In the previous few modules, you learned about the different aspects of innovation such as its dimensions, the five major trajectories for managing innovation, the spaghetti model of innovation and many more. In this discussion, you may choose to discuss some of these concepts or other innovation concepts covered in this course and reflect on the following aspects of your course project:
In your initial post you should address the following questions:
What was your strategy for choosing incremental or discontinuous innovation in Milestone One?
What were your reasons for selecting the processes for managing innovation you used in Milestone Two?
How do your recommendations for the organization structure promote a climate for innovation in your project?
Incremental or Discontinuous Innovation
By: Johnathon Blake Davis
Option A and B
Business problem: Connected cars will become of greater demand in the future.
Option A: Incremental Innovation
Option B: Discontinuous Innovation
Two benefits of option A:
Increase product diversification
Protect the current business model
Two risks of option A:
Lack of coordination
Time risk/reward related to demand
Two benefits of option B:
– Securing the competitive advantage
Increased market share/profitability
Two risks of option B:
Unknown demand of the new product
Production cost that could potentially outweigh profit
BMW: navigation, emergency services, smart house connectivity
Functionality emphasis: vehicle control/safety, IFTTT-customized applications and IoT connectivity, LTE
Toyota: navigation, emergency services, social media
Functionality emphasis: vehicle control, social media, safety, entertainment, navigation, 5G
Volkswagen: navigation, emergency services, consumer orders, maintenance status
Functionality emphasis: vehicle control, maintenance, in-car consumer experience
BMW: Projection of fully autonomous vehicles in the next 12 years.
-5-10-year plan: fully integrated information system, semi-autonomous driving, connection to traffic information systems, introduction of fully autonomous driving early 2030s
Toyota: Social media in Japan and expectation of of implementing in US markets with 5G capability.
-5-10-year plan: fully integrated information system; semi-autonomous driving; connection to traffic information systems, expanded social media, and communications; consumer services; maintenance; fully autonomous vehicle early 2030s
Volkswagen: Same forecast as us. They have partnered with Microsoft to try and ease ahead of competition.
-5-10-year plan: fully integrated information system; semi-autonomous driving; connection to traffic information systems; connectivity with smart home; fully autonomous vehicle early 2030s
Partial Gap Analysis
We have some connectivity regarding the technology – driver apps, OnStar, detect accidents, and alert first responders. Most of the technology will need to be purchased to gain market share.
The 10 best automotive technologies of 2021: Advanced driver assistance, emergency braking, mobile app connection, teen driver, exit warnings, wireless charging, 360-degree camera, video rearview mirror, stole vehicle software, blind-spot monitor (https://www.kbb.com/awards/best-car-technologies/)
Partial Gap Analysis
Available for purchase:
Video rearview mirror
Wireless Bluetooth connectivity
Push to start button
Vehicle start from remote key
The Incremental Innovation approach would be the best option for the company moving forward.
Reason 1: Introducing a new product into the automotive industry isn’t a good idea.
Reason 2: The reward outweighs the risk.
