Question 1: Breakthrough innovation

You are attending an annual clothes and fashion industry meeting. One of the participants tells about a U.S. innovator trying to create clothes that will control physical state of the organism. These ‘smart clothes' can watch after the health of their owners and react to heart beat, body temperature, and level of physical activity. Smart clothes would be a breakthrough innovation: a technology which simultaneously shifts a market and has superior outcomes for the world at large. You will join a group of people who debate on what companies should do in the face of this new industry threat/opportunity. One of the debaters, Wessel, argues they should focus on surviving disruption. Other debaters, Mountz and Gassman, argue that companies should focus on creating breakthrough innovation themselves. However, they disagree over whether a company should become a breakthrough innovator alone or pursue networked innovation. Finally, explain your opinion.

Question 2: Case solving:

case ClassicLive (all lessons) ?Read the following short case about ClassicLive, an Internet startup that decided to change the world of classical music consumption. Discuss what do you think the entrepreneurs did right and what probably went wrong. Can you suggest what ClassicLive should do to change the course and reach the original goal?

In 2007, a group of Finnish professionals and fans of classical music decided to launch a new online service, ClassicLive. It is an Internet portal concept providing access to many orchestras via a single portal - an international network offering live concerts by some of the world's finest orchestras. The portal language is English. ClassicLive was the first major commercial producer of classical music content on the Internet. It was initiated when the entrepreneurs realized orchestras were only reaching up to 1,000 people at a time in a concert hall with music that could appeal to a lot more. The system requirement for this service providing TV-standard images and almost CD-standard sound is broadband access of only 1Mb. Each concert will first be streamed live via the Internet all over the world. Following brief editing it will then be visible and audible on demand at any time during the next three weeks. Access to the portal concerts at www.classiclive.com can be purchased online by credit card per day, week and 30 days. The price for the "tickets" ($6 / 1 day, $12 / 7 days, $22 / 30 days) is the same worldwide.

According to TuomasKinberg, General Manager of the Lahti Symphony Orchestra and an entrepreneur at Saltarello Ltd., the startup company behind the ClassicLive service, the objective was to create a limited premier ClassicLive league of 15 orchestras by 2009, one orchestra from each country. They could provide the service with 400 concerts a year. Main responsibility for the service lies with Saltarello Ltd. The technical platform and operations were developed and supplied by TietoEnator Corp., a major Finnish ICT company whose customers are large corporations, major public sector organizations and government offices. TietoEnator (TE) was chosen to provide the technology, because LauriJamsen, an entrepreneur and Saltarello's Managing Director, used to work for TE for several years and had friends working there. The content management system, developed by TE and based on Microsoft technology, provides the service with a platform. The service was designed so that, in the future, receiving broadcasts via mobile broadband using mobile phones and other terminals will be possible. ?Each network orchestra is responsible for the initial production of its Internet concert streaming videos in accordance with the high artistic and technical quality specifications.

Orchestras had to purchase a high-definition video camera ($70,000) and subscribe for Saltarello's ClassicLive service and TE's technical support for $18,000 annually. No camera operator was necessary, because the standalone camera was?placed somewhere in a back row in a way that viewers will see the?whole orchestra hall on their?computer screen. The ClassicLive?portal had little functionality and?options from the customer's point of?view, but the service focused on?creating an authentic classical music?concert experience for online users?at their home. The first ClassicLive?concert was webcasted by Lahti?Symphony Orchestra (LSO) in late?2007. LSO was Saltarello's first customer thanks to Kinberg's dual role working both for Saltarello and LSO. This issue drew later some inconvenient media attention and he was forced to resign from Saltarello's board of directors.

Several international orchestras were interested to join the ClassicLive network, and by early 2008 the network included four orchestras. They were mainly "b-class" orchestras, as trade unions, labor unions, and professional organizations required top orchestras pay extra to their musicians if the concert was recorded and broadcasted. This was a standard procedure related to orchestral television broadcasts in many countries. Unlike major television channels, Saltarello was unable to pay top orchestras for broadcasting their concerts. Conversely, Saltarello's business model was based on the idea that orchestras would pay Saltarello for webcasting their concerts over the ClassicLive service. According to Jamsen, 5-10 percent of people in developed countries listen to classical music, and ClassicLive could reach 5-10 percent of them. He also said that the service can be extended to include other performing arts, such as ballet. In late 2008, ClassicLive signed a contract with Ballet Mikkeli to webcast live and recorded ballets. By the time, ClassicLive's network included 5 orchestras.

Saltarello lacked a marketing plan for the ClassicLive service, but Jamsen thought he will use the marketing agency he had used when working at TE. The marketing agency was specialized in luxury products such as Maybach and Rolls Royce cars. They had little experience of digital marketing or building online consumer communities. The use of this marketing agency was deemed viable because the entrepreneurs at ClassicLive thought consumers of classical music are cultured, well-educated, and wealthy. They would pay for the "tickets" - as the access to the online service were called - to live classical concerts from world's top orchestras while sitting comfortably on a sofa and enjoying the music from the other side of the world. However, despite Saltarello's effort, the ClassicLive service did not succeed as anticipated. In 2009, ClassicLive reported sales of $28,000 and operating loss exceeding $350,000. The near bankrupt ClassicLive service was acquired by a wealthy couple who are avid fans of performing arts. They were unable to turn the company into a cash cow and watching performances on ClassicLive became free of charge in 2011.


Question 3: Knowledge creation and knowledge sharing

Write two short essays in which you discuss the following arguments in a critical manner.

Essay A) Every company should establish a virtual community to benefit from user input, the same way over 80% of the high-tech firms listed in the S&P 500 index have done.

Essay B) Face-to-face contacts between R&D team members is always a better way to share knowledge for firms' new product development than digital communication.

Question 4: Service innovation

Write an essay on ‘how service innovation is impacted by different cultures?' Oxford Dictionary defines culture as the ideas, customs, and social behavior of a particular people or society. Cultural differences manifest in many ways in the service innovation context, e.g. viability of a service in markets characterized by different cultures, different organizational cultures between customers and providers in service co-creation, contrasting perspectives of social science and engineering in service design, and different worlds of the academic and practitioner in service research. Choose one or several perspectives to cultural differences. Discuss the barriers that different cultures might present and the possible ways to break these barriers.