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Technology & Innovation...

100 Slides

The
The Early Mainstream
Market Market
The
Chasm
Te Pr
Vis
En chno ion ag
ma
Co
n se
Sk
ep
thu log ari rva ti cs
sia y es ti sts tiv
sts es

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Key Words...
Entrepreneurship – Venture Models – Driving Forces
– Venture Capital – Growth Phases – Technology
Life Cycle – The Chasm Model – The Transilience
Map – Diffusion Curve – Technology Strategies –
Knowledge Creation Process – Innovation
Management – First Mover Advantage – Technology
Acquisition – Core Technologies – Technology
Portfolio – Patent Management – Intellectual
Property – Innovation Types – Kano Model – R&D –
New Technologies – Risk Bubble Diagram –
Technology Evolution – E-Business Models – Growth
Strategies – Start-up – Private Equity – Financing
Life Cycle – Product Innovation Process
Who is the Entrepreneur?

High

Inventor Entrepreneur

CREATIVITY
AND
INNOVATION
Manager,
Promoter
Administrator

Low High

GENERAL MANAGEMENT SKILLS, BUSINESS


KNOW-HOW, AND NETWORKS
Fit of Entrepreneur and Venture Capital

High Low

Potential for singles Potential for triples


or doubles, but many and home runs
strike out
ATTRACTIVENESS
OF VENTURE
OPPORTUNITY

Not hat and no cattle Big hat, no cattle

Low High

ENTREPRENEUR‘S FIT AND BALANCE


Central Issues in Entrepreneurial Finance

Shareholders

Value Creation Customers

Employees

Allocating risks
and returns
Slicing the value pie
Cash-Risk-Time

Debt: Take control


Covering risk
Equity: Staged
commitments
Dominant Venture Modes

Seed/Startup High Growth Maturity


Most Most

Higher potential, Higher potential,


growth-minded ventures growth-minded ventures

ENTREPRENEURIAL CHANGE AND


UNCERTAINTY

Lifestyle, Mom and Mature, bureaucratic


Pop ventures dinosaurs

Least Least
Least Most

ADMINISTRATIVE

Entrepreneurial domain
Administrative domain
Principle Driving Forces

Seed/Startup High Growth Maturity


Most Driven by: Driven by: Most
• Collaboration within the firm • Rejuvenators and innovators
• Opportunity focus • Opportunity focus
• Resource requirements expanding • Resource ownership

Organization: Informal; fluid Organization: Formal


ENTREPRENEURIAL CHANGE AND
Driven by: Driven by: UNCERTAINTY
• Few owners • Administration/trustees
• A specific product • Product focus
• Burdensome resource requirements • Resource ownership

Least Organization: None or too rigid Organization: Formal Least


Least Most

ADMINISTRATIVE

Entrepreneurial domain
Administrative domain
Financial Strategy Framework

Opportunity

Financial strategy Sources and deal Business strategy


structure
Degrees of strategic freedom: Marketing
Dept Operations
Time to OOC Equity Finance
Time to close Other Value creation
Future alternatives
Risk/Reward
Personal concerns
Financial
requirements
Driven by:

Burn rate
Operating needs
Working capital
Asset requirements
and sales
The Five Tasks of Strategic Management
Fund conception
Target investment opportunities

Raise capital for investment

Generate deal flow


New and young companies with
high potential

Fund conception
Target investment opportunities

Fund conception
Target investment opportunities

Add value via:


• Strategy development
• Acitve board membership
• Attract outside expertise
Typically • Attract later round investors
5 to 10 year • Attract other stakeholders, management
window • Provide contacts, access to info, people, institutions

Craft and execute


exit strategies
• Sale • Liquidation
• IPO • Alliances
• Merger
Flows of Venture Capital

Investors Venture Capital Firms Portfolio Companies

Provide capital • Identity and screen opportunities Use capital


• Transact and close deals
• Monitor and add value
• Harvest
• Raise additional funds
MONEY MONEY

Limited partners Opportunity


2-3% ANNUAL FEE Creation
Pension funds
recognition and
Individuals
General partners execution
Corporations
Insurance companies 15-25% of capital gains
Foreign Endowments Entrepreneurs
IPOs/Mergers/Alliances

Return of principal Value-creation


plus 75-85% of and harvest
EQUITY
capital gain
Growth Phases

Phase 1 Phase 2 Phase 3 Phase 4 Phase 5


Large
5. Crisis of ?

