Academy of Strategic Management Journal (Print ISSN: 1544-1458; Online ISSN: 1939-6104)

Research Article: 2021 Vol: 20 Issue: 6S

Features of a Combined Approach to Corporate Innovative Strategic Planning

Sergey Yevgenievich Barykin, Peter the Great St. Petersburg Polytechnic University

Vladimir Vasilievich Bakharev, Peter the Great St. Petersburg Polytechnic University

Angela Bahauovna Mottaeva, Moscow State University of Civil Engineering

Khakimdzon Inomdzonovich Aminov, St. Petersburg University of Economics

Ruslan Atkhamovich Ikramov, Peter the Great St. Petersburg Polytechnic University

Keywords

Innovation Process, Strategic Planning, Knowledge Flows, Management Innovation

Abstract

Currently, there is a high rate of changes in the environmental and socio-economic situation on a global scale, which leads to an increase in the competitive advantages of companies and organizations of all forms of ownership, taking into account the requirements of sustainable development of society. Authors consider the importance of innovations in management under the influence of technology necessitating adaptation of the management process to environmental changes, which can be called intellectually accelerated changes in economic reality. In this regard, corporate innovative strategies come out on top, the application of which will facilitate rapid adaptation to changes in the external environment. The article discusses the theoretical prerequisites and features of the formation of a combined approach to strategic planning by innovative processes of an enterprise, which allows, in the process of developing an innovation strategy, to take into account both the need to model one's development in the present and in the future, and the ability to quickly adapt to changing market conditions for decision-making. For the development of the company.

Introduction

The implementation of the competitive strategy of the enterprise is impossible without the constant growth of innovation activity. New technologies in the digital transformation allow modelling the dynamic nature of human performance within a socio-technical system (Nardo et al., 2015). The exchange of knowledge enables firms independently of their scale increase their impact on markets on the basis of open innovations being defined by Clayton M. Christensen as disruptive (Christensen et al., 2018). The transfer of knowledge and innovation process allow interacting people and organizations in the growing complexity of changes being under the influence of technology.

The determining value of the intellectual component in the final product and service determines the need to adapt the management process to changes in the environment, which can be called changes in economic reality accelerated by intelligence. Management of innovative processes of the enterprise, as a rule, is considered as a comprehensive activity, implying the formulation of goals, a set of innovative programs, methods of motivation and a system of financing. However, most publications do not explicitly take into account the process of generating new knowledge, which contributes to the growth of the company's assets and for the organization of which the methods of innovative management are intended.

The authors attempt to prove that the strategy of managing the organization's innovation process involves the formation of innovative combinations in order to implement some innovative project. The authors believe that the problem of innovative development research requires economic science to develop a new, in-depth approach to the study of the objective foundations of the economic structure, as well as to the analysis of the state, structure and scale of innovation capacity building. The authors consider the innovation process as a sequential chain of events: "science-technology-production", reflecting the process of transformation of scientific knowledge into innovation, which generally implies the commercialization of inventions, new technologies, types of industrial products, consumer goods and services, financial and managerial decisions.

Authors could show that the development of companies is impossible not only without the renewal of tangible and intangible assets, but also without the use of innovations in management. Such management innovations involve the organization of network interaction in the company, which will maximize the growth of new knowledge in the products produced, goods sold and services provided.

Methodology

Sufficiently differentiated business model being hard to replicate for incumbents and new entrants allows an organization to get a competitive advantage (Teece, 2010). Business models are created in connection with business strategy and innovation management as well as economic theory. Teece assumes that there is a lack of theoretical grounding in both economics or in business studies regarding the concept of a business model. It’s very interesting point of view that business models have no place in economic theory. In this article the researchers aim to develop theoretical basis connecting business strategy and innovation management on the basis of important role of the transfer of knowledge. The authors agree with the thesis that business model innovation is based on the business concept innovation (Souto, 2015). Taking into account that innovation is a means for obtaining competitive advantages (Snihur & Wiklund, 2019), the researchers suppose that a strategy for managing innovation processes should be developed on the basis of the knowledge about the ways of creation customers’ value. The work considers knowledge as a critical innovation factor (Hjalager, 2010).

