=Paper=
{{Paper
|id=Vol-2763/CPT2020_paper_s3-6
|storemode=property
|title=Tools for innovation strategies
|pdfUrl=https://ceur-ws.org/Vol-2763/CPT2020_paper_s3-6.pdf
|volume=Vol-2763
|authors=D.S. Seleznev,A.Kh. Ozdoeva
}}
==Tools for innovation strategies==
https://ceur-ws.org/Vol-2763/CPT2020_paper_s3-6.pdf
Tools for innovation strategies
D.S. Seleznev, A.Kh. Ozdoeva
skyforward11@gmail.com | 4305@bk.ru
National Research University of Oil and Gas named after I.M. Gubkin, Moscow, Russian Federation
The current article is devoted to search tools for determining the optimal solution and forming the optimal company strategy for
small innovative companies in the business innovation environment of the oil and gas complex. The main area of research in the
article is the reasons for the difficulties of innovative Russian entrepreneurship and its entry into the domestic market and work in this
market. We also consider tools such as SWIFT-analysis of assessment and forecasting of the company's performance, the portfolio
model of BCG (Boston consulting group), a multi-factor matrix for selecting strategies for the most effective planning of the company's
activities, as an improved version of the Arthur D. Little model. At the same time, the study revealed that a wider range of project and
strategic opportunities for planning and managing a company is formed by the production and economic matrix using SWOT analysis.
Thus, based on this study, the following recommendations were formulated for beginning entrepreneurs and developers in the field of
innovation: take into account and apply the strategy for small innovative enterprises according to the SWOT analysis for monitoring
and forecasting upcoming events (production or economic); use marketing research tools, as well as forms for planning a product
plan for the life of the company; take into account that the forecast should be based on strategic analysis, using the optimal method for
specific goals, and be the starting point for developing new models and business development plans.
Keywords: business strategies, cascading strategy, SWOT analysis, product plan
1. Introduction formalization and implementation of scientific and
innovative priorities. There is a gap between the
The modern way of innovative development of any development and creation of technologies, the
country can be implemented through integration with the implementation of R&D and the release of technologies
world system. However, business models often focus into mass production. Partly, the lag in this area is a
exclusively on project activities and do not take into consequence of the established administrative command
account the current management and development needs system of the USSR, which does not allow fully
of a company, region, or country. It remains obvious that developing many promising areas of R&D, as well as the
the socio-economic development of the state depends on result of uncontrolled transformations of the 1990s [2].
innovations of strategic importance, including in the oil During periods of paradigm shift, including in
and gas industry. The synthesis of technological and scientific and innovative approaches, namely, the
economic methods can lead to GDP growth. According to transition from the paradigm of “catching up with foreign
statistics, the current market volume of high-tech innovations” to the paradigm of catching up while
products is 2 trillion 300 billion US dollars. According to creating something fundamentally new, and not just
statistics, the US accounts for 39% of this production, copying existing analogues, there are opportunities to
Japan-30%, Germany-16%. Russia's share is only 0.3 % catch up with outrun the leaders. Changing approaches
[1]. The national security of a country may depend on the makes it possible to open new paths of development, gain
level and volume of impact of high-tech products on the an advantage, and become better in their direction, while
economy, its position on the world market, as well as on others are just learning. However, it is worth noting that
its activity in the economy. Thus, when forming a one cannot just take and change landmarks, conditions
business strategy and determining innovative must be created.
development, it is necessary to proceed from the needs of Within several years since the creation of the first
the external environment and internal potential [8]. This nanocenter, 11 centers and 275 start-ups created by them
study defines the limits of opportunities and analyzes the appeared [3]. In the Sverdlovsk Region, 27
resources of both companies and the state in determining fundamentally new scientific and technical products were
innovative development using business strategies. created: anti-corrosion materials and coatings:
2. Comparisons nanocrystalline magnetic alloys, heavy-duty parts based
on hard alloys, and optoelectronic devices. In the field of
For the second half of 2018 and the first quarter of computer technology, Russia has overcome a huge and
2019 US government spent 39.24 billion dollars. to the difficult path, getting new modern market products based
scientific sector of the economy for development and on the fundamental scientific, technical and educational
research. The USA has increased the budgetary backlog, formed back in the USSR and attracting
allocations for science since 2009 by 29%. Similar international practice [4].