4. Crisis of
RED TAPE 5. Growth through
COLLABORATION
3. Crisis of
CONTROL 4. Growth through
SIZE OF
COORDINATION
ORGANIZATION 2. Crisis of
AUTONOMY
3. Growth through
1. Crisis of DELEGATION
LEADERSHIP
2. Growth through
Evolution stages
DIRECTION
Revolution stages
Small 1. Growth through
CREATVITY
Young Mature
AGE OF ORGANIZATION
A Way to Think about Potential

Not Obvious

Black Holes Home Runs

CONCEPT

Filling Stations Squirrel Cages

Obvious

Small Large
GROWTH / ULTIMATE FINANCIAL POTENTIAL
Four Archetypal Structural Approaches to
Coordination

High

Laissez-faire Professional
Management Management

DELEGATION OF
RESPONSIBILITY

Entrepreneurial Bureaucratic
Management Management

Low
Low High

USE OF FORMAL CONTROL MECHANISMS


The Technology Adoption Life Cycle

• Innovators • Technology Enthusiasts


• Early Adopters • Visionaries
• Early Majority • Pragmatists
• Late Majority • Conservatives
• Laggards • Skeptics
The Chasm

The
The Early Mainstream
Market Market
The
Chasm
Te Vi Pr Co
En chno sio ag
ma ns e
Sk
e pti
thu log na rv a cs
sia y ri e ti sts ti v
sts s es
Amar Bidhé Framework

„Regular“
Start-ups

Promising Revolutionary
High

VC Backed
UNCERTAINTY Startups

Marginal Corporate

Low „Regular“
Corporation
Low High
SCALE

Uncertainty: unqualifiable and immeasurable risk


Scale: expected total profit from opportunity
On Innovation
Why do firms innovate?

Novelty Appropriability
Product
(patent, secrecy...)
innovation Escaping from
perfect competition

Consumers accept to
pay a higher price

Price > marginal cost

Monopoly rent

Economic
value Rent X market share (trade off)

Monopoly rent

Price > marginal cost

Costs are decreasing

Escaping from
perfect competition
Process
innovation Novelty Appropriability
(patent, secrecy...)
Framework for Investigating the Impact of
Innovation on Growth and Employment
TECHNOLOGICAL CHANGE
Industry-specific opportunities for innovation in firms

Behavior of firms: NON INNOVATING FIRMS INNOVATING FIRMS INNOVATING


FIRMS MAINLY IN PROCESSES MAINLY IN PRODUCTS

Innovative strategy High R&D and innov. exp.


No R&D and innov. exp. Some R&D and innov. exp.
of firms: mainly for new products
mainly for investment
Growing productivity
Stable productivity Growing productivity
through higher quality
through restructuring
Expans. of market share
Cost savings, Defence of market shares
Search for new markets
low quality through cost reductions
and monopoly profits

Competitive strategy: Passive Active Technological


price competitiveness price competitiveness competitiveness
External conditions
Stagnant Growing Stagnant Growing Stagnant Growing
of markets and demand:
Stable or slow growing Fast growing
Outcomes for the firm: Losing out to Falling or stable market shares market shares
competitors market shares (at the expense Developm. of
of competitors) new markets
Stable
Outcomes for the industry: Strong fall of Slow growth of Strong growth
value added,
value added, stable of value added,
value added falling employm.
employm. with growth some employm.
and employm. with growth
of productivity growth
of productivity
Types of Lock-In and Types of Switching
Costs
Type of lock-in Switching costs
Contractual commitments Compensatory or liquidated damages

Replacement or equipment; tends to


Durable purchases decline as the durable ages

Learning a new system, both direct costs


Brand-specific training and lost productivity; tends to decline as
people learn to learn

Converting data to new format; tends to


Information and data bases rise over time as collection grows

Funding of new supplier; may rise over


Specialized suppliers time if capabilities are hard to find

Combined buyer and seller search costs;


