MBA501: EFS Case Study Disruptive Innovation Analysis

This case study analyzes Essendon Food Solutions (EFS), a holding company with two subsidiaries, EnzymeTech and Essendon Emulsifiers, facing challenges in disruptive innovation and strategic leadership. The analysis covers internal factors like organizational culture, resource allocation, and struct...Read More

Dynamic Strategy and Disruptive Innovation 1
Dynamic Strategy and Disruptive Innovation
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Internal Perspective
Major internal structures that impact Essendon Food Solutions innovative capacity
includes human resource, organizational culture, resource allocation and organizational structure.
The leadership at Essendon Food Solution does not understand the value of disruptive innovation
because they are used to doing things following a systematic approach which hinders innovation
(Karimi and Walter 2015). This is attested by the company’s policy to attract holders of a degree
in microbiology before they are molded to various fields. Besides, new recruits are expected to
ask few questions and follow instructions in order to survive in the firm.
The organizational culture at EFS indicates that all decisions are made from the General
Managers and senior executives rise up through ranks. This implies that there is no room for
suggestions or feedback hence hindering disruptive innovation in the organization. Since EFS is
a holding company that has two subsidiaries, resource allocation is based on competitive
approach. The organization structure of the institution comprises 800 employees who are led by
the Chief Executive Officer and a Board of Directors with two general managers who manage
each subsidiary. Such a large institutions makes it difficult to successfully develop and
implement change because of the bureaucracy involved (Teece, Peteraf and Leih 2016).
In order for EFS to develop and implement disruptive innovations, it ought to bring in
fresh team that will be able to change the company’s ways of doing things. Furthermore, the
organization is expected to institute change with an aim of altering the culture of the organization
which is responsible for hindering innovation in the organization. The organization should allow
junior staff members to contribute meaningfully to the operations of the company (Ghezzi,
Cortimiglia and Frank 2015). Hence, assisting the general managers to make decision that can

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promote change in the organization. In doing so, the organization will enhance flexibility by
having small business units that encourage decision making at the lower levels of the business.
External perspective
The key external factor that are influencing EFS’s innovative capacity include
commitment and relationships as well as regulatory and economic conditions. The organization
has been committed to paying dividends to its investors even in times when they are not making
substantial profits. The support is evident where the executive committee and the Board of
Directors are worried as a result of CFO’s suggestion to channel dividends towards high-
potential projects.
The concern of the executive and the Board of Directors is that the move would send a
wrong message which would affect the share price thus impacting the company’s reputation. In
this regard, the case of Apple attests to the fact that the CEO made sure that the investors were
aware that their input in the company would not affect the company’s quest to deliver to its
consumers or influence innovations.
The research and development team that is based at Adelaide is not committed to reach
out to the consumers to interact with them. This is as a result of self-vindication that they
understand their duties. However, studies indicate that it is significant to listen to customers in
order to understand what they need so that businesses can transform by serving the needs of their
markets (Schoemaker, Heaton and Teece 2018).
On the other hand, Essendon Emulsifiers indicate that they lack energy and capacity to
pursue new markets. This is another aspect that is related to financial obligation characterized
with regulations that hinder disruptive innovation. Possible recommendation for external factors

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that hinder innovation include assessing the potential impact to innovation before entering into
binding contract with investors among other external entities. In addition, business should not
rely on their own research and development practices that are not in touch with the real market.
This is because innovation rely on both expertise and market dynamics to successfully realize
innovative objectives (Christensen et al 2016).
Marketing Perspectives
Key marketing and customer related factors that influence EFS’s innovative capacity
include customer visit programs, empathic designs and lead-user processes. Customer visit
programs assist an organization to understand their target market with precision. This
information normally helps an organization to reduce the cost of marketing. This is as a result of
developing products based in the needs that consumers have which generate automatic interest.
Unlike, developing a product beforehand and trying to convince consumers through
extensive market on the significance of the product (Bourke and Roper 2016). This approach can
be conducted by various departments within an organization including the research and
development team. Empathic design on the other hand is centered on the emotional aspect of the
consumers. It suggests that the organization should strive to understand the feelings of their users
towards a given products and be able to develop a product that the customer may not know that
they desired.
This approach can be achieved successfully at EFS because they have a research and
development team that is specialized in their field and all they require is to visit the consumers
and learn more about their feelings towards their products. Lead user processes also influence
marketing and customer related factors by virtue of being the pioneers of the testing new

