Diary from Innovation and Entrepreneurship module at Stanford University, October 2010.

1. LEARNING DIARY
STUDY PROGRAM IN PALO ALTO, NOVEMBER 15-19, 2010
STRATEGIC INNOVATIONS
CREATING NEW BUSINESS
Student name: Petra Söderling
Company: Nokia
(Student number: 201968)
Date: February 20, 2011

2. TABLE OF CONTENTS
1 Introduction ............................................................................................... 3
2 Strategic Leadership of Corporate Innovation by professor Robert A.
Burgelman ....................................................................................................... 3
3 Building Robust Business Clusters: Lessons from biotech by Professor
Walter W. Powell.............................................................................................. 7
4 Dynamic Capabilities: Strategy Process Dynamism by Kathleen M.
Eisenhardt ...................................................................................................... 10
5 Discovering Successful Business models, by William P. Barnett ............ 11
6 Good Boss, Bad Boss, Lessons for CEOs and other Senior Executives by
Robert I. Sutton .............................................................................................. 12
7 Design process ....................................................................................... 13
8 Start-up process ..................................................................................... 14
9 Summary ................................................................................................ 14

3. 1 Introduction
This study program is one of two international modules as part of the TKK
MBA program. The one week module in Palo Alto concentrates on strategy,
innovations and entrepreneurship.
2 Strategic Leadership of Corporate Innovation by
professor Robert A. Burgelman
Professor Burgelman is the Edmund W. Littlefield professor of management at
Stanford University, and the Executive Director of the Stanford Executive
Program.
Corporate innovation is an interesting topic, some might say that innovation
doesn‟t live in corporations but in smaller entities. Others claim that innovation
is done by people, not by corporations, start-ups or by entrepreneurs.
As pre-reading professor Burgelman had recommended three articles:
“Managing Internal Corporate Venturing Cycles” by Robert A. Burgelman and
Liisa Välikangas, published by MIT Sloan Management Review, “Intel
Centrino in 2007: a new “platform” strategy for growth” by Robert A.
Burgelman, Philip E. Meza and Evan Berrett, published by Stanford Graduate
School of Business, and selected chapters from an unmarked Intel book.
We began the day by posing the following strategic questions.
1. How to generalize the Intel case
2. Role of top management in innovation
3. How to manage emerging strategies
4. How to create and manage a strategic planning process
5. How to continue to innovate within financial constraints (crisis)
6. How to deal with top management‟s pressure to „make it big‟
7. How to capitalize on „all‟ knowledge residing in the organization from
bottom to top (study knowledge power vs decision making power under
the concept of constructive confrontation)
8. Strategy and regulation
The group discussed the topics lively throughout the day, beginning by
defining strategy from multiple perspectives. Strategy can be viewed as
“mentality”, a state of mind or a way of looking at the world. If strategy is a
mentality, then one can identify oneself as living in a culture of strategy.
Strategy is a culture, a corporate culture or one‟s personal culture, way of
being. Strategy without culture is just empty words, and culture without
strategy is aimless.

4. When defining corporate strategies one must also bear in mind the national
and geographical cultures surrounding. For example what is considered
“constructive confrontation” in the US – encouraging people to confront their
leaders in order to challenge thinking and create new – might work better in
Japan if defined as “constructive conversation” – encourage free and open
discussion to create new.
Why is strategy then needed?
Strategy helps leaders to manage downwards. This is, define and
communicate a direction to their teams. After all is said and done, leaders
must help their teams to win.
Strategy helps leadership upwards. Without a defined, agreed and articulated
strategy owners and top managers of a company must be committed to taking
the company to the direction agreed. Managers can always justify new
innovative ideas, or basic business-as-usual requests in line with the strategy.
Strategy also helps leaders to interact with peers. Many companies depend
their success on individual contributors, these are professional people in the
organization who have influential power, and often are the ones introducing
constructive confrontation. A strategy helps these individuals to discuss
around correct assumptions.
Strategy becomes real only when implemented. Strategy is about long term
commitment, but the world is dynamic and doesn‟t stop to wait that your
strategy is ready and implemented. This is why the „mentality‟ of it is so
important. Long term can become very short in an instance, so one needs to
define their own critical time horizons (e.g. in the Intel Centrino case their chip
development took 4 years). Strategy can help us maintain a control of our
destiny.
The familiar Porter model is here enhanced as “Porter +” taking into account
strategic business realities outside of the usual diamond.