Search costs includes learning about quality of
alternatives

Any lost benefits from incumbent


Loyalty programs supplier, plus need to rebuild cumulative
use
The Transilience Map

BREAKTHROUGH

Niche creation Architectural

Technology Market
Customers Production

Regular Revolutionary

CONTINUITY
Organizational Capabilities

A B C
SM SM SM

F1 F2 F3 F4 F1 F2 F3 F4 F1 F2 F3 F4

P P1
P2
P
P3

Functional Functional matrix Balanced matrix

D E F
SM SM SM

P1 P2 P3 P4 P1 P2 P3 P4
P4 F1 F2
P3 F3 F1
P2 F4 F2
P1
F3
F4

Project matrix Project-led Project-based


organization organization
A New Kind of Competition:
Winner-Take-All

100

Winner

MARKET SHARE
50 Battle zone
(in %)

Loser
0
TIME
The Classical Diffusion Curve

Adoption Dynamics

Saturation

Takeoff
NUMBER
OF
USERS

Launch

TIME
Positive Feedback's Should not be
Confused with Growth

Popularity Adds Value in a Network Industry

Virtuous
cycle

VALUE
TO USER Vicious
cycle

NUMBER OF COMPATIBLE USERS


The Whole Product Model

Potential Product

Augmented Product

Expected Product

Generic Product
The Simplified Whole Product Model

Standards
and Additional
Procedures Software

Training Additional
Generic Anything else
and Hardware
Product you would need
Support
to achieve your
compelling reason
to buy
System
Cables Integration

Installation
and
Debugging
The Competitive-Positioning Compass

SUPPORTERS

Product Company

Visionaries Conservative

Mainstream Market
Developing the

Developing the
Early Market
C
th ros
SPECIALIST e C si GENERALIST
ha ng
sm

Technology Pragmatist
Enthusiasts

Technology Market

SKEPTICS
Define the Battle
SUPPORTERS

• Benchmarks • Revenues and profits


• Product Reviews • Strategic partners
• Design wins • Top tier customers
• Initial sales volumes • Full product line
• Trade press coverage • Business press coverage
• Visionary endorsements • Financial analyst endorsements

Product Company
SPECIALIST GENERALIST
Technology Market

• Architecture • Market share


• Schematics • Third party support
• Demos • Standards certification
• Trials • Applications proliferation
• Technology press coverage • Vertical press coverage
• Guru endorsements • Industry analyst endorsements

SKEPTICS
Discontinuity and Life Cycle

High Prototypes Early Market

Pure Chasm
Science
Technology Visionaries
Enthusiasts

PARADIGM
SHOCK

Conservatives Pragmatists
End of Bowling
Life Alley

Low Main Street Tornado

Low High
APPLICATION
BREAKTHROUGH
Development of Technological
Entrepreneurial Regions

Academic Scientific/
Institutions Technical
Knowledge

Technological Trained
Available Capital Venture Capital
Enterprise Individuals

Service Enterprise
Growth
Economic &
Employment
Growth

Successful Unsuccessful

Spin-Off
Enterprise
Technological Enterprise Space

High

TECHNOLOGY

Future
New
Low MARKET
Emerging
Existing
Incremental Radical
Existing New Generation

INNOVATION
Technological Strategic Planning Model

Core Competencies Evaluation of:


• Overall • Organization‘s
• Strategic Business - Strengths
Units - Weaknesses
• Environmental
- Opportunities
- Threats
Corporate Strategy Technological Action
Vision, Objectives, Goals Strategy Plan
Environmental Emerging
Analysis Technologies
• Internal • Assessment
• External • Technological
Forecast
Knowledge Creation Pyramid

Competitive
Advantage

Continuous
Innovation

Knowledge
Creation
Technology Strategy Risk-Return Space

High Cost
Reduction
Technology
Peripheral

Pull Push

RETURN
Product Line
Extension

Low Trend High


Expanding
Market Trend
Low or
Mature
Negative
Market
RISK
Two-Dimensional Technological Space

