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Strategic Innovation Management


Abstract and Figures

This first edition of Strategic Innovation Management is an exciting new addition to the established bestselling texts Managing Innovation and Innovation and Entrepreneurship written by Joe Tidd and John Bessant. Aimed at students taking courses in business studies and management, as well as non-specialist courses in other disciplines, this book provides a practical and accessible evidence-based approach to managing innovation in a wide range of contexts, including: manufacturing, services, small to large organizations and the private, public and third sectors. The text has been designed to be fully integrated with the Innovation Portal at, which contains an extensive collection of additional resources for both lecturers and students including teaching resources, case studies, media clips, innovation tools, seminar and assessment activities and over 300 test-bank questions. This first edition of Strategic Innovation Management is an exciting new addition to the established bestselling texts Managing Innovation and Innovation and Entrepreneurship written by Joe Tidd and John Bessant. Aimed at students taking courses in business studies and management, as well as non-specialist courses in other disciplines, this book provides a practical and accessible evidence-based approach to managing innovation in a wide range of contexts, including: manufacturing, services, small to large organizations and the private, public and third sectors. The text has been designed to be fully integrated with the Innovation Portal at
Content may be subject to copyright.
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Chapter 1
What Is Innovation–
And Why Does It
By the end of this chapter you will develop an understanding of:
what ‘innovation’ and ‘entrepreneurship’ mean – and how they are essential for
survival and growth
innovation as a series of changes which create some kind of value
types of innovation – incremental/radical and component/system
innovation as a process of change.
What Is Innovation?
Innovation is everywhere. You don’t have to look very far before you see the magic word
on advertising hoardings, company websites, on TV and in the press. And it’s not just in the
world of commercial products and services – much of the discussion in the public sector these
days is all about how innovation is the way forward. For example. . .
The word ‘innovation’ comes from the Latin, innovare, and is all about change. Perhaps
a more helpful de nition in terms of what we actually
have to manage is that innovation is
the process of creating value from ideas.
And as we’ll see in this book, there are plenty of
directions in which we can do this. We can change the
Case Studies exploring these
companies, together with many
other examples of innovation, are
availableon the Innovation Portal at
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4 Part 1 Foundations of Managing Innovation
Meeting the Innovation Challenge
‘We always eat elephants . . .’ is a surprising claim made by Carlos Broens, founder and head
of a successful toolmaking and precision engineering  rm in Australia with an enviable growth
record. Broens Industries is a small/medium-sized company of 130 employees which survives in
a highly competitive world by exporting over 70% of its products and services to technologi-
cally demanding  rms in aerospace, medical and other advanced markets. The quote doesn’t
refer to strange dietary habits but to their con dence in ‘taking on the challenges normally seen
as impossible for  rms of our size’ – a capability which is grounded in a culture of innovation in
products and the processes which go to produce them.
Despite a global shift in textile and clothing manufacture towards developing countries,
the Spanish company Inditex (through its retail outlets under various names including Zara)
has pioneered a highly  exible, fast-turnaround clothing operation with over 2000 outlets in
52 countries. It was founded by Amancio Ortega Gaona, who set up a small operation in the
west of Spain in La Coruna – a region not previously noted for textile production. The  rst
store opened there in 1975. It now has over 5000 stores worldwide and is the biggest clothing
retailer; signi cantly, it is also the only manufacturer to offer speci c collections for northern and
southern hemisphere markets. Central to the Inditex philosophy is close linkage between design,
manufacture and retailing. Its network of stores constantly feeds back information about trends
which are used to generate new designs. The stores also experiment with new ideas directly on
the public, trying samples of cloth or design and quickly getting back indications of what is going
to catch on. Despite the network’s global orientation, most manufacturing is still done in Spain,
and it has managed to reduce the turnaround time between a trigger signal for an innovation
and responding to it to around 15 days.
At the other end of the scale Kumba Resources is a large South African mining company
which makes another dramatic claim: ‘We move mountains.’ In its case the mountains contain
iron ore and the huge operation requires large-scale excavation – and restitution of the landscape
afterwards. Much of Kumba’s business involves complex large-scale machinery – and its ability
to keep it running and productive depends on a workforce able to contribute their innovative
ideas on a continuing basis.
People have always needed arti cial limbs and the demand has, sadly, signi cantly increased
as a result of high-technology weaponry, such as mines. The problem is compounded by the fact
that many of those requiring new limbs are also in the poorest regions of the world and so are
unable to afford expensive prosthetics. The chance meeting of a young surgeon, Dr Pramod Karan
Sethi, and a sculptor, Ram Chandra, in a hospital in Jaipur, India, led to the development of a
solution to this problem: the Jaipur Foot. This arti cial limb was developed using Chandra’s skill
as a sculptor and Sethi’s expertise and is so effective that those who wear it can run, climb trees
and pedal bicycles. It was designed to make use of low-tech materials and be simple to assemble.
For example, in Afghanistan craftsmen hammer the foot together out of spent artillery shells, while
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Chapter 1 What Is Innovation– And Why Does It Matter? 5
products and services which we offer, the ways we create and deliver those offerings, the
markets we offer them to and the underlying models about how we do what we do.
Of course, there are differences in the novelty of the changes we introduce. For example,
updating the styling on a car is not the same as coming up with a completely new concept
car which has an electric engine and is made of new composite materials as opposed to steel
and glass. Similarly, increasing the speed and accuracy
of a lathe is not the same thing as replacing it with a
computer-controlled laser forming process. There are
degrees of novelty in these, running from minor, incre-
mental improvements right through to radical changes
which transform the way we think about and use them.
Sometimes these changes are common to a particular
sector or activity, but sometimes they are so radical and
far-reaching that they change the basis of society, for
example the role played by steam power in the Industrial Revolution or the huge changes
resulting from today’s communications and computing technologies.
And innovation is often like Russian dolls: we can change things at the level of com-
ponents or we can change a whole system. For example, we can put a faster transistor on a
microchip on a circuit board for the graphics display in a computer. Or we can change the way
several boards are put together in the computer to give it particular capabilities – a games box,
an e-book, a media PC. Or we can link the computers into a network to drive a small business
or of ce. Or we can link the networks to others on the
Internet. There’s scope for innovation at each level – but
changes in the higher-level systems often have implica-
tions for lower down. For example, if cars – as a com-
plex assembly – were suddenly designed to be made out
of plastic instead of metal it would still leave scope for
car assemblers – but would pose some sleepless nights
for producers of metal components.
