MoT Intro Managing Innovation TB 1-2

7/26/2019 MoT Intro Managing Innovation TB 1-2

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Management of Technology35C00400

Lectures at Tue & Thu 14:15 15:45Lecture hall U8 / U270

Otakaari 1, U-Wing, Otaniemi

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Course evaluation

Cases 50%1. 3M Taiwan 20%

2. Amazon, Apple, Facebook,

Google 20%

3. Accenture: Industrial internetterm project 10%

Exam 50%

based on course book, lectures,

articles and other material

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Cases Working rules Groups

2 - 5 persons, please kick free riders out!

Larger group means somewhat higher requirements

However, singles not encouraged

Reporting

Max. sixteen (16) Powerpoint slides

Possibility of class presentation earn one point

Returning

Well before the lecture case will be discussed (before 2 pm)

By email to [email protected]

(or in color print to lecture hall, or to Chydenia 5th floor mail box)

Late submissions graded at 50% reduced

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Case: 3M Taiwan 20%

Due date 24.9. lecture when case will be

discussed

Assignment questions:

1. Should Chung proceed with the Acne

Dressing project?

2. What options does Chung have regarding

the launch of Acne Dressing?

3. What resources (if any) should Chung seek

from headquarters and/or other

subsidiaries?

4. Recommend a path forward for Chung.

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Case Amazon, Apple, Facebook and Google 20%

Due date 1.10. lecture when the case will be discussed

Remember to prepare a presentation?


1. Define the contested boundaries among Amazon, Apple, Facebook and Google

2. For each contested boundary that you have identified, how is the contest likely toplay out? How many contests give rise to winner-take-all markets? How many to

always-a-share markets? How will the complex ecosystems, in which onlinebusinesses are built on top of other online businesses, and third-party sellers thatrely on platforms, evolve?

3. Identify a firm that you know something about, for example a media company, aretailer, or manufacturing firm, with some involvement in the online economy.Which, if any, of the big four firms does it currently rely on? Might that reliancechange? How might that firm hedge the risk it will face if there is a transition to one

of the others?4. What skills will be under-supplied in the future of digital economy that you

envisage?

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NOTICE: Still subject to changes!?

Case: Accenture/Industrial Internet 20%

Due date 13.10. class when case reports will be discussed

8.10. lecture Industrial Internet Opportunities for newservices business

by Kari Kaario, Managing Director, Accenture ManagementConsulting,

the assignment for the Case/Term project will be delivered


1. Application type?

2. Company/industry/markets/ affected?

3. Examples or priciples?

4. Conclusions/Recommendations

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Exam 50%

Based on course book, articles and lectures

Essay questions and concept explanations

Exam dates:

Thu 15 Oct 2015 14:15-17:00 (in class, no

registration needed)

Tue 20 Oct 2015 9:00-12:00

Wed 20 Dec 2015 9:00-13:00

Advance registration via WebOodi

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Objectives & Contents:

This course concerns the formulation of business

strategy and the management of business enterprises in

rapidly evolving, technology-intensive industries.

The primary goal of this course is to develop the

participants understanding of the management

problems and the nature of the forces driving

competitive inter-action between technology-based

firms.

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2009 John Wiley & Sons Ltd.

www.managing-innovation.com

Joe Tidd

and

John Bessant

ISBN: 978-0-470-99810-6

http://www.managing-innovation.com/

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http://www.managing-innovation.com/http://www.managing-innovation.com/


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Lectures and requirements

Introductory lecture

Lectures based on book and other material

Three case assignments in teams

Three guest lectures Strategy& (PwC network),Accenture, and Enfo

No course wrap up lecture

Exam in last class Thu 15. Oct at 14:15-17:00

Detailed Schedule Fall 2015 see MyCourses

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The rest of the lectures are corporate guest speakers and case sessions.