Radical

New Generation

TECHNOLOGY
Incremental

Existing

Existing Emerging New Future

MARKET
Innovation Feedback Process

Expertise

Technology, customers, markets,


expertise, patents, trademarks, trade
secrets

Market
Invention Implementation
Penetration

Market space,
competitors, suppliers

Economic Power
Nested Enterprise Strategy Sets

Strategy

Mission

Vision
Key Elements of Business and
Technological Strategy Domains

Business Technology
Elements Elements

Market Technology
Forecasts Forecasts
Programs Enterprise
Objectives
Technological
Mission Space
Space

General Needs Technologies

Specific Technological
Increasing Detail

Requirements Applications

Projects
Drives
Bounds
Technological Risk Domain

High

RISK Moderate

Low

Existing Incremental New Radical


Improvement Generation

TECHNOLOGY
Trilogy of Strategic Technology Decisions

Which Way to Go
Decision

Leadership Team

Technological Potential

Make or Buy Keep or


Technologies Structures
Decision Sell Decision

Processes

Product, Process System


$
or Service Functions
Relationship of Needs, Core
Technologies and Competencies

Needs Market Products,


Processes or Services

Technologies to
Meet Needs Core
Technologies

Defining
Capabilities
Core
Competencies
Strategic Technology Position

Core
Technology
Region
New
Technology
Vector
TECHNOLOGICAL
ATTRACTIVENESS

Aging
Technology

0 10
COMPETITIVE
TECHNOLOGICAL STRENGTHS
Technological SWOT Analysis Diagram
Numerous
Enterprise
Environmental
Opportunities

Turnaround Aggressive
Strategy Strategy

Critical Substantial
Enterprise Enterprise
Technological Technological
Weaknesses Strengths

Defensive Diversification
Strategy Strategy

Major
Technological
Environmental
Threats
Technological Strategic Clusters

Emerging technology
market with rapid growth

(„Go-for-it“) („Niche“)

Strong technological I II Weak technological


competitive position IV III competitive position

(„Partnering“) („No-Go or
Change it“)

Existing technology market with


slow to moderate growth
Internal and External Interactions for
Technological Strategy Development
External Environment

External Forces

Enterprise
Differentiating Business Strategy
Capabilities Technological Organizational
Competencies and Strategy Learning
Technologies

Internal Culture

Enterprise Internal Environment


Components of a Competitive Analysis

What drives the What the competition is


competition? doing and can do?
? ?
?? ? ?? ?
? ?
Future Current
Goals Strategy

Competitor‘s
Response Profile

Strengths Weaknesses

Opportunity Threats

Assumptions Capabilities
Held about itself Strengths and
and the industry weaknesses
Impact of Competitive Advantage

SIZE OF TECHNOLOGICAL
COMPETITVE ADVANTAGE

Small Large
Stalemate Volume
ROI ROI
Few

NUMBER OF WAYS Market share Market share


TO ACHIEVE Technological
TECHNOLOGICAL Competitive
COMPETITIVE Fragmented Specialization Differentiation
ADVANTAGE ROI ROI

Many

Market share Market share

Barriers of Entry to
Technological Market Space
First Mover Advantage Model
Environmental Opportunity
Attractiveness

Competitive First-Mover Later-Entrant Competitive


Strategy • Distinctive Competencies • Distinctive Competencies Strategy
• Resources • Resources
First-Mover Positional Advantages
Cost Differentiation
Later-Entrant
Economic Pre-emption Technological Behavioral
Advantages
Factors Factors Factors Factors
• Imitation Costs
Technological • Free-Rider Effects
Demand Pre-emptive
Innovation Nature of Good • Scope Economics
Uncertainty Investment Characteristics • Learning from
Entry Product
Technological Pioneer‘s Mistakes
Change & Market Type
Scale Characteristics Discontinuity
Efficient
Market
Scale-to-
Market Size Evolution

Advertising Buyer‘s
Intensity Investment in
Cospecialized
Response Assets
Time

Scope
Economies

Overall Magnitude of First-Mover Advantage

Market Share Performance Profitability Performance


• Absolute • Return on Assets
• Relative • Return on Sales
Financing Life Cycle
Venture
FFF & Angels Investment Banks &
Capitalist
Banks

