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Innovation Management and New

Product Development

New Product Management

Innovation, Technology and Strategy

New Product Management

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

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Technology and Strategy


Porters 5-forces model

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Technology and Strategy


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

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Technology and Strategy


Generic strategy
Overall cost
leadership

Overall differentiation

Focus-segment cost
leadership

Focus-segment
differentiation

Product technological
change

Product development to
reduce product cost
by lowering
materials content,
facilitating ease of
manufacture,
simplifying
logistical
requirements, etc.

Product development to
enhance product
quality, features,
deliverability, or
switching costs

Product development to
design only enough
performance for the
segment's needs

Product design to meet


exactly the needs
of the particular
business segment
application

Process technological
change

Learning curve process


improvement
Process
development to
enhance economies
of scale

Process development to
support high
tolerances, greater
quality control,
more reliable
scheduling, faster
response time to
orders, and other
dimensions that improve
the ability to perform

Process development to
tune production
and delivery
system to segment
needs in order to
lower cost

Process development to
tune the production
and delivery
system to segment
need in order to
improve
performance

Technological policies

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Technology and Strategy


Technology and Product-Market Strategy
A firms strategy is expressed in the products and
services it brings to market. One way to get at the
integration of a firms technology and productmarket strategy is:
Decompose each product or service into its
constituting technologies and assess the relative
strengththe degree of distinctive competence
the firm has with respect to that technology

New Product Management

Technology and Strategy


Technology Portfolio
Harris, Shaw, and Somers suggest:
Once various technologies have been identified,
they can be classified in terms of their importance
for competitive advantage
Next, the firms position relative to its competitors
can be assessed

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Technology and Strategy

ec nat r op mi ygol onhce T

High

Bet

Draw

Cash in

Fold

Low
High

Low

Relative technology position

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Technology and Strategy


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

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Technology and Strategy

High

High

Low
Low

High
Competitive position

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ec nat r op mi ygol onhce T

ss e ne vit artt A

Low
High

Low

Relative technology position

11

Technology and Strategy


Technology Forecasting
It is the capacity to perform systematic
technological forecasting. Some useful techniques
for forecasting are:
Technological progress functions (S-curves)
Trend extrapolation
The Delphi method
Scenario development

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Technology and Corporate Planning


Executives generally have low technology
experience
Black-box view on R&D
Delays, success rates,...?
Time horizon difference in planning

Elements in planning
Industry, competition, organizational resources...
Technology can result from inside or outside
Questions: How are technological issues recognized by
management? How has technology been used to
implement strategic objectives? How has technology
been monitored? How are technology-related activities
recognized and organized?
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Technology and Corporate Planning


Unit of analysis
Often product or specific techniques
Should be generic technologies

Link to elements of product success


Functional performance
Acquisition cost
Ease-of-use
Operating cost
Reliability
Serviceability
Compatibility

Importance can differ for markets / segments


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Technology and Corporate Planning


Demand elasticity
How does demand change based on these
characteristics (that are influenced by technology)?
Importance can differ for markets / segments

Based on this analysis, compare your technology


to competitors'
Competitive technological profile

Profile of technologies to products (Exhibit 2)


Common technologies?
Emphasizing product and all its technologies?
Technology-driven or driving technology?

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Technology and Corporate Planning


Strategic considerations
Technological strengths for use in several products?
Matches strengths in production and marketing?
Mergers etc.
Analyse market needs at the same time...

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Management
Innovation

Criteria

for

Effective

Assessing and directing technological innovation


Management criteria to discriminate profitable and
unprofitable new technologies

Two sides
technological (new and good) and business
(embodiment, operational consequences and market
dynamics)

Technical potential
What fundamental technical constraints limiting prior art
are lifted?
What new technical constraints are inherent?
How favourable is the trade-off?

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Management
Innovation

Criteria

for

Effective

Embodiment
Is the end product enhanced by additional technology
and components required to use innovation?
Is the innovation enhand or diluted by embodiment?
Does the embodiment offer potential for further
inventive enhancement?

Operations
What operations are displaced or weakened?
What new operations are needed?
What is the tradeoff?

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Management
Innovation

Criteria

for

Effective

Market
Does the product provide enhanced effectiveness
serving the final user?
Does the operation reduce cost of delivery?
Does latent demand expansion or price elasticity
expansion determine characteristics of new markets?

Example analyses
Transistors (Exhibit 1)
Jet turbines (Exhibit 2)

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Core Competence of the Corporation


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


Long run winner based on to build quickly and at
low cost the competencies that spawn new
products
Move from portfolio of business to portfolio of
competencies
Tree analogy: trunk are core products, branches are
business units, leaves are end products, competencies
are roots (Exhibit 1)

Core competence
Collective learning, coordinate production skills, bring
together technologies, organization of work, delivery of
value
Sony: miniaturization, Philips: optical-media, 3M: sticky
tape
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Core Competence of the Corporation


Must be nurtured and used, maintained
Not necessarily outspending
Shared costs between business units (components,
factories etc.) most often post-hoc effort

Identifying core competencies


Provides access to a variety of markets
Makes significant contribution to perceived customer
benefit of end product
Difficult to imitate

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Core Competence of the Corporation


Loosing core competencies
Looking at costs only risky - might lead to outsourcing of
core competences (Chrysler vs. Honda)
Leaving businesses (US companies - TV)

