Category: Innovation

An Analysis of The Lego Group’s Innovation Activities

Executive Summary

Use key words from the assignment brief

The following report will investigate the extent to which Starbucks Corporation is an innovative firm. This will be done by identifying their core innovation activity, determining the set of circumstances, as well as, the processes used to develop it. Ultimately representing how this activity contributes towards the overall sustainability and competitive advantage of the firm.

The opening section, 1.0, will introduce the report, giving a brief overview of the nature of Starbucks Corporation, by defining its activities as well as communicating the core innovation activity of the firm.

Section 2.0 identifies the drivers of innovation influencing Starbucks core innovation activity. This will be shown by the technological advances, changing customer needs, intensified competition and strategic intent that play an equally important role in driving Starbucks core innovation activity, before discussing the disadvantages of these drivers.

The next part of the study distinguishes the three different degrees of innovation; incremental, breakthrough and radical and how alongside the innovation ambition matrix, can be used to categorise Starbucks core innovation activity.

Thereafter, the Pentathlon Framework is used in section 4.0 to understand how Starbucks engage in open innovation which allows the co-creation of ideas between Starbucks and their customers. This method is used to develop the core innovation activity to its implementation and highlight how each part of the model is interdependent to Starbucks sustainable competitiveness.

The final section of the report examines the AVAC model, focusing on how Starbucks generate competitive advantages through their activities, value, appropriability, and change as well as showing how each element contributes towards Starbuck’s overall sustainability.

Introduction (200 words)

The LEGO Group is one of the largest toy manufacturers in the world, committed to providing children with “good quality play” as a building block to laying a foundation for future adult life (The Lego Group 2018). LEGO which was founded by Ole Kirk Christiansen in 1932 in Billund, Denmark. The companies name originates from the first two letters of two Danish words: leg godt, which loosely translates to ‘play well’ (Robertson 2013). Reasoning that no matter how hard times were, parents would want to support their children, an insight which sustained LEGO through almost a century of subsequent global recessions.

LEGO’s product portfolio started with the craft of wooden toys, moving onto the iconic studded plastic brick and is now adopting to an increasingly digital world which has reduced demand for conventional physical toys (reference). To retain competitiveness, LEGO has introduced a range of technologically advanced products such as the Mindstorm EV3 which is based on the successful mindstorm toy. Thus, allowing children to play with physical toys whilst incorporating technological abilities to meet the modern children’s needs (reference).

LEGO’s brand values; imagination, creativity, fun, learning, caring and quality are all focused on providing the consumer with the best possible experience with guaranteed quality and originality (LEGO Group 2018). To ensure consumers are provided with the best experience, LEGO introduced the Future Lab which is a department with the sole focus of providing the future of play to children worldwide in order to remain competitive in a technologically advancing world (Ringen 2015). This innovation lab is paramount to ensure the capability ceiling of LEGO is raised to allow for progressive development of technology in line/ahead of competitors (Goffin and Mitchell 2016).

Finish this section with more references and mention the core innovation activity.

System of Play:

• Lego brick
• Mini-figure

Triple number of products between 1993-98

Designers were given freedom until 2003 when Lego changed and provided their designers with minimal bricks to choose from to reduce costs and increase creativity

Innovation is looked at from 2 angles – http://blog.bearing-consulting.com/2013/02/08/the-lego-innovation-story/#

1. Understanding children – spending time with the families in various countries to get an understanding of what they want
2. Give designers scarce choices which influences creativity

Circumstances: The Innovation Landscape (600 words)

Drivers of LEGO’s Core Innovation Activity

According to Goffin and Mitchell (2016), there are five main drivers of innovation which can be seen in Figure 1.0. Four of these drivers will be assessed to explore how they contribute to LEGO’s core innovation activity.

Figure 1.0, Drivers of the need for Innovation (Adapted from Sheth and Ram 1987).

Technological Advances

Technology has become a prominent driver in most industries over the past couple of decades; the toy industry is not an exception (reference). Once LEGO’s business model was retuned in 2004 after many failed transformational innovation attempts, the company regained focus on the core products of LEGO and started making money again (reference). This proves that breakthrough innovation is not always required to maintain traction in the external environment.

However, continual innovation is required in the competitive toy market as traditional toys become less sought after than more advanced toys such as video games (reference). Thus, the Future Lab is used to identify these changes in consumer behaviour and provide creative solutions. For example; LEGO augmented reality allows the user to virtually play with various characters from the LEGO portfolio (Sawy et al. 2016). Technological advances has driven this innovative change in the LEGO company from physical to virtual toys however, the Future Lab also focuses on traditional toys as they are much cheaper and more practical for consumers therefore still in demand (reference).

• Significance of technological discontinuity
• Unpredictable
• Threaten to render exiting capabilities useless
• Range of features, configurations, standards
• Competence-destroying (destroys previous incremental patterns of innovation)
• They implemented many of the common innovation tools in the time leading up to the crash: they had a huge focus on disruptive innovation and searching for blue oceans, the formed diverse creative teams, and they tried several different versions of open innovation.
• Nearly all of the products that resulted from these efforts failed – and that is what led to the collapse.
• Then, as LEGO successfully launched the Architecture Series, and LEGO Games, and a whole series of wildly successful new products, they used the same set of tools to create these breakthroughs.

Changing Customers and Needs

Teece (2010) states that innovations should be driven by the changing needs of customers. LEGO has displayed its ability to change and add to its product portfolio by not only catering to the needs of children, but also to a growing adult customer base (reference). This change in customers is a result of LEGO being viewed as a highly useful tool to increase creativity both on a personal and business scale (reference). Through understanding customer needs, LEGO is able to aim its products and services at the relevant target market therefore increasing customer satisfaction (Chen and Poppvich 2003).

Intensified Competition

In order to flourish, businesses need to innovate (Makhmoor and Rajesh 2017). In a highly competitive market, this is said to be more difficult for an organisation, however, Porter (1998) considers that the direction and pace of innovation is driven by competition. This increase in competition may have been a driver for LEGO creating the Future Lab in an effort of creating unique products which are much harder to replicate than the LEGO brick which is no longer trademark protected which led to a rise in competitors duplicating their brick (reference).