Early Later
Seed Capital Growth Growth
& Early Stage

Enterprise Enterprise
Cash Flow Mezzanine Public Financing
3rd Market
2nd

1st Initial
Public
Offering

Time
Valley Break-even
of Death point

Emerging Growth
Break-Even Regions

Cash flow

Returned capital Cumulative revenue


breakeven

Cash flow breakeven

$
EVA breakeven

Opportunity cost based on


capital risk assumed

P&L breakeven
Financial Strategy Framework

Due dilligence process Investor Investment strategy Alternative Investments

Time to close deal Risk/Reward Space

Financial Strategy Opportunity

Debt
Entrepreneurial concerns
Sources and Deal
Time to out of cash Equity
Structure
Future alternatives Other
Burn Rate

Operating Financial Business Strategy


Requirements Requirements
Working Capital

Market Strategy Technological Strategy


Asset Requirement
Financing Space

Highest cost for Highest risk for investors


enterprise but lower potential risk to
enterprise

Preferred Stock
Lowest risk for
stock
investors but highest
potential risk to
Options enterprise
Subordinated
Debt

Lowest cost
for enterprise

Senior Debt RISK PLANE

COST PLANE
Investor Perceived Risk-Return Space

Angels
High
FFF

VCs
Entrepreneur
PERCEIVED
Moderate
RETURN Realistic
Investors

Banks
Low

Low Moderate High

PERCEIVED RISK
Technological Risk-Return Space

High

RISK Moderate

High
Low Moderate RETURN
Low
Incremental Radical
Existing New Generation

TECHNOLOGY
Technological Market Risk Space

High

Moderate
RISK

New
MARKET
Low Developing DEVELOPMENT
Existing STAGE
Low Moderate High

POTENTIAL
MARKET GROWTH
Enterprise Risk-Return Space

100

80

ANNUAL 60
RETURN
(%)
40

20
High
Moderate RISK
0
Low
Seed & Early Later
Mezzanine Buy-out
Early Stage Growth Growth or IPO

ENTERPRISE
STAGE
Davenport’s Investment Risk-Return
Space
100
Data from
Venture
Capitalist
80

Davenport‘s Risk/
EXPECTED 60 Return Space
ANNUAL
RETURN
(%)
40

20

0
Low Moderate Risky Most
Risky
INVESTMENT RISK
New Enterprise Growth Space

Ability to Grow

Low
Propensity for Growth

Life-style High-growth

Successful
Marginal and
growing
High
Three-Dimensional Technological
Management Model

Management skills

Management roles

SKILLS &
EXPERTISE Critical functions

Managerial functions

Functional Management

Technology buildup
Preproject Resources Procedures Structure Strategy Culture

Project
ASSETS
Production

Marketing PROCESSES

Service
Internal-External Technology Acquisition
Model

Technology Relatedness
Degree of Competitiveness
Decision
Core Enterprise Technology
Mechanism
Degree of Protection

Managerial Capabilities
Life of Technology
Enterprise Experience with External Technology

External
Technology
Acquisition
Technology Leadership Space

Life Team
High style focus
HUMAN
focus
RESOURCES Public Enterprise
ORIENTATION
Growth
Authority DEVELOPMENT
Low Unfocused
focus Early Stage STAGE

Start-up
Low High

GROWTH ORIENTATION
Enterprise Management Process

Decision
Process

Mission & Enterprise


Strategy Structure

Customer
Satisfaction

Value Enterprise
Improvement Learning

Benchmarking
The 7 Elements Overview

Focus on
Strategic customer
framework benefits –
not on customer

Controlling of
project portfolio
(innovation
controlling)

Management Fast
of pre-project project
phase realization

Tools
(methods)

Create innovative
environment
Technological Challenges

Managing the Managing the


USE of Technology CREATION of Technology

Rapidly Managing organizational response


Managing highly skilled
Changing to the introduction of rapidly
technologists to create new
Technologies changing technologies e.g.:
technologies e.g.:
• Identifying and using IT
• Managing R&D labs
• Using technology for new
• Marketing high-tech products
services

Managing the most efficient and


Developing organizations that can
cost-effective creation of new
Slowly make the most efficient and cost-
products e.g.:
Changing effective use of established
Technologies technologies e.g.: • World-class, low-tech
manufacturing
• Labor-intensive retailing and
• Consumer-oriented prod. design
service organizations
& marketing
Timing and Impact of Management
Attention and Influence

