Agile Directing - Johda ketterästi

Creating and capturing value from innovation

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Monday 7/27/15 time 8:54 PM


Innovation is said to be absolutely necessary for growth, profitability, and competitive advantage. Becoming more innovative has become a mantra. Yet, this advice is not enough. The challenge is not just creating value from innovation, but capturing that value as well. However, so often the second mouse gets the cheese. Doesn’t it indicate that we should imitate rather than innovate?

Researchers Pisano and Teece illustrate the challenge of capturing value from innovation (see the article here). They refer to firms such as Apple, Google and Intel to see examples of how innovation can drive performance. They emphasize that there are no guarantees that innovators themselves will be rewarded for their efforts. History is littered with examples of innovators who failed to get economic success. Netscape may have been the first commercially viable web browser but it was Microsoft’s who took the larger market share. Search engine innovators lost market share first to Yahoo, then to Google, etc.

Hence, it has been recognized that the ability to capture substantial profits from an innovation by the innovator is uncommon. Returns from innovation can be siphoned off by imitators, customers, suppliers, and other providers of complementary products and services. Over the past three decades, the link from value capture from innovation to firm strategy has expanded dramatically. In practice and in research, much of the emphasis has been on how to build protective barriers around innovations in order to afford the innovator a bigger slice of the pie.

Teece has already a long ago developed a framework called Profiting from Innovation (PFI) which provides an explanation as to why some innovators profit form innovation while others lose out. PFI is a framework based on intellectual property environment and architecture of the industry. These two forces managers typically look out as beyond their control. Researchers affirm, however, that under the right circumstances and if properly managed these two domains can be shaped by managers in ways that favour one form over another.

Teece & Pisano state among other things that it is sometimes beneficial for innovators to push technology into the public domain rather than keeping it proprietary. Also, it is sometimes beneficial to promote modularity, particularly if one retains competence (and control over the systems integration function). Clearly, it can be sometimes hazardous as well.

Despite of the long history of this discussion researchers conclude that how to manage these trade-offs is still in its infancy.

So, this was the science part. Evidently, it is still of primary challenge to discover the means how to be innovative at the first place.  In order to become innovative, in turn, requires among other things ability to break the old-established thought patterns and paradigms.  We should also remember that innovation is a very comprehensive concept. Actually we need that ability on a daily basis in a form of featuring new methods, innovative designs, in order to be able to introduce new ideas and be creative in thinking etc.

Let’s take a bit more entertaining approach established on the requirement to be innovative.

“Gioia di vivere”

In the airplane on the way to Rome I was asked what is the time difference between Italy and Finland. I answered that Finland is about 50 years ahead. ;-) But I continued that it is not necessarily such a bad thing in case you can stand the sentences such as  ”Non Funziona” (it doesn’t work)  and ”Fatto Domani” (let’s do it tomorrow). You see, their secret is in the concept of  ”Gioia di Vivere” (joy of living) which, in my opinion, is much more important.

Goliarda Sapienza’s book L’Arte della Gioia describes very well and profoundly the concept of joy of living. The book was published in Italy not earlier than 20 years after the writer was already passed away. The work was initially completed in 1978 but it was all too radical for Italian publishers. Currently, it is considered as a masterpiece. It is a story about the girl named Modesta who was born in poor Sicily. The girl escaped the poverty being convinced that life will provide something better for her. Through fire and blood she ended up in a priory. Then the fate took her in a noble palace. Modesta, as being intelligent, acted now and then as an aristocrat, a socialist, a libertine, a poet, a resistance fighter, a power-hungry career woman, a mother and an insatiable lover. But she was supported by an invincible weapon originated from the Sicilian sun:  the joy of living.

On the one hand the book is a description about Italy in 1900s, about its politic, moral and social history. On the other hand it is a description about a woman whose life is directed by strong sexuality, unconventional sense of justice and hunger for knowledge.

It came to my mind that actually the joy of living is a kind of force not just preventing to get stuck on things, situations and environments but it also encourages to develop something totally new, to overcome the fear of living or the self-indulgence providing simultaneously the strength to proceed despite of the obstacles.

Few days ago I organized an Italian evening in our magnificent archipelago, so let’s end this posting with an Italian cover track (imitation!). I might hurt deeply some Radiohead fans as I obviously did for the youth who were present at this soiree. (Literally, they just stared at me as if I were out of my mind :-D ) But perhaps it was just because of the right ambiance in Italy why this version sounded even better than the orginal one. In my defence, though, I must remind you that Vasco Rossi (Il Blasco) is a popular Italian singer and songwriter.

Keywords: Innovation, management, strategy, innovaatio, johtaminen, strategia,


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