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Espacios. Vol. 37 (Nº 24) Año 2016. Pág. 7

Innovation strategy

Estrategia de la innovación

Jhon Wilder ZARTHA S. 1; Juan Manuel MONTES H. 2; Elva Esther VARGAS M. 3; Estívenson VELEZ E. 4; José Luis HOYOS C. 5; Raúl HERNANDEZ Z. 6; Olga NOVIKOVA 7;

Recibido: 18/04/16 • Aprobado: 30/05/2016

Contents

1. Introduction

2. Framework

3. Background

4. Methodology

5. Results

Aknowledgements

References

1. Introduction

For several years now, at the organizational level there has been growing interest in comprehending the innovation strategy characteristics, particularly how it is materialized in varied enterprises - in other words, how the strategy is formulated and implemented. Schilling (2013), among other authors and consultancy firms, has developed various proposals in order to elaborate a sort of the innovation strategy generic "profile".    Freeman (1974), Strategy & Formerly Booz & Company (2015), Pelser (2014), Turriago (1998), among others, have proposed how to align a technological and innovation strategy with a corporate one (Pineda, 2010).

The current article attempts to present a methodology that creates an innovation strategy diagnostic tool within productive sector organizations based on the analysis of scientific articles, patents, PhD theses, and technical documentation related to the topic. The analysis was complemented with application of the surveys to the R + D + i experts in order to obtain knowledge on the prioritized issues, necessities and opportunities of the innovation strategy as well as the main innovation strategy input and output, with the purpose of identifying the most significant variables, thus designing a diagnostics of the entrepreneurial innovation strategy.

This article is divided into two sections. The first section is related to the innovation strategy theoretical framework, while the second one refers to the three-phased methodology that includes the literature review, preliminary identification of the variables, and two prioritization surveys applied to experts. Finally, we introduce a proposal of twenty-three macro variables that correspond to the number of the Likert-type scale questions related to the "the innovation strategy diagnostics".     

2. Framework

Before going further into the importance of an innovation strategy, it is first necessary to define what is meant by a strategy. A strategy is a set of analysis, concepts, policies, arguments, and actions that respond to big challenges (Rumelt, 2011 cited in Teece, 2014). Besides, it is the determination of the long-term enterprise objectives, selection of the actions, and assignment of the necessary resources to achieve these actions (Chandler, 1962).

A strategy is not well shaped at the beginning; it rather emerges after a trial period. Meanwhile the actions are visible for the competitors, the policies and the diagnostics remain covert. A good strategy contains a premonitory diagnostics, leading policies, and coherent actions (Teece, 2014).

Mintzberg (1979) cited in Croteau and Bergeron (2001) suggests the necessity of the developed strategy. It must not only be projected and deliberated but also measured.

The strategy concerns the competences; however, it must become an action in order to achieve the innovation success. Ritter and Gemunden (2004) proved that the strategy makes a strong impact on the technological and network capacity.

Enterprise case studies also suggest that high complexity strategies can resist imitation attempts (Rivkin, 2000).

Simón (1962) cited in Rivkin (2000) mentions that the approach based on the strategy complexity raises a barrier against imitation. This barrier depends on the number of decisions that comprises the strategy and the level of interaction between these decisions.

To Fernandez (2005, p. 288), "the strategy refers to the "how" and it is related to the decisions made to attain the proposed objectives. The decision is the process, through which one of the behavioral alternatives is selected at every instant. Therefore, the decision process delineates the resources available for the enterprise in order to accomplish its tasks and establish the way these resources are assigned. However, the decision leads to the action". Thus, Oster (1999), among others, defines the strategy as the commitment to undertake a series of certain actions, which inevitably implies the resource assignment. In fact, the actions define how the organization's objectives are achieved. Hence, the strategies are potential actions that require decisions made by the executives and human resources.

2.1. Approaches to the concept of the innovation strategy

Tidd and Bessant (2009) demonstrate what is considered the most useful for the innovation strategy definition and implementation, while Teece and Pisano (1997) distinguish three elements of a corporate innovation strategy: competitive national positioning, technological trajectories, and organizational and managerial processes.

