Organizing Innovation
Organizing Innovation
Organizing Innovation
• Participation (20%)
• Group Presentation (20%)
• Exam (60%)
Preparedness (max 2 points) – Preparedness and attitude (max 2 points) – Are you prepared for
class and able to fully express foundational knowledge? Do your contributions use appropriate
technology management language and concepts as introduced by the readings? Are you a good
listener? Are you positive and cooperative?
Engagement (max 4 points) - Are your contributions insightful and do they enhance learning? Do
you effectively identify and summarize key learning points? Do your contributions relate to,
connect and apply appropriate theory, methods and examples within the course and between
courses?
GROUP PRESENTATION
• Each group is required to make a 15-minute presentation on the technology management
topic assigned for that week.
• The objective of these presentations is to give us all a good overview of what a general
manager, not an innovation management specialist, should know about the topic.
• EVERY group member is expected to contribute to development and delivery of a narrated
PowerPoint presentation.
• See here for how to narrate a PowerPoint presentation: https://www.youtube.com/watch?
v=Y5dgwwa5XRA
• Upload the resulting video file to a Youtube channel that you create. Then send me the link
to video.
• Please list the names of all group members on the Title slide of the presentation.
What is technology?
• "technology" is a fairly new word — coined by Jacob Bigelow in 1820s
– technology — techne (Greek) art, craft, or skill.
– teks (Indo-euro) weave or fabricate.
• Technologies are developed to help us do something we otherwise couldn’t do.
Our ability to continually create technologies sets us apart from other animals.
DEF TECHNOLOGY: The application of knowledge, often for the attainment of specific goals
• Technology is associated with “progress” and continual improvement.
• Sometimes new technologies come about by accident.
• New technologies often create their own needs.
• New technologies are not always useful, consider fashion, prestige and other ways
consumers are controlled.
WHAT IS INNOVATION?
• Do not use the internet for any of the following:
– Individually think of one word that defines innovation. Write that word down.
– Individually write down a definition of innovation.
– Now define innovation in the context of a business function
• R&D, marketing, manufacturing, supply chain management accounting,
finance, human resources, sales.
– Now go into groups and Briefly introduce yourself and share the above
COMPONENTS OF INNOVATION
• It is to renew or change something, which is then applied and has some benefits.
• The word ‘innovation’ comes from the Latin, ‘innovare’, and is all about change.
It is any idea, practice or artifact that is perceived to be new by the users who adopt it.
It includes changes to products, services, technologies, processes, regulations, marketing and ways
of workings.
New to the organization, the industry, the country, the world
WHAT IS INNOVATION? (OECD DEFINITIONS)
• Product innovation
– A good or service that is new or significantly improved. This includes significant
improvements in technical specifications, components and materials, software in the
product, user friendliness or other functional characteristics.
• Process innovation
– A new or significantly improved production or delivery method. This includes
significant changes in techniques, equipment and/or software.
• Marketing innovation
– A new marketing method involving significant changes in product design or
packaging, product placement, product promotion or pricing.
• Social Innovation
– A new approach to addressing social issues (e.g., working conditions and education
to community development and health) that extend and strengthen civil society.
• Organizational innovation
– A new organizational method in business practices, workplace organization or
external relations.
INNOVATION
• An event, a process, and outcome?
• Innovation has a rate (i.e., how often or how fast)
• Innovation has a direction
– Continuous i.e., more of the same ( example of camera 2005 to 2010 improves to
quality, lower price, )
– Discontinuous i.e., in different direction ( (example camera but different model)
• Innovation has a velocity = rate + direction
• Innovation has a magnitude i.e., how big is the difference
– Incremental vs. radical
Paper: Ahlstrom, D., 2010. Innovation and growth: How business contributes to society. Academy
of management perspectives, 24(3), pp.11-24.!!
What does this paper say?
– Profits matter, but…….
– Why is firm growth important?
– What happens when societies grow economically and technologically?
• 1 hour of work in 1890, takes seven minutes in 2000
• Purchasing power, living standards, personal and organizational productivity.
THE IMPORTANCE OF INNVATIONS
• In groups discuss:
– Why does innovation matter?
– Who does it matter to?
– In what ways does it make a difference – economically, socially, living standards,
humanitarian, etc.
– Present your ideas in three slides and email them to me: [email protected]
EXCERCISE
• In groups produce a set of slides (max 6 slides) that explains how one or two technological
innovations affect society, both positively and negatively?
• Provide examples of the positive and negative impact.
• Explain who benefited or was hurt by the innovation.
• Explain how they benefited or how were hurt by the innovation?
• Email them to me at: [email protected]
IMPACT ON SOCIETY
Innovation enables a wider range of goods and services to be delivered to people worldwide.
• More efficient food production, improved medical technologies, better
transportation, etc.
• Increases Gross Domestic Product by making labor and capital more effective and
efficient.
• However, may result in negative externalities.
• For example, pollution, erosion, antibiotic-resistant bacteria.
WHY IS INNOVATION IMPORTANT FROM THE PERSPECTIVE OF OUR SOCIETY
AND ECONOMY AT LARGE?
• To increase economic growth by producing the same with less factor input or by producing
more with the same factor input (quantitative growth).
• To get products which better fit to customer needs (qualitative growth, enhancing consumer
welfare).
• To increase productivity of downstream industries by supplying better components and
machines.