expenses of Russia in 2018 amounted to 431,073.2 Thus, adaptation of Russian legislation to
million rubles. (about 6.79 billion dollars). Russia has international standards, adopted best practices in this
increased its budgetary allocations for science since 2009 area, closer interaction with the global economic system,
by about 50%. Thus, in relative terms, the budget have a positive effect on the business environment of
expenditures of Russia for innovation are higher, but in Russia, creating market growth, including fair
fact in absolute terms the difference is quite noticeable competition, as well as a more attractive investment
(more than 5 times). climate for high technology long-term forecasts [9].
The key drawback of Russia's scientific and
innovation policy is the lack of consistency in the
Copyright © 2020 for this paper by its authors. Use permitted under Creative Commons License Attribution 4.0 International (CC BY
4.0)
3. Business strategies and tools great informativeness and transparency for developing
strategies together with representatives of large
Working towards each other is the most reliable and
businesses, in particular innovation areas. The model
shortest path to understanding and trust in public-private
included: formation of expert groups by area, analysis
partnerships. Solving the problems of introducing and
and evaluation of company reports by experts, including
commercializing innovative technologies, a clear
business models in the oil and gas sector. (annual reports
understanding and adoption of measures is necessary
of LUKOIL-Western Siberia, Gazprom, Novatek,
both from the state and from the business side. The main
Rosneft, Exxon Mobile, etc. [7]) For example, the
part of the mutual cooperation procedure begins on the
advantage of a concentrated growth strategy is that it
part of the innovative enterprise, namely, understanding
allows small businesses with a new product to enter the
the basic elements of the company’s work and business
market and have a large demand, while there is a risk that
development strategy.
larger companies that have a budget can make a similar
At present, there are 4 fundamental business
product a year later and having a customer base
strategies [5,6]:
successfully sell it, forcing a new manufacturer out of the
˗ a strategy of concentrated growth - a strategy to
market. On the other hand, the diversification strategy
strengthen market positions, a market development
makes it possible to manufacture several others on the
strategy, a product development strategy;
basis of one product and make the company less
˗ reduction strategy - elimination strategy, “harvest”
dependent on one product, ensure financial stability, but
strategy, reduction strategy, cost reduction strategy;
there is a risk of a lack of managerial personnel. The
˗ diversification growth strategy - centered
integration growth strategy allows you to attract entire
diversification strategy, horizontal diversification
teams with an administrative apparatus, which greatly
strategy;
simplifies and accelerates the growth rate of the
˗ integrated Growth Strategy - a strategy of reverse
production base and expands the influence on the market
vertical integration, a strategy of forward-going
of an innovative company, but may entail a decrease in
vertical integration.
the competencies of the general administrative
Each of these strategies has its advantages and
managerial staff and a deterioration in marketing
disadvantages, its capabilities and threats. A fairly clear
awareness, which in turn can be decided individual
assessment can be obtained using such tools as SWOT
events (additional financing). In addition, you can use the
analysis, the portfolio model of BCG (Boston consulting
strategies already discussed earlier in a cascading way of
group), a multi-factor matrix for selecting strategies for
switching from one to another. The cost reduction
the most effective planning of the company's activities, as
strategy can be attributed, in this case, as an auxiliary
an improved version of the Arthur D. Little model (Table
one, it allows at each stage to optimize the company’s
1) however, the expert assessment procedure based on
activities and save it from unnecessary costs, but it is not
SWOT analysis in the course of the study has shown
recommended to make it basic.
