3 Innovation

Innovation Management and New
Product Development
New Product Management 1

Innovation, Technology and Strategy

Contents
1. Technology and Strategy (Part I - Intro)

2. Technology and Corporate Planning (Reading I-2)
3. Management Criteria for Effective Innovation
(Reading I-4)
4. Core Competence (Reading I-3)

Technology and Strategy
Porter’s 5-forces model

Porter’s “generic strategies” concept is a

widely used framework for classifying
competitive strategies. The generic strategies
are:
Industrywide differentiation
Focused differentiation
Industrywide cost leadership
Focused cost leadership

Generic strategy
Overall cost Overall differentiation Focus-segment cost Focus-segment

leadership leadership differentiation
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 and Product-Market Strategy

A firm’s strategy is expressed in the products and
services it brings to market. One way to get at the
integration of a firm’s technology and product-
market strategy is:
Decompose each product or service into its
constituting technologies and assess the relative
strength—the degree of distinctive competence—
the firm has with respect to that technology

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

High Bet Draw
Cash in Fold
ec nat r op mi ygol onhce T
Low
High Low
Relative technology position

Technology & Business Portfolio

Couples Technology portfolio with McKinsey (BCG)
framework for business portfolio based on
competitive position and attractiveness...

High High
B
A B A
ss e ne vit artt A
Low ec nat r op mi ygol onhce T Low

High Low High Low
Competitive position Relative technology position

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

Technology and Corporate Planning
 Executives generally have low technology

experience
 Black-box view on R&D
 Delays, success rates,...?
 Time horizon difference in planning
 Elements in planning
 Industry, competition, organizational resources...
 Technology can result from inside or outside
 Questions: How are technological issues recognized by
management? How has technology been used to
implement strategic objectives? How has technology
been monitored? How are technology-related activities
recognized and organized?
 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
 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...

Management Criteria for Effective
Innovation
 Assessing and directing technological innovation

 Management criteria to discriminate profitable and
unprofitable new technologies
 Two sides
 technological (new and good) and business
(embodiment, operational consequences and market
dynamics)
 Technical potential
 What fundamental technical constraints limiting prior art
are lifted?
 What new technical constraints are inherent?
 How favourable is the trade-off?

Innovation
 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?

Innovation
 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)

Core Competence of the Corporation
 Rethinking the company based on its core

competencies
 Example: NEC
 Recognized convergence of computing and
communications a s strategic intent
 Success would hinge on competencies, particulary
semiconductors
 New strategic architecture, coordination groups etc.
 Three technological/market streams: mainframe to
distributed, IC to VLSI, communications from mechanical
to digital
 Semiconductors as core product
 Myriad strategic alliances

 Long run winner based on to build quickly and at

low cost the competencies that spawn new
products
 Move from portfolio of business to portfolio of
competencies
 Tree analogy: trunk are core products, branches are
business units, leaves are end products, competencies
are roots (Exhibit 1)
 Core competence
 Collective learning, coordinate production skills, bring
together technologies, organization of work, delivery of
value
 Sony: miniaturization, Philips: optical-media, 3M: sticky
tape
 Must be nurtured and used, maintained

 Not necessarily outspending
 Shared costs between business units (components,
factories etc.) most often post-hoc effort
 Identifying core competencies
 Provides access to a variety of markets
 Makes significant contribution to perceived customer
benefit of end product
 Difficult to imitate

 Loosing core competencies

 Looking at costs only risky - might lead to outsourcing of
core competences (Chrysler vs. Honda)
 Leaving businesses (US companies - TV)
 Core products – link between competencies and
end products
 e.g. engines for Honda
 Components contributing to value
 Differentiate brand and manufacturing share (Canon)

 Concept of organization – Business Unit vs.

Competencies
 Exhibit 2
 Ownership of resources
 Bounded innovation
 Disintegrated IS, career paths, communication
 Strategic architecture
 Establish objectives for competence building
 How long could we stay in this business if we lose it?
How central to customer value? Future opportunities
foreclosed?
 Architecture provides logic for product and market
diversification (Does it add to overall goal? Does it
exploit/add to core competencies?)
 Business units and core competencies

 They belong to company
 BU bid for them – goes to one with highest payoff
 Transfer of people etc.
 Cooperation rewarded

Technology and Innovation Strategy

Contents
1. Technology Strategy (Part II - Intro)

2. Technological Innovation and the S-Curve (Reading
II-1, II-2 and II-3)
3. Disruptive and Sustaining Innovations (Reading II-4
and II-5)
4. Organizational Adaptation (Reading II-13)
5. Strategic Dynamics (Reading II-16)
 Case: Infosys Consulting (Case II-11)
 Case: NTT DoCoMo (HBS)
 Case: Kindle (HBS)
 Case: Amazon Web Services (HBS)
 Case: Geox (HBS)
Introduction – Technology Strategy
 Technology is a resource (like human, financial

and information resources) and a potential
source of distinctive (“core”) competence
 To manage technology as a resource and distinctive
competence, a technology strategy must be developed.
 The technology strategy must support the business
strategy in developing a competitive advantage
 Goes beyond R&D strategy

