Creative destruction

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Creative destruction enhancing innovationin
economic crisis

• Miika Kajanus
• Suceava 29.7.2009

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Own background developing demand driven
practical based innovation services

• 2001 Strategy and innovation model for an
  entrepreneurial forest owner (dissertation)
• 2004 Regional Research and Innovation Manager
  active search for innovation ideas and their
  implementation via networks
• 2006 - 2007 INNO-STU project (developing the
  model)
• Regional Innovation Strategy Results 162 ideas,
  89 feasibility studies, 31 development projects,
  15 innovations
• 2008 - 2010 KIP-project (model launch)
• University network based innovation service
  products Pedagogical models, User innovations
• 2008 2009 A Model for Developing the
  Entrepreneurship Skills in Degree Programme in
  Agriculture and Rural Industries
• The Centre of Excellence A Certificate got from
  Ministry of Education in Finland,
• 2009 year of Creativity and Innovation in EU
• INNO-FOREST (2005 2007) was chosen as an
  example of best practice in the field of
  creativity, innovation and entrepreneurship
• 1.8.2009 new organization of Savonia University
  of Applied sciences

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Contents

• Story of Stromsdal Ltd. in small town of
  Juankoski
• Plan B project to create new jobs and businesses
• About innovation some aspects
• Research and development not the only mean to
  innovate
• Disruptive innovation
• Open innovation
• Interpretation and analytical problem solving is
  different phases in an innovation process
• Self assessment of innovation capabilities
• Savonia reorganizing its activities to respond
  for the development needs of the companies and
  the region
• Lessons learnt

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Creative destruction ?
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Stromsdal Ltd.

• 1746 the blast furnace milieu stars, the first
  ironworks in Finland
• (bog iron)
• the first sawmill established at the end of
  1800
• the first groundwood plant 1907
• the first board mill at 1913
• iron production end 1911
• Kymmene Ltd. owned the board mill 1915 1988
• 1989 sold to private owners and new company
  name Stromsdal Ltd.
• main product whiteboard and high tech covers
• 160 employers, turnover 56,1 million EUR
• 2008 announced economical difficulties and
  finally at November
• bankruptcy gt crisis for small town Juankoski
  (6.000 inhabitants)
• two options
• 1) to find new investor (Spanish company
  Castor Plus letter of intend
• June 2009, final agreement expected at
  the end of September 2009)
• 2) plan B if the mill can not continue as
  itself, what then?

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Plan B for Juankoski

• Activities
• Regional Liaison program (research and
  innovation manager)
• Organizing innovation processes for Stromsdal
  staff and others
• Idea generation (sessions, RPM, workshops)
• Feasibility studies
• Development projects (financed by Tekes and
  others)
• Launching projects
• Tailored education courses for implementing
  innovations
• Launching Research programs for the needs above

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Plan B for Juankoski

• Objectives by the end of 2011
• Produced Regional Innovation strategy for the
  sub-region
• Innovations
• 10 implemented innovations (start ups or
  others)
• 50 feasibility studies
• 100 innovation ideas
• 10 educational courses
• 5 research programs

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What is innovation?
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Can flying car be considered as an innovation?
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OECD - Typology of Innovation at firm level
- New at firm level - New at industry level -
Absolutely new
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Innovation

• For customer innovation means a better product or
  service, less costs or easier usage better
  means to achieve ones values.
• For organisation it gives a competitive
  advantage reason for live.
• For society innovation is an important
  development instrument way for democracy e.g.
  living labs and other demand driven approaches

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Two different models of innovation
Practical based like water finding its way
(Philip Cooke and Vesa Harmaakorpi)
Waterfall from science to practice
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From where does the innovations come from?
Innovations comes
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from science
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other sources, mostly from customers
(Harmaakorpi 2008)
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Non-RD innovators

• European Innovation Scoreboard 2008 and
  Innobarometer 2007
• More than 50 of innovative firms innovate
  without carring out RD!
• They are smaller, active in low tech sectors and
  located in areas with relative poor innovative
  capabilities.
• However, they are growing at the same rate as
  their RD performing counterparts!

