Chapter 8 Summary
A number of factors will influence whether a firm chooses to collaborate on an innovation. Some of the most important include whether the firm (or a potential partner) has the required capabilities or other resources, the degree to which collaboration would make proprietary technologies vulnerable to expropriation by a potential competitor, the importance the firm places on controlling the development process and any innovation produced, and the role of the development project in building the firm's own capabilities or permitting it to access another firm's capabilities.
Firms may choose to avoid collaboration when they already possess the necessary capabilities and other resources in-house, they are worried about protecting proprietary technologies and controlling the development process, or they prefer to build capabilities in-house rather than access a partner firm's capabilities.
Some of the advantages of collaboration include sharing costs and risks of development, combining complementary skills and resources, enabling the transfer of knowledge between firms and the joint creation of new knowledge, and facilitating the creation of shared standards.
The term strategic alliances refers to a broad class of collaboration activities that may range from highly structured (e.g., joint ventures) to informal. Strategic alliances can enable simple pooling of complementary resources for a particular project, or they may enable the transfer of capabilities between partners. The transfer of capabilities often requires extensive coordination and cooperation.
A joint venture is a partnership between firms that entails a significant equity investment and often results in the creation of a new separate entity. Joint ventures are usually designed to enable partners to share the costs and risks of a project, and they have great potential for pooling or transferring capabilities between firms.
Licensing involves the selling of rights to use a particular technology (or other resource) from a licensor to a licensee. Licensing is a fast way of accessing (for the licensee) or leveraging (for the licensor) a technology, but offers little opportunity for the development of new capabilities.
Outsourcing enables a firm to rapidly access another firm's expertise, scale, or other advantages. Firms might outsource particular activities so that they can avoid the fixed asset commitment of performing those activities in-house. Outsourcing can give a firm more flexibility and enable it to focus on its core competencies. Overreliance on outsourcing, however, can make the firm hollow.
Chapter 9 Summary
The degree to which a firm can capture the rents from its innovation efforts is largely determined by the degree to which competitors can quickly and easily imitate the innovation. Some innovations are inherently difficult to copy; others are difficult to copy because of the mechanisms the firm uses to protect its innovation.
The three primary legal mechanisms used to protect innovation in most countries are patents, trademarks, and copyrights. Each mechanism is designed to protect a different type of work or good.
International treaties have helped to harmonize patent, trademark, and copyright laws around the world. Most countries now have patent, trademark, and copyright laws of some form, and in some instances protection can be applied for in multiple countries simultaneously.
Trade secrets provide another mechanism of protecting innovation. Firms that protect their intellectual property as a trade secret often have legal recourse if another party wrongfully takes and uses such property.
Legal mechanisms for protecting innovation are more effective in some industries than others; in some industries, inventing around a patent or copyright is relatively easy. Similarly, in some industries it is nearly impossible to protect an innovation by using trade secrets because commercializing the innovation reveals its underlying technologies.
Sometimes the choice between protecting versus diffusing a technology is not obvious. Both strategies offer potential advantages. Many firms use neither a wholly open nor wholly proprietary strategy, but rather a partially open strategy.
Protecting an innovation helps ensure that the firm earns the lion’s share of the returns from the innovation. These returns can then be reinvested in further developing the technology, promoting the technology, and producing complementary goods.
Protecting an innovation also preserves the firm’s architectural control, enabling it to direct the technology’s development, determine its compatibility with other goods, and prevent multiple incompatible versions of the technology from being produced by other firms.
Chapter 10 Summary
Organizing for Innovation
The impact of firm size on innovation has been debated for more than 50 years. Size is thought to confer advantages such as economies of scale in R&D, greater access to complementary resources (like capital and market access), and learning benefits. However, size may also be associated with disadvantages such as inertia and governance problems.
Many firms attempt to make big companies feel small by breaking them into networks of more specialized divisions. These divisions can behave like smaller, more entrepreneurial firms.
Structural dimensions of the firm, including formalization, standardization, and centralization, also affect the firm’s propensity to innovate and its effectiveness at innovation. Formalization and standardization tend to improve efficiency, but can stifle experimentation and creativity. Centralization has a more ambiguous effect on innovation; in some cases, centralization can enable significant innovation to occur more rapidly, and in other situations, decentralization fosters more innovation by enabling managers to respond quickly to local needs.
