Leadership and innovation complete notes prof mariano corso PDF

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Leadership and InnovationTeachers:Mariano CorsoLuca GastaldiTo go more in dept with the differences between managers and leaders, there is this metaphor:Then Covid-19 arrived, with the following effects on innovation investments by some Italian companies:In the future we will have less managers with...

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Leadership and Innovation

Teachers: Mariano Corso Luca Gastaldi

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1. Leadership and Innovation Relationship We must study leadership and innovation together, since they are two faces of the same coin. Why innovation? Because if we don’t innovate, we cannot be forever in the market. Running operations is a routinary process, but then there are innovation projects, which are very different because they start with the objective of dying since they have a beginning and an end. The real difficulty is not the process itself, but the point is to make the outcome of the project the new operation, so the overlapping is the tricky point. Change management process is very challenging and difficult to standardize: for years managers had to choose between running operations and developing innovative processes. Today the pace of innovation process is increasing drastically everyday: innovation and change are seen as an everybody and everyday challenge. Therefore, companies must behave in an ambidextrous way.

Today, we are living in the Fourth Industrial Revolution, characterized by these new characteristics: • Pace: time available before the full impact of innovation is shorter and shorter. • Pervasiveness: innovation is not something episodic or sporadic but rather it is an everyday and everybody business. • Openness: sources of innovation are more and more outside the company boundaries with actors that in many cases are non-contractible by the company. Why leadership? Because to promote and realize innovation nowadays being a good manager is not enough, because innovation is not something that can be done in R&D anymore, but it is an act of inspiring people, designing new services and new communication and, to do it, we need to be a leader. Indeed:

A manager is someone who gets things done through other people in organisations. A leader is someone who is able to influence a group of followers toward the achievement of a vision or goals. Engaging followers is very important because followers are the ones who recognize leadership in the leader.

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To go more in dept with the differences between managers and leaders, there is this metaphor:

Then Covid-19 arrived, with the following effects on innovation investments by some Italian companies:

In the future we will have less managers with a different kind of skills from the ones they used to have for many years. Particularly, there are four metaphors for a manager valuable for the tomorrow organization: • Being an Architect to develop bridges of meanings in the organization and between the organization and the environment in which the company is. • Being a Personal Trainer to be able to have a personal relationship with each employee, to help him to develop his strengths and performances. • Being a Broker in terms of sharing flexibility, because we don’t have only to give flexibility to people letting them to be autonomous, but because we want also to have this flexibility back. • Being an Orchestrator to deal with diversity. In the more traditional kind of organizational model (mechanic organization), we think that a leader is someone in the centre or top of the organization; however a real leadership model should be based on a more organic organizational model. Therefore, leaders need to know how to get the most out of people, and teamwork, cross-cultural, communication, conflict handling and negotiation skills are needed early and often in today’s organizations. According to Peter Drucker: “Management is doing things right; leadership is doing the right things”.

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2. Innovation Strategies A company has two choices: innovate or perish. Considering the most important 250 firms in the Down Jones Index in 1900, only one firm survived till 2000 and it was General Electrics:

Indeed, according to Miko Kosonen (Former CIO of Nokia): “Most companies die not because they do the wrong things, but because they keep doing what used to be the right things for too long”. So, basically, most companies die because they do not innovate. Innovation needs the right attitude to change. For example, the beginning of the end for Nokia was not considering Apple because at the time it was a niche in the computer industry. However, it is not the hardware to make the difference, but how Apple developed a perfect ecosystem. Then, also Microsoft did it. Like it happens in most of the cases, Nokia did not understand this innovation because it was a successful company with a successful product, so this signed the beginning of Nokia’s failure in mobile industry. Innovation is about bringing something new. It could either be about creating something new or improving something already existing. An innovative company is a company that plays with technologies and develops new products or services. According to Oslo Manual: “An Innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations”. So, it doesn’t mean that something has to be new, because it can also be an improvement of something already existing. Then, innovation must be implemented in the real world, creating value and progress. Coca Cola has always been an innovative company along the years. The innovations made by Coca Cola were about the production system and the package (a more resistant and lighter package), the shape of the Coca Cola bottle as a powerful way of communication, and the distribution system, distributing the product to the army during the war and during the Olympic Games, since it was one of the main sponsors. Therefore, now Coca Cola has one of the highest brand awareness in the world, because it is extremely good in communication. The most valuable asset is still nowadays the brand and not the formula. Historical definitions of innovation are: • According to Schumpeter: “Innovation is the implementation of new combinations. Innovation is a source of competitive advantage and the main source of progress through a process of creative destruction”. • According to Freeman: “Innovation is different from Invention! Invention is an idea, a sketch or a model for a new or improved device, product, process or system. Innovation (in the economic sense) is accomplished only with the first commercial transaction involving the new product, process”. So, there is not innovation if it is not sold into the market; in this case we have the invention, which is something valuable, but it is not an innovation.

