Learning Objectives

Recap

What is strategic alliance and problems with it?

What is Strategic Alliance

A strategic alliance is a collaborative arrangement between two or
more firms to pursue agreed common goals

Two or more firms come together to share capabilities with the view
of enhancing their competitive advantages and/or creating new
products/business without losing their respective strategic autonomy

Unlike M&A, alliance partners while pooling resources remain distinct
and separate businesses.

Why Companies Use Strategic Alliances

To obtain or learn new capabilities

By sharing resources and knowledge, alliances creates a learning opportunity
for businesses.

Risk Sharing:

Many international business decisions involves a lot of risk. Alliances allow
business to pool resources to limit the impact of the risk on one firm.

Speed of Action

Entering a new market or industry may take significant time. Alliances allow
businesses to respond swiftly to market needs.

Why Companies Use Strategic Alliances

Exploration

Allows businesses to explore business opportunities. E.g learn more about
new business by partnering with them, or form an alliance as precursor to an
acquisition.

Political risks and legislation:

Alliance with local partners allows businesses to overcome political or
expropriation risks. Also, in some countries, legislations restrict full foreign
ownership.

Gain access to new markets

Entering a new market or industry may take significant time. Alliances allow
businesses to respond swiftly to market needs.

Problems with Strategic alliances

Partner-opportunistic actions:

A strategic partner may not stick to the agreement and take advantage of the technology and
business secrets of the partner.

Incompetence of partners

While partners access the competences of each other before partnering, it is difficult to fully
know the competence of the organisation. As a result, a partner may not be able to deliver
what they promise to the alliance.

Uneven alliances:

In an alliance between a weak and strong partner, the stronger partner may dominate the
decision making.

Risk of asymmetric learning by partner

One partner may be learning more; increasing their internal capabilities from the alliance while
they guard again the transfer of their capabilities to their partners.

Poor Partner Fit

Changes in economic prospects

Managing the Global Alliance Relationship

Partner selection – consider strategic fit, capabilities fit, cultural fit
and organizational fit

Set clear common goals

Learning is paramount

Avoid increasing partner dependency

Forestall partner opportunism

Assign company gatekeepers to manage learning and knowledge
transfer

Ongoing performance-related checks.

What is innovation?

What do we think of when we think of
innovation?

How often do you use your
Spangler?

Inventors are not always remembered

Creating Value from ideas.

It is not just invention. It is ideas in practice or applied.

‘The process of turning opportunity into new ideas and of putting these into widely used

practice’ (Bessant and Tidd, 2013)

Innovation is the successful exploitation of new ideas (DTI)

‘Innovation includes the scientific, technological and commercial introduction of a new
(or improved) product or new (or improved) production process or equipment’
(Dodgson, 2000)

Innovation is about taking risks and managing change (EU

Defining Innovation

Competition Driven by Innovation

Invention is discovery of new ideas/products

Wright brothers – airplane flight

Innovation is the commercialization of invention

Boeing & Airbus – selling the airplanes

Schumpeter’s “gale of creative destruction”

Encyclopedias to Wikipedia…

Typewriters to PCs to ???

Pharmaceuticals to custom treatments

(individualized medicine)

7–#

Innovation: A Novel and Useful Idea that is Successfully Implemented

Innovation is an invention that is implemented in the marketplace

1–#

Competition and competitive advantage is driven by change

Competitive advantage through innovation derives from doing
things better or more cheaply or doing new things

Innovation can lead to the displacement of industry leaders and the
emergence of new firms in new industries

Economic prosperity is enhanced by extracting greater value from a
fixed level of resources

The significance of innovation

Changes to create a competitive edge/ innovation contributes to
competitive success in many different ways

between firms for markets – innovation helps provide the difference, making

something faster, cheaper, with more features, etc.

public sector – competing against the challenge of limited resources, for example
providing high-quality health care to a growing and ageing population without
raising taxes.

law and order – criminals are constantly seeking new ways to commit crime and

policing is having to innovate to keep pace with or, better, get ahead of this

third sector (charities, voluntary workers, and humanitarian agencies) – competing
with the problems posed by an earthquake and how to replace communications,
access to shelter, food or water with viable alternatives before starvation and
disease have a major impact

(Tidd and Bessant, 2018)

Innovation and competition

Call centres

Complex financial products

Ecotourism

E-learning

SMS

Skype and VOIP

New surgical procedures

New care models

New forms of teamworking

Other examples….?

Innovation is not just products

Innovation is about Change..

Innovation involves different degrees of novelty

Incremental innovations are typically extensions to current product offerings and
involve relatively minor adjustments to existing processes.

Doing what we already do- but better

Radical innovations “involves the development or application of new technologies
or ideas into markets which are either non-existent or require dramatic behavior
changes to existing markets” (McDermott & O’Connor 2002, p. 424)

Spectrum of innovation

Incremental or radical

It is not a case that radical is good and incremental bad;
both make a difference

Incremental innovation over time often has more
impact than occasional radical shifts

Radical change is always followed by extensive
incremental innovation

Types of Innovation

Innovation can take different forms:

Product innovation’ –

business makes changes to its products/services

‘Process innovation’ –

The business alters the way its products and services are created and
offered.

Types of Innovation

Position innovation’ –

The business repositions the offering and perception of their
products/services

‘Paradigm innovation’ –

The business changes the core and underlying mental models that
underpins its activities. E.g the shift to low-cost airlines, provision of
online insurance and other financial services, etc

Business Model Innovation-

The business changes how it extracts value from what it creates.

E.g Netflix moving to subscription based model.