• To support ecological or social sustainability by producing products and services in a
different, more efficient way
• Because the knowledge associated with an innovation can be used by others as well.
“BUILDING AN INNOVATION FACTORY” (HARGADON AND SUTTON)
• What is this reading about?
– Knowledge brokering – old (existing) knowledge applied in new contexts. Some
firms (or individuals) play a pivotal role in the innovation network. (ex Lamborghini,
born as agricoltural machine and now it is sport car)
– Brokers = intermediaries
• What is the knowledge brokering cycle?
– Capture good ideas.
– Keeping ideas.
– Imagining new uses for old ideas.
– Putting promising concepts to the test.
INNOVATION FUNNEL
Of 5000 compounds that are created for a specific physical ailment, 125 compounds qualify as
leads. They are subjected to discovery and preclinical evaluations. The evaluations last for three to
six years. Of the 125 compounds, two to three drugs qualify for clinical trials that last for six to
seven years. One drug clears the clinical trials and is approved as a form of treatment within a
period of 0.5 to 2 years.
THE S-CURVE
All it says is: things are going very, very slow in the beginning, the pace quickens in the middle,
and then decelerates in the end. That’s all it says. It’s a tool for thinking where you are strategically,
it’s a tool for asking questions, like ”what performance measure should I plot?” It is not a magic
forecasting tool.
S-CURVE INSIGHTS
The states that tended to adopt earlier were those with the highest economic return
(in terms of yields). Within each state, adoption followed an S-shaped pattern
TELEVISON, WASHING MACHINES, AND VCRS
ONE DAY’S ACTIVITY IN 1999 !
• All the world trade in 1949 = one day of world trade in 1999
• All the scientific projects in 1960 = a day of science in 1999
• All the telephone calls in 1983 = a day of calls in 1999
• All the emails in 1990 = a day of emails in 1999
IN 2019
• By 2020, there will be around 40 trillion gigabytes of data (40 zettabytes) (Source: EMC)
• Internet users generate about 2.5 quintillion bytes of data each day (Source: Data Never
Sleeps 5.0)
• 90% of all data has been created in the last two years. (Source: IBM)
• Today it would take a person approximately 181 million years to download all the data from
the internet. (Source: Physics.org)
TIME IT TOOK TO GAIN 50 MILLION USERS
INDUSTRY DYNAMICS
• The opportunity for and rate of innovation varies.
• At the birth of an industry innovation is often fertile and risky
– Detroit saw over 700 auto companies founded between 1900 – 1920!
– The 80 years for the next global player to emerge.
• Which company was this?
• Effective management of technological innovation helps you mitigate & manage those risks
Innovation can arise from many different sources. It can originate with individu- als, as in the familiar
image of the lone inventor or users who design solutions for their own needs. Innovation can also come from
the research efforts of universi- ties, government laboratories and incubators, or private nonprofit
organizations
Creativity is the underlying process for innovation. Creativity enables individu- als and organizations to
generate new and useful ideas. Creativity is considered a function of intellectual abilities, knowledge,
thinking styles, personality traits, intrinsic motivation, and environment
Innovation sometimes originates with individual inventors. The most prolific inventors tend to be trained in
multiple fields, be highly curious, question pre- viously made assumptions, and view all knowledge as
unified. The most well- known inventors tend to have both inventive and entrepreneurial traits.
EXERCISE slide of person familiar, list of what makes them creative, what is about in mind, heart
history and personalitiy that makes cretivite
OPEN-mindness, passion, courage, ability to explore, communication, travel
Nicholas, my friend and chef colleagues. His creativity is related to the combination of different
flavors. I think his creativity is influenced by the many travels and aborad experience that he
made.
Innovation can also originate with users who create solutions to their own needs.
Creative organization:
Firms’ research and development is considered a primary driver of innovation. In most countries, firms
spend significantly more on R&D than government institu- tions spend on R&D, and firms consider their in-
house R&D their most important source of innovation
VERTICAL THINKING
• SCAMPER is an acronym for a useful list of active verbs that can be applied as stimuli to
make you think differently about the problem.
• SCAMPER was defined by Robert Eberle, after an initial list from Brainstorming originator
Alex Osborn.
• Substitute? ..... Who else, where else, or what else? Other ingredient, material, or
approach?
• Combine? ...... Combine parts, units, ideas? Blend? Compromise? Combine from different
categories?
• Adapt? .......... How can this (product, idea, plan, etc.) be used as is? What are other uses it
could be adapted to?
• Modify? ........ Change the meaning, material, color, shape, odor, etc.?
– Magnify? ...... Add new ingredient? Make longer, stronger, thicker, higher, etc.?
– Minify? ........ Split up? Take something out? Make lighter, lower, shorter, etc.?
• Put to other uses? ..... How can you put the thing to different or other uses? New ways to
use as is? Other uses if it is modified?
• Eliminate? ..... What can you eliminate? Remove something? Eliminate waste? Reduce
time? Reduce effort? Cut costs?
• Rearrange? ..... Interchange parts? Other patterns, layouts? Transpose cause and effect?
Change positives to negatives? Reverse roles? Turn it backwards or upside down? Sort?
THEORY IN ACTION
Inspiring Innovation at Google.
• Google uses a range of formal and informal mechanisms to encourage its employees
to innovate, including:
• 20% Time (all engineers are encouraged to spend 20% of their time working
on their own projects).
