This PDF details the things that make a company drive innovation by listing the nature and necessary ingredients on innovation for a capital rich to an entrepreneurial setup.

1. Anatomy of Innovation
strategy in tech business
Mid term PHD Submission for
G649 reading course by:
Vikas Vardhan Soni
ID 2020PHXP0115P
Instructor: Prof Jyothi, Dep't of management

2. Conceptual understanding around anatomy of innovation
strategy in technology business based upon review of following
papers/books
 Strategic Management and Competitive Adv: Concepts and Cases by Barney/Hesterly
 Competitive Advantage: Creating and Sustaining Superior Performance by E. Michael
 10 Must Reads: On Strategy (Harvard Business Review Must Reads) by HBR
 Seeing what’s next: Using theory of innovation to predict industry change by C. Christensen
 The innovator’ dilemma: When new technology cause great firms to fail by C. Christensen
 Argyres, N. (2020), Organizational change and the dynamics of innovation: Formal R&D structure and intrafirm inventor networks,
Strategic Management Journal, 41, 2015-2049.
 Gans, J. (2019), Foundations of entrepreneurial strategy, Strategic Management Journal, 40, 736-756.
 Sturgeon, T. (2019), Upgrading strategies for the digital economy, Global Strategy Journal, 1-24.
 Kirtley, J. (2019), What is a pivot? Explaining when and how entrepreneurial firms decide to make strategy change and pivot,
Strategic management journal, 1-34
 Davis, J. (2020), Knowledge mobilization in the face of imitation: Microfoundations of knowledge aggregation and firm-level
innovation, Strategic Management Journal, 41, 1983-2014

3. Strategy and Key Frameworks
 Industry Analysis Frameworks & Strategies
 PESTEL Risk framework : Analyses the industry in which a company operates on following parameters
 Political Risk
 Economical Risks
 Social Risks
 Technology Risks
 Environmental Risks
 Legal Risks
 5 Force Analysis : Analyses the business entry/exit barriers, switching costs and forward/backward integration risk for a
focal firm arising out of
 Suppliers
 Buyers
 Rival/Competitor Firms
 Substitutes
 Complementary Firms
Porter and Barney argues that strategy involves a series of decision that a business makes to generate long term competitive advantage.
NOTE : Operational Efficiency is not strategy (Michael Porter)

4. Strategy and Key Frameworks - Contd
Barney(2018) suggests following models for firm and organizational level strategies
 Firm Analysis Frameworks & strategies
 Resource Based View : VRIO (Valuable, rare, imitable, Organization)
Framework
 Balanced Score Card
 Degree of strategic Fit (First, second and third degree Fit)
 Organizational Strategic Choices
 Business Strategies
 Cost Leadership (Propriety tech, Business Know-how, power over
Supplier)
 Product Differentiation
 Corporate Strategy
 Vertical Integration : Backward and Forward Integration
 Horizontal Integration : Competitor acquisition
 Diversification
 Strategic Alliances

5. Innovation & types of innovation
 Sustaining tech Innovation
 Innovation which can be incremental or isolated in nature. They typically improve an existing products performance or may add
another performance dimension. Historically they have never led to fall of a leading industry firm.
 Some data pieces are available to make an informed call.
 Disruptive tech Innovation
 Disruptive innovation typically bring to market a very different value proposition than what had been previously present. They may
compete with an existing product on certain dimensions but typically introduces some new performance dimensions which are
highly valued.
 For ex, iPhone displaced, phone, iPod and camera at the same time with a differentiated and simplified user experience.
 Mostly the data has to generated over multiple experiments and tactical changes are made to adjust with the new information
available.
 Low – market innovation
 Innovation with cheap products and most commonly used features. This type of innovation comes at the very fag end of
innovation cycle and is typically found when technology gets mature and marginal returns become minimal.
Innovation is strategy shift to hack business growth or create a completely new market for an existing or new product.
According to Christensen(2008), innovation can be classified into following:

6. The S Curve of Innovation
Disruptive Tech innovation
Sustaining innovation
Low Market innovation
Time
Performance/Cost
Another Disruptive Tech
innovation
According to Christensen(2008), innovation follows following cycles for a technology:

7. Disruptive innovation : Few examples
Existing Technology Disruptive Technology
Brick and Mortar retail E-retail
Manned fighter craft Unmanned craft
Paper Books Amazon Kindle
Silver halide photography Digital Photography
Telephone Mobile Phone
Feature Phone Smartphone
Physical banking Internet banking
Bypass Surgery Angioplasty

8. Consumers that drive innovation
Christensen(2008) further divides customers based upon their drive for innovation:
 Undershot Customers: Customers whose expectations from the products are not met. They look forward for improvements in
the products and are ready to pay for it. These customers keep searching the competitor products for better performance
and they are the reason behind sustaining innovation.
 Overshot Customers: Customers who are happy with the quality of product that is offered and they do not need any major
improvement in product quality but rather they seek a cost reduction. These customers are mainly responsible for low
market innovation or disruptive innovations.
 Non Consumers: Customers in this group are not happy with the products that are being offered in the market space and
are looking for some new products that provide them their needed performance. This group of customers pave the way for
new market innovations.