Schilling (2013) establishes a methodology to formulate and implement an innovation strategy within organizations and disaggregates the innovation strategy formulation and implementation as follows: phases in the formulation of the innovation strategy, R+D project map, collaborative forms, intellectual property and digital rights mechanisms. The author mentions the phases of the innovation strategy implementation: organizational structure, new product/service management methodology, development team structure, and strategy deployment. These formulation and implementation phases are shown in figure 1.

Figure 1. The innovation strategy formulation and implementation phases.

Source: Adapted from Schilling (2008)

3. Background

The implementation of the innovation strategy is comprised of various phases or components, among them is the "New or improved product/service development methodology". One such methodology is Stage – Gate. Based on this aspect, it has been established that 68% of American enterprises, including IBM, P&G, 3M, General Motors, (Griffin, 1997 cited in Schilling, 2008), 56% of European and 59% of Japanese organizations use some form of this process (Roberts, 2001 cited in Schilling, 2008).

Zartha, Orozco, Vergara, and Martínez (2011) state that the methodology employed is based on the Schilling (2008) model, even though it contains as an added value the previous diagnostics and the evaluation of the innovation strategy formulation in the analyzed research groups.

According to the innovation strategy subject, Strategy & Formerly Booz & Company (2015) has found that nearly all the organizations follow one of the three strategies: necessity identifiers, market readers and technology proponents. Each of these strategies has a distinct ensemble of capabilities that, due to their performance, are identified as the most critical. After responding to each item (see chart 1), the tool produces a report for each of the three strategies, with a crossed strategy or shared aptitudes: conception, product development and marketing, as well as specific capabilities of the strategy profile, which includes: conception, project selection, and marketing.

In the web tool of the consulting firm, it is mentioned about the necessity of considering each of the four dimensions of an innovation strategy in regards to its organization and its typical approach to innovation (through product teams, business units, etc.). One should select the checkbox that better represents the company's focus towards innovation. The questions are as follows:

Incremental change: Innovations tend to be limited to a moderate improvement of existing products.

Major innovations: Innovations on products, processes or business models focused on brand-new products, big changes to the technology, or market applications.

Fast follower: It rapidly takes advantage of the experiences of pioneers to acquire a market share avoiding high risks. It attempts to learn from the improvement and effort of the initial innovators.

First on the market: It endeavors to be the first to introduce a service, process, or business model. Intends to attain a major market share by creating such a market, a category, or a segment. It assumes high risks on potential product failures.

At the forefront of technology: The innovative ideas that proceed from the inside (e.g., R+D laboratories owned by the company) are frequently found when searching for applications to new technologies. Innovation processes have a strong R+D guidance and focus on the breakthrough in differentiating technology.

Market analysis: The innovative ideas emerge from the market needs. Innovation processes are strongly directed toward determining the unfulfilled needs of potential customers.

Indirect consumer insight: the consumer's perception through indirect methods (e.g., observing industry tendencies or competitiveness) and customer's feedback.

Direct consumer insight: the innovation is profiled by efficient and immediate customer service.

On regards to the innovation strategy, Carlos Shell (2002) states that it is applied when opportunities are found or created: by perceiving consumer's needs, through the generalization of solutions to a specific problem, or when strategies are enabled by predictions based on opportunities derived from cost reduction on technology, the arrival of new applications generated from emergent technologies, the intersection of new technologies, or the efficient search for opportunities and solutions to perceived issues, by means of an extensive research and technological development program. Because of an abrupt technological break, applications or solutions are launched into the market.

Burgelman, Christensen, and Wheelwright (2003) make emphasis on subjects such as technology and strategy integration, innovation capabilities, development and implementation of strategies focusing stronger on technological strategy than innovation.

On the other hand, Pelser (2014) conducted a study where he analyzed eight innovation strategy variables in eighty-nine enterprises. The purpose of the variables considered by Pelser were: to evaluate innovation management efficiency, to have a strategy for innovation management and market innovation, to evaluate market innovation efficiency, to attain a product innovation strategy, to assess product and process innovation efficiency, and to possess a strategy for process innovation.