Figure 1.1 illustrates the range of choices, highlighting the point that such change can
happen at component or sub-system level or across the whole system. . .
Innovation and Value
All of these are about making changes, and doing so not for the sake of change itself but in
order to create value. Value may be de ned in terms of creating a product or service which
others  nd useful and which they value. In business terms they are prepared to pay for it to
in Cambodia some of the foot’s rubber components are scavenged from truck tyres. Perhaps the
greatest achievement has been to do all of this for a low cost. The Jaipur Foot costs only $28 (£17)
in India. Since 1975, nearly one million people worldwide have been  tted with a Jaipur limb and
the design is being developed and re ned, for example using advanced new materials.
Activity to help you compile a list of
innovations and try to classify them
in terms of the themes in this section
(incremental or radical, products or
service, etc.) – classifying innovation –
is available on the Innovation Portal at
Activity to help you think about
architectural and component innovation
is available on the Innovation Portal at
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6 Part 1 Foundations of Managing Innovation
express how much they value it – and this provides the economic underpinning for innova-
tion. Entrepreneurs use new ideas to create ‘value propositions’ – it is cheaper, you can have
it faster, it is of higher quality, it has more features, etc. – which they hope people in the mar-
ketplace will value enough to make a purchase.
But value isn’t only commercial – innovation can also be about creating social value.
Take the case of Dr Venkataswamy, an eye surgeon in India who retired after a long career
working in one of the best eye hospitals there. He used
his retirement to follow through a long-held passion:
to try to bring good-quality eye care, speci cally cata-
ract surgery, to the millions of Indians who were unable
to afford it in a country where public health care is
still limited. His efforts were focused around  nding
new ways of delivering such surgery and in particular
cutting the costs from an average of $300 (£180) per
operation to $30 (£18). Over many years he developed
an alternative, through his Aravind Eye Clinics, which
is now able to provide care at an average cost of $25
(£15) – a social innovation which has literally trans-
formed the lives of millions.
Innovation and Competition
All of our examples are also about using changes to create a competitive edge. Let’s be clear
about what we mean by the word ‘competition’. In some cases it is rivalry between  rms for mar-
kets, and innovation helps provide the difference, making something faster, cheaper, with more
(‘new to
the world’)
(‘new to the
(‘doing what
we do better’)
New versions
of motor car,
aeroplane, TV
to components
New components
for existing
New generations
e.g. MP3 and
download vs.
CD and
cassette music
Steam power,
ICT ‘revolution’,
materials to
FIGURE 1.1 Types of innovation
Case Study on Aravind Eye Clinics,
together with others describing similar
innovations in health care, is available
on the Innovation Portal at
Activity to explore different ways
ofcreating value through innovation
and to identify actual examples
ofsuch innovations is available
ontheInnovation Portal at
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Chapter 1 What Is Innovation– And Why Does It Matter? 7
features, etc. But ‘competition’ of a different kind drives the public sector – competing against the
challenge of limited resources, for example providing high-quality health care to a growing and
ageing population without raising taxes. Or it is the underlying ‘competition’ against illiteracy
through education innovation, or against limited mobility by transport innovation. There is even
the equivalent of a competition going on in the world of
law and order: criminals are constantly seeking new ways
to commit crime, and policing is having to innovate to
keep pace with or, better, get ahead of this.
And in the third sector – of charities, voluntary
workers and humanitarian agencies – the need for
innovation is clear. Here ‘competition’ may be about
competing with the problems posed by an earthquake
and how to replace communications, access to shelter,
food or water with viable alternatives before starvation
and disease have a major impact. Or about competing
as fundraisers for a share of people’s disposable income.
Innovations don’t come from thin air. They are
driven by a quest for opportunity or a response to
threat. It’s a bit like Darwin’s model of the survival of
the  ttest, in which organizations  nd ways of coping
with competitive and hostile environments. But the big
difference is that there is an element of deliberate rather
than random variation – innovation involves conscious
If we look at the pattern of innovation in a particular sector, we will see that it is a
mixture of occasional radical change (doing something different) punctuating long periods
of incremental (doing what we do but better) change. There are times where experiment
is high risk and much longer periods when the varia-
tion is stabilized and improved upon. We can see this if
we look back over different sectors – for example, the
music industry grew up on the back of innovations like
radio and the gramophone. For a long time it was con-
centrated on a mature industry which rode successfully
several changes in distribution format (vinyl, cassettes,
CDs) before the digitalization revolution sparked by the
invention of the mp3 player led to massive disruption.
Similarly, the light bulb developed by Edison, Swann
and others dominated lighting for over a century but
has now given way to massive shifts in the industry on
the back of the move to solid stateelectronics.
Innovation and Entrepreneurship
A key idea associated with making changes is the entrepreneur. This is an individual or group
who sees an opportunity and takes the risk of trying to exploit it. If they succeed, they gain an
Case Study detailing a report on
cybercrime and how it is becoming a
rapidly moving innovation battleground
is available on the Innovation Portal
Case Studies of innovation
by humanitarian agencies are
availableonthe Innovation Portal
Case Studies of the changing music
industry and the dimming of the light
bulb are available on the Innovation
Portal at
Activity to help you explore possible
sources of strategic advantage
through innovation is available
ontheInnovation Portal at
Activity to help you explore sector
patterns of innovation is available
onthe Innovation Portal at
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8 Part 1 Foundations of Managing Innovation
edge – and then others notice what they are doing and start to imitate. One of the important
theorists on innovation was Joseph Schumpeter, one-time  nance minister of Austria, and his
core ideas relate to the importance of entrepreneurship.1
Entrepreneurs come in all shapes and sizes – from
the lone genius who battles single-handed to bring his/
her idea to fruition (James Dyson) to the start-up team
whose creative interchange helps shape something new
(Larry Page and Sergey Brin of Google, Bill Gates and
Paul Allen at Microsoft, the Angry Birds team at Rovio)
through to social entrepreneurs like Dr Venkataswamy of Aravind, Devi Shetty (the Henry
Ford of heart surgery in India) or Muhammad Yunus (the Nobel prizewinning founder of
Grameen Bank).
