tidd lectures 07

7/26/2019 Tidd Lectures 07

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nov 07 Laestadius: MONTIC/Tidd 1

Managing Innovation -

lectures related primarily to abook byTidd, Bessant & Pavitt

Staffan Laestadius, prof.

Nov 2007

OBS last years lectures!!!!!

Version alpha


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Structure of the lectures (preliminary)

Follows the structure of the book:

lecture one: part I (chpt 1-2) lecture two: part II (chpt 3-6) lecture three: part III-IV (chpt 7-10) lecture four: part V-VI (chpt 11-13) (lecture five: to disposition)

Highly selective on the topics in various chapters Includes comments/reflections, i.e. enlarges the scope of

the text

The ambition is to contribute to an integrated view andunderstanding on the challenges/problems of innovationmanagement rather than focusing on details in the book.


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The key issues (chpt 1) Innovation and competitive advantage 1.1

Innovation and competitive advantage Whilst competitive advantage can come from size, or

posession of assets etc. the pattern is increasinglycoming to favour those organizations which can

mobilize knowledge and technological skills andexperience to create novelty in their offerings(products/services) and the ways in which they createand deliver those offerings

High costs (e.g. wages) are of little importance if

you can charge more (due to productinnovations) or produce more efficiently (due toprocess innovations)


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The key issues (chpt 1)

Innovation and competitive advantage 1.1 Walking on two legs - not only (physical)

product innovations, cf:

Toyota Benetton

Ikea

H&M

The role of the internet


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Types of innovation 1.2

The important thing is changeand novelty

As regards products it is the perceived degree of noveltywhich matters - they are in the eye of the beholder

As regards process innovations - the important thing iscosts, but also the impact on products and how they areperceived (e.g. environmentally friendly processes)

The distinction between product and process innovations isnot important - sometimes it is just a question of

perspective


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Types of innovation 1.2:

Type of innovations

Product innovations

Process innovations

Position innovations

Paradigm innovation

Degree of novelty

Incremental

Radical

The significance of the innovation

System level

Component level


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Systemlevel

Componentlevel

Incremental Radical

Improvementsto components

New componentsforexisting systems

AdvancedMaterialsTo improveComponentperformance

New versions ofmotor car,aeroplanes etc.

New generations of MP3s etc

ICT revolutionBiotech revolution


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the role of incremental innovations 1.3

Cf. Rosenberg Shipbuilding (Gilfillan) Petroleum refineries (Enos)

Airliners (Rosenberg)

Microchips/consumer electronics Cars


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The key issues (chpt 1)Innovation as a knowledge based process 1.4

The two dimensional analysis by

Henderson & Clark


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The structure of innovations

Core concepts

Reinforced Overturned

Incremental

innovation

Modular

innovation

Architecturalinnovation

Radicalinnovation

Link

agesbetweencoreconceptsandcomponents

Unc

hange

d

Ch

ange

d


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The HC-typology: some illustrations

Incremental

Marginal improvement of software

Modular

Digitalizing the AXE system

Internet based e-commerce/shopping

Architectural The typewriter?

Radical penicillin


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What kind of innovation isthis?


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And this??.

Cf box 1.3 in Tidd et al


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The Challenge of DiscontinuousInnovations

1.5

Fluid phase

Rateo

fMajorInnovation

Product innovation

Process innovation

Transitionalphase

Specific phase

Back to the Abernathy-Utterback model


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The Christensen Dilemma of Disruptive

Innovations1.6

Sustaining vs Disruptive TechnologiesIncremental or radical/discontinuous

Disruptive technologies result in worse product performance

Disruptive technologies are typically cheaper, simpler, smaller, more

convenient

Market need vs Technology Improvement

Technologies can progress faster than market demand, they overshoot

Disruptive Technologies vs Rational Investment

Not rational for established companies to invest because Lower margins

Insignificant markets

Leading customers/firms cannot use the products


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Cf. the three Utterback dimensions - theUtterback Cube!

