Strategy transformation through strategic innovation capability – a case study of Fanuc

This paper presents a theoretical framework under which large companies should be able to bring about strategy transformation. First, we present the concept of ‘strategic innovation capability’, a corporate system capability to achieve corporate strategy transformation by strategic innovation. Then, we consider strategic innovation capability by comparing it with previous theories (dynamic capability, major innovation, dynamic capability, breakthrough innovation capability). Second, we present the case example of strategy transformation at Fanuc, a company that holds the top global share in the numerical control (NC) market. In this case study research, we consider and analyze historically how the company aimed for new creativity in the NC market, developed innovative NC technology for the machine tool market, and used that technology energetically for commercialized products. From the strategic innovation capability framework, the core theory of this paper, we also analyze and consider how top management made conscious efforts to form a new development organization within the company, and the processes involved in achieving strategy transformation to establish competitive superiority in this field. Finally, we discuss the implications drawn from this case analysis, and the issues for future research.     

Competitive strategies and new technology: an empirical investigation in the UK polymer processing industry

This paper examines how companies can achieve competitive advantage by fitting their business strategies to the way in which new technology implementation is managed. In particular, the inter-relationship between strategy, technology and performance is examined. Five strategic types and seven types of technological objectives were used to find combinations which were associated with high performance. It was found that companies pursuing a prospector strategy (a strategy based on product innovation) combined with technological objectives emphasizing marketing, image and technical development were the highest performing group of companies. The lowest performing companies were those where strategy was dominated by price competition.
The general conclusion of the paper is that, in order to achieve competitive advantage, companies need to see technology objectives as an inherent part of strategy. The study was carried out on a sample of twenty companies within the polymer processing industry, but the findings should be applicable to companies in other industries, and particularly to smaller companies.     

Perspective: The Innovation Dilemma: How to Innovate When the Market Is Mature

Most companies have ambitious growth goals. The trouble is there are only so many sources of market growth. Markets in many countries and industries are mature and increasingly commoditized; achieving growth in market share is expensive; and acquisitions often do not work. For most companies, product development means line extensions, improvements, and product modifications, and only serves to maintain market share. Markets aren't growing, so firms increasingly compete for a piece of a shrinking pie by introducing one insignificant new product after another. The launch of a truly differentiated new product in mature markets is rare these days. As a result, development portfolios have become decidedly less innovative since the mid‐1990s, and R&D productivity is down. The answer is bold innovation—breakthrough products, services and solutions that create growth engines for the future. This means larger‐scope and more systems‐oriented solutions and service packages. Examples such as Apple's iPod are often cited. (Note that Apple did not invent the MP3 player, nor was this opportunity in a blue ocean; in fact there were 43 competitors when Apple launched!) What Apple did succeed in was in identifying an attractive strategic arena (MP3s) where it could leverage its strengths to its advantage and then to develop a solution that solved users’ problems. The result—an easy‐to‐use, easy‐to‐download MP3 system, which also happened to be “cool.” Our benchmarking studies reveal that five vectors must be in place to undertake this type of innovation to yield bolder and more imaginative development projects. First, develop a bold innovation strategy that focuses your business on the right strategic arenas that promise to be engines of real growth. Most businesses focus their efforts in the wrong areas—on flat markets, mature technologies, and tired product categories. Break out of this box towards more promising strategic arenas with extreme opportunities. Next, foster a climate and culture that promotes bolder innovation. Leadership is vital to success. If senior management does not have the appetite for these big concepts, then all your efforts and systems will fail. Senior management plays a vital role here in promoting an innovative climate in your business. Next, create “big ideas” for integrated product‐service solutions. The best methods for generating breakthrough new product ideas are identified in this paper. Then drive these “big concepts” to market quickly via a systematic and disciplined idea‐to‐launch system designed for major innovation initiatives. Just because these projects are imaginative and bold is no reason to throw discipline out the window. In fact, quite the reverse is true. Finally build a solid business case and focus on the winners. Most innovation teams don't get the facts, and consequently build weak business cases; the result is that many worthwhile innovations don't get the support they need to be commercialized. It's essential to do the front‐end homework, and so build a compelling business case. Then make the right investment decisions—evaluating “big concepts” for development when little information is available. Note that financial models don't work well when it comes to evaluating major innovations, because the data are often wrong. But other methods can be used to make these tough go/kill decisions. Illustrations and examples are provided from many industries and companies to show how to implement these five vectors.     