• Recognition awards.
• Google Founders’ Awards.
• Ad sense Ideas Contest.
• Innovation reviews.
TRANSFORMING CREATIVITY INTO INNOVATION
Innovation by Users.
• Users have a deep understanding of their own needs, and motivation to fulfill them.
• While manufacturers typically create innovations to profit from their sale, user
innovators often initially create innovations purely for their own use.
Many innovation are created because people are curious
Firms often collaborate with a number of external organizations (or individuals) in their innovation activities.
Firms are most likely to collaborate with customers, suppliers, and universities, though they also may
collaborate with competitors, producers of complements, government laboratories, nonprofit organizations,
and other research institutions.
Many universities have a research mission, and in recent years universities have become more active in
setting up technology transfer activities to directly com- mercialize the inventions of faculty. Universities
also contribute to innovation through the publication of research findings.
Government also plays an active role in conducting research and development (in its own laboratories),
funding the R&D of other organizations, and creating institutions to foster collaboration networks and to
nurture start-ups (e.g., science parks and incubators). In some countries, government-funded research and
devel- opment exceeds that of industry-funded research.
Private nonprofit organizations (such as research institutes and nonprofit hospi- tals) are another source of
innovation. These organizations both perform their own R&D and fund R&D conducted by others.
Probably the most significant source of innovation does not come from indi- vidual organizations or people,
but from the collaborative networks that leverage resources and capabilities across multiple organizations or
individuals. Collabora- tive networks are particularly important in high-technology sectors.
Collaboration is often facilitated by geographical proximity, which can lead to regional technology clusters.
Technology spillovers are positive externality benefits of R&D, such as when the knowledge acquired
through R&D spreads to other organizations.
Internal process
Traps:
Controls too tight
Metrics wrong
Changes and adaptations discouraged
Lessons:
Different metrics and controls needed for innovations
Expect deviations and changes to the plans as normal
Company structure
Traps:
The pitfalls of running innovation projects and established projects at the same time in the company
Lessons:
Loosen formal controls but strengthen connections within business
Expect innovations to be inspired within the business as well as outside
Avoid creating two classes of citizens
People and skills
Traps:
Undervaluing the significance of the right people
Time to build trust and knowledge within a team
Avoid closed environments
Lessons:
Importance of the right leaders
Communicators and connectors are key – collaboration can foster this
Team dynamics are important
CLASS QUESTIONS
• What is the relationship between creativity, invention and innovation?
• How are ideas generated?
• What makes an individual or organization creative?
RECAP INNOVATION
• An event, a process, and outcome?
• Innovation has a rate (i.e., how often or how fast)
• Innovation has a direction
– Continuous i.e., more of the same
– Discontinuous i.e., in different direction
• Innovation has a velocity = rate + direction
• Innovation has a magnitude i.e., how big is the difference
– Incremental vs. radical
TYPES OF INNOVATION
Radical versus Incremental Innovation.
• The radicalness of an innovation is the magnitude of newness or difference from
previously existing products and processes.
• Incremental innovations may involve only a minor change from (or adjustment to)
existing practices.
• The radicalness of an innovation is relative; it may change over time or with respect
to different observers.
• For example, digital photography a more radical innovation for Kodak than
for Sony.
Incremental Innovation
The knowledge required to offer a product builds on existing knowledge.
Most innovations are incremental
Also called Sustaining technology
Sony produced 75 models of its Walkman portable stereo
Radical Innovation
The technological knowledge required is very different from the existing knowledge; existing
knowledge becomes obsolete
Radical innovation à look outside the boundaries to innovate
Also called Disruptive technology
Disruptive innovation (switch from 1 reality to 1 reality) key thing is the people has to think “this is
a joke”
• Your best customers (at first) do not value performance attributes of the innovation
• The innovation (at first) performs worse on certain attributes.
• It appears (at first) to be financially unattractive: small markets, low profit margins
• Difficult to predict the growth rate of the market
• Often is associated with a new business model of value creation and capture.
• Often requires new manufacturing/delivery processes.
• Often not radical, at first.
Disrupt customers preferences, but in way that is good to customers and bad to incumbents.
HARD DRIVE EXAMPLE
So, Innovation is not something that is a static event. It has life, and like any kind of life, it
develops.
The end of life is different for every offering, every industry. For many areas of technology, we are
very familiar now with the patterns of new innovations coming in, we anticipate them – my son is
looking to the new PS5, even as the existing PS4 is doing well in sales – he got one for Christmas.
He knows it’s in development, he expects it.
But for other industries, the end of life is less well defined and familiar, less clear. They are
industries that move more slowly, or where the knowledge and expertise that drives them is less
tangible and is not so easily applied into the same kind of development model as technology. Think
about the restaurant business, hospitality, others…????
Many of these are service industries.
For those industries and markets, it’s less clear when they have to start thinking about the next
innovation.
INNOVATION LIFE CYCLE
We can also think of Innovations as having a life cycle – an S curve, with infancy, growth,
maturity and ultimately decay
It goes through initial conception, to a development stage where different little problems are
ironed out, usually with some significant market feedback, to maturity, where it is an accepted
offering, and finally to end of life.
