Managing Innovation: A Report on Microsoft's Strategies and Theories

This report provides a comprehensive analysis of Microsoft's innovation management, focusing on the application of key innovation theories such as Red Ocean and Blue Ocean strategies, and disruptive innovation. The report examines how Microsoft has historically employed these strategies to develop and launch new products, such as Microsoft Office and Windows, and gain a competitive advantage in the market. It delves into the historical development of Microsoft's product lines, highlighting how the company has used differentiation strategies to meet market demands and compete with rivals like Apple and Google. Furthermore, the report explores potential future development pathways for Microsoft, considering the continued relevance of these innovation theories in a rapidly evolving technological landscape. The analysis includes insights into Microsoft's expansion into new market segments and its adoption of disruptive technologies, like VR tools, to maintain its position as a market leader. The report concludes with a discussion of the challenges and opportunities that Microsoft faces in managing innovation and sustaining its competitive edge.

MANAGING INNOVATION
ASSESSMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Theories and ideas........................................................................................................................1
Historical development................................................................................................................4
Future Development.....................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Innovation can be defined as creative thoughts or new ideas, imaginations which can be
used to develop a new method or device. It is mostly used to develop better solutions, fulfil and
meet new requirements of existing market. Companies try to use new innovative ideas to bring
changes or improvement within their existing products or services, or introduce completely new
product or service within the existing market or in new market. It is extremely important to to
manage innovation within an organization as innovation management allows corporate
employees to understand goals, objectives and processes of the company so that they can use
both internal or external opportunities, use new and creative ideas to produce new products. This
helps them to fulfil their goals and objectives as well as enter into new market space and create
new value network. Microsoft is one of those companies who is famous for bringing innovation
within their products or service (Pisano, 2015). Many times they have introduced new and
innovative products in the market which has helped them to capture the new market. This
assignment will lay emphasis on two innovation theories. Both the theories will be used in
explaining the historical development and the possible future development pathways of
Microsoft's products and services.
MAIN BODY
Theories and ideas
Competition in today's world is increasing continuously. In order to sustain and gain
competitive advantage in this over crowded industry, organizations need to bring innovation
within their products and services and offer something new to the customers so that companies
can sustain within this competitive market. There are various ways through which companies can
gain competitive advantage and sustain in the marketplace by bringing innovation among their
product design, services and in many other things. These ways help companies to increase
market demand of their products or services as compared to their substitutes available in the
market. There are many innovation theories that are used by organizations to bring new or
improved products in the market. These theories are important for companies like Microsoft who
are famous for innovation. These theories help them to maintain their products demand within
the market and maintain their success (Tidd and Bessant, 2018). Microsoft is one of those
companies who are famous for entering into new business space or creates new market niches.
Red Ocean and Blue Ocean Strategy
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Blue ocean strategy is a theory which uses differentiation or cost in order to enter into a
new market or create new demand. This theory provides opportunity for companies by creating a
blue ocean of uncontested market in order to make competition irrelevant. There are two types of
strategies that can be used to bring innovation within a company or to increase market demand
that are red ocean strategy and blue ocean strategy. Red ocean term is used to define all the
current existing industries or companies present in today's competitive market. In this industry
boundaries are set or defined and all the companies try to perform excellently in order to gain
competitive advantage, outperform their competitors or rivals so that their can gain larger market
share or increase their market share. It is important for companies to perform in an excellent
manner because if the market space gets more crowded, overall profits of the companies gets
reduced, new product or service turns into a substitute as a result competition increases and
whole competitive market turns into water bodies and turns into blood competition where all the
organizations fight for their survival, hence it is called red ocean (Biemans, 2018). Similarly,
blue ocean term is used for companies that are not in existence today and has unknown market
space with zero competition. In this blue ocean market demand for a product is created rather
than to fight for. There are ample of opportunities that can be used to gain a profitable market
and for the rapid growth of the company. In blue ocean competition is irrelevant because
boundaries of the game are ready to be set. In this potential of new unexplored market space is
explored. It is one of the best way and term for profitable growth of a company. Organizations
like Microsoft uses differentiation as a strategy in order to align their organizational activities in
order to gain competitive market.
The main requirement of blue ocean strategy is that companies should continue to search
and bring innovation among their products. Red ocean strategy focuses on competing against
existing market space, beat the competition, make value cost trade off, exploit existing demand
and by aligning organizations activities by choosing their appropriate strategies either of
differentiation or low cost. However, blue ocean strategy focuses on creating uncontested market
space, making competition irrelevant, capture and create new market demands, break the value
cost trade off, and align all the organizational activities by perusing low cost or differentiation
strategy. One of the most famous multinational company Nokia revived themselves by using
blue ocean strategy by doing a partnership with Microsoft (Mi, 2015). Microsoft is one of those
organizations who used both blue and red ocean strategies to sustain themselves into the
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competitive market and enter into a new marketplace. Microsoft considered red ocean strategy in
order to compete with Apple by offering different range of applications, but their innovative
thinking and partnership with Nokia redefined their market place by refocusing and redefining
their smartphone specifications and features. They are finally gaining competitive advantage
using blue ocean strategy. Not only this by using Blue ocean strategy Microsoft has today
accquired Nokia and increased their market share as well.