Table 1. SWOT analysis of business strategies
SWOT Opportunities: Threats:
Concentrated growth strategy 1. high demand for the service 1. Competition
2. The presence of workers, craftsmen 2. High dependence of the profitability of the
(professionals in their field) production activity of the enterprise on changes
3. Availability of premises in prices for energy carriers and used raw
4. Availability of equipment and materials materials;
5. The possibility of raising capital
6. Underemployment of the market, there
are free places
7. Diversification of services
8. The presence of a customer base for staff
Strengths: Development of competitive advantages Overcoming threats (minimize the
1. Acceptable pricing policy (maximize opportunities) consequences of threats)
2. Availability of professional staff 1. Holding stocks on a new product along 1. Increase in customer service due to low
3. Performance of quality services with the old prices for services
4. Maintaining the economic balance 2. Follow the market trend 2. Retention of competitive positions due to
of the company thanks to several 3. Make a convenient work schedule customer satisfaction.
products 4. Increase the number of new offers for new 3. Professional staff will bring potential
products customers
4 Image acquisition through quality services
5 Establishment of new business relations with
the administration, state. familiar inspections
6. Fulfillment of scheduled inspections of the
main type of production
7. Search for alternative suppliers of materials
and basic raw materials, to maintain a price
balance
Weaknesses: Elimination of weaknesses Non-standard events (maximum caution)
1. Lack of feedback Provide affordable prices for services 1. Networking
2. Little information about a new Carrying out PR-actions: 2. Attracting specialists from the production
product High level of professionalism implementation of the product
3. Lack of working capital; New Product Ads 3. Use of platforms to attract customers and
Attracting investors public relations of the company (technology
parks, etc.)
4. Search and attraction of partners and
distributors
SWOT Opportunities: Threats:
Growth diversification strategy 1. Decrease in economic risks 1. The complexity of the internal coordination
2. Flexible reallocation of resources from of units
areas with low perspectives to where they 2. The uncertainty of the future is growing
are high 3. Reducing the role of the former core
3. Investment Opportunity production
4. Expand existing markets and find new
ones.
5. Improve the efficiency of using the
accumulated potential
6. Ensure full capacity utilization
7. Adapt to market conditions, actively
counteract rivals (including by buying up
their enterprises)
8. Reduce partner dependency
Strengths: Development of competitive advantages Overcoming threats (minimize the
1. Survival is ensured by obtaining a (maximize opportunities): consequences of threats):
guaranteed level of profit. 1. The planned control of fixed assets, including
2. Achieving economic stability and Continuous training of employees and the the main area of activity.
financial stability use of this in competition 2. The increase in customer service due to low
3. Gaining a dominant market position Need to follow the trend of technology prices for services
development 3. Retention of competitive positions due to
Continuous advertising and marketing customer satisfaction.
4. Professional staff will bring potential
customers
5. Image acquisition through quality services
Weaknesses: Elimination of weaknesses Non-standard events (maximum caution)
1. requires new skills, new staff 1. stay afloat in case of deterioration of 1. Establishment of new business relations with
2. A relatively large budget is needed economic indicators by type of activity, the administration, state. familiar inspections
3. there may be uncertainty about the since possible failures in one area are offset 2. To expand through the acquisition of new
managerial aspect of diversification by success in others resources and technologies the possibility of
(for example, how the two teams of 2. liquidate stocks of enterprises at their optimizing the range of products, financial
leaders will collaborate with each peak on time and skillfully invest them in flows
other) growing promising firms
4. high-risk strategy for long-term 3. economies of scale
returns
5. Significant cash reserves required
6. There may be a tendency to transfer
shortcomings from an existing
enterprise to a new one.