The authors have studied a causal relationship between the desire to maximize the growth of knowledge, the adoption of appropriate management decisions of a strategic nature and innovative development (Figure 1).

Figure 1: The Causal Relationship of the Increase in Knowledge With the Corporate Innovative Development

In this case, the concept of "knowledge" means a deeper approach to the planning process compared to the concepts of data and information, "knowledge" is considered in this research as the result of knowledge, which can be logically or actually justified, and empirically or practically verified. Intellectual work is based on knowledge and information, which justifies the fundamental conclusion about scientific knowledge as the basis of the formed innovative economy. Scientific information can be considered as information obtained as a result of the interaction of economic agents. The formulated idea can be continued by putting forward the thesis that the basis for the development of which is the maximization of the increase in knowledge in the assets of companies, and the purpose of the emerging material, intangible, technological and financial links is to distribute the flows of knowledge, the intellectual component.

Hjalager notices that currently innovations differs from the concept of innovation in traditional academic innovation research of Joseph Schumpeter developed in 1934 (Schumpeter & Backhaus, 2003), the classical innovation issues reviewed by Dosi (Dosi, 1982), as well as Landau and Rosenberg (Landau & Rosenberg, 1986) considering innovations regarding both the manufacturing industries and patenting intensity. However recently the definition of innovations concerns immaterial products (Drejer, 2004). Traditional, technology-focused manufacturing approach to innovation have been ignored some important issues such as innovation capability consisting of the firm’s intangibles (Saunila & Ukko, 2014) and integrating technological and non-technological innovation in accordance with the synthesis approach (Gallouj & Weinstein, 1997) to analyze innovation in service firms being considered in the work (Chang, Linton & Chen, 2012). The researchers find very interesting approach of non-technological trajectories such as organizational innovation (Djellal & Gallouj, 2001) to study innovation in services.

The conclusion about the relationship of organizational and managerial innovations with the goals of the organization's development should be considered justified, since, indeed, the result of innovation implementation directly depends on the intellectual resources aimed at conducting innovative activities. The authors formulate a thesis about building a company's development trajectory based on the organization of knowledge flows and their maximization, which ensures the maximum intellectual contribution in the strategic plan, which in turn will ensure an increase in the duration of the company's operation in the market.

Thus, the presence of an innovative growth strategy based on the maximization of the knowledge component ensures the implementation of the principle of purposefulness of innovative development, and in the absence of the considered integrated approach to the innovation development strategy, the principle of timely implementation of the strategic goals of the enterprise is violated. Therefore, the study of the problem of innovative development requires the active use of innovative management methods and the development of theoretical approaches and scientific methods of management based on knowledge flows.

Starting from groundbreaking theory of disruptive innovation after years of research, Harvard Business School professor Clayton Christensen and his co-authors have definitely proved that understanding customer jobs is more important than understanding customers (Christensen et al., 2016). Customers “hire" products or services to do a job instead of buying them. Clayton Christensen considers the so-called "Jobs-to-Be-Done" approach. According to Christensen disruptive innovations make products and services more available to a larger population (Christensen, 2021). The Christensen’ Jobs Theory or Theory of Jobs to be done by explains the causal mechanism of customer behavior as the fundamental driver of innovation success (Satheesh, 2017).

Arguing for his own approach, Christensen rightly shows that despite the structure and order of innovation processes in companies, innovations themselves are not closely linked to strategic guidelines, which leads to the lack of implementation of breakthrough innovations that are critical for long-term and stable development. According to the authors of the article, the main problem is the disorganization of the huge amounts of data collected by companies. The most significant factor in innovation is the reason for using an innovative product or service. The information collected is not causally related to the development of the market (Christensen points out the need to search for reasons that explain the choice of the client). According to Christensen, the company should identify the task that the innovation being developed can contribute to. The essence of this approach is to consider innovation as a source of development of any socio-economic system.

