This report discusses the innovation strategy at Amazon, focusing on design thinking and its influence on innovation trends. It explores concepts such as organizational environment, innovation capabilities, and value creation. The report also highlights the importance of strategic alignment in innovation strategy.
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Running head: INNOVATION STRATEGY1 Innovation Strategy Name Institution
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INNOVATION STRATEGY2 Table of Contents Executive Summary.......................................................................................................................2 Introduction....................................................................................................................................3 Amazon Innovation trend.............................................................................................................4 Organizational Environment........................................................................................................6 Innovation trend............................................................................................................................7 Innovation strategy........................................................................................................................7 Innovation capability.....................................................................................................................8 Innovation value creation and capture........................................................................................8 How the creation of an innovation strategy ensures strategic alignment.................................9 Importance of strategic alignment...............................................................................................9 References.....................................................................................................................................10
INNOVATION STRATEGY3 Executive Summary This report is an innovation strategy focusing on Amazon as an online store. The report discusses how design thinking is significant and how it has influenced innovation trend at Amazon. The report provides a brief outlook of Amazon Company and background regarding its innovation trend. Besides, the report focuses on various concepts such as organizational environment, innovation trend, innovation strategy, innovation capabilities and innovation value creation and capture. Also, the report discusses the relationship between these concepts. Lastly, the report provided a description of how creation of an innovation strategy ensures strategic alignment within organization as well as its significance. Introduction Amazon is one of the biggest retail outlet in the world and is based in Seattle, Washington. The company is the largest in e-commerce marketplace and cloud computing platform across the world by both revenue and market capitalization. Amazon was founded by Jeff Bezos in 1994 as a bookstore and later grew to include other products categories. Ever since, the company has grown to host a wide range of products on its online e-commerce platform. Besides, Amazon is considered to be the second largest employer in the United States. In 2002, the company started Amazon Web Services which offered a number of services to marketers and developers. Later in 2006, the company grew and began to rent computer processors and data storage through the internet(Halpern, Zhu & Reddi, 2016). In the same year, the company launched its fulfillment by Amazon because it managed its inventory from a single location. Amazon partnered with Kiva Systems to automate its inventory. Similarly, the company has managed to form strategic alliances with various businesses. Among some of the notable partnership include Toys “R” US, borders Group, DC
INNOVATION STRATEGY4 Comics, United States Postal Service, Nike, AmazonFresh and Apple Inc. The website began attracting huge number of visitors annually. According to statistics by the United States government in December 2017, Amazon website received 197 million visitors. However, the results generated by its search engine are partly as a result of promotional content. The company depends on multi-level sales strategy which is responsible for majority of its revenue. The company began its strategy by targeting business-to-business consumer relationship as well as business-to-business between the company and its suppliers. In addition, the company allows anyone to sell their products on its platform. Besides, it has an affiliate program where affiliates earn through posting links of products and earn commissions for directing customers to make purchases. Other e-commerce sellers have resorted to selling their items on amazon as well as their website in order to increase sales. Another sales strategy that the company uses is drop shipping where people advertise products on amazon and they order from other members when a sale is made. The drop shippers often have millions of products and are characterized with large transaction numbers that makes them appear like businesses that have been around for a long time. The company lobbies the United States government on various issues such as enforcement of sales taxes, transportation safety, privacy and data protection as well as intellectual property. Amazon Innovation trend Amazon relies on the principle of customer first and an iterative approach that has ensured the company’s success over the years. Amazon began as an online book seller but has since transformed how business is conducted. Amazon has been successful in its innovation endeavors beyond wildest imagination of other e-commerce platforms. Common innovations include cloud web based services, drone delivery in their supply chain and Academy Award for
