Developed by David Owens at Vanderbilt University and customized for the cultural sector with National Arts Strategies, this course is designed to help arts and culture leaders create an environment where new ideas are constantly created, shared, evaluated and the best ones are successfully put to work. One of the toughest challenges for any leader is getting traction for new ideas. Winning support can be a struggle. As a result, powerful new ideas often get stuck. This is especially true in the cultural sector. People involved in arts and culture often have little time and even less money for experimentation and risks. This course will help those in the performing arts, museums, zoos, libraries and other cultural organizations build environments where new management and program ideas flourish. Leading Innovation in Arts & Culture will teach you how to make an "innovation strategy" a fundamental component of your organization's overall strategy. In this seminar you will learn to: - Analyze constraints on innovation in your organization, foresee obstacles and opportunities, and develop a shared vision - Develop a process to manage the demands of multiple stakeholders, shifting priorities and the uncertainty inherent in new initiatives - Create a culture for innovation and risk-taking that generates new perspectives and challenges existing practice - Create a strong customer focus within your organization that anticipates customer needs National Arts Strategies worked with David Owens to customize this course for those working in the cultural sector. They based their work on David Owens’ Leading Strategic Innovation in Organizations course. This highly interactive 8-week course will engage you in a series of class discussions and exercises.
L5-Part 3 Competition Constraints
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Leading Innovation in Arts and Culture
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Industry / Sector Constraints
This week's topic is Industry/Sector Innovation Constraints. We are interested in understanding how the dynamics in a sector will facilitate or constrain innovation. We start with the story of Kodak's invention of the digital camera, trying to understand why they were unable to be successful at commercializing it. While there are some organizational innovation constraints that apply, we'll see that taking the perspective of economics and strategy, looking at competition constraints, supplier constraints, and market constraints, can provide a much more powerful analysis and explanation. We end with a brief overview of the "Disruptive Technology" (aka Innovator's Dilemma) work of C. Christensen, showing it's place within and consistency with the innovation constraints framework.
Conheça os instrutores
David A. Owens, PhD, PEProfessor
Practice of Management and Innovation
Jim RosenbergIndependent Consultant and Senior Advisor at NAS
[MUSIC].
Here's one more thing I want to say about industry constraints is that, in industry
constraints or what I think of them as external constraints.
The things we talked about before, individual group and organizations are
what I call internal constraints, those are ones that you have a little bit of
control over. You know, you have control over yourself,
and there are things you can do to make groups behave a certain way, and even
organizations. However, when we get to the industry
level, there are all these other outside entities involved, and so they becomes
much more difficult to do that kind of control.
So therefore, I'm going to call out the external constraint as I am going to be
calling the external the societal and technical constraints we have in the next
week, and the following week after that. So again, these external, external
constraints are ones that we can't necessarily control, but if we understand
how they operate, we can actually get to a place where we can still do our
innovation process mindfully. And understanding that there are
constraint, constraints present, and that we just need to understand how they
operate and how it is we can become strategic about it getting around them.
So, the first of the industry constraints we're going to talk about is competition.
So competition is when two organizations are trying to satisfy the same need in a
market and so they both try to do it in different ways.
We're going to talk about rivals, and rivalry, and how two organizations or
more actually try to compete to satisfy a need, and what the implications are of
that for innovation. We're going to talk about capital
intensiveness, to what extent that we have to put capital in, and how that
forms a barrier to innovation, a barrier to the entry of new things, but also sets
up other interesting dynamics. Then we're going to talk about maturity
and how organizations in an industry, as the industry matures, how their behavior
begins to change in ways that actually pushes back or pushes down innovation?
So the competitive environment is such that, if you, if there's highly, things
are highly competitive, we say oh, we have to build a new product, because they
built a new product, we have to go back and forth.
However, if an organization has monopoly power, for example, the way Kodak did,
they become a little bit more slow, they become a little bit less interested in
innovation. Because innovation is work and innovation
is risk and innovation can represent even experiments that fail.
And so, why would you spend effort doing that if you don't have to?
The other thing that will happen is, is, is, as the speed of competition speeds
up, it could be that competition speeding up actually helps innovation, because
we'll do something and they'll respond, and they'll respond, and they'll respond
back and forth. But it could be also that that, that
speed of response as it gets too fast, we sort of aren't able to address it.