Assembled- non assembled

Substitution - market broadening

Competence enhancing - destroying


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The Christensen cases

The hard disc drives

The excavator: hydraulics

Minimills and continuous thin slab casting

Computers: from main frame (IBM) via minis (Digital) to PC:s(Apple)

Printers: HP on lasers and inkjets

PDA:s - was Newton a failure?

Kittyhawk and HP (1.3HD)

Honda and the small scale motorbike

Intel and the microprocessor


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Changes in Market Leadership -- Hard Disk Drive Industry

Product Generation:

14-inch (1973)

8-inch (1978)

5.25-inch (1981)

3.5-inch (1986)

2.5-inch (1990)

1.8-inch (1994)

Leading Firm:

Control Data

Priam, Shugart

Seagate, Miniscribe

Conner, Quantum

Conner, Quantum

Integral


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1

10

100

1000

10000

74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90

HardDiskCapacity(MB)

14-inchD

riveTech

nology

Demandin

Mainframe

Market

8-inc

hDrive

Techn

ology

5.25-in

chDri

veTec

hnolog

yDemandi

nMinicom

puterMarket

Demandi

nDesktop

PCMarket

3.5-in

chTechno

logy

Demand

inPorta

blesMa

rket

2.5-in

ch

Noteb

ooks

Intersecting Trajectories of Capacity Demanded vs. Capacity Supplied in Rigid Disk Drives


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Number of Firms in the U.S. Rigid Disk Drive Industry

Years (from 1976 to 1989)

NumberofFirms

0

10

20

30

40

50

60

76 77 78 79 80 81 82 83 84 85 86 87 88

entry

exit

total


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HP printersThe Apple and Newton

Honda motorbikes HP Kittyhawk


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Christensen: the message in one picture

Capacity

Year

New (disruptive) technology

Low end demand

High end demand


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Performance oversupply and the evolution ofproduct competition

Performance oversupply changes the basis forcompetition, eg.

Capacity

Size

Reliability

Price

Creates a vacuum/niche waiting to be filled


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The choice of strategy: incumbants

Market segmentation - high-end & low end?

pricing

Ambidextrous organization (Tushman-Anderson)?

HP inkjet

IBM pc:s

Revitalize the old technology?

ADSL/XDSL

Railroads - high speed trains

Integrate with/buy/join the entrant firms


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A

B

Ca1

a2

a3

Waves of technologies - attacks and counter attacks

time

performance

Pommernland


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Small markets do not meet the growth needs of largecompanies.

Yet the greatest opportunities for the future are in smallmarkets today.

The pattern seen in the disk drive industry is remarkably

similar to e.g. that of the typewriter industry. Each change in market requirements, even though some

changes seemed trivial, resulted in a change in leadershipin the industry.

Conclusions I


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Complexity, over-complication of products, often leads to

failure in the market.

Simplicity and functionality lead to enduring classicdesigns.

Conclusions II


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Innovation as a management process(chpt 2:1)

The real challenge not invention - but innovation

a core business process involving: searching

selecting

Implementing (acquiring/executing/launching/sustaining)

Learning (all the time!!!)

Similarity in most processes/situations

Innovation management is a learned capabilitity Cook book recipes not enough


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Innovation as a management process

(chpt 2:1, cont.) Size matters (but not only big!!)