Core products link between competencies and


end products
e.g. engines for Honda
Components contributing to value
Differentiate brand and manufacturing share (Canon)

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Core Competence of the Corporation


Concept of organization Business Unit vs.
Competencies
Exhibit 2
Ownership of resources
Bounded innovation
Disintegrated IS, career paths, communication

Strategic architecture
Establish objectives for competence building
How long could we stay in this business if we lose it?
How central to customer value? Future opportunities
foreclosed?
Architecture provides logic for product and market
diversification (Does it add to overall goal? Does it
exploit/add to core competencies?)
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Core Competence of the Corporation


Business units and core competencies
They belong to company
BU bid for them goes to one with highest payoff
Transfer of people etc.
Cooperation rewarded

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Technology and Innovation Strategy

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Contents
1. Technology Strategy (Part II - Intro)
2. Technological Innovation and the S-Curve (Reading
II-1, II-2 and II-3)
3. Disruptive and Sustaining Innovations (Reading II-4
and II-5)
4. Organizational Adaptation (Reading II-13)
5. Strategic Dynamics (Reading II-16)

Case: Infosys Consulting (Case II-11)

Case: NTT DoCoMo (HBS)

Case: Kindle (HBS)

Case: Amazon Web Services (HBS)

Case: Geox (HBS)


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Introduction Technology Strategy


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

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Introduction Technology Strategy


Strategy making as evolutionary organizational
learning process

Technological
capabilities

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Technology
strategy

Experience

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Introduction Technology Strategy


Internal Environment

Strategic
action

Organizational
context
Technology
strategy

Technology
evolution

Industry
context

Integrative Mechanisms

Generative Mechanisms

Determinants
of Technology
Strategy

External Environment
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Introduction Technology Strategy


TECHNOLOGY EVOLUTION: Company affected by
endogenous evolution
S-curve trajectories
Product-process interplays
New technologies and trajectories
Technological change
Competence enhancing
Competence destroying

De-maturity (renewed innovation in wellestablished markets)


Organizational determinants
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Introduction Technology Strategy


INDUSTRY CONTEXT: affect profitability
distribution, choices etc.
Industry structure (5-forces model)
Appropriability regime
Complementary assets
Dominant designs
Increasing returns to adoption
Industry standards
Social systems aspects of industry development
Interplay of social systems and technological
change
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Introduction Technology Strategy


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

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Introduction Technology Strategy


ORGANIZATIONAL CONTEXT: allows subsitituting
internal for external (market) selection
Internal selection environment
Opportunities within current strategy (induced)
Opportunities outside (autonomous)
Ability to balance those

Dominant culture
Reflects distinctive competence
Science vs. engineering vs. manufacturing
Reflects product architecture
Can reflect founders

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Technological Innovation and S-Curve


Productive unit's capacity for and methods of
innovation depend on stage of evolution from
small, technology based to major high-volume
producer
Major innovations followed by many smaller ones
Often acccount for more than half of economic gain
Typically result in specialized systems with economies of
scale
Generally reduce flexibility

Major innovations often based on emerging need


or new way to meet demand
Entrepreneurial act, often based on superior
performance
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Technological Innovation and S-Curve


Two types of innovation (incremental change to
efficient production system vs. radical
innovation)
Often evolution over time
Product vs. process innovations
e.g. microelectronics or Ford (5 models in 4 years based
on flexible factory, then after Model T 15 years process
innovations)

Implications for management of technology


3 stages: fluid, transitional and specific
Exhibit 1

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Technological Innovation and S-Curve


S-curve - Overview
Theory of the potential for technological improvement
Framework for describing substitution of new for old
technologies at industry level
Progress slow at beginning, then increases until maturity
(approaches natural or physical limits)
Plots time (or engineering effort) versus main product
performance feature
Leading firms often focus on mature technologiies, new
entrants based on new technologies
Component versus architectural technologies S-curves
(all impact product performance)
Industry-level versus individual firm
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Technological Innovation and S-Curve


S-curves for individual firms
Aid in planning sequence of component and architecture
projects to gain performance
Difficult for predictions on when to change (misjudge
plateau, often riding S-curve better than being first to
switch to new technology)
Architectural innovations very important, often not
recognized, and often high market innovation as well

Case disk drive industry component S-curve


Industry level: Exhibit 2
Result of a series of component and architectural
improvements (Exhibit 3)

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Technological Innovation and S-Curve


Plateau often based on perception of maturity and
research scale-back (Exhibit 4)
Firm timing for introducing new technology and gain
(Exhibit 5), most innnovators had been leaders but did
not receive particular benefits, most did not jump out of
reach of old technology
Strategies: either frequent changes to new technologies
(IBM) or longer incremental improvements (HP), stays
quite consistent

Case disk drive industry architectural S-curve


Pronounced first-mover advantage exists
First used in emerging markets
New firms succeeded because they were better there
(leading firms technologies comparable)
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Technological Innovation and S-Curve


Architectural innovations often are worse with regard to
measures, but change measures
Example: 5.25-inch changed from capacity and speed to
capacity per inch and cost per unit, i.e. mainframe to
desktop
Due to improvements, often invades (very rapidly) home
market and leader is dethroned (Exhibit 2)

