Innovation strategies involve a portfolio of internal R&D spending, strategic alliances, acquisitions, and recruiting/retaining top human capital. Firms must balance the upsides and downsides of each approach, such as controlling intellectual property versus time to market. The document also maps the degrees and types of innovation, and examines factors that influence external sourcing decisions for companies of different sizes.

1. INNOVATION
Anna Sabidussi

2. Some facts and figures…
29%
of new business founded in 1992
were still alive in 2002.
• Source: Shane (2008)

3. Some facts and figures…
1/3
of companies listed in the
FORTUNE 500 in 1970 had
disappeared by 1983.

4. Mapping the innovation space
ATTRIBUTE
DEGREE

5. Mapping the innovation space
Product- Process Strategic
Service
Product
Radical
Process Re-
Revolution engineering Strategic
Transformation
Current Incremental
Product Process Strategic
Evolution Change Development
Market Process Strategic
Penetration Efficiency Focus
Source: Ahmed and Shepherd, 2010

6. Mapping the innovation space
• Disruptive innovation (source: Clayton Christensen)

7. • 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

8. Mapping the innovation space
• Business Model Innovation canvas (Osterwalder and Pigneur)

9. • NYTD’s organizational evolution
Ability to borrow
Integrated Distinct but
(1995) linked (2004) High
Unsopported Isolated (1999)
Low
Low High
Ability to forget
Source: Govindarajan and Trimble, 2005

10. INNOVATION NETWORK
R&D partnerships in software 1970-1979,
MERIT-CATI
R&D partnerships in software 1995-1999,
MERIT-CATI
Source: Cloodt et al. 2010

11. Relative importance of external sourcing drivers
Market entry
Time-to -Market*
Cost
SMEs
LARGE
Uncertainty
Knowledge
Monitoring
0.0 1.0 2.0 3.0 4.0 5.0
Market entry
Time-to -market
Cost
Large average
Large best in class
Uncertainty
Knowledge
Monitoring**
0.0 1.0 2.0 3.0 4.0 5.0
Source: Sabidussi, 2009

12. Cooperation …
70
60
50
40 positive
negative
30 neutral
20
10
0
Patents Sales/New Products Economic Indicators R&D inputs Process Innovation
Performance implications of cooperation
Source: Belderbos, Duysters and Sabidussi, 2012

13. … and beyond …
HIGH
Acquisition
Joint Ventures
CONTROL
CVC
Alliance
Licensing
LOW
SHORT LONG
TIME HORIZON

14. Innovation strategy Upsides Downsides Requirements Examples
-Organic growth is
-Better control of IP
Slower
Recruiting and -Long term growth -Astute strategic human -Google
-Challenge of
Retaining superior focus Resource management -Merk
Identifying and
Human capital -Difficult for competitors - Organizational flexibility -Goldman Sachs
valuing superior
to imitate
human capital.
-Apple
-Internalization of skills -Full risk exposure -Culture of risk tolerance
Internal R&D -Intel
and capabilities -Long time horizon -Organizational flexibility
Spending -BMW
- Full capture of returns -Uncertain returns -Long term commitment
-HP
-Shared risk
-Potential loss of
Multiple, small-scale -IBM
IP control Dedicated function
Strategic investments provide -Eli Lilly
-Challenge of for the management
Alliances strategic options -Oracle
alignment of goals of partnerships
-Faster than internal -Procter & Gamble
-Shared returns
internal development
-Faster than growing -Risk of overpaying
organically -Cultural integration Capability to identify -Cisco
Acquisitions -Acquire innovative -Involves relying and assimilate -GE
technologies before startups on others for acquisition targets -Microsoft
become competitors innovation
Source: Frank Rothaermel and A. Hess. MITSLoan management review spring 2010

15. 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

16. 2
Portfolio Balance
Individual GC
Assessment
1
(risk-return profile)
Governance choice
selection
3
no yes
B2B ?
OTHER Update total
portfolio
t= t0 + ∆t
EXTERNAL
4
Internal
INTERNAL sourcing no
Technology
Vs.
change
external
sourcing ?
Mayor Evolutions ? Market
yes
development
Corporate
Strategy shift
Start
t= t0
Source: Sabidussi et al., 2011