 Strategy making as evolutionary organizational

learning process
Technological Technology
capabilities Experience
strategy

Internal Environment
Determinants Generative Mechanisms Strategic Organizational
Integrative Mechanisms
action context
of Technology
Strategy
Technology
strategy
Technology Industry
evolution context
External Environment
TECHNOLOGY EVOLUTION: Company affected by

endogenous evolution
 S-curve trajectories
 Product-process interplays
 New technologies and trajectories
 Technological change
 Competence enhancing
 Competence destroying
 De-maturity (renewed innovation in well-
established markets)
 Organizational determinants

INDUSTRY CONTEXT: affect profitability

distribution, choices etc.
 Industry structure (5-forces model)
 Appropriability regime
 Complementary assets
 Dominant designs
 Increasing returns to adoption
 Industry standards
 Social systems aspects of industry development
 Interplay of social systems and technological
change
STRATEGIC ACTION: captures organizational

learning
 Induced by prevailing concept of strategy, can
mean inertia, lock-in
 Autonomous strategic action aimed at new
business, means renewal, often rooted in
technology development efforts, explores
boundariess of firm

ORGANIZATIONAL CONTEXT: allows subsitituting

internal for external (market) selection
 Internal selection environment
 Opportunities within current strategy (induced)
 Opportunities outside (autonomous)
 Ability to balance those
 Dominant culture
 Reflects distinctive competence
 Science vs. engineering vs. manufacturing
 Reflects product architecture
 Can reflect founders

Technological Innovation and S-Curve
 Productive unit's capacity for and methods of

innovation depend on stage of evolution from
small, technology based to major high-volume
producer
 Major innovations followed by many smaller ones
 Often acccount for more than half of economic gain
 Typically result in specialized systems with economies of
scale
 Generally reduce flexibility
 Major innovations often based on emerging need
or new way to meet demand
 Entrepreneurial act, often based on superior
performance
 Two types of innovation (incremental change to

efficient production system vs. radical
innovation)
 Often evolution over time
 Product vs. process innovations
 e.g. microelectronics or Ford (5 models in 4 years based
on flexible factory, then after Model T 15 years process
innovations)
 Implications for management of technology
 3 stages: fluid, transitional and specific
 Exhibit 1

 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

 S-curves for individual firms

 Aid in planning sequence of component and architecture
projects to gain performance
 Difficult for predictions on when to change (misjudge
plateau, often riding S-curve better than being first to
switch to new technology)
 Architectural innovations very important, often not
recognized, and often high market innovation as well
 Case disk drive industry – component S-curve
 Industry level: Exhibit 2
 Result of a series of component and architectural
improvements (Exhibit 3)

 Plateau often based on perception of maturity and

research scale-back (Exhibit 4)
 Firm timing for introducing new technology and gain
(Exhibit 5), most innnovators had been leaders but did
not receive particular benefits, most did not jump out of
reach of old technology
 Strategies: either frequent changes to new technologies
(IBM) or longer incremental improvements (HP), stays
quite consistent
 Case disk drive industry – architectural S-curve
 Pronounced first-mover advantage exists
 First used in emerging markets
 New firms succeeded because they were better there
(leading firms technologies comparable)
 Architectural innovations often are worse with regard to

measures, but change measures
 Example: 5.25-inch changed from capacity and speed to
capacity per inch and cost per unit, i.e. mainframe to
desktop
 Due to improvements, often invades (very rapidly) home
market and leader is dethroned (Exhibit 2)
 Lessons
 Difference component / architecture curves
 Architecture often closely coupled with market, new
entrants often successful

Disruptive and Sustaining Innovations
 Link of situation to competition winner

 Large vs. small companies or incremental versus
breakthrough not sufficient
 Sustaining situations: race entails making better
products to be sold for more money to attractive
customers – incumbents often win
 Disruptive situations: commercialize a simpler or more
convenient product to be sold to at less money to new or
unattractive customers – newcomers often win

 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
 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

 Disruptive ideas – conditions

 New market: Large population without money or skill, so
did without or hired somebody? Do users have to go to
inconvenient or centralized location?
 Low end: Customers happy to purchase product with
less performance at less cost? Can we create a business
model to win the business of these overserved
customers?
 Is the innovation disruptive to all incumbents?

 Viewpoint of incumbent – Why do they fail?

 Well-managed firms have lost over the ages to
newcomers with regard to new technology and markets
 Listen too well to customers!!! This places stringent
limits on strategies...
 Patterns of resource allocation in organizations
fundamental in success (ideas get funded or not)
 Resource allocation often driven by market demand
might lead to not funding projects based on emerging
needs
 Resource dependence theory says that decisions depend
on interests of external entities, important customers
(and marketing) will argue for sustaining which
influences resource allocation

Organizational Adaptation
 Evolutionary focus on strategy

 How does it come about and evolve?
 From outside (environmental determinism) or inside
(strategic choice)?
 Intraorganizational perspective: initiatives emerge and
compete
 Variation – selection - retention
 Internal and external selection
 Induced strategic process
 Retention: after successful founding, top management
will base strategy on learning about basis for success,
embodied in managers, statements about
technical/economic/cultural factors

 Selection: knowledge about strategy often located at

top, as firm becomes larger, communication difficult, so
participants might perceive different strategies as best
for them and firm (reason for variation), top
management needs to establish internal selection
mechanisms to maintain coherence (administrative –
rules, control systems, rewards, cultural – rituals,
norms), should be in line with external (market)
selection pressures
 Variation: induced process targeted at preserving
coupling of initiatives at operational level with strategy,
might lead to reduction of variation, depends on growth
opportunities in current domain

