INTRO

• Participation (20%)
• Group Presentation (20%)
• Exam (60%)

Preparedness (max 2 points) – Preparedness and attitude (max 2 points) – Are you prepared for
class and able to fully express foundational knowledge? Do your contributions use appropriate
technology management language and concepts as introduced by the readings? Are you a good
listener? Are you positive and cooperative?
Engagement (max 4 points) - Are your contributions insightful and do they enhance learning? Do
you effectively identify and summarize key learning points? Do your contributions relate to,
connect and apply appropriate theory, methods and examples within the course and between
courses?
GROUP PRESENTATION
• Each group is required to make a 15-minute presentation on the technology management
topic assigned for that week.
• The objective of these presentations is to give us all a good overview of what a general
manager, not an innovation management specialist, should know about the topic.
• EVERY group member is expected to contribute to development and delivery of a narrated
PowerPoint presentation.
• See here for how to narrate a PowerPoint presentation: https://www.youtube.com/watch?
v=Y5dgwwa5XRA
• Upload the resulting video file to a Youtube channel that you create. Then send me the link
to video.
• Please list the names of all group members on the Title slide of the presentation.

THE IMPORTANCE OF TECHNOLOGICAL INNOVATION

• Readings:
– Chapter 1 of course text
– Paper: Hargadon, A. and Sutton, R.I., 2000. Building an innovation factory. Harvard
Business Review, 78(3), pp.157-157.
– Paper: Ahlstrom, D., 2010. Innovation and growth: How business contributes to
society. Academy of management perspectives, 24(3), pp.11-24.
• Questions:
– What is technological innovation?
– Why is technological innovation so important to firm success?
– How does technological innovation affect society, both positively and negatively?

What is technology?
• "technology" is a fairly new word — coined by Jacob Bigelow in 1820s
– technology — techne (Greek) art, craft, or skill.
– teks (Indo-euro) weave or fabricate.
• Technologies are developed to help us do something we otherwise couldn’t do.
Our ability to continually create technologies sets us apart from other animals.
DEF TECHNOLOGY: The application of knowledge, often for the attainment of specific goals
• Technology is associated with “progress” and continual improvement.
• Sometimes new technologies come about by accident.
• New technologies often create their own needs.
• New technologies are not always useful, consider fashion, prestige and other ways
consumers are controlled.
WHAT IS INNOVATION?
• Do not use the internet for any of the following:
– Individually think of one word that defines innovation. Write that word down.
– Individually write down a definition of innovation.
– Now define innovation in the context of a business function
• R&D, marketing, manufacturing, supply chain management accounting,
finance, human resources, sales.
– Now go into groups and Briefly introduce yourself and share the above
COMPONENTS OF INNOVATION
• It is to renew or change something, which is then applied and has some benefits.
• The word ‘innovation’ comes from the Latin, ‘innovare’, and is all about change.

It is any idea, practice or artifact that is perceived to be new by the users who adopt it.
It includes changes to products, services, technologies, processes, regulations, marketing and ways
of workings.
New to the organization, the industry, the country, the world
WHAT IS INNOVATION? (OECD DEFINITIONS)
• Product innovation
– A good or service that is new or significantly improved. This includes significant
improvements in technical specifications, components and materials, software in the
product, user friendliness or other functional characteristics.
• Process innovation
– A new or significantly improved production or delivery method. This includes
significant changes in techniques, equipment and/or software.
• Marketing innovation
– A new marketing method involving significant changes in product design or
packaging, product placement, product promotion or pricing.
• Social Innovation
– A new approach to addressing social issues (e.g., working conditions and education
to community development and health) that extend and strengthen civil society.
• Organizational innovation
– A new organizational method in business practices, workplace organization or
external relations.
INNOVATION
• An event, a process, and outcome?
• Innovation has a rate (i.e., how often or how fast)
• Innovation has a direction
 – Continuous i.e., more of the same ( example of camera 2005 to 2010 improves to
quality, lower price, )
– Discontinuous i.e., in different direction ( (example camera but different model)
• Innovation has a velocity = rate + direction
• Innovation has a magnitude i.e., how big is the difference
– Incremental vs. radical

Scope the Change (workgroup, department, division, enterprise)

Determine Number of Individuals Impacted
Define Change Type (policy, process, system, organization, job roles, etc.)

Paper: Ahlstrom, D., 2010. Innovation and growth: How business contributes to society. Academy
of management perspectives, 24(3), pp.11-24.!!
What does this paper say?
– Profits matter, but…….
– Why is firm growth important?
– What happens when societies grow economically and technologically?
• 1 hour of work in 1890, takes seven minutes in 2000
• Purchasing power, living standards, personal and organizational productivity.
THE IMPORTANCE OF INNVATIONS
• In groups discuss:
– Why does innovation matter?
– Who does it matter to?
– In what ways does it make a difference – economically, socially, living standards,
humanitarian, etc.
– Present your ideas in three slides and email them to me: imccarthy@luiss.it

WHY IS TECHNOLOGICAL INNOVATION SO IMPORTANT TO FIRM SUCCESS?

• Technological innovation is one the most important drivers for competitive success
– Many firms earn over one-third of sales on products developed within last five years
• Product life cycles ( time between product introduction to market and its withdrawal)
– Software 4-12 months
– Computer hardware 12-24 months
– Large home appliances 18-36 months
More customers sample the 24 flavours.
Customers sample the same number of flavours regardless of 6 or 24 flavours.
30% of the customers offered 6 flavours make a purchase.
3% of the customers offered 24 flavours make a purchase.
INNOVATION AND CHOICE
Car JUST FEW INDIVIDUALS IN 1800 had the car
• In 2018, Toyota offered 22 different passenger lines and associated 193 different models.
1930 many manufcatiring in us, in one day 2000 cars
What is the innovation of henry ford? People drive around the world -line , automation. Henry ford
decide to increase the pay

the last column is increisng, when the challenging

choice

BCG INNOVATION SURVEY

Risky, expensive,

WHY IS INNOVATION MANAGEMENT DIFFICULT? Right Tab

The role of customers is determinant, sometimes costumers kill the company ( es blackberry first
company of smartphone)

EXCERCISE
 • In groups produce a set of slides (max 6 slides) that explains how one or two technological
innovations affect society, both positively and negatively?
• Provide examples of the positive and negative impact.
• Explain who benefited or was hurt by the innovation.
• Explain how they benefited or how were hurt by the innovation?
• Email them to me at: imccarthy@luiss.it
IMPACT ON SOCIETY
Innovation enables a wider range of goods and services to be delivered to people worldwide.
• More efficient food production, improved medical technologies, better
transportation, etc.
• Increases Gross Domestic Product by making labor and capital more effective and
efficient.
• However, may result in negative externalities.
• For example, pollution, erosion, antibiotic-resistant bacteria.
WHY IS INNOVATION IMPORTANT FROM THE PERSPECTIVE OF OUR SOCIETY
AND ECONOMY AT LARGE?
• To increase economic growth by producing the same with less factor input or by producing
more with the same factor input (quantitative growth).
• To get products which better fit to customer needs (qualitative growth, enhancing consumer
welfare).
• To increase productivity of downstream industries by supplying better components and
machines.
• To support ecological or social sustainability by producing products and services in a
different, more efficient way
• Because the knowledge associated with an innovation can be used by others as well.
“BUILDING AN INNOVATION FACTORY” (HARGADON AND SUTTON)
• What is this reading about?
– Knowledge brokering – old (existing) knowledge applied in new contexts. Some
firms (or individuals) play a pivotal role in the innovation network. (ex Lamborghini,
born as agricoltural machine and now it is sport car)
– Brokers = intermediaries
• What is the knowledge brokering cycle?
– Capture good ideas.
– Keeping ideas.
– Imagining new uses for old ideas.
– Putting promising concepts to the test.
INNOVATION FUNNEL

Of 5000 compounds that are created for a specific physical ailment, 125 compounds qualify as
leads. They are subjected to discovery and preclinical evaluations. The evaluations last for three to
six years. Of the 125 compounds, two to three drugs qualify for clinical trials that last for six to
seven years. One drug clears the clinical trials and is approved as a form of treatment within a
period of 0.5 to 2 years.
THE S-CURVE

All it says is: things are going very, very slow in the beginning, the pace quickens in the middle,
and then decelerates in the end. That’s all it says. It’s a tool for thinking where you are strategically,
it’s a tool for asking questions, like ”what performance measure should I plot?” It is not a magic
forecasting tool.
S-CURVE INSIGHTS

THE CASE OF HYBRID CORN

The states that tended to adopt earlier were those with the highest economic return
(in terms of yields). Within each state, adoption followed an S-shaped pattern
TELEVISON, WASHING MACHINES, AND VCRS
ONE DAY’S ACTIVITY IN 1999 !
• All the world trade in 1949 = one day of world trade in 1999
• All the scientific projects in 1960 = a day of science in 1999
• All the telephone calls in 1983 = a day of calls in 1999
• All the emails in 1990 = a day of emails in 1999
IN 2019
• By 2020, there will be around 40 trillion gigabytes of data (40 zettabytes) (Source: EMC)
• Internet users generate about 2.5 quintillion bytes of data each day (Source: Data Never
Sleeps 5.0)
• 90% of all data has been created in the last two years. (Source: IBM)
• Today it would take a person approximately 181 million years to download all the data from
the internet. (Source: Physics.org)
TIME IT TOOK TO GAIN 50 MILLION USERS

INDUSTRY DYNAMICS
• The opportunity for and rate of innovation varies.
• At the birth of an industry innovation is often fertile and risky
– Detroit saw over 700 auto companies founded between 1900 – 1920!
– The 80 years for the next global player to emerge.
• Which company was this?
• Effective management of technological innovation helps you mitigate & manage those risks

WEEK 2 21.09. https://luiss.webex.com/webappng/sites/luiss/dashboard/pmr/imccarthy

CREATIVITY AND INNOVATION
• Readings:
– Chapter 2 of course text
– Paper: Amabile, T.M. & Khaire, M. 2008. Creativity and the role of the leader.
Harvard Business Review, 86(10): 100-109
– Catmull, E. 2008. How Pixar fosters collective creativity. Harvard Business Review,
86(9): 65–72
• Questions:
 – What is the relationship between creativity, invention and innovation?
– How are ideas generated?
– What makes an individual or organization creative?

Generating ideas: where the idea comes from?

Everywhere

Innovation can arise from many different sources. It can originate with individu- als, as in the familiar
image of the lone inventor or users who design solutions for their own needs. Innovation can also come from
the research efforts of universi- ties, government laboratories and incubators, or private nonprofit
organizations

Creativity is the underlying process for innovation. Creativity enables individu- als and organizations to
generate new and useful ideas. Creativity is considered a function of intellectual abilities, knowledge,
thinking styles, personality traits, intrinsic motivation, and environment

Innovation sometimes originates with individual inventors. The most prolific inventors tend to be trained in
multiple fields, be highly curious, question pre- viously made assumptions, and view all knowledge as
unified. The most well- known inventors tend to have both inventive and entrepreneurial traits.

Creativity? Ability to produce something different

How does creativity relate to ideas and innovation

EXERCISE slide of person familiar, list of what makes them creative, what is about in mind, heart
history and personalitiy that makes cretivite
OPEN-mindness, passion, courage, ability to explore, communication, travel
Nicholas, my friend and chef colleagues. His creativity is related to the combination of different
flavors. I think his creativity is influenced by the many travels and aborad experience that he
made.
Innovation can also originate with users who create solutions to their own needs.