Knowledge Concept Basic Prototype Pilot Manufacturing


PHASES Acquisition Investigation Design Building Production Ramp-Up

High

Ability
to Influence
Outcome

INDEX OF
ATTENTION
AND INFLUENCE

Actual
Management Activity
Profile

Low
Priority Issues in Technology and
Innovation Management

200 GROWING Linking Technology


IMPORTANCE to Business
180 Building
Seamless
Innovation
160
Processes
140 Changing Culture
IMPORTANCE Building/Leveraging and Values in R&D
LEVEL 120 Competences
(NEXT 5 YEARS)
100
Managing for
Managing R&D R&D Efficiency
80
in a Global World
60
Rethinking
Technology Management DECLINING
40 IMPORTANCE

40 60 80 100 120 140 160 180 200

IMPORTANCE LEVEL (PAST 5 YEARS)


Technological Progress I

Base
Technology

Key
PERFORMANCE Technology
OF THE
TECHNOLOGY

Pacemaker
Technology

CUMMULATED R&D SPENDING


Technological Progress II

Higher
Potential
PERFORMANCE
OF THE New
Old
TECHNOLOGY Technology
Technology

CUMMULATED R&D SPENDING


Core Competencies:
Open Markets, Difficult to Imitate

Processes

Core
Competencies

Technologies Capabilities
Core Competencies: Market and
Resources

Low Company View High


High

Competency 1
Competency 5

Competency 4
Market View

Competency 6

Competency 2
Low

Competency 3
A Consumer Products Competency Map

Customer Core Competency


Care

Trade Service End Customer Capabilities


Partnering Excellence Delight

Space and Electronic Expectation Delight and


Trade Service Processes
Replenishment Data Trend Loyalty
Marketing Innovation
Management Interchange Management Measurement

Category Space Promo Sub-Processes


Management Management Management

Customer Customer Resources


„Partners“ Database
Technology Portfolio: 5 Generic
Strategies

Investing

Pilot project

STRATEGIC
RELEVANCE Optimizing

Observation
Desinvesting

TECHNOLOGICAL MATURITY/
STRENGTH (INTERNAL VIEW)
Platforms Link Technology and Market

INTEGRATION OF MARKET AND TECHNOLOGIES


VIA PRODUCT PLATFORM

Technologies

Technical
core competencies

„Market- Product „Technology


Information platforms flow“
flow“

Product groups
Individual products
Market segments

Customer needs
Platforms: Management Focus

Vision

IN THE PAST TODAY


Platforms

Product family

Individual products
Value vs. Volume

Value
Decisions

Knowledge

Information

Volume
Data
Innovation & Distinctive Capability =
Competitive Advantage

Innovation

Patent Secret Strategy

Valium Coke Sony Walkman

Competitive
Advantage
A Model of a Knowledge Company

INTELLECTUAL CAPITAL

Human
Intellectual
Resources
Assets

STRUCTUAL CAPITAL
A Model of Intellectual Capital

Intellectual
Human Assets
Resources
Intellectual
Property
The Intellectual Capital of the Firm

Intellectual Assets

Documents
Drawings
Programs
Human Capital Data
Inventions
Processes
Experiences

Know-how

Skills
Intellectual Property
Creativity Patents
Copyrights
Trademarks
Trade Secrets
Semiconductor Masks
Knowledge Management Strategies

Unfocused Strategy Focused Strategy

Codification Strategy Increase the absolute level of codification For each type of organizational knowledge
across all dimensions of codification and decrease the level of codification on those
knowledge. dimensions of codification which transfer
knowledge fastest and most accurately.

Tacitness Strategy Decrease the absolute level of For each type of organizational knowledge
codification across all dimensions of decrease the level of codification on those
codification and organizational dimensions of codification which pose
knowledge. greatest risks of involuntary transfer of
knowledge.
Intellectual Property Management
Patent selling,
buying, licensing
Defending Identification of
Patents Patent weaknesses

Infringement of Work with external


Patents Patent Consultants

Patent analysis for


technology trends Intellectual Patent strategy
Property Management

Patent search
Patent abstracts

Patent Mapping
with competitors‘
patents Brain Maps
Patent Key Know How holder maps
writing (competitors)
Positioning and Evaluating Assets

Technology Push
Technology Risk
Clear
Extension
for Existing Business
Eastman
MARKETS

Known to
Industry

Unknown Technology
Market to Market Push
Market Risk & Market Push-
World Large Risk

Incremental New to Eastman New to the World


for Eastman
TECHNOLOGY TYPE
Separate Pre-project and Implementation:
Open vs. Tight

Concept and planning Implementation


Project
planning

Specs and business plan Detailed specs


Market &
Generation of ideas Product concept Detail Design Prototype etc.