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Main methods to innovate

• Research and development
• Technology adoption
• Minor modifications or incremental changes
• Imitation including reverse engineering
• Combining existing knowledge in new ways
• Adopting solutions developed by users

See Neglected innovators How do innovative
firms that do not perform RD innovate? Results
of an analysis of the Innobarometer 2007 survey
No. 215, INNO-Metrics Thematic Paper, A. Arundel,
C. Bordoy, and M. Kanerva, MERIT, March 31, 2008
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Technology adoption

• Firms can acquire innovative products and
  processes from sources external to the firm, with
  little or no further work required. For example,
  a computer assembler can purchase faster hard
  drives or wireless cards, purchased from
  specialist firms, to include in a notebook
  computer, or a food processing firm can purchase
  improved packaging equipment. CIS data used by
  Evangelista and Mastrostefano (2006) show that
  the acquisition of new machinery and equipment is
  one of the most common innovation activities
  across firms. Similarly, firms could acquire the
  ideas for organisational innovations from other
  firms.

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Minor modifications or incremental changes

• to products and processes, including the use of
  engineering knowledge (Kline and Rosenberg,
  1986). Modifications can be made to both
  purchased products and processes or to
  technologies developed by the firm itself in a
  previous time period. These innovation activities
  are particularly common for process innovation
  (Evangelista et al 2002 Nascia and Perani 2002).
  Lhuillery and Bogers (2006) estimate that 15 of
  overall cost reductions are from incremental
  innovations made by employees to production
  processes. Incremental change can depend on
  learning by doing, as a firm gets better at what
  it already does (Cohen and Levinthal, 1989).

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Imitation including reverse engineering

• Many activities to replicate products or
  processes that are already available, including
  some solutions to circumvent a patent (Kim and
  Nelson, 2000), do not require RD. This method of
  innovating could be especially common in less
  developed countries or for innovations that are
  not patentable.

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Combining existing knowledge in new ways

• This can include some types of industrial design
  and engineering projects (Grimpe and Sofka, 2007
  Huston and Sakkab, 2006). The Italian informal
  learning systems, characterized by SMEs in
  traditional industries and mechanical and
  electrical/electronics sectors, use these methods
  to create new products (Evangelista et al. 2002).
  These systems build on tacit knowledge,
  engineering skills and cumulative learning
  processes, where the necessary knowledge is
  located in the system, rather than in a specific
  firm (Gottardi, 1996). Informal contacts and
  mobility of highly-skilled personnel move tacit
  knowledge from firm to firm.

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Adopting solutions developed by users

• Von Hippel (2005) argues that user innovation is
  much more widespread than earlier thought. User
  innovation thrives when there are methods for
  sharing information and breaking down a problem
  into components (e.g. innovation toolkits). These
  enable users to innovate without new RD and
  improve the ability of users to combine and
  coordinate their efforts (e.g. over the
  internet).User innovation can also serve as an
  important source of solutions for firms.Von
  Hippel calls the ability of users to develop what
  they need instead of buying what is available the
  democratisation of innovation.

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Innovation characteristics

• New for firm, new for markets, new for the world
• Innovation is technological, organisational,
  social or institutional
• Incremental or radical sustaining or disruptive

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Innovation market based strategies
1. Sustaining Bring a better product into an
established market (market leaders)
Range of performance that customer can utilize
The innovators solution Creating and
sustaining successful growth Cristensen and
Raynor 2003
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Innovation market based strategies
1. Sustaining Bring a better product into an
established market (market leaders)
Range of performance that customer can utilize
2. Low end Disruption Address over served
customers with lower-cost business model (growth
opportunities)
The innovators solution Creating and
sustaining successful growth Cristensen and
Raynor 2003
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Innovation market based strategies
1. Sustaining Bring a better product into an
established market (market leaders)
Range of performance that customer can utilize
2. Low end Disruption Address over served
customers with lower-cost business model (growth)
3. New market disruption Compete against
non-consumption (radical innovation)
The innovators solution Creating and
sustaining successful growth Cristensen and
Raynor 2003
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Typical innovation process?
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Open innovation
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• Innovation process is one of the key processes
  in an enterprise, which can and should be managed
  systematically and goal oriented (not just a
  product development project)

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Key processes in enterprise

• Management
• Production
• Delivery and marketing
• Support
• Innovation

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Innovation process in enterprise
Gatekeeper
Gatekeeper
Gatekeeper
Gatekeeper
Idea Generation
Launch Rollout
Feasibility
Capability
Concept refinement and prototype creation
Product or process optimization
Commercialization Production Distribution
Initial marketing and technical concepts
Post Launch Review
Launch Proposal
Contract
Tracks success of and key learnings from launched
products
Charter
Launch Plan including CEP approval request.
Cross-functional development plan including
project plan as contract between team and
Gatekeeper.
KEY
One page description of proposed project
including objective, rationale and development
routes. Early Commercial Assessment
GATE
DOCUMENT
Professor Rebecca Henderson MIT Sloan School of
Management
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Example, key questions in different phases
Portfolio Review
Phase Review 1
Phase Review 2
Phase Review 3
Phase Review 4
Current Product Support
Idea Generation
Phase 1 Concept Investigation
Phase 4 Post Release
Phase 3 Development
Phase 2 Feasibility