Knowldege: understand difffernet field, look to ford he was an engineer

Personality introverse, extroverse, why do that?
Environment to encourage to explore
Inventors versus innovators
Innovation is the implementation of creative ideas into some new device or process.
1. Have mastered the basic tools and operations of the field in which they
invent.
2. Are curious, and more interested in problems than solutions.
3. Question the assumptions made in previous work in the field.
4. Often have the sense that all knowledge is unified. They will seek global
solutions rather than local solutions.
• Such individuals may develop many new devices or processes but
commercialize few.

Creative organization:
Firms’ research and development is considered a primary driver of innovation. In most countries, firms
spend significantly more on R&D than government institu- tions spend on R&D, and firms consider their in-
house R&D their most important source of innovation

CREATIVITY AND THE ROLE OF THE LEADER

2. Paper: Amabile, T.M. & Khaire, M. 2008. Creativity and the role of the leader. Harvard
Business Review, 86(10): 100-109
3. What is the role of the leader?
• “One doesn’t manage creativity. One manages for creativity”
•
The leader should inspired his staff,
Enable collaboration,
Diversity requires coordination and communication cost, general rule is more radical
 FOSTERING CREATIVITY
• Be persistent
• Be collective and share ideas ( combined different ideas)
• Be willing to let go of ideas that seem perfect in your eyes.
• Filter out the best content.
 • Avoid premature commitment to the first decent idea as-is. Build on it.
SOME WEIRD IDEAS
• Flip-flop method – design the worse process you can imagine, and then consider the
opposite.
• Think of some ridiculous or impractical things to do and plan to do them.
• Take your past successes and forget them
• Hire:
• slow learners of the organizational code
• people who might make you uncomfortable
• Encourage people to work on projects of their choice. Monitor and rarely interfere.
THE FLIP-FLOP METHOD ( to improve something
Instead of trying to respond to the challenge, what would you do to make it worse? Do the
following:
Invert the challenge (problem):
a. The challenge = “An initiative that makes appropriate and effective contributions to
self-governance for indigenous communities.”
b. The challenge inverted = “An initiative that makes inappropriate and ineffective
contributions to self-governance reality for indigenous communities.”

Challenge: How do we improve student satisfaction?

b. Inverted Challenge: How do we make students more dissatisfied?
a. Cancel classes with no notice
b. Uncomfortable classrooms
c. Disinterested professors
d. Assessments not related to course content and learning.
e. Inflexible learning programs
f. Expensive parking for cars
g. No extra-curricular activities
Inverted Challenge: How do we design the worst backpack for a university student?

SOME MORE WEIRD IDEAS

1. Decide to do something that will probably fail, then convince yourself and everyone else
that success is certain
2. Reward success and failure; punish inaction
3. Think of some ridiculous or impractical things to do and plan to do them.
4. Take your past successes and forget them
5. Hire:
• slow learners of the organizational code - the ICBC way;
• people who make you uncomfortable
6. Encourage people to ignore and defy their bosses and peers
WEIRD IDEAS AND AWARDS FOR CONTEMPT

• Charles House is ordered to halt work on an oscilloscope.

• Many HP managers -- including David Packard -- tell Chuck House to stop
working on it.
• He doesn’t. He goes on vacation and …….
• Product becomes a big success.
• Charles House awarded a medal by Packard for “extraordinary contempt and defiance
beyond the normal call of engineering.”
HOW TO BRAINSTORM
1. Don’t start brainstorming as a group. Individually list ideas i.e., brain writing.
2. Individually share ideas with the group. The most junior (or newest) person shares first.
Everyone listens. No one makes comments.
3. As a group discuss the ideas shared. Question and “constructively” praise, apply, criticize, test
and challenge. Organize, combine and adapt them.
4. Individually and privately vote on ideas
DISADVANTAGE OF BRAINSTORMING
Premature contamination
Extroverts vs freerides

VERTICAL THINKING
• SCAMPER is an acronym for a useful list of active verbs that can be applied as stimuli to
make you think differently about the problem.
• SCAMPER was defined by Robert Eberle, after an initial list from Brainstorming originator
Alex Osborn.

• Substitute? ..... Who else, where else, or what else? Other ingredient, material, or
approach?
• Combine? ...... Combine parts, units, ideas? Blend? Compromise? Combine from different
categories?
• Adapt? .......... How can this (product, idea, plan, etc.) be used as is? What are other uses it
could be adapted to?
• Modify? ........ Change the meaning, material, color, shape, odor, etc.?
– Magnify? ...... Add new ingredient? Make longer, stronger, thicker, higher, etc.?
– Minify? ........ Split up? Take something out? Make lighter, lower, shorter, etc.?
• Put to other uses? ..... How can you put the thing to different or other uses? New ways to
use as is? Other uses if it is modified?
• Eliminate? ..... What can you eliminate? Remove something? Eliminate waste? Reduce
time? Reduce effort? Cut costs?
• Rearrange? ..... Interchange parts? Other patterns, layouts? Transpose cause and effect?
Change positives to negatives? Reverse roles? Turn it backwards or upside down? Sort?
THEORY IN ACTION
Inspiring Innovation at Google.
• Google uses a range of formal and informal mechanisms to encourage its employees
to innovate, including:
• 20% Time (all engineers are encouraged to spend 20% of their time working
on their own projects).
• Recognition awards.
• Google Founders’ Awards.
• Ad sense Ideas Contest.
• Innovation reviews.
TRANSFORMING CREATIVITY INTO INNOVATION
Innovation by Users.
• Users have a deep understanding of their own needs, and motivation to fulfill them.
• While manufacturers typically create innovations to profit from their sale, user
innovators often initially create innovations purely for their own use.
Many innovation are created because people are curious

Research and Development by Firms.

• Research refers to both basic and applied research.
• Basic research aims at increasing understanding of a topic or field without
an immediate commercial application in mind.
 • Applied research aims at increasing understanding of a topic or field to meet
a specific need.
• Development refers to activities that apply knowledge to produce useful devices,
materials, or processes.
• Science Push approaches suggest that innovation proceeds linearly:
• Scientific discovery  inventionmanufacturing  marketing.
• Demand Pull approaches argued that innovation originates with unmet customer
need:
• Customer suggestions  invention  manufacturing.
• Most current research argues that innovation is not so simple, and may originate
from a variety of sources and follow a variety of paths.

Firms often collaborate with a number of external organizations (or individuals) in their innovation activities.
Firms are most likely to collaborate with customers, suppliers, and universities, though they also may
collaborate with competitors, producers of complements, government laboratories, nonprofit organizations,
and other research institutions.

Firm Linkages with Customers, Suppliers, Competitors, and Complementors.

• External versus Internal Sourcing of Innovation.
• External and internal sources are complements.
• Firms with in-house R&D also heaviest users of external
collaboration networks.
• In-house R&D may help firm build absorptive capacity that enables it
to better use information obtained externally.
Universities and Government-Funded Research.
• Universities.
• Many universities encourage research that leads to useful innovations.
• U.S. Bayh-Dole Act of 1980 allows universities to collect royalties on
inventions funded with taxpayer dollars.
• Led to rapid increase in establishment of technology-transfer offices.
• Revenues from university inventions are still very small, but universities also
contribute to innovation through publication of research results.

Many universities have a research mission, and in recent years universities have become more active in
setting up technology transfer activities to directly com- mercialize the inventions of faculty. Universities
also contribute to innovation through the publication of research findings.

Universities and Government-Funded Research.

• Governments invest in research through:
• Their own laboratories.
• Science parks and incubators.
• Grants for other public or private research organizations.

Government also plays an active role in conducting research and development (in its own laboratories),
funding the R&D of other organizations, and creating institutions to foster collaboration networks and to
nurture start-ups (e.g., science parks and incubators). In some countries, government-funded research and
devel- opment exceeds that of industry-funded research.

Private Nonprofit Organizations.

 • Many nonprofit organizations do in-house R&D, fund R&D by others, or both.
• The top nonprofit organizations that conduct a significant amount of R&D include
organizations such as the Howard Hughes Medical Institute, the Mayo Foundation,
the Memorial Sloan Kettering Cancer Center, and SEMATECH.

Private nonprofit organizations (such as research institutes and nonprofit hospi- tals) are another source of
innovation. These organizations both perform their own R&D and fund R&D conducted by others.

INNOVATION IN COLLABORATIVE NETWORKS

Probably the most significant source of innovation does not come from indi- vidual organizations or people,
but from the collaborative networks that leverage resources and capabilities across multiple organizations or
individuals. Collabora- tive networks are particularly important in high-technology sectors.

Collaboration is often facilitated by geographical proximity, which can lead to regional technology clusters.

Technology spillovers are positive externality benefits of R&D, such as when the knowledge acquired
through R&D spreads to other organizations.

Collaborations include (but are not limited to):

• Joint ventures.
• Licensing and second-sourcing agreements.
• Research associations.
• Government-sponsored joint research programs.
• Value-added networks for technical and scientific exchange
• Informal networks.
Collaborative research is especially important in high-technology sectors where individual firms
rarely possess all necessary resources and capabilities.
INNOVATION IN COLLABORATIVE NETWORKS
Likelihood of innovation activities being geographically clustered depends on:
• The nature of the technology.
• For example, its underlying knowledge base or the degree to which it can be
protected by patents or copyright, the degree to which its communication
requires close and frequent interaction;
• Industry characteristics.
• For example, degree of market concentration or stage of the industry
lifecycle, transportation costs, availability of supplier and distributor markets;
and.
• The cultural context of the technology.
• For example, population density of labor or customers, infrastructure
development, national differences in how technology development is funded
or protected.
INNOVATION IN COLLABORATIVE NETWORKS
technological spillovers occur when the benefits from the research activities of one entity spill over
to other entities.
• Likelihood of spillovers is a function of:
• Strength of protection mechanisms (for example, patents, copyright,
trade secrets).
• Nature of underlying knowledge base (for example, tacit, complex).
• Mobility of the labor pool.
TRAPS AND LESSONS FOR INNOVATION
Strategic and culture
Traps:
• Focus exclusively on big ideas – reject the small
• Risk aversion
• Focus only on products
Lessons:
• Not every innovation has to be a blockbuster
• Move beyond narrow product innovation focus
• Innovation pyramid – big bets, smaller ideas in various test stages

Internal process
Traps:
Controls too tight
Metrics wrong
Changes and adaptations discouraged
Lessons:
Different metrics and controls needed for innovations
Expect deviations and changes to the plans as normal
Company structure
Traps:
The pitfalls of running innovation projects and established projects at the same time in the company
Lessons:
Loosen formal controls but strengthen connections within business
Expect innovations to be inspired within the business as well as outside
Avoid creating two classes of citizens
People and skills
Traps:
Undervaluing the significance of the right people
Time to build trust and knowledge within a team
Avoid closed environments
Lessons:
Importance of the right leaders
Communicators and connectors are key – collaboration can foster this
Team dynamics are important

CLASS QUESTIONS
• What is the relationship between creativity, invention and innovation?
• How are ideas generated?
• What makes an individual or organization creative?