Strategic Intent

Strategic intentions of LEGO have led to products and services being tailored to best suit the target market, evident through the reduction of LEGO’s product portfolio since 2004. This reduction was initiated by new CEO, Jorgen Vig Knudstorp, who was appointed in 2004 and identified LEGO’s decline as ‘over innovation’ due to increased competition and technological advances (reference).

Disadvantages of Drivers of Innovation

The five drivers in this model limit the scope in which innovation can be measured due to important drivers being missed out such as environmental (Taalbi 2017). This could be seen as an important driver for LEGO due to their involvement with children and vast quantities of plastic (oil derivative). The model also has a narrow focus on just one driver rather than multiple drivers with contribution.

Categorization of Core Innovation Activity (600 words)

Degrees of Innovation

LEGO’s innovations will be categorised into three main degrees; incremental, breakthrough and radical (Goffin and Mitchell 2016).

Degree of Innovation

Explanation

Investment (%)

Incremental Innovation

(Core)

Toys for Girls (Ref)

Licensing Agreements (reference)

LEGO Ideas (Minecraft etc)

60%

Breakthrough Innovation

(Adjacent)

LEGO Mindstorms EV3 (LEGO Group 2018)

LEGO Architecture

20%

Radical Innovation

(Transformational)

Augmented Reality App (Sawy et al. 2016)

20%

Table 1.0, Degrees of Product Innovation (Adapted from Goffin and Mitchell 2016).

Incremental Innovation

The incremental strategy of LEGO has been central to operations since the company was founded, following a structure much the same as Mintzberg (1989) model of Design, Failure corrected by adjustments and leading to success. These incremental innovations build on company knowledge and present capabilities to improve existing products, services and processes (Bessant 2008). LEGO’s future Lab incorporates open innovation to

• 1998 – Mindstorms
• 2004 – 4 MUP’s helped develop the new toy
• Ninjago – 2011 – ask kids what they like/don’t like
• 1999 – star wars Lego was first brought out and it was a big hit.
• Lego went back in the box after 2003 and started making money again
• Lego hits – Stars wars, harry potter, Bionicle
• Galidor – big failure – Had a tv show and game etc. People saw this toy as not a Lego toy, so it didn’t do well

Lego looking to target the adult market using crowdfunding for its new idea (Lego Forma). This is the latest in 2018.

Breakthrough Innovation

• Lego Games – moved from toy shelf to game shelf too
• Lego friends – very profitable
• International Networks for technology creation – 19. Journals on Models
• Radical Innovation
• From Wood to plastic
• From plastic to technology components (Sensors etc)

Processes Supporting the Core Innovation Activity (600 words)

The Pentathlon Framework

Figure 2.0 is a representation of the model which will be discussed in relation to LEGO’s innovation processes. The framework is used by companies as a tool to respond to challenges by generating, selecting and implementing innovative ideas (Oke 2007).

Figure 2.0, The Innovation Pentathlon Framework (Adapted from Goffin and Mitchell 2016).

Ideas Generation

To allow idea generation to flow, ideas must be collected from both internal and external sources (sowrey 1990). External idea generation has become more accepted in recent years due to companies recognising the fundamental benefits and insights into consumer behaviour (reference). This is known as open innovation which allows consumers to put forward ideas and ultimately be part of the development process of both new products and incremental changes (parjanen, Hennala and Uotila 2011). LEGO’s Future Lab applies this method through a website called LEGO ideas which is a crowdsourcing platform used to gain consumer knowledge and influence innovative new ideas from outside the company (Liu, Zhao and Sun 2018). Other users can vote on this platform and if the LEGO set reaches 10,000 votes, the set will be put into production within reason (reference).

Through open innovation, LEGO is able to tailor their sets to the current consumer trends which should in turn increase profitability (Schenker-wicki and Inauen 2012). This method of innovation does come with drawbacks, such as the sheer volume of requests and time required to manage the large volumes of submissions. This may waste valuable resources and rely too heavily on consumer feedback therefore take the ingenuity away from the designers or vise versa (reference).

Ideas Selection

Once ideas have been selected, it is vital that an effective selection process is used to select and develop the best ideas further (Goffin and Mitchell 2016).

Ideas Implementation

Innovation Strategy

People, Culture and The Organisation

Limitations of the Pentathlon Framework

Contribution (600 words)

Allows the company to remain competitive in a changing environment

AVAC framework – Lecture 4, slide 25

Conclusion (100 words)

References

1. THE LEGO GROUP, 2018. The Lego Group. [online]. Available at: https://www.lego.com/en-gb/aboutus/lego-group [Accessed 4 Dec. 2018].
2. ROBERTSON, D., 2013. Brick by Brick: How LEGO Rewrote the Rules of Innovation and Conquered the Global Toy Industry.
3. Lipkowitz, D. (2012). The LEGO book. Dorling Kindersley.
4. THE LEGO GROUP, 2018. The LEGO Brand. [online]. Available at: https://www.lego.com/en-gb/aboutus/lego-group/the_lego_brand [Accessed 4 Dec. 2018].
5. RINGEN, J., 2015. How Lego Became the Apple of Toys. Fast Company, (192).
6. GOFFIN, K. and MITCHELL, R., 2016. Innovation management: effective strategy and implementation. 3rd ed. Basingstoke, Hampshire: Palgrave Macmillan.
7. SHETH, J.N. and RAM, R. 1987. Bringing innovation to market: how to break corporate and customer barriers. New York: Wiley.
8. SAWY, O.A., KRAEMMERGAARD, P., AMSINCK, H. and VINTHER, A.L., 2016. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership. MIS Quarterly Executive, 15(2).
9. CHEN, I. and POPOVICH, K. 2003. Understanding customer relationship management (CRM). Business Process Management Journal, 9(5), pp.672-688.
10. MAKHMOOR, B. and RAJESH, V. 2017. Why Business Model Innovation Is the New Competitive Advantage. IUP Journal of Business Strategy, 14(1), pp.7-17.
11. OKE, A. 2007. Innovation types and innovation management practices in service companies. International Journal of Operations & Production Management, 27(6), pp.564-587.

