Category: Academic Theory

A signpost to useful information on the academic theories and frameworks used in the international business and global strategy literature.

Search and the Role of Learning- About in Developing Ideas for New Products and Services

In addition to generating new knowledge, conducting R&D leads to smarter organizations because the knowledge these organizations already have helped understand new information when it becomes available. The best way to conduct R&D and to improve the organizational innovation and creativity is to learn-by-doing and to engage in search activity. In this section, we will discuss searching for ideas first and we will discuss learning-by-doing later.

Learning-about, or the search process, involves reading magazines, books, and technical articles, attending schools, observing the competition, one-on-one discussion, interacting with customers, and attending symposia and conferences. It involves acquiring knowledge and integrating and synthesizing that knowledge. This is the first step in developing individual and organizational knowledge structures. Learning-about in its basic form is search and synthesis. It is too expensive in terms of time and resources for organizations to build every product and service that is conceived. Many companies therefore learn-about an idea by reading, interacting with experts, and also by attending symposia and conferences related to an emerging technology. The goal is to gain insight and understand the potential of an emerging technology or a new idea.

It is our thesis that book learning, lectures, and even homework are usually beneficial. This is essentially the learning-about process. Search plays a key part in the learning-about process. This is particularly true when an organization searches outside the organization for ideas related to product innovation. Search can be classified in terms of the breadth and depth of the search.
[28] The breadth of the search refers to the number of outside sources used and consulted. The depth of search refers to the intensity of the relationship between the searcher and the external sources. Table 1.1, “External Sources of Information” lists potential sources of external information that can be used by entrepreneurs and product developers when engaging in an innovative activity.

As illustrated in Figure 1.9, “Breadth and Depth of Search and Innovative Activity” (adapted from Laursen and Salter [29]), it appears that the breadth of search is important for incremental improvements innovation and that both breadth and depth of search are important for new and radical innovation. In terms of the breadth of the search, it appears that the sweet spot is about eleven sources plus or minus two sources (see Figure 1.10, “Breadth of Search and Innovative Performance”, adapted from Laursen and Salter [30]). This is a rather useful finding upon further reflection. When searching for new information, it is often difficult to determine how much information to gather and the number of sources for collecting information in order to avoid information overload. The point is that you have to seek out a variety of sources of information in order to improve the chances of introducing a successful innovation.

Table 1.1. External Sources of Information

Sources of information from the market

Suppliers of equipment, materials, components, or software

Clients or customers

Competitors

Consultants

Commercial laboratories/R&D enterprises

Sources of information from institutions

Universities or other higher education institutes

Government research organizations

Other public sectors, e.g., business links and government offices

Private research institutes

Sources of information from the profession

Professional conferences and meetings

Trade associations

Technical/trade press and computer databases

Fairs and exhibitions

Sources from specialized places

Technical standards

Health and safety standards and regulations

Environmental standards and regulations

Screen Shot 2015-02-07 at 14.34.43

Extracted from

Developing New Products and Services by the Saylor Foundation: Available on http://www.saylor.org/site/textbooks/Developing%20New%20Products%20and%20Services.pdf

The Role of R&D Process in Innovation

The objectives of R&D are to develop existing and new core competencies, to further existing and new products, and to develop existing and new business processes through invention and innovation. [23] The R&D process is the engine that drives product and process differentiation. Innovation is typically defined as the ideas, the products, the services, or processes that are perceived as being new and different and they have been implemented or even commercialized.

Research and development are usually thrown together as one concept, but in reality they are somewhat distinct processes. [24] Research is typically considered to be science-oriented whereas development is the mechanism for translating the science into commercial products and services. Basic science can be thought of as the engine for pushing new discoveries and ideas into society. This is in contrast to the concept of market pull. Market pull is essentially the process of translating the basic science into products and services in order to satisfy customer needs, wants, and demands. The interaction between science push and market pull creates a very powerful feedback loop that spurs on the development and diffusion of new products and services. [25]

As noted earlier, the diffusion and awareness of technologies typically follows an S-curve. In the early stages of the S-curve, there are very few people aware of the technology. Market research is not important at this stage because there are few untapped wants because of the lack of awareness. As a technology matures and begins to take off, there is a propagation of awareness with increased insight of the possibilities of a technology. [26] It is at this stage that market research becomes viable. It is also at this stage that many similar products begin to emerge because of the surfacing of a kind of group aha because of the interconnectedness of businesses and research groups. This group aha occurs because market research by producers and product development laboratories leads to the same conclusions about consumer wants. Once consumers begin to use products and have had the opportunity to experience a product, they also begin to identify areas of deficiencies in the product and areas where a feature might be added. And this is where market research is very effective because market researchers are very adept at identifying changes in consumer wants.

