Chapter 6. Verification of Innovation Dynamics with Case Studies
6.6. Discussion and Implication
In the above sections, the five case studies discussing innovation and value creation are all consistent with Innovation Dynamics. They might not have Innovation Dynamics in their minds, but unwittingly, they follow the pattern of Innovation Dynamics. If a corporation is aware of Innovation Dynamics, it can avoid stepping into decision traps. By examining the operations of each link in Innovation Dynamics, corporations can understand if each and all links are properly developed, so that they can continuously upgrade their products/services and maximally create value by releasing pains and frustrations for the customers in the potential domains. The Innovation Dynamics can help them to be as successful and competitive as Super Girl, YouTube, Nintendo, Wretch, or 85C Bakery Cafe.
The Innovation Dynamics also points out that each and all links must be properly examined and developed. Missing one of them could lead to serious mistakes. For instance, if the distribution of the created value is unfair or ineffective, the stakeholders can be disintegrated or lose the morale for continuously upgrading the products/services.
Without Innovation Dynamics, people can easily get into decision traps. They may focus on some activities in certain links and neglect those on other links (decision making in changeable spaces), which could lead to serious problems. As an example, suppose corporations emphasize on all the links, except that of pains and frustrations of the customers in the potential domains. They may not be able to
provide the products/services which could really satisfy customers’ needs and release their charge. For example, in Nintendo’s case (Section 6.4), its opponents (Sony and Microsoft) focused their video game console design on the game’s image/sound effects to satisfy people’s gratification of sight and sound. They paid little attention to the gratification of physical movement and emotional excitement of winning while playing a video game. As a consequence, they lost their market competitiveness to Nintendo. The case clearly shows that if companies cannot create value, they cannot survive. To create value, companies need to reduce or remove the pains and frustrations of potential customers in the potential domains.
Let us look at the following example, the failed acquisition of BenQ-Siemens, to illustrate how innovation and business management can fail if decision makers are unaware of the major points of innovation dynamics. BenQ-Siemens was the mobile communications subsidiary of the Taiwanese BenQ Corporation. In October 2005, the division was formed out of BenQ's acquisition of the then struggling Siemens Mobile Group. The goal of the company was to pull together BenQ's lifestyle experience, their renowned design team, and Siemens' engineering capabilities to create a new leader in the mobile communications arena. Unfortunately, due to huge financial losses of over NTD35 billion (which is about USD1.1 billion), in September 2006, BenQ announced that it would stop investing in the German division of the company (Siemens Mobile Group). BenQ-Siemens filed for bankruptcy in a Munich court in 2006, and the acquisition failed.
According to Pritchett (1987), companies have as much as a fifty-fifty chance of achieving a successful merger, with the worst case findings of up to 80 percent of all mergers being disappointments. Merger and acquisition, as two ways to expand corporate CSs, are actually an integration of different corporate HDs, including different human resources, skills, technologies, management styles, problem solving attitudes, corporate cultures, etc. Some of these parameters are observable, but some are not. If BenQ had understood innovation dynamics, it would have been aware that in link (i) to (ii) of innovation dynamics (see Figure 6), the variables hidden in PDs (such as attitudes, management styles, cultures, etc.) must be taken into account when expanding or transforming their CSs. The difficulties of integrating two corporate CSs and HDs should not be underestimated, and this risk-taking strategy could have been avoided or at least reconsidered.
A similar experience occurred to Dell, which attempted to reinvent itself from a PC and server maker to an all-encompassing IT products and services company, but did not succeed in launching its first smartphone product or buying a small,
little-known developer of high-end data storage technology called 3PAR (藍書平, 2010). Although it is good at manufacturing and delivering low-cost PCs, Dell missed cues from its markets that the company needed to change. It focused on maximizing earnings out of its existing resources and capabilities rather than thinking about what its customers needed. As indicated in link (ii) to (iii) of innovation dynamics, this can lead to failures or mistakes. Therefore the company has not had an easy time claiming a bigger stake in higher-margin corporate-focused businesses – like storage services that 3PAR offers – and fast-growing consumer markets such as smartphones.