 Autonomous strategic process

 Variation: some people willl try to get firm to engage in
activities outside current strategy, derive from new
combinations of skills, capabilities, competences, more
often from lower level, reasons: self-image that risk is
not greater, career prospects, start-up
 Selection: clear up importance in context of current
strategy, usually outside normal selection process
through champions and top management, may lead to
change in strategy, difficult processes, often some
alternate funding reserved for demonstrating viability
 Retention: autonomous strategic process allows firm to
become aware of environmental variations, autonomous
initiatives can lead to new companies or stretch
resources too thin, but open up strategic options
 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)

 Strategic renewal: major changes through autonomous

process if internal selection (strategic context
determination) works well
 Exhibit 2
 Success factors
 Top management builds quality of induced and
autonomous process
 Maintain top-driven strategic intent and bottom-up
internal experimentation and selection processes
 Successful reorientation preceded by internal
experimentation and selection processes

Strategic Dynamics
 Decision making and game theory

 Game theory is concerned with other parties that have
own strategies and goals, decision making generally
only with the environment
 Game defined by players, available strategies, payoffs
and rules (repeated games, memory, information)
 Prisoners' dilemma probably most famous example...
 Proposal
 Corporate longevity depends on matching cycles of
autonomous and induced strategy with strategic
dynamics
 Strategic leadership means balancing those cycles

Strategic Dynamics
 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

Strategic Dynamics
 Rule-abiding means additive, linear, fairly predictable

change
 Rule-changing materially change strategic context for
others, nonlinear, difficult to predict
 Exhibit 1
 Strategic recognition important, seeing rule-changing
implications quickly, reaction time, constant alertness
 Player-independent change: problematic, e.g. rebates
against new manufacturing

Strategic Dynamics
 Link to induced and autonomous strategy process

 Example Intel: Independent industry change (DRAM
came, Intel slow to withdraw, but autonomous strategy
had provided microprocessor option), controlled change
(Centrino based on autonomous strategy), runaway
industry (RISC vs. CISC, internal civil war)
 Resource accumulation: firms engage in quite a lot
autonomous processes (exploration mode), often funded
by middle management faced by problems using
resources from mature business not absorbed by
induced process
 Scaling up: experimentation and selection of
autonomous processes, middle management tries, role
of cash reserves (Exhibit 2)

Strategic Dynamics
 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

Case: Infosys Consulting
 What is the strategic position, what are the

distinctive competencies? How about culture?
 Why and how did Infosys move to consulting?
Describe this segment.
 What were the rules of the game and how is
Inofsys trying to change them?
 How about client relations and institutional
knowledge in the industry and at Infosys?
 How are IBM and Accenture going to see this and
respond?
 What are the challenges with managing growth
and how can Infosys stay ahead of the game?
Case: NTT DoCoMo
 “NTT DoCoMo (TM): Value Innovation at DoCoMo”

(HBS)

Case: Kindle
 “eReading: Amazon's Kindle” (HBS)

Case: Amazon Web Services
 “Amazon Web Services” (HBS)

Case: Geox
 “Geox: Breathing Innovation into Shoes” (HBS)

R&D and New Product Development

Contents
1. Developing Innovative Capabilities (Part III - Intro)
2. Corporate R&D (Reading III-2 & III-3)
3. Invention to Innovation and Research to
Development (Reading II-4 & II-5)
4. Absorptive Capacity (Reading III-6)
 Case: NEC (Case III-1)
5. Corporate Venture Capital (Reading III-7)
6. Evaluating Innovation Investment (Reading III-10)
7. New Product Development
8. Communication in NPD (Reading IV-1)
9. Project Plans & Product Development Maps (Reading
IV-5 & IV-6)
 Case: Apple (HBS)
Developing Innovative Capabilities
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

Functions of corporate research

New strategic directions Support of existing businesses
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

Links between R&D units:

Geographical
Closed Open
Personal Personal
Closed Open Closed Open
Closed Tight
Administrative
coupling
Open No
coupling

 Linking corporate research to corporate strategy

 Clear charter (common understanding of what corporate
research should do) defined
 Process for deciding what to develop
 Also makes assessment easier
 Assessing opportunities
 High uncertainty (usefulness unclear, depends on
complementaries or total system, often new uses, ability
to link to need)
 Questions (I): Are first-class researchers available? Is
major investment going to return major result? How
many years to useful results? How many
failures/successes did others have in that area?
 Questions (II): Can be obtained from vendors or

acquisitions? Cost for displacing an existing program to
implement new one? Enough hope to transfer
downstream? Necessary capital available?
 Different levels in corporate research
 Technician / Bench scientist / Group leader / R&D
manager / Director of corporate R&D
 Chief scientist or advisory board for top management
 Parallel ladder of career advancement
 Middle management important
 Allocating resources to corporate R&D
 Inertia, might depart from strategy, long-term

Corporate R&D
 Case study: Xerox Palo Alto Research Center

(PARC)
 Located in Silicon Valley near Stanford University
 Xerox spent hundreds of millions, but many ideas were
turned into products by start-ups
 Still successful (copiers, CAD, laser printers)
 Especially computerized office systems (original reason)
not cashed in on (business at Xerox makes loss)
 Problems: slow decision making due to size and being a
one-product company, organizational flaws (weak ties to
rest of company, generally no marketing channels for
such products)
 Problems have also led to people leaving frustrated