But ‘entrepreneurs’ are also part of any large established organization, trying to propose
and introduce changes which will renew its products, services or operating processes. Their
names may not be so familiar but they work on the inside
trying to renew what the organization offers and the
ways it creates and delivers those offerings.
And – as we’ve seen – the motivation for entrepre-
neurship varies from those who are trying to create com-
mercial value to those with more of a social concern.
This idea of entrepreneurship driving innovation to create value – social and commercial –
across the lifecycle of organizations is central to this book. Table 1.1 gives some examples.
TABLE 1.1 Entrepreneurship and Innovation
Stage in
lifecycle Start-up Growth Sustain/scale Renew
exploiting new
or market
Growing the
through adding
new products/
services or
moving into
Building a portfolio
of incremental and
radical innovation to
sustain the business
and/or spread its
in uence into new
Returning to the radical
frame-breaking kind
of innovation which
began the business
and enables it to move
forwards as something
very different
concerned to
improve or
change something
in their immediate
the ideas and
engaging others
in a network
forchange –
perhaps in a
region or around
a key issue
Spreading the idea
widely, diffusing it to
other communities of
social entrepreneurs,
engaging links with
mainstream players
like public sector
Changing the
system – and then
acting as an agent
for the next wave
Case Studies describing several
social entrepreneurs are available
onthe Innovation Portal at
Video Clips of several social
entrepreneurs are available on
theInnovation Portal at
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Chapter 1 What Is Innovation– And Why Does It Matter? 9
Innovation and Knowledge
One last point is worth making here: the key role played by knowledge in innovation. The
ability to make the kind of changes we looked at above depends on creating or acquiring and
then deploying knowledge to create value. Essentially, what organizations know and have
learnt is a core asset which they can leverage. This may be technology or it may be under-
standing of markets, and the knowledge involved may be in explicit or tacit form. But the
evidence is clear: paying attention to creating, captur-
ing and using knowledge is critical in innovation. One
indicator of just how important it has become is the
sheer scale of investment in R&D, which is currently
running at $1500 billion (£920 billion) per year! We’ll
look closely at this theme in the book, not least because
in such a knowledge-rich world the challenge is increasingly one of managing  ows of knowl-
edge around an increasingly global and networked space. This challenge is often given the
label ‘open innovation’. We’ll return to it later in the book.
Why Does Innovation Matter?
As we’ve already seen, innovation is about survival and growth – if we don’t change then
competitive forces may threaten our future. But on the positive side there are real opportuni-
ties for those able to manage the process well. For example, in its regular survey of ‘innova-
tion leaders’ in 25 sectors of the economy, the consultancy Innovaro reports not only that
these companies outpace their competitors on a year-by-year basis but also that this has a
marked effect on their share price. In the period 2003 to 2013, they regularly outperformed
the average share price index on the NASDAQ, Dow Jones and FTSE markets, and in 2009,
when other companies’ share prices grew on average by between 40 and 70%, the Innovation
leaders’ average growth was 130%.
It’s also important for whole economies – as the economist William Baumol pointed out:
‘Virtually all of the economic growth that has occurred since the eighteenth century is ulti-
mately attributable to innovation.’2 Not for nothing do regional and national governments
spend a great deal of money trying to stimulate and support innovation in different ways.
But part of the problem is that innovation involves a moving target – simply being able
to manage it effectively today is no guarantee of long-term success since technologies, mar-
kets, regulations and other elements are constantly changing. So successful innovators are
concerned to develop ‘dynamic capability’ to change
their approaches. The risk is clear if organizations fail
to keep pace: there are plenty of examples of major
corporations which began with an innovative  our-
ish but ended up beaten by their failure to innovate
fast enough or in the right directions. The examples
Activity to help you explore the
importance of knowledge-based
innovation is available on the Innovation
Portal at
Case Study of Fuji lm that explores
this challenge is available on
theInnovation Portal at
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10 Part 1 Foundations of Managing Innovation
of great photographic pioneers Kodak and Polaroid are graphic reminders that competitive
advantage doesn’t always last, even if you are a major spender on R&D and have powerful
marketing skills.
To Whom?
Innovation is about survival and growth, so simply leaving things to chance is not a great
approach. Instead, individuals and organizations need to take innovation seriously; it has to
be more than just a slogan. And that means having some clear idea of where and how mak-
ing changes can take us forward – a ‘strategy’ and some idea of how we will implement that
strategy, how we will make innovation happen.
But innovation also matters to a range of what we might call ‘policy agents’ – organiza-
tions which have a broader concern with innovation. These include:
governments (local and national): innovation creates economic growth, jobs, etc., so foster-
ing innovation becomes a key issue
trade and sector bodies: their interest is in stimulating innovation to make for sector health
and competitiveness
supply chain ‘owners’: any supply network is only as strong as its weakest link, so it makes
sense for  rms to try to manage their supply systems and upgrade them.
Innovation matters to all of these players but their
concern leads us in two complementary directions. For
the individual enterprise it is about how to organize and
manage the process – and policy agents can create an
environment which helps this directly (e.g. through advice
or money) or indirectly (e.g. through favourable tax or
other policies). But there is a second and increasingly important level, which is about systems.
Innovation is a multiplayer game and needs different bits of the network to work together – in
supply chains, regional clusters, industrial sectors, etc. There’s growing interest in such systems
of innovation – local, regional and national – and how policy agents can help develop them.
Innovation Isn’t Easy!
Coming up with good ideas is what human beings are good at; our brains are  tted with this
facility as standard. But taking those ideas forward is not quite so simple – and the evidence
is clear. Most new ideas, and most entrepreneurs carrying them, fail. It takes a particular mix
of energy, insight, belief and determination to push against these odds – and even more judge-
ment to know when to stop banging against the brick wall and move on to something else.