Traditionally, scholars have divided organization structures into two major types: mechanistic structures, which are highly formalized and standardized, and are good for efficient production, and organic structures, which are loose and free flowing and are good for creativity and experimentation.
Ambidextrous organizations attempt to achieve both the efficiency advantages of large mechanistic firms and the creativity and entrepreneurial spirit of small organic firms. These firms may have divisions with different structures and control schemes, or they may alternate between different structures.
Recently many firms have begun forming loosely coupled networks both within and between firms to conduct development activities. Part of this transition is attributed to the rise in information technology and the resultant decrease in coordination costs.
Multinational firms face significant challenges in determining where and how to conduct their R&D activities. One primary challenge is to balance the need to tap the knowledge and resources of local markets while also achieving coherence across the corporation and ensure that technological innovations are diffused and leveraged throughout the organization.
Chapter 11 Summary
Managing the New Development Process
Successful new product development requires achieving three simultaneous objectives: maximizing fit with customer requirements, minimizing time to market, and controlling development costs.
Many firms have adopted parallel development processes to shorten the development cycle time and to increase coordination among functions such as R&D, marketing, and manufacturing.
Many firms have also begun using project champions to help ensure a project’s momentum and improve its access to key resources. Use of champions also has its risks, however, including escalating commitment and unwillingness of others in the organization to challenge the project.
Involving customers in the development process can help a firm ensure that its new products match customer expectations. In particular, research indicates that involving lead users can help the firm understand what needs are most important to customers, helping the firm to identify its development priorities. Involving lead users in the development process can also be faster and cheaper than involving a random sample of customers in the development process.
Many firms use beta testing to get customer feedback, exploit external development of the product, and signal the market about the firm’s upcoming products.
Firms can also involve suppliers in the development process, helping to minimize the input cost of a new product design and improving the likelihood that inputs are of appropriate quality and arrive on time.
Stage-gate processes offer a blueprint for guiding firms through the new product development process, providing a series of go/kill gates where the firm must decide if the project should be continued and how its activities should be prioritized.
Quality function deployment can be used to improve the development team’s understanding of the relationship between customer requirements and engineering attributes. It can also be a tool for improving communication between the various functions involved in the development process.
Failure Modes and Effects Analysis can be used to help firms prioritize their development efforts in order to reduce the likelihood of failures that will have the greatest impact on the quality, reliability, and safety of a product or process.
Design for manufacturing and CAD/CAM are additional tools development teams can use to reduce cycle time, improve product quality, and control development costs.
Firms should use a variety of measures of their new product development effectiveness and overall innovation performance to identify opportunities for improving the new product development process and improving the allocation of resources.
Chapter 12 Summary
Managing New Product Development Teams
Bringing multiple people together into a team enables multiple bases of expertise to be collectively directed toward problem solving; thus, teams are powerful mechanisms for problem solving. However, if teams become too big, administrative costs and communication problems can become significant.
Diversity of team members ensures that the team can draw on different perspectives and bases of expertise. In particular, functional diversity is often sought in new product development teams. Cross-functional teams enable design, manufacturing, and marketing objectives to be integrated in the new product development process.
Diversity of team members ensures that the individuals in the team not only possess different knowledge or viewpoints, but also have different sources of extra-team resources upon which to draw through boundary-spanning activities.
Diversity can also make it more difficult for teams to develop a common understanding of the new product development project and can result in lower group cohesion. Teams may need long-term contact and incentives for cooperation to overcome these challenges.
The way in which a team is structured (collocation, permanence, supervisory relationships, etc.) significantly influences how team members interact and the likely outcomes of a development project. Different types of teams are appropriate for different types of development projects.
Attributes of the team leader (seniority, authority, multilingual skills) must match the team type for teams to be most effective.
Many firms have teams develop and sign a project charter and contract book to ensure that all team members have a common understanding of the project’s goals and possess a sense of ownership and commitment to the project’s success.
