Nokia - Synergy between Innovation and Strategy - Case Study Example

Question Innovation By: + Introduction Within each business industry either in local markets or in international markets, companies face acute competition, which is increased by the advancement of technology and globalization. Over the years, the intensity of competition between firms in the same industry has surged leading only in innovative companies at the top. Strategy development is vital in ensuring that businesses reach full potential as much as innovation is. For example, Ask.com and Yahoo gave up the fight of being the top search engines after Google Inc. was developed due to the innovation and strategy that Google Inc. implemented. Innovation and strategy can hence be said to go hand in hand in the development and growth of a successful business. Innovation is defined as the application of creative, new and resourceful ideas to the process, products, services or other aspects concerning a firm’s activities. In other words, innovation is re-conceiving an existing industry model into a better more profitable industry that creates new value for consumers, increases the company’s competitive advantage and increases revenue for stakeholders. As technology advances and new ideas are brought into play in the economy, businesses that adapt to the incoming demand by innovation their businesses are at a more advantageous position to increase sales as the market recognizes the most differentiated products. For example, large corporate companies such as Apple and Samsung battle out to produce better products that increase their sales considerable through innovation. A good example is the integration of finger scanning technology. Apple innovated the idea and integrated it to ensure secure payments through their devices thus ensuring that only the owner of the device can complete a transaction. Based on the importance of innovation in a business the synergy between the two in unsinkable hence it can be said that strategy is innovation; innovation is strategy. This essay is aimed at exploring the synergy between strategy and innovation in the creation of differentiable value of an organization and the balance between the two using a case study to identify gaps and suggesting socio-political-cultural measures that can be used to counter barriers to change in an organization. Synergy between innovation and strategy To fully understand the marriage between innovation and strategy, we need to understand the basic concepts of strategic management. Strategic management refers to the process of developing and implementing key changes in an organization that affects the way the company makes decisions or approaches certain issues. In the field of strategic management, analysis, decisions and actions that are affected by internal and external environments are put into consideration to develop working strategies. As defined before, innovation is the process of introducing new ideas into a business hence in strategic management; the process of analysing and implementing new ideas in its strategies is considered innovation. Innovation and strategy are required in an organization to ensure the success of the firm. This can be explained by exploring certain aspects of innovation and strategy to show that the implementation of innovations and strategy should be consistent. According to porters five forces, the consideration of what new entrants in the business industry are bringing and what the competition is currently doing is critical. According to Guan and Ma, (2003), the main reason behind this move is to monitor the innovation of the competition and the new entrants in the industry. Analysing the key reasons why the competition is posing as a threat is necessary in developing a working strategy to counter the threat this means that the company has to innovate and come up with new techniques and ideas that will counter the move by the competition. It also provides the company to consider and implement new ideas that new entrants may have innovated by liaising with them. Innovation is the key factors that defined the differentiation of a company. The incorporation of innovation in strategy development is crucial in increasing the competitive advantage of a business. According to Roper and Love (2002), the primary source of differentiation of a company in a largely competitive industry is its innovation levels, which directly affect the companys competitive advantage. Popular business management and innovations techniques such as benchmarking, outsourcing, total quality, reengineering, etc. that increased the founders competitive advantage over its competitors have been adopted as necessities in the modern economy. These strategies proved to work, and hence more business copied the ideas and implemented them. Based on the result from the companies that first innovated an idea such as Google Inc. who brought an open source mobile operating system, "Android OS". The market share of Google Inc. today has primarily affected the competition of the company among major competitors such as Apple. This is because, the idea of making the operating system open source increased the interest of major companies such as Samsung and HTC to start developing phones based on the operating system. This strategic move increased Google Inc. opportunity to grow its AdSense part of the company as advertisement are incorporated in applications developed for the Android platform. A firm’s ability to develop and adopt new technology is crucial to the establishment of a strong competitive advantage over its competitors as characterized by Google Inc. The development and innovation of new technology that enhances a business differentiation is crucial to the development of a working strategy within the organization. According to Roper and Love, (2002) and Guan and Ma, (2003), a firm ability to adopt, develop and innovate technology that enhances its competitiveness is crucial in that the strategy developed will incorporate critical changes and ideas that would otherwise not exist. In terms of technology innovation, the development of better, faster and more efficient technology to handle the delivery of services or the production of products in a company will increase its overall competitive advantage and differentiation advantage. This is because consumers will prefer the use of products that are delivered faster and have a better quality. According to Akman and Yilmaz, (2008), having an innovation-based strategy in an organization improves the capability of the company to formulate and monitor future innovation strategy development, which are crucial for the continuity of the business. The development of an innovation-based strategy based on Clercq et al., (2008) and Poon and McPherson, (2005) research largely depends on the internal cooperation between the innovation team and the strategy development team. Therefore, although, a clear link between innovation and strategy is clear, the two need to be balanced since the process for their development is different. Based on this the over reliance of one part either innovation