Developed by David Owens at Vanderbilt University and customized for the cultural sector with National Arts Strategies, this course is designed to help arts and culture leaders create an environment where new ideas are constantly created, shared, evaluated and the best ones are successfully put to work. One of the toughest challenges for any leader is getting traction for new ideas. Winning support can be a struggle. As a result, powerful new ideas often get stuck. This is especially true in the cultural sector. People involved in arts and culture often have little time and even less money for experimentation and risks. This course will help those in the performing arts, museums, zoos, libraries and other cultural organizations build environments where new management and program ideas flourish. Leading Innovation in Arts & Culture will teach you how to make an "innovation strategy" a fundamental component of your organization's overall strategy. In this seminar you will learn to: - Analyze constraints on innovation in your organization, foresee obstacles and opportunities, and develop a shared vision - Develop a process to manage the demands of multiple stakeholders, shifting priorities and the uncertainty inherent in new initiatives - Create a culture for innovation and risk-taking that generates new perspectives and challenges existing practice - Create a strong customer focus within your organization that anticipates customer needs National Arts Strategies worked with David Owens to customize this course for those working in the cultural sector. They based their work on David Owens’ Leading Strategic Innovation in Organizations course. This highly interactive 8-week course will engage you in a series of class discussions and exercises.
L5-Part 4 Supplier Constraints
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From the course by Vanderbilt University
Leading Innovation in Arts and Culture
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From the lesson
Industry / Sector Constraints
This week's topic is Industry/Sector Innovation Constraints. We are interested in understanding how the dynamics in a sector will facilitate or constrain innovation. We start with the story of Kodak's invention of the digital camera, trying to understand why they were unable to be successful at commercializing it. While there are some organizational innovation constraints that apply, we'll see that taking the perspective of economics and strategy, looking at competition constraints, supplier constraints, and market constraints, can provide a much more powerful analysis and explanation. We end with a brief overview of the "Disruptive Technology" (aka Innovator's Dilemma) work of C. Christensen, showing it's place within and consistency with the innovation constraints framework.
Meet the Instructors
David A. Owens, PhD, PEProfessor
Practice of Management and Innovation
Jim RosenbergIndependent Consultant and Senior Advisor at NAS
[MUSIC].
I want to talk about supplier constraints.
So suppliers are the people and the, the capital.
Let's think of it as capital; knowledge capital, human capital, different things
that supply in an industry brings in the raw material.
And so we need these suppliers in order to help the industry work.
Alright. So, these are the suppliers that either
work for an organization or even work outside the organization.
Kind of things that I want to talk about just real quickly are labor mobility.
How do we get people? Where is labor?
Can we get it to the place where we need it?
Then, also, the information technology transfer.
So these labor, these people have ideas. They have knowledge and they have
know-how. And how we get that to the place where we
actually need it then, in the sort of, the technology transfer sense?
So the three kinds of constraints I want to talk about just briefly are;
suppliers tend to favor their own interests, and we all favor our own
interests but suppliers have special interests vis a vie, the organizations
they might work for. talking about the diff-difficulty getting
the kind of people that you need. Sometimes you need a certain kind of
person but that person doesn't make it easy to get that person, even knowing who
it is. And then the third thing we're going to
talk about, the third constraint is these powerful professions and guilds, things
like unions and trade you know, like teachers, doctors, lawyers.
Those are the professions and also the trade unions.
And those kind of guilds that can be constraints to innovation.
I'll talk to you a little bit about how that can be.
A big supplier constraint has to do with this labor mobility, that people may have
the skills but they may not be where we need them, or the skills may not even
exist if it's a new industry, right, so they are creating this new industry
called the digital camera. Digital photography, then they're may not
be people available who are experts, who are able to bring in and help us do this
thing called innovate around this new technology.
Also what are the motivations of people? Are the people who would supply you with
their knowledge, with their mode of power are their interests aligned with yours
Usually not. But they're interested in is a long term
contact. They would like to be able to be stable.
Whereas what you're may be interested in more is having a, short term contract and
being able to swap people in and out and play people against each other.