When a company wishes to form a team with individuals who have unique skills but live great distances from each other, it might opt to form a virtual team. Virtual teams use information technologies to achieve communication and coordination. Virtual teams face a distinct set of challenges in promoting participation, cooperation, and trust. As a result, they require special consideration of the selection of team members and the team administration processes.
Chapter 13 Summary
Crafting a Deployment Strategy
A firm can use its launch timing strategy to take advantage of business cycle or seasonal effects, to influence its positioning vis-a`-vis competitors, and to ensure that production capacity and complementary goods are sufficiently available at time of launch.
The launch timing decision must also consider the need to harvest cash flows from existing product generations versus the advantages of willingly cannibalizing existing products to preempt competitors.
Successful deployment requires striking a careful balance between making a system open enough to attract complementary goods providers (and/or other producers if that is desirable) and protected enough to ensure that product quality, margins, and compatibility can be sustained.
Common pricing strategies for technological innovations include market skimming and penetration pricing. While the first attempts to maximize margins earned on early sales of the product, the second attempts to maximize market share. Pricing strategies should consider the firm’s ability to earn profits from sales of complementary goods or services—if profits from complements are expected to be high, lower prices on the platform technology may be warranted.
Firms can manipulate the customer’s perception of the product’s price (and the timing of cash flows) through the timing of when the price is paid.
Intermediaries provide a number of valuable roles in the supply chain, including breaking bulk, transporting, carrying inventory, providing selling services, and managing customer transactions.
Sometimes a firm can accelerate distribution of its innovation by forging relationships with distributors, bundling the good with others that have a wider installed base, sponsoring large customer groups, or providing sales guarantees to distributors or complements producers.
Marketing methods vary in attributes such as cost, reach, information content, duration of exposure, flexibility of message, and ability to target particular segments of the market. When designing the marketing plan, the firm must take into account both the nature of the innovation (e.g., Is it complex? Are benefits easy to observe?) and the nature of the customer (e.g., Does the customer require in-depth technical detail? Is the customer likely to be influenced by brand images and/or reputation? How much uncertainty is the customer likely to tolerate?)
Marketing strategies can influence the market’s perception of how widely used the product is or will be, and thus can influence the behavior of customers, distributors, and complementary goods producers. Preannouncements, the firm’s reputation, and credible commitments can all influence the market’s assessment of the product’s likelihood of success.
Alliance is a general term that can refer to any type of relationship between firms. Alliances may be short or long term and may include formally contracted agreements or be entirely informal in nature
A partnership between two or more firms involving a significant equity stake by the partners and often resulting in the creation of a new business equity
A contractual arrangement whereby one organization or individual (the licensee) obtains the rights to use the proprietary technology (or trademark, or copyright, etc.) of another organization or individual (the licensor)
Combining ("pooling") the capabilities and other resources of partner firms, but not necessarily transferring those resources between the partners
Exchange of capabilities across firms in such a manner that partners can internalize the capabilities and use them independently of the particular development project
When a firm hires another firm (often a specialized manufacturer) to manufacture its products
The degree to which a firm is able to capture the rents from its innovation
Knowledge that cannot be readily codified or transferred in written form.
|Socially Complex Knowledge||
Knowledge that arises from the interaction of multiple individuals
A property right protecting a process, machine, manufactured item (or design for manufactured item), or variety of plant
An indicator used to distinguish the source of a good
A property right protecting works of authorship
Information that belongs to a business that is held private
|Open Source Software||
Software whose code is made freely available to others for use, augmentation, and resale.
|Wholly Proprietary Systems||
Goods base don technology that is owned and vigorously protected through patents, copyrights, secrecy, or other mechanisms. Wholly proprietary technologies may be legally produced and augmented only by their developers.
|Wholly open systems||
Goods based on technology that is not protected and that is freely available for production or augmentation by other producers.
|Original Equipment Manufacturers (OEMs)||
Firms that assemble goods using components made by other manufacturers, also called value-added resellers.
The ability of a firm (or group of firms) to determine the structure, operation, compatibility, and development of a technology.
When something is separated into its constituent parts
The degree to which the firm utilizes rules, procedures, and written documentation to structure the behavior of individuals or groups within the organization
The degree to which activities are performed in a uniform manner
|Centralization / Decentralization||
Centralization is the degree to which decision making authority is kept at top levels of managment.