To Freeman (1975), an enterprise can adopt the following six strategies for the innovation process: offensive innovative strategy, defensive innovative strategy, imitative strategy, dependent strategy, traditional strategy, and niche or opportunistic strategy. In order to learn how relevant each of these strategies is inside innovation foresight and planning, an analysis of the scientific and technological functions within the organizations must be conducted, as illustrated in the chart below.

Chart 1.Innovative strategies within organizations

Conventions: ++, very strong. +, strong. *, average. -, poor. --, very poor or not existing.
Source: Freeman, 1975, p.258.

3.1. Technology innovation strategies

Three main aspects determine a basic technology innovation strategy: process improvement, product improvement, and market expansion.

The research and development areas related to the engineering and construction, production, marketing, personnel management, and funding play an important role in defining a basic technology innovation strategy, as presented in chart 2.

Chart 2. Technology innovation strategies

Source: Albala, (1992)

As Turriago states (1998), a systematic approach based on the combination of technology, product and market facilitates the generation of technology innovation strategies. In order to make these strategies succeed, the entrepreneur must select one of the following alternatives:

1. Total or partial transference
2. Original technology establishment via R&D
3. The combination of the two above alternatives

In figure 2, Albala (1992) cited in Turriago (1998) illustrates a basic technology innovation strategy development model rooted in technology, product, and market.

Figure 2. Innovation strategy development model

Source: Albala, (1992)

3.2. An innovation strategy

 Roberts (1987) cited in Turriago (1998) asserts that the corporate practice adoption that promotes the innovation can undoubtedly become one of the most challenging steps in an organization.

1. The sense of opportunity: the organizations must be deeply aware of the environment in order to determine all the opportunities that may exist. During 1981-1983, numerous big enterprises underwent a decline period when closing a company was not considered as a possible solution.
2. Organizations leaned toward the innovation: currently, the innovation is one of the main aims within the management strategy for a large amount of organizations. One of the most well-known cases is what happened to the big enterprises, such as Hewlett-Packard and 3M, which decided upon building small work units that allowed them to achieve a higher new product development within the organization.
3. Complex production line planning: the link between the current and potential production lines has become one of the most cumbersome functions within the organizations. For this purpose, a production department structuring based on the enterprise objectives must come into existence. Thereby, it can be established which future products are necessary to be devised and which of them must be removed from the market.

3.3. Innovative strategy in Colombia

Regarding the innovative strategy subject, the consulting firm "Miller Consulting" elaborates a report, which contains different strategies adopted by some of the Colombian industries. The report underpins the following factors:

1. The textile sector adopts a defensive strategy to opt for a technological information system, which allows for the new tendency detection.
2. The chemistry and metalmechanic sectors are characterized by selecting an imitative strategy.
3. The automobile sector follows a dependent strategy.

It is noteworthy that very few firms conduct offensive strategies and the majority of industrial companies still follow a traditional strategy, which indicates that many of them are not aware of the necessity to incorporate technologies in order to improve their complexity through modernizing the operations.

4. Methodology

4.1. Phase I:

The databases consulted for this study were the following: Scopus, WIPO database - the World Intellectual Property Organization, Japanese, German and European patents, and Google Scholar. A detailed analysis of scientific articles, PhD theses, technical documentation, and patents was conducted for this research.  In total, forty-five documents were found.

The documents were analyzed through the following format (see chart 3):

Chart 3. Document revision and author contribution format

Source: Compiled by authors

4.2. Phase II:

The most relevant variables of each selected document were identified, in terms of not only the concepts of the innovation strategy or its theoretical analysis but also its formulation and implementation. The number of obtained variables was 129.

4.3. Phase III:

The current phase was divided into two parts:

Phase III A:

During this phase, two surveys were designed and consulted with experts involved in different processes and organizations related to the innovation strategies in order to, first, identify and prioritize the main problems, necessities and opportunities regarding the innovation strategy, and, second, prioritize the innovation strategy input, transformation process and output. The first survey is observed in Figure 3.

Figure 3. Survey No. 1. Prioritization of the innovation strategy problems, necessities and opportunities.

Source: Compiled by authors

Furthermore, with aim of complementing survey No. 1 results, survey No. 2 was conducted that allowed for prioritizing of the most significant innovation strategy variables under the input, transformation process and output scheme (Zartha et al, 2015). The survey is detailed in Figure 4.