Innovation Dynamics in Sony: Analytical Essay

Introduction

Innovation is considered as the most primarily bandied about terms in the modern era of global business. The newly devised products and services of an innovative organization offer various numbers of innovative and creative features, traits, and consumer touchpoints in amalgamation. The purpose of the assignment is to explain the innovation strategies and innovation dynamics with reference to the organization “Sony”. Every individual industry progresses via stages of steadiness and calmness when innovation is regarding what can be improved further or stages of disruptions where the rules of the business get completely changed. The potential consumers have evolved in the modern years to become increasingly habituated to explore for the latest, convenient and fashionable products offered by the organisations. In this assignment, some key theory discussion and analyses will be conducted in order to understand the level of innovation and innovation dynamics in the specific organization.

Key Theory Discussion and Analysis

Sony’s focus on innovation from survival

Sony has shifted its focus towards innovation from survival as it has laid emphasis on the creation and development of new products such that the trend of the market shifts completely. Sony has combined artificial intelligence and robotics with everyday gadgets or electronic products. The organization developed PlayStation and walkman that was invincible for several decades. However, the organization faced several losses in the period 2008 to 2014. In that period, software earned the profit and not hardware. However, the organization made such strategies and implemented them that turned out to be in favour of the organization.

The organization developed Aibo that is a robotic dog. The organization also developed a humanoid robot named Qrio. The leaders of the organization took steps that changed the direction in which it was moving forward (Asia.nikkei.com, 2016). The organization developed 4K television that had ultrahigh-definition. The organization started investing on PlayStations and music that proved to be a boon for it. In the era, while the sales of the organization fell manifold that resulted in the association to cut down approximately 10,000 jobs all around the world. The organization made decisions of connecting robotics and AI with the network. The organization put in several efforts in robotics and AI in order to get back its lost battle.

The management of the organization made a drastic decision of shifting its emphasis to emphasis and come out of its comfort zone. The organization started taking risks as organizations like Apple entered and took over the market. Therefore, the organization made decisions of working on Artificial Intelligence (AI) and robotics so that such innovations can aid it to conquer the market. The organization started focussing on the development of hardware or electronic gadgets of better quality with innovative features so that the customers can be benefitted from it. The organization mainly emphasized on Artificial Intelligence (AI) so that the adverse situation that the organization was facing can be turned around. The audio-video technologies that the organization developed embedded robotic and Artificial Intelligence (AI) capabilities in them. The organization embedded Artificial Intelligence (AI) technology in its camera app ‘Xperia’ as the ‘AR effect’, this application utilized Augmented Reality (In.finance.yahoo.com, 2019). The Smile Shutter and face recognition function of the digital cameras and PlayStation respectively are the examples of AI that the organization worked on and achieved in order to change the market trend. The AI-based product that the organization developed was ranked number one in the market. The organization put in several efforts in robotics and AI in order to get back its lost battle.

Sony’s Generic Strategy

In order to gain the competitive edge of other organizations in the world of electronics and technology Sony adopted a generic strategy like Porter’s Model. Sony adopted intensive strategies in order to give tough competition to its competitors in the market. The competitive strategy adopted by Sony is the uniqueness of its products. The intensive strategy adopted by the organization mainly focuses on increasing its share in the market in the field of games, financial services, entertainment, and electronics (Sony.net, 2019A). Behind the success of PlayStation uniqueness was the prime factor. The organization gained an advantage over organizations like Nintendo through product differentiation.

The continuous focus of the organization on innovation aided it to decrease the cost of production and increase its profitability. The main purpose of the organization was to penetrate the market so that it can increase its sales. The other motto of the organization was product development, that is, to embed new innovative features in its products so that the quality of services offered to the customers can be improved. Market development was another strategy adopted by the organization so that it can reach more customers by expanding its branches (Sony.net, 2019B). The organization adopted diversification so that it can offer its customers a wide range of products.

Sony’s Intensive Growth Strategies

Intensive strategies are defined as the specific strategies, which requires additional intensive knowledge and efforts in order to enhance the performance and productivity of the existing products or services in the market (Luo et al., 2011). The three types of intensive strategies that Sony has adopted are market penetration, product development and market development. Market penetration is considered as the primary intensive strategy of Sony as it is focused towards the aim of improving the productivity and profitability of the business by increasing the level of sales in the market where the organization operates. The main goal is to acquire a large volume of the market share by attracting potential consumers. For example, Sony improves its business by escalating its marketing initiatives and various campaigns to improve the sales of its PlayStation devices (Chiesa and Frattini, 2011). The organization implements its differentiation generic strategy in order to attain a competitive edge over its major rivals and to support the penetration process into the market. Sony implements its product development plan as a secondary intensive strategy in order to devise more effective products and services than compared to the competition in the market. In other terms, this second strategy is executed in order to support the generic plan of differentiation in regard to the design and features of the product.

For example, Sony has continued to improve the performance and design of its gaming products in order to provide their potential consumers with the best gaming experience (El-Nasr et al., 2016). The gaming products and services of Sony have been a major driver of growth for them as they have helped in outperforming the competition in the market. Diversification is considered as the least important intensive strategy as its goal is to achieve growth and development via new developments and progress in the business. However, the significance of this strategy has decreased over the years due to the decision of the organization to pay attention to specific products and services.

R&D structure for AI x Robotics at Sony

In order to come out of the adverse stage that the organization, Sony was facing it invested huge sums on research and development so that it can stand up and win the lost battle. The organization worked in Artificial Intelligence (AI) and robotics in order to offer new innovative products to the customers. The organization did immense research and came up with Aibo the robot dog. The history of Sony begun in D21 laboratory wherein the starting of 2000s or the 21st century the organization’s focus was to create a robot version or edition of living things or creatures. The organization took several steps to make sure that the recent developments that were made can change the market trend and turns out to be in favour of the organization. The organization started expanding its market by increasing the diversity of its products.