So we may decide, let's, let's sit back and wait, let's become followers instead
of leaders in the organization, in the, in the industry.
So let's sit back and wait because it just changes too fast.
And that can actually cause us to become a little bit out of touch.
Let's call it out of touch with what's going on in the industry, because we sort
of stayed back and we're trying to be a follower.
The intensity of competition, it can, you know, it can increase innovation like I
just said, it can, the speed of response there's a push for lower costs, and those
lower costs will actually cause us to we have to innovate to achieve them.
Alright, we have to become more efficient, we have to become more
quickly. However, some ways that we respond can
also constrain innovation. Because, as an organization in the
industry, we'd like to stabilize the market, we'd like to keep pricing at a
certain level, and we can do that in many different ways.
So, one way is to form alliances in order to form partnerships as we connect to
other organizations. And those organizations will allow us to
address the market, but do it without having to actually, run the risk of
innovation. To give you a concrete example, at one
point recently, AT&T, the, the mobile phone service in the United States was
going to acquire T-Mobile the T-Mobile, because T-Mobile had this 4G network that
AT&T didn't have. So AT&T was in a situation where they
could actually build a new 4G network or they could just buy it, because someone
already had one. And by forming of that alliance would
actually allow AT&T to get to a new place, right, a more innovative place,
but without actually doing the work of innovation.
Unfortunately, for those two companies, that deal was killed by the FTC, the
Federal Trade Commission, because it was deemed as anti-competitive.
And so, that kind innovation of, of, through alliances and partnerships or the
kind of squelching of innovation, the pushing down of innovation that would
happen that way was called out and said, you can't do it that way.
And so, there is something about this competition and about how it can cause us
to be more innovative, but at the same time cause us to not want to seek
competition. Think about it.
Perfect competition. In the, if you've taken an economics
class, perfect competition is what will lead to zero profits.
Competition can also be very distracting. That is, as we're fighting with someone,
as this, we're rivals in this, in this industry trying to get, to, to fill this
need that others may pop up and may come in from somewhere else.
Let me talk about new entrants into markets.
So there's one thing to have the existing rivalries, so that's, these are
organizations that we, we compete with, that are already there.
But what drives new entrants? What drives new competitors to come into
a market? Well, one thing in mature markets, we
have, let me just describe for a second, we have these performance standards.
So in a, in a mature market, we have an understanding of what price is, what kind
of performance we get for that certain price.
So these kinds of standards are what people have.
So if you're going to buy a computer, you know about how much it's going to cost,
because it, you know, they're all sort of the same, that what, what we call a
mature market. Mature markets also end up with
professional standards, right, they try to keep things so that, where, they're
are able to, to address the market, so the needs, the understanding what a need
is, like what does a person need in a phone, there's a very common
understanding of that. And so it's almost towards a performance
standing, but as a professional, we understand what those, as a professional
in that industry, we understand what the needs are.
We also have controls on knowledge, of how people can move knowledge around in
our industry. our value chains, our value chains are
really focused on derive, deriving high values of efficiency.
As, as we're mature, we become more efficient, we take waste out, we're able
to drive the price down. drive the cost down in that way, because
price will slowly erode also, but we'll be able to drive the cost down.
And then also, what we'll see then is new entrants coming in to our market.
And so, if you said, well, if there are all these things in place, all these
kinds of performance standards professional standards, value chains in
place. How are new entrants going to come in?
Well, they're going to come into places where there's low capital needs.
So think about it this way, that if there's a industry that's being
addressed, so for example Kodak, right? Kodak was, had this, this photography
industry in order to compete on Kodak's terms you would have to have a lot of
capital, right? You need all these machines all around,
you need all this chemistry all around, you need all these chemical companies,
you need all this knowledge, you need all these things in order to compete with
them head on. So, you're not going to do that, what
you're going to do is you're going to come in in a way that allows you to have
very low capital, means you're going to come in from the bottom, you're going to
come in the slow way. And that's going to be the pattern of
disruptive technology that we're going to talk about a little bit later, but for
now, let's just think about this as a competition issue.
So, for Kodak, they really had no competition.
They had these super efficient systems they had that which drove them to not
really push on any kind of platform innovation.
They would had something going on in the lab, they really didn't push to
commercialize it. And what they were using was basically
using old tests for new ideas. And so, when this digital camera came
out, they were saying, well, does it have the same quality, does it have the same
price, does it have the same performance, does it have the same output?