9. Drivers of Disruptive Innovation
 Existing Overshot/Non consumers
 Price
 Flexibility and Scalability
 Differentiated Value proposition
 Sturgeon (2019) points at following new age opportunities that has been at
the forefront of disruptive innovation
 Data & Device
 Cloud
 ML & AI
 Platforms (Tech/Core/Higher)
 Modularity
 Open Innovation (Crowd source modules except core
competencies)

10. Innovation Mix: Capital Rich business
Argyres (2020) identified following drivers of innovation for an established and capital rich business
 Reserved Capital & Budget Centralization
 Knowledge heterogeneity and inventor Networks
 Organizational hierarchy needed for Innovation
 Organizations needs a centralized organization structure to harness the potential of discrete inventor
networks that exists within an organization.
 Choice between searching New customers vs Serving current customers, based upon strategic vision

11. Mapping Creativity and Innovation
Frameworks
 Jason Theodor’s Framework around creativity showcases a theoretical
framework to build creativity. He argues that creativity is a systematic
outcomes of the following process
 Action ( Doing something or taking an action)
 Connection (Connecting deeply with everything around that action)
 Deviation (Deviating from the repeated path to create something new)
 Jason’s framework of creativity has a strong resemblance with Davis
(2020) framework on innovation process and inventor networks that exists
in a mature and large organizations that drive disruptive innovation
 Transfer : culture of knowledge share
 Collaboration : Collaboration between inventors
 Recombination : Recombination of existing knowledge to drive
innovation

12. Measures of Innovation
Argyres (2020) lists out following measure to quantify innovation in established and
capital rich organizations
 Giant & Entropy : Argyres N. defines few parameters which can help under
innovation index of an enterprise
 Giant = No. of inventors in largest inventor cluster/ Number of inventors
in firm, where it assumes that a firm can have many internal inventor
network clusters. In case the firm has a centralized R&D budget and
team, Giant = 1.
 Entropy = It captures heterogeneity in the size of network component.
Less entropy means higher heterogeneity in component size.
 Internal to External patents ratio : This is calculated as the ratio of patents
generated organically/Total patents owned by the firm. For a firm that has
taken an acquisition route for growth and does not maintain a healthy
inventor network, the ratio of captive patents to total patents will drop.

13. Innovation Mix: Entrepreneurial Setup
Gans (2019) and Kirtley (2019) argues about following factors that constraint innovation in an entrepreneurial setup.
 Idea with multiple strategic choices
 Vision and team alignment to vision
 Lack of capital and data
 Agility
 Agility of smaller firms and design level flexibilities helps entrepreneurial firms to capture disruptive tech and
roll out a value proposition.
 Strong Feed back Loops
 Pivot

14. Innovation at Entrepreneurial Setup
 Pivot cases [Kirtely(2019)]
 Octro Games
 Started : ErLang for server-server communication, Pivoted: Games
 Slack
 Started : Gaming Pivoted : Collaboration Tools
 Hubilio
 Started: Offline Event Planning Pivoted: Online Events
IDEA Strategic choice 1
Strategic choice 2
Strategic choice 3
Strategic choice 4
Strategy Chosen
Resources (tech,
data and finance)
New Info
MVP fail
Re-examine Choices
Pivot
Change/reorient/encapsulate strategy

15. Conclusion and Next steps
Next to be worked upon
 Early signs of an innovative technology
 Firms response to an innovative technology
 Tools for Technology forecasting
Conclusion
 Innovation is not an accident but is a part of company vision and strategy has to built to drive it.
 For a matured business, disruptive innovation can happen when R&D networks in the company are centrally organized and
funded. Single inventor level knowledge has to amass as firm level knowledge.
 Innovation at an entrepreneurial setup has to be carefully designed with proper experimentation and reacting to market level
intelligence. Because of budget and data constraints, entrepreneurs may have to reevaluate strategic options or pivot.