or strategy over the other will result to a failure in its implementation and hence an adverse effect on the business. Considering this, Poon and McPherson, (2005) argues that the synergy between innovation and strategy needs to be clearly defined to strike a balance. This balance ensures that innovation can be introduced into an existing business model without overrunning the organization. The need for a balance of the two is because innovation is primarily based in the state of being while strategy is more of a process of doing. The forces that guide the two are also quite different where innovation is largely premised on the market orientation, transference, value creation and new opportunity spaces meaning that it is unpredictable and exploitative. On the other hand, strategy is more control and planning oriented meaning that it can be tailored to meet the current needs of an organization. Another reason for the need to balance the two is that innovation strives to create competitive advantage by defining a desirable future state of the organization, other than trying to predict it, and then working on achieving the state without consideration of the organization’s corporate history. According to Roper and Love, (2002) innovation lacks the capability to make assumptions based on experiences thus, it is perceived as a shot in the dark. On the other hand, strategy is defined by intuition and analysis based rational instrumentalism meaning that its tries to achieve a state of profitability by considering the company’s past experiences and working to better the prior strategy. Therefore, strategy is bound by rules, structure, schedule and boundaries thus it is less risky to pursue compared to innovation. That said, innovation, therefore, requires organizations to make commitments that are fundamentally different or entirely new. Due to this, the decision of strategy and innovation is left to the management to strike a balance between the two in order to achieve an equilibrium of the two where the company does not make unnecessary risks nor hold back too much that it suffers as stated by Moller, Rajala, and Westerlund (2008). To achieve a balance between innovation and strategy, managers have to develop and promote a culture of considerable innovation in their workplace. This will ensure that the employees in the organization are not too optimistic of a new idea/ innovation such that they disregard the history of the company. Therefore, the value of innovation in the organization should be weight in terms of what it promises for the company at what cost. For example, an organization might rely on innovation so much that after they develop a new idea they dismiss their previous practices. If such an act does not bear fruit, the failure and collapse of the organization is imminent. The management can increase the balance between innovation and strategy by increasing cooperation, diversification, flexibility and risk involved in the implementation of the two. Cooperation The significance of co-operation between innovation and strategy should be emphasized in an organization in order to achieve synergy of the two. This can be reached by building a culture of innovation whereby the development, adoption and implementation of new ideas are critically analysed to ensure that its implementation co-operated with the organizations strategy. The sharing of information concerning how the two can cooperate in the organization is critical since it provides a platform for discussing possible risks and costs to the company and whether the risk is necessary and how the innovation can increase the differentiation advantage and competitive advantage of the firm. According to the works of Edler, Meyer-Krahmer, and Reger (2002), the cooperation of innovation and strategy will increase the stability of the company by ensuring innovation is encouraged in the organization while limiting the impact of the implementation of the new ideas. Diversification Based on the works of (Bennett, Peterson and Gordon, 2009), the balance between innovation and strategy can be achieved by diversification. This implies the launch of different strategies that are different; one is innovation based while the other is strictly strategy based. This creates an environment where the organization benefits both ways, that is, if the innovation-based strategy works, the company is at position that is more advantageous and if it fails, it is in a position to recover, since its business will be still running. This can be considered as a sandbox method where the company launches its strategy to gauge its effectiveness before completely shifting to the new strategy. Flexibility Managers should consider the flexibility of innovation and strategy to changes. According to (Bennett, Peterson and Gordon, 2009) and Matthyssens, Pauwels and Vandenbempt (2005), the flexibility of an innovation-based strategy should be considered before it is fully implemented in an organization. The new strategy should be analysed to ensure that it is flexible in terms of introduction of appropriate changes to products, allocation of resources and distribution of funds (cost of implementation). This means that the innovation should be balanced in that it should allow for the introduction of new products and is flexible to shortages that may arise due to its implementation. In reference to the works of Zheng Zhou and Wu (2010), the synergy between innovation and strategy can be achieved by considering how flexible the implementation of each is to the organization. They argue that flexibility and innovation should be made to coexist thus offering an environment where imagination, lateral thinking, research, and development are not hindered while still maintaining efficiency. Risk The risk of implementation of an innovation-based strategy should be mitigated to ensure that the company is not taking too much risk. This can increase the balance between innovation and strategy by using strategic techniques to limit and control the implementation and adoption of certain innovations by organizations. Marinova (2004) and Cascio (2006), agree that risk is necessary but unnecessary risks brought by adaptation of new ideas and innovative ideas should be limited as the factors that contribute to the effective implementation of such innovations are unpredictable. Case study In the identification of gaps that are barriers to change, socio-political-cultural barriers that hinder change will be identified from a case study and hence generate suggestions on measures that can be implemented to overcome such obstacles. The selected case study is Nokia’s fall. Nokia is cell phone manufacturing and software Development Company that had a massive market database due to the production of high quality cell phone but was bought off by Microsoft due to its poor performance when Google’s Android platform was introduced (Levis, 2009). The main reason for the company’s failure was the lack of innovation. Barriers to Innovation in Nokia The major barrier that caused a lack of innovation in Nokia was its organizational culture. Nokia had a reliable and