Some innovations have very short life cycles [eg. Betamax]
Others have very long life cycles [eg. writing, roman numerals]
Each stage can take different lengths of time
TECHNOLGY S-CURVES
Both the rate of a technology’s improvement, and its rate of diffusion to the market typically follow
an s-shaped curve.
S-curves in Technological Improvement.
The first graph is a labeled s-curve of cumulative adopters. In this graph, the x-axis represents time.
The y-axis represents cumulative adopters; its values are as follows: 2.5 percent, 16 percent, 50
percent, 84 percent, and 100 percent. The diffusion s-curve is a line graph that starts near the origin
of the graph, curves upward, and continues in an upward incline, after which it reaches a plateau.
Lines extend from each marking of the y-axis, splitting the diffusion curve into five sections that
correspond to Roger’s adopter categories. In the first section labeled innovators, the line graph
extends from the point of origin. In the second section labeled early adopters, the line curves
upward. In the third and fourth sections labeled early majority and late majority, respectively, the
line continues steadily on an upward incline. In the fifth section labeled laggards, the line plateaus
and travels parallel to the y-axis. The first section of the curve corresponds to the range of
percentage values from 0 to 2.5. The second section of the curve corresponds to the range of
percentage values from 2.5 to 16. The third section of the curve corresponds to percentage values
from 16 to 50. The fourth section of the curve corresponds to percentage values from 50 to 84. The
fifth section of the curve corresponds to percentage values from 84 to 100.
TECHNOLOGY CYCLES
Technological change tends to be cyclical:
• Each new s-curve ushers in an initial period of turbulence, followed by rapid
improvement, then diminishing returns, and ultimately is displaced by a new
technological discontinuity.
• Utterback and Abernathy characterized the technology cycle into two phases:
• The fluid phase (when there is considerable uncertainty about the technology
and its market; firms experiment with different product designs in this phase).
• After a dominant design emerges, the specific phase begins (when firms
focus on incremental improvements to the design and manufacturing
efficiency).
Anderson and Tushman also found that technological change proceeded cyclically.
Each discontinuity inaugurates a period of turbulence and uncertainty (era of ferment) until a
dominant design is selected, ushering in an era of incremental change.
The technological cycle comprises two eras, each of which is triggered by an event. The era of
ferment is triggered by technological discontinuity. It is characterized by companies competing to
create the best design and substitution. The era of ferment ends with the rise of a dominant design.
This triggers the beginning of the era of incremental change, which is characterized by the
elaboration of the dominant design. This era continues until the next technological discontinuity
begins another era of ferment, and so on.
Anderson and Tushman found that:
• A dominant design always rose to command the majority of market share unless the next
discontinuity arrived too early.
• The dominant design was never in the same form as the original discontinuity, but was also
not on the leading edge of technology. It bundled the features that would meet the needs of
the majority of the market.
During the era of incremental change, firms often cease to invest in learning about alternative
designs and instead focus on developing competencies related to the dominant design.
This explains in part why incumbent firms may have difficulty recognizing and reacting to a
discontinuous technology.
EX DISRUPTIVE TECHNOLOGIES/INNOVATIONS
• Carefully look at the definition as per Clayton Chrisetensen’s theory
• What are the performance drivers? How are they going change?
• Identify how consumers or consumer behavior changes.
• Explain why the best existing customers (at first) do not value performance attributes of the
innovation
• The innovation (at first) performs worse on certain attributes.
• It appears (at first) to be financially unattractive: small markets, low profit margins.
• Difficult to predict the growth rate of the market
• Maybe associated with a new business model of value creation and capture.
• Maybe requires new manufacturing/delivery processes.
HOW YOU INNOVATE DEPENDS ON THE TYPE OF INNOVATION DESIRED
WEEK 4: STANDARDS, MODULARITY AND PLATFORMS
• Readings:
– Chapter 4 of course text
– Case: Teixeira, T.S. and Brown, M., 2016. Airbnb, Etsy, Uber: Acquiring the First
Thousand Customers.
– Paper: Shapiro, C. and Varian, H.R., 1999. The art of standards wars. California
management review, 41(2), pp.8-32..
• Questions:
– Why does a dominant design emerge, and why it is not always the most
technological superior design that becomes dominant?
– Are dominant designs good for consumers? Competitors? Complementors?
Suppliers?
Vhs wins even if its costly more superior, vhc invest in and supported things to play on this video
recorders. Betamax made by sony thisn is way sony invest in music play and etc.
HOW DOES A DOMINANT DESIGN EMERGE?
Increasing returns to adoption
A technology often becomes more valuable the more it is adopted. Two primary sources are
learning effects and network externalities.
The Learning Curve: As a technology is used, producers learn to make it more efficient and
effective.
The first graph illustrates a decrease in the cost per unit corresponding to an increase in cumulative
output. The second graph illustrates an increase in the performance on each unit corresponding to an
increase in cumulative output.
What are network externalities?
The benefit from using a product increases with the number of other users of the same product.
Network externalities are common in industries that are physically networked.
• For example, railroads, telecommunications
Network externalities also arise when compatibility or complementary goods are important.
For example, many people choose to use Windows in order to maximize the number of people their
files are compatible with, and the range of software applications they can use.
A technology with a large installed base attracts developers of complementary goods; a technology
with a wide range of complementary goods attracts users, increasing the installed base. A self-
reinforcing cycle ensues.