TYPES OF INNOVATION LESS 3,

• Readings:
– Chapter 3 of course text
– Bower, J., Christensen, C., 1995. Disruptive technologies: catching the wave.
Harvard Business Review, (Jan-Feb), 43}53.
– O’Reilly, C. and Binns, A.J., 2019. The Three Stages of Disruptive Innovation: Idea
Generation, Incubation, and Scaling. California Management Review
• Questions:
– Think of examples of competence enhancing innovation versus competence
destroying innovation, and architectural innovation versus component innovation.
 – How do you recognize a disruptive innovation?
– What are some of the reasons that both technology improvement and technology
diffusion exhibit s-shaped curves?
Starting in week 4 at least one group is make a 15-minute (maximum) narrated video presentation
and upload this to a YouTube Channel that you create.
• I will email you your topic.
• You will email me:
– The link to where you posted your video presentation on your YouTube.
– The slides only (not the video file) for your presentation. Please list the names of all
group members on the Title slide.
– Please advise me by email of any non-contributing members.
The criteria for this video presentation are as follows:
– Does the presentation inform a general manager about the topic, in an interesting and
compelling way, and in such a fashion that as general managers we can all say, after
the presentation: “I think I know the most important and fundamental things there
are to know about (insert topic here)? (max 4 points).
– Is the topic well presented by the group? Does it flow well, and is the audience
engaged by it? (max 2 point).
• In addition to covering the key concepts and theory related to the topic, focus on
identifying and using examples to explain and illustrate the concepts and theory.
• EVERY group member is expected to contribute to development of the presentation.
• But, not every member has to deliver (i.e., speak in the presentation).
• You choose how many speakers you wish to have.

RECAP INNOVATION
• An event, a process, and outcome?
• Innovation has a rate (i.e., how often or how fast)
• Innovation has a direction
– Continuous i.e., more of the same
– Discontinuous i.e., in different direction
• Innovation has a velocity = rate + direction
• Innovation has a magnitude i.e., how big is the difference
– Incremental vs. radical
TYPES OF INNOVATION
Radical versus Incremental Innovation.
• The radicalness of an innovation is the magnitude of newness or difference from
previously existing products and processes.
• Incremental innovations may involve only a minor change from (or adjustment to)
existing practices.
• The radicalness of an innovation is relative; it may change over time or with respect
to different observers.
• For example, digital photography a more radical innovation for Kodak than
for Sony.

THE FIRST IPHONE WAS RADICALL , with the evolution changes

Magnitude of newness
 evolution of technology , looking the
weight, the size

Componenet or system level change

Competence-Enhancing versus Competence-Destroying Innovation.

• Competence-enhancing innovations build on the firm’s existing knowledge base.
• For example, Intel’s Pentium 4 built on the technology for Pentium III.
• Competence-destroying innovations renders a firm’s existing competencies
obsolete. (ex macchina da scrivere pc, vinyl  cassettacd mp3 )
• Whether an innovation is competence enhancing or competence destroying depends
on the perspective of a particular firm.
Architectural versus Component Innovation.
• A component innovation (or modular innovation) entails changes to one or more
components of a product system without significantly affecting the overall design.
• For example, adding gel-filled material to a bicycle seat.
• An architectural innovation entails changing the overall design of the system or the
way components interact.
• For example, transition from high-wheel bicycle to safety bicycle.
Most architectural innovations require changes in the underlying components also

Incremental Innovation
The knowledge required to offer a product builds on existing knowledge.
Most innovations are incremental
Also called Sustaining technology
Sony produced 75 models of its Walkman portable stereo

Radical Innovation
The technological knowledge required is very different from the existing knowledge; existing
knowledge becomes obsolete
Radical innovation à look outside the boundaries to innovate
Also called Disruptive technology

WHY ARE INCUMBENT FIRMS MORE LIKELY TO FOCUS ON INCREMENTAL

INNOVATION?
• Economic Incentives:
– Established companies are focused on defending their position
– Exploitation versus exploration
• Organizational Inertia:
– Established companies rely on formalized business processes and structures
– Competency trap
• Innovation Ecosystem:
– Established companies are part of a value chain of suppliers, buyers, complementors
- Incentivi economici:
- Le compagnie affermate sono concentrate sulla difesa della loro posizione
- Sfruttamento contro esplorazione
- Inerzia organizzativa:
- Le aziende consolidate si affidano a processi e strutture aziendali formalizzate
- Trappola delle competenze
- Ecosistema dell'innovazione:
- Le aziende consolidate sono parte di una catena di valore di fornitori, acquirenti, complementari

Disruptive innovation (switch from 1 reality to 1 reality) key thing is the people has to think “this is
a joke”
• Your best customers (at first) do not value performance attributes of the innovation
• The innovation (at first) performs worse on certain attributes.
• It appears (at first) to be financially unattractive: small markets, low profit margins
• Difficult to predict the growth rate of the market
• Often is associated with a new business model of value creation and capture.
 • Often requires new manufacturing/delivery processes.
• Often not radical, at first.
Disrupt customers preferences, but in way that is good to customers and bad to incumbents.
HARD DRIVE EXAMPLE

IS UBER A DISTRUPTIVE INNOVATION? Cheaper, safer comfortable, private, no tip, no

exchange money.
No disruptive innovation
• What are the performance dimensions?
• Who are the customers?

THE INCUMBENT'S WEAK RESPONSE

• Late, slow, half-hearted, tentative and ineffective
• On the “wrong” peak (accelerate their own, ignore the new)
• Lacking critical mass, under-funded, under-supported
• Expensive
. Time compression diseconomies
. Lasting stalemate
• Often strategically flawed
. Transfer of “old” value creation system
WHAT FIRM SHOLD DO
• How do you identify disruptive innovations and their potential impact?
• An innovation that:
– That (at first) does not appeal to your best customers.
– Has lower performance that your offerings.
– Has substantially lower profit margins than your business can support.
• It:
– challenges existing business models
– enables applications to move down market to new uses
– disrupts established competitors
• At first a disruptive innovation is generally NOT:
– Better technology and better performing
– Disruptive to you current customers 
 • Be Observant
– Customers typically won’t lead you to them.
– Less profitable than alternatives - with current business models.
– Marketing, sales and financial people will oppose or be unenthusiastic.
– Senior management will often be unaware or attach little importance to technology.
• Be Proactive
– Initial applications will be unclear. Watch for a market to emerge.
– Vulnerable markets are those which are over served in terms of functionality and
populated by large, complex, inconvenient products and services (e.g., Xerox)
– Draw a trajectories map. 
INNOVATION LIFE CYCLES
• New
• Development
• Maturity
• End of life
• When do you phase in new generation?

So, Innovation is not something that is a static event. It has life, and like any kind of life, it
develops.
The end of life is different for every offering, every industry. For many areas of technology, we are
very familiar now with the patterns of new innovations coming in, we anticipate them – my son is
looking to the new PS5, even as the existing PS4 is doing well in sales – he got one for Christmas.
He knows it’s in development, he expects it.
But for other industries, the end of life is less well defined and familiar, less clear. They are
industries that move more slowly, or where the knowledge and expertise that drives them is less
tangible and is not so easily applied into the same kind of development model as technology. Think
about the restaurant business, hospitality, others…????
Many of these are service industries.
For those industries and markets, it’s less clear when they have to start thinking about the next
innovation.
INNOVATION LIFE CYCLE

We can also think of Innovations as having a life cycle – an S curve, with infancy, growth,
maturity and ultimately decay
It goes through initial conception, to a development stage where different little problems are
ironed out, usually with some significant market feedback, to maturity, where it is an accepted
offering, and finally to end of life.
Some innovations have very short life cycles [eg. Betamax]
Others have very long life cycles [eg. writing, roman numerals]
Each stage can take different lengths of time
TECHNOLGY S-CURVES
Both the rate of a technology’s improvement, and its rate of diffusion to the market typically follow
an s-shaped curve.
S-curves in Technological Improvement.

Technology improves slowly at first because it

is poorly understood.
Then accelerates as understanding increases.
Then tapers off as approaches limits.
The x-axis of the graph represents effort. The y-axis of the graph represents performance. The graph
is an s-curve with the plateau labeled limit of technology.
When money and effort are invested, technology initially improves at a slow pace. With
improvements, performance accelerates at an exponential rate. Performance reaches a plateau when
technology begins to reach its inherent limits.
Technologies do not always get to reach their limits.
May be displaced by new, discontinuous technology.
A discontinuous technology fulfills a similar market need by means of an entirely new knowledge
base.
For example, switch from carbon copying to photocopying, or vinyl records to compact discs.
Technological discontinuity may initially have lower performance than incumbent technology.
For example, first automobiles were much slower than horse-drawn carriages.
Firms may be reluctant to adopt new technology because performance improvement is initially slow
and costly, and they may have significant investment in incumbent technology.

S-Curves in Technology Diffusion.

• Adoption is initially slow because the technology is unfamiliar.
• It accelerates as technology becomes better understood.
• Eventually market is saturated and rate of new adoptions declines.
• Technology diffusion tends to take far longer than information diffusion.
• Technology may require acquiring complex knowledge or experience.
• Technology may require complementary resources to make it valuable (for
example, cameras not valuable without film).
The x-axis represents years; its values range from 1980 to 2004 at intervals of 2. The y-axis
represents percentage; its values range from 0 to 100 at intervals of 10.
The approximate data from the graph are as follows:
For videocassette recorders, household penetration was 1 percent in 1980. It rose steadily between
1980 and 2000. Household penetration was 97 percent in 2000 and decreased between 2000 and
2003. It then increased to 91 percent in 2004
CONTAGION IN ACTION: ORTEIG PRIZE & THE SPIRIT OF ST. LOUIS
• 1919 Raymond Orteig puts up a $25,000 challenge to fly New York Paris.
• 9 Teams register to compete and spent $400,000 to win the prize.
• The underdog, 25 year old Charles Lindberg wins the prize!
• Within 18 months of his flight:
– Passenger traffic increased 30x
– # of aircraft increased 4x
– Aviation stocks soar
ADOPTER CATEGORIES
• Innovators are the first 2.5% of individuals to adopt an innovation. They are adventurous,
comfortable with a high degree of complexity and uncertainty, and typically have access to
substantial financial resources.
• Early Adopters are the next 13.5% to adopt the innovation. They are well integrated into
their social system, and have great potential for opinion leadership. Other potential adopters
look to early adopters for information and advice, thus early adopters make excellent
"missionaries" for new products or processes.
• Early Majority are the next 34%. They adopt innovations slightly before the average
member of a social system. They are typically not opinion leaders, but they interact
frequently with their peers.
• Late Majority are the next 34%. They approach innovation with a skeptical air, and may
not adopt the innovation until they feel pressure from their peers. They may have scarce
resources.
 • Laggards are the last 16%. They base their decisions primarily on past experience and
possess almost no opinion leadership. They are highly skeptical of innovations and
innovators, and must feel certain that a new innovation will not fail prior to adopting it.