The organization collaborated with Olympus in order to develop a neurosurgical microscopic system. This enabled the doctors to open or create small holes in the patient’s body and use instruments like thin forceps specially designed and endoscope that is long and thin in order to perform operations. The doctors need not cut open abdomen of the patients. The organization further worked on the improvement of medical conditions so that the method of operation can be improved and people can be given a better quality of life through artificial intelligence (Sony.net, 2019C). The researchers and developers of the organization further did research so that the medical equipment can be improved and people can be given better treatment.

However, the main emphasis of the organization was to train people to use the tools so that these developed equipment do not prove to be a bane. It was mandatory to make several steps so that the equipment and the gadgets developed are fruitful for human beings. Several tests were conducted to make sure that the products developed are useful and does not have any hazard. Therefore, the organization took the topic of training the employees and the users very seriously so that any adverse effect or negative results are not produced.

The organization is working on machine learning in order to develop innovative products for customers. Sony had taken such measures that brought robots closer to Artificial Intelligence (AI). The organization made its first attempt in 1999 when the organization released AIBO the robot dog. The organization also worked on Artificial Intelligence (AI) and incorporated into digital cameras. Smile Shutter was the function that was incorporated in the digital cameras developed by Sony that was disruptive innovation as it changed the trend of the market (Sony.net, 2019E). The organization also worked on its PlayStation and added Face Recognition feature in it (Sony.net, 2019D). These developments completely changed the trend in the market and proved to be advantageous for the organization as it made the organization earn huge amounts of profit and overcome the closes that its face before.

The organization also worked on its hardware or electronic products and developed $K television with ultrahigh-definition. The organization also worked on Audio Video technology and music so that the experience of the customers in terms of entertainment can be improved. The organization is continuously working on its features so that innovation can be incorporated more and more so that the quality of the products can be improved which in turn will improve the quality of lives of the people or customers. The organization worked on it not only to take control of the market but also to make sure that people or its customers are benefitted from it. Thus, the organization laid emphasis on AI and robotics.

Social Value through Disruptive Innovation

Sony’s Initiatives in Robotics and AI

The organization is amalgamating its prevailing strengths in various units and areas including audio and video technologies and mechatronics with robotics, technology and artificial intelligence (AI) in order to provide the consumers with new proposals and schemes leading to the expansion of the robotics field. For example, the autonomous entertainment robot was pre-inaugurated in the year 2018 and it is considered as the outcome of the organization’s effort in leveraging robotics and AI in order to devise such a robot that interacts and develops a bond with human beings (sony.net, 2019). The appearance and capability of Aibo have evolved in recent times to be considered into account for utilization in different environments. For example, Sony Lifecare Incorporation is planning to adopt Aibo in order to enhance the quality and quantity of its residential services. The Mars Desert Research Station (MDRS) situated in the USA has borrowed two Aibos in order to conduct research regarding the process of establishing a life and living on the planet of Mars (sony.net, 2019). The project handled by the MDRS is focused on monitoring and managing the influence on interpersonal relations and advantages from experiencing a robot within the enclosed research station (Keisner et al., 2016).

Sony’s Initiatives in Automotive Image Sensory

The organization in the year of 2014 proclaimed that it would exploit or materialise image sensors for utilization in the automotive sector. Sony has always positioned the automobile industry in the primary choice for its business of image sensors and it is constantly working on R&D in order to popularise the notion of self-driving vehicles (Mukhi and Lakhani, 2016). In order to promote the notion of safety and preventive measures in self-driving cars, the organization has introduced a safe-zone notion named Safety Cocoon (sony.net, 2019). This concept of safe-zone is focused on securing the safety of the car in different driving conditions by 360˚ monitoring around the self-driving car. In other terms, it means enabling early planning and preparation in order to avoid risk and casualty. The automotive image sensors of the organization provide various benefits and advantages to the users including greater sensitivity, wide extent of dynamic range and mitigation functions, that also help in reducing flickering when portraying traffic signals or signs. The primary aim of Sony in the field of automotive image sensors is to drive the acceleration of the trend of self-driving vehicles or cars by sharing and communicating this long-term vision with its collaborated partners (sony.net, 2019).

Global Education

The mission of Sony Global Education Incorporation is to develop an educational infrastructure for the interlinked societies of future times. The entity is focused on fostering the people held liable for carrying the initiatives to cater to the problems and issues faced by the modern world in order to explore solutions for a brighter future of the world. For example, Sony in the year of 2017 introduced an interlinked robotics kit named KOOV for the future innovators (sony.com, 2019). KOOV helps the learner to understand the concept of coding by organizing various blocks into different shapes to develop robots that are specially programmed in a different way.

Disruptive Innovation Journey of Sony

It can be said that the disruptors of the modern world can easily evolve into the future’s disrupted. Disruptive innovation specifically refers to the technology whose implementation essentially influences the way or the manner in which a sector or industry operates. Disruptive innovation is completely differentiated from disruptive technology as that kind of innovation focuses on the utilization of the technological elements instead of focusing on the technology itself (business today.in, 2019). In the modern field of the business world, a majority of the technologies and inventors have eventually led to disruptive innovation. At the initial stages, Sony’s potential of disruptive innovation was a long and uncertain journey but since its establishment, the organization has properly managed to convert the faded potential into a profitable business. In the year of 1970, Sony caused disruption to its imaging business under the leadership of Shigeyuki Ochi. Next, in the year 1972 and 1977, Sony developed a pixel image sensor along with the assembling of the CCD R&D team. This team was termed as costly and every individual member had to encounter insults and criticism from other colleagues and staffs. It can be said that disruption takes place when the compulsory mainstream consumers start purchasing the devised products or service in a large volume.

Sony by introducing its CCD-V8 i.e. an 8mm single-unit VCR along with a camera with an installed CCD chip of 250,000 pixels marked its inauguration of new successful business as the eye of the camcorder was introduced on a global scale (sony.net, 2019). This uncertain journey of converting a blurry potential into a successful business not only bought success and fortune to the organization Sony but also caused disruption to the camera industry. Hence, it can be said that innovation amalgamated with technology is an essential and crucial competence to possess.