The context (=> position)

Networks and systems

Project organizations

Do better/do different


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(chpt 2:2-3)

Rothwell: from simple linear model to systemsintegration

Examples on partial (mis)understanding of theinnovation process (bounded vision):

seeing innovation as a linear technology push process

seeing innovation in terms of major breakthroughs only

seeing innovation as a single isolated change

seeing innovations as product or process only


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Can we manage innovation?

not every innovation fails, and some actors havelearned ways of responding and managing them so thatthe probability to succeed increases

Success in innovation appears to depend upon twokey ingredients- technical resources(people,equipment, knowledge) and the capabilitiestomanage/mobilize them

The creation of routinesbased on shared beliefs

on how to do things

The trade off between routines and creativity


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(chpt 2:4) Reflections on innovative routines (cf Nelson &

Winter) not necessarily repetitive but backbone driven

how to organize projects (project management theory isnormally noy related to innovativeness) routines become built in into organizational structures/

artefacts/policies some routines are better that others

possible to learn - although not easy to acquire the negative side of routines - NIH/core rigidities


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(chpt 2:5-6)

Innovation is a process, not a single event

The process can be manipulated to become

more innovative - innovation is (to someextent) manageable

The need for an integrated view cf. Rank Xerox


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(chpt 2:7)

Roadmaps for success Searching (and creation)

selection

Implementing Acquiring knowledge resources

Executing the project

Launching the innovation

learning and reinnovation


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II: Developing the framework for an

innovation strategy

(integrated view on chpt 3)

Rationalist or incrementalist strategies forinnovations (3:1)

Technology and competitive analysis (3:2)

Assessment of Porter (3:3)

The dynamic capabilities of firms (3.4)

Innovation strategies in small firms (3:5)


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The rationalistic strategy tradition.

Systems analysis, linear programming the military inheritage, Clausewitz

the linear, rationalistic model of action appraice

determine act

The classic : Igor Ansoff


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..is far from unproblematic

Influences our focus: is the target to defeat anenemy or to create satisfied customers?

Civic society has totally different sticks andcarrots (structrures of incentives)

The shortcomings of military intelligence

The linear, rationalistic model lacks - in its simpleform - a cognitive dimension, i.e. learning

the rationalist approach tends to underestimate the

cultural heritage, i.e. to overestimate the degreesof freedom.


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Famous illustrations

When the analysis can go wrong:

The war in Vietnam i going well and will succeed (RobertMacNamara, 1963)

Cf. the Iraqui war

When overestimating the strength of own resources:

I cannot conceive of any vital disaster happening to this vessel(Captain of Titanic, 1912)

When underestimating new technology

I think there is a world market for about five computers (T. Watson,IBM, 1948)


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The rationalistic view tends to have

an industry (branch) focus

Structural properties of industries

Barriers for entry

Product differentiation

Demand elasticity

In short the competitive situation, i.e.primarily exogenousmechanisms


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The alternatives

the incrementalist view

Mintzberg: position, plan,

Focus on pattern of behaviour, revealed strategy

the resource based approach

Teece & Pisano, the dynamic capabilities approach

orig. Penrose, The Theory of the Growth of the Firm

processes, positions, paths

Normally starts in the unique resource combinations of the

firm, i.e. endogenousmechanisms


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Porter - rooted in the rationalist

school

Porters field of forces - five structural forces

Porters strategy matrix - three (four) strategies

From competitive analysis to SWOT


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The field of forces

New entrants

Rivalry among existing

firms

Strength of buyers

Strength of suppliers

Substitute products


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Porters strategy matrixStrategic advantage

Unique advantagesfor the customer

Low costposition

Strategic

targetgroup

Total industry

Selectedsegment

Diffe-

rentiation

Cost

leadership

Differentia-

tion focus Cost focus


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SWOT-analysis(related to the Porter tradition)

Strengths internal

Weaknesses internal

Opportunititesexternal

Threats external


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Consequences of the matrix thinking -in between positions are

underestimated

profitability

Market share

X


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Critical reflections

Underestimates the the power/strength of technology(technological trajectories)

Overestimates the ability of management to enforce/

implement strategies i.e. To break with the product base,the base of customers, the technology base, thecompetence base etc.

getting stuck in the middle not necessarily a problem

To focused on competition and rivalry - where are

cooperative relations and (win-win) networks?

where is learning, innovativeness, dynamics?