As the market matures, the demand for the products also begins to decline with the emergence of substitute products and technological obsolescence. It is then necessary to re-prime the pump and reload science. This is done by working with new science and new technologies in order to identify new opportunities for developing products and services. The figure below “Push, Pull, and Reload” illustrates the concepts of science push and market pull and how they relate to diffusion and awareness.

Screen Shot 2015-02-07 at 14.27.01

Some individuals believe that there is a limit on the ability of innovative activities to bring new products to the market. This suggests that differentiation cannot go on forever. This line of reasoning is similar to the idea attributed to someone in the U.S. patent office that: “Everything that can be invented has been invented.” There is good news, however, from the patent office. Research has shown that companies can keep innovating and still contribute to the bottom line because it appears that, in general, there are no diminishing returns to scale for R&D expenditures. [27] In essence, continued investment in R&D yields rewards, revenues, and profits. Even though a particular technology may have a performance limit, advances in R&D and in basic science along with customer pull will start the process anew. Moore’s law continues to work for Intel because they continuously re-prime the pump. They have gone from focusing on the clock rate of their CPU, which is constrained by thermodynamic considerations, to exploring multiple CPU cores and restructuring the overall microarchitecture of their chips.

Extracted from

Developing New Products and Services by the Saylor Foundation: Available on http://www.saylor.org/site/textbooks/Developing%20New%20Products%20and%20Services.pdf

Product and Technology Life Cycles

Life cycles are a very useful way to understand how products and technology evolve over time. They are very useful in tracking product and process differentiation. They can be used to understand the evolution, growth, and decline of ideas and phenomena in the physical world, the plant and animal kingdom, and technology. The most commonly used life cycles in business are the technology life cycles and the product life cycles. They are used to track the diffusion of technologies and products.

Diffusion is the acceptance, adoption, and awareness of a technology or a product by individuals. The technology and product life cycles are essentially the same, except the product life cycle is focused on selling products while the technology life cycle is focused on innovation. The technology and product life cycles consists of four phases that follow the classic S-curve and they consist of awareness of the technology, technological growth, technological maturity, and a decline of interest in the technology

Screen Shot 2015-02-07 at 14.22.05

Extracted from:
Developing New Products and Services by the Saylor Foundation: Available on http://www.saylor.org/site/textbooks/Developing%20New%20Products%20and%20Services.pdf

The Kingpins of Product Differentiation and Entrepreneurial Innovation Activity

Jeff Bezos, founder and CEO of Amazon.com, and Steve Jobs, the former CEO of Apple, are excellent models of serial entrepreneurship and the differentiation strategy. Many businesses give lip service to the notion of satisfying customers’ wants. Bezos means it. He is a maker of markets, a veritable doer and inventor. Amazon did not have skills in developing electronic books or selling cloud computing, so Bezos embarked on a mission to develop competencies in electronic books and cloud computing. His goal was to satisfy customer needs for books anywhere and computing anywhere at any time at an attractive low price. Bezos even enlisted a Harvard MBA to craft a business plan for the cloud computing initiative. Here is the essence of the Bezos approach for developing new businesses:

  •   The business should be capable of generating significant returns.
  •   The business should be able to scale substantially.
  •   The business should address an underserved market.
  •   The market should be highly differentiated.
  •   The opportunity should be in an area where a company is well-positioned to provide a new service.
    Steve Jobs was always an experimenter and a doer. Although some of Apple’s products, such as the Newton, the Lisa, and Apple TV, might be considered failures, he bounced back numerous times and introduced dazzlingly exceptional products that have and still are dominating the market. He is a superb example of an experimenter who sometimes failed in the marketplace, but learned from his mistakes and achieved subsequent success. This is the hallmark of the serial entrepreneur.Our view of innovation does not require an expensive research lab, but it can. It does not demand a large team of physicists, chemists, engineers, and software developers, but it can. It does not need lots of money, even though it helps. Innovation, as always, just demands hard work and constant attention to searching for new ideas and building things, and is often accompanied by failure. Success is the result of a never-ending process of trial and error and being entrepreneurial.

