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Managing Innovation Integrating Technological, Market and Organizational Change

Sixth Edition

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 Managing Innovation
Integrating Technological, Market
and Organizational Change

Sixth Edition

Tidd6e_ffirs.indd 1 2/27/2018 9:18:17 PM

Tidd6e_ffirs.indd 2 2/27/2018 9:18:17 PM
 Managing Innovation
Integrating Technological, Market
and Organizational Change

Sixth Edition

JOE TIDD
Science Policy Research Unit (SPRU),
University of Sussex, UK

JOHN BESSANT
Business School,
University of Exeter, UK

Tidd6e_ffirs.indd 3 2/27/2018 9:18:17 PM

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ISBN: 978-1-119-37945-4 (PBK)

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Library of Congress Cataloging in Publication Data:

Names: Tidd, Joseph, 1960- author. | Bessant, J. R., author.

Title: Managing innovation : integrating technological, market and
organizational change / by Joe Tidd and John Bessant.
Description: Sixth Edition. | Hoboken : Wiley, [2018] | Revised edition of
the authors’ Managing innovation, [2013] |
Identifiers: LCCN 2017059953 (print) | LCCN 2018006518 (ebook) | ISBN
9781119379416 (epub) | ISBN 9781119379409 (pdf) | ISBN 9781119379454 (pbk.)
Subjects: LCSH: Technological innovations—Management. | Industrial
management. | Technological innovations. | Organizational change.
Classification: LCC HD45 (ebook) | LCC HD45 .T534 2018 (print) | DDC
658.5/14—dc23
LC record available at https://lccn.loc.gov/2017059953

The inside back cover will contain printing identification and country of origin if omitted from
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on the back cover is correct.

Tidd6e_ffirs.indd 4 2/27/2018 9:18:18 PM

 About the Authors
Petrobras, and international agencies such as UNESCO
in Africa. He is the winner of the Price Waterhouse Urwick
Medal for contribution to management teaching and
research and the Epton Prize from the R&D Society.
He has written 9 books and more than 60 papers
on  the management of technology and innovation, with
than 17,000 research citations, and is Managing Editor
of the International Journal of Innovation Management
(http://www.worldscientific.com/worldscinet/ijim),
the official journal of International Society of Professional
Innovation Management. He hosts a the Innovation Mas-
ters YouTube channel and is part of the Intrapreneurship
J O E T I D D is a physicist with subsequent degrees in tech- Hub, a collaborative venture between Sussex, Bocconi,
nology policy and business administration. He is profes- and Renmin business schools.
sor of technology and innovation management at SPRU,
and visiting Professor at University College London, and
previously at Cass Business School, Copenhagen Business
School, and Rotterdam School of Management. Dr Tidd
was previously Deputy Director of SPRU and Head of the
Innovation Group and Director of the Executive MBA Pro-
gram at Imperial College.
He has worked as policy adviser to the CBI (Confed-
eration of British Industry), presented expert evidence to
three Select Committee Enquiries held by the House of
Commons and House of Lords, and was the only academic
member of the UK Government Innovation Review. He is a
founding partner of Management Masters LLP.
He was a researcher for the 5-year International Motor J O H N B E S S A N T Originally a chemical engineer, John
Vehicle Program of the Massachusetts Institute of Technol- Bessant has been active in the field of research and con-
ogy (MIT), which identified Lean Production, and has worked sultancy in technology and innovation management for
on technology and innovation management projects for over 35 years. He is currently holds the Chair in Innova-
consultants Arthur D. Little, CAP Gemini, and McKinsey, tion and Entrepreneurship at the University of Exeter and
and numerous technology-based firms, including American has visiting appointments at the universities of Erlangen-
Express Technology, Applied Materials, ASML, BOC Edwards, Nuremburg, Queensland University of Technology, and
BT, Marconi, National Power, NKT, Nortel Networks, and the National University of Ireland.