BANDWAGON EFFECT
Bandwagon effect occurs when an important organizations makes a unilateral public
commitment to one standard; if others follow the lead they will be compatible at least with
the first adopter, and potentially with the followers.
The first adopters of a standard take the highest risk, but they also have the benefit of
developing competence early
If the old technology does not retain its critical mass, those left behind are referred to as
angry orphans.
TIMING OF STANDARDIZATION
• Standardization at an inappropriate time can lead to economic inefficiency.
• Too early standardization may prematurely lock an industry into a technology, precluding
experience with the diversity.
• Standardization occurs too late if technological options have already become entrenched.
Companies with installed bases will then ignore the standards.
Ex ikea
MODULARIZATION
If you are smart consumer you ll get skoda (more cheaper and same technology of wolsfagen)
POSTPONEMENT
If oyu emerge a car , number of variance , in a very modular way
VALUE OF MODULARITY
• Modularity accommodates change.
• It encourages innovation by decentralizing decision making on hidden modules
• Technically, it creates the option for third parties to innovate on a module
– Parties compete to create a better module
– A few “experiments” likely to create superior module whose value to users exceeds
cost of experiments; downside minimal because can keep old
• Cluster of innovators emerge around architecture, resulting in new industry
THE MIRRORING HYPOTHESIS
Modularity-in-design is not good or bad. It is important and it is costly. And dangerous to ignore.
PLATFORM
• Businesses built on digital platforms that bring together two or more market actors and grow
through network effects.
• Top-ranked companies by market capitalization include Apple, Microsoft, Alphabet
(Google’s parent company), Amazon, Facebook, Alibaba, and Tencent. (this represent
trillions of value)
• As of January 2020, these seven companies represented more than $6.3 trillion in market
value, and all of them are platform businesses.
INNOVATION PLATFORM
• Innovation platforms facilitate the development of new, complementary products and
services, such as PC or smartphone apps
• Complementary = the platforms add functionality or assets to the platform.
• Network effects = the more complements or their higher quality makes the platform more
attractive.
• Platform often delivers and capture value by selling or renting a product/service, and
advertising.
TRANSACTION PLATFORM
• Transaction platforms are intermediaries or online marketplaces.
• They facilitate the exchange goods and services or information.
• Network effects = the more participants and functions the more useful it becomes.
• Value is created by enabling exchanges that would not otherwise occur without the platform.
• They capture value by collecting transaction fees or charging for advertising.
PLATFORM ECOSYSTEM
What is a platform ecosystem? Examples?
In a platform ecosystem, some core part of a product (such as a video game console) mediates the
relationship between a wide range of other components or complements (for example, video games,
peripherals) and prospective end-users.
• A platform’s boundaries can be well-defined with a stable set of members or
amorphous and changing.
• The success of all members of the ecosystem depends in part upon the success of
other members.
• Members often invest in co-specialization or exclusivity agreements.
PLATFORM ECOSYSTEM Are impacted by:
technology standards – may reduce the need for or importance of platforms
dominant designs
modularity (platform is very modular)
Network effects
RECAP
• Technology, technology management and perspectives, and impact.
• How to carry out technology management?
– It depends!
– Depends on what?
The nature of the innovation (continuous-discontinuous, incremental-radical, competence
destroying or enhancing)
Industry and innovation velocity (rate and direction of change)
The industry innovation ecosystem: dominant designs and associated standards, and platforms)
32
30
Water T
28
26
24
22
0 10 20 30 40 50 60 70 80 90 100 110 120
Time
What do you think would happen in a more complicated setting, where you have to share the supply
of hot water with someone/something else?
DELAYS CAUSE
• Over-corrections
• Increasing instability.
• Large “unexplained” changes.
• Large variances in forecasts
• Excessive action
• It takes time to make decisions and it takes time for decisions to affect the market and
industry..
INDUSTRY VELOCITY: THINK IN TERMS OF A CONTINUUM OF FLOW
Flow of informaiton
CONSEQUENTLY
• Effective technology
management is more
about rhythm and synchronization with the velocity (or flow) of change, rather than being
simply fast or slow.
INDUSTRY VELOCITY IMPACTS:
How we think about and do technology management in terms of:
–Modularity versus integrated (more easy to respond to min 39 min)
–Forecasting versus scenario planning
–Temporal orientations: monochronic versus polychronic
–Innovation teams: homogenous versus diverse
–New product development (NPD) frameworks: linear vs. recursive
These diagrams show decision makers have affects on the process conditions which create positive
and negative feedbacks, which are non-linear.
In negative feedback, the process responds in such a way as to reverse or negate the affect of any
change in the process conditions. It is feedback that seeks to counter change and maintain the
current behaviors of the process.
The second type of response is positive feedback. This means that if a change occurs in some
process variable, the response is to change that variable even more in the same direction. The result
is a continuing spiral of change. (Eventually, negative feedback may take over to put a limit on
things.)
TEMPORAL ORIENTATIONS
What type of time is in this photo?
island time
• “A temporal orientation is a cognitive concept that describes how individuals and teams
conceive of time”
The way people view time differs from culture to culture, as observed and described by researcher
Edward Hall. Monochronic time cultures emphasize schedules, a precise reckoning of time, and
promptness. Time is viewed as a discrete commodity. People with this cultural orientation tend to
do one thing after another, finishing each activity before starting the next.
