Strategy Management - Innovation, Business Strategies - Assignment Example

Strategic management An innovation represents a significant improvement over what exists. A successful innovation generates a product or servicesthat are valued highly by customers. Innovation may improve the yield of existing resources or may provide more value or satisfaction to customers. Innovation may endow resources with a new capacity to create wealth. Innovation may create a resource or change the wealth producing potential of alre4ady existing resources. Innovation are characterized by a great degree of uncertainty and this uncertainly creates dilemmas in the mind if managers. Innovations are largely due to hard work and systematic analysis of the opportunities available for creating something new. Innovation has strong marketing components. The best of ideas do not sell themselves. They need to get a buy in from the people involved. New networks have to be built. According to Sutton (2002) "Too many innovations succeed because they are sold better, not because they are objectively superior to those of competitors". Peter Drucker (1985, 1988) puts unexpected success and failures as managers' dilemma. When a product succeeds or fails unexpectedly, there is potential for innovation. The unexpected success is an affront to the management's judgment. Very few managers pay attention to the unexpected success. It should force managers to ask; what would it mean to us if we exploited it Where could it lead us What would we have to do to concert it into an opportunity How do we go about it What basic changes are now appropriate for the organization in the way it defines its business, its technology and its market If these dilemmas are answered, then the unexpected success is likely to open up various innovation opportunities. Unexpected failures also create opportunities to innovate. But they are usually handled better. Any change likely to offer an opportunity for innovations. Managers often do not make adequate efforts to understand why there is a discrepancy between what is and what 'Ought' to be or between what is and what everyone assumes it to be. But they realize that these discrepancies present an opportunity to innovate. As Christensen and Raynor (2003) points out, companies who understand what job the customer is trying to get done and how the products or services fits in, will have an opportunity to innovate. In the era of global unification, the emergence of new knowledge and technology also increases the dilemma of managers knowledge based innovation is very risky because of the long lead times involved. Knowledge based innovations are usually not based on one factor but on the convergence of several kinds of knowledge. Knowledge based requires a careful analysis of all the relevant factors, social, economic and perceptual. To be successful, a knowledge based innovation has to be ripe. It must gain customer acceptance. The risks are not because highest in innovations based in new knowledge and technology not because of failure but perception of the public. But innovations are essential to any organization be its' product or services to meet its market its market needs. So companies must modify the traditional innovation process, companies need a flexible product development process. Top management must keep goals broad and tolerate ambiguity. It must encourage trial and error and at the same time generate creative tension by setting challenging goals. Knowing customers priority and needs is essential for successful innovation. According to Drucker (1985, 1988), nothing motivates a manager to be a better innovator than the realization that the present product or services will be abandoned within the foreseeable future. There is only one way to make an innovation attractive to managers: a systematic policy of abandoning whatever is outwork, obsolete and no longer productive. Innovation performance must be regularly assessed. Management must judge the company's total innovative performance against its innovation objectives. 2. Business strategies are the courses of action adopted by a firm for each of its businesses separately to serve identified customer groups and provide value to the customer by a satisfaction of their needs. In the process the firm uses its competencies to gain, sustain and enhance its strategic and competitive advantage. The source of competitive advantage for any business operating in an industry arises from the skillful use of core competencies. Michael Porter is credited with pioneering work in the area of competitive strategy. The dynamic factors that determine the choice of a competitive strategy, according to Porter, are the Industry structure and the positioning of a firm in the industry. Lynch (2006) identifies that an organizations strategic position can be analyzed through drawing evaluations on its strengths & weaknesses depicting the strategic capabilities and its opportunities and threats. The positioning of the firm in the industry is designed to gain sustainable competitive advantage and is based on two variables: the competitive advantage and the competitive scope. The competitive advantages can arise due to two factors: lower cost and differentiation. These competitive advantages are called generic competitive strategies. Cost leadership involves a relentless focus on process efficiencies to cut cost. Differentiation involves creating a superior product that can fetch a premium in the market place. Focus means narrowing the scope of activities and being excellent in the chosen activities. But the three generic strategies need not be viewed as watertight compartments. Cost leadership typically involves differentiation through a superior process. Focus effectively means being different by specializing in a particular niche. In cost leadership, costs cannot be cut at the expanse of quality. And in differentiation, costs can not be allowed to go out of control in the name of quality. Cost leadership strategy is based on the premise that a low price is an attractive proposition for a customer and he/she places great emphasis on it in their buying decision. But this is certainty not correct in every case. There might be product or service features that are considered essential by the customer and he/she is willing to pay something extra for those features. Over emphasis on a cost leadership strategy may deprive a firm of these customers. Low cost by itself