Profit Chain INNOVATION MANAGEMENT PROFIT CHAIN. Profit Chain INNOVATION MANAGEMENT Profit chain...
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Profit Chain INNOVATION MANAGEMENT PROFIT CHAIN
Transcript of Profit Chain INNOVATION MANAGEMENT PROFIT CHAIN. Profit Chain INNOVATION MANAGEMENT Profit chain...
Profit Chain
INNOVATION MANAGEMENT
PROFIT CHAIN
Profit Chain
INNOVATION MANAGEMENT
Profit chain
ENVIROMENT• Competitive• MacroINTERNALS• Strategy• Structure• Systems• People
NATURE OF INNOVATION
• Incremental, radical, architectural
• Complexity, tacitness
• Life cycle phase
NATURE OF INNOVATION
•Incremental, radical, architectural
• Complexity, tacitness
• Life cycle phase
KNOWLEDGE
COMPETENCES
Ability to design engines, integrate different function, build logistic, market, new ideas, manufacture
ASSETS
Size, patents, copyrights, location, skilled scientists, reputation, sponsor, licenses
PROFIT
From innovation that leads to low – cost or differentiad products
Profit Chain
INNOVATION MANAGEMENT
What is the innovation?
Profit Chain
INNOVATION MANAGEMENT
INNOVATION = INVENTATION + COMMERCIALIZATION
Innovation is the use of new knowledge to offered a new product or service that customers want (Afuah).
IDEA MARKET
Definition of innovation
Profit Chain
INNOVATION MANAGEMENT
How can a firm make profit from innovation?
Profit Chain
INNOVATION MANAGEMENT
Profit
ENVIROMENT• Competitive• MacroINTERNALS• Strategy• Structure• Systems• People
NATURE OF INNOVATION
• Incremental, radical, architectural
• Complexity, tacitness
• Life cycle phase
NATURE OF INNOVATION
•Incremental, radical, architectural
• Complexity, tacitness
• Life cycle phase
KNOWLEDGE
COMPETENCES
Ability to design engines, integrate different function, build logistic, market, new ideas, manufacture
ASSETS
Size, patents, copyrights, location, skilled scientists, reputation, sponsor, licenses
PROFIT
From innovation that leads to low – cost or differentiad products
Profit Chain
INNOVATION MANAGEMENT
A firm makes profit from selling a product or service when the revenues are greater than the cost of offering it.
P(z,q) = Price
z = attributes of the product
Q= quantity
q(z)= quantity that are sold
C(q,z)= cost
Profits = Revenues – Cost = P(z,q) . q(z) – C(q,z)
Profit
Profit Chain
INNOVATION MANAGEMENT
NEW TECHNOLOGICAL
KNOWLEDGE
NEW PRODUCT
• Low cost
• Improved attributes
• New attributes
COMPETENCES AND
ASSETS
NEW MARKET KNOWLEDGE
Innovation and profit
Innovation is use of technological and market knowledge to offer a new product or service that customer will want (low cost, improved attributes, new attributes) and increase the profit through selling of it.
MORE PROFITS
Low cost for a given price
New or better attributes (price premium) for a
given cost
Process
innovation
Product
innovation
Profit Chain
INNOVATION MANAGEMENT
Assets and competences
ENVIROMENT• Competitive• MacroINTERNALS• Strategy• Structure• Systems• People
NATURE OF INNOVATION
• Incremental, radical, architectural
• Complexity, tacitness
• Life cycle phase
NATURE OF INNOVATION
•Incremental, radical, architectural
• Complexity, tacitness
• Life cycle phase
KNOWLEDGE
COMPETENCES
Ability to design engines, integrate different function, build logistic, market, new ideas, manufacture
ASSETS
Size, patents, copyrights, location, skilled scientists, reputation, sponsor, licenses
PROFIT
From innovation that leads to low – cost or differentiad products
Profit Chain
INNOVATION MANAGEMENT
Assets
They are the resources that a firm needs to exploit the innovation.
ASSETS CAN BE GROUPED INTO
TANGIBLE, physical and financial resources (plants, equipment and cash reserves).
INTANGIBLE, nonphysical and nonfinancial assets (patents, copyrights, reputation, brands, trade secrets, relations with customers, employees and knowledge embedded in different forms).
HUMAN, skills and knowledge of the employees.
Profit Chain
INNOVATION MANAGEMENT
Attributes of the assets
CORENESS
IMITABILITY
How central assets are to a firm’s business.