Lessons
Difference component / architecture curves
Architecture often closely coupled with market, new
entrants often successful

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Disruptive and Sustaining Innovations


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

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Disruptive and Sustaining Innovations


Disruptive innovations
Rate of improvement that customers can absorb (e.g.
traffic regulations or jams)
Trajectory of improvement of innovating companies
(steeper), will outgrow standard need to meet not
satisfied customers
Sustaining innovation targets demand, high-end
customers, disruptive innovation redefine trajectory at
less performance but other values (convenience, price)
that appeal to new or less demanding customers
Exhibit 1

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Disruptive and Sustaining Innovations


Innovators dilemma
Incumbents: Should we fight when attacked from below?
Should we invest to protect the least attractive end of
business, to retain least loyal, most price-sensitive
customers? Or strengthen position with profitable
customer who pay top prices for good products?
Does not mean sustaining innovation is unimportant (get
to top of pack)
Even for start-up, but then probably sell out to a leader
Continue to move up to higher-priced products (high
profits), but seeds sow for own disruption (dilemma)

Disruptive is relative, can be sustaining for others


Internet sustaining for Dell (had used telephone before),
disruptive for others
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Disruptive and Sustaining Innovations


Types of disruption
Low end or new market
Exhibit 3
New market competes with non-consumption, market
leader does not feel anything at first, then people switch
(because of price or convenience), e.g. PC, BlackBerry,
E-Bay, Wireless telephony,...
Low end, e.g. Hyundai, amazon.com, supermarkets
(department stores moved to high price fashion)
Internet banking?
Table 1.1

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Disruptive and Sustaining Innovations


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

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Disruptive and Sustaining Innovations


Viewpoint of incumbent Why do they fail?
Well-managed firms have lost over the ages to
newcomers with regard to new technology and markets
Listen too well to customers!!! This places stringent
limits on strategies...
Patterns of resource allocation in organizations
fundamental in success (ideas get funded or not)
Resource allocation often driven by market demand
might lead to not funding projects based on emerging
needs
Resource dependence theory says that decisions depend
on interests of external entities, important customers
(and marketing) will argue for sustaining which
influences resource allocation
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Organizational Adaptation
Evolutionary focus on strategy
How does it come about and evolve?
From outside (environmental determinism) or inside
(strategic choice)?
Intraorganizational perspective: initiatives emerge and
compete
Variation selection - retention
Internal and external selection

Induced strategic process


Retention: after successful founding, top management
will base strategy on learning about basis for success,
embodied in managers, statements about
technical/economic/cultural factors
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Organizational Adaptation
Selection: knowledge about strategy often located at
top, as firm becomes larger, communication difficult, so
participants might perceive different strategies as best
for them and firm (reason for variation), top
management needs to establish internal selection
mechanisms to maintain coherence (administrative
rules, control systems, rewards, cultural rituals,
norms), should be in line with external (market)
selection pressures
Variation: induced process targeted at preserving
coupling of initiatives at operational level with strategy,
might lead to reduction of variation, depends on growth
opportunities in current domain

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Organizational Adaptation
Autonomous strategic process
Variation: some people willl try to get firm to engage in
activities outside current strategy, derive from new
combinations of skills, capabilities, competences, more
often from lower level, reasons: self-image that risk is
not greater, career prospects, start-up
Selection: clear up importance in context of current
strategy, usually outside normal selection process
through champions and top management, may lead to
change in strategy, difficult processes, often some
alternate funding reserved for demonstrating viability
Retention: autonomous strategic process allows firm to
become aware of environmental variations, autonomous
initiatives can lead to new companies or stretch
resources too thin, but open up strategic options
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Organizational Adaptation
Organizational adaptation
Relative inertia: adaptation necessary (reliability,
legitimation), but reduces apatability to changes,
consistent with induced strategic process, strategy
evolution slow, internal selection needs to be open, free
championship and challenging of ideas, role of founders
and rule of knowledge and facts over position
Adjustment: leave overall strategy in place and changes
peripheral features, deliberate, non-random, generally
increases life chance of firm, consistent with induced
process
Reorientation: major changes, upsets induced process,
generally by environmental selection (would reduce
chance for survival)
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Organizational Adaptation
Strategic renewal: major changes through autonomous
process if internal selection (strategic context
determination) works well
Exhibit 2

Success factors
Top management builds quality of induced and
autonomous process
Maintain top-driven strategic intent and bottom-up
internal experimentation and selection processes
Successful reorientation preceded by internal
experimentation and selection processes

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Strategic Dynamics
Decision making and game theory
Game theory is concerned with other parties that have
own strategies and goals, decision making generally
only with the environment
Game defined by players, available strategies, payoffs
and rules (repeated games, memory, information)
Prisoners' dilemma probably most famous example...