The first graph is a labeled s-curve of cumulative adopters. In this graph, the x-axis represents time.
The y-axis represents cumulative adopters; its values are as follows: 2.5 percent, 16 percent, 50
percent, 84 percent, and 100 percent. The diffusion s-curve is a line graph that starts near the origin
of the graph, curves upward, and continues in an upward incline, after which it reaches a plateau.
Lines extend from each marking of the y-axis, splitting the diffusion curve into five sections that
correspond to Roger’s adopter categories. In the first section labeled innovators, the line graph
extends from the point of origin. In the second section labeled early adopters, the line curves
upward. In the third and fourth sections labeled early majority and late majority, respectively, the
line continues steadily on an upward incline. In the fifth section labeled laggards, the line plateaus
and travels parallel to the y-axis. The first section of the curve corresponds to the range of
percentage values from 0 to 2.5. The second section of the curve corresponds to the range of
percentage values from 2.5 to 16. The third section of the curve corresponds to percentage values
from 16 to 50. The fourth section of the curve corresponds to percentage values from 50 to 84. The
fifth section of the curve corresponds to percentage values from 84 to 100.
TECHNOLOGY CYCLES
Technological change tends to be cyclical:
• Each new s-curve ushers in an initial period of turbulence, followed by rapid
improvement, then diminishing returns, and ultimately is displaced by a new
technological discontinuity.
• Utterback and Abernathy characterized the technology cycle into two phases:
• The fluid phase (when there is considerable uncertainty about the technology
and its market; firms experiment with different product designs in this phase).
• After a dominant design emerges, the specific phase begins (when firms
focus on incremental improvements to the design and manufacturing
efficiency).
Anderson and Tushman also found that technological change proceeded cyclically.
Each discontinuity inaugurates a period of turbulence and uncertainty (era of ferment) until a
dominant design is selected, ushering in an era of incremental change.
The technological cycle comprises two eras, each of which is triggered by an event. The era of
ferment is triggered by technological discontinuity. It is characterized by companies competing to
create the best design and substitution. The era of ferment ends with the rise of a dominant design.
This triggers the beginning of the era of incremental change, which is characterized by the
elaboration of the dominant design. This era continues until the next technological discontinuity
begins another era of ferment, and so on.
Anderson and Tushman found that:
• A dominant design always rose to command the majority of market share unless the next
discontinuity arrived too early.
• The dominant design was never in the same form as the original discontinuity, but was also
not on the leading edge of technology. It bundled the features that would meet the needs of
the majority of the market.
During the era of incremental change, firms often cease to invest in learning about alternative
designs and instead focus on developing competencies related to the dominant design.
This explains in part why incumbent firms may have difficulty recognizing and reacting to a
discontinuous technology.
EX DISRUPTIVE TECHNOLOGIES/INNOVATIONS
• Carefully look at the definition as per Clayton Chrisetensen’s theory
• What are the performance drivers? How are they going change?
• Identify how consumers or consumer behavior changes.
• Explain why the best existing customers (at first) do not value performance attributes of the
innovation
• The innovation (at first) performs worse on certain attributes.
• It appears (at first) to be financially unattractive: small markets, low profit margins.
• Difficult to predict the growth rate of the market
• Maybe associated with a new business model of value creation and capture.
• Maybe requires new manufacturing/delivery processes.
HOW YOU INNOVATE DEPENDS ON THE TYPE OF INNOVATION DESIRED
WEEK 4: STANDARDS, MODULARITY AND PLATFORMS
• Readings:
– Chapter 4 of course text
– Case: Teixeira, T.S. and Brown, M., 2016. Airbnb, Etsy, Uber: Acquiring the First
Thousand Customers.
– Paper: Shapiro, C. and Varian, H.R., 1999. The art of standards wars. California
management review, 41(2), pp.8-32..
• Questions:
– Why does a dominant design emerge, and why it is not always the most
technological superior design that becomes dominant?
– Are dominant designs good for consumers? Competitors? Complementors?
Suppliers?

Vhs wins even if its costly more superior, vhc invest in and supported things to play on this video
recorders. Betamax made by sony thisn is way sony invest in music play and etc.
HOW DOES A DOMINANT DESIGN EMERGE?
Increasing returns to adoption
A technology often becomes more valuable the more it is adopted. Two primary sources are
learning effects and network externalities.
The Learning Curve: As a technology is used, producers learn to make it more efficient and
effective.

The first graph illustrates a decrease in the cost per unit corresponding to an increase in cumulative
output. The second graph illustrates an increase in the performance on each unit corresponding to an
increase in cumulative output.
What are network externalities?
The benefit from using a product increases with the number of other users of the same product.
Network externalities are common in industries that are physically networked.
• For example, railroads, telecommunications
Network externalities also arise when compatibility or complementary goods are important.
For example, many people choose to use Windows in order to maximize the number of people their
files are compatible with, and the range of software applications they can use.

A technology with a large installed base attracts developers of complementary goods; a technology
with a wide range of complementary goods attracts users, increasing the installed base. A self-
reinforcing cycle ensues.

MULTIPLE DIMENSIONS OF VALUE

• In many industries, the value of a technology is strongly influenced by both:
• Technology’s standalone value
• Network externality value( support and invest)
• A technology’s stand-alone value
• Includes such factors as:
• The functions the technology enables customers to perform
• Its aesthetic qualities
• Its ease of use, etc.
Network externality value
• Includes the value created by:
• The size of the technology’s installed base
• The availability of complementary goods
 • A new technology that has significantly more standalone functionality than
the incumbent technology may offer less overall value because it has a
smaller installed base or poor availability of complementary goods.
• For example, NeXT Computers were extremely advanced
technologically, but could not compete with the installed base value
and complementary good value of Windows-based personal
computers.

How much this is works , installed base

Competing for Design Dominance in Markets with Network Externalities
• We can graph the value a technology offers in both standalone value and network
externality value:

ARE WINNER-TAKE-ALL MARKETS GOOD FOR CONSUMERS?

• Network externality benefits to customers rise with cumulative market share
Potential for monopoly costs to customers (for example, price gouging, restricted product variety,
etc.) also rise with cumulative market share
STANDARDS
• What are standards? What is standardization?
– Standards are specifications for products, processes and services.
• The set of rules that assure compatibility between nodes and links in a
network of technologies, products and services. (set by some organization or
instituitions)
Standardization is the process of developing and implementing specifications based on the
consensus of the views of firms, users, interest groups and governments
• Standards are intended to promote compatibility, interoperability and quality.
• Standards can promote network effects: the more people that adopt a standard, the more
valuable it becomes.
– There are often rewards for interconnecting.
• Like networks, standards can be propriety, open, voluntary or mandated.
• Standards strategy become more important as systems proliferate and interconnect.
• Standards can reduce variety, thereby lowering the cost associated with the production of
one unit and creating economies of scale.
STANDARDS AND TRADE
• Ensuring interoperability is important in order to avoid fragmentation of the Single Market.
• Standards can also be used to protect domestic markets.
– Complicated procedures to determine product conformity with technical
requirements increase transaction costs and hinder trade (WTO, 2005).
– If producers have to certify their products in each country, they will face substantial
costs (WTO, 2005). Mutual recognition of certification bodies resolves this problem.
STANDARDS AND TRADE:ELECTRICAL WHITE GOODS
• 20 years ago trade was dominated by national (sometimes regional) manufacturers
• Significant world trade today
• Standards have contributed to acceptance of goods worldwide, notably
– electrical safety standards, and today
– energy efficiency standards and
– performance standards
• Cultural differences still exist (e.g. North American consumers are used to much larger
appliances than European/Asian consumers)

What are the takeaways from this reading

Min 1.18 Compatible tv black and white broadcasting, all thi
Ip rights if the innovation became standard or dominant design. Ability to innovate
Incompatible

The Art of Standards Wars

Summary
The article begins with a discussion of the historic examples: North vs South in railroad gauges, Edison vs
Westinghouse in electric power and RCA vs CBS in color television. Besides telling the stories, this section also draws
the learning from these examples. Then the authors go on describing the types of standards wars. They have identified
three types:
Rival Evolutions, Rival Revolutions and Revolution vs Evolution. The terms evolution and revolution refers to the
backward compatibility (and lack of it, respectively) of new technologies. The authors have then identified seven
key assets, ownership of which could indicate strength for waging in the standards war:
- Control over an installed base of customers - can be used to block cooperative standard setting and also to
block rivals from offering compatible products.
- Intellectual Property Rights (IPR)
- Ability to innovate
- First-mover advantages
- Manufacturing capabilities - cost advantage is important!
- Strength in complements
- Reputation and brand name
In next section, the authors have identified two crucial marketplace tactics: preemption and expectations management.
There are multiple ways to preempt. One simple way is to be first to market. Secondly, you should aggressive early on
to build an installed base of customers.
Penetration pricing can be used to build such installed base of customers. For expectations management, vaporware is a
classic way: announcing an upcoming product so as to freeze rival's sales. But perhaps the most direct way to manage
expectations is by assembling allies and by making grand claims about product's current and future popularity.
Finally, the authors have given advice to both winners and losers. The advice for winners is
as follows:
- Stay on guards and let not rigidity due to early move constrain you for brining in improvements.
- Offer customers a migration path so that newer versions of products can be brought out without worrying
about supporting the older versions.
- Commoditize complementary products so as to maintain a competitive market.
- Competing against your own installed base
Protecting your position by offering ongoing attractive terms to important complementers and by taking
steps to avoid being held up by others who claim that your product infringes their patents or copyrights.
Leveraging your installed base by carefully expanding in adjacent space and/or by
expanding geographically.
Staying a leader by means such as developing proprietary extensions to otherwise open standards and by allowing
complementors and even rivals to participating in developing standards under your terms
The advice for losers for recovery is as follows:
- Add an adapter or somehow interconnect with a larger network.
- Resist from offering survival pricing as it signal weakness.
Contribution and Critique
The authors tried to understand how standards wars begin and to classify type of standards wars through historic
examples. Even though empirical analysis didn’t, they identified seven key assets in network market and the crucial
market tactics. Also, they commented the action of companies depending on whether they won or they fell behind.
Although written for technology companies engaged in standards wars, this article is a good read for anybody interested
in knowing how standards get established and in knowing the political side of standards-setting. It also contains very
pertinent advice to the technology companies, which are involved in the standards wars. It talks about strategies and
tactics with quite a few examples from field.
LEZ 7.10
RECAP WHAT IS A DOMINANT DESIGN? – a product or process architecture that dominates a product category.
It is a de facto standard ( it’s not actually a standard)
So while it is not officially enforced design, it

FREE RIDER PROBLEM

• Companies who are unwilling to participate in and contribute to the standards process
usually nevertheless have access to the standard (because most committee standards are
available on the web for free or at low cost).
• This phenomenon is called the free rider problem.
NETWORK EXTERNALITIES
• Standards, particularly in the communication field, have network externalities: i.e. every
new user in the network increases the value of being connected to the network.
– direct network externalities: e.g. every new fax machine increases the reach of the
network
– indirect network externalities: e.g. if everyone buys the same car brand, the number
of dealers and the availability of spare parts will be higher
 • Network externalities require compatibility. Competing networks that are incompatible
reduce the externalities of the networks involved.
LOCK-IN AND SWITCHING COSTS
What are these costs?
• The costs associated with switching from one standard to another.
• Applies to consumers and organizations.
• Creates inertia
• Lock-in is when the switching costs are too high.
• To help consumers switch, organizations will reduce their switching costs.