Authors assume in this article that strategic planning of innovative processes aims at forming a new system for managing technological processes, monitoring the implementation of the strategy with further adjustments in case of deviation of the actual indicators from the planned ones. New knowledge is formed in the process of assimilation of information about objective reality obtained from various sources. Most likely, the importance of scientific information will increase, which can be understood as logically constructed information generated in the process of intellectual work (according to the author, scientific work is more significant) and reflecting the patterns of changes in objective economic reality.

Then, there will be a causal relationship between the innovative solution and the strategic orientation of the company, which allows you to systematize the innovation process carried out without an appropriate analytical description (Figure 2).

Figure 2: The Interdependence of Scientific Approaches to Strategic and Innovative Planning

The authors of the article use the Theory of Jobs to Be Done by Clayton Christensen to build causal relationships between strategic guidelines for innovative development and management decisions that precede strategic changes in the company.

The main task of innovation search is to formulate goals in relation to the complex of the most important works for innovation. Systematization of the innovation process involves the implementation of the following components of strategic planning:

1) Understanding the most significant work that the company performs for customers or users of an innovative product or service;

2) Detailed elaboration of the company's strategic planning goals in relation to innovations;

3) develop an innovative decision-making process that is synchronized with the assessment of the importance of the resources used and the significance of strategic guidelines, taking into account the preferences of customers or users of innovative products or services;

4) the most complete description of alternative management solutions aimed at the development of the company.

The work (Gay, 2014) investigates the network perspective for the consideration of business models in action and both value creation and firm networking activities for different firms. According to the theorist in behavioral economics Richard H. Thaler (Nobel Memorial Prize in Economic Sciences, 2017) in the framework of behavioral economics in relation to judgments about intertemporal preferences, the phenomenon of "preference in favor of the present" is that it is more significant for an expert to have a difference of one month in the near term compared to the same difference of 1 month when assessing the economic result in a year (Thaler, 2015). In this regard, it can be suggested to evaluate the impact of the strategy components on the result of strategic planning, using a network representation of the process of developing an innovative development strategy.

Research Results

In the process of strategic planning, it is necessary to form a knowledge base based on the use of science as a source of objective knowledge about economic reality, as a result of scientific activity, represented primarily by scientific knowledge, as well as a certain social institution. When forming the knowledge base, the following types of scientific knowledge are used: facts, patterns, theories, and scientific pictures of the world. The process of strategic planning can be represented as an iterative process, during which the goal setting is concretized into strategic guidelines for the development of the company, for the achievement of which, in turn; a certain set of possible combinations of strategies can be used.

The authors propose to include in the strategic planning process a system of assessments of a whole set of interrelated elements (Figure 3).

Figure 3: The Interdependence of the Elements of Corporate Planning

The formation of interaction network structures will allow us to study the knowledge flows in the system of innovative development. The authors find interesting the approach of recognized Japanese experts in the field of knowledge management Ikujiro Nonaka and Hirotaka Takeuchi (Nonaka & Takeuchi, 1995). Japanese researchers believe that considering an organization as a device for processing information with an attitude to knowledge as formalized, concrete and systematized (explicit knowledge) limits the development of the company (Book review The Knowledge-creating company: How Japanese companies create the dynamics of innovation: (Nonaka & Takeuchi, 1997). On the contrary, priority should be given to informal knowledge (tacit knowledge), which arises at the level of the individual, closely related to the worldview, actions, experience and values of a particular employee. Indeed, the development of the organization is ensured by social interaction within the organization (company, institution) and with the external environment (environment).