SWOT Opportunities: Threats:
Cost reduction strategy 1. Price reduction to attract customers and 1. It is fraught with a protracted “price war”
create a customer base 2. Decrease in profitability of the company
2. Increase in sales 3. Copying competitor cost reduction methods
3. By reducing costs do not reduce the cost 4. The risk of excessive concentration on cost
of the product reduction - lack of marketing
5. The decrease in consumer value of the goods
Strengths: Development of competitive advantages Overcoming threats (minimize the
1. Strong price competition (maximize opportunities) consequences of threats)
2. Low brand change costs 1. Conducting targeted marketing for 1. To lay the main production and alternative
3. Cooperation with large customers customers with a more price-sensitive 2. Determine the optimal level of the volume of
requiring a price reduction customer DOS. funds for primary and secondary
2. Planned cost reduction through the search 3. Training
for new suppliers and ways to reduce costs 4. Presentations to clients, lectures, information
refinement
5. Integrity check of counterparties
Weaknesses: Elimination of weaknesses Non-standard events (maximum caution)
1. Standard or intended for a wide 1. Setting a clear cost plan and reducing 1. Maintenance of planned inspections for cost
range of consumer’s goods variable costs control
2. The inability to diversify the goods 2. Reducing the cost of delivery of products 2. Company privacy mode
3. Standard use of goods 3. Identification of new product markets
4. Competitors can copy cost reduction
methods
SWOT Opportunities: Threats:
Integration Growth Strategy 1. New specialists bring new customers 1. The risk of unprofitability
2. The acquisition of new technologies 2. Simple
3. New consumption markets 3. Low qualification
4. Expansion of the product range 4. High competition
5. Attracting new counterparties 5. The risk of not selling the entire volume
6. Improving the image of the company 6. Disruptions in supply - lack of raw materials
(domestic)
7. Low implementation efficiency
8. Low customer information
Strengths: Development of competitive advantages Overcoming threats (minimize the
1. Accelerated Growth (maximize opportunities) consequences of threats)
2. Scale up market coverage 1. Improving old products and developing a 1. To lay the main production and alternative
3. The acquisition of contracts for the new product 2. Determine the optimal level of the volume of
full cycle of work 2. Cost optimization DOS. funds for primary and secondary
4. The increase in stages for one artist 3. Diversification of the stages 3. Training
4. Presentations to clients, lectures, information
refinement
5. Integrity check of counterparties
Weaknesses: Elimination of weaknesses Non-standard events (maximum caution)
1. Poor awareness 1. Marketing research 1. Maintenance of planning meetings
2. Low technological equipment 2. Direct marketing 2. Absorption of small innovative enterprises
3. Lack of competencies 3. Scheduled continuing education seminars with the presence of
4. Lack of admin control. The staff 4. Compilation of personnel reserve - administrative staff
5. The cost of continuing education 5. Budgeting for staff training - customer base
6. Lack of relevant standards and 6. Review of accounting policies
regulations
7. Weak customer awareness
It is worth noting that the standard procedure for for example, when moving to the early growth stage, the
reaching a solution in any business, given the choice of company can use the methods of Primary Marketing - the
strategy, combines the following stages: first, on a small scale, launch of a product, used to
• identification of the problem/possible risks; determine the possible adoption of the product when
• information collection; launching for more wide market or conduct elasticity - to
• selecting the analysis method; understand how sensitive the consumer is to price
• select a group of experts for each issue.; changes. This also includes methods for creating a sales
• creating a request to experts; plan, which will include a customer base, a sales funnel, a
• collecting expert responses; plan for communicating information to potential
customers of the company, through direct marketing or
• developing a computer model (cognitive,
digital marketing, as well as other methods. All this
hierarchical, etc.);
influences quite strongly the decision-making regarding
• formulation of decisions and conclusions on the
the product and strategic development of the company, as
existing issue / problem;
well as the pricing of the product and the financial and
• development of new goals and objectives in
economic plan of the company.
accordance with the established solutions. [10].
It is very important for novice entrepreneurs who are
involved in the development and commercialization of
In addition, a novice entrepreneur must necessarily
their innovative technologies, in the case of cascading
resort to the techniques and tools of marketing research.
strategies, to understand their product plan, which should
So, for example, at the startup stage, conduct a general
include at least the terms of development and the timing
assessment of the market for your product:
of products on the market. As one of such schemes, one
˗ market assessment using Potential Available Market
can cite as an example a table of one of the possible plans
(PAM) 1, Total Addressable Market (TAM) 2,
for applying strategies in a cascading way for years,
Served/Serviceable Available Market (SAM) 3,
where the plan is formed from the beginning of the
Serviceable & Obtainable Market (SOM) 4;
product development and testing (R&D) stage to entering
˗ demand assessment - determine the approximate
the market with one strategy, and then switches to a new
level of demand for a given product;
one, developing and introducing new products. This
˗ sales forecasting - determine the expected level of
diagram is presented as a demonstration and can be
sales for a given demand.
changed in various conditions and specifics of the
enterprise (Fig.1).