5. Barriers can be tangible such as money, or intangible like reputation. Each
leader should ask themselves how dependent they are on these forces, and
how much power do I have over them.
Strategic situations can be classified over dependence and influence as
follows:
An example of this is the 1973 US oil prediction case, where the government
stated that by 1980 US would be foreign oil independent. High dependency on
gulf oil high, but high influence through US manufactured oil fleets. However
this changed rapidly as the Chinese began to build and operate fleets.
In the Intel case D-RAM become commoditized through forces in the industry.
Intel loses influence and grows on dependence until they abandon the
strategy of increasing bandwidth on D-RAM and begin to allocate
manufacturing capacity to the new wireless chip Centrino.

6. Professor Burgelman introduces also another enhanced version of a
traditional business model, the Strategy Diamond. He calls this the “rubber
band model”, as each of the arrows here are flexible and accommodate the
current market situation.
All of these four elements of business strategy are in place simultaneously,
but their influence and interdependence vary.
The internal selection environment has four distinct characteristics:
1. Resource allocation should reflect competitive reality
2. Allows debating new opportunities between those who make money
today, and those who promise to make money tomorrow
3. What is the capacity in my organization, senior and top mgmt for
strategic recognition
4. Take strategic recognition to action (=strategy leadership)
The internal selection happens at a point called Strategic Inflection Point.

7. Also, we discussed in class about intuition vs. strategy, with the following
points:
- Bring structure to an unstructured situation
- Be faster, gain time
- Intuition can be a burden
- Keep intuition fresh by talking to diverse people from different
industries
- Most of us look for confirming information but successful leaders look
for discomforting information (Warren Buffet: if you don‟t have a future
today, you won‟t have a future tomorrow).
To summarize, one must create a unique culture and style of strategic
leadership to enable all that was discussed during the day. Whether it is
bottom up leadership where one is strong in constructive confrontation but can
be a drifting culture, or a top down leadership with strong constructive
confrontation, but in the worst case a lock-step situation where everyone
moves into the same direction.
Leadership style determines much of the ability to commit to decisions. Too
little debate leads to an authoritarian CEO calling all decisions, or everyone is
just doing their own thing, whereas too much debate can result an internally
focused company where people compete who has the nicest slides with little
action.
3 Building Robust Business Clusters: Lessons
from biotech by Professor Walter W. Powell

8. Walter Powell is the professor of education and sociology, organizational
behavior, management science and engineering, and communication at
Stanford University.
His part of the week was one of the most interesting to me. He and his
students had studies the formation of business clusters in a number of US
states/cities, using biotech companies, universities and public authorities as
players.
There are three elements for successful clusters:
1. Mix of different organizations (governmental, private, non-profit etc). it
needs to be a rich soup, and diversity matters
2. There needs to be a catalyst anchor tenant, just like a successful mall
has an anchor store that pulls customers to the mall. This anchor
tenant protects the openness of the community, and allows multiple
views to flourish
3. Cross-cutting local networks (e.g. job movement in the Silicon Valley),
movement across organizations, “rewiring”, all of which leads to good
ideas circulating through the decentralized system
The start of biotechnology companies in the US concentrates around
geographical hubs.
1978 – East coast was strong: Boston, NY, Philadelphia. Some companies in
Texas and California.
1984 – San Francisco area and East Coast getting much bigger and ahead of
the other areas. There are some new spots in the middle of the country. Now
total of 130 companies.
1990 – San Francisco area, San Diego and East Coast are still growing while
other hubs stabilize. Now 253 companies.
2002 – Extreme geographical concentration: More than 50% of the 368 US
based biotech companies can be found in just three areas: Boston, Bay Area,
and San Diego. This encompasses employees, patents and products.
In successful clusters the baton is passed from university or a venture capital
firm to companies. In an unsuccessful local area there is no baton being
passed, but status quo is kept.
A common process for all areas was job mobility, local competitors
collaborating, mashup of private and public, all independent of the control of a
dominant organization. 1+1=3 ideas, this is 2 and the possibility of the
combination of the two.
Interesting note from the professor was that both Helsinki and New York have
the potential of clusters forming, except that they are both well connecting