BANDWAGON EFFECT
 Bandwagon effect occurs when an important organizations makes a unilateral public
commitment to one standard; if others follow the lead they will be compatible at least with
the first adopter, and potentially with the followers.
 The first adopters of a standard take the highest risk, but they also have the benefit of
developing competence early
 If the old technology does not retain its critical mass, those left behind are referred to as
angry orphans.
TIMING OF STANDARDIZATION
• Standardization at an inappropriate time can lead to economic inefficiency.
• Too early standardization may prematurely lock an industry into a technology, precluding
experience with the diversity.
• Standardization occurs too late if technological options have already become entrenched.
Companies with installed bases will then ignore the standards.

TECHNOLOGY MATURITY AND STANDARDIZATION TIMING

PRODUCT ARCHITECTURE: DEFINITION

The arrangement of functional elements into physical chunks which become the building blocks for
the product or family of products.
MODULAR

Ex ikea

• Modules implement one or a few functions entirely.

• Interactions between modules are well defined.
• Modular architecture has advantages in simplicity and reusability for a product family or
platform.
Modularity is the extent to min 13
Music system: you can remove some part
Integrated music system : it is not easy to change some components
TRAILER EXAMPLE: MODULAR ARCHITECTURE
Modular integrated (perform better but is hard to change
DELL AND COMPAQ
• Dell did to Compaq what Compaq did to IBM…
• Dell created an equally good machine, but….
– used product and process modularity to reduce its production, logistics and
distribution costs and increase ROIC
– Negative Net Working Capital
– Direct sales, no dealers
• By 1990 Compaq was seeking to exit the unprofitable PC marketplace!
•
TYPES OF MODULARITY

MODULARIZATION

If you are smart consumer you ll get skoda (more cheaper and same technology of wolsfagen)
POSTPONEMENT
If oyu emerge a car , number of variance , in a very modular way

VALUE OF MODULARITY
• Modularity accommodates change.
• It encourages innovation by decentralizing decision making on hidden modules
• Technically, it creates the option for third parties to innovate on a module
– Parties compete to create a better module
– A few “experiments” likely to create superior module whose value to users exceeds
cost of experiments; downside minimal because can keep old
• Cluster of innovators emerge around architecture, resulting in new industry
THE MIRRORING HYPOTHESIS

If you are company higher, university is very modular, the

PRODUCT ARCHITECTURE AND NPD PROCES

CHOOSING THE PRODUCT ARCHITECTURE

• What business and organizational factors influence the architecture:
– Rate and direction of product change
• Modularity allows for “continuous” upgrades and “add-ons”
– Desired or required product variety
• Modularity can vary without adding tremendous complexity to the
manufacturing system.
– Standardization
• Use the same components in multiple products.
– Product performance
– Manufacturing implications
• Economies scale with standardized modules

Modularity-in-design is not good or bad. It is important and it is costly. And dangerous to ignore.
PLATFORM
• Businesses built on digital platforms that bring together two or more market actors and grow
through network effects.
• Top-ranked companies by market capitalization include Apple, Microsoft, Alphabet
(Google’s parent company), Amazon, Facebook, Alibaba, and Tencent. (this represent
trillions of value)
• As of January 2020, these seven companies represented more than $6.3 trillion in market
value, and all of them are platform businesses.
INNOVATION PLATFORM
• Innovation platforms facilitate the development of new, complementary products and
services, such as PC or smartphone apps
• Complementary = the platforms add functionality or assets to the platform.
• Network effects = the more complements or their higher quality makes the platform more
attractive.
• Platform often delivers and capture value by selling or renting a product/service, and
advertising.
TRANSACTION PLATFORM
• Transaction platforms are intermediaries or online marketplaces.
• They facilitate the exchange goods and services or information.
• Network effects = the more participants and functions the more useful it becomes.
• Value is created by enabling exchanges that would not otherwise occur without the platform.
• They capture value by collecting transaction fees or charging for advertising.
PLATFORM ECOSYSTEM
What is a platform ecosystem? Examples?
In a platform ecosystem, some core part of a product (such as a video game console) mediates the
relationship between a wide range of other components or complements (for example, video games,
peripherals) and prospective end-users.
• A platform’s boundaries can be well-defined with a stable set of members or
amorphous and changing.
• The success of all members of the ecosystem depends in part upon the success of
other members.
• Members often invest in co-specialization or exclusivity agreements.
PLATFORM ECOSYSTEM Are impacted by:
technology standards – may reduce the need for or importance of platforms
dominant designs
modularity (platform is very modular)
Network effects

MOBILE PHONE PLATFORM ECOSYSTEM

 its outsources company,
PLATFORM ECOSYSTEMS STRIKE A BALANCE BETWEEN PURE MODULARITY
AND PURE INTEGRATION

RECAP
• Technology, technology management and perspectives, and impact.
• How to carry out technology management?
– It depends!
– Depends on what?
The nature of the innovation (continuous-discontinuous, incremental-radical, competence
destroying or enhancing)
Industry and innovation velocity (rate and direction of change)
The industry innovation ecosystem: dominant designs and associated standards, and platforms)

Presentation Orgainizing Innovation- Explaining what a Dominant Design is.

1) The context: the technology cycle the context in which the D.D. arise parallelism with
the “the scientific revolutions’ structure”, kuhn (1962, 1969)
2) The Dominant Design a general overview (what is? Some definitions)
3) The Dominant Design Life Cycle
4) Ax example ( maybe in the automobilistic sector)
5) Possibly another example.

SESSION 5: SPEED AND TIMING

Discussion Questions:
1. What are the advantages and disadvantages of entering the air taxi market early?
2. What are the important complementary goods and enabling technologies for the air taxi
market? Are they currently available in sufficient quality and economy?
3. Is Uber well positioned to be a dominant player in this market? What resources will Uber
need to develop or acquire be successful?
4. Overall, would you say Uber’s entry into the air taxi market is too early, too late, or about
right?
5. Where would you suggest they Uber launch this service? Explain why?
1: advantage over helicopters in urban mobility in terms of safety, costs, noise and efficiency thanks
to distributed propulsion and electricity
a competitive advantage is strong brand recognition and customer loyalty.
Other companies can copy and improve the product
another advantage may include time to develop economies of scale, cost-efficient ways to produce
or deliver a product.
The disadvantages of first movers include the risk of products being copied or improved by
competitors.

C0muflage fake info

DELIBERATELY LEAKING SECRETS

leading stimulate reaction to consimer or to competitors

DELIBERATELY LEAKING SECRETS
• John Martellaro (2010), a former senior marketing manager at Apple, one how the firm
engaged in ‘‘controlled leaks‘‘
• “We need to release this specific information. John, do you have a trusted friend at a major
outlet? If so, call him/her and have a conversation. Idly mention this information and
suggest that if it were [to be] published, that would be nice. No e-mails!’’
• “Often, information floated in leaks isn’t final, and something about the product will
change before production actually occurs, and if there’s no trail and no evidence to point
to, both Apple and the news outlet are protected against claims of having disseminated false
information. Official leaks are published after the close of the stock market to avoid
accusations of stock manipulation.”
ITS ABOUT TRYING TO GENERATE and stuiulate reaction, when you look at story of leak.
Leaking is central to organizing innvovation . control leak claim a
LEAKING SECRETS

Provoking : accidental as Apple in a bar .

Which is the most ethical? Informing
The least ethical/unlegal? Provoking( depending in which part of the word you are)

TECHNOLOGY MANAGEMENT TIMING

 • First movers (or pioneers) are the first entrants to sell in a new product or service category.
• Early followers (or early leaders) are early to market but not first.
• Late entrants do not enter the market until the product begins to penetrate the mass market
or later.
FIRST-MOVER
What are the advantages and disadvantages of being a first mover?
Advantages:
• Brand loyalty and technological leadership.
• Preemption of scarce assets.
• Exploiting buyer switching costs.
• Reaping increasing returns advantages.
Disadvantages:
• High research and development expenses.
• Undeveloped supply and distribution channels.
• Immature enabling technologies and complements.
• Uncertainty of customer requirements.
Deleware, the country with most off shore is the us . deleware it’s the legal regime

THE MARKET OFTEN PERCEIVES FIRST MOVERS AS HAVING ADVANTAGES

BECAUSE IT HAS MISPERCEIVED WHO WAS FIRST

STRATEGIES TO IMPROVE TIMING OPTIONS

• To have more choices in its timing of entry, a firm needs to be able to develop the
innovation early or quickly.
• A firm with fast-cycle development processes can be both an early entrant, and can quickly
refine its innovation in response to customer feedback.
In essence, a firm with very fast-cycle development processes can reap both first- and second-
mover advantages
THE CASE FOR BEING FAST
Speed Demons
How smart companies are creating new products -- and whole new businesses -- almost
overnight

THE CASE FOR GOING SLOW

"Apple Goes Slow to Win Fast“
“speed kills innovation” and "slow is the new fast
ENVIRONMENTAL (INDUSTRY) VELOCITY
• A way of understanding industry change and the impacts of change.
• Multiple dimensions of change: demand, competitors, technology, regulatory( think the
drone regulation), and products.
• Each dimension has a rate and direction of change
• The degree to which different dimensions might have different velocities (homology)
• The degree to which the velocities of different dimensions might affect one another over
time (coupling)
WHEN NEW INDUSTRIES EMERGE
• They are often considered to face high velocity conditions characterized by “rapid and
discontinuous change in demand, competitors, technology and/or regulation, such that
information is often inaccurate, unavailable, or obsolete” (Bourgeois & Eisenhardt, 1988:
816).
• To perform well companies need to be fast.
• This is achieved by:
– rational and formal strategic decision-making.
– rapid product development simple rules.
– team based decision-making.

sOME MORE OBSERVATIONS ABOUT RESEARCH ON VELOCITY

• It seems that most industries have high-velocity environments. Can this be true?
 • It is incorrectly assumed that:
• high-velocity = high technology, and that velocity = speed
• It seems studies have:
– treated velocity as single, latent descriptor i.e., a unidimensional concept
– Ignored that velocity is a vector i.e., it has a rate and a direction of change
VELOCITY
• Consider what is changing?
• Their rate of change (speed at which they move).
• Their direction of change?
From the innovation prospection
RATE AND DIRECTION
• The rate of change = the amount of change in a dimension of the environment over a
specified period of time (e.g. number of new products, regulations, patents, etc. per year)
• The extent to which the changes are:
– continuous (innovations that are more of the same and head in the same direction)
– or discontinuous (innovations that are different from the past and go in a different
direction)
• Discontinuities can, therefore, be represented by inflection points in the trajectories that
describe change in a dimension over time.

EXAMPLE PRODUCT VELOCITY

VELOCITY DIMENSIONS: HOMOLOGY AND COUPLING
• Velocity homology is the degree to which the rates and directions of change of different
velocity dimensions are similar to each other over a period of time.
• Velocity coupling is the degree to which and the ways that velocity dimensions interact
over time.