Sales forecast/financial snapshot
Option A – Sales
Sales Traditional 183.29999999999998 188.71249999999998 194.26526789999994 199.95984500569995 205.79753408935821 211.77936279123503 217.90604290767092 224.17792513444687 230.59494878970997 237.15658599184798 244.08999999999997 Sales Connected 3.8 4.1 875999999999998 5.2344999999999997 5.7684189999999997 7.2105237500000001 9.0131546875000002 11.266443359375 14.083054199218751 17.603817749023438 22.004772186279297 27.505965232849121
Option A – Gross Margin
Gross Margin Traditional 27.494999999999997 28.306874999999994 29.139790184999988 29.993976750854991 30.86963011340373 31.766904418685254 32.685906436150638 33.626688770167029 34.589242318456492 35.573487898777195 36.613499999999995 Gross Margin Connected 0.79799999999999993 0.87939599999999996 1.0992449999999998 1.2113679899999998 1.5142099874999999 1.892762484 3749999 2.3659531054687499 2.9574413818359373 3.6968017272949218 4.6210021591186523 5.7762526988983156
January 1, 2021. KBB Editors. https://www.kbb.com/awards/best-car-technologies/
Carroll, Andrew. Oct 23, 2019. https://innotechtoday.com/top-10-connected-car-features/
Hard, Andew. Nov 19, 2017. https://www.digitaltrends.com/cars/10-car-technologies-to-be-thankful-for/
Final Project – MBA 580
There are three rivals of the organization and those include VW, BMW, and Toyota. The connected cars, as well as trucks of Toyota’s market share, is 8.90 percent and it grows by 24.80 percent in the next ten years. Whereas, cars and trucks market share is 8.53 percent which is rising by 3.90% in the coming decade. As a result, Toyota’s IoT vehicles are developing much quicker than simple vehicles in general (Wilbur & Farris, 2014). The second competitor is VW. The cars and light trucks of VW market share is 8.76 percent and its CAGR is 4.30%. Alternatively, connected vehicles market share is 15.50% and is grown by 23.20 percent. So, the connected cars and trucks of the VW market share are growing faster as compared to the light trucks and cars. Moreover, connect trucks and cars of VW is the huge source of profitability of the company. The third competitor of the company is BMW. BMW’s current market share of light trucks, as well as cars, is 3.91 percent and it grow by 3.70% over a decade. However, the current market of IoT cars, as well as trucks, is 3.00 percent and it grows by 25.50 percent over the next ten years (Aobdia & Shroff, 2017). So this analysis shows that BMW connected cars and trucks are growing by the highest percentage over the ten years. Moreover, as a consequence, the IoT- vehicles of BMW are expanding as well as attracting more customers and markets, it is also getting the most competitive advantage.
VM’s sales is $282.9 billion as well as its operating profit and net income is 20.5 billion and 16.1 billion dollars, respectively. Nevertheless, by looking at the balance sheet of the VW company, its total assets are 590.6 billion dollars and its liabilities are 443.2 billion dollars which makes the 147.4 billion dollars’ total equity. Furthermore, the total number of employees that work in the VW company is three hundred and four thousand, one hundred and seventy-four (Nishikawa, Kamiya, & Kawanishi, 2016). The second competitor is BMW. The number of people employed at BMW is 133,778. The total revenue of the company is 126.1 billion dollars, whereas, its net income and operating incomes are 6.1 billion dollars and 9 billion dollars, respectively. On the other hand, its assets worth is 275.9 billion dollars and total liabilities is 203.4 billion dollars, so the equity of BMW is 72.5 billion dollars. The third competitor of the company is Toyota. The total revenue, operating income, and net income of Toyota are 275.4 billion dollars, 22.5 billion dollars, and 19.7 billion dollars, respectively (Cordazzo, 2013). However, the total equity of the company is $190.8 billion and the number of people employed is 359,542. Therefore, this statement states that the financial position of Toyota is the strongest amount all competitor and company because its income and equity is high. Furthermore, it has more employees which show that Toyota company business is huge (Bataineh & Rababah, 2016).
By analyzing the growth data of the company, we conclude that due to IoT-connected trucks and cars, the company is gaining market share. However, due to cars and light trucks, it is losing its market share. The major factor behind the change in the company’s market share is customer preferences. Now customers prefer the drive those cars and trucks that have more sensors and technology, which positively influence the connected trucks as well as cars of the market share (Marasco, Picucci, & Romano, 2016). Another factor that positively influences the market share of connected cars and trucks is strengthening the relationships with the customer. As the company invest in the R&D process and know that strong customer relationship benefits the company as well as increase the market share. Therefore, the company is likely to know about the customer desires of new products and manufacture that product which strengthens the company’s relationship with its customers. Therefore, customer preferences and strong relationship with customer plays a vital role in changing the market share of connecting cars as well as light trucks (Rahimi & Kozak, 2017).