9. externally and globally, but poorly connected locally. Here‟s a though to Aalto
University and other in the Helsinki region players working for a cluster.
Virtuous cycle
In Silicon Valley, the lawfirms have a tendency to negotiate a mutual benefit
for both parties. They do not go for the “winner takes all” approach, which
leads to the other party being left with nothing. This is the way many NYC
based law firms operate, often destroying the other player.
Spillover effects of expansive local clusters:
- New high tech companies
- Growing labor market for well educated
- Suppliers, research tools, equipment
- Services (law, IP), finance, (VC, angel, investment bank), accounting,
architecture (green buildings), universities (tech transfer)
Red Queen effect (running as fast as you can just to stay where you are): high
rates of foundings and disbanding raise the bar.
Successful clusters are not the ones who had more money to begin with
(SFO, Philly and and Seattle had the most money). MIT was only #47 in the
list of recipients for government originated public funding.
Cross-network transportation: in the 1950‟s Stanford was not part of the top
100 universities in the world. It grew with the mix of business, risk etc.
Implications
- Host tenant is not the loudest, but host of the party (e.g. in Boston it
was the Public Research Organizations, in Silicon Valley it was the
Venture Capital firms)
- Mix of Public Research Organizations and small firms
- Relational vs. transactional ties
- Institutional diversity
- Transposition, using coin of the realm of one network in a new one
- Cross-cutting multiple network, fluid labor market
In Europe there are three (bio)tech clusters: Cambridge UK (rivalry between
Oxford), Munich (rivalry between Munich Uni and Munich Tech Uni), and
Basel. European research institutions tend to measure their success in
international links. Local links are not considered important, therefore clusters
are not forming. (e.g. All successful Irish companies leave Ireland).

10. 4 Dynamic Capabilities: Strategy Process
Dynamism by Kathleen M. Eisenhardt
Kathleen Eisenhardt is the Stanford W. Ascherman M.D. Professor at
Stanford University, and a Co-Director of the Stanford Technology Ventures
program. She is also a visiting faculty member within INSEAD‟s
Entrepreneurship and Family Enterprise area.
As pre-reading for her class, we read “Competing on the edge – Strategy as
Structured Chaos” by Shona L. Brown and Kathleen M. Eisenhardt.
Asking yourself the question where do you want to go, and how to get there
can result two kinds of answers: Static or Dynamic.
In either case, there are various sources of ambiguity, such as
- Extreme uncertainty about future
- Blurred timing and paths
- Shifting competitive basis, from products to business models
- Increasing penalty stock market is more selective
Strategy as a structured chaos
- Strategy is simple: The more ambiguous markets, the simpler
strategies
- Time: Longer time horizons, rhythm not speed (changing your rhythm
can distract your opponent)
- Organization drives strategy: Organization is poised “on edge of chaos”
Improvising the business strategy as simple rules. Follow “common
experience => Myths => Best practices. For example, a common experience
might be that Innovative ideas suffer from poor execution. The myth is that
successful companies are run by a braintrust of a few, smart senior
executives. A corresponding Best practice for this is to focus on a few key
strategic processes and a few simple rules to exploit opportunities.
For Yahoo, these simple rules where
1. Look, brand
2. Launch in a structured way
3. Every developer works on every product
4. Priorities
For Miramax movies (Crying Game, Pulp Fiction, English Patient,
Shakespeare in Love ), the simple rules are
1. Center the movie on a basic human condition
2. Flawed but sympathetic character
3. Have a clear beginning, middle and end

11. 4. Disciplined financing (50% more efficient than industry standard)
 Have only a small number of central rules
Successful companies implement an inverse power law for scale of change:
Lots of small changes, some mid-size changes and only few big changes.
Key ideas for changes are, if you want to grow, leverage something you
already know. Mix old and new people, change only selected things, use new
business to refresh old ones, every so often exit, and remember modularity.
For example, the most innovative solar energy companies are those with a
mix of people from ICT, internet etc, and the least innovative are those who
employ only strictly solar energy experts.
Examples of time-pacing, the rhythm of growth strategies:
- Intel opens new manufacturing facilities every 9 months
- Starbucks open 300 new cafes per year
- Gillette gets 40% of sales from products launched within the past 5
years
- Dell would synchronize their production with major CE magazine
review cycle
Rhythm helps to align R&D, sales, and marketing
Rhythm makes you feel focused and confident
Co-evolving, a cross business synergy
Best approaches to co-evolving are a few temporary collaborations with
exceptional payoffs, manage the number of your collaborations, and senior
management as the creators of business environment but business decide the
outcome. Remember not to incentive collaboration per se, but incentivize by
your own business.
5 Discovering Successful Business models, by
William P. Barnett
Mr. Barnett is the Thomas M. Siebel professor of Business Leadership,
Strategy and Organizations, BP faculty fellow in Global Management, Senior
Fellow of Woods institute for the Environment at Stanford, Director f the
Center for Global Business and Economy, Director of the Business Strategies
for Environmental Sustainability Executive Program, and Co-director of the
Executive Program in Strategy and Organisation at Stanford.
Our pre-reading for this class included a number of case studies: Establishing
Network Appliance, Cemex, Global competition in local business, and