When techonolgy ,min 25

INDUSTRY DYNAMICS: COUPLING AND DELAYS
Impact of delays

MANAGING WATER TEMPERATURE IN A SHOWER

 34

32

30
Water T

28

26

24

22
0 10 20 30 40 50 60 70 80 90 100 110 120
Time
What do you think would happen in a more complicated setting, where you have to share the supply
of hot water with someone/something else?
DELAYS CAUSE
• Over-corrections
• Increasing instability.
• Large “unexplained” changes.
• Large variances in forecasts
• Excessive action
• It takes time to make decisions and it takes time for decisions to affect the market and
industry..
INDUSTRY VELOCITY: THINK IN TERMS OF A CONTINUUM OF FLOW

Flow of informaiton

CONSEQUENTLY
• Effective technology
management is more
 about rhythm and synchronization with the velocity (or flow) of change, rather than being
simply fast or slow.
INDUSTRY VELOCITY IMPACTS:
How we think about and do technology management in terms of:
–Modularity versus integrated (more easy to respond to min 39 min)
–Forecasting versus scenario planning
–Temporal orientations: monochronic versus polychronic
–Innovation teams: homogenous versus diverse
–New product development (NPD) frameworks: linear vs. recursive
These diagrams show decision makers have affects on the process conditions which create positive
and negative feedbacks, which are non-linear.
In negative feedback, the process responds in such a way as to reverse or negate the affect of any
change in the process conditions. It is feedback that seeks to counter change and maintain the
current behaviors of the process.
The second type of response is positive feedback. This means that if a change occurs in some
process variable, the response is to change that variable even more in the same direction. The result
is a continuing spiral of change. (Eventually, negative feedback may take over to put a limit on
things.)
TEMPORAL ORIENTATIONS
What type of time is in this photo?

island time
• “A temporal orientation is a cognitive concept that describes how individuals and teams
conceive of time”
The way people view time differs from culture to culture, as observed and described by researcher
Edward Hall. Monochronic time cultures emphasize schedules, a precise reckoning of time, and
promptness. Time is viewed as a discrete commodity. People with this cultural orientation tend to
do one thing after another, finishing each activity before starting the next.
On the other hand, in polychronic cultures, people tend to handle multiple things concurrently (or
intermittently during a time period) and to emphasize the number of completed transactions and the
number of people involved, rather than the adherence to time schedule. Being on time is less
important in polychronic cultures than in monochronic cultures.
The way people view time differs from culture to culture, as observed and described by researcher
Edward Hall. Monochronic time cultures emphasize schedules, a precise reckoning of time, and
promptness. Time is viewed as a discrete commodity. People with this cultural orientation tend to
do one thing after another, finishing each activity before starting the next.
On the other hand, in polychronic cultures, people tend to handle multiple things concurrently (or
intermittently during a time period) and to emphasize the number of completed transactions and the
number of people involved, rather than the adherence to time schedule. Being on time is less
important in polychronic cultures than in monochronic cultures.
Monochronic people (Hall terms as M- people) tend to view activities and time in discreet segment
or compartments, which are to be dealt with one at a time. It is not logical to have two activities
going on at the same time. M-people can become frustrated with Polychronic people (P-people)
who view time as something fluid, and who easily alter schedules to shifting priorities. In P time
cultures, meetings may start late, run overtime, and allow outside issues to interrupt team meetings.
In addition, multiple activities may be scheduled at the same time, and adherence to deadlines may
depend on the strength of the relationship. (International Business; A basic Guide for Women,
Wilen, 2001)
SPEED OF LICENSING
• Is it better to license patented innovations quickly or slowly?
• In twos or threes develops arguments for either or both cases
Potential period move fast or slow?
Reason to slow: Complemtary technology can arrive
RED QUEEN EFFECT
It takes all the running you can do, to keep in the same place.

Lezione 19.10

For the simulation do the following:

1. Self-organized groups into small groups 2 – 5 students
2. Just one member of your group signs up for the Breaking News Simulation at:
https://hbsp.harvard.edu/import/874741 before our first class next week on the 26th October.
3. I will open the simulation for you to play in on the morning of 28th October.
4. In groups of you are tasked by a CEO to bring innovative new ideas to a struggling
newspaper business.
5. You are not the idea generator. You are making recommendations for initiatives that will
generate ideas.
6. The goal is to think and learn about the different ways of generating and selecting
ideas.
7. The initiatives are run one at a time (i.e., not in parallel).
8. Go slowly. No benefits to going fast. Should take about 20 minutes to play
9. Think and record your thinking and decision logic. Develop and submit 3 slides
10. Simulation has stochastic elements, so the same decisions can produce slightly different
results.

After running you want to run review the generated ideas and submit one
YOU ARE SELECTING IDEA
Criteria to select the ideas

How to select ideas min 11

Step 1: IDENTIFY THE DIMENSIONS
First try to identify the path the technology has taken over the past:
• Were there phases when different aspects changed?
• Can you identify the dimensions along which it changed? (Tip: Aim for about 4 to 6
high-level dimensions).
Next, try to imagine what customers would want if they could have anything.
• Does this suggest dimensions you haven’t considered?
How can improve the dimension ?
STEP 2 map the utility curve for investing in each dimension
• Try to estimate the shape of the customer’s utility curve with respect to each of the
dimensions you identified.
• Next estimate where you think we are now on each of those curves.
• Which dimensions offer the most relative utility to be gained? What is the costliness of
moving along those curves? Where would our effort best be deployed?
Min 17.

STEP 3 determine your focus

When you look to the existing dimension you can look to the different the buyers , room for
improvement. This can intend as critieria. That s is a framework to select the idea.
STRATEGY AND INNOVATION VALUE
• Strategies help us to ‘choose’ what to do and what not to do.
• Strategy is the answer to five questions:
1. What value will you offer?
2. Who wants the value?
3. How will you deliver value to those who want it?
4. What capabilities will you need to develop and maintain to succeed?
5. What business processes and systems will you need to develop and maintain the
capabilities?

QUANTITATIVE METHODS FOR CHOOSING PROJECTS

Commonly used quantitative methods include discounted cash flow methods and real options.
•Discounted Cash Flow (DCF).
• Net Present Value (NPV): Expected cash inflows are discounted and
compared to outlays.
THIS is accounting methods

Internal Rate of Return (IRR): The discount rate that makes the net present value of investment
zero.
• Calculators and computers perform by trial and error.
• Potential for multiple IRR if cash flows vary.
•Strengths and Weaknesses of DCF Methods:
• Strengths.
• Provide concrete financial estimates.
• Explicitly consider timing of investment and time value of money.
• Weaknesses.
• May be deceptive; only as accurate as original estimates of cash
flows.
• May fail to capture strategic importance of project.
Real Options: Applies stock option model to nonfinancial resource investments. For example, with
respect to R&D:
The cost of the R&D program can be considered the price of a call option.
the cost of future investment required to capitalize on the R&D program
(such as the cost of commercializing a new technology that is developed) can be
considered the exercise price.
• The returns to the R&D investment are analogous to the value of a stock
purchased with a call option.
How do you innovation?
Small number of key things:
- The circumstances of the company (liquidity and not only)
- Type of innovation you want incremental (continuis ,discontinuus , modular , component,
architectural innovation etc)
- Depends on your industry dynamic, your country, your culture
Real option is more used in fashion industry, super hi-tech industry, in air space
REAL OPTION THINKING
A great place to begin but a terrible place to finish?
Strengths
• A focus on the quantifiable costs and benefits of the project
• Allows for easy ranking and comparison
Weaknesses
• Forces a focus on “the numbers”
• Neglects the role of uncertainty
• Neglects strategic considerations
• Ignores interdependency between projects
• Recognition that:
•uncertainty creates opportunity and value
 •such value requires adequate decision-making in order to materialize
• Identification of the sources of uncertainty and collection of information
• Identification of the decisions (options) that:
•promote exposure to favourable outcomes.
•reduce exposure to downside risk
• Source: Pavlov, 2001
QUANTITATIVE METHODS FOR CHOOSING PROJECTS
Options are valuable when there is uncertainty (as in innovation).
However, real options models have some limitations:
•Many innovation projects do not conform to the same capital market assumptions
underlying option models.
• May not be able to acquire option at small price: may require full investment
before its known whether technology will be successful.
• Value of stock option is independent of call holder’s behavior, but value of
R&D investment is shaped by the firm’s capabilities, complementary assets,
and strategies.
TRADITIONAL FINANCIAL VS. REAL OPTIONS PERSPECTIVES

SEPARATING ENDOGENOUS RISK FROM EXOGENOUS RISK

Endogenous risks and uncertainties are those unique to your company, over which you will have
some managerial and technical control are best approximated through expected value of outcome
probabilities estimated by internal experts
Exogenous risks and uncertainties are those outside the control of your company and linked to the
market, regulations, standards, competitors, politics, war and/or natural events are best
approximated through an estimate of underlying volatility and real options approach
WHEN SHOULD TO USE NPV, DECISION ANALYSIS, OR REAL OP1ONS?
SELECTION - HOW-NOW-WOW MATRIX

THE AGGREGATE PROJECT PLANNING FRAMEWORK

• Wheelwright SC, Clark KB (1992) Creating project plans to focus product development.
Harvard Bus Rev 70:70–82
• What is the framework?
1.Define project types as either breakthrough, platform, derivative, R&D, or partnered
projects.
2.Identify existing projects and classify by project type.
3.Estimate the average time and resources needed for each project type based on past
experience.
4.Identify existing resource capacity.
5.Determine the desired mix of projects.
6.Estimate the number of projects that existing resources can support.
7.Decide which specific projects to pursue.
8.Work to improve development capabilities.
• Advanced R&D Projects: develop cutting-edge technologies; often no immediate
commercial application.
• Breakthrough Projects: incorporate revolutionary new technologies into a commercial
application.
• Platform Projects: not revolutionary, but offer fundamental improvements over preceding
generations of products.
• Derivative Projects: incremental improvements and variety in design features.
• Derivative projects pay off the quickest, and help service the firm’s short-term cash flow
needs. Advanced R&D projects take a long time to pay off (or may not pay off at all), but
can position the firm to be a technological leader.
• Managers then compare actual balance of projects with desired balance of projects.
THE AGGREGATE PROJECT PLANNING FRAMEWORK

Do you have the right portfolio?

THE GOLDEN CIRCLE, BE GUIDED BY YOUR ‘WHY’

It’s harder to select ideas and then decide which to kill and which to develop without a strong
*****? (strategy)

LEZIONE 26.10 WEEK 7: INNOVATION PROCESS PART I

WHAT ARE THE STAGES OF NPD?
-idea generation
- idea screening
- concept development and testing
- product development
Test marketing
commercialization

NEW PRODUCT DEVELOPMENT AT GOOGLE

• Google was founded in 1998 by two Stanford PhD students.
• The company now has 119,000 employees.
• The company is organized into small technology teams with considerable decision-making
authority.
• The structure and culture was designed to foster informal communication and collaboration.
• Most technical personnel spend 20% of their time on innovative projects of their own
choosing.
• Andy Grove (former CEO of Intel) described the company’s organization as chaotic, noting,
“From the outside it looks like Google’s organization structure is best described by
Brownian motion in an expanding bottle ” and questioned whether this model would

continue to work forever.

SIZE AND STRUCTURAL DIMENSIONS OF THE FIRM
Size is bigger better? -more funds, more resources, reputation , invenstors, reputational capital,
different cultures  global mindset

Structural Dimensions of the Firm.

