03 Jun A. Watch the video here: https://www.youtube.com/watch?v=HwbX4HUOdE8 B. Address the following: Explain the value of diverse perspectives in the pr
A. Watch the video here: https://www.youtube.com/watch?v=HwbX4HUOdE8
B. Address the following:
- Explain the value of diverse perspectives in the process of innovation.
- How is this related to the concept of strong versus weak ties?
- Why do most large organizations seem to have trouble coming up with and implementing innovations?
- If you were running a large organization, how would you make sure that innovative thinking was not only “safe,” but encouraged? Why is it important to make it “safe to fail”? (See Slide 5 of the Lesson 3 PowerPoint). In connection with (4), please view the following short link: https://www.ted.com/talks/shimpei_takahashi_play_this_word_game_to_come_up_with_original_ideas
- In addition to the course readings and lectures (which you may cite along with other sources), you should use LIRN to find at least one additional article related to this topic. One is provided for you (Russel and Russel [1992] in the Readings for Lessons 3 and 4.
C. The paper should be 6-8 pages long. It should include at least 4 citations, using APA rules. Use 12-pt Times New Roman font and upload it here to your Canvas platform, Paper Assignment #1. Be sure to view the rubric to see how your paper will be graded.
DRU 502: Innovation and Entrepreneurship Lesson 4
The Curse of “Bigness”; Drucker’s 5 Principles of Systematic Innovation; “Do’s and Don’ts”
Objectives of This Presentation
Review: Why it is hard for large organizations to innovate
Drucker’s 5 Principles of Systematic Innovation
The “do”s
The “don’t”s
Examples
Learning Outcomes
By the time you have done the work associated with this lesson, you will be able to:
Explain why the 5 Principles of Entrepreneurship are effective
Articulate the “do’s” and “don’ts” associated with them
Assess any given business start-up in terms of these principles
Why It’s Hard for Big Organizations to Innovate (Review)
Internal politics of “credit”
Big organizations have the advantage of economies of scale
…But in time, when they pass their “primes,” their bigness becomes an impediment
Snarled in methods and procedures
And if they have “Box 3 Scenarios,” people will fear taking risks.
But if they have “Box 2 Scenarios,” people will be more likely to take risks.*
*Note: But large organizations (or for that matter, even small organizations) often lack “Box 2 Scenarios.” This requires considerable sophistication on the part of an organization’s top management.
4
For more information, go to:
Review of Outcomes of Innovation Process
Consequences for Innovation
Consequences for
Innovator
+ +
+ –
– +
– –
Here it is “safe to fail”
Why is it important for an organization to make it “safe to fail”?
Drucker’s Principles of Systematic Innovation
So far, we have considered where the innovative ideas come from (the “7 Sources of Innovation”)
In order to take them from mere “ideas” to “reality,” Drucker believed we need a set of systematic, repeatable practices…
These practices are sometimes called (by Drucker) the “5 Principles of Entrepreneurship,” and sometimes the “5 Principles of Systematic Innovation.” Whatever we choose to call them, here they are (again):
Drucker’s 5 Principles (the “Do”s)
Begin with an analysis of the opportunity
See if people will be interested in using the innovation
Make it simple, and focused on a specific need (presumably identified in the second bullet)
Start small and be parsimonious; refine as you gain market experience
Aim at leadership (See Chapter 11 and think hard about what “market leadership” means)
The “Don’t”s
“Not invented here” syndrome
“Creaming” the market
gravitate to the most profitable segments of their markets
devote less and less resources to the less profitable segments
Belief that, because they may have spent 30 years developing and producing a product, this in itself signifies “Quality”
The delusion of a “premium price”
Raise the price to increase margin rather than cutting costs
The “Don’t”s
Maximize rather than optimize
Big, established firms often try to build every possible customer need into one product.
Creates an advantage for a newcomer, who can specialize in a subset of the market
Newcomer gives customers exactly what the need, no more and no less
Newcomer charges a lower price, and, having established a beachhead, attacks other market segments, using the same strategy
Examples
Kawasaki, Honda, and Yamaha, who became major players in the motorcycle industry, started off with cheap little off-road vehicles, also known as “dirt bikes.”
These and many other examples were presented in Clayton Christensen, The Innovator’s Dilemma (1997), the source of the (now) common phrase, “disruptive innovation.”
Concluding Thoughts
The reason I have focused on the flaws of “big business”:
The ones who make one or more of the “errors” listed above create opportunities for new businesses to enter the market “from below”
And those who do this and follow Drucker’s 5 Principles of Systematic Innovation will be able to manage their costs, keep their cost advantage (for a while, at least), and use their cost advantage to encroach on the markets of large, established firms who make the errors described a couple of slides ago…
Thus, one or more of you may find an opportunity to do that, just by considering your own customer experience with large, hitherto successful firms.
So keep your eyes open…
End of Lesson 4
References
Adizes, Ichak. (1988). Corporate lifecycles: How and why corporations grow and die and what to do about it. Paramus, NJ: Prentice Hall
Christensen, Clayton M. (1997). The innovator’s dilemma. Boston: Harvard Business School Press
Drucker, Peter F. (1985). Innovation and entrepreneurship. New York: Harper and Row Publishers, Inc.
,
DRU 502: Innovation and Entrepreneurship Lesson 3
Intrapreneurship vs. Entrepreneurship, the Dangers of Innovation, and Drucker’s 5 Principles of Systematic Entrepreneurship
J. Richard Johnson, PhD
“Intrapreneurship” versus “Entrepreneurship”
The Dangers of Innovation: Why It’s Hard for Large Organizations to Innovate
But if they do want to innovate, how should they proceed?