    Extracted from

    Developing New Products and Services by the Saylor Foundation: Available on http://www.saylor.org/site/textbooks/Developing%20New%20Products%20and%20Services.pdf

Monopolistic Competition

Edward Chamberlin published the foundations of monopolistic competition in his 1933 book entitled The Theory of Monopolistic Competition. It is considered by some economists to have the same stature as John Maynard Keynes’s General Theory in revolutionizing economic thought in the 20th century. [8] The idea behind monopolistic competition is simple in form and powerful in practice.

Monopolistic competition involves many buyers, many sellers, and easy exit and entry, with slightly differentiated products. The sellers in these markets sell products that are closely related, but not identical. They have features that differentiate them from the competition. Usually, the buyers and sellers also have good information on the attributes of the products and the prices of the products in the marketplace. Indeed, most products and services are sold in markets characterized by monopolistic competition. The list includes jewelry, movie production, food, entertainment, many electronic gadgets and components, some durable goods, books, crafts, soda, houses, cars, consulting businesses, software, game consoles, restaurants, bars, and so forth.

A monopolist is a price setter and a business competing in a perfectly competitive market is a price taker. Most businesses strive to be price setters within a certain range of prices by offering a product that is closely related, but not exactly identical to other products in the market. The key strategy for competing in markets characterized by monopolistic competition is to offer products that are differentiated. The products are sort of quasi-substitutes, but they still resemble the original product or service. For example, Apple developed the iPod to compete with existing MP3 players.

According to standard economic theory, a purely competitive market has many buyers and sellers and each individual firm is a price taker. In essence, consumers and producers determine the market price for a product or service. In perfectly competitive markets, there are many sellers and buyers, and entry into and out of the market is easy. In a perfectly competitive market, companies sell their products at prevailing market prices where marginal revenue equals marginal cost. In actuality, every business would like to control the market, set the price, and be a monopolist. All businesses should strive to compete as a monopolist, even if it is in the short term. The goal is to rake in lots of money in the short term because your company is the only seller of a slightly differentiated product or service. [9] This will be short term (unless you have an exclusive patent on a product, own a large oil field, or have exclusive rights to providing cable or utility services) because successful products will always attract the competition. The only way to compete in contemporary markets is to become a serial entrepreneur, to constantly refine and reposition your products, and to function as a near-monopolist in the short term.

Source
Developing New Products and Services by the Saylor Foundation: Available on http://www.saylor.org/site/textbooks/Developing%20New%20Products%20and%20Services.pdf

The Indian Avatar of Democracy

I must start this post by recanting a bit of history.
In Athena, circa BC 508, Cleisthenes , an aristocrat and grand son of a tryant is credited with creating demokratia – ‘government of the people by the people for the people. Although, some research claim that democracy had been around in an earlier practice in 1500 BC. Democracy as a form of government in Athena would survive for another 150 years until the Roman Invasion subdued it. Revolutions would reawaken democracy in 18th century France and US.

In the modern world, we celebrate the spread of democracy and its core concepts, linking it with concepts of personal freedom, free trade, liberty and freedom of expression.  We are conditioned to believe that representative democracy is the best form of government for all states. While true in most cases, the process of electing representatives in many states have had its inherent flaws. 

In Athena, representatives were elected by lots, as this was considered to be the most democratic process, not by election.  The argument was that election would favour the rich and powerful over ordinary citizens. Another practice was the practice of ‘ostracism’, where citizens could vote to exile politicians for up to 10 years. True representative power!

Consider now case of India, celebrated as the largest democracy with over 814 million voters and having survived as a democracy in a region synonymous with dictatorships, military rule and single party states. A true poster for democracy with over 6 national political parties, 36 state parties, 324 regional parties and 24 new parties awaiting approval for the 2014 election.  The electoral college of 814 million voters choose 543 representatives to represent them in parliament. The people power of 1.2 billion citizens.