Tidd6e_fbetw.indd 5 2/27/2018 9:20:02 PM

 Preface to the Sixth Edition
Innovative firms outperform, in both employment and • Extensive additional interactive resources, available
sales, firms that fail to innovate [1]. We know that those from the Wiley Book Companion Site (BCS), including
organizations that are consistently successful at managing video, audio pod casts, innovation tools, interactive
innovation outperform their peers in terms of growth, exercises, and tests to help apply the learning. Further
financial performance, and employment and that the video is available on our YouTube channel, innova-
broader social benefits of innovation are even greater [2]. tion masters (https://www.youtube.com/channel/
However, managing innovation is not easy or automatic. UCG3tXfZXJpDZOGJXuzCUVLw/videos).
It requires skills and knowledge, which are significantly
different to the standard management toolkit and experi- In this fully updated sixth edition, we draw upon the
ence, because most management training and advice are latest research and practice, and have extended our cov-
aimed to maintain stability, hence the most sought after erage of topical and relevant subjects, including business
degree is an MBA – Master of Business Administration. As model innovation, open innovation, user innovation and
a result, most organizations either simply do not formally crowdsourcing, service and social innovation.
manage the innovation process or manage it in an ad hoc Our understanding of innovation continues to
way. Studies confirm that only around 12% of organiza- develop, through systematic research, experimentation,
tions successfully manage innovation, and only half of and the ultimate test of management practice and expe-
these organizations do so consistently across time [3]. rience. As a result, it is a challenge for all of us interested
Since the first edition of Managing Innovation in innovation to keep abreast of this fast-developing and
was ­ published in 1997, we have argued consistently multidisciplinary field. In the general field of business
that successful innovation management is much more research, the 200 or so active research centers worldwide
than managing a single aspect, such as creativity, produce some 5000 papers each year, many relevant to
­entrepreneurship, research and development, or ­product managing innovation [6]. In the more specialist fields of
technology and innovation management, the 120 research
development [4]. Our companion texts deal with such
centers worldwide publish several hundreds of papers
issues more fully [5], but here we continue to promote
each year [7]. One goal of this book is to help make sense
an integrated process approach, which deals with the
and navigate through this mass of material. Another is to
inter­actions between changes in markets, technology,
encourage action. As we declared in the first edition, and
and organization. In this sixth edition, we continue our
still believe strongly, this book is designed to encourage
­tradition of differentiating our work from that of others by
and support practice, and organization-specific experi-
developing its unique characteristics:
mentation and learning, and not to substitute for it.
• Strong evidence-based approach to the under- We would like to acknowledge the extensive feedback,
standing and practice of managing innovation, support, and contributions from users of the previous edi-
drawing upon thousands of research projects, and tions, our own colleagues and students, the team at Wiley,
“Research Notes” on the very latest research findings. and the growing community of innovation scholars and pro-
Managing Innovation had more than 8000 citations in fessionals who have contributed directly to this sixth edition,
Google Scholar in 2017; in particular, the generous participants in the workshops we
ran in London, Manchester, Melbourne Rotterdam, Berlin,
• Practical, experience-tested processes, models, and
Barcelona, Helsinki, Budapest, and Kuala Lumpur.
tools, including “View,” first-person accounts from
practicing managers on the challenges they face JOE TIDD & JOHN BESSANT
managing innovation; January 2018

vi

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   P reface to the Si xth Edition   vii

References
1. Tidd, J. and B. Thuriaux-Alemán, Innovation manage- and J. Tidd, Meeting the innovation challenge: Leadership for
ment practices: Cross-sectorial adoption, variation and transformation and growth. 2006, Wiley; Bessant, J., High
­effectiveness, R&D Management, 2016. 46(3), 1024–1043. involvement innovation. 2003, Wiley.
2. Tidd, J., From knowledge management to strategic compe- 6. Mangematin, V. and C. Baden Fuller, Global contests in the
tence. 2012, Imperial College Press, third edition. production of business knowledge, Long Range Planning,
3. Jaruzelski, B., J. Loehr, and R. Holman, The global innova- 2008. 41(1), 117–139.
tion 1000: Why culture is key, Strategy+Business, Issue 65. 7. Bhupatiraju, S., et  al., Knowledge flows – Analyzing the
2011, Booz and Company. core literature of innovation, entrepreneurship and sci-
4. Eagar, R., et al., The future of innovation management: The ence and technology studies, Research Policy, 2012. 41(7),
next 10 years, Prism, Issue 2011/1. 2011, Arthur D. Little. 1205–1218; Martin, B., P. Nightingale, and A. Yegros-Yegros,
5. Bessant, J. and J. Tidd, Entrepreneurship. 2018, Wiley; Science and technology studies: Exploring the knowledge
­Innovation and entrepreneurship. 2015, Wiley, 3rd edition; base, Research Policy, 2012. 41(7), 1182–1204.
Strategic innovation management. 2014, Wiley; Isaksen, S.