On the other hand, in polychronic cultures, people tend to handle multiple things concurrently (or
intermittently during a time period) and to emphasize the number of completed transactions and the
number of people involved, rather than the adherence to time schedule. Being on time is less
important in polychronic cultures than in monochronic cultures.
The way people view time differs from culture to culture, as observed and described by researcher
Edward Hall. Monochronic time cultures emphasize schedules, a precise reckoning of time, and
promptness. Time is viewed as a discrete commodity. People with this cultural orientation tend to
do one thing after another, finishing each activity before starting the next.
On the other hand, in polychronic cultures, people tend to handle multiple things concurrently (or
intermittently during a time period) and to emphasize the number of completed transactions and the
number of people involved, rather than the adherence to time schedule. Being on time is less
important in polychronic cultures than in monochronic cultures.
Monochronic people (Hall terms as M- people) tend to view activities and time in discreet segment
or compartments, which are to be dealt with one at a time. It is not logical to have two activities
going on at the same time. M-people can become frustrated with Polychronic people (P-people)
who view time as something fluid, and who easily alter schedules to shifting priorities. In P time
cultures, meetings may start late, run overtime, and allow outside issues to interrupt team meetings.
In addition, multiple activities may be scheduled at the same time, and adherence to deadlines may
depend on the strength of the relationship. (International Business; A basic Guide for Women,
Wilen, 2001)
SPEED OF LICENSING
• Is it better to license patented innovations quickly or slowly?
• In twos or threes develops arguments for either or both cases
Potential period move fast or slow?
Reason to slow: Complemtary technology can arrive
RED QUEEN EFFECT
It takes all the running you can do, to keep in the same place.
Lezione 19.10
After running you want to run review the generated ideas and submit one
YOU ARE SELECTING IDEA
Criteria to select the ideas
When you look to the existing dimension you can look to the different the buyers , room for
improvement. This can intend as critieria. That s is a framework to select the idea.
STRATEGY AND INNOVATION VALUE
• Strategies help us to ‘choose’ what to do and what not to do.
• Strategy is the answer to five questions:
1. What value will you offer?
2. Who wants the value?
3. How will you deliver value to those who want it?
4. What capabilities will you need to develop and maintain to succeed?
5. What business processes and systems will you need to develop and maintain the
capabilities?
Internal Rate of Return (IRR): The discount rate that makes the net present value of investment
zero.
• Calculators and computers perform by trial and error.
• Potential for multiple IRR if cash flows vary.
•Strengths and Weaknesses of DCF Methods:
• Strengths.
• Provide concrete financial estimates.
• Explicitly consider timing of investment and time value of money.
• Weaknesses.
• May be deceptive; only as accurate as original estimates of cash
flows.
• May fail to capture strategic importance of project.
Real Options: Applies stock option model to nonfinancial resource investments. For example, with
respect to R&D:
The cost of the R&D program can be considered the price of a call option.
the cost of future investment required to capitalize on the R&D program
(such as the cost of commercializing a new technology that is developed) can be
considered the exercise price.
• The returns to the R&D investment are analogous to the value of a stock
purchased with a call option.
How do you innovation?
Small number of key things:
- The circumstances of the company (liquidity and not only)
- Type of innovation you want incremental (continuis ,discontinuus , modular , component,
architectural innovation etc)
- Depends on your industry dynamic, your country, your culture
Real option is more used in fashion industry, super hi-tech industry, in air space
REAL OPTION THINKING
A great place to begin but a terrible place to finish?
Strengths
• A focus on the quantifiable costs and benefits of the project
• Allows for easy ranking and comparison
Weaknesses
• Forces a focus on “the numbers”
• Neglects the role of uncertainty
• Neglects strategic considerations
• Ignores interdependency between projects
• Recognition that:
•uncertainty creates opportunity and value
•such value requires adequate decision-making in order to materialize
• Identification of the sources of uncertainty and collection of information
• Identification of the decisions (options) that:
•promote exposure to favourable outcomes.
•reduce exposure to downside risk
• Source: Pavlov, 2001
QUANTITATIVE METHODS FOR CHOOSING PROJECTS
Options are valuable when there is uncertainty (as in innovation).
However, real options models have some limitations:
•Many innovation projects do not conform to the same capital market assumptions
underlying option models.
• May not be able to acquire option at small price: may require full investment
before its known whether technology will be successful.
• Value of stock option is independent of call holder’s behavior, but value of
R&D investment is shaped by the firm’s capabilities, complementary assets,
and strategies.
TRADITIONAL FINANCIAL VS. REAL OPTIONS PERSPECTIVES
It’s harder to select ideas and then decide which to kill and which to develop without a strong
*****? (strategy)
•Nearly 60% of firms use some type of stage-gate process to manage their NPD
•process.
In simulation 2 decision games: which initiatives do we run? Test the idea and produce initiatives?
In final which idea we are going to select and deliver to ceo?
STAGE GATE IS A LINEAR FRAMEWORK
• Assumes the process is relatively fixed, discrete and sequential stages.
•Connections, flows and outcomes are comparatively deterministic.
•A simple and effective representation of the structural logic and flows.
•Suited to incremental innovations activity (relatively reliable market push or strong
market pull forces).
• Does not consider the behaviors and relationships associated with agency, freedom and
resulting innovations.
ALTERNATIVE NPD REALITY – TYPE 1
ALTERNATIVE FRAMEWORKS
• More recursive.