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INNOVATION STRATEGY5 writing original content. Amazon success in its innovation practices is centered on its ability to offer competitive prices on a wide range of products(Kim, Lee & Altmann, 2015). The company’s competitive advantage relates to its ability to foresee what the market wants and delivering the solutions to change the consumer behavior. For instance, the company recognized the need for a streamlined shopping experience and the company adjusted its check out and shipping options to suit the needs of the company’s consumers. Amazon is able to execute orders with a click or asking Alexa to make purchases of frequently bought household goods. With services such as Prime, Amazon was able to address specific needs that the consumers had not thought about(Rodríguez, Paredes & Yi, 2016). As a result, many customers across the world enjoy seamless shopping experience. Besides, the company has a huge loyal fan base that pay annual subscription fees for various types of benefits and exclusive access. For instance, Amazon Web Services made 3.53billion in revenue in the first quarter of 2016. The Amazon Web Service is used by numerous businesses ranging from small businesses to large businesses like Netflix. The web services now account for a significant share of the company’s revenue which increases competition for tech giants such as Microsoft and Google(Dolata, 2017). Amazon Web Services became much accessible for small businesses that would have incurred significant cost on computing solutions. With such innovations, Amazon is considered to be walking on its own path and many e-commerce platform watch out for the company to adjust their businesses model based on new trends. Majority of businesses are often discouraged from taking risks which limits opportunities for growth(Bogue, 2016). As a result, majority of the company lag behind from innovating solutions that would directly solve specific needs for their competitors. Amazon strategy in innovation can be explained through consistency in
INNOVATION STRATEGY6 improving solutions rather than making them work for the first time. The advantage that the company enjoys is that it is able to launch s product and improve it on real-time based on feedback from their customers. Amazon believes that each iteration process offers new insight and a step closer towards making innovations work for the consumers. An example of such innovation is Amazon Custom which is a feature that allows customers to make customizable offers through the company’s website(Sorescu, 2017). These are just among some of the innovation trends that Amazon has managed to realize through design thinking which considers customers’ demands and innovation solutions to address the needs. Organizational Environment An organizational environment constitutes forces that have an influence on performance, operations and resources of an institution. Therefore, for managers to manage their institution effectively, they have to depend on understanding their environment carefully. Normally, organization environment is classified under internal and external environment. An organization internal environment comprises entities, regulations, events and factors within an institution that contribute in influencing activities and choices(Winkler & Marshall, 2017). These aspects may be significant in showing strength and weaknesses of an organization. Besides, other factors such as employee behavior, organization culture, mission statement and leadership style influence the internal environment of a company. On the other hand, external environment involves factors outside a company that influences activities and choices. These can be significant in determining threats and opportunities. Among common factors of external environment that influence the performance of an institution include, customers, public opinion, economic forces, competition and government regulation. Internal and external organizational environment are related to other concepts such as innovation trend, innovation strategy,
INNOVATION STRATEGY7 innovation capabilities and value creation and capture. This is because innovation trend is dependent on an enabling environment which informs the innovation strategy that considered capabilities of an organization before value is generated from a specific innovation. Therefore, these concepts are linked in terms of process and approach required to launch a successful innovation. Innovation trend Innovation trend is concept that aims to answer future needs of the consumers. This is one particular area that is challenging for many business leaders, entrepreneurs, innovators and marketers. Innovation trend is what informs solutions that consumers will need based on changes in internal and external organizational environment. This concept is related to the other concept stated under organizational environment. This is because the likely trends that a business will choose to pursue will be informed through changes in the internal and external organizational environment(Daspit, 2017).The trend will play a crucial role in developing an innovation strategy which will consider capabilities of the innovation and value that the company will derive from the use of a particular innovation. Innovation strategy An innovation strategy is concept that defines the framework that is going to be used in growing market share or improving profitability position of a product or service. Innovation strategy depends on a number of factors such as organization environment, capabilities and value. Therefore, an innovation strategy that can be adopted has to consider whether there is sufficient needs and support from other factors including the company resources to fund research and development towards finding a specific solution for specific problem that is experienced among consumers(Pisano, 2015).
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INNOVATION STRATEGY8 Innovation capability Innovation capability is a concept that is used to show relationship between a new product or service and ability of a firm to see through the creation process. In essence, innovation capability seeks to determine whether an institution is capable of creating a new product to solve existing needs in the market(Donate, Peña & Sanchez de Pablo, 2016). This concept is related to other concepts discussed since an organizational environment will determine whether a firm is capable or not. For instance, regulations may hinder the creation of a new technology and advancement in technology may influence the duration of developing new technology. More so, innovation capability informs the strategy that a firm will use in creating the new products or service. Innovation value creation and capture. This is a concept that focuses on evaluating the benefits as a result of a particular innovation. Different company’s often have different approach towards finding value which are based on business objectives. Value through an innovation is therefore dependent on the mission and goals of an institution(Bez et al, 2018). Besides, value creation concern the value that consumers will benefit from using a particular product while capturing value concerns the significance of the new creation on the overall impact of an organization. The link between these concept and the rest that have been discussed is that all processes offer learning opportunities of the significant steps that are required to develop a new product. Otherwise, this valuable information can be used by other organizations with supporting environment and capabilities to gain a competitive edge in the market.