The logic and structure of the course

Lecture on

Managing Innovations and Finnish Innovation System

Lecture on

Context of innovation: Organization and strategy

Lecture on

Search for

sources and

partners

Lecture on

SelectLecture on

Implementation and Capture

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Contact information

Ari Vepslinen, Professor of Logistics [email protected]

Chydenia room H 5.30, phone +358 50 589 7485

Call by phone, send e-mail, or come by

Suvituulia Taponen, Research Associate

[email protected]

phone +358 50 465 7044

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Managing Innovation (Ch. 1)

Learning Outcomes:

1. Innovation and performance

2. Models and modes of innovation

3. Creating and capturing value from innovation

1. How different types of innovation affect thecommercialization process, specifically the novelty oftechnology and markets;

2. The development and commercialization processes for fourdifferent types of innovation differentiated, technological,

architectural and complex;

3. The similarities and differences between new product andnew service development

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Managing Innovation

Session 1 outline:

1. Innovation and performance

2. Models and modes of innovation

3. Creating and capturing value from innovation



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Session Plan

Definitions

of Innovation

Innovation &

Performance

Models &

Modes ofInnovation

Creating &

Capturing Value

From Innovation



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Innovation and Performance

What is innovation?

Companies achieve competitive advantage through

acts of innovation.

They approach innovation in its broadest sense,including both new technologies & new ways of

do ings th ings

- Michael Porter

(emphasis added)



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Innovation has to be actively managed:Innovation is the specific tool of entrepreneurs, the

means by which they exploit change as an opportunity

for a di f ferent bus iness o r service. It is capable of being

presented as a discipline, capable of being learned,capable of being practiced

- Peter Drucker

(emphasis added)



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What means

Technology, and Business?

Dictionary tells:

Tech-nol-o-gy1. The application ofscience, esp. in industry or commerce.

2. The methods and materials thus used.

(Greek techn, skill, art, +logy).

Busi-ness 1. The occupation in which a person is engaged.2. Commercial, industrial or professional dealings.

3. Any commercial establishment.4. Commercial policy or practice.

(Old English bisignis, care, solicitude, bisig,busy)

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What is technology?

Definition of technology:

The application of science, especially in industry or commerce.

The methods and materials thus used.

Classes of technology: Technology as Objects

Technology as Knowledge

Technology as Activities

Technology as a Process

Technology as a Sociotechnical System


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Why is Technology Management and

Innovation important?

Industrial research and development expenditures have

been steadily increasing

3-10% of sales are invested in R&D in technology

intensive sectors

Technology-intensive industries account for a large

share of sales growth

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Why is Technology important?

Positive relationship between investments in technology

and economic growth

Economic development as we know it essentially started

with the industrial revolution

Large proportion of economic growth cannot be

explained by increased use of factors of production or

inputs (e.g. raw materials, labor and capital), it is caused

by technological change, or innovation

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Some stylized facts about the relationshipsbetween innovation and performance:

1. Relationships between R&D, patents, new products andperformance are strongest at the industry level,weakest at the firm level

2. Returns from process innovation are typically fourtimes those from product innovation

3. R&D expenditure stronger than patents in predictingperformance

4. At firm level, both R&D and new products associatedwith higher value-added and market to book values



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Innovation and Performance contd

1. Returns from use of new technology higher than from itsgeneration

2. Highest variability in performance is at firm level

3. Senior management typically accounts for 15-50% ofvariance

Sources: J. Bessant & J. Tidd (2007) Innovation and Entrepreneurship (Wiley);

J. Tidd (2006) From Knowledge Management to Strategic Competence (Imperial CollegePress, 2nd edition);

J. Tidd, J. Bessant & K. Pavitt (2005) Managing Innovation: Integrating technological,market & organizational change (Wiley, 3rd edition);

S. Isaksen & J. Tidd (2006) Meeting the Innovation Challenge: Leadership forTransformation and Growth (Wiley, 2006).



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R&D spending may lead to success or then no t?!

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Innovation and Performance still contd

Innovation has an inherent variability, but rate of

success can be improved through better & different

management:

85% of new ideas never reach a market

60% of R&D projects are market failures

40% of consumer products & services fail

20% of business products & services fail



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Innovation by Industry:The Importance of Strategy

Successful innovation requires carefully crafted strategies and

implementation processes.

Innovation funnel

Most innovative ideas do not become successful new products.