Proposal
Corporate longevity depends on matching cycles of
autonomous and induced strategy with strategic
dynamics
Strategic leadership means balancing those cycles

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Strategic Dynamics
Corporate longevity
Fortune 100: from 1965, 19 remain in 2005
Most of the time, companies operate in stable
environment, and strategy making process is geared
towards linear strategic dynamics
Sometimes (quite often newcomers) nonlinear dynamics
change rules of game (normative rules laws, customs
etc., economic rules, technological rules, cognitive rules
industry recipe), outcomes difficult to predict

Strategic dynamics
Actions of company and environment (other players,
suppliers, technological change, government,...)
considered, can be rule-abiding or -changing
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Strategic Dynamics
Rule-abiding means additive, linear, fairly predictable
change
Rule-changing materially change strategic context for
others, nonlinear, difficult to predict
Exhibit 1
Strategic recognition important, seeing rule-changing
implications quickly, reaction time, constant alertness
Player-independent change: problematic, e.g. rebates
against new manufacturing

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Strategic Dynamics
Link to induced and autonomous strategy process
Example Intel: Independent industry change (DRAM
came, Intel slow to withdraw, but autonomous strategy
had provided microprocessor option), controlled change
(Centrino based on autonomous strategy), runaway
industry (RISC vs. CISC, internal civil war)
Resource accumulation: firms engage in quite a lot
autonomous processes (exploration mode), often funded
by middle management faced by problems using
resources from mature business not absorbed by
induced process
Scaling up: experimentation and selection of
autonomous processes, middle management tries, role
of cash reserves (Exhibit 2)
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Strategic Dynamics
Balance
Limited change: continue induced, but manage
autonomous (slight rebalancing)
Independent change: autonomous process key
Controlled change: induced process key
Runaway industry change: management decides based
on whether bet available
Exhibit 3

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Case: Infosys Consulting


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


NTT DoCoMo (TM): Value Innovation at DoCoMo
(HBS)

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Case: Kindle
eReading: Amazon's Kindle (HBS)

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Case: Amazon Web Services


Amazon Web Services (HBS)

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Case: Geox
Geox: Breathing Innovation into Shoes (HBS)

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R&D and New Product Development

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Contents
1. Developing Innovative Capabilities (Part III - Intro)
2. Corporate R&D (Reading III-2 & III-3)
3. Invention to Innovation and Research to
Development (Reading II-4 & II-5)
4. Absorptive Capacity (Reading III-6)

Case: NEC (Case III-1)


5. Corporate Venture Capital (Reading III-7)
6. Evaluating Innovation Investment (Reading III-10)
7. New Product Development
8. Communication in NPD (Reading IV-1)
9. Project Plans & Product Development Maps (Reading
IV-5 & IV-6)

Case: Apple (HBS)


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Developing Innovative Capabilities


Corporate research
Role is to generate new technologies
Long-range, high risk, exploratory
5-10% of sales for established high-technology
companies for R&D, most for R&D for mainstream
businesses, 10-15% for corporate research
Strategic issues
Whether invested in areas with highest returns
How tightly linked to business objectives in those areas

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Developing Innovative Capabilities


Functions of corporate research
New strategic directions
Innovations by:

Corporate service by:

Support of existing businesses

Improving and strengthening


understanding of technologies
in use
Discoveries and developing
new technologies

Diversifying to new
applications and markets

Identifying product and process


improvements

Diversifying to entirely new


businesses

Developing new processes for


established products

Intelligence

Opening windows on new


science and technology
Recruiting new kinds of skills

Assessing threats and


opportunities
Recruiting talented people with
high potential
Recruiting for all divisions, from
corporate research to operations

Human resources
Technology transfer

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Identifying acquisition
candidates with needed
technological expertise

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Developing Innovative Capabilities


Key interfaces:
Induced process
Corporate researchDivisional R&D interface: differing
orientations and expectations, divisional labs or product
development see corporate research as a service links
are important

Autonomous process
Corporate researchBusiness research interface:
entrepreneurial task, needs market link, business
researchers generally more ad-hoc, less structured,
more external time pressure

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Developing Innovative Capabilities


Links between R&D units:
Geographical
Closed

Open

Personal

Personal

Administrative

Closed
Closed

Open

Closed

Open

Tight
coupling

Open

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No
coupling
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Developing Innovative Capabilities

Linking corporate research to corporate strategy


Clear charter (common understanding of what corporate
research should do) defined
Process for deciding what to develop
Also makes assessment easier

Assessing opportunities
High uncertainty (usefulness unclear, depends on
complementaries or total system, often new uses, ability
to link to need)
Questions (I): Are first-class researchers available? Is
major investment going to return major result? How
many years to useful results? How many
failures/successes did others have in that area?
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Developing Innovative Capabilities

Questions (II): Can be obtained from vendors or


acquisitions? Cost for displacing an existing program to
implement new one? Enough hope to transfer
downstream? Necessary capital available?

Different levels in corporate research


Technician / Bench scientist / Group leader / R&D
manager / Director of corporate R&D
Chief scientist or advisory board for top management
Parallel ladder of career advancement
Middle management important

