International Business Strategy Lecture 7

Innovation and Change

This Weeks Objectives

After the lecture, seminar and linked readings and reflection, to Discuss the role of different types of innovation and change in building and sustaining competitive advantage Evaluate the challenges of managing innovation and change processes within multinational enterprises Compare and contrast incremental and transformational approaches to change Identify the role you would prefer to play within the change process do you see yourself as a manager, a leader, and/or a change agent?

Changing The Business Model

1) Customer Value Proposition Who are your target customers? What is the problem or need you will help them with? How will you meet their needs? 1) Key Resources (needed to deliver the CVP) 2) Key Processes (Porters Value Chain activities) 3) Profit Formula (costs and revenues) Managers look at how these factors will vary as the SCALE of output rises over TIME lead times, throughput, cash flows over SPACE do you need to adapt the business model when you move beyond your home market?
(Johnson, M.W., Christensen, C.M. and Kagermann, H. (2008) Reinventing Your Business Model. Harvard Business Review. 86/12 p: 50)

Innovation within the Product Life Cycle (Frynas & Mellahi 2011: Ch 11)

Product innovation: the development of a new or enhanced product Process innovation: the implementation of a new or improved production or delivery method

The Strategic Management Process: Supports Innovation and Change

Strategic management is the process of strategic decision-making that sets the long-term direction for the organisation (Frynas & Mellahi, 2011: 8) The central thrust of strategic management is achieving a sustainable competitive advantage The strategy-making process involves key decisions made by negotiation within the organization and with its business partners and other interested parties (stakeholders - Week 8) Many MNEs are in fact business groups with interlocking shareholdings and a complex network of relationships linking subsidiaries incorporated separately in each location (partly for tax reasons - Week 9) this complicates negotiations further

Capabilities and Competitive Advantage

Competitive advantage: The ability to use resources effectively and to deliver

a combination of price and performance valued by the target group of buyers better than the competition generating superior profit levels for the firm

Distinctive capabilities: a wide range including innovation, flexibility and reputation (Week 4)

Must create value for customers, be rare and hard to copy If they are valuable but not rare, they are necessary or threshold rather than distinctive or core resources

Innovation as a capability: springs from an organisations ability to manage change and to learn from experience and from environmental cues

Three Models of Innovation

(Bartlett et al 2011: Ch 5)

Central: pursuing efficiency

Global strategy, centralised hub configuration, strong product (business) managers Multinational strategy, decentralised federation configuration, strong geographic (area) managers Transnational strategy, integrated network configuration, locally leveraged and globally linked Remember Week 6? A complex organisational form, governed by simple rules (Sull and Eisenhardt 2012) Functional managers scan globally for new ideas, both inside and outside the organisation - and champion new ideas within the MNE Geographic managers identify the need for new ideas, develop their own and implement others locally

Local: building responsiveness

Transnational: sharing learning

MNEs: Motives, Strategies and Organizational Configurations

Centralized Hub (Japan, 1970s)

Competitive positioning motives Global strategy

Decentralized Federation (Europe, 1930s) Integrated Network

Resource seeking motives Multinational strategy

Remember Lecture 6?

(worldwide, 1990s onwards) Global scanning motives Transnational strategy

Market seeking motives International strategy

Coordinated Federation (USA, 1950s)

Central Innovation (Japan 1980s)

I I I I I I

S-R-I

Headquarters Senses world-wide opportunities Centralised assets and resources favour unitary global Responses Implementing strategy is decided centrally and executed locally Typical of centralised hub configuration, positioning perspective

Local Innovation (Europe since 1930s)

S-R-I S-R-I S-R-I National units Sense local needs
Distributed assets and resources allow local Response Local-for-local Implementation Typical of decentralized federation configuration, resource seeking approach

S-R-I S-R-I S-R-I S-R-I

Transnational Innovation: Two Emerging Processes

Locally leveraged

Local opportunity sensed and responded to by subsidiary Implementation carried out worldwide Shares the resources and capabilities of many operations New activity is jointly created and managed

Globally linked

Locally Leveraged and Globally Linked

Centre: Co-ordinates flows of people, money and information supporting a complex process of shared strategic decision making
Centre

The Integrated Network:

Subsidiaries: Develop specialised resources and capabilities and then share them Overall: this is a learning organisation, that is, a knowledge-creating company (Nonaka 1991)

Managing Global R&D Networks

& Mellahi 2011: 370)

(Frynas

Networking Beyond the Boundaries of the Organisation

The learning organisation has its limits: tends to adopt evolutionary (small-step, or continuous) rather than revolutionary (episodic, disruptive) patterns of change Experience of Procter and Gamble (Huston and Sakkab 2006) example of Pringles potato crisps: application of radically new printing technology to add words and pictures P&G had adopted the integrated network configuration in late 1980s, but couldnt make this leap alone Networking with outsiders (entrepreneurial SMEs) supported cutting-edge new product development Markides C. And Geroski P. (2005) Fast Second. Wiley ebook: suggests that SMEs are best at creating radical new markets

Established corporations are best at scaling up and consolidation - so both sides can gain from alliances

Connection to our core text: Frynas & Mellahi (2011) Ch 10

Evolutionary, continuous change is also known as incremental change (pp. 318-9) Revolutionary, disruptive change is also known as transformational change (pp. 319-20) Our core text authors have referenced their table on this (p. 319) to UHBS own Professor Ralph Stacey but beware... In Staceys view, transformational change (in products and delivery methods: top down) is different from transformational management processes (interactions which change peoples way of thinking through conversation)

Differences between Incremental and Transformational Change

Incremental change Management Doing things better or doing more of them Bottom-up Fundamental beliefs unaffected Efficiency Transformational change Leadership Doing things very differently or doing different things Top-down Fundamental beliefs changed Effectiveness

Transformational Conversations and Organisational Learning

De Wit & Meyer (2010: Ch 9, The Organizational Context)

The organizational leadership perspective (Kotter 1990: What Leaders Really Do. Harvard Business Review, 68, 3: 103-111): organizations thrive when a strong leader runs them well

The organizational dynamics perspective (Stacey 2007): whether leaders like it or not, they are involved in an interdependent relationship with their followers: they struggle to make a difference and on a good day, they engage in transformational conversations

Develops a distinctive vision and decides what to do: proposes transformational change Inspires others and uses central control to ensure compliance

Through the interplay of intentions, people change their thinking Leaders help order to emerge by setting simple rules, influencing the way followers think when solving problems: people use their learning to make better business decisions Emergent strategy develops as organized chaos (Brown and Eisenhardt 1998: Competing on the edge : strategy as structured chaos . Harvard Business School Press)

Maybe it depends on their style (Frynas & Mellahi 2011: 331-333)

Or maybe it depends on the skills of the change agents who work for them... Change Agents: Key skills (Frynas and Mellahi 2011: 325-331) Clear understanding of top management objectives including how and why these change Political awareness ability to mediate conflict Sensitivity to the views of employees including classic phases of the coping cycle (denial, defence, discarding, adaptation, internalization) Communication and negotiation Team-building and leadership Individual characteristics: energy, enthusiasm, high tolerance of ambiguity and risk

This Weeks Objectives

After the lecture, seminar and linked readings and reflection, to Discuss the role of different types of innovation and change in building and sustaining competitive advantage Evaluate the challenges of managing innovation and change processes within multinational enterprises Compare and contrast incremental and transformational approaches to change Identify the role you would prefer to play within the change process do you see yourself as a manager, a leader, and/or a change agent?