Nonaka and Takeuchi make an interesting argument that knowledge is created through the organization's accumulation of knowledge generated in the organization through the exchange of experiences, observations, discussions (in the form of formal scientific discussion or informal conversations), which contribute to the process of crystallization of knowledge at a higher level of the management hierarchy. It can be proved that each stage contributes to the generation of knowledge that differs from the knowledge accumulated at previous levels. Considering the set of stages of knowledge transformation, covering socialization, externalization, internalization and combination of knowledge, one can notice a different degree of depth of consideration by scientists in different sources. According to the arguments of Nonaka and Takeuchi, three of the four stages are widely covered in the scientific literature. With regard to the publication of the results of research on the stages of knowledge transformation, Nonaka and Takeuchi show that the description of socialization can be found in scientific works on the study of group processes and the theory of organizational culture, the combination stage is considered from the standpoint of the theory of information processing, and the internalization stage is studied in the context of theoretical attitudes and definitions of the learning organization. The externalization stage remains less deeply studied than the other three stages. Such a method of knowledge transformation as externalization is not sufficiently studied, while remaining the most important link in the process of knowledge generation. Only at the stage of externalization there is an interaction between individuals that ensures the transfer of personal perception of the knowledge accumulated as a result of the generalization of individual experience. At the same time, such knowledge obtained as a result of the interaction of the company's employees is not formalized and therefore it is difficult to give in to the process of formal transfer. However, non-formalized knowledge is transformed into knowledge that is suitable for the process of verbalization, which allows it to be spread through words and numbers.

From the point of view of knowledge generation, the process of developing an innovative development strategy can be considered as follows (Figure 4).

Figure 4: Knowledge Flows in An Innovative Self-Organizing System Based on Interaction Networks

From a scientific point of view, socialization provides an opportunity to create intelligent models and technical skills, the combination stage provides system knowledge, on the basis of which prototypes and new component technologies are developed, the internalization stage results in operational knowledge intended for project management, production process and new product implementation. Unlike the previous stages, the conceptual knowledge created at the externalization stage connects the unformalized and the formalized. The organization distributes the knowledge generated by employees in the conditions of such dynamic integration of individuals and the organization (according to Nonaka and Takeuchi), which contributes to the emergence of the process of self-organization and the implementation of the work necessary for the implementation of innovations in the sense of K. Christensen, corresponding to the various options for the development of the situation Si (i=1, 2,..., I) and aimed at the formulation of strategic guidelines Gj (j=1, 2, ..., J) and the development of innovative scenarios for the company Ad (d=1, 2, ..., D).

The researchers could prove that the most important factor in the process of increasing knowledge and making managerial decisions is the necessary work at all stages of knowledge transformation, including at the stage of externalization, based on the relationship and interaction of elements of the innovation development strategy. Authors can agree with the opinion of Japanese experts that the initially used unformalized knowledge serves as an incentive to innovate in a completely new way, which differs from the original not only in the combination of disparate data and information, but also in the individual process of self-renewal and updating of the organizational structure. The main problem of developing innovative scenarios for the development of an organization is to provide conditions for creating knowledge based on the interaction of employees of the organization.

The developed approach to the formation of the company's innovative development strategy has been tested in PJSC Svetlana (Russian Federation) and allows one to assess the priorities of alternative management decisions based on a network of interdependent components in terms of the levels of development scenarios and strategic guidelines. Taking into account that the implementation of innovative R&D is carried out by high-tech companies that are part of the Svetlana Innovation and Industrial Complex (IIC "Svetlana" cluster). Financing of complex works of innovative development is carried out from the state budget (with the implementation of the relevant measures of the Federal target programs), funds of investors and own funds of enterprises of the IIC "Svetlana" cluster. Three probable outcomes were taken as options for the development of the situation: optimistic (sales growth), average (stable sales volume) and pessimistic scenario development (decrease in sales and revenue). Strategic landmarks are reviewed in a hierarchy. Seven options for management decisions were selected, the most probable of which may be the continuation of the traditional option for the development of a group of companies based on the previously formed innovation cluster "Svetlana" (alternatives characterized by a gradual increase in the degree of decentralized decision-making in relation to innovative projects), mixed (combined scenario of development, in which increased the degree of decentralization of decision-making while maintaining management control over reporting, as well as a scenario of control over the process of assessing risks associated with the macroeconomic situation and financial flows of a group of companies) and an alternative scenario of an innovative radical restructuring of the management system with a higher than alternative options for management decisions (minimal intervention of the management of the management process).