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Innovation and Performance some factors

Some explanations for the observed wide variation inthe relationships between innovation and performance:

1. Scale of technological inputs, critical mass, and

market value of commercial outputscomplementary assets

2. Oppo rtu nity spill-overs within sectors andbetween firms

3. Managemen t differences in cogn i t ion, co-ord ination and contro l



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Models and Modes of Innovation

Dimensions of innovation space the 4 Ps:

1. Product changes in the things (products/services)which an organization offers,

2. Process changes in the ways in which they arecreated and delivered

3. Pos it ion changes in the context in which theproducts/services are introduced

4. Parad igm changes in the underlying mental &business models which frame what the organization

does



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Types of Innovation- Radical vs Incremental Innovat ion -

1. The radicalness of an innovation is thedegree to which it is new and different

from previously existing products and

processes.

2. Incremental innovations may involveonly a minor change from (or adjustment

to) existing practices.

3. The radicalness of an innovation is

relative; it may change over time or withrespect to different observers.

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Types of Innovation- Competence-Enhancing vs. Competence-Destroy ing Inno vat ion -

Competence-enhancing

innovations build on the

firms existing knowledge

base.

creating opportunities to

increase sales or market

penetration

Competence-destroying

innovations render a firms

existing competencies

obsolete.

eliminating an entire

product line or type of

technology

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Types of Innovation- Archi tectural vs Component Innovat ion -

A component innovation (or modular innovation)creates changes to one or more components of a

product system without significantly affecting the

overall design.

An architectural innovation entails changing theoverall design of the system or the way

components interact.

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Types of Innovation- Produc t vs Process Innovation -

Product innovations are embodied in the outputs of

an organization its goods or services.

Process innovations are innovations in the way an

organization conducts its business, such as in

techniques of producing or marketing goods or

services.

1. Product innovations can enable

process innovations and vice versa.

2. What is a product innovation for one

organization might be a process

innovation for another

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Creating and Capturing Value

lack of technological knowledge is rarely the cause ofinnovation failuresthe main problems arise in

organization and, more specifically, in co-ordination and

control four mechanisms identified by earlier analysts

of the innovating firms: competition, cognition, co-ordination and control

- Keith Pavitt



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Creating and Capturing ValueManagers with mature

perceptions believethat:

1. The industry is stable

with slow demand

growth & incremental

changes in technology2. Profitability is achieved

by process improvement

and product

differentiation

Managers with dynamic

perceptions believe that:

1. There is potential for

change, new ways of

operating, & new strategies

2. Value is created through

innovation in positions and

paradigms



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Mature managers view:

1. Profitability is determined by

industry, it is limited in

mature industries

2. Market share is critical forcompetitiveness

3. Dominance demands

extensive resources

Dynamic managers view:

1. Profitability is determined by the

firm. Mature industries offer

many opportunities

2. Market share is reward forcreating value

3. Effectiveness, not extent of

resources counts



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Choice of strategy (& luck) are more important than

industry:

choice of industry 8.35%

choice of strategy 46.4%

parent company 0.8%

unexplained (e.g. luck) 44.5%



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0

20

4060

80

100

Japan Germany USA France UK

Source: OECD

Patents per million population



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0

5

10

15

USA UK Germany France Japan

Source: OECD

Entrepreneurial Activity



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Advantages of innovation in position or paradigm:

1. Reputation as a pioneer

2. Early learning curve benefits

3. Establish barriers to entry e.g. Design, patents,

standards4. Dominate new supply & distribution networks

5. Earn 'monopoly' profits

6. But, beware regulatory & demand uncertainty, e.g.burden of educating users



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Conclusions and implications from observation andresearch:

1. Relationships between R&D, patents, new products andperformance are strongest at the industry & sector level, but

weakest at the firm level but, management & strategy canmake a difference

2. Too much emphasis on technological innovation, processimprovement & product differentiation produces low returns



Conclusions 1:


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Conclusions 2:


1. Greater focus on a wider range of innovation e.g.positional and paradigm innovation has potential toimprove returns from innovation

2. This suggests active search for external technologyspill-overs (inputs) and exploitation of commercial

complementary assets (outputs)3. (Re) combination & integration of different types of

innovation important role of international alliances& corporate venturing to help identify, create &exploit new businesses and services



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Discussion Questions

1. Why is innovation so important for firms to competein many industries?

2. What are some of the advantages of technologicalinnovation? Disadvantages?

3. Why do you think so many innovation projects fail to

generate an economic return?

