Professional Documents
Culture Documents
3 Innovation
3 Innovation
Product Development
Technological policies
Product technological Product development to Product development to Product development to Product design to meet
change reduce product cost enhance product design only enough exactly the needs
by lowering quality, features, performance for the of the particular
materials content, deliverability, or segment's needs business segment
facilitating ease of switching costs application
manufacture,
simplifying
logistical
requirements, etc.
Process technological Learning curve process Process development to Process development to Process development to
change improvement support high tune production tune the production
Process tolerances, greater and delivery and delivery
development to quality control, system to segment system to segment
enhance economies more reliable needs in order to need in order to
of scale scheduling, faster lower cost improve
response time to performance
orders, and other
dimensions that improve
the ability to perform
Technology Portfolio
Harris, Shaw, and Somers suggest:
Once various technologies have been identified,
they can be classified in terms of their importance
for competitive advantage
Next, the firm’s position relative to its competitors
can be assessed
Cash in Fold
ec nat r op mi ygol onhce T
Low
High Low
High High
B
A B A
ss e ne vit artt A
Technology Forecasting
It is the capacity to perform systematic
technological forecasting. Some useful techniques
for forecasting are:
Technological progress functions (S-curves)
Trend extrapolation
The Delphi method
Scenario development
Unit of analysis
Often product or specific techniques
Should be generic technologies
Link to elements of product success
Functional performance
Acquisition cost
Ease-of-use
Operating cost
Reliability
Serviceability
Compatibility
Importance can differ for markets / segments
New Product Management 14
Technology and Corporate Planning
Demand elasticity
How does demand change based on these
characteristics (that are influenced by technology)?
Importance can differ for markets / segments
Based on this analysis, compare your technology
to competitors'
Competitive technological profile
Profile of technologies to products (Exhibit 2)
Common technologies?
Emphasizing product and all its technologies?
Technology-driven or driving technology?
Strategic considerations
Technological strengths for use in several products?
Matches strengths in production and marketing?
Mergers etc.
Analyse market needs at the same time...
Embodiment
Is the end product enhanced by additional technology
and components required to use innovation?
Is the innovation enhand or diluted by embodiment?
Does the embodiment offer potential for further
inventive enhancement?
Operations
What operations are displaced or weakened?
What new operations are needed?
What is the tradeoff?
Market
Does the product provide enhanced effectiveness
serving the final user?
Does the operation reduce cost of delivery?
Does latent demand expansion or price elasticity
expansion determine characteristics of new markets?
Example analyses
Transistors (Exhibit 1)
Jet turbines (Exhibit 2)
Technological Technology
capabilities Experience
strategy
Integrative Mechanisms
action context
of Technology
Strategy
Technology
strategy
Technology Industry
evolution context
External Environment
New Product Management 30
Introduction – Technology Strategy
S-curve - Overview
Theory of the potential for technological improvement
Framework for describing substitution of new for old
technologies at industry level
Progress slow at beginning, then increases until maturity
(approaches natural or physical limits)
Plots time (or engineering effort) versus main product
performance feature
Leading firms often focus on mature technologiies, new
entrants based on new technologies
Component versus architectural technologies S-curves
(all impact product performance)
Industry-level versus individual firm
Disruptive innovations
Rate of improvement that customers can absorb (e.g.
traffic regulations or jams)
Trajectory of improvement of innovating companies
(steeper), will outgrow standard need to meet not
satisfied customers
Sustaining innovation targets demand, high-end
customers, disruptive innovation redefine trajectory at
less performance but other values (convenience, price)
that appeal to new or less demanding customers
Exhibit 1
Innovators dilemma
Incumbents: Should we fight when attacked from below?
Should we invest to protect the least attractive end of
business, to retain least loyal, most price-sensitive
customers? Or strengthen position with profitable
customer who pay top prices for good products?
Does not mean sustaining innovation is unimportant (get
to top of pack)
Even for start-up, but then probably sell out to a leader
Continue to move up to higher-priced products (high
profits), but seeds sow for own disruption (dilemma)
Disruptive is relative, can be sustaining for others
Internet sustaining for Dell (had used telephone before),
disruptive for others
New Product Management 43
Disruptive and Sustaining Innovations
Types of disruption
Low end or new market
Exhibit 3
New market competes with non-consumption, market
leader does not feel anything at first, then people switch
(because of price or convenience), e.g. PC, BlackBerry,
E-Bay, Wireless telephony,...
Low end, e.g. Hyundai, amazon.com, supermarkets
(department stores moved to high price fashion)
Internet banking?
Table 1.1
Organizational adaptation
Relative inertia: adaptation necessary (reliability,
legitimation), but reduces apatability to changes,
consistent with induced strategic process, strategy
evolution slow, internal selection needs to be open, free
championship and challenging of ideas, role of founders
and rule of knowledge and facts over position
Adjustment: leave overall strategy in place and changes
peripheral features, deliberate, non-random, generally
increases life chance of firm, consistent with induced
process
Reorientation: major changes, upsets induced process,
generally by environmental selection (would reduce
chance for survival)
Corporate longevity
Fortune 100: from 1965, 19 remain in 2005
Most of the time, companies operate in stable
environment, and strategy making process is geared
towards linear strategic dynamics
Sometimes (quite often newcomers) nonlinear dynamics
– change rules of game (normative rules – laws, customs
etc., economic rules, technological rules, cognitive rules
– industry recipe), outcomes difficult to predict
Strategic dynamics
Actions of company and environment (other players,
suppliers, technological change, government,...)