And the suppliers don't want you to be able to do that.
To make suppliers compete with each other.
Sometimes people are available, they aren't willing to do it at the price that
you're willing to pay. So, besides labor mobility, we have this
issue of information transfer. How do we find out what's going on in the
industry, what other people are doing inside of our industry?
and usually it's the suppliers that we're going to use to find that out, but what
is their interest in telling them? Also towards enter they control what we
can see or what we can't see as supplier its not, its in my interest to not let
you see too much about what I'm able to do and how I'm able to do it.
Right, because I would like to keep that as the competitive advantage for myself
that gives me bargaining power with respect to you.
And also sometimes we tend to look at suppliers for the information.
That we need, and if we're only using suppliers, we have to assume that that
information may come in in a biased way. And it's not that this is a nefarious,
that is a real super negative, cynical conspiracy.
It really is just to say if we just look at the interests, the interests are not
aligned with each other and they have an effect that they're going to move people
in different directions. So the information transfer can really be
a problem. Finally, we have this technology
development problem. So one thing is, is to know how, to find
the people that know, but how can those people actually do the thing that we need
them to do in our context, in our organization.
Because someone can do something inside of Kodak, does not mean they can do the
same thing inside of Sony. Nowadays if you can do something in Apple
can you do the same thing in[UNKNOWN], right.
So we recently saw an executive move from one to the other.
And is the know-how translatable into the[UNKNOWN] called the do-how, can we do
it? Can we translate for that knowledge out
of the supplier into ourselves. I want to talk about professionalization
Professionalization is when people begin to behave like what we call
professionals. Professionals are a group of people that
have a practice domain, that produce a particular domain that society has said,
hey you can solve all the problems of a certain kind within that domain.
So let me give you an example of doctors. Doctors have a domain called human health
and they're in charge of that. And they're actually self regulate so if
you want to be a doctor, you get licensed by other doctors to be able to practice
inside of that domain. Same as law, same as education and so on.
So these are the professions and we called them.
And what professions are able to do is they're able to control behaviors.
So they get to decide what it means to be a doctor, and how it is that you have to
behave if you're going to be a doctor. And how it is that you behave to not be a
doctor. They have traditional knowledge bases,
they have certain ways of doing things and they have certain ways that they've
been educated to do things. Proposing to do things in a different way
may not be in the interest of the profession, and they become not
interested in doing things in a different way.
Professions can also gauge in guild like behaviors, and basically by having
certification requirements, by controlling movement of people, through
maybe degree requirements. Even advertising practices, so for
example law firms, they are not allowed to advertise prices for services, and
that is, and doing that, you can actually get thrown out of the profession.
And so these guild-like behaviors act to protect due to sort of reinforce what's
happening inside the guild. And so as you can imagine, this does not
really lend itself to innovation. That is, it does not push innovation to
happen because what the guild wants to do is keep things the way they are.
And by keeping things the way they are they're able to maintain that power.
Of course there are going to be innovations, but the innovations are
going to come in much more slowly. We think about how innovation happens in
the profession. Well, think about it this way.
you, you start out by learning and so, learning the art, other than to call it.
So for example, I have a sister who's a doctor, and she had to learn the art of
doctoring. And so, she went through her
undergraduate, then she did went through medical school.
she's, she graduated from medical school and she started doing residency, then she
started doing fellowships. And so it takes a long time to get from
the learning part to the mastery part. Once you master it, you're able to do
practice. And so for her, that was a long process
to go from learning through mastery, through practice.
You know, maybe like a 20, 30 year period for doctors.
And then other professions it can take equally as long.
So when you ask people in the profession to update, that is to say okay, we're
going to change how health care works. We're going to change how doctoring
works. Well, that's a really hard thing if
someone's trained to do this thing for 30 years in the way that they have.
And also, keep in mind, that along the way they'd been told the deal is, if you
work really hard now, yeah, I know you'll be poor, I know you'll work really hard,
you'll have terrible hours, but when you've, when you're finally able to
practice, you'll be compensated for that and you'll be well compensated for that.