Decentralization is the degree to which decision making authority is pushed down to lower levels of the firm.
An organization structure characterized by a high degree of formalization and standardization, causing operations to be almost automatic or mechanical
An organization structure characterized by a low degree of formalization and standardization. Employees may not have well-defined job responsibilities and operations may be characterized by a high degree of variation
The ability of an oranization to behave almost as two different kinds of companies at once. Different divisions of the firm may have different structures and control systems, enabling them to have different cultures and patterns of operations
Skunk Works is a term that originated with a division of Lockheed Martin that was formed in June of 1943 to quickly develop a jet fighter for the US Army. It has evolved as skunk works to refer more generally to new product development teams that operate nearly autonomously from the parent organization, with considerable decentralization of authority and little bureaucracy
|Center for Global Strategy||
When all innovation activities are conducted at a central hub and innnovations are then diffused throughout the company
|local for local strategy||
When each division or subsidiary of the firm conducts its own R&D activities, tailered for the needs of the local market
|locally levereged strategy||
When each division or subsidiary of the firm conducts its own R&D activities, but the firm attempts to leverage resulting innovations throughout the company
|Globally linked strategy||
Innovation activities are decentralized, but also centrally coordinated for the global needs of the corporation
|Development Cycle Time||
The time elapsed from project initiation to product launch, usually measured in months or years
|Partly parallel development process||
A development process in which some (or all) of the development activities at least partially overlap. That is, if activity A would precede activity B in a partially parallel development process, activity B might commence before activity A is completed.
Customers who face the same general needs of the marketplace but are likely to experience them months or years earlier than the rest of the market and stand to benefit disproportionately from solutions to those needs.
|go/kill decision points||
Gates established in the development process where managers must evaulate whether or not to kill the project or allow it to proceed
When an individual in a team does not exert the expected amount of effort and relies instead on the work of other team members
|cross functional teams||
Teams whose members are drawn from multiple functional areas in the firm such as R&D, marketing, manufacturing, distribution and so on
The tendency for individuals to like other people whom they perceive as being similar to themselves
Teams in which members may be a great distance from each other, but are still able to collaborate intensively via advanced information technologies such as videoconferencing, groupware, and email or Internet chat programs
When a firm's sales of one product (or at one location) diminish its sales of another one of its products (or at another one of its locations).
When products of a technological generation can work with products of a previous generation. For example, a computer is backward compatible if it can run the same software as a previous generation of the computer.
When the proce of a good is set very low (or free) to maximize the good's market share
Independent agents that promote and sell the product lines of one or a few manufacturers. They are often used when direct selling is appropriate but the manufacturer does not have a sufficiently large direct sales force to reach all appropriate market segments
companies that buy manufacturer's products in bulk, and then resell them (often in smaller or more diverse bundles) to other supply channel members such as retailers
Companies that sell goods to the public
|Original equipment manufacturer (or value added reseller)||
A company that buys products (or components of products) from other manufacturers and assembles them or customizes them into a product that is then sold under the OEM's own name.
When the number of intermediaries in a supply channel is reduced; for example, when manufacturers bypass wholesalers and/or retailers to sell directly to end users.
Strengths, Weakness, Opportunity, Threat
Strengths & Weakness --> INTERNAL
Opportunity & Threat --> EXTERNAL
2) Porter's Five-Force Model
Threat of Potential Entrants
Bargaining Power of Buyers
Threat of Substitutes
Bargaining Power of Suppliers
Degree of Existing Rivalry
3) Value Chain Tool
This is an internal tool for company to look at itself. Template can be modified to support different company types.
4) Stakeholder Analysis (can be done both internal & external)
Most people use SWOT if they can only choose one. Need to be careful with this approach since the SWOT is very general and difficult to confirm what a "good" SWOT Analysis is.
One way to make the SWOT good is to incorporate Quantitative Analysis.
DATA + MODELS = ANALYSIS
Determining where we are going to put the companies money
1) Capital Budget
2) Operating Budget
Chapter 8 Case
1) What are the pros/cons of Abgenix's collaboration with a partners on ABX-EGF?
