Non-Core Innovation Challenges Faced by Incumbent Firms A Case Study Investigating Challenges Faced by a Product Strategy Department at a Multinational Incumbent Technology Firm When Pursuing Non-Core Innovation

Abstract

Incumbent firms, with their established market positions and competitive advantages, excel in stable environments due to strong customer relationships and product specialization. However, they often struggle to adapt to market changes and focus on disruptive innovation, leading to the "Incumbent's Curse." This occurs when incumbents resist radical ideas that new entrants develop, reshaping the market and threatening the incumbents' dominance. Despite this, some incumbents successfully pivot to new markets, as seen with GKN and The Tandy Corporation. Research indicates that while incumbents can pursue radical innovation, many struggle due to mechanistic organizational structures and a focus on sustaining innovations for existing customers. This thesis examines the primary challenges an incumbent firm faces when pursuing non-core innovation, using a case study approach on a multinational technology firm active in the automotive industry. Focusing on a product strategy department, the study identified eight significant challenges, which were grouped into three main areas. The first area highlights the difficulties in discussing innovation, due to varied interpretations of terms like "disruptive," "adjacent," "transformational," and "non-core innovation." This complexity underscores the need for a common language and comprehensive discussions within the department. The second area addresses the dilemma of responsibility for non-core initiatives. Opinions were divided on whether the department should handle non-core innovation, with employees advocating for a broader innovation scope to mitigate risks, while managers were more cautious due to perceived higher risks. The third area pertains to practical challenges in driving non-core innovation, including the impact of reorganization, resource allocation issues, mindset and motivation problems, and structural barriers. These challenges suggest the need for a shift in organizational mindset and resource allocation, potentially requiring a separate division for noncore innovation. The thesis primarily focused on identifying challenges rather than providing solutions, laying the groundwork for future research. However, six practical recommendations could be provided: achieving a unified view on non-core innovation, educating on various innovation theories, balancing resource allocation, establish a workforce with diverse skills and knowledge backgrounds, creating a separate unit for non-core innovation, and establishing new valuation methods for non-core initiatives. Limitations to the study include the single-case design and time constraints, which may affect the generalizability of the findings. Future research could involve multiple case studies and exploring industry-specific challenges and solutions for non-core innovation.