How Elephants Learn the New Dance When Headquarters Changes the Music: Three Case Studies on Innovation Strategy Change

Does a product innovation strategy change at company headquarters resonate the same way at different strategic business units (SBUs)? What factors play a role in differing implementation of new innovation strategies? A collective case study was conducted at three SBUs of an international conglomerate to investigate why the SBUs implement the same corporate innovation charter in vastly different manners, both in strategic processes and in organizing for new product development (NPD). This study's contribution to the literature is twofold. First, it develops initial insights into how three SBUs implement diverse SBU‐level innovation strategies in response to the same product innovation charter. Second, it extends the findings of previous studies on NPD strategy by presenting how three SBUs reshape their structure and resource allocation, changing various dimensions of their innovation strategy while also fitting the competitive structure in their individual, non‐high‐tech, traditional manufacturing industries as they respond to the corporate mandate. In this study, several factors were observed to influence a firm when formulating a new product innovation strategy. First, past performance and strategic typology constrain the innovation paths available. Poor past performance limits available resources whereas the strategic typology managers use limits their ability to recognize other opportunities. Next, capacity constraints provide a catalyst in moving toward process improvements. Third, management involvement in the day‐to‐day implementation of change is necessary to ensure that the new processes are implemented. Finally, corporate performance metrics are quite influential in how SBUs adapt to change. This study identifies that even with the immense power corporate has over these SBUs, some still dance to their own tune, ignorant of their deviation from the corporate mandate because the metric is not sufficient to detect these deviations. This study suggests the use of multiple types of metrics to minimize the likelihood of nearsighted responses to innovation charter changes.     

Managing radical innovation: an overview of emergent strategy issues

Despite differences in definitions, researchers understand that radical innovation within an organization is very different from incremental innovation , and and that it is critical to the long-term success of firms. Unfortunately, research has also shown that it is often difficult to get support for radical projects in large firms [14], where internal cultures and pressures often push efforts toward more low risk, immediate reward, incremental projects. Interestingly, we know considerably less about the effective management of the product development process in the radical than in an incremental context. The purpose of this study is to explore the process of radical new product development from a strategic perspective, and to outline key observations and challenges that managers face as they move these projects to market. The findings presented here represent the results of a longitudinal (since 1995), multidisciplinary study of radical innovation projects. A multiple case study design was used to explore the similarities and differences in management practices applied to twelve radical innovation projects in ten large, established North American firms. The findings are grouped into three high-level strategic themes. The first theme, market scope, discusses the challenges associated with the pursuit of familiar versus unfamiliar markets for radical innovation. The second theme of competency management identifies and discusses strategic challenges that emerge as firms stretch themselves into new and unfamiliar territory. The final theme relates to the people issues that emerge as both individuals and the project teams themselves try to move radical projects forward in organizations that are not necessarily designed to support such uncertainty.A breadth of subtopics emerge within and across this framework relating to such ideas as risk management, product cannibalization, team composition, and the search for a divisional home. Taken together, our observations reinforce the emerging literature that shows that project teams engaging in radical innovation encounter a much different set of challenges than those typically faced by NPD teams engaged in incremental innovation.     

Strategic planning in a turbulent environment: evidence from the oil majors

The long‐running debate between the ‘rational design’ and ‘emergent process’ schools of strategy formation has involved caricatures of firms' strategic planning processes, but little empirical evidence of whether and how companies plan. Despite the presumption that environmental turbulence renders conventional strategic planning all but impossible, the evidence from the corporate sector suggests that reports of the demise of strategic planning are greatly exaggerated. The goal of this paper is to fill this empirical gap by describing the characteristics of the strategic planning systems of multinational, multibusiness companies faced with volatile, unpredictable business environments. In‐depth case studies of the planning systems of eight of the world's largest oil companies identified fundamental changes in the nature and role of strategic planning since the end of the 1970s. The findings point to a possible reconciliation of ‘design’ and ‘process’ approaches to strategy formulation. The study pointed to a process of planned emergence in which strategic planning systems provided a mechanism for coordinating decentralized strategy formulation within a structure of demanding performance targets and clear corporate guidelines. The study shows that these planning systems fostered adaptation and responsiveness, but showed limited innovation and analytical sophistication. Copyright © 2003 John Wiley & Sons, Ltd.     