Corporate R&D
 Founded in 1969 for Xerox to become “architect of

information in the office”
 Top people attracted (blank check and 10 years no
corporate interference)
 50% computer science, 50% physical sciences
 Image of scientists / hackers basically from there
(beards, T-shirts,...)
 PARC became leader in human-computer interaction
 Pioneered windows and mouse for interactions
 Hands-off management led to overstepping (developed
Alto – open - as PC product, other divison developed Star
- closed)
 Text editor Bravo developed (outside charter), nobody
saw market potential → became MS Word

Corporate R&D
 Visitor Steve Jobs got some ideas for Apple from

Smalltalk
 Ethernet developed at PARC
 Xerox strategy was complete office systems to increase
lock on customers (open PC was not a good fit), and big-
bank (build the best, not something better)
 Reorientation at PARC to increase transfer out and
management attention / links
 PARC was transformed in 2002 into an independent,
wholly owned subsidiary company dedicated to
developing and maturing advances in science and
business concepts with the support of commercial
partners and client

Corporate R&D
 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

Invention to Innovation
 Innovation means welding marketplace

opportunities with inventive technology and new
technical knowledge
 Complex decision making – how to make a product out
of break-through?
 Also involves consistency with firm corporate interest
(“fabric”)
 Elements to be brought together: technical competency,
market need and corporate interest
 How is this process of linking done? By whom?

 Evolution and patterns

 Corporate R&D established (scientists), market
specialists seen as advisor to be brought in, then
became a separate function in R&D: Should they take
lead or work together?
 Technology push (scientists, based on technology), need
pull (marketing, based on demand and markets) or
cooperation
 Technology push
 Mostly based on scientists, aware of corporate interests
 Exhibit 1
 Problems: tends to focus on easy applications, locked in
to one technology, biased user selection, getting funding
(bootleg research)
 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

 Successful transfer: moved from research to

development and resulted in product
 Unsuccessful transfer: left research but no product
 Nontransfer: intended for transfer but not accepted in
development
 Primary success factors
• Technical understanding: main technical issues need
to be understood before passing on
• Feasibility: demonstration necessary (agreement
what that means), might imply user acceptance and
therefore real users
• Advanced development overlap: research must
deterime whether to maitain activity (support or
defend), or to explore related and advanced
technologies
• Growth potential: too narrow aim without technical or

market growth potential, new technology might
become obsolete by old ones stretching in
competition
• Existence of an advocate: someone in research
selling it, looking after it
• Advanced technology activities at development lab:
helpful and often necessary, sometimes provides
hurdle (competitive, skeptical) but in the end
beneficial as leads to thorough work and involvement
• External pressures: same technology at competitor
lab or announcement
• Joint programs

 Secondary success factors

• Timeliness
• Internal users: creates pressure and demand
• Government contracts
• High-level involvement: research sometimes turns to
top management
• Individual corporate responsibility: corporate
watchdog
• Proximity: no major factor generally, might be
convenient and saves money, but transfer does not
depend

Absorptive Capacity
 Outside sources often critical to innovation

process
 Ability to evaluate, recognize value, asssimilate and
utilize outside knowledge important
 Factor of prior related knowledge (basic skills, shared
language etc.), based on cognitive learning (associate
learning by linking, learning is cumulative and based on
richness of knowledge structure)
 Absorptive capacity
 Byproduct of doing research (sometimes manufacturing
– production experience)
 Can also be directly generated – trainings etc.

Absorptive Capacity
 Organizational absorptive capacity

 Based on members' absorptive capacities
 Not simply the sum, but also based on transfers on
knowledge within
 Not only direct interface to outside, but also structure of
communication within and distribution of expertise
 Interface can be diffused or centralized (people may act
as gatekeepers or boundary spanners) – depends on
speed and uncertainty of change
 Internal communication based on languages, codes etc.
- developing them can make this communication more
efficient, but make outside-in more difficult (not-
invented-here syndrom, tends to increase with group
tenure)

Absorptive Capacity
 Knowledge structure: some overlap between individuals

necessary for communication, diversity also important
(tradeoff of specialization)
 Cross-function interfaces, job rotations etc.
 External acquisition of absorptive capacity
 Hiring people, consultants, acquisitions...
 Often not that efficient, as some elements are firm-
specific and when integration with other activities
necessary
 Time lag

Absorptive Capacity
 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)

Absorptive Capacity
 Competence destroying technical change

 Radical change can destroy competence, building new
ones can be difficult due to accumulation effects, or may
be blind to developments
 Absorptive capacity and R&D spending
 Absorptive capacity byproduct of R&D spending, but also
influences it
 Makes possibilities known
 Increased or decreases costs
 Basic research valuable even in case of spillouts

Case: NEC
 What is your assessment of new technology

strategy? What will it take to succeed?
 How can the new site best contribute?
 What is your assessment of performance to date?
 How should management ensure long-term
survivial and growth of the center?
 What should Mr. Shinoda do next?

Corporate Venture Capital
 Invest in external start-ups

 In 2000, reduced by 30% and 80% in volume (stronger
than private VC)
 Whether to invest in certain start-up and when
 Investment of corporate funds directly in external start-
up companies
 Two characteristics: objective and degree of operations
linking
 Objective either strategic (increase profits of own
business and exploit synergies – e.g. sell own products
alongside) or financial (economic return on investment,
could be helped by own brand)
 Linking loose or tight (loose could also insulate from
interference): use of processes, assets etc.