considered, can be rule-abiding or -changing
Balance
Limited change: continue induced, but manage
autonomous (slight rebalancing)
Independent change: autonomous process key
Controlled change: induced process key
Runaway industry change: management decides based
on whether bet available
Exhibit 3
Corporate research
Role is to generate new technologies
Long-range, high risk, exploratory
5-10% of sales for established high-technology
companies for R&D, most for R&D for mainstream
businesses, 10-15% for corporate research
Strategic issues
Whether invested in areas with highest returns
How tightly linked to business objectives in those areas
Innovations by: Improving and strengthening Diversifying to new Identifying product and process
understanding of technologies applications and markets improvements
in use
Discoveries and developing Diversifying to entirely new Developing new processes for
new technologies businesses established products
Corporate service by: Intelligence Opening windows on new Assessing threats and
science and technology opportunities
Human resources Recruiting new kinds of skills Recruiting talented people with
high potential
Technology transfer Identifying acquisition Recruiting for all divisions, from
candidates with needed corporate research to operations
technological expertise
Key interfaces:
Induced process
Corporate research—Divisional R&D interface: differing
orientations and expectations, divisional labs or product
development see corporate research as a service – links
are important
Autonomous process
Corporate research—Business research interface:
entrepreneurial task, needs market link, business
researchers generally more ad-hoc, less structured,
more external time pressure
coupling
Open No
coupling
Cross-pollination
Idea of mixing things up to get creative results
Cross- or interdisciplinary teams
Value on average lower, but breakthroughs of unusually
high value
Depending on alignment of disciplines (e.g. economics
and physics quite near, economics and psychology
farther apart)
Exhibit 1
Rules: pairings of well-established fields, deep expertise
people
Need pull
Targeted research by specific market goals (not too
broad and not too narrow - focusing)
Exhibit 2
Problems: absence of true believer or champion,
continues to change target (miss opportunity)
Both types of linking necessary: technical
(problem with knowledge) and need
(breakthrough to demand)
Also corporate interests needs to be accounted for
Quite often group leaders as driving force (contact to
technology, business and organizaitonal knowledge)
Successful conceptualization
Synthesizers, almost simultaneous linking of all three
dimensions
Steve Jobs and Smalltalk
Exhibit 4
Better conceptualisations result from flexibility and
modifications (do not get locked in)
Transfer of technology from research to
development
e.g. IBM research (3 locations – Yorktown Heights, San
Jose and Zurich) is a separate division, product
development in 27 product development divisions
Path dependence
Set of decisions one faces for any given circumstance is
limited by the decisions one has made in the past –
history matters
Accumulating in one period will increase accumulation in
the next
Absorptive capacity allows to see trends, which will lead
to build absorptive capacity (expectation formulation)
Ceasing to invest in absorptive capacity can lead to
lockout (NIH-syndrom – too far away), confines firm to
work in a particular domain based on early decisions
Self-reinforcing cycle with high absorptive capacity: sees
opportunities, aspires to them (proactive instead of
reactive)
Economic climate
Bad economy: companies will probably leave passive
and emergent investments
Enabling and driving have more staying power, might be
less for enabling due to generally higher costs
Evaluation not based on financial returns alone
Pre-project planning
Traditional role: select, screen and evaluate project
ideas, decide which to pursue (assumes adequate
coverage, enough information,...)
Development strategy leadership approach: motivate
and guides the organization to create the best set of
projects by articulating the criteria for the “correct set”
of projects
product
Addition to
Product family Enhancements,
hybrids, and
derivatives
Add-ons and
enhancements
Sustaining
Engineering documentation
Product and process documentation (designs, lists,...)
Level of detail: costly to produce but important, more
documentation necessary with high-volumes, unskilled
labour, much automation
Engineering changes on existing products
Requests for changes on documentation (form
engineering, service, marketing etc.)
Can affect many parts of organization
Procedure for handling change requests necessary
Cost-benefit trade off (obsolence vs. efficiency gain)
Batching changes or even new product (marketing
bonus)?
Sequencing of projects
Sequence over time (Exhibit 5)
Steady stream approach: every second year new
platform, followed by derivatives in intervals (teams
mixed and people transferred)
Secondary wave approach: longer platform lifetime,
derivatives come later
Product development
Often fails because of misunderstanding of markets (lack
of distinctiveness) or own technology, mismatches
between functions
Planning and mapping necessary
Complementary assets
Commercialization needs know-how plus capabilities /
assets
Services, other parts of a system,... (Exhibit 5)
Can be generic, co-specialized (bilateral dependence) or
specialized (unilateral dependence)
Profitability under tight appropriability
If possible, easy for some time
Time to access complementary assets, or come up with
dominant design
Specialised R&D firms possible (e.g. petrochemicals)
Implications
Direct R&D towards tight appropriability or assets under
control
Small-large firm comparison
Industry structure and appropriability: weak
appropriability should direct towards integration
New entry more difficult in mature industries, as assets
under control of incumbents (but technological change
can change this)
Importance of manufacturing
Trade and investment barriers can mean denying access
to assets necessary and lead to local/government
capturing majority of profits
Dimensions: Implications:
Strategic Degree of Administrative
importance control linkages
(authority)
Organizational
design
alternatives
3 6 9
Unrelated Special Independent Complete
business business spin-off
Operational relatedness
units units
2 5 8
Partly New product New Contracting
related department venture
division
1 4 7
Strongly Direct Micro new Nurturing
related integration venture and
department contracting
Cycles of ICV
Programs begin and end in cycles
Wasteful, short-term and precludes learning
Dimensions: prospects of mainstream business and
uncommited financial resources
Situations: ICV orphans (good/good), All-out ICV drive
(bad/good), ICV irrelevance (good/bad), Desperately
seeking ICV (bad/bad)
Reasons: economy overall, planning cycles that put too
much load on ICV, too much success that would make
internal units look bad or become competition,
reorganizations, strategy making as top management
prerogative