Case Study describing supply chain
learning is available on the Innovation
Portal at
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Chapter 1 What Is Innovation– And Why Does It Matter? 11
While the road for an individual entrepreneur may be very rocky with a high risk of hit-
ting potholes, running into roadblocks or careering off the edge it doesn’t get any easier if
you are a large established company. It’s a disturbing thought, but the majority of companies
have a lifespan signi cantly less than that of a human being. Even the largest  rms can show
worrying signs of vulnerability, and for the smaller  rm the mortality statistics are bleak.
Many small and medium-sized enterprises (SMEs) fail because they don’t see or recognize
the need for change. They are inward looking, too busy  ghting  res and dealing with today’s
crises to worry about storm clouds on the horizon. Even if they do talk to others about the
wider issues, it is very often to people in the same network and with the same perspectives,
for example the people who supply them with goods and services or their immediate custom-
ers. The trouble is that by the time they realize there is a need to change it may be too late.
But it isn’t just a small  rm problem – there is no guaranteed security in size or in previ-
ous technological success. Take the case of IBM, a giant  rm which can justly claim to have
laid the foundations of the IT industry and one which came to dominate the architecture
of hardware and software and the ways in which computers were marketed. But such core
strength can sometimes become an obstacle to seeing the need for change – as proved to be the
case when, in the early 1990s, the company moved slowly to counter the threat of network-
ing technologies – and nearly lost the business in the process. Thousands of jobs and billions
of dollars were lost and it took years of hard work to bring the share price back to the high
levels which investors had come to expect.
A common problem for successful companies occurs when the very things which helped
them achieve success – their ‘core competence’ – become the things which make it hard to see
or accept the need for change. Often the response is what is sometimes called ‘not invented
here’ – the new idea is recognized as good but in some way not suited to the business.
(A famous example of this was the case of Western Union, which, in the nineteenth cen-
tury, was probably the biggest communications company in the world. It was approached by
one Alexander Graham Bell, who wanted it to consider helping him commercialize his new
invention. After mounting a demonstration to senior executives, he received a written reply
which said that ‘. . . after careful consideration of your invention, which is a very interest-
ing novelty, we have come to the conclusion that it has no commercial possibilities . . . We
see no future for an electrical toy.’3 Within four years of being invented, there were 50 000
telephones in the United States and within 20 years  ve million. Over the next 20 years, the
company which Bell formed grew to become the largest corporation in the United States.)
Sometimes the pace of change appears slow and the old responses seem to work well.
It appears, to those within the industry, that they understand the rules of the game and that
they have a good grasp of the relevant technological developments likely to change things. But
what can sometimes happen here is that change comes along from outside the industry – and
by the time the main players inside have reacted, it is often too late.
For example, in the late nineteenth century there was a thriving industry in New England
based on the harvesting and distribution of ice. In its heyday, it was possible for ice harvest-
ers to ship hundreds of tons of ice around the world on voyages that lasted for as long as six
months – and still have over half the cargo available for sale. By the late 1870s, the 14 major
rms in the Boston area of the United States were cutting around 700 000 tons per year and
employing several thousand people. But the industry was completely overthrown by the new
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12 Part 1 Foundations of Managing Innovation
developments which followed from the invention of refrigeration and the growth of the mod-
ern cold storage industry. The problem is that the existing players often fail to respond fast
enough to the new signals coming from outside their industry – as was the case for many of
the old ice industry players.4
Of course, for others these conditions provide an opportunity for moving ahead of the
game and writing a new set of rules. Think about what has happened in online banking,
call-centre linked insurance or low-cost airlines. In each case the existing stable pattern has
been overthrown, disrupted by new entrants coming in with new and challenging business
models. For many managers, business model innovation is seen as the biggest threat to their
competitive position, precisely because they need to learn to let go of their old models as well
as learn new ones. By the time they do so they may well have been overtaken by newcomers
for whom this is the only business model and one they are well placed to exploit.
It’s not all doom and gloom, though. There are
also plenty of stories of new  rms and new industries
emerging to replace those which die. And in many cases
the individual enterprise can renew itself, adapting to
its environment and moving into new things. Consider
the company Stora in Sweden, which was founded in
the twelfth century as a timber cutting and processing
operation but which is still thriving today – albeit in the
very different areas of food processing and electronics.
Can We Manage Innovation?
The  rst point here is to recognize that there is something to be managed. Innovation is not
simply a random process but rather a sequence of planned experimentation. This is the dif-
ference between the Darwinian idea of survival of the  ttest and the way innovation works;
in the latter case the variation is planned and designed. It is still risky and may not succeed
but it is a purposive activity.
And we know something about this sequence of planned experimentation. It involves a
process of searching for possible opportunities (generating variation), selecting a particular
one (selection) and then implementing it (propagation). Making this happen involves a set
of behaviours which, over time, become learnt and embedded – ways of searching, ways of
selecting, ways of implementing. These represent distinctive patterns of behaviour which
shape the way innovation is managed.
At the outset – a start-up business – there won’t necessarily be a clear pattern but a series
of experiments, a bit like a child learning to walk for the  rst time. But there is learning from
experience and from failure so that over time the start-up entrepreneur learns to manage
the process and can repeat the trick, starting up other ventures or introducing other innova-
tions to grow his/her business. By the time we look at the business in a mature state it has
‘routinized’ a lot of this, with structures and formal processes in place for searching (market
Case Study of Marshalls, a UK
family business that has been
operating for over 100 years
and isstill growing through its
commitment to innovation and its
agile approach to management, is
available on the Innovation Portal
3GC01.indd 123GC01.indd 12 15/02/14 9:45 AM15/02/14 9:45 AM
Chapter 1 What Is Innovation– And Why Does It Matter? 13
research or R&D), selecting and allocating resources for innovation projects and project
management systems for taking ideas through to reality.
Of course, it’s also not a case of ‘one size  ts all’. There will be different patterns depend-
ing on the size of the organization and the sector in which it operates, for example. Small
organizations have little structure and limited resources, so their ‘process’ for managing
innovation may be informal, whereas giant pharmaceutical corporations need a range of
structures and procedures to enable innovation to happen in a coordinated fashion. Service
sector businesses work closely with customers and emphasize search behaviours which try to
articulate and use insights around their needs – whereas high-tech businesses may be more
concerned with formal scienti c R&D and behaviours which enable that to work well. And
whole industries have lifecycles associated with them. We can see the car industry now as a
mature sector with a history of over a hundred years, whereas nanotechnology and applied
genetics are still in their infancy. Innovation in new sectors tends to focus on product/service
offerings as the main target, whereas in more mature sectors it shifts to the ways we create
and deliver those offerings, for example can we make them cheaper or faster?