Figure 4. Survey No. 2. Prioritization of variables under the concept of input, transformation process and output.

Source: Compiled by authors

In these tools, a Likert scale of 1-5 was used to develop questions, where the lowest rating was 1 and the highest one was 5. The option "does not know/does not respond" was accepted. The calculation of the mode and the consensus percentage was applied to the results collected in order to establish the priorization.

Phase III B:

After having prioritized the variables, items, or macro groupings provided in the input, transformation process and output, twenty-three questions based on the results were developed on a Likert scale of 1-4 facilitating the evidence of the existing weaknesses and strengths within organizations regarding the innovation strategy. Thus, the diagnostics tool was generated.

5. Results

In phase I, based on the information obtained from the forty-five documents, the revision and author contribution format was applied, which was a self-administered survey with the analysis and classification of the main contributions, problems, weaknesses, and the initial questions related to the innovation strategy. All the above became the basis for identifying the variables.

As a result of the self-administered survey application, a total of 129 variables were obtained in phase II. The details are shown in the chart below:

Chart 4. Innovation strategy variables

Source: Compiled by authors based on the ongoing PhD thesis: "The modified Delphi method as a dynamizer of innovation strategies, in the framework of an innovation management model in organizations that compose the productive sector" written by Jhon Wilder Zartha Sossa

Subsequently, based on the results collected during the first two phases, the surveys were conducted in order to receive the opinion of the experts involved into innovation strategy processes and organizations. These surveys were submitted to the representatives of the seventy-one Technological Development Centers acknowledged by Colciencias – Colombia. The first survey was sent along with the participation letter to the email address that appeared on each website. Furthermore, to give balance to the participation of the other experts, the assistance of the specialists from Chile, postgraduate teachers and enterprise representatives was required. A total of sixty-nine invitations were submitted to development and innovation experts, including two international specialists. Twelve out of the contacted experts accepted to participate in the survey. As regards the reasons for not responding to the questions, a number of technological development center integrants responded stating that they lacked the necessary knowledge on innovation strategies, while the others did not even reply to the request. The purpose of selecting the Colombian technological development centers as the primary focus is largely due to the fact that the PhD thesis, the core of the article, had initially an emphasis on a fish technological development center. However, in the course of the PhD proposal development, a wider focus on productive organization sector was therefore selected.

With a purpose of evaluating the priorities of each problem, opportunity and necessity, all collected data and analysis results were grouped. Similarly, the mode, the mode frequency, the consensus, and the consensus average were extracted from a descriptive statistics evaluation.

In order to define the relevance of the variables, the following criteria were considered:

Variable or priority issue: Mode equal to or higher than 4 and the consensus above the grouper consensus average.

Variable or non-priority issue: Mode equal to or lower than 2 and the consensus below the grouper consensus average.

Variable or issue under discussion: Mode equal to or lower than 3 and the consensus above the grouper consensus average, or Mode equal to 3 and the consensus below the grouper consensus average.

After having explained the parameters considered for the priorization, the results collected from survey No. 1 are presented in figure 5.

Figure 5. Consolidated results (survey No. 1). Innovation problems, necessities and opportunities within organizations.

Source: Compiled by authors

In the above figure, the data related to the priorization of the innovation strategy variables are observed.

According to the most significant results from survey No.1, the two most relevant problems, necessities and opportunities were related to "insufficient knowledge on the innovation strategy formulation and implementation" and "lack of information about the innovative activity importance as a capability that can be developed systematically in the framework of an innovation strategy". These two issues had a mode equal to 4 or 5 and the consensus percentage above the average, that is to say, greater than 38%.

The other issues are highlighted, with a mode equal to 4 and the consensus not greater than 38%, which requires the analysis of the innovation strategy impact. These issues are: limited internalization of the innovation strategy, lack of methods on how the innovation strategy and the innovation management model can be aligned, and little clarity regarding the logic used for materializing an innovation strategy.

As far as survey No. 2 is concerned, the collected results are shown in figure 6.

Figure 6. Consolidated results (survey No. 2). The input, transformation process and output concept.

