals. They actively search for new ideas by talking to people who may offer a radically different view of things. For example, Steve Jobs was told by Apple Fellow Alan Kay to “go visit these crazy guys up in San Rafael, California.” The crazy guys were Ed Catmull and Alvy Ray, who had a small computer graphics operation called Industrial Light & Magic (the group that created special effects for George Lucas’s movies). Fascinated by their operation, Jobs bought Industrial Light & Magic’s computer animation group for $10 million, renamed it Pixar, and eventually took it public for $1 billion. Had he never chatted with Kay, he would never have purchased Pixar, and the creative Toy Story, Monsters Inc., and Finding Nemo films might not have been produced.

Experimenting. Finally, innovators are constantly trying out new experiences and piloting new ideas. Experimenters explore the world intellectually and experientially, holding convictions at bay and testing hypotheses along the way. They visit new places, try new things, seek new information, and experiment to learn new things. Jobs, for example, tried new experiences all his life—from meditation and living in an ashram in India, to dropping in on a calligraphy class at Reed College. All these varied experiences triggered ideas for innovations at Apple.

Collectively, these discovery skills—the cognitive skill of associating and the behavioral skills of questioning, observing, networking, and experimenting—constitute “The Innovator’s DNA,” or the code for generating innovative business ideas.

 

Reference

Dyer, Jeffrey, H. et al. Strategic Management: Concepts and Cases. Available from: MBS Direct, (3rd Edition). Wiley Global Education US, 2019.

Unit 3: Overview – Evaluating the Internal Environment

Introduction

In traditional approaches to assessing an organization’s internal environment, a manager’s primary goal would be to determine the firm’s relative strengths and weaknesses.  These also are two elements of the SWOT analysis. There are many limitations of SWOT analysis, however, including its static perspective, the potential to overemphasize a single dimension of a firm’s strategy, and the likelihood that an organization’s strengths do not necessarily help the firm create value or competitive advantages.

There are two frameworks that serve to complement SWOT analysis in assessing a firm’s internal environment: Porter’s value chain analysis and the resource-based view of the firm. In conducting a value chain analysis, a manager first divides the firm into a set of value creating activities. These include primary activities such as inbound logistics, operations, and service as well as support activities that include procurement and human resources management. The manager then analyzes how each activity adds value as well as how interrelationships among value activities in the firm and among the firm and its customers and suppliers add value. Thus, instead of merely determining a firm’s strengths and weaknesses per se,  the manager has analyzed them in the overall context of the firm and its relationships with customers, suppliers, and the value system.

Part of the internal strategy development process is determining what strategies a company can use best based on their resources.  The company’s resources will help determine if it is best to differentiation based on a specific market segment (seniors), on cost (lowest price), or on a focused differentiation (always first with current technology).  Each of these strategies requires  different resources in personnel, material and speed of internal process.

Unit Learning Outcomes

At the conclusion of the unit, the learner will be able to:

1. Apply a value chain analysis and describe its value as an internal strategic tool. (CLO 3, 6)

2. Differentiate between the vision and mission of an organization and how they reflect an organization’s culture. (CLO 2)

3. Evaluate how organization’s business model, systems and culture affect the strategy and tactics the organization might use to meet goals and objectives. (CLO 2)

Innovative Strategies that Change the Nature of Competition

 

Professor’s Goals for this Lecture

There are many types of problems that can be solved for a company by doing a cost analysis. A cost analysis can be used to solve problems as diverse as marketing (e.g., how much to spend to acquire additional customers) or HR (how much labor costs go down per unit with increases in volume). The principle tools to be learned in this chapter are designed to help the student examine the relationship between a company’s size (measured in volumes produced or market share) and cost per unit. This is primarily reinforced by teaching students how to create a scale/experience curve (both done in the same way with “cost per unit” on the “Y” axis but the scale curve uses volume for a given year on the “X” axis whereas the experience curve uses cumulative volume on the “X” axis. The students will have the opportunity to examine the relationship between scale/experience in the following assignments:

– the homework assignment involving calculating an experience curve in semiconductors

– Fry’s Credit Card Mini-case (in lecture); considers the relationship between total number of subscribers (X axis) and cost per subscriber (Y axis)

– the Southwest Case (after lecture); considers the relationship between total passengers flown (or market share) and performance (profitability) in the industry

 

 

However, before we get into The Innovator’s DNA framework, I’d first like to share with you what years of research on business innovators has found in terms of where creative ideas come from. This summary framework was compiled by Teresa Amabile, a professor of entrepreneurship at Harvard who also serves as their department chair in entrepreneurship. After reviewing all of the studies on creativity in business Amabile found three common themes. Creative ideas come from people who: 1) have deep expertise in a particular field or knowledge domain, 2) are intrinsically motivated to pursue new ideas, and 3) have “creativity skills” which was generally defined as being “right brained” or able to see things from a different angle and think intuitively.

 

An innovation is a new product or service that comes from a creative idea. An innovation needs to be: a) novel, b) useful, and c) successfully implemented in order to help companies win. While there are several types of innovation, this mini-lecture focuses on strategies based upon more radical innovations. These are innovations that draw on different knowledge bases to create value in truly unique ways. Strategies that draw on radical innovations often use new technologies or employ fundamentally different business models than rivals, that is, they deliver customer value through very different activities. Innovative strategies are often called “disruptive” innovations because incumbents find the innovation so disruptive that they can no longer do business as usual.

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