A closer look at this election, reveals the flaws with India’s brand of democracy. 
  • Identity politics based on caste, religion and family ties, dominate the selection of candidates and their winning of seats.
  • Bigotry and hate speeches are often used to mobilize vote banks. One potential MP has 19 cases registered against him on account of inciting violence.
  • Politicians use ‘ dummy’ candidates having similar names to confuse/fool voters and thus split voting patterns.
  • 18% of the 1492 candidates have criminal cases registered against them.
  • A candidate of the new anti corruption party, AAP has over 300 criminal cases against him and the police still treat him as an absconder from justice.
  • 41% of the opposition BJP party’s MPs face criminal charges, compared to  24% of the ruling congress party’s MPs 
  • 30% of the current representatives in parliament have criminal records of some sort.
  • The supreme court of India tried a form of ostracism by ordering convicted politicians to be banned from politics. This was opposed by the ruling party and has now been withdrawn.
  • Over 30 candidates have been charged with rape.
  • Corruption dominates Indian elections, and the state has slipped down 15 places to be ranked as the 95th most corrupt country.
  • 3 Cabinet ministers have been sentenced to imprisonment whilst holding offices
  • One MP has won 4 sucessive elections whilst being jailed for life. He still continue to discharge his duties from jail.
  • A single family dynasty (Nehru-Gandhi) has dominated politics for most of India’s 64 years of democracy and we still call it a representative democracy!
  • Parliamentary seats have inherited by political families including the Gandhis and many former kings who have traded thrones for seats in the peoples parliament.
  • Every Indian MP under the age of 30 is hereditary and two-thirds of Indian MPs under the age of 40 are from political families.
  • The ruling dynasty has been charged with manipulating real estate prices and secreting billions of dollars gained from dubious deals involving guns, helicopters and ‘cows’, in overseas tax havens.
  • A Key prime ministerial candidate, Narendra Modi has been accused of engineering violence against minorities, whilst the current PM has had the dubious distinction of presiding over the most corrupt government, whilst remaining personally untainted.

Perhaps, we need to reclassify India as a Dynastic democracy ( a termed made famous by Tavleen Singh) instead of celebrating it as the world’s largest democracy.  Athenians would cringe at the state of democracy in India, if we could bring them back to today. Another apt definition could be of India being called a ‘cunning state’ that ‘capitalises on its perceived weakness in order to render itself unaccountable to its citizens‘. 

On a closing note, i would still prefer to have India’s experiment with democracy than be a subject of any other alternative forms of government. Perhaps, democracy in its Indian avatar was meant have its flaws. Or is this avatar,  truly representative of the people of India?

Putin, the EU and the return of the Black Sea spring

Another one bites the dust! Viktor Yanukovych of the Ukraine  flees to his stronghold in the eastern part of the country or perhaps has left to Russia as I write this. The people’s revolution has momentarily triumphed and we wait for the trumpets to proclaim a new constitution. The political prisoners are out too including a former PM.

Unlike other dictators , Viktor Yanukovych was an elected leader. But one who may paid for bending backwards to appease big brother Russia whist the people it seems now favoured a more southern approach to the EU zone much like Moldova.


And pray, what are the key issues that keep Ukrainian people outdoors in bad weather and see him out of the presidential palace? It seems our good friend of Russia wants to go one step and ‘manage democracy’ like Putin. He has already jailed opposition politicians like Yulia Tymoshenko, muzzled free press and introduced censorship. 


But was Yanukovych that so bad that the EU and the world should take notice? After all, the people have had no love for Tymoshenko too if recent media reports are true. We also need to remember,Yanukovych almost signed a deal with the EU before swinging completely over to the Russians.  Why do we care for another  wannabe tinpot dictator when we accept and do business with the Mugabes, the Kims, the Musevenis and the Burmese Generals?


The answer, lies in Ukraine’s geostrategic value to the EU and the grand Russian dream of Mr. Putin.  

Ukraine is Russia’s access to the black sea through its Black Sea fleet and possibly to Mediterranean if needed. Currently, with NATO’s Turkey controlling the Bosphorus end of this sea route, the fall of Ukraine is vital to the EU. Ukraine also controls  Russia’s gas terminals to Europe. Yanukovych had already supported Russia interests by allowing Russia to  lease its Sevastopol bases till 2042. He has also agreed to increase the size of the Russian fleet. 