Source: Compiled by authors

In accordance with survey No. 2, during the input phase, the macro groupers or issues with a high mode equal to 4 or 5 and the high consensus percentage above the group average were the direction and business strategies. During the transformation process, the "analysis and application of the innovation strategy formulation and implementation phases" had a mode equal to 5 and the consensus of 62.5%, while during the output, the issues with a greater mode and the consensus percentage higher than the group average were collaborative forms, new or improved service/product development process, distribution activities, and innovation marketing.

It should be noted that none of the issues in the survey had a mode different from 4 or 5, which showed the importance of all the issues to be considered in the diagnostics.

Finally, the variables were grouped in twenty-three questions on a Likert scale by means of a diagnostic-type survey. The issues or groupers obtained are presented below:

Strategic directions

Dynamic capabilities

Innovation projects

Collaborative forms

Protection of the innovation

New product development

New product and service development team structures

Deployment strategy

Marketing

Change force

Business sophistication

Strategic process innovation

Corporate foresight

 Innovation management

Strategic capabilities

Strategy effectiveness

Strategic alignment

Innovation assessment

Network competence 

Strategic competence

The diagnostics forms part of the PhD thesis "The modified Delphi method as a dynamizer of innovation strategies, in the framework of an innovation management model in organizations that compose the productive sector", which contains twenty-three questions for the grouper "innovation management". The question type used on a Likert scale of 1-4 can be observed in figure 7:

Figure 7. Question format – innovation strategy diagnosis.

Source: Compiled by authors

For the rest of the groupers, the question type was the same – the questions on a Likert scale of 1-4.

6. Conclusions

The problems, necessities and opportunities with a high mode and consensus were the following: insufficient knowledge on the innovation strategy formulation and implementation and lack of information about the innovative activity importance as a capability that can be developed systematically in the framework of an innovation strategy. However, other issues related to "limited internalization of the innovation strategy", "lack of methods on how the innovation strategy and the innovation management model can be aligned" and "little clarity regarding the logic used for materializing an innovation strategy" deserve a special analysis due to a high mode and the consensus close to that of the priority issues.

Within the consulted issues, one that deserves special attention is "the lack of methods on how the innovation strategy and the innovation management model can be aligned", However, the study does not denote this alignment as a priority, which may occur due to the presence of the specialists with a high degree of expertize on some components who do not consider necessary to focus on the alignment forms, since it is probably a well-known subject, researched or applied. This topic could become a core for new research lines as it approaches the aspects of the organizational structure and strategy.

Regarding survey No. 2, the issues reported as a priority were the following: strategic direction, business strategy, collaborative forms, analysis and application of the phases to the innovation strategy formulation and implementation, new or improved service/product development process, distribution activities, and innovation marketing.

Concerning the approach of input, transformation process and output, it was observed that no issue was reported as non-priority, that is to say, all topics had a high mode and a high consensus percentage above the group average, which indicates the importance of the innovation strategy formulation and implementation approach, the macro groupers, or proposed topics.

It is of great importance to apply both prioritization surveys to a larger number of experts, aiming at obtaining a greater consensus on the priority aspects of an innovation strategy. The profiles of the experts who responded to both surveys were high; however, they can be enhanced on future studies.

Aknowledgements:

The authors wish to express their sincerest gratitude to the National Planning Department, general royalty system in Colombia, the government of Cauca, the University of Cauca, Regional Productivity and Innovation Centre of Cauca.

We thank the research group ASUBAGROIN for its project "Alternatives for the use of subproducts derived from the fish agribusiness" ALTPEZ, to which the PhD thesis of the doctoral program in business administration of the University of Medellin belongs. The PhD thesis is denominated "The modified Delphi method as a dynamizer of innovation strategies, in the framework of an innovation management model in organizations that compose the productive sector".

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1. Universidad Pontificia Bolivariana. Email: Jhon.zartha@upb.edu.co
2. Universidad de Medellín Email: jmontes@udem.edu.co
3. Universidad de Medellín Email: stevensonvelez@gmail.com

4. Universidad del Cauca Email: jlhoyosc@yahoo.com

5. Universidad Pontificia Bolivariana. Email: rhernandezz@uqvirtual.edu.co

6. Tecnológico de Antioquia. Email:olga060785@hotmail.com