Sony: Disruptor to Disrupted

There is a second face to this key theory discussions and analysis and it is that how does an organization as Sony termed as a preeminent example of disruptive innovation evolved on to become a loser. There are various reasons for this and the primary reason is the failing power or potential of Sony in the field of consumer electronics and music. However, the stock prices of the organization have always been stable such as $47.94 billion in 2012 to $68.35 billion in 2017 (digit.hbs.org, 2019). The organization has always been avoiding and missing valuable opportunities that have eventually led them to be dwarfed by negligible competitors including Samsung and Apple. The market capital of Sony is estimated to be of 1/30th of Apple and 1/9th of Samsung. Hence, it can be said that Sony is still sustaining in the business but winning is not the throne of possibility in the short-term business.

Figure 1: Total Revenue of Sony from 2008 to 2017

(Source: digit.hbs.org, 2019)

The secondary reason behind the organization’s failure was to adjust its model of business that explains how Sony developed values. It is important for every business organization to reevaluate their business strategies and plans in accordance with the acceleration of technological innovations and initiated change in specific industries. Sony never reevaluated its business strategy in the middle of technological innovations and changes. The organization has always paid attention towards its hardware, developing the potential of its extensive R&D that offered sustaining and disruptive innovations including Sony Trinitron or Discman (hbr.org, 2019). Hence, it can be concluded that Sony failed in reanalyzing on how it developed values and this hampered its potential to progress into the shift from the notion of hardware to software. The organization, for now, is focusing on its gaming platform and the specific values that it has developed for its potential users via networking and software.

Programs for generating Innovations

Startup Acceleration Program develops startup projects and supports business activities

The Startup Acceleration Program was launched by Sony in the year of 2014 in order to gather ideas and notions prevailing beyond the various business categories and shape them for commercialization (sony.net, 2019). This was possible due to the knowledge of a vast range of human and management resources by Sony Group in different sectors including electronics, financial services and many more. In the coming years, the organization is planning to launch businesses and gain innovative and creative breakthroughs by leveraging coordination and collaboration involving talent and technology both. This would be possible by pacing the establishment of tie-ups and partnerships with potential joint venture entities operating actively in their specialized fields of business. This program was utilised by the organization as an approach to establish business start-ups and materialize standardised concepts and notions by tapping into the production and design knowledge that Sony Group possesses.

The first ever initiative that the organization has carried out under the shade of the program is known as “First Flight” i.e. an e-commerce portal providing a specific platform to the organization for developing links and connections between their launched start-ups and potential consumers (sony.net, 2019). This initiative focused on the specific potential consumers who have a taste for new products and services and who are interested in converting business ideas into successful and profitable business. Under the planning of the initiative and crowdfunding framework, a project under evaluation process for start-up establishment tends to attract a large volume of consumers in acknowledging their reviews regarding whether it can be used as a marketable product or not. Additionally, various business proposals and developments in the process are reported daily on the e-commerce website in order to acknowledge the reviews and feedbacks by consumers and then incorporate it to improve their service. However, the programs for generating innovations and other solutions for pacing the exploitation of business concepts were expanded to encompass business entities operating outside the Sony Group. The Group has also installed a Creative Lounge in Tokyo to trial and test the new ideas and notions with the help of 3D printers and other important equipment (sony.net, 2019).

Expansion of the Startup Acceleration Program Worldwide

In the year of 2016, Sony Group established its European hub of the program in Sweden and it utilises the similar processes and methods as the Japan hub (Tasic et al., 2015). The European team assembled constantly shares ideas and notions with the Japanese team while executing workshops and training programs for the hardworking European staffs and employees to guide them in developing successful ideas and networks. Till date, three auditions have been conducted with the effective cooperation and active involvement of the individual employees from various countries such as Netherlands, UK, Belgium and many more. The two things that Sony wanted its specific program to accomplish are the cultivation of a new pool of entrepreneurial talent and effective training of experts and professionals having the desire to pace the establishment and function of new potential businesses (sony.net, 2019). The start-up projects evolved from the program have been guided by a small group of elite and expert members by gaining a lot of support and help from people specialised in various fields. The amalgamation of Sony’s entrepreneurial talent pool and innovation knowledge affords potential opportunities to extract the maximum of the potential of staffs and employees.

Cultivation of Startup Projects and Initiatives

Sony Group in the year of 2016 launched a project named “Startup Switch” i.e. an annual business strategy for new start-ups and businesses (sony.net, 2019). The entries are auditioned and screened before selecting the winning entry and the organization awards a prize and supports the startup to pace business development by delivering mentoring with promotional and technical activities.

Conclusion

It can be concluded from the assignment that innovation is the major key to restoring and sustaining the shine of Sony and to achieve this Sony pursues various innovative initiatives focused on enhancing the quality of the product or service. The organization has portrayed its potential to lead effectively and sustain relevantly by backing up from the pack in every virtually known category of a camera. The purpose of the assignment was to explain the innovation strategies and dynamics of Sony in a detailed manner and by including discussion of key theories and concepts used by the organization. It has been concluded that the more Sony has attempted to play it safe, the more it has dealt with obstacles and struggles. The organization has lost its sense or judgement of direction and eventually grew risk and threats-averse. In this assignment, the various innovations and programs for generating innovation have been demonstrated.

Recommendations

The various recommendations advised to Sony Group are as follows:

• Improving the Quality of products and services – The organization needs to devise design-related quality initiatives and schemes. Sony requires relevant units and departments such as original equipment and design manufacturer i.e. OEM and ODM in order to comply with the quality standards and norms set by the groups.
• ·Improving the safety of the products and services – It can be said that offering of dependable products and services that can be utilised by the consumers safely is the primary objective and priority for Sony. It needs to ensure that the explanations and knowledge provided to the potential consumers regarding safety are appropriate and easy to understand.