12. Seagate Technology 2004, all published by Stanford Graduate School of
Business.
The class was almost entirely a conversation, a dialogue within the class. On
NetApp, we discussed their initial strategy, how it developed over time and
what triggered these changes. This was a company who completely changed
everything from the product, their channel, their business model and even
their customers. We looked at their organizational strengths and weaknesses,
and compared those to our own.
Cemex is a company operating in the cement industry where products,
markets, customers and technologies are well understood. Still successful
business models emerge, like Cemex‟s time based delivery model which
allowed the customers to preplan the construction site so that when the
cement arrived, everything was ready for it.
With Seagate, the class looked again at a high-tech industry company, with
much similarities to the Intel case studied earlier in the week. The Red Queen
competition came up, and we debated time-based competition where the
importance lies in using strategic rationale to diagnose performance.
6 Good Boss, Bad Boss, Lessons for CEOs and
other Senior Executives by Robert I. Sutton
Robert Sutton is the Professor of Management, Science and Engineering at
Stanford University, and a co-director of Center of Work, Technology and
Organisation faculty of the Stanford Technology Ventures Program. He is also
the author of Good Boss, Bad Boss book, which we received as pre-reading.
First, setting the stage with talking on mindset. “If you believe you can‟t learn
new skills, can‟t get smarter, and can‟t alter your style, then you probably
won‟t.” Or as Henry Ford put it, “whether you think you can, or cannot, you are
right”.
While creativity enhances variance, experiment, and failure (especially cheap
and fast failure), implementation drives out variance, and failures are not
wanted. Steve Jobs has been quoted to say that it is easy to kill lousy ideas,
but to be a great company one must kill most of the good ideas too.
Good bosses and bad bosses can be viewed through seven themes:
1. Assertiveness – be in tune with reactions to your words and deeds, and
make the right adjustments
2. Small wins strategy – frame big hairy goals into small manageable
steps
3. Wisdom – the courage to act on what you know in concert with humility
to doubt your assumptions and actions
4. Avoiding the smart-talk trap – link talk to action and make it simple

13. 5. Strive for small and stable teams – best performing teams between 4 to
6 people
6. Got their backs ? – protect your people
7. Stars and rotten apples – on average there are 5 bad apples to 1 star,
fix or toss the apples
As a parting exercise the professor asked us to diagnose ourselves by
thinking about what it feels like to work for me, and if my people had a choice
would they elect to work for me again.
7 Design process
Perry Klebahn is a Consulting Associate Professor at Stanford d.School (the
Stanford institute of Design). He, and his partner ran a hands-on exercise and
lesson on designing a product that fits your customer‟s needs.
First we formed pairs, and each told the other partner what gift they had given
recently, outlining to whom the gift was for, on what occasion, how it was
selected, how much it cost, where bought, how did the receiver feel about the
gift etc.
During the interviews we captured findings, defined a problem statement, and
then sketched 3-5 radical ways to meet the other partner‟s user needs. After
discussing the sketched ideas with the partner, they were fine tuned into one
big idea, and then built into actual products using whatever was on the table.
The lesson on listening to the customer, contemplating their real need and
matching the product with that need, was well received.

14. 8 Start-up process
The week in Stanford finished with Professor Garth Saloner, the Philip
H.Knight Professor and Dean from Stanford Graduate School of Business.
Professor Saloner has worked in a number of startups as an advisor, board
member, or an investor, and has taught entrepreneurship at Stanford Center
for Entrepreneurial Studies since 2004.
Our morning with Professor Saloner was most interactive one, discussing
different ways to start a company (product-led, business-led, innovation-led,
or simply enthusiasm-led), and what distinguishes Silicon Valley from other
high tech hubs in the world.
9 Summary
The entire week was absolutely fantastic, with top professors with a lot of
materials and knowledge to give, a wonderful opportunity to discuss and
debate with them, as well as an innovative environment for our Finnish group
to reflect the drive and energy of Silicon Valley and plan for how that is
brought back to Finland.