The analysis showed that the highest priority according to the adopted strategic guidelines, taking into account the options for the development of the situation, is received (a moderate degree of decentralization of decision-making while maintaining management control over the reporting and assessment of risks associated with the innovative project and financial flows of the group of companies).

Suggestions for Scientific Discussion

From the point of view of a systematic approach, the evaluation of consequences, whether valid or desirable, means determining the value of consequences in accordance with previously accepted attitudes. The evaluation ranks alternative systems and ranks them according to their ability to approach the goals. If the optimal system (i.e., having the highest priority according to the criterion) meets the requirements and interests of the persons interested in its development (stakeholders), then the whole process ends. If the optimal system does not meet the interests of stakeholders, then either the best systems should be synthesized, or compromise options should be considered.

The goals provide a logical basis for synthesizing the system and creating alternatives. These alternatives are then analyzed, and the actual consequences found are compared with the desired ones. In the case of dissimilarities, more vigorous efforts are needed to bring the two sets closer together: the actual consequences and the desired ones. The synthesis, analysis, and comparison functions can be considered as elements of a feedback loop.

The decision criterion can be expressed as a function that the company seeks to maximize. Then, the criterion can be considered as a rule indicating how to combine the consequences when choosing the optimal system (in the dissertation, the strategy of innovative development is considered from a systemic point of view).

Authors can conclude that it is possible to successfully combine the approach of Japanese management Nonaka and Takeuchi with modern achievements of the concept of innovation, such as the Theory of Jobs to Be Done by Clayton Christensen.

Conclusion

1. The development of a methodology for the formation of a combined approach of innovative and traditional scenarios of the company's strategic development involves the study of the process of evaluating and selecting options, taking into account the social orientation of innovative development on the basis of a combinatorial approach to the formation of a mixed strategy based on innovative and traditional solutions, followed by a transition to comparing management decisions.

2. The process of development of the socio-economic system, which is a company of different scale and type of activity, taking place in the context of the knowledge economy, does not necessarily represent a radical scenario of innovative development – it can also be combined with an inertial scenario of traditional development, which can be supplemented with innovative solutions without a radical restructuring of the previously formed system. The basis of the developed approach is the theory of the necessary tasks for the performance of the work. Christensen's methodology (the methodological tools of which are used to build causal relationships between strategic guidelines for innovative development and management decisions that precede strategic changes in the company) and knowledge flows Nonaka–Takeuchi vision for assessing the mutual impact of the components of the corporation strategy.

3. It is shown that the most important factor in the process of knowledge growth and management decision-making is the necessary work at all stages of knowledge transformation, including at the stage of externalization, based on the relationship and interaction of elements of the innovation development strategy. From the point of view of knowledge generation, the process of developing an innovative development strategy can be considered as follows. The organization distributes the knowledge generated by employees in the conditions of such dynamic integration of individuals and the organization (according to Nonaka and Takeuchi), which contributes to the emergence of the process of self-organization and the implementation of the work necessary for the implementation of innovations in the sense of K. Christensen, corresponding to various options for the development of the situation and aimed at the formulation of strategic guidelines and the development of innovative development scenarios for the company. It can be proved that the self-organization of the process of innovative development is based on the formation of a network of interaction between the elements of the system, which contributes to the emergence of the process of formalized representation of knowledge, initially obtained in an unformalized form, with the subsequent translation of formalized knowledge models into system knowledge at the stage of combination for subsequent saturation at the stage of internalization with elements of unformalized knowledge, which, in turn, are studied at the stage of socialization by methods of research of unformalized knowledge.