Reference List

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2. businesstoday.in (2019). Disruptive innovation is a strategy, not just the technology. [online] Businesstoday.in. Available at: https://www.businesstoday.in/magazine/cover-story/clayton-christensen-on-theory-of-disruptive-innovation/story/213471.html [Accessed 28 Mar. 2019].
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Global Outsourcing and Innovation: Analytical Essay

Question:

Analyse the ‘Strategic Outsourcing at Bharti Airtel Limited’ case applying insights from the module to answer the following questions

“I declare that this work is entirely my own in accordance with the University’s Regulation 11 and the WBS guidelines on plagiarism and collusion. All external references and sources are clearly acknowledged and identified within the contents.

No substantial part(s) of the work submitted here has also been submitted by me in other assessments for accredited courses of study, and I acknowledge that if this has been done it may result in me being reported for self-plagiarism and an appropriate reduction in marks may be made when marking this piece of work.”

Question 1

Introduction

Bharti like any other growing telecom company was faced with the challenge of managing network expansion for its growing customer base. In order to succeed in the Indian mobile phone market firstly, Bharti must focus its services on providing excellent customer services through “error-free” services (low call drop rates, value-added service, etc), cost efficiency, and innovation in new products and services.

Secondly, Bharti must scale up network coverage to cover its growing customer base and Bharti must come up with a strategic and sustainable business model that will enable it to increase network infrastructure simultaneously as customer demand increases.

Discussion

Bharti should focus on its four core competencies to succeed in the Indian mobile phone market. Core competencies in Sales, Promotions, Customer Care/ Services, and Identifying Customer’s Pain Points (Harvard Business Review, 2012). From a sales point of view, Bharti can offer mobile telecom service at $0.01 to $0.005 per minute, perhaps the lowest rates in the world. Bharti enjoyed compounded annual growth in sales revenues of 120% and growth in net profits of 282% per year between 2003 and 2010. Its market cap has steadily grown over the same period and stood at around US$30 billion as of 2010 (ibid.).

For branding and promotions, Bharti went for a variety of advertising using different brand ambassadors, starting from cricket icons like Sachin Tendulkar to renowned music composer A.R.Rahman to cine stars like Shahrukh Khan, Madhavan, etc (Jeyavelu and Radha, 2008). It also carried out a combination of both functional and symbolic campaigns. Bharti conducted regional campaigns to ensure a wide reach to even the most remote areas. Bharti also ensures all campaigns had a common theme and went for high visibility advertising, targeting a variety of customer segments (ibid.).

Bharti took several awards for marketing and brand excellence as well as for distribution and service excellence over the last few years. In 2004, Bharti has announced the ‘World Communications Best Brand of the Year(ibid.). This was a prestigious award that recognized outstanding performance by companies and brands from across the world in the telecommunications industry.

A survey conducted by The Economic Times (ET) Brand Equity in 2007 also recognized Bharti as The Second most trusted Brand’ in the world (ibid.). Bharti also implemented comprehensive intelligence and data warehousing capabilities which helped it better understand customers’ usage patterns and predict network coverage demand. This service enables Bharti to identify customers’ pain points and make relevant improvements to better serve its customers (ibid.).

Bharti also focuses its services on providing excellent customer services through “error-free” services (low call drop rates, value-added service, broad coverage, etc), cost efficiency, and innovation in new products and services. Bharti introduced new and innovative products that were received well in the market and enabled the Company to maintain its leadership position in the Indian mobile phone market despite highly competitive pressures. For example, in 2005 the company introduced new products like BlackBerry wireless solution, Airtel Live, and Ring back tones (Hello Tunes) which were all firsts in the country (ibid.).

Conclusion

Bharti must focus on its four main competencies; Sales, Promotions, Customer Care/ Services and Identifying Customer’s Pain Points, by doing this well the company can succeed in the Indian mobile phone market. Bharti’s strength was grounded in its brand management, people management, and customer management capabilities.

Question 2

Introduction

“Outsourcing refers to the practice of transferring activities traditionally done within a firm to third-party providers within the country or “off-shore” (Sen and Shiel, 2006). In the case of Bharti, the proposed outsourcing agreement is to multinational vendors operating within the country. The author strongly agrees with Gupta’s proposed outsourcing agreement. Gupta’s strategy includes handing over responsibility for the build-up, maintenance, and servicing of the telecom network to an equipment vendor.

Gupta considered Ericsson, Nokia or Siemens as potential partners. In addition, Gupta’s strategy also considers outsourcing the build-up, maintenance, and servicing of Bharti’s core IT infrastructure to IBM. The next section discusses the advantages and disadvantages of the Gupta outsourcing agreement, backing them up with relevant theories and examples from an external source. Furthermore, the following section highlights how the outsourcing agreement works toward building Bharti’s core competencies.

Discussion

This section discusses the advantages and disadvantages of the Gupta outsourcing agreement and then highlights how the advantages of the outsourcing agreement work towards building Bharti’s core competencies discussed in question 1.

Advantages of Bharti’s Proposed Deal

Firstly, the proposed deal can enable Bharti to reduce operating costs (Oshri, et al, 2009).

Typically, suppliers will always want to sell more equipment than required, while the operator will aim to maximize coverage and capacity with as little equipment as possible. The outsourcing of the build-up, maintenance, and servicing of the telecom network to equipment suppliers can reduce the operating cost because this agreement helps get rid of the inherent conflict of interest between Bharti and telecom suppliers. The proposed agreement will ensure the optimum use of equipment to provide the required network capacity.

A typical network uses only 60% to 70% of its installed capacity at any point in time, it is an industry practice to purchase excess 20% to 30% capacity to in order to keep on step ahead of customer demand. For Bharti, in terms of capital assets, the excess 30% excess capacity through 2007 would represent around $300 million to $400 million, hence outsourcing this process presents a huge cost-saving strategy for Bharti.

Secondly, the proposed outsourcing deal not only gives Bharti access to the best possible technology, these partnerships also enable Bharti to focus on core competencies (ibid.). By freeing itself from managing technology, the company can use all its resources to focus on its core competencies – strategic management i.e building its own strategy without external consultants; increasing sales revenue, branding and promotions, and providing excellent customer services – through constant innovation and providing value-added services, identify customers pain points and working with regulation and regulators.