By comparing the company’s growth potential with its competitor, in comparison to VW or Toyota, the company’s IoT vehicle profitability market is huge. However, the company’s IoT vehicles profitability market, is low in comparison with BMW. The revenue of the organization is $187.1 billion, whereas its net income and operating income, is $0.9 billion and $5.7 billion, respectively (Overby & Lee, 2006). However, the net income of the company is less than its competitors (BMW, Toyota, and VW). On the other hand, the total worth of the company’s assets is three hundred and ten billion dollars as well as its liabilities are $270.2 billion. Due to this, the organization equity is $39.9 billion.
The TAM, as well-referred to as total available market, refers to the revenue option accessible to a service or product if it achieves 100 percent share. It aids in determining how much effort as well as funding a company or person should place into the innovative enterprise line (Kenrick, Svabova, & Nica, 2019). The TAM for the light trucks and cars of Toyota is 275.40 billion dollars. Whereas, the TAM for the light trucks and cars of the company is 187.10 billion dollars. Moreover, the Total-available-market for VW and BMW is 282.90 billion dollars and 126.10 billion dollars, respectively. The TAM of connected trucks, and cars for the company, is $3.83 billion. However, the three rivals are VW, Toyota, and BMW. The first competitive rival is BMW, as well as its TAM for IoT cars and light trucks is $1.62 billion (Agnolucci, 2007). Additionally, another rival of the organization is Toyota. TAM for connected trucks and cars of Toyota is $4.80 billion. Furthermore, another rival of the organization is VW as well as its total-available-market for IoT light trucks and cars is $8.36 billion.
CAGR refers to average annual growth of an invested capital over a time period greater than 1 year. The CAGR of the company’s light trucks as well as cars over the 10 years is 3.10 percent (Mishra, Pandey, & Verma, 2018). However, the three competitors are VW, Toyota, and BMW, and its CAGR of cars, as well as light trucks over the ten years, are 4.30 percent, 3.90 percent, and 3.70 %, respectively. Over the next 10 years, the anticipated CAGR for connected cars and trucks was indeed 10.20 percent (Hamilton-Basich, 2021). BMW’s connected vehicles and trucks are expected to grow at a rate of 25.50 percent. Furthermore, Toyota’s projected CAGR for connected automobiles is 24.80 percent, while VW’s is 23.20 percent.
After comparing the connected cars and trucks CAGR as well as projected CAGR of simple cars and connected cars and trucks of three rivals, we concluded that the fastest-growing competitor of the company is VW because of its market share, TAM, and CAGR, when compared to its rivals as well as the corporation, it is greater.
If the customer of the organization is slow to buy (respond) the innovation, then the company needs to change its marketing strategy. Because marketing strategy of the company plays a vital role in changing the buying decision of the customer. As the company is producing IoT-connected cars as well as lights trucks, so it needs to utilize the most effective marketing strategies (Sudha & Sheena, 2017). Therefore, the company needs to target those right individuals with the automotive campaigns. Make a different segment for the audience, as well as run separate marketing campaigns for all. The social media that can be used in the marketing campaigns are Twitter, Facebook as well as Instagram. If the competitor of the company overtakes the company as well as other competitors, then the company needs to offer a competitive price to its customers. Because one of the effective ways to defeat the competitor is by offering affordable prices (Kim, Lee, & Roehl, 2018). When companies more focus on the existing rate of the market for a product then they can set the price within the competitor price range.
The development size would be high because the company needs to establish an innovative product and that needs research and development too. The company will need additional personnel as well as capital because when the company is choosing incremental innovation then it needs to add innovative feature in the existing product or technology that attracts the customers (Rask & Günzel-Jensen, 2019). For add new features in product, the company needs to invest a high amount of capital in R&D. Furthermore, it also required additional personnel that will make the new product according to the customer needs.
For adding feature and launching a product, the company will take one year. To begin with the research and development, it will take two months to understand the wants and requirements of the customer through surveys and questionnaires. After R&D, the company will make changes in the product as per the demand of the customers. This process will take one month. In addition, the company will decide on target customers because if the company does not decide who they are targeting then it negatively influences their marketing campaign (Hermawan, 2018). Moreover, after deciding the target market, it will decide the marketing channels. After that, it will finalize the launch of its new product and announce the final date. In between this, the company will share the information related to the product and launch its new product. Furthermore, the company will evaluate the product’s success through its sales in the first month.