Success in innovation, be it as an individual  rst-timer or a global corporation, is not
just about having a good idea and assembling the resources (people, equipment, knowledge,
money, etc.) to make it happen. It’s also about having the capabilities to manage them – and
these are the hardest to get a handle on – but they make or break the process. So what is
involved – and how do we know?
Over the past hundred years a wide range of studies have attempted to answer these ques-
tions. Researchers have looked at case examples, at sectors, at entrepreneurs, at big  rms and
small  rms, at success and failure. Practising entrepreneurs and innovation managers in large
businesses have tried to re ect on the ‘how’ of what they do. The key messages come from
the world of experience. What we’ve learnt comes from the laboratory of practice rather than
from some deeply rooted theory.
The Case for Strategic Innovation Management
One  nal point in this chapter. We’ve seen that innovation matters and that in order to survive
and grow organizations need to pay attention to managing the process. This is of concern not
only to those directly involved but also to a wider gallery of players – governments, supply
chain owners, trade and sector agencies – who have a concern that innovation happens and
happens effectively. And we have begun to see that there is something – a process of  nding
opportunities, choosing projects and implementing them – which is common to innovation
and needs to be managed. We need to learn and develop the capability to do this.
But innovation takes place in a changing world. New technologies emerge, new markets
appear,  nancial, legal, social rules change. So organizations not only have to innovate to
survive and grow but also need to innovate in the ways they approach this problem of man-
aging the process. For example, at the beginning of this century the Internet was still in its
infancy and we had only just begun to see its potential role in changing the way innovation
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14 Part 1 Foundations of Managing Innovation
happened. Now we are in a world where increasingly products and services are delivered in
virtual space and where markets are increasingly focused around social networks and com-
munities. The potential for information  ow across this world is huge: Facebook with over
one billion members would qualify as the world’s third largest country by population! All of
these changes have an impact on what we can do in our search, select and implement process,
and so organizations have had to learn new tricks to take on board these new challenges.
Table 1.2 gives an idea of these challenges.
Throughout this book we’ll look at the idea of ‘dynamic capability’ – learning and build-
ing capability not just to organize and manage innovation but also to step back and review
how we do this. And having taken a step back to review, implementing changes in the ways
we make innovation happen – new or different ways and letting go of some of the older ones.
TABLE 1.2 Challenges in the Innovation Context5
Context change Indicative examples
Acceleration of
OECD estimates that around $1500 billion is spent each year
(public and private sector) on creating new knowledge – and hence
extending the frontier along which ‘breakthrough’ technological
developments may happen.
Global distribution
Knowledge production is increasingly involving new players, especially
in emerging market  elds like the BRIC (Brazil, Russia, India, China)
nations – so there is a need to search for innovation opportunities
across a much wider space. One consequence of this is that
‘knowledge workers’ are now much more widely distributed and
concentrated in new locations (e.g. Microsoft’s third-largest R&D centre
employing thousands of scientists and engineers is nowin Shanghai).
Market expansion Traditionally much of the world of business has focused on the
needs of around one billion people since they represent wealthy
enough consumers. But the world’s population has just passed the
seven billion mark and population, and by extension market, growth
is increasingly concentrated in non-traditional areas, like rural Asia,
Latin America and Africa. Understanding the needs and constraints
of this ‘new’ population represents a signi cant challenge in terms
ofmarket knowledge.
Market fragmentation Globalization has massively increased the range of markets and
segments so that these are now widely dispersed and locally
varied – putting pressure on innovation search activity to cover much
more territory, often far from ‘traditional’ experiences – such as the
‘bottom of the pyramid’ conditions in many emerging markets6 or
along the so-called long tail – the large number of individuals or small
target markets with highly differentiated needs and expectations.
(continued )
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Chapter 1 What Is Innovation– And Why Does It Matter? 15
Context change Indicative examples
Market virtualization The emergence of large-scale social networks in cyberspace poses
challenges in market research approaches (e.g. Facebook with one
billion members is technically the third-largest country in the world
by population). Further challenges arise in the emergence of parallel
world communities (e.g. Second Life now has over six million
‘residents’, while World of Warcraft has over 10 million players).
Rise of active users Although users have long been recognized as a source of
innovation, there has been an acceleration in the ways in which
this is now taking place (e.g. the growth of Linux has been a user-
led open community development). In sectors like the media, the
line between consumers and creators is increasingly blurred (e.g.
YouTube has around 100 million videos viewed each day but also
has over 70 000 new videos uploaded every day from its user base).
Growing concern
Major shifts in resource and energy availability prompting search for
new alternatives and reduced consumption. Increasing awareness
of the impact of pollution and other negative consequences of high
and unsustainable growth. Concern over climate change. Major
population growth and worries over our ability to sustain living
standards and manage expectations. Increasing regulation on areas
like emissions and our carbon footprint.
Development of
technological and
social infrastructure
Increasing linkages enabled by information and communications
technologies around the Internet and broadband have enabled and
reinforced alternative social networking possibilities. At the same
time the increasing availability of simulation and prototyping tools
has reduced the separation between users and producers.
TABLE 1.2 (Continued )
Source: Bessant, J. and T. Venables, Creating wealth from knowledge: Meeting the innovation
challenge 2008, Cheltenham: Edward Elgar, pp 6–7.
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16 Part 1 Foundations of Managing Innovation
Innovation is about growth – about recognizing opportunities for doing something new
and implementing those ideas to create some kind of value. It could be business growth;
it could be social change. But at its heart is the creative human spirit, the urge to make
change in our environment.
Innovation is also a survival imperative. If an organization doesn’t change what it offers
the world and the ways in which it creates and delivers its offerings, it could well be in
trouble. And innovation contributes to competitive success in many different ways. It’s
a strategic resource to getting the organization where it is trying to go, be that delivering
shareholder value for private sector  rms, providing better public services or enabling
the start-up and growth of new enterprises.