Finally, the proposed outsourcing deal helped improve Bharti’s Time-to-Market (Ibid.) From the case study, when there is a need for network expansion, typically the process of planning, tendering, financing, purchasing, and installation could take between six months to a year. With this partnership, the speed comes because each partner is a specialist and can do a bit better than anyone. This entire arrangement allows Bharti’s network utilization to be high all the time. The agreement gives Bharti the ability to increase network capacity in a quick time and creates a situation where the capacity is made only when they are ready to be consumed.

Disadvantages of Bharti’s Proposed Deal

Firstly, the proposed outsourcing agreement can be hindered by the cultural difference between the two organizations (Oshri, et al, 2009). Bharti being an Indian-based company with a start-up culture, IBM was quite the opposite. The potential vendors looked at the deal as an arrangement where the main objective is to provide world-class infrastructure while for Bharti, the main objective is to respond to a high-intensity environment of growing customer needs. There is bound to be initial glitches between these two diverse objectives, but communication between the two parties can help in sorting this out. Secondly, the proposed agreement state that Bharti staff carrying out the task to be taken over by the vendors would be transferred to the vendors respectively. This can lead to another important issue of loss of loyal staff.

In terms of achieving Bharti’s core competencies, the proposed agreement to outsource the telecom infrastructure to suppliers such as Ericsson, Nokia, or Siemens and internal IT infrastructure to IBM will enable Bharti to focus on improving Sales, providing excellent customer services through “error free” services (low call drop rates, value-added service, etc), cost efficiency and innovation in new products and services, promotion and identify customers pain points. These outsourcing agreements will enable Bharti to free up resources as they no longer have to worry about technology.

Conclusion

The proposed outsourcing agreement presents more advantages than disadvantages to Bharti and will help Bharti achieve its core competencies. The main advantages provided by the agreement are cost saving, quicker time to market, access to the best technology, and enabling focus on core competencies.

Question 3

Introduction

Bharti outsourcing agreement like any other presented some major concerns mainly due to uncertainties the deal could cause for Bharti itself. According to the case study, a senior employee acknowledged the fact that vendors such as Ericsson/Nokia /Siemens have access to the best technology but questioned the vendor’s operative expertise in managing network installation, servicing, and maintenance of the Telcom infrastructure.

Another issue raised by the marketing and IT department was if IBM will be willing to work fairly with other vendors, would the agreement mean Bharti will no longer have access to certain creative new applications? Also, whether hardware and software not supported by IBM would no longer be available. There were also concerns about staff relocation, some staff might not want to be transferred or the vendors might not want to take them. The following section discusses Bharti’s major concerns about entering an outsourcing agreement with IBM and Ericsson, Nokia or Siemens in detail, backing each point with relevant theories.

Discussion

Firstly, Bharti’s main concern with the outsourcing agreement to Ericsson, Nokia or Siemens is their delivery competency (Feeny, D et al, 2005) – particularly the vendor’s lack of domain expertise (ibid.). The vendor may provide access to the best technology, but that doesn’t necessarily mean that they are competent in planning, building up, installing, servicing, and maintaining of telecom infrastructure.

This increases the chances of Operational risk (Aron, R et al, 2005) as network expansion processes might not operate smoothly after being outsourced. To avoid this risk, Bharti being more experienced in planning, building up, installing, servicing, and maintaining of telecom infrastructure can codify the process and share knowledge with vendors (ibid.). Alternatively, domain expertise can be transferred from clients to vendors via employee transfer which is already included in the agreement. This will allow vendors to apply and retain sufficient professional knowledge of the target process to meet Bharti’s requirements.

Furthermore, another concern with the outsourcing agreement to Ericsson, Nokia or Siemens is Bharti’s lack of control (Feeny, D et al, 2005). The proposed agreement gives full control of the management of telecom infrastructure to the vendors. The telecom infrastructure is the backbone on which Bharti provides services to its customers. In a case where an issue arises such as a power failure, Bharti has no control and is fully dependent on the vendors to rectify such issues. The major effect will be felt by Bharti and this can damage the brand image or even make loyal customer switch providers.

Bharti can solve this problem by ensuring the selected vendor has good relationship competency (Feeny, D et al, 2005), this will ensure the vendor will go to the far extent to cultivate a win-win relationship that will align Bharti and vendors’ goals and incentives over time.

Thirdly, Bharti’s main concern with the outsourcing agreement to IBM is their transformation competency – particularly in IBM technology exploration (ibid.). Technology exploration is the willingness and ability of a vendor to swiftly deploy new technology to support critical services and ensure client meet their improvement targets (ibid.). For instance, in a case where IBM fails to innovate or is behind competitors in deploying new technology, Bharti will be directly affected by this because competitors might have more advanced technology hence gaining an advantage over Bharti.

Finally, an additional concern with the outsourcing agreement to IBM is their delivery competency (ibid.) – particularly the lack of sourcing. Sourcing is the vendor’s ability to tap the resources needed to meet the client’s service targets (ibid.). The proposed agreement permits IBM to manage all Bharti internal IT architecture, and applications including applications provided by other vendors. IBM might not be willing to implement a third-party application that carries out an operation better than their own product. This puts Bharti employees at a disadvantage because they might not have access to new better creative applications.

IBM might not be willing to work fairly with other vendors. Software and hardware that are not supported by IBM might no longer be available. Employees may be required to learn new skills to effectively use IBM technology, this puts pressure on HR to deploy the required training and initially can lead to less productivity.

Conclusion

The two major concerns Bharti would have about entering an outsourcing agreement with IBM and with Ericsson, Nokia or Siemens are their transformation competency and delivery competency respectively (Feeny, D et al, 2005). For IBM, Bharti can solve this problem by ensuring the selected vendor has good relationship competency, this will ensure the vendor will go too far extent to cultivate a win-win relationship that will align Bharti and vendors’ goals and incentives over time. For Ericsson, Nokia or Siemen, Bharti can share knowledge by codification and through domain expertise transferred from clients to vendors via employee transfer.