Agnolucci, P. (2007). Economics and market prospects of portable fuel cells. International Journal of Hydrogen Energy, 4319-4328.
Aobdia, D., & Shroff, N. (2017). Regulatory oversight and auditor market share. Journal of Accounting and Economics, 262-287.
Bataineh, A., & Rababah, A. (2016). Comprehensive Income and Net Income, which is more powerful in predicting Future Performance. International Journal of Academic Research in Accounting, Finance and Management Sciences, 114-120.
Cordazzo, M. (2013). The impact of IFRS on net income and equity: evidence from Italian listed companies. Journal of applied accounting research .
Hamilton-Basich, M. (2021). Xifin Enters Radiology RCM Services Segment with Computerized Management Services Acquisition. AXIS Imaging News .
Hermawan, H. (2018). Updates on the research and development of absorbable metals for biomedical applications. Progress in biomaterials , 93-110.
Kenrick, N., Svabova, L., & Nica, E. (2019). Real-time health-related data, wearable medical sensor devices, and smart cyber-physical systems. American Journal of Medical Research, 25-30.
Kim, M., Lee, S., & Roehl, W. (2018). Competitive price interactions and strategic responses in the lodging market. Tourism Management, 210-21.
Marasco, A., Picucci, A., & Romano, A. (2016). Determining firms׳ utility functions and competitive roles from data on market shares using Lotka–Volterra models. Data in brief, 709-713.
Mishra, P., Pandey, A., & Verma, R. (2018). Compound Annual Growth Rate of Credit Deposit Ratio of Schedule Commercial Banks. Research Journal of Humanities and Social Sciences, 740-746.
Nishikawa, I., Kamiya, T., & Kawanishi, Y. (2016). The definitions of net income and comprehensive income and their implications for measurement. Accounting Horizons, 511-516.
Overby, J. W., & Lee, E.-J. (2006). The effects of utilitarian and hedonic online shopping value on consumer preference and intentions. Journal of Business research, 1160-1166.
Rahimi, R., & Kozak, M. (2017). Impact of customer relationship management on customer satisfaction: The case of a budget hotel chain. Journal of Travel & Tourism Marketing, 40-51.
Rask, M., & Günzel-Jensen, F. (2019). Business model design and performance in nascent markets. Management Decision.
Sudha, M., & Sheena, K. (2017). Impact of influencers in consumer decision process: the fashion industry. SCMS Journal of Indian Management, 14-30.
Wilbur, K. C., & Farris, P. (2014). Distribution and market share. Journal of Retailing, 154-167.
Organizational Structure and Culture Report
The current organizational structure, which is divisional, has supported the business objectives and strategic plans. This structure connects with traditional corporate systems employed in the country’s businesses. This structure has helped in enhancing the effectiveness of the company in sustaining a substantial market presence worldwide. Primarily, the structure has defined the patterns in the company’s resources and processes and facilitated the firm’s effective and efficient business management.
The Current Organizational Structure’s Impact On Innovation
Since this divisional organizational structure relies on formal control, it has a significant impact on innovation. Through this structure, the company can improve innovative achievement by facilitating coordination among the organization’s various functional units, increasing cost-effectiveness while reducing uncertainty and production errors. According to Kalay & Lynn (2016), a divisional structure makes cross-functional knowledge and resource sharing attainable. Thus, the structure tends to be a crucial aspect for the company in facilitating strategic decision-making, resolving disputes, and the active and effective coordination of innovation.
The divisional organizational structure influences innovation within the organization by leading to positive stiff competition between its established sub-sections, promoting innovation in the entire organization. Thus, the divisional structures possess better control over their sub-units than functional structures, giving the company’s top management a higher level of control over its workforce and its tasks. The sub-divisions foster innovation activities since they operate independently under a divisional manager (Aksoy, 2017). This unit manager reports to the main office and delegates the decision-making power on production, promotion, and marketing functions.