Allocating resources to corporate R&D


Inertia, might depart from strategy, long-term
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Corporate R&D
Case study: Xerox Palo Alto Research Center
(PARC)
Located in Silicon Valley near Stanford University
Xerox spent hundreds of millions, but many ideas were
turned into products by start-ups
Still successful (copiers, CAD, laser printers)
Especially computerized office systems (original reason)
not cashed in on (business at Xerox makes loss)
Problems: slow decision making due to size and being a
one-product company, organizational flaws (weak ties to
rest of company, generally no marketing channels for
such products)
Problems have also led to people leaving frustrated
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Corporate R&D
Founded in 1969 for Xerox to become architect of
information in the office
Top people attracted (blank check and 10 years no
corporate interference)
50% computer science, 50% physical sciences
Image of scientists / hackers basically from there
(beards, T-shirts,...)
PARC became leader in human-computer interaction
Pioneered windows and mouse for interactions
Hands-off management led to overstepping (developed
Alto open - as PC product, other divison developed Star
- closed)
Text editor Bravo developed (outside charter), nobody
saw market potential became MS Word
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Corporate R&D
Visitor Steve Jobs got some ideas for Apple from
Smalltalk
Ethernet developed at PARC
Xerox strategy was complete office systems to increase
lock on customers (open PC was not a good fit), and bigbank (build the best, not something better)
Reorientation at PARC to increase transfer out and
management attention / links
PARC was transformed in 2002 into an independent,
wholly owned subsidiary company dedicated to
developing and maturing advances in science and
business concepts with the support of commercial
partners and client

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Corporate R&D
Cross-pollination
Idea of mixing things up to get creative results
Cross- or interdisciplinary teams
Value on average lower, but breakthroughs of unusually
high value
Depending on alignment of disciplines (e.g. economics
and physics quite near, economics and psychology
farther apart)
Exhibit 1
Rules: pairings of well-established fields, deep expertise
people

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

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Invention to Innovation
Evolution and patterns
Corporate R&D established (scientists), market
specialists seen as advisor to be brought in, then
became a separate function in R&D: Should they take
lead or work together?
Technology push (scientists, based on technology), need
pull (marketing, based on demand and markets) or
cooperation

Technology push
Mostly based on scientists, aware of corporate interests
Exhibit 1
Problems: tends to focus on easy applications, locked in
to one technology, biased user selection, getting funding
(bootleg research)
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Invention to Innovation
Need pull
Targeted research by specific market goals (not too
broad and not too narrow - focusing)
Exhibit 2
Problems: absence of true believer or champion,
continues to change target (miss opportunity)

Both types of linking necessary: technical


(problem with knowledge) and need
(breakthrough to demand)
Also corporate interests needs to be accounted for
Quite often group leaders as driving force (contact to
technology, business and organizaitonal knowledge)

New Product Management

76

Invention to Innovation
Successful conceptualization
Synthesizers, almost simultaneous linking of all three
dimensions
Steve Jobs and Smalltalk
Exhibit 4
Better conceptualisations result from flexibility and
modifications (do not get locked in)

Transfer of technology from research to


development
e.g. IBM research (3 locations Yorktown Heights, San
Jose and Zurich) is a separate division, product
development in 27 product development divisions

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77

Invention to Innovation
Successful transfer: moved from research to
development and resulted in product
Unsuccessful transfer: left research but no product
Nontransfer: intended for transfer but not accepted in
development
Primary success factors
Technical understanding: main technical issues need
to be understood before passing on
Feasibility: demonstration necessary (agreement
what that means), might imply user acceptance and
therefore real users
Advanced development overlap: research must
deterime whether to maitain activity (support or
defend), or to explore related and advanced
technologies
New Product Management

78

Invention to Innovation
Growth potential: too narrow aim without technical or
market growth potential, new technology might
become obsolete by old ones stretching in
competition
Existence of an advocate: someone in research
selling it, looking after it
Advanced technology activities at development lab:
helpful and often necessary, sometimes provides
hurdle (competitive, skeptical) but in the end
beneficial as leads to thorough work and involvement
External pressures: same technology at competitor
lab or announcement
Joint programs

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79

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

New Product Management

80

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

New Product Management

81

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

82

Absorptive Capacity
Knowledge structure: some overlap between individuals
necessary for communication, diversity also important
(tradeoff of specialization)
Cross-function interfaces, job rotations etc.

External acquisition of absorptive capacity


Hiring people, consultants, acquisitions...
Often not that efficient, as some elements are firmspecific and when integration with other activities
necessary
Time lag

New Product Management

83

Absorptive Capacity
Path dependence
Set of decisions one faces for any given circumstance is
limited by the decisions one has made in the past
history matters
Accumulating in one period will increase accumulation in
the next
Absorptive capacity allows to see trends, which will lead
to build absorptive capacity (expectation formulation)
Ceasing to invest in absorptive capacity can lead to
lockout (NIH-syndrom too far away), confines firm to
work in a particular domain based on early decisions
Self-reinforcing cycle with high absorptive capacity: sees
opportunities, aspires to them (proactive instead of
reactive)
New Product Management

84

Absorptive Capacity
Competence destroying technical change
Radical change can destroy competence, building new
ones can be difficult due to accumulation effects, or may
be blind to developments

Absorptive capacity and R&D spending


Absorptive capacity byproduct of R&D spending, but also
influences it
Makes possibilities known
Increased or decreases costs
Basic research valuable even in case of spillouts

New Product Management

85

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

New Product Management

86

Corporate Venture Capital


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

87

Corporate Venture Capital


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

New Product Management

88

Corporate Venture Capital


Economic climate
Bad economy: companies will probably leave passive
and emergent investments
Enabling and driving have more staying power, might be
less for enabling due to generally higher costs

Evaluation not based on financial returns alone

New Product Management

89

Evaluating Innovation Investment


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

90

Evaluating Innovation Investment


Emphasis on earnings per share: focus on short-term
stock performance, as principal-agent led to incentives,
reputation depends on it, also buyout signal (today most
principals also invest short-term or are agents
themselves)