Customer Empowerment in New Product Development*

The traditional new product development (NPD) model, in which companies are exclusively responsible for coming up with new product ideas and for deciding which products should ultimately be marketed, is increasingly being challenged by innovation management academics and practitioners alike. In particular, many have advocated the idea of democratizing innovation by empowering customers to take a much more active stake in corporate NPD. This has become feasible because the Internet now allows companies to build strong online communities through which they can listen to and integrate thousands of customers from all over the world. Extant research has provided strong arguments that indicate that customer empowerment in NPD enables firms to develop better products and at the same time to reduce costs and risks if customers in a given domain are willing and able to deliver valuable input. Customer empowerment, however, not only affects the firm's internal NPD processes as reflected in the products that are ultimately marketed. Instead, it might also affect the way companies are perceived in the marketplace (by customers who observe that companies foster customer empowerment in NPD). This paper provides the first empirical study to explore how customers from the “periphery” (i.e., the mass that does not participate) perceive customer empowerment strategies. Customer empowerment in NPD is conceptualized along two basic dimensions: (1) customer empowerment to create (ideas for) new product designs; and (2) customer empowerment to select the product designs to be produced. Therefore, customers may be empowered to submit (ideas for) new products (empowerment to create) or (2) to “vote” on which products should ultimately be marketed (empowerment to select). In the course of two experimental studies using three different product categories (T‐shirts, furniture, and bicycles) both customer empowerment dimensions (as well as its interaction) are found to lead to (1) increased levels of perceived customer orientation, (2) more favorable corporate attitudes, (3) and stronger behavioral intentions. These findings will be very useful to researchers and managers interested in understanding the enduring consequences of customer empowerment in NPD. Most importantly, the results suggest that empowerment strategies might be used to improve a firm's corporate associations as perceived by the broad mass of (potential) customers. In particular, marketers might foster customer empowerment as an effective means of enhancing perceived customer orientation. Customers will in turn provide rewards, as they will form more favorable corporate attitudes and will be more likely to choose the products of empowering as opposed to nonempowering companies, ceteris paribus. Customer empowerment thus constitutes a promising positioning strategy that managers can pursue to create a competitive advantage in the marketplace.     

A tentative model of the innovation process

The paper proposes a model of innovation claimed to be applicable both to the lone entrepreneur and the large institution. It treats innovation as a social process and views it in some respects as analogous to natural selection.
The model takes into account 12 elements: the innovator, the new concept, the innovating group, the new product, target user, competitors, capital supply, strategy, supplying organization, technology, relevant environment and chance. The author characterises each element and shows how they interact in the course of guiding a particular innovation to success or failure.
The operation of the model is illustrated by applying it to two cases — the rise and decline of the metal ski and the launch and success of a national US newspaper.
The paper concludes with a list of possible uses of the model, as a checklist for action, as a basis for incorporating other approaches to the innovation process and as a starting point for a quantitative representation of the innovation process.     

Research findings in strategic management with implications for R&D management

Abstract
The author has reviewed the literature, predominantly North American, on the relationships between corporate strategy and corporate performance.
The general context is the question of where and how a firm should diversify. The author considers three areas of decision: corporate strategy, (where to compete), business strategy, (how to compete), and corporate organization (receptiveness to diversification). It appears that the most advantageous corporate strategy is to diversify into a high-profit area but to maintain a substantial relatedness to existing businesses; the best business strategy is to have a market-related perspective, to use R&D to develop new products with a marked competitive advantage rather than new processes, to minimise investment but to enter the market on a sufficiently large scale. This last condition presupposes a high degree of top-management commitment to the venture. Furthermore, consideration has to be given to whether the organizational culture is such as to nurture rather than stifle the venture by insisting on administrative controls appropriate to the firm's traditional base.
The author points to three areas deserving of further investigation: How a firm in a mature industry can find a related area that is sufficiently attractive; how to fix on the correct scale of an entry taking into account the long lead times before the venture shows a net return; and how to ensure that the corporate culture will be able to accommodate novel interests and procedures.
All the above matters pose questions for the management of technology and the direction of R&D.     