References

  1. Book review The Knowledge-creating company. (1997). How Japanese companies create the dynamics of innovation: I. Nonaka & H. Takeuchi. Research Policy, 26(4), 598–600.
  2. Chang, Y.C., Linton, J.D., & Chen, M.N. (2012). Service regime: An empirical analysis of innovation patterns in service firms. Technological Forecasting and Social Change, Elsevier Inc. 79(9), 1569–1582.
  3. Christensen, C.M. (2021). Disruptive innovation. Christensen Institute.
  4. Christensen, C.M., Hall, T., Dillon, K., & Duncan, D.S. (2016). Competing against luck: The story of innovation and customer choice. New York: Harper Business.
  5. Christensen, C.M., McDonald, R., Altman, E.J., & Palmer, J.E. (2018). Disruptive innovation: An intellectual history and directions for future research. Journal of Management Studies, 55(7), 1043–1078.
  6. Djellal, F., & Gallouj, F. (2001). Patterns of innovation organisation in service firms: Postal survey results and theoretical models. Science and Public Policy, 28(1), 57–67.
  7. Dosi, G. (1982). Technological paradigms and technological trajectories: A suggested interpretation of the determinants and directions of technical change. Research Policy, 11(3), 147–162.
  8. Drejer, I. (2004). Identifying innovation in surveys of services: A Schumpeterian perspective. Research Policy, 33(3), 551–562.
  9. Gallouj, F., & Weinstein, O. (1997). Innovation in services. Research Policy, 26(4–5), 537–556.
  10. Gay, B. (2014). Open innovation, networking, and business model dynamics: The two sides. Journal of Innovation and Entrepreneurship, 3(1).
  11. Hjalager, A.M. (2010). A review of innovation research in tourism. Tourism Management. Elsevier Ltd, 31(1), 1–12.
  12. Landau, R., & Rosenberg, N (eds). (1986). The positive sum strategy: Harnessing technology for economic growth. The National Academies Press: Washington, DC.
  13. di Nardo, M., Gallo, M., Madonna, M., & Santillo, L.C. (2015). A conceptual model of human behaviour in socio-technical systems. Communications in Computer and Information Science, 532, 598–609.
  14. Nonaka, I., & Takeuchi, H. (1995). The knowledge-creating company: How Japanese companies create the dynamics of innovation. Oxford Uni.
  15. Satheesh, K.T.N. (2017). Book review: Clayton M. Christensen, Taddy Hall, Karen Dillon and David S. Duncan, Competing Against Luck: The Story of Innovation and Customer Choice. Global Business Review, 18(3_suppl), S206–S209.
  16. Saunila, M., & Ukko, J. (2014). Intangible aspects of innovation capability in SMEs: Impacts of size and industry. Journal of Engineering and Technology Management - JET-M. Elsevier B.V. 33, 32–46.
  17. Schumpeter, J., & Backhaus, U. (2003). The theory of economic development BT-Joseph Alois Schumpeter: Entrepreneurship, Style and Vision. Backhaus J (ed). Springer US: Boston, MA, 61–116.
  18. Snihur,Y., Wiklund, J. (2019). Searching for innovation: Product, process, and business model innovations and search behavior in established firms. Long Range Planning, 52(3),305–325.
  19. Souto, J.E. (2015). Business model innovation and business concept innovation as the context of incremental innovation and radical innovation. Tourism Management. Elsevier Ltd, 51, 142–155.
  20. Teece, D.J. (2010). Business models, business strategy and innovation. Long Range Planning. Elsevier Ltd, 43(2–3), 172–194.
  21. Thaler, R.H. (2015). Misbehaving: The making of behavioral economics. New York; London: W.W. Norton & Company.
Get the App