• Does the product make sense from marketing,
  technical financial perspectives?
• If yes, then
• concept
• approved
• full team
• allocated

• What is the product spec?
• Can we develop it within budget and schedule?
• Can we produce it at the required cost volume?
• If yes, then
• prototype
• approved
• full team
• allocated

• Has the product been fully verified and
  validated?
• Have production objectives been met?
• If yes, then
• full manufacturing
• approved
• sub-team
• allocated

• Does the idea fit roughly with our strategy and
  resource availability?
• If yes, then
• concept document
• approved
• sub-team allocated

• Is the product meeting safety, efficacy and
  business targets in the market?
• If yes, then
• closeout
• approved
• handoff to
• product support

Professor Rebecca Henderson MIT Sloan School of
Management
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Different types of phases
2. Analysis - problem solving
3. Traditional management
1. Interpretation
Portfolio Review
Phase Review 1
Phase Review 2
Phase Review 3
Phase Review 4
Current Product Support
Idea Generation
Phase 1 Concept Investigation
Phase 4 Post Release
Phase 3 Development
Phase 2 Feasibility

• Does the product make sense from marketing,
  technical financial perspectives?
• If yes, then
• concept
• approved
• full team
• allocated

• What is the product spec?
• Can we develop it within budget and schedule?
• Can we produce it at the required cost volume?
• If yes, then
• prototype
• approved
• full team
• allocated

• Has the product been fully verified and
  validated?
• Have production objectives been met?
• If yes, then
• full manufacturing
• approved
• sub-team
• allocated

• Does the idea fit roughly with our strategy and
  resource availability?
• If yes, then
• concept document
• approved
• sub-team allocated

• Is the product meeting safety, efficacy and
  business targets in the market?
• If yes, then
• closeout
• approved
• handoff to
• product support

Professor Rebecca Henderson MIT Sloan School of
Management
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• Ability to generate a stream of new product,
  to improve upon old ones, and to produce existing
  product in an increasingly efficient way, depends
  on two fundamental processes gt
• Analysis
• Interpretation
• Innovation The missing dimension, Lester and
  Piore 2004

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1. Interpretation

• is not directly towards the solution of
  well-defined problems
• This process dont have a clear end-point, its
  ongoing in time
• Activity, out of which something innovative
  emerges a new insight about the customer, a new
  idea of a product, a new approach producing or
  delivering it
• The role of manager has less to do with problem
  solving or negotiation between interests, rather
  the role is in initiating and guiding
  conversations among individuals and groups
• The interpretative view is not widely understood
  or even recognized!

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2. Analysis, rational problem solving

• In designing a new product, the product
  development manager first seeks to define a clear
  objective, usually based on research into
  customer needs
• Then identifies the resources -human, financial,
  and technical-that are available to meet that
  goal, as well as constraints on those resources.
• He then organizes a project to accomplish the
  goal. The key is to divide the problem into a
  series of discrete and separable components and
  assign each one to a knowledgeable specialist.
• The solution is obtained by bringing the
  components together in some optimum combination
  as quickly and efficiently as possible.
• Managers role leading problem solver or
  negotiator resolving conflicts

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Self assessment

• Innovation process can be managed by means of
  quality approach
• E.g. Imp3prove

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Imp3rove process
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Savonia organization 1.8.2009
Business and culture
Technology and environment
Social and healthcare
Well-being products and services
Industrial design
Energy and environment
Safe live
Entrepreneurship and innovation
Centers of expertise
Departments (like faculties)
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New Savonia model
Practical oriented Innovation Toolbox Innovation
strategy, sessions, mentors, student projects,,
expert evaluations, PD-projects, Innovation
foresight (RPM) etc.