Strategies of Innovation and Imitation of Product Languages*

Nowadays, design is recognized as a strategic resource. Customers are increasingly paying attention to the aesthetic, symbolic, and emotional value of products, a value that is conveyed by the design language—that is, the combination of signs (e.g., form, colors, materials) that gives meaning to a product. As a consequence firms are devoting increasing efforts to define a proper strategy for the design language of their products. An empirical analysis was conducted on the product language strategies in the Italian furniture industry; in particular, the present article explores the relationship between innovation and variety of product languages. Companies are usually faced by two major strategic decisions. The first one concerns the innovation of product languages: To what extent should a firm proactively propose new design languages or, rather, should adopt a reactive strategy by rapidly adopting new languages as they emerge in the market? The second decision concerns the variety and heterogeneity of languages in their product range. Should a firm propose a single product language to communicate a precise identity, or should it explore different product languages? Of course, the two strategic decisions—innovativeness and variety of product languages—are closed connected. Analyzing more than 2.000 products launched by 210 firms, the present article explores how the variety of product languages is approached in the strategy of innovators and imitators. The empirical results illustrate an inverse relationship between innovativeness and heterogeneity of product signs and languages. Contrary to what is expected, innovators have lower heterogeneity of product languages. They tend to be strongly proactive and limit experimentations of new languages in the market. Imitators, instead—which would be expected to have low variety since they can invest only in languages that have been proven successful in the market—tend on the contrary to have higher product variety. Eventually, by having lower investments in research on trends of sociocultural models, they miss the capability to interpret the complex evolution of products signs and languages in the market. Strategic decisions on innovativeness and variety of product languages are therefore interrelated; counterintuitively companies should carefully analyze these decisions jointly.     

Top Management Support and Initial Strategic Assets: A Dependency Model for Internal Corporate Venture Performance

Internal corporate venturing is frequently used by established companies desiring to innovate and grow. These ventures, however, often fail, and previous research has revealed surprisingly little about the antecedents to performance for this strategically important phenomenon. Using resource dependence theory and the resource‐based view, a model is developed wherein the positive relationship between top management support and the internal corporate venture's (ICV) initial strategic asset endowment is moderated by the amount of the venture's operations autonomy. We then argue how top management support, the venture's initial strategic asset endowment, and parent‐venture product similarity are related to ICV performance. Primary data were collected from 72 firms which furnished data on 145 ICVs. The results suggest that increases in the level of support provided by top management leads to higher levels of initial strategic assets endowed in the corporate venture. This relationship, however, is weakened the more corporate parents give their ICVs operations autonomy. Further, top management's support of the corporate venture, as well as the level of initial strategic assets endowed to the venture, increases the subsequent performance of the ICV. The performance benefit of these initial strategic assets, however, is lower the more there is an overlap between the parent's and the venture's products.     

Business Performance and Strategic New Product Development Activities: An Empirical Investigation

Despite the ongoing search for the so-called silver bullet that provides the ultimate competitive advantage, there is no roadmap showing the “right” way to perform new product development (NPD). What's more, it is highly unlikely that such a formula could be developed. Given the diversity of firms and industries as well as the complexity of the NPD process, no single set of NPD activities or steps can be defined that will be appropriate for all firms. However, Roger J. Calantone, Shawnee K. Vickery, and Cornelia Droge propose that it is possible to develop such a framework within the confines of a specific industry. They suggest that successful companies within an industry are likely to focus on certain essential NPD activities that allow them to achieve the best possible results within the constraints of their market. Their research is directed toward identifying the relationship between the performance of specific innovation-related activities and overall business performance in the furniture industry. This study also assesses the relationship between a firm's performance on an NPD activity and the importance assigned to that activity by the firm's chief executive officer (CEO). With the current emphasis on cross-functional teams, the study also seeks to determine whether performance on a given NPD activity is related to the assignment of responsibility for that activity. The following NPD activities were evaluated for their effect on corporate performance: customization, new product introduction, design innovation, product development cycle time, product technological innovation, product improvement, new product development, and original product development. Compared to their competitors, top performers consistently put more strategic emphasis on each of these activities. All of these activities have a strong positive influence on return on investment (ROI) and ROI growth. What's more, most of the activities also clearly relate to stronger market share, market share growth, return on sales (ROS), and ROS growth. The vision and focus on these essential NPD activities must begin with CEOs who recognize their strategic value. Such leaders will direct appropriate staff and technical resources toward performance of the necessary activities. They will also ensure that the organization is sufficiently flexible to accept the changes in responsibilities for coordination and leadership that are necessary during different stages in the NPD process. To gain the product flexibility necessary for competing in numerous market segments, top performers require greater input and leadership from design, engineering, and manufacturing.     