Chapter 7. Contributions and Conclusions
7.1. Contributions
While pursuing a better decision making tool or problem solving model, one must remember that it is human beings who are making decisions. To solve decision making problems efficiently and effectively, one should manage, improve and enhance the most essential decision making tool - our own human systems. This dissertation introduces the concepts of Habitual Domains and decision makings in changeable spaces as to describe the dynamics of human behavior and the changing nature of decision making problems. Understanding the dynamic feature of parameters in decision making, the behavior dynamics and HDs of ourselves and others can enable people to study, search, and identify the best change of the relevant parameters as to become a superior strategist and decision maker.
This dissertation also introduces the concepts of Competence Set Analysis and discusses the relationship between CS and decision blinds and traps. As suggested by this study, by looking into the depth of potential domains to acquire and master the needed competence sets, decision makers can reduce decision blinds, avoid decision traps and obtain better solutions for decision problems in changeable spaces.
Based on HD theory and CS analysis, a framework of Innovation Dynamics is introduced. The dynamics describes how we can expand and enrich our CSs on one hand and maximize the value of our CSs on the other hand. In the aspect of business management, corporations are not just facing one single decision problem but a sequence of problems in changeable spaces. Innovation Dynamics provides a framework to show systematically the cycling processes including transforming CSs, developing products/services, releasing pains and frustrations for targeted customers, creating and releasing charge, creating and distributing values, etc. It allows us to examine key management problems in potential domains in the dynamics. The contributions of Innovation Dynamics can be summarized as follows:
(i) Providing a blueprint for corporations to create value:
In the increasingly competitive world, many corporations in search of higher competitiveness have turned to such means of cooperation as direct investment, strategic alliances, common development, acquisitions, etc., to maximize corporate synergy and expand markets. The Innovation Dynamics proposed in this paper are the blueprint these corporations need. By utilizing the aforementioned clockwise and counterclockwise exploration of the framework, one can effectively discover a
corporation’s innovation direction and value. The success of this study will provide corporate leaders with a concrete and powerful management ideal and means, enabling them to continue creating value and attain sustainability in a competitive environment.
(ii) Creating a virtuous cycle in non-profit organizations (NPO):
Besides enhancing competitiveness and creating value for business corporations, Innovation Dynamics can also be applied to NPOs. Satisfying the life goals and obtaining a sense of achievement are all intangible values; these potential values cannot be measured with money. As the saying goes, “You can buy a house, but you can’t buy a home; you can buy sex, but you can’t buy love.” The values in potential domains are not quantifiable. NPOs carry out public services and pursue the prosperity of society; Innovation Dynamics can assist in sublimating the invisible and intangible values within to create a virtuous cycle. Moreover, even though NPOs seem to have nothing to do with commerce, they do need knowledge of organization management. The management keys emphasized at each link of Innovation Dynamics can be a useful reference of organization planning and strategic implementation for NPOs.
(iii) When applied to the self, being able to bring good to self and others
Every person has his or her own competence sets; Innovation Dynamics can also be applied to the self to utilize one’s competences (including those in PDs, such as contacts, people skills, etc.) and create values, thereby releasing others’ pain and frustration, creating one’s own values. Similarly, when we experience pain, frustration, and need, we can also use this system to understand how to transform our CSs and release the pain and frustration of a certain group under certain circumstances. By following the clockwise or counterclockwise directions of the Innovation Dynamics, we can continuously create and accrue our CSs, continuing to release the pain and frustration of ourselves and others; and we will move towards an ideal habitual domain (HD), giving us more strength, higher productivity, and more joy in increasing our own energies, so as to release the charge, pain, and frustration of even more people. As a result, the success of the study of Innovation Dynamics will not only bring advantages to corporate management, but also bring prosperity to personal management of the self, even bringing prosperity to society as a whole.