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The Dynamic Capabilities of the

Firm (cf. Section 3.4)

A firm can accumulate large resources/assets andstill lack useful competences/capabilities

The ability to utilize the resources of the own firm

and acquire (assimilate) external ones may belabelled dynamic capabilities

The foundation in this approach is that capabili-tites/competencies not easily can be bought/sold

on the market but to a significant extent have to bebuilt outside the market.


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The core of the resource based/capabilities approach

A successful firm is characterized by its capabilitytocreate heterogenitythrough transforming existent oracquired resources.

This heterogenity is not possible to imitate in the short

perspective or possible to instantly buy/sell on the market. We may thus talk about a temporary excess interest

(monopoly or entreprenurial interest or profit)

The dynamic capabilitites may be analyzed through theconcepts:position, path, process


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II: Positions (chpt 4)

National systems of innovation (4.1)

Relation to competitors (4.2)

Appropriability conditions (4.3)

Positioning of small firms (4.4)


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Positions: national systems of innovation

(4.1)

National competence profiles

R&D landscape

National institutions

Cultural institutions (often neglected)

Cf. Porters diamond

Catching up: from the first to the second tiertigers


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The role of design culture


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The Porter diamond


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Positions: relation to competitors (4.2)

Comparing with competitors -benchmarking

Learning, imitating, match racing


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Positions: appropriability conditions

(4.3)

From technological leadership to economic benefits:

Translate technological advantage into commerciallyviable products/processes

Capacity to defend the advantage against imitators

Cf. Xerox which did not reap the harvest it created (theWYSIWYG, the mouse.)


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4.3 cont: The factors of appropriability

Secrecy

Accumulated tacit knowledge Lead times and after sales-service The learning curve

Complementary assets

Product complexity Standards Pioneering radical new products

Strength of patent protection


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II: Paths: exploiting technological

trajectories (chpt 5)

Major technological trajectories (5.1)

Revolutionary technologies (5.2)

On firm-specific competencies (5.3) The core competence problem

Technological paths in small firms (5.4)


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Major technological trajectories (5.1)

A taxonomy on major technologicaltrajectories (Pavitt) Supplier dominated firms, eg. agriculture

Scale intensive firms, eg. pulp&paper

Science based firms, eg. pharma

Information intensive firms, eg finance,

Specialized supplier firms. Eg. mach. equipm.


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Major technological trajectories (5.1,contd.)

Questions to ask: Where do the companys technologies come

from?

How do they contribute to competitiveadvantage?

What are the major tasks of innovationstrategy?

Where are the likely opportunities and threats,and how can they be dealt with?


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Revolutionary technologies (5.2)

Revolutionary technologies (science based???): ICT

Biotechnology

Materials

More?? (nano??)

Impacts: Pervasiveness, genericness

Revolutionary impact: products, processes, industries


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Firm-specific competencies (5.3)

Prahalad & Hamel: the core competence problem

The strength of the cc appoach Technology diversification Multitechnology firms Core rigidities (limited visions)

The strategic function of technology/competence

Core/critical Background/enabling Emerging/key

Developing and sustaining competencies

And identifying them!!


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II: Processes: integration for strategic

learning (chpt 6)

Locating R&D activities Corporate vs divisional (6.1)

Global vs local (6.2)

Allocating resources for innovation (6.3)

Technology and corporate strategy (6.4)


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Corporate vs Divisional location of R&D(6.1)

What is the role of the R&D/innovation/design unit?

Corporate intelligence - contribute to absorptive capacity?

Create capabilities/competencies?

Produce radical innovations?

Contribute to incremental innovations?

Focus on products, on processes?

Other?

A multi dimension problem: Physical location to different corporate levels/divisions

Funding responsibility

Decentralization - centralization


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Global vs local R&D (6.2)

Hitherto most multinational firms have localized theirR&D units to their home countries - why??

There is now a tendency to globalize also R&D - why?