Dipend of the type of assets:• legally protection;• uncertainty and complexity.
Negligible profits
Long – term profits
No profitsShort – term profits
Coreness
Noncore CoreIm
ita
bil
ity
High
Low
For example, in investment banking,
client relationship are core. Role that assets can play in
ability of a firm to make profit.
Profit Chain
INNOVATION MANAGEMENT
Relationship between competences and assets
Competences• Design engines• Negotiate contracts
Products or services• Low cost• Differentiated
Assets• Intellectual property• Skilled personnel• Brand names• Reputation• Client relations
- NO PROFIT competences and assets non core- MAKE PROFITS competences and assets core
Source of assets is competence
Assets help to build competences
Assets have on the effectiveness of
competences a leveraging effect in delivering
low - cost or differentiated products
Profit Chain
INNOVATION MANAGEMENT
Knowledge
ENVIROMENT• Competitive• MacroINTERNALS• Strategy• Structure• Systems• People
NATURE OF INNOVATION
• Incremental, radical, architectural
• Complexity, tacitness
• Life cycle phase
NATURE OF INNOVATION
•Incremental, radical, architectural
• Complexity, tacitness
• Life cycle phase
KNOWLEDGE
COMPETENCES
Ability to design engines, integrate different function, build logistic, market, new ideas, manufacture
ASSETS
Size, patents, copyrights, location, skilled scientists, reputation, sponsor, licenses
PROFIT
From innovation that leads to low – cost or differentiad products
Profit Chain
INNOVATION MANAGEMENT
Innovation is the use of new technological and market knowledge to offer a new product or service that customers will want.
Market knowledgeIt is knowledge of distribution channels, product applications and customer expectations, preferences, needs and wants.
Technological knowledge
It is knowledge of components, linkages between components, methods, processes and techniques that go into a product or service.
Knowledge
Profit Chain
INNOVATION MANAGEMENT
How well does a firm perform the activities that rest on the knowledge?
Profit Chain
INNOVATION MANAGEMENT
Properties of the knowledge
Quantity It is a function of the complexity of the activities that go into the product, which may or may not result in a complex product.
Newness
Tacitness
How new the knowledge is to the function or organization performing the activity, so:
if it is very different from existing knowledge, it is
said RADICAL (competences destroying);
if it is builds on existing knowledge, it is said INCREMENTAL (competences enhancing).
Knowledge can be:
EXPLICIT if it is spelled out in writing, verbalized or coded in drawings, computer programs, or other products; TACIT if it is uncoded and nonverbalized.
Profit Chain
INNOVATION MANAGEMENT
Nature of innovation
ENVIROMENT• Competitive• MacroINTERNALS• Strategy• Structure• Systems• People
NATURE OF INNOVATION
• Incremental, radical, architectural
• Complexity, tacitness
• Life cycle phase
NATURE OF INNOVATION
•Incremental, radical, architectural
• Complexity, tacitness
• Life cycle phase
KNOWLEDGE
COMPETENCES
Ability to design engines, integrate different function, build logistic, market, new ideas, manufacture
ASSETS
Size, patents, copyrights, location, skilled scientists, reputation, sponsor, licenses
PROFIT
From innovation that leads to low – cost or differentiad products
Profit Chain
INNOVATION MANAGEMENT
Degree of Technical Innovation’s NewnessDegree of Technical Innovation’s Newness
Radically NewRadically New
New set of engineering principles
Often opens new markets/potential
Often causes difficulties for established firms
Exploits potential of existing design
Incrementally NewIncrementally New
Relatively Minor Changes
Often reinforces the dominance of existing firms
Numerous incremental changes over time very valuable
Different competitive consequencesbecause they require different
organizational capabilities whichare difficult to create/adjust.
Architecturally NewArchitecturally New
change relationship between components
Type of innovation
Profit Chain
INNOVATION MANAGEMENT
Environment and internals
ENVIROMENT• Competitive• MacroINTERNALS• Strategy• Structure• Systems• People
NATURE OF INNOVATION
• Incremental, radical, architectural
• Complexity, tacitness
• Life cycle phase
NATURE OF INNOVATION
•Incremental, radical, architectural
• Complexity, tacitness
• Life cycle phase
KNOWLEDGE
COMPETENCES
Ability to design engines, integrate different function, build logistic, market, new ideas, manufacture
ASSETS
Size, patents, copyrights, location, skilled scientists, reputation, sponsor, licenses
PROFIT
From innovation that leads to low – cost or differentiad products