And so, I did my part. I learned, learned, learned and, and
mastered and then, and now finally I practiced.
And now, you want to change everything? Like I don't want everything to be
changed. And so, this can be also part of what we
see, the kind of constraint that we see from education, the kind of constraints
that we see from law, the kind of constraints that we see from health care.
in these kind of professions where there's a really long preparation period,
before someone is allowed to practice. And the idea of the cost of update seems
very very high to them and they're going to oppose it.
On the other hand if we think of innovation as a, like It's called a
professional software engineering, right? Where I learn something, by the time I
learn something in in in learn master and practice in software engineering I can go
really quickly. It's only our 14 year old kids now who
are able to, to very quickly go through this cycle here where they're able to
learn something, apply it and then master it and then learn a new thing, apply it
and master it. And the cycles are so short here that
even in the, in these kinds of professions we might think that learning
is part of the profession. You have to be able to learn quickly in
order to stay alive, to be able to be a member of this profession.
And so, those would be the kinds of differences that we would see between the
kinds of professions and constraints that they pose as suppliers in an industry.
Ad so again, supplier constraints, the goals for suppliers who really want to
increase the value of their expertise. If they have an expertise and they want
to increase the value of it. We all do.
We all have something of value and we want to increase the value of that.
They're going to do it by controlling labor resources.
That is who's able to be in that field. How they're able to get into that field.
What they have to do in order to be in, remain a member of the field.
They're going to control knowledge flows. Often we have jargons and technical ways
of, of having Really a sort, we'll call secret
information about how it is we do certain things.
and also we're going to embed our value into proprietary system.
Let me say that in a different way, to say that if I know I have something of
high value, I don't want to give that directly to my the organization that is
that I'm supplying to. I don't want to give them the value in a
way that they can sort of desegregate it and take it apart and use it to their own
devices. If I give them the whole package, in a
way that they can't take it apart, then actually I've maintained some value.
So my interest in innovation, in innovating is innovating for myself, in
the proprietary system not innovating for my, the organization to which I'm
supplying, my value. So how do we overcome these supplier
constraints? What can we do as a way of getting over,
or, or at least mitigating the kind of, of dynamics that cause suppliers to want
to be not super open to our innovations? One thing we can do is not to outsource
our core. Often we have to make a decision, know,
in the, in the, development of an innovation.
Do we make a part of it or do we buy a part of it?
Well one thing to think about is what is the, how core is that piece to the value
of what I produce. And so in terms of the digital camera I
have to sort of think about what's the most valuable part of that and let me not
supply that, let me not outsource that thing.
Let me make the things that are most important to me where I create a value.
Let me outsource the things where they are not core value that I can actually
set up contracts where I can get suppliers to bid against each other.
for something. Also, we need to know the threat of our
innovation. When we propose innovations, it's
going to threaten our suppliers. And so what does it do to them?
Does it make them feel like not professionals anymore, does it drive down
their costs, does it drive up their costs, does it drive down their their
profit? And if we know that, we're much more
likely to be able to mitigate the threat. We might be able to understand how
they're likely to behave. With this innovation in mind.
You want to share the "Returns Innovation"?
So when you innovate and you're able to get some advantage from your suppliers,
can you share that? Can you share that with them?
They're much more likely to go along with you to help you innovate if they
understand that[UNKNOWN] some return to that.
So if the process is more efficient so you need fewer[UNKNOWN] or their services
maybe you can give them a higher price or maybe show them a way that they can
actually get more customers doing the same kind of thing.
And then also one of the cas-, costs of capital, understanding the cost of
capital, you know, what strings are attached when you take money from a bank?
Right, so a bank could be a supplier to you, supplies money to you.
What strings are attached are there certain loan covenants for example that
require you to have a certain amount of money in the bank and if you have to have
that money in the bank you can't be innovating with it.
And so those are the kinds of costs that might come with the capital that you take
in. Same with human capital.
Well, that's a discussion of a supplier constraints.
Now I want to move to the market and we're going to talk about the kinds of
constraints we face by being in the market.
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