Innovation doesn’t just happen. It is driven by entrepreneurship. This powerful mixture of
energy, vision, passion, commitment, judgement and risk-taking provides the power behind
the innovation process. It’s the same whether we are talking about a solo start-up venture
or a key group within an established organization trying to renew its products or services.
Innovation doesn’t happen simply because we hope it will. It’s a complex process which
carries risks and needs careful and systematic management. Innovation isn’t a single
event, like the light bulb going off above a cartoon character’s head. It’s an extended
process of picking up on ideas for change and turning them into effective reality. The
core process involves four steps: recognizing opportunities,  nding resources, develop-
ing the venture and capturing value. The challenge comes in doing this in an organized
fashion and in being able to repeat the trick.
Further Resources
More detailed discussion of these themes can be found in our companion books, Managing
Innovation: Integrating technological, market and organizational change, now in its  fth
edition, and Innovation and Entrepreneurship, now in its second edition. Peter Drucker’s
famous Innovation and Entrepreneurship provides an accessible introduction to the subject,
but perhaps relies more on intuition and experience than on empirical research.7 And there
are several other textbooks including those by Gof n and Mitchell,8 Trott,9 Schilling10 and
Dodgson, Salter and Gann.11
There are several compilations and handbooks covering the  eld, the best known being
Strategic Management of Technology and Innovation, containing a wide range of key papers
and case studies, though with a very strong US emphasis.12 A more international  avour is
present in Dodgson and Rothwell13 and Shavinina.14
Case studies of innovation provide a rich resource for understanding the workings of the
process in particular contexts. Good compilations include those of Baden-Fuller and Pitt,15
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Chapter 1 What Is Innovation– And Why Does It Matter? 17
1. Schumpeter, J. (2006) Capitalism, Socialism and Democracy, 6th edn. London:
2. Baumol, W. (2002) The Free-Market Innovation Machine: Analyzing the growth
miracle of capitalism. Princeton: Princeton University Press.
3. Bryson, B. (1994) Made in America. London: Minerva.
4. Utterback, J. (1994) Mastering the Dynamics of Innovation. Boston: Harvard
Business School Press.
5. Bessant, J. and T. Venables (2008) Creating Wealth from Knowledge: Meeting the
innovation challenge. Cheltenham: Edward Elgar.
6. Prahalad, C. K. (2006) The Fortune at the Bottom of the Pyramid. Upper Saddle
River, NJ: Wharton School Publishing.
7. Drucker, P. (1985) Innovation and Entrepreneurship. New York: Harper & Row.
8. Gof n, K. and R. Mitchell (2010) Innovation Management, 2nd edn. London:
9. Trott, P. (2011) Innovation Management and New Product Development, 5th
edn. London: Prentice-Hall.
10. Schilling, M. (2005) Strategic Management of Technological Innovation. New
York: McGraw-Hill.
11. Dodgson, M., A. Salter and D. Gann (2008) The Management of Technological
Innovation, 2nd edn. Oxford: Oxford University Press.
12. Burgelman, R., C. Christensen and S. Wheelwright (eds) (2004) Strategic
Management of Technology and Innovation, 4th edn. Boston: McGraw-Hill.
13. Dodgson, M. and R. Rothwell (eds) (1995) The Handbook of Industrial
Innovation. Edward Elgar: London.
14. Shavinina, L. (2003) International Handbook on Innovation. New York: Elsevier.
Nayak and Ketteringham16 and Von Stamm,17 while other books link theory to case studies,
for example Tidd and Hull18 with its focus on service innovation. Several books cover the
experiences of particular companies, including 3M, Corning, DuPont, Toyota and others.19–22
Various websites offer news, research, tools, etc., for example AIM (
and NESTA (
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18 Part 1 Foundations of Managing Innovation
Deeper Dive explanations of innovation concepts and ideas are
available on the Innovation Portal at
Quizzes to test yourself further are available online via the Innovation
Portal at
15. Baden-Fuller, C. and M. Pitt (1996) Strategic Innovation. London, Routledge.
16. Nayak, P. and J. Ketteringham (1986) Breakthroughs: How leadership and drive
create commercial innovations that sweep the world. London: Mercury.
17. Von Stamm, B. (2003) The Innovation Wave. Chichester: John Wiley & Sons, Ltd.
18. Tidd, J. and F. Hull (eds) (2003) Service Innovation: Organizational responses
to technological opportunities and market imperatives. London: Imperial College
19. Leifer, R., D. McDermott and G. C. O’Connor (2000) Radical Innovation. Boston:
Harvard Business School Press.
20. Kanter, R. (ed.) (1997) Innovation: Breakthrough thinking at 3M, DuPont, GE,
P zer and Rubbermaid. New York: Harper Business.
21. Graham, M. and A. Shuldiner (2001) Corning and the Craft of Innovation.
Oxford: Oxford University Press.
22. Kelley, T., J. Littman and T. Peters (2001) The Art of Innovation: Lessons in crea-
tivity from Ideo, America’s leading design  rm. New York: Currency.
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Chapter 1 What Is Innovation– And Why Does It Matter? 19
Cases Media Tools Activities Deeper Dive
Jaipur Foot
Aravind Eye
Cybercrime report
The changing
music industry
The dimming of
the light bulb
Stores (social
Fuji lm
Supply chain
Suzana Moreira,
Simon Tucker,
The Young
Melissa Clark-
Strategy toolkit
SWOT analysis
and component
Creating value
through innovation
advantage through
Sector patterns of
Rich pictures
Summary of online resources for Chapter 1 –
all material is available via the Innovation Portal at
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... Leadership is based on the understanding of the context, top management should demonstrate leadership and commitment by establishing an innovation vision, strategy, and policy, including the necessary roles and responsibilities (Tidd., Bessant, 2014). ...
... • reevaluating the innovation initiative portfolio and ensuring resources are allocated appropriately; • building the foundation for post-crisis growth in order to remain competitive in the recovery period (Tidd, Bessant, 2014). Many businesses simply cannot operate as they could in the past. ...