Tidd6e_fpref.indd 7 2/27/2018 9:23:33 PM

 How to Use This Book:
Key Features
This sixth edition of Managing Innovation has seven key 6. Extended Case Studies, for deeper understanding,
features throughout the book and as associated resources class discussion, and analysis.
to support learning: 7. Multiple-choice Questions, to chart progress and test
the understanding of key concepts.
1. Research Notes, which present the latest empirical
findings from academic studies to deepen your In this print edition, most of these additional fea-
knowledge. tures are freely available to students on the Wiley Book
2. View, first-person accounts of how innovation is Companion Site (BCS) – https://www.wiley.com/en-us/
managed in practice. Managing+Innovation%3A+Integrating+Technological
3. Video interviews, experienced managers and leading %2C+Market+and+Organizational+Change%2C+6th+
academics share their insights. Edition-p-9781119379416.
In addition, for instructors, the BCS provides Power
4. Examples of Innovation in Action, short, real-life
Point slides, seminar exercises and a test bank of q
­ uestions
examples of innovation.
and answers.
5. Practical Tools, to experiment and apply the models
and methods to improve innovation in a range of
contexts.

viii

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 Brief Contents

ABOUT THE AUTHORS   v 9 Making the Innovation Case  306

PREFACE TO THE SIXTH EDITION   vi
HOW TO USE THIS BOOK: KEY FEATURES  viii 10 C
 reating New Products and
Services  347
1 Innovation – What It Is and Why
It Matters  1 11 E
 xploiting Open Innovation and
Collaboration  394
2 Innovation as a Core Business
Process  48 12 P
 romoting Entrepreneurship and
New Ventures  436
3 Building the Innovative
Organization  89 13 C
 apturing the Business Value of
Innovation  493
4 Developing an Innovation Strategy  139
14 Capturing Social Value  531
5 Sources of Innovation  190
15 C
 apturing Learning from
6 Search Strategies for Innovation  226 Innovation  554
7 Innovation Networks  255
SUBJECT INDEX   577
8 Decision Making Under
Uncertainty  281

ix

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 Contents
ABOUT THE AUTHORS   v
3 Building the Innovative
PREFACE TO THE SIXTH EDITION   vi
HOW TO USE THIS BOOK: KEY FEATURES   viii Organization  89

1 Innovation – What It Is and Why

3.1 Shared Vision, Leadership, and the Will to
Innovate  91
It Matters  1 3.2 Appropriate Organizational Structure  96
3.3 Key Individuals  100
1.1 The Importance of Innovation  1 3.4 High Involvement in Innovation  103
1.2 Innovation Is Not Just High Technology  3 3.5 A Roadmap for the Journey  108
1.3 It’s Not Just Products . . .  6 3.6 Effective Team Working  111
1.4 Innovation and Entrepreneurship  7 3.7 Creative Climate  117
1.5 Strategic Advantage Through Innovation  9 3.8 Boundary-Spanning  131
1.6 Old Question, New Context  14 Summary  134
1.7 What Is Innovation?  15 Further Reading  134
1.8 A Process View of Innovation  19 Case Study  135
1.9 Innovation Scopes and Types  20 References  135
1.10 Key Aspects of Innovation  26
1.11 Innovation Management  40
4 Developing an Innovation
Summary  44
Further Reading  44 Strategy  139
Case Studies  46
References  46 4.1 “Rationalist” or “Incrementalist” Strategies for
Innovation?  140

2 Innovation as a Core Business

4.2  Innovation “Leadership” versus
“Followership”  147
Process  48 4.3  The Dynamic Capabilities of Firms  150
4.4  Appropriating the Benefits from
2.1 Different Circumstances, Similar Innovation  156
Management  49 4.5  Exploiting Technological Trajectories  161
2.2 Services and Innovation  50 4.6  Developing Firm-specific Competencies  164
2.3 Variations on a Theme  55 4.7  Globalization of Innovation  175
2.4 A Contingency Model of the Innovation 4.8  Enabling Strategy Making  180
Process  63 Summary  184
2.5 Evolving Models of the Process  64 Further Reading  184
2.6 Can We Manage Innovation?  67 Case Studies  185
2.7 Learning to Manage Innovation  70 References  185
2.8 What Do We Know About Successful Innovation
Management?  73
5 Sources of Innovation  190
2.9 Beyond the Steady State  83
Summary  84 5.1 Where Do Innovations Come From?  190
Further Reading  84 5.2 Knowledge Push  191
Case Studies  85 5.3 Need Pull  193
References  85 5.4 Making Processes Better  196
x