 Types of investments based on these dimensions

 Driving (strategic/tight): advances strategy of current
business (e.g. MS in .net start-ups which will help
adoption, promoting a standard)
 Enabling (strategic/loose): complements strategy,
primarily strategic, but tight coupling not necessary, e.g.
increase demand for products, or work on streamlining
 Emergent (financial/tight): exploration of new
businesses, option for when they become strategic
(leveraging underutilized technologies, experimenting
with new capabilities, developing backup technology,
exploring whitespace)
 Passive (financial/loose): financial returns only

 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

Evaluating Innovation Investment
 Failure in successful innnovation often due to

(wrong) use of financial investment analysis tools
 Net present value and discounted cash flow: discounts
future cash flows to current value, assumption is that
not investing does not change health of company in the
future (might not be true, difficult to predict), errors of
estimation
 Fixed and sunk costs: argument is that past investments
should not be considered, only future marginal cash
outlays, assumes necessary capabilities stay the same,
biases towards things that exploit current assets and
capabilities (for newcomer, there is always full-cost),
also use of usable lifetable for depreciation instead of
competitive lifetime adds to this

Evaluating Innovation Investment
 Emphasis on earnings per share: focus on short-term

stock performance, as principal-agent led to incentives,
reputation depends on it, also buyout signal (today most
principals also invest short-term or are agents
themselves)
 Process to support or sabotage innovation
 Stage gate model: ideas pass through steps/phases,
after each an evaluation/review takes place (financial),
assumptions might be tweaked to ensure funding, ill-
suited to new growth businesses
 Discovery-driven planning: based on minimally
acceptable figures, list of assumptions to fulfill those is
generated, ordered by importance (deal killlers) and
costs to test, in next stage, is used not as a plan to
execute but to learn
New Product Development
 Development projects can provide benefits

 Market success through new products or processes,
leverage and enhance existing assets, provide
organizational renewal and change, build confidence and
momentum
 Process of bringing a new product or service to market,
first stage in product life cycle, new to market or company
 Steps: idea generation, idea screening, concept
development and testing, business analysis, beta and
market testing, technical implementation,
(commercialization)

 Many projects delayed or failed

 Firms must develop a host of skills and concepts that
can differ significantly from the natural inclinations
common in organizations
 Senior management's involvement in the development
process is far more likely to be part of the problem than
part of the solution
 Failed products sometimes necessary for learning and
prerequisite for later success – learning effect (learning
by using – market, by failing – management and by
doing – manufacturing) on technology, market and
organization


 Three areas of management activity that

constitutes development strategy for a business
 Pre-project planning
 Project execution
 Post-project learning (e.g. project audits)

 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

 Creating the aggregate set of projects –

Aggregate project matrix
 Defines individual projects according to the degree of
change in the product and manufacturing process they
entail
 The greater degree of change along either dimension,
the more resources that are likely to be needed in
completing the project
 Sometimes based on market change / technology risk
 Appropriate mix necessary (depends on strategy)

Research Process Changes

and Next Tuning
advanced Single
New core generation dept. and
development
process process upgrade incremental
New core Unique

radical
Product Changes
product
Next generation Platform or

of core product next generation
Addition to
Product family Enhancements,
hybrids, and
derivatives
Add-ons and
enhancements
Sustaining

 Chartering and bounding individual projects necessary

(goals, boundaries,...)
 Providing and allocating resources to projects (hard
choices often necessary to avoid overcommitment,
simultaneous asssignments of people often problematic)

 Project organization and management

 Integration necessary – teams
 Functional team structure (passing of results,
dependencies problematic, aligned with career paths
and specialization, but overall success not tracked)
 Lightweight team structure (mostly junior project
managers, little influence, but coordination improved)
 Heavyweight team structure (primary influence with
project manager, motivation increased, loss of focus
probable, conflicts with rest, more generalist)
 Autonomous team structure (“tiger team”, full project
assignment, fast, focus and integration loss problem)
 Selection based on type of project, maturity, industry
conditions,...


Communication in NPD
 Extensive communication between engineering

and production critical
 Informal communication: beer busts, technical
symposia, offsite, multiday discussion meetings etc.
 Formal communication also essential
 Tasks: introducing new products to manufacturing,
providing optimum level of documentation on products,
facilitating orderly and effective changes to products in
production
 Introduction of new products
 Most taxing communication task
 Design engineers will maximixe performance,
manufacturing engineers will minimize costs (should be
together – value engineering)
 Prototyping: first in engineering for testing (lab & field)

using different materials etc., then pilot production with
normal design – joint responsibility
 Design freeze: done before full-scale production (in
agreement), later changes only through notices and
formally, can be sequential for parts
 Skunk works: multidisciplinary teams with own facilities
(high prestige, resources, fast, but might be disruptive)
 Following engineers: some design engineers move to
production for some time (job rotation)
 Multiple products: more difficult balance of maintenance
engineering and development, standardization of
components becomes issue

 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)?