Conference Paper
The past decade, the crowdfunding market was growing rapidly in the European Union, including Latvia. At the same time, crowdfunding had remained unregulated domain until the European Union Regulation on European crowdfunding service providers for business (henceforth - the Regulation) was passed in October, 2020, giving the Member States one year for its adoption, and additional one year for crowdfunding service providers for authorising under the Regulation. Nevertheless, by the end of 2022, there was only one licensed crowdfunding service provider managed by Latvian legal entity. Considering this, the goal of the study is to explore why the majority of existing crowdfunding platforms, managed by legal entities registered in Latvia, has not authorised itself under the Regulation. To achieve the goal, the methodology of the study combines in-depth analysis of the Regulation with an explanatory case study of crowdfunding platforms managed by Latvian legal entities. Having considered nine platforms managed by Latvian legal entities, the results of the study show that four biggest Latvian platforms have authorized themselves as investment firms. Among other platforms which are unlicensed for the time being, there could be only one potential candidate to extend the list of crowdfunding service providers authorised under the Regulation. The conclusion was made considering the business models of the providers, and presence or absence of an auto-investing function, which was restricted by the Regulation. An implication of the obtained results is the possibility that the research will serve as a base for future studies on the Regulation’s effect on the European crowdfunding industry.
... Bailey et al (2009) demonstrate that the engagement of the customers in the coining of an organization's vision, mission and therefore the strategic plan is key for its success and survival, especially in a service oriented industry like banking. Tidd and Bessant (2014) prescribe that the control systems of firms that are rigorous in implementing strategic management practices must stimulate innovation, proactiveness, and risk-taking. Further, strategic controls base performance on strategically relevant criteria as opposed to objective financial information (Chandler, 2000). ...
... Innovativeness can be managed by building an innovative organization (e.g., a structure and climate that encourages people to be innovative) and creating networks for innovation (e.g., internal and external cooperation). (Tidd and Bessant 2014). Innovativeness is supported by an organizational culture that shapes the mindset regarding the internalization of innovation by individual members of the organization where innovation is instilled and ingrained (Kahn 2018). ...
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One of the significant factors that have an impact on the level of innovativeness is that of the intra-group social capital and inter-group social capital. Both of these types of social capital support the innovative climate and may constitute a key attribute in creating new knowledge and innovation, which in turn increases the opportunities of enterprises in terms of market competition. The acceptance of the assumption that social capital has an impact on the creation of the innovative climate in enterprises facilitated the formulation of the research aim, which was to search for answers to the following three research questions: What is the scope of occurrence of the intra-group and inter-group of social capital in enterprises in the innovative sector in Poland? To what extent does the intra-group and inter-group of social capital have an impact on the processes that are favourable to creating knowledge and innovation in enterprises? To what extent does the intra-group and inter-group of social capital have an impact on the creating the innovative climate in enterprises? The assumed goal was executed thanks to the application of the survey method. Empirical research, together with the use of a standardized questionnaire was conducted by means of the CATI technique in 2022. A total of 575 department heads and employees of the innovative sector participated in the research. As a result of the research, significant statistical relations were discovered between the intra-group and inter-group of social capital and the indicators of the innovative climate. Likewise, the positive impact of their attributes on the intra-organizational processes was illustrated, which are favourable towards the creation of knowledge and innovation.
Service innovation has come to represent an essential underpinning necessitated for enhanced value creation, competitiveness, idiosyncrasy, and long-term survival in contemporary contexts. Given the importance of this construct, a substantial corpus of the literature has developed and been devoted towards exploring this phenomenon. Despite increasing interest in this field, however, theoretical approaches solely dedicated towards service innovation have yet to materialize, while scholars remain divided on fundamental aspects of service innovation, e.g., the developmental paths through which innovation emerges. Compounding these issues, explorations aimed at investigating service innovation in the context of tourism enterprises remain nascent, while limited attention has been placed on investigating the role of ITs and ICTs in the innovation processes of tourism enterprises. To counteract these shortcomings and based on Buhagiar et al.’s [51] conceptual model of service innovation, this paper investigates the micro-foundation processes deployed in boutique hotels in Valletta, Malta, to reconfigure knowledge resources and establish innovation outcomes. Concurrently, this research explores the inflection points at which ITs and ICTs are deployed in the innovation processes of boutique hotels in Valletta, Malta, and examines how such technologies influence the innovation activities of these hotels.
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Objectives The subject of the study is the issue of innovation, or more precisely, an attempt to present potential barriers preventing or limiting its implementation. The main objective of the research is to identify key anti-innovation factors (composition of key barriers) and to rank them (enterprise self-evaluation). Material and methods The above objectives resulted in detailed tasks including an in-depth literature search, verification of available expert knowledge and research of a representative group of entities. The research was carried out by defining a set of the most important barriers to innovation. This enabled further exploration of the issue as part of the work on the method, expert discussions and in-depth sectoral analysis (agricultural machinery - technical means of agricultural transport). Results The results confirmed that the adopted research method concept is a helpful evaluation instrument. Conclusions developed as part of the surveyed entities' assessment, related to anti-innovation determinants, proved to be important for the final decisions. Theoretical and empirical considerations were based on the formulated research hypothesis and the assumptions constituting the starting point. Although the research field has been narrowed down to the agricultural machinery sector, attention has been paid to the cognitive value of work in relation to other sectors of the economy. Conclusions In the context of the conducted research, a catalog of barriers that significantly affect the implementation of innovations was indicated. An important point on the development map of the surveyed enterprises will be meeting the challenges related to the barriers' elimination. It is on the part of enterprises to take appropriate actions aimed at increasing efficiency and creating new management models.