The formation of green strategies in Chinese firms: matching corporate environmental responses and individual principles

This study examines how Chinese firms began responding to worsening environmental concerns in the late 1990s. Combining predictions from control theory, escalation of commitment, and goal theory, we seek to explain how leaders' cognitions shape the formation of novel responses to the value‐laden issue of corporate greening. We propose an iterative model that links leaders' principles with corporate actions and test it using survey data gathered from 360 firms. The model views strategy organically, as a set of adaptive goals and behaviors, and highlights the role of systemic and local feedback loops in strategy formation. We find that top executives who champion new strategic initiatives monitor early success or failure, and adjust their efforts to match early performance feedback. Perceptions of satisfactory performance strengthen leaders' efforts towards their initial target, while perceptions of unsatisfactory performance diminish them. This feedback relationship is invariant throughout favorable or unfavorable expectancies of success, contrary to the contingent prediction of control theory. The model also examines how top‐down and bottom‐up strategic initiatives combine to help firms maintain a positive momentum of change when champions' efforts decline in the face of premature failure signals. Copyright © 2004 John Wiley & Sons, Ltd.     

The Performance Impact of Content and Process in Product Innovation Charters

The significance of product innovation charters (PICs) cannot be overemphasized, as they provide understanding and a tool for setting organizational goals, charting strategic direction, and allocating resources for new product portfolios. In a unique way, a PIC represents a sort of mission statement mutation for new products. With the backdrop of strategy formulation and product innovation literatures, this article investigates the impact of both content specificity within PICs and satisfaction with the PIC formulation process on new product performance in North American corporations. A survey was undertaken among executives knowledgeable about their organization's new product development process. The respondents included chief executive officers, vice presidents, directors, and managers. The findings demonstrate that significant differences exist both in PIC content specificity and process satisfaction between highly innovative and low innovative firms. The study also shows that PIC specificity in terms of the factors mission content and strategic directives positively influences new product performance. Further, the study demonstrates that satisfaction with the process of formulating PICs plays a positive and powerful mediating role in the PIC specificity–performance relationship. The results suggest that product innovation charters, like their mission statement cousins, may be of more value than most managers realize. The study shows that achieving a state of organizational satisfaction with a PIC's formulation process is critical for obtaining better new product performance. Directions for future research also are suggested.     

Strategy making as iterated processes of resource allocation

Capitalizing on the Bower-Burgelman process model of strategy making in a large, complex organization, we investigate the multilevel managerial activities that lead firms facing similar new business opportunities to respond with different strategic commitments. Our field-based data provide evidence on (I) the role of ‘corporate contexts’ that reflects top managers' crude strategic intent in shaping strategic initiatives of business-unit managers; (2) the critical influence of early business development results on increasing or decreasing middle managers' enthusiasm to the new businesses and top managers' confidence in these middle managers in a resource allocation; (3) the escalation or deescalation of a firm's strategic commitment to the new businesses as a consequence of iterations of resource allocation. We conclude that it is useful to conceptualize strategy making in a large, complex firm as an iterated process of resource allocation.     