Analyzing R&D strategies:

Market oriented R&D

Process/technology/competence oriented R&D

Global networks in R&D?

Huawei & ZTE have R&D units in Kista - what are they

doing there?


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Global network? Global hub system

The problem of global knowledge formation


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How to finance R&D? (6.3)

Quantitative methods for evaluating resource allocation inR&D are not so used as you could imagine, although theyare there:

NPV

Probability/uncertainty

Project management methods (earned value)

What is the product from the R&D unit? (learning,competence, positioning)

Two leg strategy in R&D?:

The R-leg (scanning, competence building)

The D-leg (product/process development)


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Technology and corporate strategy (6.4)

A two way link between technology strategy and corporatestrategy in general

The dependence on the technological path (you cannot

reasonably decide to be best on everything!!)

Strategy styles:

Financial control

Strategic planning (centralized)

Strategic control (decentralized)


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III: Learning from markets (chpt 7)

How do technology and markets affectcommercialization (7.1)

Differentiating products (7.2)

Creating architectural products (7.3)

Marketing technologival products (7.4)

Commercializing complex products (7.5)

Forecasting diffusion of innovations (7.6)


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high

low

high

Noveltyofte

chnology

Novelty of markets

Technological

Complex

Differentiated Architectural

The market learning problem (7.1)

(new solutionsto exist. probl.

Novel comb. Of

Exist. Techn.)

(compete on qual. And features)

(everything newand open)


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Nokia: between design and innovation


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Customerrequirements

Competitorassessment

Technical assessment

Financial assessment

Design options

Options

QualityFunctionDeployment

7.2

Differentiating/

optimizing

Matrix of relationships


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Architectural products (7.3)

The segmentation problem

Consumer markets (B2C)

Business markets (B2B)

Identifying potential niches to develop in the existingmarkets or to create new markets

Cf. Christensen


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Design - the neglected dimension?


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but not neglected in the automotiveindustry!

A complex relation between form

and function


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Technological products (7.4)

Identifying reverse salients in segments ofthe existing markets - real shortcomingswhere our product may have a role to play

Identify customer value for potentialcustomers to upgrade their technology

IPR problems


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7.5 Complex products

The CAT scanner

Cf von Hippel - user led innovations


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7.6 Forecasting the diffusion - and non

diffusion - of technologies

Penetration of:

mobile phones

TV-sets

Automobiles

DVD players.

The conventional wisdom


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The classical diffusion problem:

Why did - or did not - theMid-West farmers in the USA

Transform to high yield hybrid

Corn in the 1930s and 1940s?

Cf:

Griliches (1960)


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Diffusion of clay storage of maize in Benin

(Maboudu et al)


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The diffusion matrixLaestadius (2005)

Not

informed

Informed

Does not fit Fits

The improvement dimension

Th

ecommu

nication

dimens

ion

(fitness is a social

construction)


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Is this diffusion?


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III: Learning through alliances (chpt 8)

Why collaborate? (8.1)

Forms of collaboration (8.2)

Patterns of collaboration (8.3)

Effect of technology and organization (8.4)

Managing alliances for learning (8.5)


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Why collaborate? (8.1)

To reduce cost of technological development

To reduce risk

To achieve economies of scale

To reduce time to market (TTM)

Consider

Transaction costs

Strategic implications


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Forms of collaboration (8.2)

Supplier relations and subcontracting

Depends on the supplier market and on objectives

Technology licensing

Speed of access rather than costs

Research consortia

Reduces risk, pooling scarce expertise, setting standards Strategic alliances

Create critical mass, gain new/complementary competencies, reachnew markets

Joint venture

Innovation networks

Open innovation


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Effect of Technology on Organization/

cooperation (8.4)

Competitive significance of technology

Complexity of the technology

Codifiability of the technology

Credibility potential Corporate strategy

Firm competencies

Company culture

Management comfort


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8.5 Alliances for learning


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IV: Managing the internal processes

(chpt 9)

Building dynamic capabilities through building routines-enabling management: Scanning routines (identification) Strategy making routines (selection) Resource provision , technology acquisition

Mobilizing the absorptive capacity

Implementation The PD funnel

Concurrent working/integrated design/learning before doing

Mass customization/modularized products

Process innovation routines

Learning routines


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The creation of options (variety) andreduction (selection) of alternatives

SearchCreateoptions

SelectReduce

alternativesimplement


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Examples of search processes (9.1)

What business are we in?