is not absolute but relative to competitors. Cost advantage has to come essentially by operational effectiveness. Such a cost advantage should also be sustainable. The ultimate success of a differentiation strategy lies in its ability to identify a tangible basis for customers to latch on to the product/service a firm offers. Yet there is a paradox here that the more tangible the basis is the greater are the chances that a competitors will be able to copy it. So a firm has to rely on its core or distinctive competencies to offer a not so tangible differentiation which a customer could easily relate to and that could be sustained at a price that he or she is willing to pay. The risk to focused firms is real. Several firms in competitive market focus their strategies on narrower segments. But wider choices of products, greater variety of services and a risisng trend to customized product/services are very much evident. Strategies of organizational change have recently become a byword for maintaining success and creating competitive performance in complex organization (Wilson, 1992). So strategic positioning a firm adopts to be cost leader or differentiator or focused is open to certain amount of risks. It is necessary for the firms to continually evaluate one's position and take appropriate action to protect from threats. Whatever be the generic strategy chosen, the aim should be value leadership. The ability to create better value for customer in a superior and unique way and the ability to capture a reasonable portion of the value created so that the business is profitable. 3. Strategy development is equated with strategic planning systems. In many respects they are archetype manifestation of the design approach to managing strategy. Organization which have sophisticated and extensive planning systems may well be populated with managers who believe that strategies can and should be developed in such ways and who may argue that a highly systematic approach is the rational approach to strategy formulation (Johnson & Scholes, 2008). The evidence of the extent to which the formalized pursuit of such a systemized approach results in organizations performing better then others is however equivocal-not least because it is difficult to isolate formal planning as the dominant or determining effect on performance. (McKiernan and Morris, 1994). Formalized planning is a process and it can provide a structured means of analysis and thinking about complex strategic problems. Planning as a process used as a means of control by regularly reviewing performance and progress against agreed objectives. Rational planning develops on the basis of more and more informal environment and people experience. So as a process, planning is not seen as directing the development of strategy so much as drawing together the threads of strategy which emerges as a process and experience and perhaps post rationalizing it. Careful rational planning is a systematic planning system and as a process it modify along with the experience and time. The process of rational planning may be so cumbersome that the people understand that planning is related excessively to the result rather than process. Planner can overlook the importance of the experience of those in an organization and see centrally planned strategy as determining art goes on in an organization. If careful rational planning systems are to be useful, those responsible for them need to ensure that they draw on such experience. This may account for why more and more organizations are changing to more inclusive way to develop rational planning process involving different level of management. But careful rational planning process has certain drawbacks. Planning is more or less successfully implemented through people. Their behavior as well as social, cultural and political dimensions may not be included in the planning process and this situation will certainly have impact on the whole planning process of the organization. Rational planning if linked with tight mechanism of control and systems, the result will be inflexible, hierarchical organization with a resultant stifling with ideas and damping of innovative capacity. Planning can become obsesses with the search for a definitively right strategy. It is unlikely that a right strategy will naturally fall out of planning process. As we know that process of planning consists of several well defined steps and at each level, evaluation of action takes place and finally when evaluation of planning takes place it again move towards the first step. The whole process of rational planning is a continuous process and the main value of rational planning remains in its planning process rather then the resultant of the plan. Planning is part of an ongoing continuous activity. Irrespective of the quality of the format of the actual plans engaging in the planning process can be valuable. It helps individual managers to establish priorities and address problems; it can bring managers together so that they can share their problems and perspective. Ideally the result of rational planning process will be improved communication, coordination and commitment (Thomson and Mestin, 2005). In order to ensure that planning does not become an end in itself and that planners facilitate management thinking simply planning techniques and analyses are used to clarify the key strategic issues. Once broad strategic directions are clarified, detailed implementation planning will follow. References: 1. Christensen, Clayton, M. and Raynor, Michael E. (2003), The Innovators' solutions, Harvard business School press. 2. Drucker, Peter F. (1985), Innovation and Entrepreneurship, Harper Business. 3. Drucker, Peter F. (1988), The discipline of Innovation, Harvard Business Review, Nov- Dec. PP. 149-157. 4. Johnson, G & Scholes, Kevan, (2008), Exploring Corporate Strategy, 8th edition. Pearson Education Ltd. London, UK. 5. Lynch. R (2006), Corporate Strategy London: Pitman publishing 6. P. McKiernan and C. Morris, (1994) Strategic Planning and Financial Performance in the UK SMEs', does not it matter Journal of Management, Vol.5 PP.531-542. 7. Sutton, Robert I. (2002) "Weired Ideas that work," The free, press, New York. 8. Thomson, J.L, F, Mestin (2005), Strategies Management awareness and change, Cengage Learning EMEA. 9. Wilson D.C. (1992). A strategy of change; concepts and controversies in the management of change Cengage Learnings EMEA. Read More