On the other hand, Yulia Tymoshenko wants the Russian influence to diminish and for the fleet to leave, Perhaps, that is why, Mr Putin might have suggested that Yanukovych ‘manage’ her. Russia badly needs Ukraine’s ports for both export of goods and oil resources.

The EU through its  European Neighbourhood Policy would like to see the Ukraine in its embrace, partly due allowing it ‘values of democracy, rule of law and respect of human rights‘. It will also benefit trade worth over $230 billion in the region. The EU through its eastern partnership  strategy with Armenia, Azerbaijan, Georgia, Moldova and BelarusIt has stepped in with an economic deal and lifeline that may counteract the $15 billion from Russia that Ukraine was dependent on. 

Historically, it may have a point as some parts of the country were created from Poland and Austria by the USSR. But the size of the economy in Ukraine with its subsidized gas and state control of key industries may not be attractive to the EU as  new market economy.

And what is the business angle?


Sea Trade and politics
The total seaborne trade is the region is minimal about 2.5% of global trade. But Russia and the Ukraine alone handle over 75% of this trade. The Ukraine is clearly the largest country with its ports at Odessa, Mariupol, Illichivsk, Mykolaiv, Izmail. Russia on the other hand depends mostly on Novorosiysk for access to the black sea.  

The shift to the EU can provide Ukraine with more access to modernizing its industries as well as preferential tariffs to the EU which is potentially a larger market than Russian and its Eurasian allies.The EU is Ukraine’s second largest trading partner.EU-Ukraine trade in goods reached €36.6 billion in 2011. The full report is here

The game

The EU wants to limit Russian influence in the EU by making a stand in Ukraine and also to reassure its allies in Moldova and Georgia that it can still roar. On the other hand, we see Putin’s a grand dream of Mother Russia exerting influence on all satellite regions and the creation of a EURASIA union. Putin would also like to limit the EU’s ingress into his territory too.

At the end of this game, who ever gets Ukraine as prize will find it uneasy as a conquest in both economic and geostrategic terms.


The Global business of keeping America solvent

Will Rogers, the american satirist once remarked ‘ All I know is just what I read in the papers, and that’s an alibi for my ignorance’ 

It sums up the media frenzy today on the US government going broke!  

Do you really think the world’s largest economy will do that ?  How hard is it for congress to raise the debt ceiling by a few more trillions when US debt ceiling has no limits?  How gut wrenching is this decision for its lawmakers? Remember we went through all of this as congress raised the ceiling 10 times from 2001 with no moral qualms about the level of debt. After does it matter, if you owe 17 or 20 trillions if you are reconciled to never bothering to pay this debt in the foreseeable future?

The soothsayers are out already debating the US sovereign default in almost of of the world’s media. But will America default? 

Historically, barring 1979, when a technical glitch caused the Treasury to default on $120 million of notes, there has been no defaults of US sovereign debt. After all how can you default when you own and manage the global economy’s currency of choice (US$) and your debts are also denominated in your own currency?. The worst case scenario would be printing more US$ bills to repay debts as Alan Greenspan once claimed.

If this is not the frenzy is all about, let us look at a few reasons:

The first reason is political. The BBC’s Linda Yueh has touched on the adverse effects of tightening US outward FDI on the emerging economies of  Indonesia, South Africa, Brazil, Turkey and India. She calls the ‘Fragile five’. Linda argues that ‘these states have the most to lose when the US Govt  restricts capital, since all of them run current account deficits and rely on capital inflow to service their repayments’ You can read the full article by Linda Yueh here. 

These states have growing economies, are emerging out of their cocoons and most importantly are ‘gateways’ to geopolitical focus regions.  All of these five states are facing elections in 2014.  Restricting capital could strangle these economies even for a few hours and this act coupled with political instability in the states could lead to even worse effects. 

The second reason is fairly straight forward. The shadow financial institutions of the global economy stand to gain the most if there is a period of uncertainty. Gold has already  peaked in many regions and is unstable as we wait. Oil prices are also on the roller coaster as we wait for the Fed and Syria to make up their minds on which is the better evil. Chemical warfare or more debt.
Amid all of this chaos, the financial world makes its money and when the debt ceiling is raised, rests till another day

I could be wrong of course and we could see the largest economy default. 


  
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