• A process with concurrent and multiple feedback loops between stages that generate
iterative behavior and outcomes that are more difficult to predict.
• Represents the dynamic, nonlinear and fluid nature of the process.
• Suited to more radical innovations with push-pull market force combinations.
EVALUATION AT THE GATES
• Project evaluation is characterised by uncertainty of information and the absence of solid
financial data.
• Project evaluation involves multiple objectives and therefore multiple decision criteria
• The evaluation method must be realistic and easy to use
• Decision must be go, kill, hold, or recycle
• Additional outputs include:
–approved action plan for next stage
–list of deliverables for next gate
NPD FOR MANUFACTURING
Minimize the number of parts Simplifies assembly; reduces direct labor; reduces material ha
inventory costs; boosts product quality
Minimize the number of part numbers (use Reduces material handling and inventory costs; improves econ
common parts across product family) (increases volume through commonalty)
Eliminate adjustments Reduces assembly errors (increases quality); allows for autom
capacity and throughput
Eliminate fasteners Simplifies assembly (increases quality); reduces direct labor c
squeaks and rattles; improves durability; allows for automatio
Eliminate jigs and fixtures Reduces line changeover costs; lowers required investment
QUALITY DIMENSIONS
1. Performance
5. Durability
2. Features
6. Serviceability
3. Reliability
7. Aesthetics
4. Conformance 8. Perception
8
1 4
7 3 5 6
POKA-YOKE
• Poka-yoke: (From the Japanese, yokeru – to prevent, and poka – inadvertent errors.)
• Simple, inexpensive, failsafe devices or systems which prevent mistakes from being made
or from becoming defects.
POKE YOKE
• In twos and threes:
– think of examples of things that have been poke-yoked (full proofed).
–think of examples of things that should be poke-yoked (full proofed).
• Car safety features. ...( Another example of poka-yoke is the inability to remove a
car's ignition key from the ignition switch if the automatic gearbox has not first been
put into park position. This prevents the driver from driving away from the car
without the wheels being locked.)
• Treadmills. ...
• Microwaves, washing machines, dishwashers, and other household appliances. ...
• Elevators & garage doors. ...
• Spell-check functions. ...
• Leak-proof water bottles & travel mugs. ...
• Power outlets and USB plugs. ...
• Overflow outlets in sinks
TECHNOLOGY ROADMAPPING
• What is a technology roadmap?
–Roadmaps are (i) forecasts of what is possible or likely to happen and (ii) plans that
articulate a course of action.
–They are a strategic management tool with a time domain that help managers be
proactive towards the environment.
Open innovation and sustainability, in Denmark the technology to do the bottle in the new materia
to package and deliver beer
When we should be use the open innovation? And when we should be close?
Close: Differentiation against the competitor, being critically independent, If you can achieve the
innovation on your own is more profitable
2 levels there is close levels a lot of the softmare was make in close way, in the 20 centuri as lot go
to open source
And a number of lot
Open innovation is more about sharing knowledge
Enel case study
• Enel traditionally was organized by function and by geography
• These created strong organizational siloes
• Information flows within the silo, but not between • Also, a strong culture of seniority • Hard to
get fired • Golden share held by the Italian government • Starace: a culture of reliability, not of
innovation • R&D measured by # patents, not business impact
Funding Innovation
Two types of organizations are focused primarily on supplying fuel for the innovation fire
- innovation investors The original innovation investor was the corporate R&D budget but now
a wide range of other types has emerged, including venture capital (VC) firms, angel investors
- Innovation benefactors provide new sources of research funding. Unlike investors,
benefactors focus on the early stages of research discovery
Generating innovation
There are four types of organizations that primarily generate innovation:
- innovation explorers: specialize in performing the discovery research function that previously
took place primarily within corporate R&D laboratories
- Innovation merchants, will innovate but only with specific commercial goals in mind,
whereas explorers tend to innovate for innovation’s sake
- Innovation architects provide a valuable service in complicated technology worlds.
- Innovation missionaries. consist of people and organizations that create and advance
technologies to serve a cause.
Commercializing innovation
Another differentiation includes two types of organization which are focused on bringing
innovations to market: characterized by the ability to profitability market ideas, both their own as
well as others. To do so, marketers focus on developing a deep understanding of the current and
potential needs in the market and this helps them to identify which outside ideas to bring in-house.
Innovation one-stop centers: provide comprehensive products and services. They take the best
ideas (from whatever source) and deliver those offerings to their customers at competitive prices.
However a number of companies, called fully integrated innovators, continue to espouse the closed
innovation credo of “innovation through total control” es IBM
Another important point is that competing modes can coexist in the same industry es
pharmaceutical
All of the different modes will evolve in an open innovation environment, and future ones will
probably emerge as well.
17.11.2020
From closed Innovation to open innovation
Close innovation Companies themselves generate, develop, manufacture, market, distribute and
service their own ideas • Self-reliance • Huge investment in internal R&D
open innovation Companies commercialize external, as well as internal, ideas by deploying
outside, as well as inhouse, pathways to the market • Reliance on internal and external environment
• External R&D, IP licensing agreements, joint ventures, etc
Regarding the organization of the OPEN POWER it is characterized by: a matrix structure (which
include global business lines, regions and countries, global service functions, holding company
functions), an organizational culture of sharing, a reduction of duplications, speak with one voice to
external partners.