•Formalization: The degree to which the firm utilizes rules and procedures to structure
the behavior of employees.
• Can substitute for managerial oversight, but can also make firm rigid.
•Standardization: The degree to which activities are performed in a uniform manner.
• Facilitates smooth and reliable outcomes, but can stifle innovation.
Centralization: The degree to which decision-making authority is kept at top levels of the firm OR
the degree to which activities are performed at a central location.
• Centralized authority ensures projects match firm-wide objectives, and may
be better at making bold changes in overall direction.
• Centralized activities avoid redundancy, maximize economies of scale, and
facilitate firm-wide deployment of innovations.
• But, centralized authority and activities might not tap diverse skills and
resources, and projects may not closely fit needs of divisions or markets.
Some firms have both centralized and decentralized R&D activities.

CENTRALIZED AND DECENTRALIZED R&D ACTIVITIES

Centralized and Decentralized R&D Activities

Decentralized is better overview , might be redundant ( 5 components)

Centralized benefit: more cheap management, could be more efficient . if everything is centralized
they give the. Same solution
Depend on your strategy
MODULARITY - MIRRORING HYPOTHESIS
Loosely-Coupled Organizational Structures.
•Modular products can enable (though do not necessitate) the use of modular
organizations – more typically termed “loosely coupled” organizational forms.
•In a loosely-coupled organization, activities are not tightly integrated; they achieve
coordination through adherence to shared objectives and standards.
 •Less need for integration enables firms to pursue more flexible configurations; may
specialize in a few activities and outsource others.
•Results in a network of loosely connected firms.
•May not be good when very close coordination is needed, or when there is high
potential for conflict.
SEQUENTIAL VERSUS PARTY PARALLEL DEVELOPMENT PROCESSES
Before mid-1990s, most companies used sequential NPD process; now many use partly parallel
process.
What are the benefits and disadvantages of parallel relative to sequential?

TOOLS FOR MANAGING THE NPD PROCESS

•Nearly 60% of firms use some type of stage-gate process to manage their NPD
•process.

In simulation 2 decision games: which initiatives do we run? Test the idea and produce initiatives?
In final which idea we are going to select and deliver to ceo?
STAGE GATE IS A LINEAR FRAMEWORK
• Assumes the process is relatively fixed, discrete and sequential stages.
 •Connections, flows and outcomes are comparatively deterministic.
•A simple and effective representation of the structural logic and flows.
•Suited to incremental innovations activity (relatively reliable market push or strong
market pull forces).
• Does not consider the behaviors and relationships associated with agency, freedom and
resulting innovations.
ALTERNATIVE NPD REALITY – TYPE 1

ALTERNATIVE NPD REALITY – TYPE 2

ALTERNATIVE NPD REALITY – TYPE 3

ALTERNATIVE FRAMEWORKS
• More recursive.
• A process with concurrent and multiple feedback loops between stages that generate
iterative behavior and outcomes that are more difficult to predict.
• Represents the dynamic, nonlinear and fluid nature of the process.
• Suited to more radical innovations with push-pull market force combinations.
EVALUATION AT THE GATES
• Project evaluation is characterised by uncertainty of information and the absence of solid
financial data.
• Project evaluation involves multiple objectives and therefore multiple decision criteria
• The evaluation method must be realistic and easy to use
• Decision must be go, kill, hold, or recycle
• Additional outputs include:
–approved action plan for next stage
–list of deliverables for next gate
NPD FOR MANUFACTURING
Minimize the number of parts Simplifies assembly; reduces direct labor; reduces material ha
inventory costs; boosts product quality

Minimize the number of part numbers (use Reduces material handling and inventory costs; improves econ
common parts across product family) (increases volume through commonalty)

Eliminate adjustments Reduces assembly errors (increases quality); allows for autom
capacity and throughput
Eliminate fasteners Simplifies assembly (increases quality); reduces direct labor c
squeaks and rattles; improves durability; allows for automatio

Eliminate jigs and fixtures Reduces line changeover costs; lowers required investment

reputation cost, spent time in money, liabilities

QUALITY DIMENSIONS
1. Performance
5. Durability
2. Features
6. Serviceability
3. Reliability
7. Aesthetics
4. Conformance 8. Perception
8

1 4

7 3 5 6

CAUSE AND EFFECT

FAILURE MODE AND EFFECT ANALYSIS

POKA-YOKE
• Poka-yoke: (From the Japanese, yokeru – to prevent, and poka – inadvertent errors.)
• Simple, inexpensive, failsafe devices or systems which prevent mistakes from being made
or from becoming defects.

POKE YOKE
• In twos and threes:
– think of examples of things that have been poke-yoked (full proofed).
–think of examples of things that should be poke-yoked (full proofed).
• Car safety features. ...( Another example of poka-yoke is the inability to remove a
car's ignition key from the ignition switch if the automatic gearbox has not first been
put into park position. This prevents the driver from driving away from the car
without the wheels being locked.)
• Treadmills. ...
• Microwaves, washing machines, dishwashers, and other household appliances. ...
• Elevators & garage doors. ...
• Spell-check functions. ...
• Leak-proof water bottles & travel mugs. ...
• Power outlets and USB plugs. ...
• Overflow outlets in sinks

TECHNOLOGY ROADMAPPING
• What is a technology roadmap?
 –Roadmaps are (i) forecasts of what is possible or likely to happen and (ii) plans that
articulate a course of action.
–They are a strategic management tool with a time domain that help managers be
proactive towards the environment.

OPEN INNOVATION 2.11

12.11 chesburg
Open innovation is “the use of purposive inflows and outflows of knowledge to accelerate internal
innovation, and expand the markets for external use of innovation, respectively.” Open innovation
can be understood as the antithesis of the traditional vertical integration approach where internal
R&D(Research and development) activities lead to internally developed products that are then
distributed by the firm.
In order to create more value and to compete better in the market, choose to involve not only the
internal resources but even external resources such as ideas, start up, university etc.
The closed innovation, the research made in the boundaries of the firm, was not longer enough,
even if the manager were afraid to share the innovation with other actors.
When to be open, when to be closed?
- It is better to be close when it wants keep the diffentiation against competitor and maintain the
differentiation because we don’t share.
- It is better be close If you want to be critically independent, and also if you want to keep the all
benefits/profits
- When you are close in the developing technology, you can control any aspects of the design
and the users experiences Three opens : open innovation open science and open to the world .
more collaboration
The open innovation is wonderful but is not always the case to apply it

Open innovation and sustainability, in Denmark the technology to do the bottle in the new materia
to package and deliver beer
When we should be use the open innovation? And when we should be close?
Close: Differentiation against the competitor, being critically independent, If you can achieve the
innovation on your own is more profitable

2 levels there is close levels a lot of the softmare was make in close way, in the 20 centuri as lot go
to open source
And a number of lot
Open innovation is more about sharing knowledge
Enel case study
• Enel traditionally was organized by function and by geography
 • These created strong organizational siloes
• Information flows within the silo, but not between • Also, a strong culture of seniority • Hard to
get fired • Golden share held by the Italian government • Starace: a culture of reliability, not of
innovation • R&D measured by # patents, not business impact

What is enel’s primary business? How does it make money?

Business model energy utility
How set the price for energy services?
Observations:
- Utilities are natural monopolies, monopolies as no competitors
- These monopolies are regulated by the state
- Innovations that cut costs are often disfavoured
- This creates strange incentives for innovation
Innovations that increase the asset base are favroed
Innovations that cut costs are often disfavored
- Green and renewable technologies often fall in the latter categoryy

How is enel organized?

Enel was organized by function and by geography
- Generation distribution, operation/service
- 30 different country managers ( wITH COUNTRY MANAGERS FOR FPORFIT
RESPONSBILTIY FOR EACH countries, this create a siloes,
- These created strong organizational siloes
Also a strong culture of seniority
- Hard to get fired
- Golden share held by the Italian government
- Starace: a culture of reliability not of innovation
- ReD measured by patents, not business impact
In 2008 why enel green power as a separate organization?
Enel take the decision to spin off organization
Anather tool that use time to time to time
30’ min Spin off on: stock market is very much link to the benefit is to bruing togheter from diffent
apert of enel a small part of the business that
observtion
- Enel culture is built not to change
- Green energy isn’t just new technology it also requires new business models
Enel culture is built not to change
Green energy isn’t just new technology, it also requires new business models
- Smaller-sized assets
- Much faster construction and deployment
- Eu incentives for green energy
Gathering all green energy projects togheter created greater organizational focus
- Better to be a bigger fish in a smaller pond (creating a spin off in a green power)
What open innovation do in the italian contexts?
Enel open power
- Idea, hackathons, my favourite failure
Enel has elevated the innovation function within the company
- Now reports directly to CEO
- More clout with individual businesses
- More scale in its efforts (e.g. universities)
Enel is opening up to others
- Sharing with other utilites
- Inviting suppliers to co-innovative
- Since case, 8 innovation hubs to engage with startups

The Different Modes of Innovation

Indeed, many companies have been defining new strategies for exploiting the principles of open
innovation, exploring ways in which external technologies can fill gaps in their current businesses
and looking at how their internal technologies can spawn the seeds of new businesses outside the
current organization. In doing so, many firms have focused their activities into one of three primary
areas: funding, generating or commercializing innovation.

Funding Innovation
Two types of organizations are focused primarily on supplying fuel for the innovation fire
- innovation investors The original innovation investor was the corporate R&D budget but now
a wide range of other types has emerged, including venture capital (VC) firms, angel investors
- Innovation benefactors provide new sources of research funding. Unlike investors,
benefactors focus on the early stages of research discovery

Generating innovation
There are four types of organizations that primarily generate innovation:
- innovation explorers: specialize in performing the discovery research function that previously
took place primarily within corporate R&D laboratories
- Innovation merchants, will innovate but only with specific commercial goals in mind,
whereas explorers tend to innovate for innovation’s sake
- Innovation architects provide a valuable service in complicated technology worlds.
- Innovation missionaries. consist of people and organizations that create and advance
technologies to serve a cause.

Commercializing innovation
Another differentiation includes two types of organization which are focused on bringing
innovations to market: characterized by the ability to profitability market ideas, both their own as
well as others. To do so, marketers focus on developing a deep understanding of the current and
potential needs in the market and this helps them to identify which outside ideas to bring in-house.
Innovation one-stop centers: provide comprehensive products and services. They take the best
ideas (from whatever source) and deliver those offerings to their customers at competitive prices.

However a number of companies, called fully integrated innovators, continue to espouse the closed
innovation credo of “innovation through total control” es IBM
Another important point is that competing modes can coexist in the same industry es
pharmaceutical
All of the different modes will evolve in an open innovation environment, and future ones will
probably emerge as well.