Project Plans & Product Development
Maps
 Reasons for problems in development projects

 Overload & missing focus on critical projects
 Planning needs to be improved and aggregated –
Project mapping
 Based on process / product change
 R&D projects (outside), breakthrough, platform and
derivative projects (all important)
 Separate maps for alliance and partnership projects
 Each project mapped according to resources and
product line (Exhibit 3), reexamine and refocus (Exhibit
4)

Maps
 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

Maps
 Product development map

 Shows evolution of product lines over time (versus
functionality/value/price)
 Categories are core and leveraged (enhanced,
customized, cost reduced, hybrid) products
 Exhibit 1
 Case study: Coolidge cleaners (Exhibit 5)
 Submaps possible for distribution channels, customer,
design engineering, manufacturing,...
 Discussions on what to put on maps beneficial

Case: Apple
 “Design Thinking and Innovation at Apple” (HBS)

Entrepreneurship and New Ventures

Contents
1. Profiting from Technological Innovation (Reading I-1)

 Case: Elio Engineering Inc. (Case I-1)
 Case: Matrix Semiconductor Inc. (Case I-4)
2. Minimum Winning Game (Reading I-5)
 Case: StubHub (Case I-5)
 Case: Lumni (HBS)
3. High Technology Management (Reading I-7)
 Case: EA in 1995 / 2002 / 2005 (Case I-6 / I-7 / I-8)
4. Internal Corporate Venturing (Reading III-13 & III-14)
 Case: Pitney Bowes (Case III-5)
 Case: Donnelley & Sons (Case III-7)
 Case: Intel: Hood River (Case III-8 plus add-on)
 Case: HP (HBS)
Profiting from Technological Innovation
 Innovating firm soften fail to obtain significant

economic returns
 Imitators, followers, customers benefit
 Strategy and imitation costs important
 Control of complementary assets often necessary
 Example: EMI (leader in records, movies,...) pioneered
radar etc. - first developed CAT scanner, but lost market
after 6-8 years
 Example: RC Cola
 Example: Xerox – desktop computers (Apple)
 Example: IBM PC (not innovative)

 Basic building blocks for profiting

 Need to be put in place to profit
 Regime for appropriability
 Two dimensions: Nature of technology and efficacy of
legal mechanisms of protection
 Patents / trade secrets
 Product / process innovation
 Tacit / explicit knowledge
 Results in tight or weak appropriability

 Dominant design paradigm

 Two stages of branch of science: preparadigmatic
(without general accepted conceptual treatment) and
paradigmatic (scientific maturity and standards)
 Paradigms can be overturned
 First design competition, then price/process innovations
after dominant design (more capital investment)
 When imitation is easy, imitator might become dominant
design

 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)

 Profitability under weak appropriability

 In preparadigmatic phase, let design float, not choose to
early, need to be intimately coupled to market and let
users impact design, maybe parallel and sequential
prototyping (but might be costly)
 In paradigmatic phase complementary assets become
more important, firms with control over these might get
profits
 Access to complementary assets (control
structures)
 Contractual modes: contracts with suppliers, distributors,
manufacturers, etc., reduces risks and capital
requirements, good in tight appropriability and competitve
supply, can bring added credibility, hazards in getting
committment, imitation risk
 Integration modes: ownership, can capture benefits on

complementary assets, more control, timing and cash
constraints important (Exhibit 9, 10, 11)
 Mixed modes: quite common, or during transitions
 Case analyses
 EMI CAT scanner: needed assets like training, servicing,
should have found a partner like Siemens
 IBM PC: needed cospecialized assets like software, chose
open system approach, induced even without contracts,
help of name to reduce risks for others
 Nutrasweet: tight appropriability, but patents will run out,
created brand and manufacturing in-house, let supplier
contracts expire

 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

Case: Elio Engineering Inc.
 Describe Elio Engineering, and its position in the

industry.
 What is their vision?
 Describe the strategic options. What issues
should be considered in evaluating them?
Analyse based on the building blocks for
profiting from innovation.

Case: Matrix Semiconductors Inc.
 What was Matrix's strategy? What was their core

competence and competitive advantage? Was
it sustainable?
 What would you recommend?

Minimum Winning Game
 New high-tech ventures

 Generally no formalized strategy process
 Problem of knowing user needs with regard to new
technology
 Often originate from technical competence of an
entrepreneur, business strategy follows (Matrix
Semiconductor case)
 Sometimes based on insight into market need (StubHub
case)
 Conceptualising business opportunity always
needs linking between technical and need
 Minimum winning game

 Minimum winning game

 First major market opportunity that is limited enough for
clear target for technology and product development
short-mid term, and sufficiently large to provide
foundation for long-term development
 Quite often maximum winning game defined (also for
venture capital), which leads to having no clear goals
and moving from one vague vision to another
 MWG is product/market position achievable in 12-18
months, depends on market (network externalities),
competition, competencies, shapes identity
 Will provide foundation for next MWG and 2-3 years
 Then define next level MWG

 Pursuing MWG – drivers of strategic action

 Technology development, product development and
business strategy
 Technology development as main driver: might be able
to reach market first, attract top talent, maintain
motivating atmosphere, but might move frome leading
to bleeding edge (too slow, costly, difficult to measure)
 Product development as main driver: more customer-
focused, learning from products, but maybe short-term
oriented, too niche-focused, or can result in production
problems due to technology

 Business strategy as main driver: provides clear

directions, longer-term oriented, but difficult with
unclear industry structure (customers, competitors,
partners etc.)
 Maintaining balance important, change of focus over
time
 Strategic planning process
 explicitly adressing MWG and drivers
 e.g. Intel has planning process every year for 3 years,
based on that product line planning with market and
product requirements documents
 Early circulation of drafts to key stakeholders, public
commitment at end

Case: StubHub
 Describe the initial minimum winning game of

StubHub and the strategic environment.
 Discuss the changes necessary to move to the
next step.