Big organizations have disadvantages that entrepreneurs can exploit
Big organizations can avoid being “invaded from below” by using Drucker’s 5 Principles of Systematic Entrepreurship.
Objectives of this Presentation
2
Intrapreneurs and Entrepreneurs
“Intrapreneur” came into popular use during the 1980s.
By 1992, it was common enough to show up in the American Heritage Dictionary. Here is the definition:
“A person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation"
3
Intrapreneurs and Entrepreneurs
As you can might suspect, “intrapreneurs” differ from “entrepreneurs” in that they work for someone else, whereas entrepreneurs work for themselves.
Entrepreneurs personally bear the risks of enterprise
Intrapreneurs do not—their efforts are paid for by someone else
That does not mean, however, that they do not bear other kinds of risk…
The Dangers of Innovation
Consider the matrix of possible outcomes for an innovation and for the innovator shown below:
Consequences for Innovation
Consequences for
Innovator
+ +
+ –
– +
– –
+
–
+
–
Healthy Organization
Bureaucracy
The Dangers of Innovation
Some things to consider:
When the innovator is an insider, i.e., an intrapreneur, what are his or her objectives?
Why will insiders who aren’t part of the intrapreneurial team often resist innovation?*
*Note: This is where the “politics of taking credit” becomes important.
7
The Dangers of Innovation
Anatomy of a Box 3 Scenario—Type I:
Line managers “don’t understand” the proposal
Innovator goes back to the drawing board, reconfigures presentation, then presents again
Process iterates
One day, the innovator comes back and the line says, “We’re already doing it”*
Why might the outcomes in the first and fourth bullets be damaging to the innovator?
*Note: They may be telling the truth, or they may be stalling…
**Note: The line just took the credit (or part of the credit) for the innovation, and implied that the innovator (or innovation team) wasted their time.
8
The Dangers of Innovation
Anatomy of a Box 3 Scenario—Type II:
The line organization doesn’t reach the “we’re already doing it” stage, instead the plug is pulled on the project by a higher up.
The innovator is given another assignment.
Six months later a “hot shot” with “pull” at the officer level comes in and revives the innovation.
Some “i”s are dotted, some “t”s are crossed, and the presentation is re-published—with the “hot shot’s” name on the front page.
The Dangers of Innovation
Here is a revealing quote from Robert Jackall, who conducted a deep study of the “moral mazes” of corporate life:
“Credit flows up in this structure and is usually appropriated by the highest-ranking officer involved in a successful decision or resolution of a problem…[A]uthority provides a license to steal ideas, even in front of those who originated them…Not to balk at so being used is one attribute of the good team player” (Jackall 1988 21; my italics).
And the surest way to wind up in a Box 3 Scenario is to claim credit, as opposed to being granted credit, by the “highest ranking officer.”*
*Note: One way to make it safe for you to be an innovator is to recognize that, in order for others to adopt the innovation, you will have to share credit with them.
10
Why It’s Hard for Big Organizations to Innovate
Internal politics of “credit”
Snarled in methods and procedures
Consequences:
People avoid standing out from the “rest”; reduction of diversity of perspectives
People who are victims of “Box 3 Scenarios” stop contributing
Big organizations have the advantage of economies of scale
…But in time, when they pass their “primes,” their bigness becomes an impediment
11
Consequences
Summing all this up, Joseph Schumpeter, the great economist, wrote:
“The bureaucratic method of transacting business and the moral atmosphere it spreads doubtless often exert a depressing influence on the most active minds. Mainly, this is due to the difficulty, inherent in the bureaucratic machine, of reconciling individual initiative with the mechanics of its working. Often the machine gives little scope for initiative, and much scope for vicious attempts at smothering it. From this a sense of frustration and futility may result which in turn induces a habit of thought that revels in blighting criticism of the efforts of others.” (Schumpeter 1950 [1942] 207).
Consequences
It is possible for large organizations to systematically innovate, as Drucker, and subsequently Christensen argued.
But to do this, much investment in organizational capability is required.
The challenges of bureaucratic careerism and self-protectionism must be addressed through company principles that foster open dialogue, make failures into “learning opportunities,” and teamwork (“Box 2” Scenarios).*
If top management does not actively and consistently support these principles, bureaucratic careerism will be the dominant force.
In time, the company will be vulnerable to “disruptive innovations” from new competitors, who may enter the market “from below.”
*Note: Consider this carefully, You will be expected to know this, and why it is important to the innovation process in one of your assignments.
13
Consequences
But if these conditions are met, a large organization could follow Drucker’s 5 Principles of systematic innovation
So, supposing that an innovative idea were generated from one or another of the 7 Sources of Innovation, the next steps would be…
Consequences
The 5 Principles of Systematic Entrepreneurship:
Begin with an analysis of the opportunity
See if people will be interested in using the innovation
Make it simple, and focused on a specific need (presumably identified in the second bullet)
Start small and be parsimonious; refine as you gain market experience
Aim at market leadership (Why? Consider this…)
End of Lesson 3
References
Christensen, Clayton M. (1997). The innovator’s dilemma. Boston: Harvard Business School Press
Drucker, Peter F. (1985). Innovation and entrepreneurship. New York: Harper and Row Publishers, Inc.
Jackall, Robert. (1988). Moral mazes: The world of corporate managers. New York: Oxford University Press
Schumpeter, Joseph A. (1950 [1942]). Capitalism, socialism, and democracy. New York: Harper Torchbooks
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