Question 4

Introduction

In the context of outsourcing, governance refers to the mechanisms, processes, and people that oversee and direct a business entity’s third-party contracts and relationships. (EY, 2016) The implementation of an effective information technology outsourcing governance has become an important problem for modern outsourcing companies. Efficient IT outsourcing management will ensure that Bharti’s IT outsourcing strategy is in line with the business goals.

A study by (Weill and Ross 2004) shows that companies with superior IT governance achieved 25 percent higher profits than those with poor governance, given similar strategic objectives. Bharti needs an effective governance mechanism to mitigate some of its concerns and capture any outsourcing advantages identified. In the discussion, Bharti’s outsourcing concerns will be reviewed and effective governance mechanisms to mitigate concerns will be suggested by the author.

Discussion

Organizations with ineffective IT outsourcing governance suffer due to inaccurate information quality, inefficient operating costs, loss of competitiveness, lack of control, and failure of the organization itself (Schwartz 2004, Woodhead 2004). Vaswani (2003), a study to determine the effectiveness of IT outsourcing governance mechanisms, revealed that three mechanisms— an IT outsourcing steering committee, senior management involvement in IT outsourcing, and corporate performance measurement systems — have been positively linked to the effectiveness of IT governance.

Firstly, Bharti can utilize this mechanism by setting up an IT outsourcing steering committee, the committee serves as a high-level managerial team, comprised of representatives from divisions within Bharti (such as Business executives -Mittal, and the CIO- Akhil Gupta), with the main function of linking Bharti Telecom Infrastructure and IT architecture outsourcing strategy and main business strategy (Nolan 1982; IT governance Institute 2003b). Bharti can also set up a Vendor Management Office (VMO) that reports directly to the steering committee.

The VMO is responsible for constant monitoring and reporting of risk/issues and status and governance reports on a regular basis to the steering committee. VMOs also monitor the knowledge transfer process (Deloitte, 2014). Bharti VMO requires Service management and an IT service management department (ibid.). Each of these departments works with vendors in their respective areas to ensure service delivery runs smoothly. Services management manages day-to-day vendor interaction and is accountable for service delivery (ibid.). The IT service manages vendors’ relationship, manages vendors’ performance, track vendors’ finances, provides vendors governance, adherence to agreed service levels, and facilitate resolutions of vendor-related issues (ibid.).

For Bharti, a steering committee can mitigate the concern of Ericsson, Nokia, or Siemens delivery competency– particularly the vendor’s lack of domain expertise. This governance mechanism will ensure the codification and transfer of required knowledge to the vendors through the activities of the VMO.

Furthermore, one of the steering committee’s duties is to oversee the implementation of the board’s strategic agenda. For Bharti to achieve this outcome, an effective performance management mechanism is necessary. In order to ensure the quality of services delivered by vendors, network capacity and IT infrastructure will be subjected to a number of quality control checks specified on the service level agreements (SLAs).

These include new application implementation delay, hotline customer satisfaction, and measure of network quality, such as the number of dropped calls, the number of incomplete calls. A penalty and reward mechanism can be set up to manage performance effectively. Such a system enables the management and the board to detect and correct any deviations and alter the strategy when necessary (IT Governance Institute, 2003b).

This governance mechanism can mitigate Bharti’s concerns (such as lack of control in the Nokia/Ericsson or Siemens agreement and lack of technology exploration in the IBM agreement), this will ensure the vendor will go to the far extent to cultivate a win-win relationship that will align Bharti and vendors goals and incentive over time.

Finally, many researchers have investigated the critical role of senior management in the success of IT outsourcing governance. Senior management involvement appears to result in effective IT outsourcing planning (Rockart 1988; Schuman and Rohrbaugh 1991; Earl 1993; Cerpa and Verner 1998; and Sohal and Fitzpatrick 2002).

Bharti can involve senior management through a practice of ensuring senior interactions with vendors and also through regular meetings as per contractual agreement and through relationship alignment – i.e. annual senior interviews (Delioitte, 2014). This governance mechanism can mitigate the concern of IBM domain expertise in lack of sourcing. Senior management meetings can ensure IBM and Bharti’s objectives are aligned.

Conclusion

In conclusion, for Bharti, effective governance will ensure Bharti captures the advantages for outsourcing and also mitigate some of Bharti’s concerns. The governance mechanisms include the involvement of senior management, the implementation of an effective performance measurement system, and the creation of an outsourcing steering committee.

Question 5

Introduction

Outsourcing involves both vendors and clients and it is important that both parties mitigate any concerns to ensure a win-win situation. In the discussion, any major concerns that IBM or Nokia should be aware of regarding the outsourcing agreement with Bharti would be outlined and reviewed.

Discussion

Firstly, a major concern for Nokia is the risk of being stuck with a significant investment in network equipment that they made on behalf of Bharti in the event that Bharti did not use the equipment. This presents concern because according to the case study, Bharti will only pay for network capacity when the capacity is up and running and have been used by Bharti customers.

Furthermore, a concern for both Nokia and IBM is the cultural difference between the companies. Bharti is an Indian-based company with a start-up mentality, and the vendors are the completely opposite – large multinational companies. The proposed agreement states that Bharti staff presently carrying out tasks that would be taken over by Nokia be transferred to Nokia. For Nokia, this also creates a concern of managing the cooperative cultural mix and managing sudden expansion in the number of employees.

Finally, a major concern for IBM was the payment structure. The proposed agreement states that IBM will receive a share of Bharti’s revenue for its services, although IBM has to invest in Bharti immediately without any form of down payment. In a case where Bharti makes a low revenue, IBM is at a risk of losing. Also, IBM will have to forecast Bharti’s revenue growth in order to estimate how much it would get paid, this forecast estimation is often inaccurate. The governance mechanism to mitigate this is the involvement of senior management (Delioitte, 2014). Senior management meetings can ensure IBM and Bharti’s objectives are aligned. IBM can also be involved in Bharti’s internal board meeting as per the contractual agreement since their revenues are tied.

Conclusion

In summary, the major concern of IBM and Nokia about entering an outsourcing agreement with Bharti is the cultural difference, the payment structure, and the risk of investing in unutilized network equipment. Some of these concerns can be mitigated through effective governance mechanisms such as involving senior management.

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