Case: Lumni
 “Felipe Vergara and Lumni: Launching an

Innovation in a Developing Economy” (HBS)

High Technology Management
 Continued management of high-technology

companies
 Study of large and small high-technology companies
 Paradox: patterns that promote disorder and informality,
at the same time order, consistency and continuity
 Continued success needs constant shift between
continuity and chaos
 Themes of success
 Business focus: tight focus on one field (Xerox, Kodak,
IBM,...), closely related products / product lines, focused
R&D (high amount ddue to size or proportion – 8-15% of
sales), consistent priorities and behaviour, also helps in
close interaction with customers

 Adaptability: balance of business focus with willingness

to undertake major and rapid change if technology or
markets change, requires organizational flexibility
(realignment of people and responsibilities and powerful
top management)
 Organizational cohesion: organizational cooperation
necessary (young/old, different areas), most often less
hierarchy and top management perks that signal
distance, good communicaiton and access to executives
(open door policy), dual career ladder, job rotation,
integration via placement (R&D next to manufacturing)
or multi-disciplinary teams, long-term employment

 Entrepreneurial culture: small divisions to recreate small

companies communications and no divisions, different
funding channels (own dision, corporate R&D, new
ventures division, or grants administered by some
selected people), tolerance of failure, free time (e.g.
20% unprogrammed time to pursue interests, or
fellowships)
 Sense of integrity: committed to individualism and
entrepreneurship, at the same time to long-term
relationships, see themselves as community, integrity is
not to be sacrificed for short-term gain, trust especially
important in areas of rapidd change and uncertainty,
self-understanding of competence and limitations

 Hands-on top management: active involvement and

understanding of basics of technology, ability to ask
questions and patience to understand
 Overall paradoxon: stability versus change
 Ambivalent management (getting rid of old products
against resistance and developing new ones, but also
incremental improvements)
 Alternating periods of relaxation and control (tension,
action and excitment followed by reflection and
evaluation)
 Different by unit or over time (Jefferson: “A little
revolution now and then is a good thing.”)

Case: EA in 1995 / 2002 / 2005
 What are key characteristics of the video game

industry (also compare to movie industry)?
 What are tradeoffs of developing hard- and
software to software only?
 What are potentials and risks associated with co-
branding?
 What were strategies and competitive
advantages in the different periods?
 What about platform development decisions?
 How has the Internet affected the industry?
 How should EA deal with convergence with TV /
Film / mobile / online?
Internal Corporate Venturing
 Managing autonomous strategic initiatives -

corporate entrepreneurship
 Creating new venture divisions
 Internal entrepreneurs allowed to pursue ventures
unencumbered by the constraints of the firm’s
mainstream business management
 Problems
• NVD–Operating division interface
• NVD–Corporate management interface

NVD–operating divisions NVD–corporate management

interfaces interfaces
Strategic interferences •Domain protection issues •Lack of diversification strategy
•Synergy considerations •Limits to rate of strategic change that can be
absorbed
• Effects on corporate image
Administrative/cultural •Rigidities resulting from •Circumvention of corporate rules and

frictions management system regulations
•Personnel transfer issues •Inadequate measurement and reward systems
•Resistance to institutionalization

 Assessing internal entrepreneurial initiatives

 Focuses on two key dimensions of strategic decision
making concerning internal entrepreneurial proposals:
• The strategic importance for corporate development
(How does it help company? What is risk? How to get
out?)
• The operational relatedness of proposals (What is
required? How to get that? How will this affect
current capabilities? Other areas requiring
innovation?)

Dimensions: Implications:
Strategic Degree of Administrative
importance control linkages
(authority)
Organizational
design
alternatives
Operational Efficiency Operational

relatedness considerations linkages
(networking)

 Design alternatives for corporate

entrepreneurship
 Determining administrative linkages
• High strategic importance → Strong administrative
linkages
• Low strategic importance → Examine how the new
business can best be spun off
• Unclear strategic importance → Relax the structural
context
 Determining operational Linkages
• High operational relatedness → Tight coupling
• Low operational relatedness → Complete decoupling
• Unclear operational relatedness → Loose coupling

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
Very Uncertai Not important

important n
Strategic importance

 Direct integration - High strategic importance and

operational relatedness require strong administrative
and operational linkages
 New product department - High strategic importance
and partial operational relatedness require a
combination of strong administrative and medium-
strong operational linkages
 Special business units - High strategic importance and
low operational relatedness may require the creation of
specially dedicated new business units
 Micro new ventures department - Uncertain strategic
importance and high operational relatedness seem
typical for the “peripheral” projects that are likely to
emerge in the operating divisions on a rather continuous
basis
 New venture division - Proposed for situations of

maximum ambiguity in the assessment framework
 Independent business units - Uncertain strategic
importance and negligible operational relatedness may
make this arrangement appropriate
 Nurturing plus contracting – An entrepreneurial proposal
may be unimportant for the firm’s corporate
development strategy yet be strongly related to its
operational capabilities and skills
 Contracting - Possibilities for nurturing diminish. There
may still be opportunities for profitable technology
licensing arrangements and for learning about new or
improved capabilities through operational linkages.