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According to managerial viewpoint: “Innovation is to shift the trade-off among performance to better fulfil existing needs or to generate new performance dimensions for new needs”.

Inventors vs Innovators Meucci invented the first prototype of phone; the telephone itself was not invented by Bell, but he was the innovator, while Meucci was the inventor. Bell took the idea from Meucci and brought it into the market, so Bell was the innovator. The inventor of vacuum cleaner was not Hoover, but his brother-in-law that invented and patented it as a suction cleaner, while Hoover was the innovator changing the name in vacuum cleaner and commercializing it. Hatcher developed RC cola (inventor), so the first cola sold in cans instead of bottles; it was not RC Cola taking advantage of this invention but mainly Pepsi and Coca Cola, the innovators.

So, it is not compulsory being an inventor for being an innovator. For instance, Apple has other companies creating components and Apple knows how to put them together, so these companies are the inventors, while Apples that combines these already existing components together is the innovator. Many times, the innovators are nothing more than very smart technology/solution brokers: • Technology Brokers. In 1866 Mr Sholes (a mechanical engineer form Milwaukee) created the first typewriter by combining (brokering) existing technologies: the forward movement (one step for each pressed key) was taken from watches, the back movement leverage was taken from sewing machines, the keyboard was taken from telegraphs, and the hammer mechanical movements for printing each letter was taken from pianoforte. So, he did not create anything, but he found out the way to put parts together. Innovators are very good in spotting things around, putting them together in different ways to fulfil the needs. They recombine them in a very smart answer to the existing needs, so they are technology brokers. • Solution Brokers. United Colours of Benetton became famous when it changed the way of designing sweaters, enabling personalization. They started to sell a huge quantity of different colours, more than 30 for each sweater. The problem was related to the safety stocks. To overcome this problem, they changed the production process, creating the sweater and only after deciding the colours based on the market requests. So, there is a postponement of the moment in which the product is characterized and, thanks to this, it is possible to have more freedom to reduce the number of sweaters into the safety stocks. More than 20 years later, Dell did the same thing. On Apple website, it is possible to choose among a fixed number of options, while on Dell website, it is possible to customize the computer because in the

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warehouses they have the components and not the final products. Dell delays the transformation in the final product by postponing. Therefore, to work on innovation, it is necessary to look around recognizing that even if the industry is different (computer and clothes), the problem may be the same and the solution transferred. It is necessary to decompose the problem, understanding the key problem. By abstracting the problem, it is possible to find solutions coming from other industries, broking the solution. The innovator is able to learn and replicate the innovation process, so he is able to learn from failure and develop something new. Apple has not always been successful, for instance it had an important invention Apple II, even if Apple III was much better in terms of innovation with better technologies, but it was a commercial disaster. It was a disaster because of a wrong process to create it: it was paid by customers but delivered only a year after. Due to this, Apple went near bankruptcy. However, learning from this mistake, then Jobs created Macintosh, one of the greatest success of Apple which became the second more sold computer in the history of computers.

Product Service System Product Service System is a system composed by products, services and communication, all designed together. Nowadays companies hardly sell products or services, but normally a customer buys a bundle of them. The coffee machine is a device but there is also a shopping online. The product innovation of Nespresso is almost nothing; what the company did was to create a new kind of experience sponsored by communication. Particularly, Nespresso made a mass product a luxury one; it is mainly a communication kind of innovation, because coffee used to be a commodity and Nespresso redesigned the experience. The iPod was something that had to stay in the pocket. Apple had to find a way to make the product communicating itself. The wires of the headphones were the only things visible: they made them white so that it was possible to notice them. In this way, a product not seen is communicated only through the wires. Nespresso did something similar using the capsules. Another example is iPhone (product) with the possibility to personalize it downloading apps (services), sponsored by a lot of advertising on how its photo camera is good for example (communication). Therefore, product, service and communication cannot be innovated separately, but they need to be innovated together.

Types of innovations A general framework to classify innovation is people (who), meaning (why) and solution (how). People are of paramount importance as innovation is done to improve people’s lives. Meaning means to change the why. The thermostat is used to manage the temperature in an interior. It ranges from 20€ to 300€. There is a strong correlation between the price and the time spent to use and

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program it. So, there are now many new options for the thermostat. The company Nest created the thermostat Nest, that uses artificial intelligence and reduces visual information. The system learns the desired temperature and every time it detects that someone is in the house, it raises the temperature. Just by using it, after one week the system can reduce the cost for the heating system of 20% in one year. Nest did not create something new but told the opposite thing: the traditional thermostat (first picture) is bought to have the power to control, while Nest (second picture) is bought to have not a relationship with the thermostat. So, it is clear that Nest innovated the meaning, changing the reasons why to buy a thermostat.