This reporting enables the managers to make decisions on their respective units in time. As a result of timely reporting, the model facilitates the sub-sections to focus on consumer interests, inspire innovative competition among these divisions and improve regulation since the sub-unit operates as an individual profit center (Choi, 2021). Similarly, since the divisional structure leads to duplication of roles, it becomes easy to develop mastery skills that play a critical role in enhancing creativity leading to innovation.
Furthermore, the divisional organizational structure improves organizational success by supporting the production process innovation. As a result of this support means that the company’s structure promotes knowledge development via formal research based on practice, experience, and inter-divisional interactions. This interconnectedness leverage the innovative capacity of the company (Garza & Lopez, 2020). Overall, in terms of impacting innovation, the organizational structure enables organization configuration. It prepares to handle new events requiring innovative techniques to cope with certainties and their occurrence chances.
The divisional organizational structure aspect of “adhocracy” is firmly linked to the promotion of innovation. Therefore, the structure is not influenced by classical principles and is precisely distant from the ideas of unified command, high behavioral formalization, and planning and control systems. Instead, this structure enhances innovation by ensuring mutual adjustment between the established departmental teams without guaranteeing formal coordination of roles (Kovaçi et al. 2021). Maintaining the organizational configuration that allows for innovative knowledge based on practical experience and interaction among workers becomes achievable. This interaction promotes an adhocratic structure incorporated in the general divisional structure. It promotes interdisciplinary teams and cooperation among sub-units that boost innovation by generating and diffusing ideas.
The current divisional structure has remained effective in addressing the market demand changes by empowering the establishment of various divisions such as marketing and research and development to correspond and respond to changes in market demand witnessed for some products or in different geographies. The sub-units or divisions have worked together in solving common changes in the market demand, which cuts across all established sub-sections (Kovaçi et al. 2021). Thus, the divisional structure tends to be crucial in handling changes since the failure of one of the sub-division units cannot directly undermine the operations of other divisions.
Further, the divisional structure has organized business operations into market groups such as customer groups and geographical locations. As a result of this grouping, the entire company has identified the critical changes in the market demand, which can positively or negatively influence performance. For instance, as the price of pneumatic tires had fallen in previous years, the quantity demanded in different markets raised because people bought more at low cost than previous (Kalay & Lynn, 2016). However, the company relied on its various sub-units within the production line to develop tubeless tires to compete with cheap selling ones.
The firm used the marketing department to market and promote the newly innovated tires to counter market demand changes. Since it was a new product, its demand was high irrespective of being high prices. Therefore, the organization has relied on its current structure to create more individual sections and distribution functions between its main offices and its branches located in different places.
Recommended Changes To The Current Organizational Structure
The proposed change should be improving this divisional structure by incorporating a multidivisional form (“M-form”). This integrated legal structure will enable the parent company to establish subsidiaries in different markets. The new branches need to use the parent company’s brand and name to gain a competitive advantage. If the change gets successfully initiated and implemented, the company’s current divisional organizational structure effectively organizes the company activities around the geographical, market, or product teams (Kalay & Lynn, 2016). Thus, a company to create more green widget groups to serve Japanese or European markets will arise. All the divisions need to comprise the complete set of functions and independently handle their accounting activities, sales, marketing, engineering, and production.
The recommended multidivisional form will support innovation by ensuring accuracy in making clustered decisions at the division level. This clustering process will get followed by opening many branches in various markets and regions with rich skills even if it is likely to incur increased costs. Once the innovative decisions get integrated into all levels, the company will experience minimized disputes and fiefdoms that do not necessarily work together for the success of the whole entity in terms of innovation.
This recommended change makes the company more responsive to market change by promoting product and geographic departmentalization. A divisional structure built by aspects of the multidivisional form implies that one manager’s authority controls different activities related to the product (Garza & Lopez, 2020). For instance, if the division produces tubeless tires, the concerned division will have its sales, engineering, and marketing departments that differ from those within the tire-making section or unit.