When a company moves from one stage to another, it
becomes necessary to use new or additional techniques,
1
potential market size
2
target market volume
3
available market volume
4
really achievable market volume
Fig. 1. Variant of the Business Plan of a small innovative enterprise in a cascading manner by year (Source: Compiled by the authors)
It should be noted that for companies that work in ˗ startup;
innovative activities and not only in this area, the period ˗ stage of growth (early / expansion);
of development or life cycle (Fig. 2) can be divided into ˗ maturity.
the following stages:
Fig. 2. The stages of enterprise growth, taking into account the change of strategies over 10 years and the change in the company's
revenue (Source: Compiled by the authors - based on worldbank.org, 2019)
As a rule, it is additionally worthwhile to attribute the both for one specifically selected strategy, for example,
stage of a company to IPO after the maturity stage, but concentrated growth, and for mixed (hybrid) strategies.
this applies more to large innovative enterprises, and in Here, a choice is possible for each of the novice
this case we consider small innovative enterprises and entrepreneurs, where at each stage of the enterprise it is
small business companies. Such a cycle can be presented possible to use the tools proposed and discussed earlier to
analyze and predict the work of your company, for 3) At the maturity stage, it is necessary to use the same
example: tools, it is also necessary to develop and introduce
1) At the Startup stage - Conduct a SWOT analysis additional regulations for the conduct of certain
applying it both to the choice of a company’s operations of a commercial, technological or
strategy and to evaluate the product of its advantages financial nature, for the stability of the enterprise’s
and disadvantages compared to competitors. Use commercial activities and the possibility of
marketing tools that were previously considered, for developing new models and business development
example, PAM, TAM, SAM, SOM to assess the plans.
market. To formulate a product plan for the terms of
product release according to the cascading method of 4. Results
business strategy. As a result, threats that appear in a specific period of time
2) At the growth stage, a repeated SWOT analysis is for one strategy can be compensated by the capabilities of
necessary, the use of deeper marketing research and another, thereby saving the entrepreneur from a crisis
the formation of a sales plan, the adjustment of the situation in the company as a whole (Fig. 3).
product plan by the timing.
Fig. 3. The result of the economic activity of the company when combining several strategies (Source: [7])
At the same time, novice entrepreneurs and
5. Conclusion developers in the field of innovation are also
By defining new paths and new approaches, working recommended:
ahead of the curve, it will open up new opportunities for - take into account and apply the strategy for small
Russia and will make it possible to occupy certain and innovative enterprises according to the SWOT
possibly completely new niches in the world market of analysis for monitoring and forecasting upcoming
high-tech products and diversify its export base. Thus, a events (production or economic);
more open Russian market, bringing Russian legislation - use the tools of marketing research, SWOT analysis
to the international level, as well as closer interaction and the formation of a product plan for the life of the
with the global economic system can positively affect the company;
business climate in Russia and significantly contribute to - based on SWOT analysis, build a cognitive model
the competitiveness and growth of investment that evaluates the management process and its
attractiveness of the service sector. and technology. In various scenarios in dynamics, and to optimize
addition, it is worth considering the application of such decision-making, set the inverse problem using a
measures that the expert community focuses on: genetic algorithm; [10]
- tighten control over the implementation of decisions - keep in mind that the forecast should be based on
and programs; SWOT analyzes as a starting point, and in the future,
- improve legislation; it is necessary to apply regulations to develop new
- introduce tax incentives for innovative activity of models and plans for business development.
enterprises
Acknowledgments
The study was carried out within the framework of
RFBR grants 19-07-00455 and 20-04-60185.
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About the authors
Denis S. Seleznev, postgraduate, National Research
University of Oil and Gas n.a. I.M. Gubkin, Moscow, Russia.
E-mail: skyforward11@gmail.com
Ozdoeva Alina Kh., PhD in economics., scientific
researcher, National Research University of Oil and Gas n.a.
I.M. Gubkin, Moscow, Russia. E-mail: 4305@bk.ru