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   CONTENTS   xi

5.5  Crisis-driven Innovation  198 Summary  278

5.6 Whose Needs? The Challenge of Further Reading  278
Underserved Markets  200 Case Studies  278
5.7 Emerging Markets  204 References  279
5.8 Toward Mass Customization  206
5.9 Users as Innovators  208 8 Decision Making Under
5.10 Using the Crowd  210
5.11 Extreme Users  213
Uncertainty  281
5.12 Prototyping  214
8.1  Meeting the Challenge of Uncertainty  282
5.13 Watching Others – and Learning From
8.2  The Funnel of Uncertainty  282
Them  215
8.3  Decision Making for Incremental
5.14 Recombinant Innovation  215
Innovation  284
5.15 Design-led Innovation  217
8.4  Building the Business Case  287
5.16 Regulation  219
8.5  Concept Testing and Engaging
5.17 Futures and Forecasting  220
Stakeholders  289
5.18 Accidents  220
8.6  Spreading the Risk  290
Summary  222
8.7  Decision Making at the Edge  291
Further Reading  222
8.8  Mapping the Selection Space  297
Case Studies  223
Summary  302
References  223
Further Reading  303
Case Studies  303
6 Search Strategies for References  303
Innovation  226
9 Making the Innovation Case  306
6.1 The Innovation Opportunity  227
6.2 When to Search  229 9.1 Developing the Business Plan  306
6.3 Who Is Involved in Search  230 9.2 Forecasting Innovation  310
6.4 Where to Search – The Innovation Treasure 9.3 Estimating the Adoption of Innovations  315
Hunt  232 9.4 Assessing Risk, Recognizing Uncertainty  326
6.5 A Map of Innovation Search Space  235 9.5 Anticipating the Resources  333
6.6 How to Search  238 Summary  343
6.7  Absorptive Capacity  241 Further Reading  344
6.8 Tools and Mechanisms to Enable Search  243 Case Studies  345
Summary  251 References  345
Further Reading  252
Case Studies  252
References  253 10 Creating New Products and
Services  347
7 Innovation Networks  255
10.1 Processes for New Product Development  347
7.1 The “Spaghetti” Model of Innovation  256 10.2 Factors Influencing Product Success or
7.2 Innovation Networks  258 Failure  356
7.3 Networks at the Start-up  266 10.3 Influence of Technology and Markets on
7.4 Networks on the Inside . . . .  267 Commercialization  362
7.5 Networks on the Outside  268 10.4 Differentiating Products  367
7.6  Networks into the Unknown  272 10.5 Building Architectural Products  370
7.7 Managing Innovation Networks  275 10.6 Commercializing Technological Products  376

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 xii  CONTE NTS

10.7 Implementing Complex Products  380 13.4 Sharing and Distributing Knowledge  508
10.8 Service Innovation  383 13.5 Exploiting Intellectual Property  513
Summary  390 13.6 Business Models and Value Capture  521
Further Reading  391 13.7 Dynamics of Generative Interaction  525
Case Studies  391 Summary  527
References  392 Further Reading  527
Case Studies  528
11 Exploiting Open Innovation References  528
and Collaboration  394
14 Capturing Social Value  531
11.1 Joint Ventures and Alliances  394
11.2 Forms of Collaboration  399 14.1 Building BRICs – The Rise of New Players on
11.3 Patterns of Collaboration  402 the Innovation Stage  531
11.4 Influence of Technology 14.2 Innovation and Social Change  536
and Organization  404 14.3 The Challenge of Sustainability-led
11.5 Collaborating with Suppliers to Innovate  417 Innovation  542
11.6 User-led Innovation  422 14.4 A Framework Model for
11.7 Extreme Users  424 Sustainability-led Innovation  543
11.8 Benefits and Limits of Open Innovation  428 14.5 Responsible Innovation  548
Summary  431 Summary  552
Further Reading  431 Further Reading  552
Case Studies  432 Case Studies  553
References  432 References  553

12 Promoting Entrepreneurship 15 Capturing Learning from

and New Ventures  436 Innovation  554
12.1 Ventures, Defined  436 15.1 What We Have Learned About Managing
12.2 Internal Corporate Venturing  448 Innovation  554
12.3 Managing Corporate Ventures  455 15.2 How to Build Dynamic Capability  556
12.4 Assessing New Ventures  459 15.3 How to Manage Innovation  557
12.5 Spin-outs and New Ventures  469 15.4 The Importance of Failure  559
12.6 University Incubators  471 15.5 Tools to Help Capture Learning  560
12.7 Growth and Performance of Innovative Small 15.6 Innovation Auditing  563
Firms  479 15.7 Measuring Innovation Performance  564
Summary  487 15.8 Measuring Innovation Management
Further Reading  488 Capability  565
Case Studies  489 15.9 Reflections  567
References  489 15.10 Developing Innovation Capability  572
15.11 Final Thoughts  574

13 Capturing the Business Value Summary  575

Further Reading  575
of Innovation  493 Case Studies  575
References  575
13.1 Creating Value through Innovation  493
13.2 Innovation and Firm Performance  498 SUBJECT INDEX   577
13.3 Exploiting Knowledge and Intellectual
Property  502

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