Similarly, the geographic departmentalization resulting from M-form will revolve around categorizing activities depending on geographical location, such as an African or Asian division, to respond to the market change needs. Primarily, geographic departmentalization is crucial if tastes and brand responses resulting from market demand differ across geographic areas, enabling flexibility in product offerings and marketing strategies (localization). However, this change in divisional organizational structure means that the autonomous divisions will be making the decisions. Therefore, the company structure will make the company conduct its business activities globally.
A multidivisional change structure will align a company with the individual units based on geographic regions, products, or services. For instance, a moving company might create a geographic-divisional structure, including the Chicago and Miami divisions. Alternatively, since the firm is a manufacturing enterprise, it can implement a product-based divisional system, including product engineering divisions (Kuznetsova & Karpenko, 2018). In contrast, a professional services company might organize around service lines, such as the personal and business services divisions.
How Organizational Changes Support Innovation Culture
The integration of “M-Form” with the divisional organization structure as a new change will help support the company’s innovation culture by utilizing both scientific management and bureaucratic controls. This favorable combination will improve the firm’s efficiency and profits. The combination is necessary since the company is big because it has many workers who are not limited in resources. Thus, every employee gets an opportunity to specialize while the firm remains organized in a strict hierarchy.
Further, M-form will enable the comp to quickly notice where production is lacking and how evaluability of each division. This identification will provide a better platform to create incentives for employees, which increase production. Since the company’s central auditing unit evaluates every division using the M-form using the same accounting techniques, the company will easily predict the efficient units (Kuznetsova & Karpenko, 2018). As a result of this prediction, this prediction becomes crucial to understand which products to produce and the best practices that are helping the company grow.
In general, M-form supports the culture of innovation by creating a shared understanding of innovation. A company looks at how and why to invent and how the newly innovated item looks different from its substitutes. Since the innovation tends to be contextual, a company may understand its significance but need to establish common knowledge around what it is and what it will do for the company (Kuznetsova & Karpenko, 2018). Therefore, forming a particular innovation mission implies the company has well-structured outlines for daily activities for spearheading the innovation process.
However, the current ways, such as the leadership team not taking the lead by establishing its intention and communicating it to the entire organization, will make the current culture work against the innovation. This failure undermines the leadership from illustrating its efforts to innovation culture via leadership behaviors and engagement in attaining innovation. Primarily, commitment lack of leadership implies miscalculated intention for enhancing the innovation culture (Garza & Lopez, 2020). Thus, the company cannot develop and implement innovative techniques to layout the innovation culture in the operational context and answer the concerns regarding who, what, where, when, why, and how it will innovate.
Conclusively, the company’s utilization of the new organizational structure that is hybrid will help achieve the set goals and objectives. Through the divisional structure, innovation opportunities are available since every sub-unit has its unique, innovative skills. Generally, culture and innovation remain as core apsects for organizational success since they cover multiple elements needed for creating independent divisions in varying geographic markets.
Aksoy, H. (2017). How do innovation culture, marketing innovation and product innovation affect the market performance of small and medium-sized enterprises (SMEs). Technology in Society, 51(4), 133-141.
Choi, K. (2021). Delegation in multiproduct downstream firms with heterogeneous channels. Journal of Economics, 1-28.
Garza, R., & Lopez, A. (2020). Measuring Innovation Culture: A Synthesis of the Innovation Culture Construct and Identification of its Research Clusters. Multidisciplinary Business Review, 13(1), 42-55.
Kalay, F., & Lynn, G. S. (2016). The impact of organizational structure on management innovation: an empirical research in Turkey. Journal of Business Economics and Finance, 5(1), 125-137.
Kovaçi, I., Tahiri, A., Bushi, F., & Zhubi, M. (2021). Organization as a Function of Management and the Types of Organizational Structures that Apply in SMEs in Kosovo. Calitatea, 22(181), 3-6.
Kuznetsova, I., & Karpenko, Y. (2018). The technology of budgeting enterprises with the divisional structure. Innovative Technologies and Scientific Solutions for Industries, (1 (3)), 96-102.
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