From the 2014 there was a transformation of the company’s innovation approach. Towards open
innovation with the focus on the sustainability. These innovation functions gathered in a central
innovation hub, reported directly to the CEO of Enel.
This approach to innovation gives many initiatives:
➢ Senior leaders brought at the HBS to learn about innovation.
➢ “Big Data” to incorporate insights(intuizioni) from customers;
➢ Collaboration with universities, start-ups, suppliers
➢ The Innovation World Cup – start-up proposals from internal staff
The Enel’s CEO Storace management was particularly fundamental for the introduction of the
matrix organization, which increased information sharing across the silos.
He also was retiring the old guard, advancing the new guard
Storace has redefined the competitors: from utility companies to the cost of generating and
distribution of the other forms of energy.
To beat these competitors, must get other utilities to Ss as well.
and contributors; followed by community or those who follow the company on social media; and as
the most external level there is the rest of the world, i.e. all the customers and contributors. It is
precisely with this last level that a crowd-open approach could benefit the company by designing
environments that are open to crowds.
Following the "Lego" model that we saw during the course, through a crowd
coordination
technology, one could access a platform aimed at collecting external contributions, becoming a
"hub" of virtual, countless "rays" of contribution. This innovation
programme can be monitored
from the core.
Regarding the advantages is possible to claim that this strategy increases agility, efficiency,
transparency, innovation and accountability within an organization. Other pros that could be arise
are: Unexpected solutions to tough problems, A greater diversity of thinking, A reduced
management burden, more marketing buzz, Faster problem solving, A rich source of customer data
The possible disadvantages that could occur are the proposed project may not achieve the desired
success; possible problems with the platform and/or funders may arise; lack of awareness and
digital literacy; and Coordination between functions can be time-consuming.
LEGO EX The formulation of the context is top down( feel free the consumers to propose an idea
is self-organize of the story) of the story the submit is top down of the story
Lego dell intel reebok Organization that decide to open on a temporary base (Crowd open)
MYTAXY TAXI COMPANY: if you are a taxi driver you can drive for your traditional company
and in a free time can work with us (jumbling: don t care if you wark with your competitor). I do
that because the app is more democratic the receiving goal. ( crowd open with low level of guided
emergence)
UBER pushing the limit that why Puts uber in a high Crowd based but very high guide
emergence because although uber can order to driver, uber can incentive him. (openness to crowd
approach with level of guided emergence)
WIKIPEDIA which is high level guide emergence because you can send to Wikipedia whatever
you want but the editorial worker are very straight control to the content that you want upload
(openness to crowd approach with level of guided emergence)
Empirical Evidence
How you engage with your internal employees is very important to use open innovation
MODE DYNAMICS
Blue Ocean
• Create uncontested market space.
• Make the competition irrelevant
• Create and capture new demand
• Value Innovation
• Attract non-customers
• Create and capture new demand
Red Ocean
• Competing in existing market space
• Beat the competition
• Exploiting existing demand
• Create competitive advantage
• Segment existing customers
• Exploit existing demand
TWO APPROACHES
• Structural ambidexterity
–“involves splitting exploitation and exploration into different organizational units (i.e.,
separate divisions, departments or teams)” (McCarthy & Gordon, 2011: 241)
–Contextual ambidexterity
–“the capacity to attain appropriate levels of exploitation and exploration behaviors in
the same R&D organizational unit” (McCarthy & Gordon, 2011: 241)
MOVING BEYOND PERFORMANCE MEASUREMENT
PLANNING
• What do I know?
• What do I need to learn?
• How can I learn it at lowest cost?
• What are my expected outcomes?
• How do I measure against plan (metrics)?
EXPERIMENTING
• Who/what is the subject?
• What is the test?
• Lowest cost possible
• What do I expect to learn?
• How does the subject respond?
RUN THE RIGHT EXPERIMENT
• Passive means doing nothing: just putting your product out there for customers to play with,
pausing, and seeing what happens.
– Passive works when “you don’t know what you don’t know”: that is, where there is
overwhelming ambiguity.
• Parallel means doing multiple experiments at once.
– Parallel is best when the entrepreneur has an abundance of clear potential
alternatives that can be tried at once. (This is also called a multi-armed bandit
solution—named after Vegas slot machines.)
• Sequential is simply doing one experiment at a time, one after another, improving the
prototype product each time.
– Sequential is optimal when the entrepreneur is stepping through stages in solving a
problem. As with the other two ways to experiment, the focus is on uncertainty, but
it’s more roughly linear rather than undefined or multi-pronged.
LEARNING
• What did I expect to find?
• What did I actually find?
• Can I explain the difference?
• What do I still need to learn?
RESHAPING
• How do I incorporate my learning?
• What is the next market test?
ESCALATING TESTS
• We test to:
• Learn. If a picture is worth a thousand words, a prototype is worth a thousand pictures.
• Solve disagreements. Testing helps eliminate ambiguity, assist in ideation, and reduce
miscommunication.
• Start a conversation. Tests are a great way to have a different kind of conversation with
users.
• Fail quickly and cheaply. Creating quick and dirty tests allows you to assess ideas without
investing a lot of time and money up front.
• Manage the entrepreneurial process. Identifying a variable to explore encourages you to
break a large problem down into smaller, testable chunks.
WHAT IS CROWDSOURCING