Disruptive Innovation
Disruptive innovation is an innovation theory that is used to create value network and
new market by disrupting existing market and value network, displacing established
organizations, alliances and products as well. It has been known as one of most influential
business idea or is a powerful way of thinking about innovation driven growth known till now. It
has been observed that many companies today are trying to use this innovation theory or idea in
order to establish themselves (Agnihotri, 2016). Organizations using this idea significantly
affects the way industry or market functions. This innovation idea focuses on use of technology
rather than technology itself. This idea focuses on the way disruptive technologies are integrated
in order to bring disruptive innovation. It has been observed that not all the ideas or technologies
are disruptive and does not have negative effect always.
Many times this disruptive innovation within an organization works as a revolution for
them and create new value network and enter into a new market or displace existing
organizations ruling the market. It has also been observed that disruptive innovation theories
main concept has been majorly misunderstood and has been misapplied within the organizations.
This theory is mostly used by new entrepreneurs or start up rather than existing market leaders.
This is because overall business environment of market leaders do not allow them to use this
innovation theory as they are not profitable at first and makes it difficult for them to sustain
within the market and compete with the current competitors. Another reason who this theory is
not suitable for larger organizations is because this theory can take much larger or longer time
period to develop as compared to conventional approach and the risk associated with this idea is
much higher. However, once this theory is applied it helps the organizations to penetrate much
faster and can lay higher degree of impact on the existing market and organizations within the
existing market. If this idea is applied accurately then it can bring various changes within the
present competitive industry. However, this theory cannot be applied to each and every
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organizations competing in the current industry. It has been observed that if this theory is used in
a better and efficient manner then it can help the organization to penetrate faster in the current
market and gain competitive advantage as it is one of the best form to bring innovation within an
organization but for these companies need to know when and where they can apply this theory
(Christensen, Raynor and McDonald, 2015). It has been observed that this disruptive innovation
theory is suitable for those companies who are new in the market and despite of the limited
resources they successfully fulfil the challenges that they face in the market and establish their
business. Owners of new business can focus on bringing improvement within their products or
services time to time as per the market's demand. They need to bring improvements within their
business and business activities and ignore needs of other businesses. Larger organization who
have already established themselves within the current market space can also use this idea only
when they want to enter into a new business, focus on mew market segment. For example
Microsoft is one of those companies who are heavily focusing on disruptive technology and
trying to expand their market by entering into a new market segment like mobile segment,
developing VR tools like Hololens and many more.
Historical development
In order to bring continuous development within Microsoft, they use red ocean strategy to
compete with Apple, Google and many more. They are trying to bring continuous development
within their products they are also trying to introduce various kinds of applications in order to
compete with their existing competitors like Apple, Google and various others. They have
always used differentiation as a strategy in order to gain or increase their market share. Most of
the times they have applied this differentiation strategy whenever they have brought innovation
within their products or services or have brought improvement within their products or services.
Microsoft has always been a company that has focused on product differentiation and has also
focused on bringing innovation within their products or services. Microsoft always had tried to
introduce new, improved, innovative and enhanced products within the market by applying
differentiation strategy. In other words they always focus on bringing something totally different
from the existing competitors products that are already available in the market. Using this red
ocean strategy they have gained huge market share and most of their products have been a huge
success and has helped Microsoft in increasing their customer base drastically. Microsoft
launched MS office which consist of various applications like word, power point etc. as per the
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existing demands of their customers (King and Baatartogtokh, 2015). They used differentiation
strategy by providing a unique product with all in one features, easy to use applications as per the
demands of existing market. As soon as they launched their new product Microsoft Office they
beat all the substitute products available in the market and beat the present competition as well.
They simply analysed the demands of existing market and exploited it in order to gain
competitive advantage. This new product of Microsoft, as soon as entered into the market it had
no main competitors and as a result market share of Microsoft increased and brand loyalty
among customers also increased.
Microsoft also launched their operating system as per markets existing requirements
which was quite easy to use and was much faster as compared to the substitute products available
in the market. Microsoft explored existing market growing interest in graphical user interface
(GUI) and used this interest in developing Microsoft Windows operating system. As soon as they
launched their operating system they ruled or dominated most of the world's personal computers
(PC). Here also they users differentiation as their main strategy in lancing their new product. It
has been one of the most popular windows product that has been developed and is still being
used by most of the people. However many competitors of Microsoft tried to develop similar free
of cost products like Windows operating system like Linux, Ubanto and many but. All of them
were not able to gain as much popularity as windows operating system gained.
But after this their market share started to decrease suddenly so for this their innovative
thinking and new partnership with Nokia helped them to redefine their market space by focusing
on introducing new windows smartphone with new improved specifications. This blue ocean
strategy was helping Microsoft to regain their lost market space. After regaining their market
share Microsoft acquired Nokia which helped them to increase their customer base and introduce
new improve products within the market. When Microsoft's new windows phones were
introduced most of the people switched from their local smartphones to windows mobile phones.