Understanding market dynamics

Trend spotting

Monitoring technological trends Market forecasting

Technological forecasting

Involving stakeholders (users, customers)

Involving insiders


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Selection/strategy (9.2)

The need for routines


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Knowledge acquisition (9.3)

Learning from internal organizations/activities

Learning from external organizations/acitivties

Absorptive capacity

Boundary spanning organizations Bridges over different cultures

NIH


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Enabling implementation (9.4)

Concurrent working

Integrated design

Modularization

Mass customization


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Scania - modularized


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IV: Learning through corporate

ventures (chpt 10)

Moving beyond the core competence (extending theprocesses, leaving the path):

Change withinthe existing organization (change management)

Acquirean organization which has what we want (fusions/

integration of foreign cultures are difficult)

Developa separate organization (going ambidextrous, corporate

venturing)


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Technology

Base Related Unrelated

Base

Related

Unrelated

Market

Internal

development

Corporate

venture

Joint venture

Joint ventureAcquisition

Cv

Cv

Id

Id


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Reasons for corporate ventures (10.2)

Exploit underutilized resources

Introduce pressure on internal suppliers

Divest non-core activities

Satisfy managers ambitions Spread risk and costs of PD

Grow the business

Learning

Diversify

Develop new competencies


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Structures of CV:s (10.4)

From direct integration

and integrated business teams

to new departments,

divisions and special business units

to independent business units

or even complete spin-offs

V: Building the innovative


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organization (chpt 11)

Shared vision, leadership and will to innovate

The NIH phenomenon

The core rigidities phenomenon

Management committment

appropriate organization structure

Organicor mechanisticstructure (Burns & Stalker, 1961)

Woodward: batch, massorprocessorganization

Centralized - decentralized (= involving all)

Parallel working, concurrent engineering

Networks

key individuals

Enabling figures (enthusiasts, eldsjlar)

Critical experts (and gate keepers)



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organization (chpt 11), contd.

stretching training and development

high involvment in innovation

Kaizen - continuous improvement

TQM

Hawthorne effects

effective teamworking

Cross-functional/competence/cultural/departmental

creative climate

Flat structure, egalitarian

Open minded, pluralist

Incentive systems



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organization (chpt 11), contd. 2

external focus

extensive communication

Job- rotation

learning organization

Learning to learn

Innovation as a learning cycle

Beyond the boundaries Beyond the steady state


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The knowledge based firm - a circus or a camping area?


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V: Creating innovative new firms (chpt 12)

Sources of New Technology-based Firms (NTBF:s) The US tradition from Silicon Valley

ICT firms Biotech firms Entry barriers high - survival rate relatively high

University Incubators

The role of the university

The teachers exception (lrarundantaget), cf USA - Sweden The academic entrepreneur

Profile of an Technical Entrepreneur

The Business Plan

To attract external funding

A platform for understanding/communication

Growth and Performance of Innovative Small Firms


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VI:An integrative approach to

innovation management (chpt 13)

Key themes

Four clusters of behaviour

Strategy

Internal/external linkages

Effective enabling mechanisms

Supporting organizational context

Three P:s of dynamic capabilities

Position

Path

process


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StrategyEffective

implementationmechanisms

Supportiveorganizationalcontext

Effectiveexternallinkages

Phases in the innovation process

part II

part V

part IV

part III

tidd lectures 07

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