Freezing Point /
Release of
Potential influence
tools any jigs
Product specifications
and costs

Few structured activities Structured processes


Types of Innovation:
Cost of Change is Important

High
Aircraft
turbines

Software
Multimedia
Cars
electronics
TECHNOLOGY
INTENSITY

New restaurant
Cosmetics concept
Low

Low High

COST OF ENGINEERING CHANGE AT LATE STATE


Selection of the Right Project
Organization
Coordination Team
Functional (Lightweight team) (Heavyweight team) Task-Force

+ • Specialists • Specialists • Management • Clear priority


• Coordination • Rapid • Rapid

_ • Slow • Slow • Line / Project • Subculture


• Big control circ • Project leader • Spec know-how
difficult position

Fire brigade
Stable environment Integration Pressure of time
New business
Indicators of Horizontal Relations
Between Core Firms
Position of the other

Independent Independent Interdependent Dependent Dependent


with with without
Influence Influence Influence

Cooperation Compliance Coalition Direct Structural


or Competition Control Control
One directional technology flow Attitude of
(second sourcing, licensing) core firm
System integration
(common standards)
Controlling (minority)
share in core firm
Technology/patent exchange
(cross-licensing, technology share)
Joint R&D (research, pacts,
joint development)
Production consortium and/or
cartel (joint production)
Merger, Joint Venture (50/50)
Direct investment,
minority share
Acquisition
OEM agreement
Distribution
Five Major Trends Drive the Evolution of
R&D Organization

Synergy

Polycentric 
Decentral Integrated
decentralized
R&D R&D Network
R&D Competences


 Costs

R&D Hub
Tapping Model

 

Central Ethnocentric Geocentric


R&D

centralized centralized
R&D External R&D
Orientation

Competition Cooperation
Survey of R&D Tools

Product = Process Planning Product = Process Realization Production

Product Integration Pilot


Ideas Strategy Concept Goals Development Introduction
program and test lot

Target Costing

Marketing information system Cost reduction for existing products

Cost management for suppliers

Quality Function Deployment

Creativity techniques Statistical Process Control

Failure Mode and Effect Analyses

Conjoint Analysis Design for ...

Computer aided ...

Database-, Simulation-, Expert Systems

Design of Experiments
The Kano Model

CUSTOMER SATISFACTION

Excitement

Performance

DEGREE
OF
ACHIEVEMENT

Basic
New Product from the Pipeline -
Market and Competence Driven
Corporate Strategies
• Navigator Book
• Corporate Product Strategy

Market Market
Pull Requirements
• Field Operations
• Customers Product
Management
Product
Creation New
Process Products
Core Technology
Competencies Management
• Skills
Technology • Technologies
Push • Resources

Product Planning
• Harmonization with Field Operations
• Resources Check
• Idea Backlog
The Core Competence Process:
Actions are Important!

Identification of actual Technology Forecasting


Core Competencies Market Strategy

Definition of Future
Core Competencies

Evaluation of
Gap-Analysis
Technology Portfolio

Actions

Road Maps, Resource R&D Human Outsourcing


R&D projects Allocation Organization Resources
Portfolio of Technical Competencies

High Invest
• Long-term investments within
Pilot project core competencies
• ROI must be lined up in the
• Strategic impact is recognized
long term, short-term success
• Pilot projects with scantly budgets,
rather not possible
„High-Risk-High-Impact“-Projects
• External partner helps to build up
internal competence Optimize
STRATEGIC • Core Competence, but strategic
IMPACT impact is medium or rather
decreasing
• ROI should be lined up in the
short term
Observation
• No budget available
Desinvestment
• Technology-owner is responsible
• Visit exhibitions, congresses • No competitive advantages
• Study magazines within the next 5 or 10 years
• Cooperation with universities • Resources should decrease
and be freed for new
Low technology potentials

