Innovation entry - L3 - created from Mind Map

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Liabilities and advantage of newness

- New organizations face “liabilities of newness” (Stinchcombe 1965) which lead to increased failure rates when compared to older firms.

Who innovates

Radical innovations are delivered predominantly by new entrants

Architectural innovation

Puzzle - It is widely accepted that established firms tend to have problems with radical innovation, and tend to be good at incremental innovation - Observation by Henderson and Clark (1990): established firms lose out to new entrants even in cases of seemingly incremental innovations § RCA and the American radio receiver market § Xerox, small copiers § Photolithographic aligners

Photolithographic aligners - Photolithographic aligners: machines used in the manufacture of integrated circuits , align mask (reticle) and wafer during photolithography process - Dramatic improvements in performance during period of study (1962–1986) - Only marginal changes in core technologies - But: Frequent changes in market leadership - H./C.: “We believe that these events are explained by the intrusion of architectural innovation into the industry”

Definition Architectural innovations “… innovations that change the way in which the components of a product are linked together, while leaving the core design concepts (and thus the basic knowledge underlying the components) untouched… [Architectural innovation] destroys the usefulness of a firm’s architectural knowledge but preserves the usefulness of its knowledge about the product’s components.”

Disruptive Innovation

Puzzle - In some industries, leading firms manage most innovations – incremental and radical – very well, but stumble over seemingly simple ones - Characteristics of these innovations? è Answer given by Clayton Christensen (1997): § These innovations are technologically straightforward § Initially, they do not satisfy customers in established markets; instead, they are sold to niche or new markets § Over time, however, performance of both established and new technology grow faster than market needs § Eventually, the new technology supplants the old one even in the established, main market è “Disruptive Technologies

“Working harder, being smarter, investing more aggressively, and listening more astutely to customers are all solutions to the problems posed by new sustaining technologies. But these paradigms of sound management are useless – even counterproductive, in many instances – when dealing with disruptive technology.” (Christensen 2000: The Innovator’s Dilemma, p. 83)

Comments - Contrast: § Architectural innovation is difficult for technical reasons § Disruptive innovation is difficult for market-related reasons - Possible solution for incumbents: § Try to create entrepreneurship within existing organizations (“corporate venturing”) § These young, small units can afford serving small, nascent markets - Words of warning: § The concept is “oversold”; it is interesting, but only explains some cases of failure by established firms § If an innovation is disruptive, it can only be found out afterwards § Clayton Christensen is a marketing genius

Conclusions and Outlook

Conclusions and Outlook - Young firms face liabilities of newness and smallness, but benefit on the other hand from related advantages. - Architectural innovation: May be difficult for established firms because the firm’s organization fits the product’s architecture too well. - Disruptive innovation: Difficult for established firms because they focus on large, existing markets and listen too much to their (present) customers.

Innovation

entry - L3