2) If Abgenix chooses collaboration, would it be better of licensing ABX-EFG to the pharmaceutical company o
Pros = Splitting Costs, Share of Risks & Rewards, Utilize skills & resources of other company
Cons = Speed, IP, Conflict of interest, profit, control
Licensing = Company has skills & resources, experience with launching and marketing products, pay up-front fees, and royalty rates
Joint Venture = Split costs, share profits, share risk & rewards. downside is that you have to create a seperate entity
3) It frees up time to work on other projects, Allows more collaborating, frees up cash flow
|Why have the number of Joint ventures gone down?||
Hard to Manage
Hard to Start
Hard do get rid of
Companies are now better at collaborating w/out becoming an entity. An entity is legally binding.
|Advantages of being an Alliance?||
Can get in and out of easily
Downside - may not be completely committed
|Why does a company need a partnership at all?||
Can't do it all
As product complexity increases, a company may need to focus on the core competency and outsource other areas.
|Conditions to choose a Joint Venture over an Alliance||
Need to maintain control
Lock up a capability to avoid competition
Access to markets
Chapter 9 Case
The Digital Music Distribution Revolution
Fraunhofer and MP3
1) What industry conditions lead to the revolution in audio distribution? Which Stakeholders stand to benefit most (or least) from this revolution?
1) The internet allowed the sharing of information (peer-to peer) and single song. Condensed file sizes. The record labels had an oligopoly.
Positive = customer benefits, music label, musicians
Negative = retailers, distributors
2) Music stores were inflexible because they were doing business the way that they always have.
This would be considered an enabling-disruptive technology
Suppliers were unable to move to new business model because it had not yet moved to the new technology.
4) Opportunity for exposure
5) Instead of commercials, products/advertisements will be put into the shows instead.
appropriability = ability to protect IP and collect rents
|BP Case Article Notes||
Top Ideas from Article
Innovation Board formed and tasked with delivering results in the following areas 1) business transformation 2) top-line revenue growth 3) cost reductions 4) Health, Safety, and Environment
The board developed a capability-based process rather than one based on carrying out sequential tasks. Process included:
Support Innovation Awareness & Capability
Stimulate and Capture innovative ideas
Support turning ideas into Opportunities
Deliver compelling case
Value realization and recognition
Six Innovation Lessons
1) Ongoing commitment by senior mgt w/in a clear business strategy is essential to sustain an innovation process.
2) Recognize and exercise the inherent innovation capability to strengthen the "innovation muscle" and let an innovation culture emerge.
3) innovation does not mean abandoning effective mgt, but must be actively supported as a priority activity.
4) Successful innovation requires intimate knowledge of customer and user needs
5) Innovation often occurs under the stimulation of a cooperative endeavor or of a clear need rather than a lone individuals unbidden insight
6) Innovation is easily blocked and needs active support
Life expectancy of an Innovation Program is 3 years
Need to have skills to follow process developed
The more complex, the less routine, and harder to write a "process" for next projects. Necessary to have the "skills".
|Characteristics of Radical Technology||
Distinctive Difference (performance increase)
Reason to believe
Sufficiency: The more radical the idea the higher the project must rate on these characteristics
Ideas must be radical. most think little - need to make them big!
Think about what you would make different to make them more believable, more benefit.
|Radical Development Strategy||
Opposite from traditional development methods
Build value rather than select value
One idea supports many ideas
Many projects may be required to realize value
|9 Decisions that need to be made before bringing an opportunity to market||
Chapter 10 Case
Organizing for Innovation
1) What are the advantages and disadvantages of the creative side of Google being run as a flexible and flat "technocracy"?
2) How does Google's culture influence the kind of employees it can at
1) Advantages = More Automony (able to manage knowledge workers), Flat organization which allows less structure, Open Culture
Disadvantages = W/out clear guidelines creates more politics, May create redundancy, innefficiencies. Affect productivity (delivering products - not idea generation).
2) Creative people don't need structure
3) Could cause resentment from other areas in the organization.
4) This has allowed google to be successful. The bigger question is how much innovation can google withstand?