Moreover, Nest started to create an ecosystem, because innovations can be combined. Jawbone, for instance, is a wearable to study the sleeping. During the night, it can detect the sleep pattern understanding the right temperature. Jawbone and Nest communicate to create the perfect environment. Nest also did a partnership with Mercedes-Benz: the connection with the car identifies if someone is coming home, starting to increase the temperature.

So, the product is not bought because it does something better than others, but the reason why it is bought is the opposite and for this reason Google decided to buy Nest for 3.2 billion dollars. Artemide is one of the most popular Italian companies related to lights. Artemide used to produce icons lamps. It introduced in the market the most famous lamps starting from the 60s. Around the year 2000, it had a problem: they were good in leveraging design, but it recognized that currently design was no more source of competitive advantage, so Artemide needed to change its value proposition. To be recognizable and to maintain the competitive advantage, Artemide decided to stop selling lamps and start selling lights. So, the company created a set of lamps that can create an environment, creating the right chromatography environment matching the mood of the person. To do this, Artemide started scientific researches on how human brain reacts according to the light environment. In the office, it creates always the perfect system of lights to make the brain work better for example. So, the company did not change the product, but radically changed the company itself, becoming a lighting company. This is a change of why: the lamp in the past was bought for the design, while today the shape of a lamp is not important anymore, but only the light is important. Talking about meaning changing, it is generally about changing the reason why a product is bought or the meaning of the company itself.

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Similar design-driven innovations are the ones by Alessi following fiction (pictures on the left) and Kartel worm (picture on the right):

Solution means to change the how. The fan is normally bought to have fresh air, but normally it is not a nice tool. However, one company created a radical new fan, completely changing the way to think at it. Once, a fan used to be on the ceiling. Creating the portable one is an incremental innovation. Normally, by doing an incremental innovation, there is not the innovation either of the architecture or of the components. There are the same mechanics, with the central axes and the blades connected to it, with the same physical effect. With the new solution, a radical innovation, there is a different technology that do not even leverage the same physical effect. They are two completely different concepts. Particularly, to classify radical and incremental innovation, it is necessary to take into account: • Functions: we have to ask ourselves if the product is enabling new functions. For instance, the first smartphone allows a new function, which is the possibility of talking in mobility, which was a radical innovation. • Performances: the new product can do the same things of the previous products, but in a better way. For instance, at the beginning, there was a modem connecting the PC with the telephone line, because there was not the ADSL. Every time the performances were doubled. Then, the optical fibre introduced higher speed, and this was a radical innovation. • Product architecture. Another classification of innovation, intrinsically linked to the incremental-radical innovation one, starts from the definition of product architecture. In most of the cases, the products sold are assembled, so in the production process, there is an assembly phase. So, there is a distinction between the product as a whole and the product in its parts. The product can be described as a list of components linked in a specific way. Putting them together in the correct way, the product is created. Product architecture is the list of components and the way in which they interact. For example, a room fan’s major components can include the blade, the motor, the blade guard, the control system and the mechanical housing. The overall architecture of the product lays out how the components work together. Perceiving a product in this way, innovation can be made either on the components or on the architecture. So, it is possible to make an innovation by changing a component, for instance if gasoline engine in the car is replaced with an electric one, there is a radical change in the component and it is a radical innovation, because there is a complete change of the technology and of the physical aspects. Furthermore, it is possible to keep the same components but changing how they are put together, so this is an architectural innovation. For instance, years ago cars had the engine connected with the tyres, while now they are connected with the front tyre. The physical aspect is different as the car is pulled. There is a radical change of the driving experience without changing the components, so it is possible to radically innovate the product by changing radically the architecture.

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The fact that the joystick became the joypad is an architectural based innovation. Components have been modified (there is a change of shape of the stick, different buttons and so on), but the main change was in the architecture because in this way it was easier to change the game experience. In the old one, there was a small combination of possible actions during the game. With the joypad, there were many different possibilities: the aim was to change the architecture as it allows more easily to change the game experience. The basic technology was still sticks and buttons, but there were many more options. After some years, the motion control of the Wii was introduced: the radical innovation was in the interactions as, thanks to an accelerometer, the actions came from the movement in the real environment. The change was mainly a component-based innovation: there were still buttons and components, but the real innovation was in the interactions thanks to the accelerometer, which was the new component, that made possible to move in the real world seeing the effects on the screen. Particularly, Nintendo was just the innovator, because the inventor of accelerometer was STMicroelectronics and that technology was used for many years until Nintendo moved it in the world of consoles, changing the game experience. Many times, the Service Concept requires the additional definition of a group of components (products and services). The idea of architecture could be applied to services, calling it the service package. A person hardly buys just one service, but a bundle of services. For instance, a person normally buys not only a flight but also the services during the flight, the comfort and so on. Indeed, buying a ticket for an airplane, there is a bundle of different services linked together in different ways.

This is the relationship between incremental a...