Process to support or sabotage innovation


Stage gate model: ideas pass through steps/phases,
after each an evaluation/review takes place (financial),
assumptions might be tweaked to ensure funding, illsuited to new growth businesses
Discovery-driven planning: based on minimally
acceptable figures, list of assumptions to fulfill those is
generated, ordered by importance (deal killlers) and
costs to test, in next stage, is used not as a plan to
execute but to learn
New Product Management

91

New Product Development


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

New Product Management

92

New Product Development


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

New Product Management

93

New Product Development

New Product Management

94

New Product Development


Three areas of management activity that
constitutes development strategy for a business
Pre-project planning
Project execution
Post-project learning (e.g. project audits)

New Product Management

95

New Product Development


Pre-project planning
Traditional role: select, screen and evaluate project
ideas, decide which to pursue (assumes adequate
coverage, enough information,...)
Development strategy leadership approach: motivate
and guides the organization to create the best set of
projects by articulating the criteria for the correct set
of projects

New Product Management

96

New Product Development


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

New Product Management

97

New Product Development

Product Changes

Research
and
advanced
development

New core
product

Next generation
of core product

Addition to
Product family
Add-ons and
enhancements

New Product Management

Process Changes
New core
process

Next
generation
process

Tuning
Single
and
dept.
upgrade incremental

Unique
radical

Platform or
next generation

Enhancements,
hybrids, and
derivatives
Sustaining
98

New Product Development


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

New Product Management

99

New Product Development


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

100

New Product Development

New Product Management

101

Communication in NPD
Extensive communication between engineering
and production critical
Informal communication: beer busts, technical
symposia, offsite, multiday discussion meetings etc.
Formal communication also essential
Tasks: introducing new products to manufacturing,
providing optimum level of documentation on products,
facilitating orderly and effective changes to products in
production

Introduction of new products


Most taxing communication task
Design engineers will maximixe performance,
manufacturing engineers will minimize costs (should be
together value engineering)
New Product Management

102

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

New Product Management

103

Communication in NPD
Engineering documentation
Product and process documentation (designs, lists,...)
Level of detail: costly to produce but important, more
documentation necessary with high-volumes, unskilled
labour, much automation

Engineering changes on existing products


Requests for changes on documentation (form
engineering, service, marketing etc.)
Can affect many parts of organization
Procedure for handling change requests necessary
Cost-benefit trade off (obsolence vs. efficiency gain)
Batching changes or even new product (marketing
bonus)?
New Product Management

104

Project Plans & Product Development


Maps
Reasons for problems in development projects
Overload & missing focus on critical projects

Planning needs to be improved and aggregated


Project mapping
Based on process / product change
R&D projects (outside), breakthrough, platform and
derivative projects (all important)
Separate maps for alliance and partnership projects
Each project mapped according to resources and
product line (Exhibit 3), reexamine and refocus (Exhibit
4)

New Product Management

105

Project Plans & Product Development


Maps
Sequencing of projects
Sequence over time (Exhibit 5)
Steady stream approach: every second year new
platform, followed by derivatives in intervals (teams
mixed and people transferred)
Secondary wave approach: longer platform lifetime,
derivatives come later

Product development
Often fails because of misunderstanding of markets (lack
of distinctiveness) or own technology, mismatches
between functions
Planning and mapping necessary

New Product Management

106

Project Plans & Product Development


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

New Product Management

107

Case: Apple
Design Thinking and Innovation at Apple (HBS)

New Product Management

108

Entrepreneurship and New Ventures

New Product Management

109

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

Case: Elio Engineering Inc. (Case I-1)


Case: Matrix Semiconductor Inc. (Case I-4)

2. Minimum Winning Game (Reading I-5)

Case: StubHub (Case I-5)


Case: Lumni (HBS)

3. High Technology Management (Reading I-7)

Case: EA in 1995 / 2002 / 2005 (Case I-6 / I-7 / I-8)

4. Internal Corporate Venturing (Reading III-13 & III-14)

Case:
Case:
Case:
Case:

Pitney Bowes (Case III-5)


Donnelley & Sons (Case III-7)
Intel: Hood River (Case III-8 plus add-on)
HP (HBS)

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110

Profiting from Technological Innovation


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

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111

Profiting from Technological Innovation


Basic building blocks for profiting
Need to be put in place to profit

Regime for appropriability


Two dimensions: Nature of technology and efficacy of
legal mechanisms of protection
Patents / trade secrets
Product / process innovation
Tacit / explicit knowledge
Results in tight or weak appropriability

New Product Management

112

Profiting from Technological Innovation


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

New Product Management

113

Profiting from Technological Innovation


Complementary assets
Commercialization needs know-how plus capabilities /
assets
Services, other parts of a system,... (Exhibit 5)
Can be generic, co-specialized (bilateral dependence) or
specialized (unilateral dependence)

Profitability under tight appropriability


If possible, easy for some time
Time to access complementary assets, or come up with
dominant design
Specialised R&D firms possible (e.g. petrochemicals)

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114

Profiting from Technological Innovation


Profitability under weak appropriability
In preparadigmatic phase, let design float, not choose to
early, need to be intimately coupled to market and let
users impact design, maybe parallel and sequential
prototyping (but might be costly)
In paradigmatic phase complementary assets become
more important, firms with control over these might get
profits