No. And so the tests showed this new
technology to be suboptimal. However, Sony, what they did, breaking
into a new market, was they broke, they came in and they tried to, ended up, not
tried, they ended up redefining the basis of competition.
They didn't build the entire system. They had other people building parts of
the system. We're going to talk about processors and
the hard disks and all those different pieces that came together.
And what's more, Sony had intense competition from others, Pentax was
working on a camera, Hitachi was working on one, Canon was working on one as well.
And so, Kodak had no competition, Sony had a very intense competition, and so we
can see who had more incentive to innovate in a way into this market.
So, if we have this kind of competition constraints what can we do?
How can we overcome them? One thing is finding new ways to compete.
There are multiple kinds of innovations. I'm going to talk about int a moment.
different, we think about what are the different kinds of innovations that we're
going to apply. There's different approaches of these
multiple types of innovations, I'll show you one here.
This is ten types of innovation. This is a a way of looking at innovation
at the kinds of innovation that was first done by Larry Keeley at the Doblin Group
in Chicago. What they did is they begin to look at,
across in industry, what are the different ways that people might actually
compete? What are the different types of
competition, competition in term of the business model, in terms of the brand, in
terms of product performance, and all these different, ten different ways that
they have here. And what Gilly found was that
interestingly, organizations, most organizations tended to try to go to the
product performance, right? To the basically make mine goes to 3
megahertz, yours goes to 4 megahertz, mine goes at 5 megahertz, mine goes at 6
megahertz. All that product performance, and people
paid much less attention, organization did much less innovating sort of at the
outside edges at the brand, brand in terms of the business model and places
like that. Also, what they did was they began to
say, let me look over time here, and began to see where innovation is
happening in the industry, in the different kinds of innovation,
innovation. And so, in a picture like this, you might
start looking and say, well, how could I use some innovation in this area where
there hasn't been very much innovation? And so, the idea here is that it doesn't
tell you what to do, but it certainly tells you how to look at different
aspects of your operations. And say, if I were to innovate in this
area, that might actually create a competitive advantage for me compared to
other people. Also, if you took, put together a set of
these in an industry. And so in this case, maybe the health
care industry can begin to see patterns across them and pull together solutions
that might actually span across many of these different places.
And you can say, well, if I have a brand in one area, how does that translate to a
brand in another area and how can I use that as a basis for competitive
innovation? So these multiple kinds of innovation,
like these ten types of innovation, well, it can show us new ways of competing.
Another thing we can do is in our partnerships and alliances.
Often, organizations form partnerships in order to kill innovation.
That is, like I, explained the T-Mobile and the AT&T merger, was really about
AT&T not having to go through the work of innovating by creating their own 4G
network. And so, but if we partner to learn and
not to kill innovation, I think, that's where we're going to get to a better
place. We don't want to act like a monopoly, but
we actually want to learn how to change, how to change things in the fundamental
way. Another thing that happens in
organizations and industries under competition, competitive pressure is they
begin to over invest in efficiency. Well, if I make mine a little bit
cheaper, make yours a little bit cheaper, make mine a little bit cheaper, cheaper,
that we try to make it super efficient in order to achieve those cost reductions.
However, what that does, it sets up other organizations, other firms other new
entrants in a way that they're going to come into the market, they're going to
have to do it at such an advantage, cost advantage, that it's, in order to
compete. Let me say that differently, a little
confusing there. If I have a very efficient way of
addressing the market the way Kodak did, any new entrant that comes in there is
not going to be able to compete on those bases, they're going to have to find some
other way to do it. And so, to the extent that over invest in
efficiency, we may be driving ourselves down a curve that is actually meaningless
at the end, because someone else is going to come in from a different direction.
Next thing we know that we have to do is develop new tests for new ideas.
Kodak was using old tests for new ideas, because they had this new digital camera,
and they were saying, well, how's it compare with our old product?
It didn't compare very well, but it was, that was because it, it was different,
right? It was comparing, it should have been
compared on a different basis. And so, if we don't develop these new
tests for new ideas its going to be problematic and so see think about
working on that. Next, we're going to talk about supplier
constraints, that is the suppliers that bring the raw material in and that
provides the motive force in the industry.
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