reputable corporate culture, which was built from the development of high quality and reliable cell phones. According to Dunnes (1992), when an organization has a strong corporate culture, its director and employees may sometimes be enveloped in the glory so much that they lack creativity. This leads to ignorance where they tend to ignore the innovations that the competition is bringing into the industry. Nokia did experience this case, since it has a strong corporate culture; it perceived the development and entry of Google into the mobile development industry as a minute threat. Due to this, they ignored it and did not develop or adopt new ideas to help increase the company’s competitive advantage (Bhatt, 2002). Other barriers were pride, fear and risk avoidance, Nokia’s lack of innovation was due to risk avoidance. As discussed above, innovation involves many risks, which for such a large company would carry devastating effects if the adoption did not work (Levis, 2009). As Google brought in touch-based smartphones, Nokia tried to counter that through their touch-based cell phone the “Asha” line of products but it was not willing to offer the software running on the devices. This was due to fear of losing rights and the ownership of the software thus; they were only marketing for themselves. In comparison, Samsung their lead competition at the time adopted the open source platform by Google. Consequently, more people were willing to purchase their devices, as they were able to customize their devices (Bhatt, 2002). Lack of resources was another reason behind the lack of innovation. According to Nokia’s financial reports of 2004, the company was not making enough sales to keep up with the current competition. This led to the layoff of majority of their employees, based on this, it is clear that Nokia had a shortage of funds to facilitate the innovation of a new product and since it has laid off some of its workers, labour and sources of innovation was also scarce. Nokia was known for it closed innovation adaptation, which meant that innovation was limited to the strategy and market needs. Consequently, Nokias research and development department was neither fully supported nor funded to analyse and develop innovations that could increase the company’s advantage. After the entry of Google’s Android platform mainly through Samsung, Nokia adopted open innovation to enhance competition. This move was strategic, but it was already too late since the Android platform had already taken much of the market share (Levis, 2009). Suggestions Nokia’s lack of innovation caused its downfall, therefore, the development and adoption of innovation is crucial in the uplift of the company to regain its market position. This can be achieved by analysis of the current market requirements and developing a product that is captivating and will promote users to want it. Since Nokia is currently part of Microsoft, the Lumia line of devices are its major comeback device and hence innovation should be focused on the development of the devices to compete against other smartphone companies such as Blackberry, Apple and Google. The adopting of an open innovation approach would be effective if Nokia agreed to incorporate user suggested designs and features in its line of new devices. Currently, the Lumia has been focused on enhancing photography and display functionality to counter the shortage of applications on its Windows platform. A broad move would be to convince Microsoft to develop an open source software for the devices hence encouraging designers and developers to develop for the new platform. This would considerably increase the sales of Nokia’s devices in that developers would build consumer-oriented software and more developers will join the development of Windows based applications enhance the functionality of the Lumia devices. More funding from Microsoft should be directed towards the research and development department of Nokia’s Lumia devices. By so doing the company will be at an added advantage in that development and innovation will be increased meaning that a breakthrough in innovation that would increase the company’s competitive advantage. Much emphasis should be given to innovation, but the synergy between the current working strategy and the innovations should be considered before any innovations are adopted and implemented. Conclusion Innovation serves an important role in ensuring that an organization remains competitive and differentiated but excessive innovation without the consideration of certain aspects that strategy management usually involves results in failure. Since innovation and strategy are complementary, that is innovation supports strategy and strategy support innovation, a clear balance between the two should be maintained in order to ensure flexibility and continuity of the organization. Organizations have the responsibility to align their properties namely architecture, skills and infrastructure in order to instil values that will support the synergy of innovation and strategy in their organizations. Based on research by Dobni (2006), the innovation environment should not be limited but the limit should come in force in the adoption and implementation of the innovation. As organizations realize the importance of innovation in the increasing competitive advantage, they should consider the impact that innovation oriented decision-making and strategy development has in their organization and hence work towards achieving a sense of synergy between the two. The success of an organization thus largely relies on its capability to achieve a balance between innovation and strategy while maintaining flexibility and efficiency in the organization. In order for its to achieve this balance, defecting from stagnant practices and processes, allocation of resources and funding to the research and development department should be enhanced thus creating an environment for sustainable growth with reduced risks. Conclusively, innovation and strategy go in hand but a synergy between the two needs to be established to ensure that innovation does not overrun an organization causing failure. Managers have a great responsibility in ensuring that innovation and strategy are at a balance in the organization in order to achieve efficiency (Levis, 2009). Recommendations Based on the current economy, innovation is a necessity for the differentiation and competitiveness of an organization therefore research and funding should be directed towards achieving a breakthrough in innovation. Although much emphasis on innovation is required, the strategy implementation and adaptation should be balanced in that innovation and strategy should coexist and cooperate to ensure that flexibility and efficiency in the implementation are achieved. Risk assessment, threat analysis among other things should be carried out by using porters five forces and other models to ensure that the company adopts an effective strategy. This will ensure that the adopted strategy is used to control the implementation of innovation in an organization. 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