Access to complementary assets (control


structures)
Contractual modes: contracts with suppliers, distributors,
manufacturers, etc., reduces risks and capital
requirements, good in tight appropriability and competitve
supply, can bring added credibility, hazards in getting
committment, imitation risk

New Product Management

115

Profiting from Technological Innovation


Integration modes: ownership, can capture benefits on
complementary assets, more control, timing and cash
constraints important (Exhibit 9, 10, 11)
Mixed modes: quite common, or during transitions

Case analyses
EMI CAT scanner: needed assets like training, servicing,
should have found a partner like Siemens
IBM PC: needed cospecialized assets like software, chose
open system approach, induced even without contracts,
help of name to reduce risks for others
Nutrasweet: tight appropriability, but patents will run out,
created brand and manufacturing in-house, let supplier
contracts expire
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116

Profiting from Technological Innovation


Implications
Direct R&D towards tight appropriability or assets under
control
Small-large firm comparison
Industry structure and appropriability: weak
appropriability should direct towards integration
New entry more difficult in mature industries, as assets
under control of incumbents (but technological change
can change this)
Importance of manufacturing
Trade and investment barriers can mean denying access
to assets necessary and lead to local/government
capturing majority of profits
New Product Management

117

Case: Elio Engineering Inc.


Describe Elio Engineering, and its position in the
industry.
What is their vision?
Describe the strategic options. What issues
should be considered in evaluating them?
Analyse based on the building blocks for
profiting from innovation.

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118

Case: Matrix Semiconductors Inc.


What was Matrix's strategy? What was their core
competence and competitive advantage? Was
it sustainable?
What would you recommend?

New Product Management

119

Minimum Winning Game


New high-tech ventures
Generally no formalized strategy process
Problem of knowing user needs with regard to new
technology
Often originate from technical competence of an
entrepreneur, business strategy follows (Matrix
Semiconductor case)
Sometimes based on insight into market need (StubHub
case)

Conceptualising business opportunity always


needs linking between technical and need
Minimum winning game

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120

Minimum Winning Game


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

121

Minimum Winning Game


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

New Product Management

122

Minimum Winning Game


Business strategy as main driver: provides clear
directions, longer-term oriented, but difficult with
unclear industry structure (customers, competitors,
partners etc.)
Maintaining balance important, change of focus over
time

Strategic planning process


explicitly adressing MWG and drivers
e.g. Intel has planning process every year for 3 years,
based on that product line planning with market and
product requirements documents
Early circulation of drafts to key stakeholders, public
commitment at end
New Product Management

123

Case: StubHub
Describe the initial minimum winning game of
StubHub and the strategic environment.
Discuss the changes necessary to move to the
next step.

New Product Management

124

Case: Lumni
Felipe Vergara and Lumni: Launching an
Innovation in a Developing Economy (HBS)

New Product Management

125

High Technology Management


Continued management of high-technology
companies
Study of large and small high-technology companies
Paradox: patterns that promote disorder and informality,
at the same time order, consistency and continuity
Continued success needs constant shift between
continuity and chaos

Themes of success
Business focus: tight focus on one field (Xerox, Kodak,
IBM,...), closely related products / product lines, focused
R&D (high amount ddue to size or proportion 8-15% of
sales), consistent priorities and behaviour, also helps in
close interaction with customers
New Product Management

126

High Technology Management


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

New Product Management

127

High Technology Management


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

New Product Management

128

High Technology Management


Hands-on top management: active involvement and
understanding of basics of technology, ability to ask
questions and patience to understand

Overall paradoxon: stability versus change


Ambivalent management (getting rid of old products
against resistance and developing new ones, but also
incremental improvements)
Alternating periods of relaxation and control (tension,
action and excitment followed by reflection and
evaluation)
Different by unit or over time (Jefferson: A little
revolution now and then is a good thing.)

New Product Management

129

Case: EA in 1995 / 2002 / 2005


What are key characteristics of the video game
industry (also compare to movie industry)?
What are tradeoffs of developing hard- and
software to software only?
What are potentials and risks associated with cobranding?
What were strategies and competitive
advantages in the different periods?
What about platform development decisions?
How has the Internet affected the industry?
How should EA deal with convergence with TV /
Film / mobile / online?
New Product Management

130

Internal Corporate Venturing


Managing autonomous strategic initiatives corporate entrepreneurship
Creating new venture divisions
Internal entrepreneurs allowed to pursue ventures
unencumbered by the constraints of the firms
mainstream business management
Problems
NVDOperating division interface
NVDCorporate management interface

New Product Management

131

Internal Corporate Venturing


NVDoperating divisions
interfaces

NVDcorporate management
interfaces

Strategic interferences

Domain protection issues


Synergy considerations

Lack of diversification strategy


Limits to rate of strategic change that can be
absorbed
Effects on corporate image

Administrative/cultural
frictions

Rigidities resulting from


management system
Personnel transfer issues

Circumvention of corporate rules and


regulations
Inadequate measurement and reward systems
Resistance to institutionalization

New Product Management

132

Internal Corporate Venturing


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

New Product Management

133

Internal Corporate Venturing

Implications:

Dimensions:
Strategic
importance

Degree of
control

Administrative
linkages
(authority)
Organizational
design
alternatives

Operational
relatedness

Efficiency
considerations

New Product Management

Operational
linkages
(networking)
134

Internal Corporate Venturing


Design alternatives for corporate
entrepreneurship
Determining administrative linkages
High strategic importance Strong administrative
linkages
Low strategic importance Examine how the new
business can best be spun off
Unclear strategic importance Relax the structural
context
Determining operational Linkages
High operational relatedness Tight coupling
Low operational relatedness Complete decoupling
Unclear operational relatedness Loose coupling
New Product Management

135

Internal Corporate Venturing


Design alternatives
3
Special
business
units

6
Independent
business
units

9
Complete
spin-off

Partly
related

2
New product
department

5
New
venture
division

8
Contracting

Strongly
related

1
Direct
integration

4
Micro new
venture
department

7
Nurturing
and
contracting

Operational relatedness

Unrelated

Very
important

Uncertai
n

Not important

Strategic importance

New Product Management

136

Internal Corporate Venturing


Direct integration - High strategic importance and
operational relatedness require strong administrative
and operational linkages
New product department - High strategic importance
and partial operational relatedness require a
combination of strong administrative and mediumstrong operational linkages
Special business units - High strategic importance and
low operational relatedness may require the creation of
specially dedicated new business units
Micro new ventures department - Uncertain strategic
importance and high operational relatedness seem
typical for the peripheral projects that are likely to
emerge in the operating divisions on a rather continuous
basis
New Product Management

137

Internal Corporate Venturing


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

New Product Management

138

Internal Corporate Venturing


Complete spin-off - If strategic importance and
operational relatedness are both low, complete spin-off
may be most appropriate.

Implementation issues
Tool for clarification between entrepreneur and
corporate management
Corporate management needs to develop measurement
and reward system for different alternatives
New information could alter perceived strategic
importance and operational relatedness renegotitation
of organization design

New Product Management

139

Internal Corporate Venturing


Process model of ICV
Core processes of ICV: activities defining it and further
growth/impetus (stage model)
Overlaying processes: activities through which strategic
and corporate contexts are determined
Taking place at different levels of the organization
Exhibit 1

Major problems
Top management has limited insight and time (due to
importance), mid-level R&D management not used to
business environment, venture manager still unclear
Exhibit 2

New Product Management

140

Internal Corporate Venturing


Vicious circles in definition
Feasibility: (technical) demonstration necessary for
resources, but needs resources product championing
(bootlegging, scavenging), even for customers or sales
people

Problems in impetus
ICV becomes venture (often with champion as manager)
Continued growth depends on manager strategic forcing
Needs to demonstrate sales volume and profit quickly
Generalists replaced by specialist, efficiency
considerations growth versus organization
Mid-level at the same time strategy building to fit
venture in it (and coach)
New Product Management

141

Internal Corporate Venturing


Top level authorizes, mostly on quantitative data (often
high expectations)
Focus on growth and inattention often leads to lag in
new product development, probably demise of venture
manager

Overlaying process
Objective often unclear, mid level management
delineates boundaries of venture, strategic context often
unclear (mid level management engages in
organizational championship)
Due to time lag and windows often small chance of
establishing venture, as strategies and top management
change
Deducts time from mid-level, can not coach venture
New Product Management

142

Internal Corporate Venturing


New ventures do not fit structural context (rewards,
selection process, goals...), can also lead to conflicts
with existing business
Reactive change of structural context in case of growth
Overlaying process overall more experimentation and
selection than planning (somewhat anarchy)

Corporate development strategy


Should be established (long-term, with resource
allocation, long-term funds), seeing ventures as source
of strategic renewal, not insurance
Top management should be better able to assess (e.g.
include people with experience), less championship, less
emphasis on numbers, more strategy
New Product Management

143

Internal Corporate Venturing


Better management of NVD (not simply a dump), pursue
other ways (external venturing), more integration with
other business, acknowledging fact of different
management needs in NVD
Measurement and reward systems: sometimes corporate
history writing, less emphasis on numbers for venture
managers
Important role of mid-managers: help in definition,
facilitate integration technology and business, coaching
(also leads to more important role in corporate strategy)
Venture manager should be more focused on
organization building than growth (more leeway and
responsibilities)

New Product Management

144

Internal Corporate Venturing


Cycles of ICV
Programs begin and end in cycles
Wasteful, short-term and precludes learning
Dimensions: prospects of mainstream business and
uncommited financial resources
Situations: ICV orphans (good/good), All-out ICV drive
(bad/good), ICV irrelevance (good/bad), Desperately
seeking ICV (bad/bad)
Reasons: economy overall, planning cycles that put too
much load on ICV, too much success that would make
internal units look bad or become competition,
reorganizations, strategy making as top management
prerogative
New Product Management

145

Internal Corporate Venturing


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

New Product Management

146

Case: Pitney Bowes


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

New Product Management

147

Case: Donnelley & Sons


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

New Product Management

148

Case: Intel: Hood River


What is the strategic situation?
How do you think Siegel would evaluate the other
managers, and they him?
How should Siegel decide?

New Product Management

149

Case: HP
Innovation at HP: The Role of the Innovation
Program Office (IPO) (HBS)

New Product Management

150