This new joint product of Nokia and Microsoft strengthen their market share and strengthen their
brand image, helped them to enter into a new market as well. Other than blue ocean strategy,
Microsoft had also used Disruptive innovation theory or idea in order to create new value
network and enter into a new market by disrupting the existing market and value network. This
disruptive model helped them to bring improvement within their business and achieve success.
This also helped them to increase overall jobs within their organization, acquire new market. It
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has been observed that Microsoft is heavily focusing on this disruptive technology like Azure,
office 365, Hololens and many more are becoming increasing participants in this disruptive
technology. Increasing use of this disruptive technology is helping Microsoft to bring innovation
within their products, enter into a new market, create new value network. Not only this, this
disruptive innovation idea is also helping them to automate their business processes and shape
their future as well.
Future Development
Microsoft is trying to bring innovation within their existing products or in new products
as well. They are focusing on entering new power bank market as well where they have least
number of competitors. Their power banks are expected to do good within the market due to the
brand loyalty they have developed within their customers. As per a survey conducted recently
Microsoft power banks will be available in the market within a short period of time. Their power
banks will have to compete with the existing Oneplus, Xiaomi and many other competitors
power banks. Microsoft studied the current existing market and needs of their customers and by
exploring their requirements they are planning to launch their own power banks. These power
banks will be available in different capacities that are 5200 mAh, 9000 mAh and 12000 mAh. It
would not take time for Microsoft to make these power banks available within the market
globally. But for this they are using low cost strategy instead of differentiation strategy. This is
because in today's market power banks are available will almost all the features that should be
having but in a higher cost. Microsoft will be offering power banks with high quality, all features
but in low price. This will attract customers and influence them to buy Microsoft's power banks
because no other brand will be offering power banks at such low price. Other than this such
powerbanks will be able to charge two devices at a single time, can be charged through any
device or plug, will be easily portable and will use quite low voltage to get charged again. This
will help them to buy more market space in this blood red ocean competition.
Other than this Microsoft are trying to use blue ocean strategy and enter into a new
market. There are two phases in which Microsoft can use Blue ocean strategy. Phase 1 is
acquisition of Quantive and phase two is hostile bid for Yahoo. This acquisition will help them
to increase their overall online advertisement market and will make them more competitive.
However, there is still competition available in the market but this will be hot on their heels. In
simple words this acquisition will help Microsoft to enter into new market space, become more
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competitive in the existing market by gaining competitive advantage. There is no doubt that this
will help Microsoft to increase their customer base but it will also increase existing competition
for Microsoft. But there are sill many doubts that will Yahoo help Microsoft to enter into new
market space. In fact this will increase their overall competition and red ocean market will
become more bloody with increasing number of competition. As per the recent survey Microsoft
has produced a road map which will focus on introducing new capabilities within their existing
products, upgrade their existing products as per recent market requirements. They are soon trying
to launch Microsoft fraud protection application for all of their products or services. This will
help their customers to protect their system and all the applications used by them, their personal
information through this fraud protection. Microsoft has identified capabilities n this fraud
protection and will soon introduce it within their business and to their customers as well. This
will help them to drive down their overall cost, increase their overall revenue and improve their
customer experience as well.
CONCLUSION
From the above assignment it has been summarized that there are various kinds of
innovation theories that can be used by organizations to bring innovation within their company,
introduce new products and services within the existing market or in new market space. Different
innovation models, theories, ideas, strategies etc. are used in different situation for different
kinds of companies. In the above assignment two innovation theories have been explained which
are red/blue ocean strategy and disruptive innovation theory. It has been analysed that different
theories have different uses and is used in variety of situations like red ocean theory is used for
existing organization present in the present marketplace. This theory is used to compete against
existing market space, beat the competition by applying either lo cost or differentiation strategy.
Blue ocean strategy is used by start-ups or new entrepreneurs to create uncontested market space,
making competition irrelevant, capture and create new market demands. Whereas, disruptive
innovation idea is used to create value network and new market by disrupting existing market
and value network. It has also been analysed that these theories has helped organizations like
Microsoft to gain competitive advantage, increase market share, bring innovation within their
organization.
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REFERENCES
Books and Journals
Agnihotri, A., 2016. Extending boundaries of blue ocean strategy. Journal of Strategic
Marketing. 24(6). pp.519-528.
Biemans, W., 2018. Managing innovation within networks. Routledge.
Christensen, C.M., Raynor, M.E. and McDonald, R., 2015. What is disruptive
innovation. Harvard Business Review. 93(12). pp.44-53.
King, A.A. and Baatartogtokh, B., 2015. How useful is the theory of disruptive innovation?. MIT
Sloan Management Review. 57(1). p.77.
Mi, J., 2015. Blue ocean strategy. Wiley Encyclopedia of Management, pp.1-1.
Pisano, G.P., 2015. You need an innovation strategy. Harvard Business Review. 93(6). pp.44-54.
Tidd, J. and Bessant, J.R., 2018. Managing innovation: integrating technological, market and
organizational change. John Wiley & Sons.
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