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Innovation as a Core Business Process (Ch. 2)

Learning Outcomes:

1. The similarities and differences between new product

and new service development

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Key issues:1. Dangers of an ad hocapproach

2. Routines & innovation

3. A generic process for innovation4. Influence of context & contingency


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Chapter 2

Innovation as a Core Business Process

Key issues:

1. Dangers of an ad hocapproach

2. Routines & innovation

3. A generic process for innovation

4. Influence of context & contingency



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The Dynamics of Innovation

Rate of major

innovation

Time

Product innovation Process innovation

Era o f

Ferment

Era o f

Dominan t Des ign

Era o f

Inc remental change

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Th t h l lif l


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The technology life cycle

Disruption/Era of Ferment

Dominant designemerges

Maturity

IncrementalInnovation

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Technological discontinuities trigger the

next waves of technological variation

(Tushman et. al. 1997, 8)

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Era of Ferment - Fluid phase

Market consists of early adapters and lead users

Alternative, competing technological standards

Emphasis on product differentiation, customization andtechnical performance

Skilled labor required

Price not an issue

Competing, often new, technology-based firms

Focus on product innovation, rate of process innovation slow

Both producers and customers are experimenting

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Era of Dominant Design

- Transitional phase

Product innovation slows down, process innovation

speeds up

Production volume rises

Production becomes more automated

R&D focus on specific product features

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A dominant design in a product class is, by definition the one that

wins the allegiance of the marketplace, the one that competitors and

innovators must adhere to if they hope to command significantmarket following (Utterback, 1994)


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Dominant design phase

New product synthesised from a number ofinnovations in previous products

Sets a benchmark and defines in peoples minds

how the product should look

Satisficer for many instead of an optimizer for few

Examples: QWERTY, VCR, IBM PC

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How does a

Dominant Design occur?

Technological superiority

Network externalities

Collateral assets

Industry regulation and government intervention

Strategic maneuvering at the firm level

Communication between producers and users

Industry consolidation

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Era of Incremental Change

- Specific phase

Highly defined and standardized products

Classic oligopoly with stable market shares

Competition on price Economies of scale become important

Late adapters, mass market

Division between broad cost competitors and

specialized niche players

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Th D i f I i


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ProductFrom high variety, to dominant design, to incremental

innovation on standardized products

Process

Manufacturing progresses from heavy reliance on skilled

labor to general purpose equipment tended by low-skilled

labor

Organization

From entrepreneurial organic firm to hierarchical

mechanistic firm with defined tasks and procedures and

few rewards for radical innovation

Market

From fragmented and unstable with diverse products and

rapid feedback to commodity-like with largely

undifferentiated products

CompetitionFrom many small firms with unique products to an oligopoly

of firms with similar products

The Dynamics of Innovation

- f rom Fermen t to Inc remental Change

(Utterback,1994)

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Special issues: Innovation in Services

The reverse product cycle

(Barras, 1986)1. First phase: the applications

of new technology aredesigned to increase theefficiency of delivery ofexisting services

2. Second phase: the newtechnology is applied toimprove the quality of theservice

3. Third phase: the newtechnology assists in

generating transformed ornew services

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The Reverse Product Cycle

Time

Rate of

innovation

Increased

eff iciency

Service

qual i ty

Product

transformation

Productinnovat ion

Processinnovat ion

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Example of Reverse Product Cycle

Time

Rate of

innovation

Increased

eff iciency

Service

qual i ty

Product

transformation

Electronic

records

ATMs Internet

banking

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Systems Innovation

How innovation happens?

Success (?)Process

2009 John Wiley & Sons Ltd.www.managing-innovation.com

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S t I ti


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Systems Innovation

How it really happens..