7.2. Conclusions
In this dissertation, the dynamics of human behavior, the concepts of decision
making in changeable spaces, HDs, CS analysis, Innovation Dynamics and its verification are introduced. It first explores the dynamics of human behavior through eight basic hypotheses, which is a dynamic decision making in changeable spaces.
The stability of this behavior dynamics leads to the concept of HD. The stability of HD on one hand makes us to be more efficient for routine problems; on the other hand, it can hinder one’s innovation.
Decision problems, like human beings, have their HDs. Some of the related parameters, such as alternative sets, criteria sets, outcome sets, etc., are observable and existed in actual domain, but some of them are invisible and hidden in the reachable domain and potential domain. The interaction of these visible or invisible parameters forms a changeable space. In fact, CSs of a problem is a projection of the HDs of the decision makers on the problem. This study enable us to understand that to obtain better solutions for decision making in changeable spaces, decision makers need to look into the depth of potential domains to acquire and master their needed CSs.
Based on Habitual Domains theory and Competence Sets analysis, Innovation Dynamics is introduced to describe a process of dynamic decision making in changeable spaces. This framework is closely related to studies in management fields;
furthermore, it is connected with psychology and behavioral science, which makes the process and results of innovation better suited to satisfy the true needs of human nature, and releases the pain and frustration of target group more effectively and efficiently.
Innovation Dynamics delivers the concepts of "sustainable innovation" and
"continuous value creation", which perfectly match the basic objectives of a corporation: sustainability and profit. This framework does not emphasize a one-time innovation success; rather, by continuously exploring the abundant resources in potential domain, it assists the corporation in perpetual development and growth.
Besides the “clockwise cycle” of transforming competence sets into goods and services, creating value, and distributing value, Innovation Dynamics also has the
“counterclockwise cycle” of setting the goals of value, looking for the pain, frustration, and charge of target customers in potential domains, finding the right product or service to develop, discovering the needed CS transformation, and releasing the pain and frustration of everyone involved (including the corporation and potential consumers) as to satisfy their needs. The former provides a direction for those corporations that “already own a certain competence set but do not know how to
utilize its values”; the latter is reference for corporations that “lack innovative spark and do not know from where to transform competences to open a process of innovation.” Whether it is the clockwise or counterclockwise cycle, Innovation Dynamics can comprehensively explicate the process by which corporations innovate and create value, proving it to be an all-encompassing theoretical framework. The case studies discussed in this paper, such as Super Girl, Wretch, YouTube, Wii, and 85C Bakery Café, all perfectly exemplify the Innovation Dynamics framework, powerfully depicting the process and means by which a corporation or organization creates value or enhances competitiveness.
Innovation Dynamics explores that in a corporation’s process of enhancing competitiveness, there must be breakthroughs and expansions in the corporation’s own habitual domain, and the corporation must effectively transform and utilize its competence sets. In the area of the target customers, the corporation must find a way to locate consumers in the PD; in satisfying customers’ needs, it must be able to discover and satisfy the wants and needs in the PD. When put to practical application, the different departments of a corporation can perform according to their specialties in the different stages of the Innovation Dynamics process, so as to implement the Innovation Dynamics framework more effectively.
Future studies remain to be explored. For instances, how to identify and understand the relevant and/or key parameters and their potential change in decision making effectively and efficiently? How to restructure the relevant parameters so that each participant in the decision problem can declare a victory as to form a win-win strategy? How to effectively detect and deal with decision traps and decision blinds before we commit mistake? How to systematically analyze the invisible potential domains as to find effective method to acquire, adjust and allocate needed competences in potential domains? The hypotheses of Innovation Dynamics need to be tested. Mathematical analysis for specific decision problems in each link of Innovation Dynamics would be of great interest to study. Answers to these questions will bring value to both practical decision making in changeable spaces and academic research in decision science.
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