INNOVATION STRATEGY9 How the creation of an innovation strategy ensures strategic alignment Strategy involves making choices between two option and innovation constitutes the means to achieve the strategy (Liedtka & Ogilvie, 2011). Without a reliable strategy it is often challenging to realize long-term success and gain a competitive advantage. Majority of executives attest that aligning strategy and innovation practices is one of the priorities of many companies. This implies that innovation strategy needs to be structured based on the overall objectives of a company. This means that innovation strategy involves the creation of new value which people are likely to use and pay for. However, innovation strategy is dependent on capabilities and environment that support the success of a new innovation(Wu, Straub & Liang, 2015). Therefore, innovation strategy is more concerned with mapping an organization mission, vision and objectives with the needs of a particular market. This means that innovation goals cannot be separated from overall business goals because they are linked towards achieving operational efficiency. It implies that marketing objectives of a firm should not be separated but seen as two entities which rely on each other to accomplish the overall objective of a firm(Gerow, Thatcher & Grover, 2015). Consequently, every innovation strategy that is aligned to the overall objectives of an organization must strive to show how innovation contributes in achieving the overall goals of an institution. As a result, an innovation strategy that is aligned with business goals will state the purpose and determine the competition for the innovation, develop value proposition and competitive advantage, determining capabilities and support systems in place (Liedtka, 2018). Importance of strategic alignment Majority of organizations across the world often experience challenges with aligning their business objectives with strategic innovation. Therefore, managers are required to be skilled
INNOVATION STRATEGY10 in understanding the significance of strategic alignment as it contributes to businesses performance(Turel, Liu & Bart, 2017). Besides, in order to remain competitive, organizations must come up with viable strategies that support business growth and sustainability. To accomplish these goals, firms must be able to maintain strategic alignment. Moreover, there are various challenges that are associated with lack of strategic alignment such as lost connection and wastage of time. However, there are numerous benefits and reasons why businesses should maintain strategic alignment. Strategic alignment helps businesses to focus their energy in the right areas, it plays a crucial role in reducing duplications and it eliminates conflict of interest. Besides, it increases team coordination and communication and it helps in providing insight to capabilities and roadmap for the employees(Vanhaverbeke et al, 2017). Also, it ensures that all employees are motivated towards accomplishing similar goals thus increasing efficiency and helps a firm to maneuver in rapid changing business environment.
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INNOVATION STRATEGY11 References Bez, S. M., Divito De Paauw, L., Gnyawali, D. R., & Rivera, J. (2018, July). The Role of Coopetition on Innovation, Value Creation and Value Capture. InAcademy of Management Proceedings(Vol. 2018, No. 1, p. 15630). Briarcliff Manor, NY 10510: Academy of Management. Bogue, R. (2016). Growth in e-commerce boosts innovation in the warehouse robot market.Industrial Robot: An International Journal,43(6), 583-587. Daspit, J. J. (2017). D. Andreini and C. Bettinelli: Business model innovation: from systematic literature review to future research directions.Journal of Management & Governance,21(3), 785-792. Dolata, U. (2017).Apple, Amazon, Google, Facebook, Microsoft: Market concentration- competition-innovation strategies(No. 2017-01). Stuttgarter Beiträge zur Organisations- und Innovationsforschung, SOI Discussion Paper. Donate, M. J., Peña, I., & Sanchez de Pablo, J. D. (2016). HRM practices for human and social capital development: effects on innovation capabilities.The International Journal of Human Resource Management,27(9), 928-953. Gerow, J. E., Thatcher, J. B., & Grover, V. (2015). Six types of IT-business strategic alignment: an investigation of the constructs and their measurement.European Journal of Information Systems,24(5), 465-491. Halpern, M., Zhu, Y., & Reddi, V. J. (2016, March). Mobile cpu's rise to power: Quantifying the impact of generational mobile cpu design trends on performance, energy, and user
INNOVATION STRATEGY12 satisfaction. In2016 IEEE International Symposium on High Performance Computer Architecture (HPCA)(pp. 64-76). IEEE. Kim, K., Lee, W. R., & Altmann, J. (2015). SNA-based innovation trend analysis in software service networks.Electronic Markets,25(1), 61-72. Liedtka, J & Ogilvie T. (2011). Designing for growth: a design thinking toolkit for managers. New York: Colombia Business School Publishing. Liedtka, J. (2018). Why Design Thinking works: It addresses the biases and behaviors that hamper innovation, Harvard Business Review, 96 (5): 72-79. Pisano, G. P. (2015). You need an innovation strategy.Harvard Business Review,93(6), 44-54. Rodríguez, M., Paredes, F., & Yi, G. (2016). Towards Future Customer Experience: Trends and Innovation in Retail.Форсайт,10(3 (eng)). Sorescu, A. (2017). Data‐driven business model innovation.Journal of Product Innovation Management,34(5), 691-696. Turel, O., Liu, P., & Bart, C. (2017). Board-level information technology governance effects on organizational performance: The roles of strategic alignment and authoritarian governance style.Information Systems Management,34(2), 117-136. Vanhaverbeke, W., Roijakkers, N., Lorenz, A., & Chesbrough, H. (2017). The importance of connecting open innovation to strategy. InStrategy and communication for innovation(pp. 3-15). Springer, Cham.
INNOVATION STRATEGY13 Winkler, M., & Marshall, E. (2017). Creating and shaping the organizational environment and culture to support practice excellence.Transformational leadership in nursing: From expert clinician to influential leader, 247-267. Wu, S. P. J., Straub, D. W., & Liang, T. P. (2015). How information technology governance mechanisms and strategic alignment influence organizational performance: Insights from a matched survey of business and IT managers.Mis Quarterly,39(2), 497-518.