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Denne artikel undersøger tesen: Styret samskabelse er pseudo-samskabelse og er en forståelsesmæssig hindring til reel samskabende adfærd. Tesen bliver underbygget gennem en intern og en ekstern kritik af begrebet styret samskabelse. Den interne kritik tager udgangspunkt i artiklen Samskabelse – en typologi (2016) skrevet af Jens Ulrich, hvori begrebet styret samskabelse bliver introduceret. Den interne kritik viser, at styret samskabelse som begreb ikke kan betragtes som samskabelse med udgangspunkt i Ulrichs egen overordnede definition på samskabelse. Den eksterne kritik tager udgangspunkt i den antagelse, at meningsfulde begreber udpeger unikke processer og kan adskilles fra andre lignende begreber. Den eksterne kritik viser, hvorledes Ulrichs udlægning af (styret) samskabelse hverken udpeger unikke processer, eller gør det muligt at adskille begrebet fra lignende begreber som eksempelvis samarbejde. Derfor er begrebet styret samskabelse ikke handlingsanvisende og kan ikke bruges som guide til at ændre adfærd. Dette præsenterer en udfordring for alle, der har en ambition om at bruge styret samskabelse som proces til at løse de problemstillinger, som velfærdssamfundet står overfor.
The analysis of the adverse effects of a merger on competition has recently changed. While for years, competition authorities have focused primarily on the effects of a merger on prices, the impact on output, or the creation or strengthening of a dominant position in a given market, they are now examining the effects of a merger on innovation. According to the author’s analysis, which begins by explaining the peculiarities of high-tech industries, the notion of “innovation”, and the rationale for merger control, this system can only establish its effectiveness by applying the same standards of proof of the pro- and anti-competitive effects of a merger.KeywordsConsumer welfareEU competition lawFuture marketsHigh technologyHigh technology industriesInnovationMerger controlMerger efficiencyImpediment to effective competitionTechnology market
This paper reports on the development and preliminary evaluation of a novel online platform that facilitates and augments diverse open innovation practices in contemporary organizations. The proposed platform offers a friendly and sustainable solution that fully supports the processes of collection, dissemination, organization, synthesis and utilization of knowledge that comes from both the internal and external environment of an organization. It is based on prominent artificial intelligence and natural language processing technologies to meaningfully cluster and aggregate stakeholders’ positions on the issues under consideration, the ultimate aim being to advance informed decision-making in the underlying data intensive and cognitively complex settings. Moreover, the platform may enable argumentation across the overall innovation development process, from idea formation to its market entry and commercialization.KeywordsOpen Innovationsoftware platformdecision makingargumentationartificial intelligencenatural language processing
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Today, cooperatives are a major engine of social and economic development in developing countries. Their main contribution is materialized by the implementation of projects with a hybrid added value: social and economic. However, the creation of this value is strongly linked to the innovative capacity of these cooperatives. The innovativeness characterization of a social project remains a major issue for social organizations, and more particularly for cooperatives. The latter remain confused about the approaches, methods and tools for this characterization. Hence the following research question: How to evaluate the innovativeness of a social project concerning the Argan cooperatives of the Souss Massa region in Morocco? This article proposes a tool for characterizing the innovation of a social project that makes it possible to assess its innovative character through the determination of the principal variables of this characterization within the Argane cooperatives of the Souss Massa region. Methodologically, authors referred to literature review on social innovation and its characterization tools. Then, they opted for a case study combining documentary analysis and interviews with staff of the social development agency (ADS- Souss Massa), consultants, experts and project leaders. The results revealed a panoply of criteria for characterizing a social project, the most relevant are: (1) identification of needs (2) impacts (3) experimentation and risk (4) involvement of actors (5) governance (6) resources (7) type of innovation and (8) innovation process.
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Radical innovation requires organizations to move into unknown territory and experiment with new processes that largely elude systemization. In this paper we report on a 6-year longitudinal study of 12 radical innovation (RI) projects in 10 large established US based firms. In actuality, there are a number of organizational factors that leverage the human side of making radical innovation happen that, if viewed systematically, could be utilized more broadly for greater radical innovation success. We report on gaps and mismatches that emerged in the sample as well regarding the expectation for radical innovation to happen and the mechanisms by which people are incented to do so. We link our observations to the evolving dynamic capabilities literature as it is currently being extended into high velocity domains.
This book illustrates that, although innovation has always mattered in economic development, simply increasing expenditure in creating knowledge may not be the answer: we need to look at the whole system through which such knowledge translates to value creation.
Why has capitalism produced economic growth that so vastly dwarfs the growth record of other economic systems, past and present? Why have living standards in countries from America to Germany to Japan risen exponentially over the past century? William Baumol rejects the conventional view that capitalism benefits society through price competition--that is, products and services become less costly as firms vie for consumers. Where most others have seen this as the driving force behind growth, he sees something different--a compound of systematic innovation activity within the firm, an arms race in which no firm in an innovating industry dares to fall behind the others in new products and processes, and inter-firm collaboration in the creation and use of innovations. While giving price competition due credit, Baumol stresses that large firms use innovation as a prime competitive weapon. However, as he explains it, firms do not wish to risk too much innovation, because it is costly, and can be made obsolete by rival innovation. So firms have split the difference through the sale of technology licenses and participation in technology-sharing compacts that pay huge dividends to the economy as a whole--and thereby made innovation a routine feature of economic life. This process, in Baumol's view, accounts for the unparalleled growth of modern capitalist economies. Drawing on extensive research and years of consulting work for many large global firms, Baumol shows in this original work that the capitalist growth process, at least in societies where the rule of law prevails, comes far closer to the requirements of economic efficiency than is typically understood. Resounding with rare intellectual force, this book marks a milestone in the comprehension of the accomplishments of our free-market economic system--a new understanding that, suggests the author, promises to benefit many countries that lack the advantages of this immense innovation machine.
The 5th Edition of Strategic Management of Technology and Innovation by Burgelman, Christensen, and Wheelwright continues its unmatched tradition of market leadership, by using a combination of text, readings, and cases to bring to life the latest business research on these critical business challenges. Strategic Management of Technology and Innovation takes the perspective of the general manager at the product line, business unit, and corporate levels. The book not only examines each of these levels in some detail, but also addresses the interaction between the different levels of general management - for example, the fit between product strategy and business unit strategy, and the link between business and corporate level technology strategy. Each part of the book starts with an introductory chapter laying out an overall framework and offering a brief discussion of key tools and findings from existing literature. The remainder of each part offers a selected handful of seminar readings and case studies. Almost all of the cases deal with recent events and situations, including several that are concerned with the impact of the Internet. A few "classics" have been retained, however, because they capture a timeless issue or problem in such a definitive way that the historical date of their writing is irrelevant.