 Complete spin-off - If strategic importance and

operational relatedness are both low, complete spin-off
may be most appropriate.
 Implementation issues
 Tool for clarification between entrepreneur and
corporate management
 Corporate management needs to develop measurement
and reward system for different alternatives
 New information could alter perceived strategic
importance and operational relatedness → renegotitation
of organization design

 Process model of ICV

 Core processes of ICV: activities defining it and further
growth/impetus (stage model)
 Overlaying processes: activities through which strategic
and corporate contexts are determined
 Taking place at different levels of the organization
 Exhibit 1
 Major problems
 Top management has limited insight and time (due to
importance), mid-level R&D management not used to
business environment, venture manager still unclear
 Exhibit 2

 Vicious circles in definition

 Feasibility: (technical) demonstration necessary for
resources, but needs resources – product championing
(bootlegging, scavenging), even for customers or sales
people
 Problems in impetus
 ICV becomes venture (often with champion as manager)
 Continued growth depends on manager strategic forcing
 Needs to demonstrate sales volume and profit quickly
 Generalists replaced by specialist, efficiency
considerations – growth versus organization
 Mid-level at the same time strategy building to fit
venture in it (and coach)

 Top level authorizes, mostly on quantitative data (often

high expectations)
 Focus on growth and inattention often leads to lag in
new product development, probably demise of venture
manager
 Overlaying process
 Objective often unclear, mid level management
delineates boundaries of venture, strategic context often
unclear (mid level management engages in
organizational championship)
 Due to time lag and windows often small chance of
establishing venture, as strategies and top management
change
 Deducts time from mid-level, can not coach venture

 New ventures do not fit structural context (rewards,

selection process, goals...), can also lead to conflicts
with existing business
 Reactive change of structural context in case of growth
 Overlaying process overall more experimentation and
selection than planning (somewhat anarchy)
 Corporate development strategy
 Should be established (long-term, with resource
allocation, long-term funds), seeing ventures as source
of strategic renewal, not insurance
 Top management should be better able to assess (e.g.
include people with experience), less championship, less
emphasis on numbers, more strategy

 Better management of NVD (not simply a dump), pursue

other ways (external venturing), more integration with
other business, acknowledging fact of different
management needs in NVD
 Measurement and reward systems: sometimes corporate
history writing, less emphasis on numbers for venture
managers
 Important role of mid-managers: help in definition,
facilitate integration technology and business, coaching
(also leads to more important role in corporate strategy)
 Venture manager should be more focused on
organization building than growth (more leeway and
responsibilities)

 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

 Long-term commitment necessary – strategic leadership

and balance necessary (too much top driven ICV bad as
well), integrated and continous part of strategy making,
ICV as a source of insights for strategic directions,
shared responsibility of senior executives

Case: Pitney Bowes
 What was the original need identified?

 How ended this up as a product? What is the
difference to Stamps.com?
 What were the main reasons for the problems,
what can be done better in the future?

Case: Donnelley & Sons
 What are differences in critical success factors in

traditional printing vs. on-demand?
 What were critical challenges faced by the Digital
Division?
 Compare old to new Technology Development
Process.
 Examine the roles and interplays between
Schetter and Clarke.
 How can and should the Books Group be dealt
with?

Case: Intel: Hood River
 What is the strategic situation?

 How do you think Siegel would evaluate the other
managers, and they him?
 How should Siegel decide?

Case: HP
 “Innovation at HP: The Role of the Innovation

Program Office (IPO)” (HBS)

3 Innovation

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3 Innovation

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Innovation Management and New

New Product Management 1

New Product Management 2

1. Technology and Strategy (Part I - Intro)

New Product Management 3

New Product Management 4

Porter’s “generic strategies” concept is a

New Product Management 5

Overall cost Overall differentiation Focus-segment cost Focus-segment

New Product Management 6

Technology and Product-Market Strategy

New Product Management 7

New Product Management 8

High Bet Draw

Relative technology position

New Product Management 9

Technology & Business Portfolio

New Product Management 10

Low ec nat r op mi ygol onhce T Low

Competitive position Relative technology position

New Product Management 11

New Product Management 12

 Executives generally have low technology

New Product Management 15

New Product Management 16

 Assessing and directing technological innovation

New Product Management 17

New Product Management 18

New Product Management 19

 Rethinking the company based on its core

New Product Management 20

 Long run winner based on to build quickly and at

 Must be nurtured and used, maintained

New Product Management 22

 Loosing core competencies

New Product Management 23

 Concept of organization – Business Unit vs.

 Business units and core competencies

New Product Management 25

New Product Management 26

1. Technology Strategy (Part II - Intro)

 Technology is a resource (like human, financial

New Product Management 28

 Strategy making as evolutionary organizational

New Product Management 29

Determinants Generative Mechanisms Strategic Organizational

TECHNOLOGY EVOLUTION: Company affected by

New Product Management 31

INDUSTRY CONTEXT: affect profitability

STRATEGIC ACTION: captures organizational

New Product Management 33

ORGANIZATIONAL CONTEXT: allows subsitituting

New Product Management 34

 Productive unit's capacity for and methods of

 Two types of innovation (incremental change to

New Product Management 36

New Product Management 37

 S-curves for individual firms

New Product Management 38

 Plateau often based on perception of maturity and

 Architectural innovations often are worse with regard to

New Product Management 40

 Link of situation to competition winner