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R ti & I ti


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Routines & Innovation (Nelson & Winter, 1982)

What are Organizational Routines?1. Regular & predictable

2. Collective, social & tacit

3. Guide cognition, behaviour & performance4. Promise to bridge (economic & cognition) theory &

(management & organizational) practices

5. the way we do things around here

6. Can promote or prohibit innovation


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Routines & Innovation (Becker, 2005):

Characteristics of Routines1. Enable co-ordination

2. Provide a degree of stability in behaviour

3. Enable tasks to be executed sub-consciously,economizing on limited cognitive resources

4. Binding knowledge, including tacit knowledge.

5. But, dif f icu l t to operat ional ize, research ormanage

6. Need to focus on cogn it ion & prac t ice


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Routines & Innovation (Feldman & Pentland, 2003):

Routines in Practice

1. Dual nature, sites of both stability/reproduction &creation/change

2. Distinguish between 'ostensive' aspects (what theyaim or claim to do), and 'performative' aspects (whatthey actually do).


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Innovation Process

Generic phases of the innovation process:1. Searching & scanningthe internal & external

environments

2. Filtering & selectingpotential opportunities

3. Acquiring the technical, financial & market resources

4. Implementing development & commercialisation

5. Reviewing & learningfrom experience


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Innovation & Context

PIMS (Profit Impact of Marketing Strategy) data:

1. Impact of innovation on performance depends on contingency& configuration, notindustry

2. Effect of R&D depends on market share3. Effect of patents depends on firm size

4. Effect of new products depends on market maturity


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Innovation Process

Scanning the external environment:

1. Identify, segment & exploit lead customers

2. Identify, segment & involve key suppliers

3. Explicit criteria for selecting alliance partners

4. Clear objectives & guidelines for licensing & out-sourcing

5. Involve all relevant parties e.g. financial & regulatory

6. Use formal exploratory techniques to identify future trends


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Commitment to existing

corporate operating structures

(with their overhead) makesorganizations slow to recognize

totally new opportunities that may

arise.

Why was it that firms that could be

esteemed as ... innovative,

customer-sensitive organizations

could ignore or attend belatedly to

technological innovations with

enormous strategic importance?

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The industry life cycle as an S curve


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The industry life cycle as an S-curve

- organizational and marketing challenges

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Managerial implications: Firms need a


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Managerial implications: Firms need a

portfolio of radical and incremental innovation

Riding the two horses dilemma (Tidd et al., 2001)

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The nature of technical work changes


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The nature of technical work changes

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Examples of existing operating structures


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Examples of existing operating structures

inhibiting innovation

a) With the invention of the

telegraph Pony Express

bought faster horses.

b) Smaller disk drives were

rejected because computers

always filled whole rooms.

c) ATMs were put outside

banks and were available

only during business hours.

Open during

business hours

9.00-17.00

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The marketing challenge evolves


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The marketing challenge evolves

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Some strategies to consider


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Some strategies to consider

1. Era of Ferment

Focus on niche products Speed, IPs

Build collateral assets

Invest to influence the dominant design

2. Era of dominant design

Focus on differentiated products and services

Invest in capacity, brand advertising and R&D

Contract with suppliers, improve reliability

3. Era of Incremental change

Focus on low cost

Emphasize quality

Signal commitments by advertising and R&D

process

product

process and product

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Industry attractiveness in different


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Era of Era of Era of

ferment dominant

design

incremental

change

Rivalry among existing

competitors Low Low H i g h

Threat of new entrants Hig h L o w /Hi g h Low

Bargaining power of

suppliers Low H ig h Hig h

Bargaining power of

customers Hig h Hig h Hig h

Threat of substitutes Hig h L o w /Hi g h Hig h

Industry attractiveness in different

phases

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Timing of


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management attention and influence

(Wheelwright Clark 1992)

Buildknowledge

and

capability

Idea

generation

Projectdefinition

and

selection

Design

and build

prototypes

Pilot

production

Manufacturing

ramp up

Abi l i ty to

inf luence

outcomes

Actu al prof i le of management act iv i ty

High

Low

Ind

ex

ofattention

and

influence

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MoT Intro Managing Innovation TB 1-2

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Transcript of MoT Intro Managing Innovation TB 1-2