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technology. The information collected from the lead user can be used to make necessary changes
to the product so that the product can resonate to specific segments that the organization is
targeting. These three processes are critical for an organization to ensure that it curves a bigger
market share in the industry (Gans 2016). This is because it is difficult to sell a product that has
no useful purpose among targeted consumers. Therefore, EFS should consider these approaches
to effectively promote their products and reduce marketing cost.
Technology Perspective
The annual strategy review for EFS is often conducted by a team of 20 senior staff
members whose mandate is to review the annual strategy. Based on the current numbers that
were provided in the meeting, EFS fell short of reaching its target. It is alluded that one of its
competitor is efficient in terms of technological capacity which allows them to produce faster
and cheaper products. In this regard, EFS is likely to experience challenges and force the
company to downsize for purposes of guaranteeing profits to their shareholders. Based on this
context, the organization is in no position to develop and implement disruptive innovation.
Technological innovation is the most challenging aspects and businesses need to be
creative in designing a better approach that is going to solve their specific needs (Marx and Hsu
2015). In order to realize this objective, the institution is required to look at the problem
categorically, consider the competitors approach to the problem, how they are able to solve their
problem and then develop a solution that is different from the rest of the players in the industry.
EFS ought to increase technology disruption in order to avoid being stagnant in
traditional approaches. This implies that the organization is required to adopt to a culture of
investing in disruptive innovation or end up being disrupted by other companies. Incentives need

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to be put in place so that businesses are aligned to the international economic growth (Park 2017.
As a result, EFS is expected to establish teams and resources sufficient for disruptive
competencies. The impact of technological disruption will change the traditional organizational
culture by replacing it with a new model for sustainable disruptive innovation. The impact of this
approach is likely to create unemployment and organizations changes within a specific
institution.
Strategic leadership
Based on the dialogue between Jonathan, Henry and CFO, it is evident that there are
challenges with respect to leadership of the organization. This is mostly attributed to the fact that
the organization recruits new employees who climb up the ranks to become executives of the
organization. The problem with this approach is that the institution will not be competitive
because the organization will have lost touch with the demanding nature of the market and
competition (King and Baatartogtokh 2015).
To remain competitive, Henry suggests that the institution is required to employ an
outside person who has been to several institution and understands what goes around. The CFO
backs Henry on this point and also provides evidence of various institutions that managed to
grow as a result of employing outsiders.
The leadership risk that the institution is facing is promoting individual simply by their
experience rather that meeting standards for various position. Besides, allowing an outsider to
come and run the company also poses a risk to the institution as a result of resistance from the
old culture (Teece and Leih 2016). Therefore, the current leadership are required to employ
strategic thinking which comprises knowledge and skills that are required to evaluate market

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opportunities and develop new strategies of ensure that the organization is able to innovate and
enhance shareholder value.
Strategic leadership will depend on a number of factors such as experience of the leaders,
cognitive ability and extraversion (Lee et al 2018). Experience in various departments is
significant in allowing the leadership of EFS to clearly monitor each department for purposes of
making reliable decisions. Besides, the leaders should be able to develop problem solving skills
as is seen by the two founders of EFS in deliberating to determine the way forward for the
company. Experience in leadership is earned through repetitions and novelty in order to address
various problems.

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Reference List
Bourke, J. and Roper, S., (2016). AMT adoption and innovation: An investigation of dynamic
and complementary effects. Technovation, 55, pp.42-55.
Christensen, C.M., McDonald, R., Altman, E.J. and Palmer, J., (2016). Disruptive innovation:
Intellectual history and future paths (pp. 1-52). Cambridge, MA: Harvard Business School.
Gans, J.S., (2016). Keep calm and manage disruption. MIT Sloan Management Review, 57(3),
p.83.
Ghezzi, A., Cortimiglia, M.N. and Frank, A.G., (2015). Strategy and business model design in
dynamic telecommunications industries: A study on Italian mobile network
operators. Technological Forecasting and Social Change, 90, pp.346-354.
Karimi, J. and Walter, Z., (2015). The role of dynamic capabilities in responding to digital
disruption: A factor-based study of the newspaper industry. Journal of Management Information
Systems, 32(1), pp.39-81.
King, A.A. and Baatartogtokh, B., (2015). How useful is the theory of disruptive
innovation?. MIT Sloan Management Review, 57(1), p.77.
Lee, M., Yun, J., Pyka, A., Won, D., Kodama, F., Schiuma, G., Park, H., Jeon, J., Park, K., Jung,
K. and Yan, M.R., (2018). How to respond to the Fourth Industrial Revolution, or the Second
Information Technology Revolution? Dynamic new combinations between technology, market,
and society through open innovation. Journal of Open Innovation: Technology, Market, and
Complexity, 4(3), p.21.

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Marx, M. and Hsu, D.H., (2015). Strategic switchbacks: Dynamic commercialization strategies
for technology entrepreneurs. Research Policy, 44(10), pp.1815-1826.
Park, H., (2017). Technology convergence, open innovation, and dynamic economy. Journal of
Open Innovation: Technology, Market, and Complexity, 3(4), p.24.
Schoemaker, P.J., Heaton, S. and Teece, D., (2018). Innovation, dynamic capabilities, and
leadership. California Management Review, 61(1), pp.15-42.
Teece, D. and Leih, S., (2016). Uncertainty, innovation, and dynamic capabilities: An
introduction. California Management Review, 58(4), pp.5-12.
Teece, D., Peteraf, M. and Leih, S., (2016). Dynamic capabilities and organizational agility:
Risk, uncertainty, and strategy in the innovation economy. California Management
Review, 58(4), pp.13-35.