17.11.2020
From closed Innovation to open innovation
Close innovation Companies themselves generate, develop, manufacture, market, distribute and
service their own ideas • Self-reliance • Huge investment in internal R&D
open innovation Companies commercialize external, as well as internal, ideas by deploying
outside, as well as inhouse, pathways to the market • Reliance on internal and external environment
• External R&D, IP licensing agreements, joint ventures, etc

ENEL GREEN POWER

MISSION: Created in 2008 • Mission of innovation and environmental sustainability (under
Storace) • To group Enel’s global renewable energy interests (hydroelectricity, wind, solar power,
biomass sources, geothermal) into one entity • Today is operates in 28 countries
REASONS FOR A SPINOFF: • To create more focus on renewables • To apply for European and
national incentives • Quick decision-making • Different mentality

ORGANIZATION AND INNOVATION APPROACH OF ENEL BEFORE 2014

Organization
• A collection of quasi-independent companies • Other utilities – viewed as competitors • Different
lines of businesses, some in geographies, some in operations • Hierarchical culture • No dialogue
between different lines of business
Innovation approach
•no culture of sharing between geographies and lines of business • The incentive system based on
individual Management by Objectives (not objectives of the whole business line) • Self-reliant on
developing and deploying new technologies • Small scale of technologies, high costs • Innovation
used to be managed inside the different business lines of the company

Regarding the organization of the OPEN POWER it is characterized by: a matrix structure (which
include global business lines, regions and countries, global service functions, holding company
functions), an organizational culture of sharing, a reduction of duplications, speak with one voice to
external partners.
From the 2014 there was a transformation of the company’s innovation approach. Towards open
innovation with the focus on the sustainability. These innovation functions gathered in a central
innovation hub, reported directly to the CEO of Enel.
This approach to innovation gives many initiatives:
➢ Senior leaders brought at the HBS to learn about innovation.
➢ “Big Data” to incorporate insights(intuizioni) from customers;
➢ Collaboration with universities, start-ups, suppliers
➢ The Innovation World Cup – start-up proposals from internal staff

The Enel’s CEO Storace management was particularly fundamental for the introduction of the
matrix organization, which increased information sharing across the silos.
He also was retiring the old guard, advancing the new guard
Storace has redefined the competitors: from utility companies to the cost of generating and
distribution of the other forms of energy.
To beat these competitors, must get other utilities to Ss as well.

OPEN INNOVATION IN PANDEMIC

How the opern innovation change in pandemic?
- Storpping the disesase
- Start the recovery
- Managing the reoccurrence
Covid trasmiss exponentially
18.11.2020 chesbrough
ADOPTION OF OPEN INNOVATION
 There are still something that we don’t know:
- How externalite..
Inbound open innovation Most commonly used
Outbound open innovation most commonly used are joint venture activites,
23 min The most important OI partners are internal employees, customers, university
The objetives for OI are new partnerships and new technology
You can use Oi for different goals
The most authority and autonomy to initiate OI projects is corporate research
The biggest organization of challenges of engaging in open innovation is managing the
organizational change internally
Evidence
PeG
IT IS a closed organization
Min 30 an

CROWD BASED ORGANIZING/ OPEN INNOVATION

To increase the effectiveness of the company x I would suggest a crowd-open organizing where
there is a low level of guided emergence in which individuals have a wide autonomy; and also, a
crowd-open in which the organisation involves crowds in business practices such as innovation.
The constitutive elements of this form of organisation are the control mentality characterised by a
strong sense of responsibility (such as smart working); experimentation as a problem-solving factor
guaranteeing a certain degree of tolerance towards employees for possible failures; and finally, the
last factor provides for strong transparency.
In this vision, management instead of having a single boundary that divides the internal
environment from the external environment, involves several levels. This multi-level structure is
composed of the core, where the decision-making process takes place by the board of directors,
strategic and executive committee; the team, composed by the employees, independent contractors,

and contributors; followed by community or those who follow the company on social media; and as
the most external level there is the rest of the world, i.e. all the customers and contributors. It is
precisely with this last level that a crowd-open approach could benefit the company by designing
environments that are open to crowds.
Following the "Lego" model that we saw during the course, through a crowd
coordination
technology, one could access a platform aimed at collecting external contributions, becoming a
"hub" of virtual, countless "rays" of contribution. This innovation
programme can be monitored
from the core.
Regarding the advantages is possible to claim that this strategy increases agility, efficiency,
transparency, innovation and accountability within an organization. Other pros that could be arise
are: Unexpected solutions to tough problems, A greater diversity of thinking, A reduced
management burden, more marketing buzz, Faster problem solving, A rich source of customer data
The possible disadvantages that could occur are the proposed project may not achieve the desired
success; possible problems with the platform and/or funders may arise; lack of awareness and
digital literacy; and Coordination between functions can be time-consuming.

LEGO EX The formulation of the context is top down( feel free the consumers to propose an idea
is self-organize of the story) of the story the submit is top down of the story
Lego dell intel reebok Organization that decide to open on a temporary base (Crowd open)
MYTAXY TAXI COMPANY: if you are a taxi driver you can drive for your traditional company
and in a free time can work with us (jumbling: don t care if you wark with your competitor). I do
that because the app is more democratic the receiving goal. ( crowd open with low level of guided
emergence)
UBER pushing the limit that why Puts uber in a high Crowd based but very high guide
emergence because although uber can order to driver, uber can incentive him. (openness to crowd
approach with level of guided emergence)
WIKIPEDIA which is high level guide emergence because you can send to Wikipedia whatever
you want but the editorial worker are very straight control to the content that you want upload
(openness to crowd approach with level of guided emergence)

Empirical Evidence
How you engage with your internal employees is very important to use open innovation

WEEK 9: INNOVATION PROCESS PART II

FRAMEWORK OF COMPLETE INNOVATION PROCESS – SEQUENCE OF
DIVERGENT AND CONVERGENT STEPS
THE OUTCOME OF DIVERGENT STEP: IDEA DISTRIBUTION
How can you change this distribution?

How do you change the distribution? -

INNOVATION DISTRIBUTION INTERVENTION 1: INCREASE IDEA VOLUME

INTERVENTION 2: INCREASE IDEA DIVERSITY

INTERVENTION 3: INCREASE AVERAGE IDEA QUALITY

 - Bias
- Reosurces
- General culture of the company (mission)
- Reputation, resilient
DIGITIZATION AND COLLABORATIVE CULTURE HAVE CREATED FOUR
INNOVATION MODES

THE FOUR MODES OF INNOVATION FRAMEWORK

Different options that they are
OPPORTUNITIES AND CHALLENGES

MODE DYNAMICS

Apple Early stage controlled and specialistic

HARDER VERSUS SMARTER
• Is it better to work harder or work smarter (differently)?
• So why is it more common to work harder?

WORKING HARD SMART

• The pursuit of two different modes of learning:
1.Exploitation = using current resources and capabilities in an efficient and reliable
fashion to head in the same direction
2.Exploration = searching for , acquiring and developing new resources and capabilities
to go in a new direction

Blue Ocean
• Create uncontested market space.
• Make the competition irrelevant
• Create and capture new demand
• Value Innovation
• Attract non-customers
• Create and capture new demand
Red Ocean
• Competing in existing market space
• Beat the competition
• Exploiting existing demand
• Create competitive advantage
• Segment existing customers
• Exploit existing demand
TWO APPROACHES
• Structural ambidexterity
–“involves splitting exploitation and exploration into different organizational units (i.e.,
separate divisions, departments or teams)” (McCarthy & Gordon, 2011: 241)
–Contextual ambidexterity
–“the capacity to attain appropriate levels of exploitation and exploration behaviors in
the same R&D organizational unit” (McCarthy & Gordon, 2011: 241)
MOVING BEYOND PERFORMANCE MEASUREMENT

CREATING THE CONTEXT TO SMARTLY INNOVATE

• To smartly innovate you need:
1.time to innovate (80-20 rule)
2.space to innovate
3.controls (goals, rules, resources and rewards) to innovate
4.diversity: mindsets and skills
SOME RULES FOR CONTEXT
Divergence: Idea Creation
• Ideas come from anywhere
• Egalitarian brainstorming and one idea at a time
• Listen actively, and build on ideas of others
• No criticism or punishment for failure
• Initiative is expected
• Data driven
• Ask “experts” and “patients”
• Diverse, fun, playful
Convergence: Idea Selection & Development
• Clear direction
• Action oriented
 • Prototyping
• Role of leadership
• Focus and deadlines
• Not “experts”
• Process for deciding
• Voting
• Involvement and sub-groups
• Adult supervision
CONSTRUCTING NEW PRODUCT DEVELOPMENT TEAMS
Team Size.
• May range from a few members to hundreds.
• Bigger is not always better; large teams create more administrative costs and
communication problems.
• Large teams have higher potential for social loafing.
Team Composition.
• Including members from multiple functions of firm ensures greater coordination
between functions.
• Firms around the world rely heavily on cross-functional teams for their new product
development efforts.
TEAMS AND IDEA GENERATION
Why Brainstorming Teams Kill Breakthrough Ideas.
• Dozens of laboratory studies have shown that brainstorming groups produced fewer
ideas and ideas of less novelty than the sum of the ideas created by the same number
of individuals working alone.
• Three main reasons:
• Fear of Judgment – people self-censor many of their most creative ideas for fear
of being judged.
• Production Blocking – when one person is talking, others are blocked from
ideating.
• Feasibility Trumps Originality – groups tend to weight “feasible” more highly
than “original”.
• Indicates that people should brainstorm alone first and elaborate their ideas before
moving into team development.
TEAMS AND BOUNDARY SPANNING
Boundary-Spanning Activities in NPD Teams.
• Ancona and Caldwell studied 45 NPD teams to identify the roles team members
engage in to collect information and resources within and beyond the firm. Found
three primary types:
• Ambassador activities: representing team to others and protecting from
interference.
• Task coordination activities: coordinating team’s activities with other groups.
• Scouting activities: scanning for ideas and information that might be useful to
the team.
• Scouting and ambassador activities more beneficial early in development cycle; task
coordination activities beneficial throughout life of team.
VIRTUAL TEAMS: DIVERSITY
VIRTUAL TEAMS: DIVERSITY

THE WHOLE BRAIN MODEL

ESCALATING MARKET TESTS

PLANNING
• What do I know?
• What do I need to learn?
• How can I learn it at lowest cost?
• What are my expected outcomes?
 • How do I measure against plan (metrics)?
EXPERIMENTING
• Who/what is the subject?
• What is the test?
• Lowest cost possible
• What do I expect to learn?
• How does the subject respond?
RUN THE RIGHT EXPERIMENT
• Passive means doing nothing: just putting your product out there for customers to play with,
pausing, and seeing what happens.
– Passive works when “you don’t know what you don’t know”: that is, where there is
overwhelming ambiguity.
• Parallel means doing multiple experiments at once.
– Parallel is best when the entrepreneur has an abundance of clear potential
alternatives that can be tried at once. (This is also called a multi-armed bandit
solution—named after Vegas slot machines.)
• Sequential is simply doing one experiment at a time, one after another, improving the
prototype product each time.
– Sequential is optimal when the entrepreneur is stepping through stages in solving a
problem. As with the other two ways to experiment, the focus is on uncertainty, but
it’s more roughly linear rather than undefined or multi-pronged.
LEARNING
• What did I expect to find?
• What did I actually find?
• Can I explain the difference?
• What do I still need to learn?
RESHAPING
• How do I incorporate my learning?
• What is the next market test?
ESCALATING TESTS
• We test to:
• Learn. If a picture is worth a thousand words, a prototype is worth a thousand pictures.
• Solve disagreements. Testing helps eliminate ambiguity, assist in ideation, and reduce
miscommunication.
• Start a conversation. Tests are a great way to have a different kind of conversation with
users.
• Fail quickly and cheaply. Creating quick and dirty tests allows you to assess ideas without
investing a lot of time and money up front.
• Manage the entrepreneurial process. Identifying a variable to explore encourages you to
break a large problem down into smaller, testable chunks.
WHAT IS CROWDSOURCING