• Learning
• processes
• RD
• International
• expert network
• end users
• (customers)

EI-Research program
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The way to innovation New centres of expertise
for organising innovation activities

• Savonia is undertaking a major organization
  reform at the moment. At the beginning of 2009,
  the number of profit centres changed from five to
  three. In the autumn of 2009, five centres of
  expertise start their operations.
• The centres of expertise utilize the expertise of
  several training programmes. The centres of
  expertise gather teachers, research staff and
  students into development projects by utilizing
  the partner network. The topics of the centres of
  expertise are the following Energy and
  Environment, Entrepreneurship and Innovation,
  Welfare Products and Services, Secure Life, and
  Industrial Design.
• The centres of expertise are demand-driven and
  serve the region by channelling education, RD
  and innovation efforts into targets that are of
  benefit for the regional economy. The launch of
  the centres of expertise will bring about
  challenges for the innovation management.
• The centres of expertise are supervised by the
  deputy headmaster and the executive group of the
  university. Each centre of expertise has a
  coordinator who is responsible for planning,
  implementing and evaluating the activities in
  collaboration with the rest of the staff.

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Savonia ? a bold innovator and cooperative
facilitator of future expertise

• Savonia, founded in 1992, is a university of
  applied sciences that operates in the cities of
  Kuopio, Varkaus and Iisalmi in eastern Finland.
  The general task of the university is to improve
  professional, business and cultural expertise in
  the region, as well as to promote competitiveness
  and welfare of the region by education and RD.
• According to its vision, Savonia is a bold
  innovator and cooperative facilitator of the
  expertise required in the future. Its regional
  task is to secure economic and social vitality of
  eastern Finland.
• At the beginning of 2009, Savonia was reorganized
  into three profit centres technology
  environment, welfare, and business culture.
• Savonia has a budget of c. 60 million and a
  staff of c. 600 employees, of which one hundred
  works in RD activities.
• Savonia has received numerous accolades,
  including the quality award of the Higher
  Education Evaluation Council.

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Lessons learnt

• In every crisis is also including a seed for new
  beginning
• Entrepreneurship not just a personal endeavor
  merely its also a local and cultural attempt
• Society, including educational institutions have
  also to contribute for solving the crisis
• Innovation process is one key process of an
  enterprise and it can and should be managed
• Consider end user benefits, i.e. customers
  customer needs and benefits
• Involve world leading experts

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University networksInnovation Services and50
new innovations!
KIP project 2008 - 2010
http//kip.savonia.fi
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Basics

• Innovation Better product or service to
  customer and/or lower price
• How universities can serve firms to innovate
  better?
• Especially in outside of campus areas

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KIP goal

• To increase the number and the share of growth
  oriented innovative firms in North Savo
• by means of developing innovation services for
  the network of educational organizations as a
  part of the regional innovation system.

Top firms
Ordinary SMEs gt KIP Target
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INNO-STU project results from 2006-2007
New or better products or processes launched
into markets or use (2 exported)
162
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89
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PD etc. projects
Feasibility studies
Innovation ideas

• Students (from ten different schools)
• Projects 27
• Thesis 12
• Trainers 9
• participated in educational courses 50 students

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KIP Objectives 2008 - 2010
600
100
50 / 12 exported
300
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KIP - INNOVATION SERVICE TOOLBOX
MENTORS
INNOVAATION- STRATEGIES
DISTANCE LAB
Demand driven search and development of
innovation ideas
INNOVATION FORESIGHT (RPM)
KIBS
SESSION
INTER- NATIONA- LISATION
IDEAN EVALUATION
PROJECT PREPARATION
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INNO-FOREST 2005 - 2007Integrating Innovation
and Entrepreneurship Research in Higher Forestry
Education

• 100 students, 100 enterprises from 12 countries
• The main objective was to develop methods and
  tools for knowledge transfer among research,
  education and enterprises.
• The products included a learning concept, where
  students, enterprises and researches are working
  together on PBL base, as well as tools and
  materials enabling this.
• Toolbox consists of course description, case
  study protocol and AWOT enterprise analysis
  tool, stimulus video, learning materials and
  web-conferencing tool.
• See http//www.inno-forest.org/ and publication
  http//portal.savonia.fi/amk/tktoiminta/julkaisut
  oiminta/tutkimusjakehitys/innoforest

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INNO-FORCE Research project

• -lectures, experts
• Learning material
• E-Learning platform
• Workshop

• Intensive Course
• Lectures
• PBL group work on cases
• Seminars
• Excursions
• Final seminar

Suggestions for the case enterprises
Case report (final exercise)
Preliminary case study analyze
selecting case enterprises
Case study protocol AWOT enterprises innovation
analysis tool
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