Schilling-07

Schilling-07 - StrategicManagementof...

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Chapter 7 CHOOSING INNOVATION PROJECTS Strategic Management of  Technological Innovation   Melissa Schilling
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2 Boeing was developing a new midsized jet, the “Sonic  Cruiser,” which would travel 15-20% faster than existing  commercial jets. It was expected to cost $10 billion to  develop.  However, in 2002 air ticket sales were down, several  airlines faced bankruptcy, and aircraft were put into storage  to reduce capacity. Despite this, Boeing forecasted that the worldwide aircraft fleet would  double by 2021.   Boeing also noted that the company needs to create a new  aircraft every 12 to 15 years or else the people with the  skills and experience will be either leave the company or  retire and the next generation of employees will not have  that knowledge passed on to them.   Boeing’s Sonic Cruiser
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3 The Sonic Cruiser was scrapped but development  of the 787 Dreamliner began and is scheduled to  fly in 2009 50 percent of the primary structure, including the fuselage  and wing, will be made of composite materials. This  eliminates 1,500 aluminum sheets and 40,000 - 50,000  fasteners.  health-monitoring systems will be incorporated that will  allow the airplane to self-monitor and report maintenance  requirements to ground-based computer systems.  Boeing’s Sonic Cruiser
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4 The Development Budget Most firms face serious constraints in capital and  other resources they can invest in projects. Firms thus often use  capital rationing : they set a  fixed R&D budget and rank order projects to support. R&D budget is often a percentage of previous year’s  sales.  Percentage is typically determined through industry  benchmarking, or historical benchmarking of firm’s  performance. 
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5 The Development Budget R&D Intensity  (R&D as a percent of sales) varies  considerably across and within industries. Industry R&D as a Percent of Sales Software & Internet 12.7% Health 11.2 Computing & Electronics 7.6 Technology 4.3 Aerospace & Defense 4.1 Automotive 4.1 Industrials 2.3 Consumer Products 2.1 Telecom 1.9 Chemicals & Energy 1.5
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6 The Development Budget Top 20 Global R&D Spenders, 2004 Microsoft’s 21% is higher than the 12.7% of the Software 7 Internet industry GM’s 3% is below the auto industry’s 4.1% Company R&D  Expenditures  ($billions) R&D as  percent of  sales Company R&D  Expenditures  ($billions) R&D as  percent of  sales Microsoft $7.8 21% GlaxoSmithKline 5.2 14% Pfizer 7.7 15% Intel 4.8 14% Ford 7.4 4% Volkswagen 4.7 4% DaimlerChrysler 7.0 4% Sony 4.7 7% Toyota 7.0 4% Nokia 4.6 13% General Motors 6.5 3% Honda 4.4 5% Siemens 6.2 7% Samsung Electronics 4.3 6%
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7 Financing New Technology Ventures Large firms can fund innovation internally; new start-ups  must often obtain external financing. 
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This document was uploaded on 10/09/2010.

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Schilling-07 - StrategicManagementof...

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