国企改制：基于治理与管理内涵职能的深化分析

公司治理是公司“依法管理”的重要体现。它为维护所有者权益和公司各利益主体间的权益制衡从而规范化行使其权能，为公司外向型决策机制的形成和市场化战略营运发展亦即企业家的选拔造就提供了必要的体制保障。作为公司治理战略意向实现方式的公司管理。在实际上成为企业家才能或企业家精神导向下的管理创新过程中。反过来又有力推动公司治理和战略构想的创新发展。从公司治理与公司管理内涵职能深化分析的视角，考察我国国企改制现实，可看到当前国资管理中“国资委模式”，存在诸多应予以关注的问题。     

Corporate Innovation and Entrepreneurship: A Canadian Study

In his study of 112 corporate innovations, Russell Knight describes how 100 large Canadian corporations identified innovative ideas, evaluated them, and allocated resources to support their development. These innovations ranged from new product introductions to new processes or systems within these firms. He conducted a series of interviews with managers to explore both the role of corporate entrepreneurs and top management in creating a favorable environment for innovation within the firms, examining the roles of marketing research, research and development, production planning and finance in the process. The article reports several general conclusions regarding the practices of the more successful firms and presents several recommendations concerning how firms should organize to explore, develop and produce new innovative ventures within the corporation. These results are also contrasted with those of an earlier article Knight published in this Journal.     

Knowledge sharing and strategic fit in integrated product development proejcts: An empirical study

While product strategy has been approached from a variety of perspectives, the role of strategic fit as a critical linkage of knowledge sharing practices and new product development outcomes have not been adequately explored. This paper discusses how strategic fit is instrumental for cross-functional teams to integrate product development outcomes. This paper identifies critical knowledge sharing components that enhances the extent of strategic fit that in turn improves the success of product development efforts. Strategic fit or alignment requires knowledge sharing practices of the product development team. Teams with a shared knowledge base are more capable of thinking strategically, adapting their actions to their project environment and accordingly engaging in innovative problem-solving while ultimately achieving project goals of time, cost and value. This paper presents and tests a research model using a sample of 285 product development projects of firms from USA, Canada and Spain. The results suggest that strategic fit is associated with greater knowledge sharing and enhance product development outcomes in both small and large firms as well as diverse regions (i.e., USA, Canada and Spain).     

An Organizational Learning Approach to Product Innovation

This article examines product innovation as an organizational learning process. It provides a framework allowing managers and scholars to relate product-innovation learning skills to organizational goals. Daryl McKee shows how different types of organizational learning skills are involved in incremental innovation, discontinuous innovation and institutionalization of innovation within the organization. This conceptualization can help scholars and managers diagnose an organization's learning skills and how they relate to new product management; direct the organization toward learning more efficient and effective product innovation; and provide scholars with a structure for future research.     

How Canon and Sony Drive Product Innovation Through Networking and Application-Focused R&D

To ensure the ongoing vitality of a company's product offerings, R&D professionals must play a daunting array of roles. The already rapid, yet still accelerating, pace of technological change may lead some companies to devote more resources to intensive internal research efforts. However, the shift toward global competition demands a more market-oriented focus from R&D; clear understanding of current and potential markets must drive R&D efforts. And efficient, cost-effective manufacturing of new products requires an R&D organization that understands and interacts effectively with the production department. How does a company create an environment in which its R&D organization comprises market-savvy, production-friendly experts in diverse technologies? With case studies of R&D efforts at Canon and Sony, Sigvald Harryson identifies and illustrates the key mechanisms that these companies use to foster product innovation. His examples show how Canon and Sony use a combination of external and internal networking mechanisms to identify and acquire key technologies and related skills, gain market knowledge, improve the results of internal R&D efforts, and ensure the successful transfer of these results to efficient production processes. He identifies four key mechanisms underlying successful product innovation at Canon and Sony: strategic training and job rotation for engineers, application-driven R&D, direct transfer of development teams from R&D to production, and extensive networking with external centers of excellence and key suppliers. At Canon, the initial training program for all researchers and engineers begins with three months of work on a production line. Sony's new researchers and development engineers spend one month in production. Both companies also give their new R&D professionals three months of training in sales and marketing. The emphasis on market-driven research at both companies means that researchers have identified some commercial application for almost every initial research proposal that gains approval. Neither company treats research as a long-term assignment; almost all engineers at both companies eventually move from the labs to production. And rather than viewing this job rotation strategy as a drain on the technological expertise in their labs, both companies rely on strong external networks with key suppliers and university-based researchers as important sources for acquiring new technologies and the competencies needed to support them.