Low High
INTERNAL RESOURCES
Tasks of IT in Dispersed R&D Teams

Rational Level:
Information richness

Emotional Level:
Social Presence
INFORMATION –
Explicit EXCHANGE
Knowledge
high

COORDINATION high CREATIVITY –


SUPPORT low PROMOTION
high

high
Tacit
DEVELOPMENT OF Knowledge
INFORMAL NETWORK
Project Categories: Market / Technologies

N
High ne ew
w p
c o lat
re fo
pr r m
od /
im pr N uc
o
pr du ew t
ov c t
ed li
RELEVANCE FOR NEW pl ne
at /
MARKETS / MARKET Variants for
SEGMENT m

Va Variants
r ia
nt
s

Low

Low High

INTRODUCTION OF
NEW TECHNOLOGIES
A Balanced Portfolio - The Risk-Reward
Diagrams

High
Bread and Butter Pearls

TECHNICAL SUCCESS
PROBABILITY OF
0 10M

REWARD (NPV)

White Elephants
Oysters
(difficult to kill) Low
Market and Technology Risk Bubble
Diagram

Very high

MARKET
Moderate
RISK

Very low

Very low Moderate Very high

TECHNOLOGY RISK
Rohm and Haas - Strategic Intent Bubble
Diagram

Project A
Food/Pharm

Project B
Sugar
Project D
Cat/Chem Project C
Process
Project F
MARKET Nuclear
SEGMENTS

Drink Water

Industrial
Water

Project E
Other

Defend Grow New New Fundamental


Application Business

STRATEGIC INTENT
The New Business Enthusiasm Curve

Costs are
The field better
trail worked We have They
Ecstasy like it
Yes an order!
and orders
it is!
and the
The New costs and inventory
We‘ll approvals
customers look great
like it! It make it Documentation
works! done! We have all
the sizes

We have
a fix Installation
Costs are problem!
It too high We need
works! It‘s not documentation
proprietary
It
doesn‘t No, he
always loves it
They
need
all the Deliveries
Sounds great sizes are late
The market
estimate
We don‘t „Serveral“
was wrong
have enough failures
Despair I have an idea resources reported
We need help
Failures in Time
The boss hates
field trail
the project
Possible Timeline for Transmission
Technology Evolution

Japan PDC W-CDMA


Personal Digital Cellular Wideband CDMA

GSM GPRS UTMS


Europe Universal Mobile Telecommunications
Global System for Mobile communication Global Packet Radio Service
System (same as W-CDMA)

TDMA EDGE
Enhanced Data rates for
Time Division Multiple Access
Global Evolution
USA

CDMA upgrade CDMA 2000


Code Division Multiple Access CDMA 3G Standard

1997 1998 1999 2000 2001 2002 2003 2004 2005

Key: 2 G 2.5 G 3G
The Virtual Marketplace Model

B2B Marketplace

Buyer 1 Platform 1
Buyer 2 Seller 1
Platform 2 Seller 2
Buyer 3 Platform 3
Buyer 4 Seller 3
Platform 4 Seller 4

Infomediary: Multiple buyers to multiple sellers

Competitive bidding: Auction / Exchange / Reverse auction / Grouped buying


Illustrative Map of E-Enabled Business
Processes

E-
Online
procurement
R&D

E-shop
Online
Suppliers: Information
construction E-monitoring E-trading Customers:
facilitator Exchanger
• Energy online • Large
• Equipment billing
E-trans- Risk • Small/Medium
• Non-core Online Idea web-
mission manager • Residential
products Meter reading generator
control online Online
Customer
Service
Finance
B2E ASP
Illustrative Map of E-Business Models in
Part of Traditional Value Chain

E-
procurement E-mail
Market
Network forecaster
Negotiation Retail
market
place
Network Marketing Sales
companies Capacity Risk Aggregator
broker management
Value chain
integrator Billing Sale agt Customers:
Energy price
producers E-trade & Energy comparer
auctions purchasing
Product Customer Energy
development Service saver

Consumption Virtual
analyst Community
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