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Title: Midterm Exam Review Slides Innovation Management ISMT 302


1
Mid-term Exam Review Slides Innovation Management
(ISMT 302)
  • Time Venue 17 Oct 2006, 1330 to 1450 _at_ Room
    4333
  • ONE A4 paper cheat sheet is allowed

2
Logical Structure of the Course
3
Classes of Things You have Learned
  • Concepts Things you need to know before you
    think about innovating. These include
  • Knowledge about previous successful and
    unsuccessful innovators (people and companies)
  • Theories and frameworks
  • Facts
  • All of these underlie and motivate your
    activities.
  • Activities and Tasks Things you (as an
    entrepreneur or intrepreneur) need to do in
    developing innovative products. These occur on
    both sides of the equation
  • Innovation Invention Commercialization
  • Activities can either Invent or they can
    Commercialize
  • Tools Used to make decisions about Inventing
    or Commercializing
  • These are the tangible mental exercises, models,
    spreadsheets, documentation, etc. that support
    innovation activities and tasks.

4
Fundamentals
5
Definition Innovation
  • An Innovation is
  • Invention Commercialization
  • Freeman, The Economics of Industrial Innovation
  • A new way of doing things that is commercialized
  • Porter
  • The new knowledge in an innovation can be either
  • Technological, or
  • Market related

6
Elements of Product Innovation
7
The Purpose of a Business is to Create a
Customer -- Peter Drucker
  • Even if you create marvelous inventions
  • Your customers wont care
  • Unless that is exactly what they need
  • Business customers are especially impatient
  • With any product that doesnt help them gain
    competitive advantage
  • Yet your firm wants to build products that take
    advantage
  • Of their Core Competences

8
What makes each of these companies Innovative?
9
Invention Generation
  • The opportunity register (OR) should be seen as
    a repository of ideas that can be pulled up at
    any time.
  • If a particular idea isnt working, you have the
    option to switch to another OR Entry (i.e.,
    another innovation)
  • You can actually plan these milestones in advance
  • Hedging your bets
  • By running many innovation projects
  • Simultaneously, or
  • Sequentially

10
Sources of Innovation
  • How innovation arises
  • Functional
  • Innovations arise from thinking about the
    functional relationships between groups and
    individuals
  • e.g., customer or manufacturer
  • Attribute Maps and Quizzing help identify
    Innovations arising functional relationships
  • Circumstantial
  • Innovations arise from thinking about the
    circumstances in which a product (innovation)
    will be encountered
  • e.g., a cooking innovation when it is consumed in
    a restaurant
  • Consumption Chain Analysis helps identify
    circumstantial Innovations
  • Where innovations arise
  • Internal RD
  • External Markets (Customers)
  • Competitors related industries
  • University, government private labs
  • Other nations / regions
  • The last two sources are strongly influenced by
    society and governments

11
Sources of Innovation
  • Internal RD
  • External Markets (Customers)
  • Competitors related industries
  • University, government private labs
  • Other nations / regions
  • The last two sources are strongly influenced by
    society and governments
  • Complementarity of several sources may amplify
    and accelerate innovation

12
Innovation at the National level
  • Success in societies which
  • operate, manage and build instruments of
    production
  • create, adapt and master new technologies
  • impart expertise and knowledge to the young
  • choose people for jobs by competence and relative
    merit
  • promote and demote on basis of performance
  • encourage initiative, competition and emulation
  • let people to enjoy and employ the fruits of
    their labor, enterprise and creativity
  • Success where government does the following
  • encourage saving and investment
  • enforce rights of contract
  • secure rights of personal liberty against tyranny
    and crime
  • provide stable government,
  • though not necessarily democratic
  • provide responsive government
  • provide no rents or favors for government
    position
  • have governments that are moderate, efficient and
    ungreedy

13
Science Technology What are they? How are they
related?
14
Complementarity What other products are needed to
complete your Commercialization?
  • Most economically significant modern products
    have little value on their own
  • They require complementary products from many
    firms to be of value
  • Petroleum has little use without internal
    combustion engines
  • Or Cars without Roads (US Road costs are around
    5-10 per gallon of gasoline)
  • Or Electricity without Electric Motors
  • Or iPods without MP3s
  • … you get the idea
  • What are your Killer Apps?
  • The complements that sell your product

15
Life cycle of an Innovation Development
Determines Optimal Market Entry Strategy
  • Fluid phase
  • Mainly lab based or custom applications of
    technology
  • Transitional phase
  • Standardization of components, and
    consumer-producer interaction lead to dominant
    design
  • Specific phase
  • Products built around the dominant design
    proliferate innovation is incremental

16
Sustainability Different Industries Different
Rates of Change
Past is indicator of Future
Future is Volatile
17
Sustainability S-Curve (Foster and others)
  • Eras of incremental change terminate with a
    discontinuity
  • We look for limits on the technologys life cycle
    using knowledge of the technology's physical
    limits
  • E.g., Moores Law will run out on current
    platforms at 2013
  • Advance of a technology is a function of
    development effort

18
Key to Generating Profits Low-cost or
Differentiated Products
  • Firms do this through their unique value
    configuration
  • (i.e., value chain, value network, value shop,
    profit chain)
  • To create Low-cost / Differentiated Products a
    firm needs
  • Plants, equipment, patents, scientists, brand
    name recognition, geographic location, client
    relations, distribution channels, trade secrets
  • i.e., Assets, Competences and Knowledge

19
Technological Characteristics that Promote
Innovation
  • (Abernathy-Clark) Two kinds of knowledge underpin
    an innovation
  • Technological
  • Market
  • Incumbents Fail when they Fail to Get one or
    the other type of Knowledge
  • (Henderson-Clark) Products are made up of
    components (even services)
  • There exist two kinds of relevant knowledge
  • Component
  • Architectural

20
Market-Technology Interplay Effect on the
Profitability of Inventions
  • Two factors are instrumental to profiting from an
    innovation
  • Imitability and
  • Complementary Assets

21
Complementarity What other products are needed to
complete your Commercialization?
  • What are your Killer Apps?
  • Who are your Co-opetitors and what essential
    assets do they control?
  • Most economically significant modern products
    have little value on their own
  • They require complementary products from many
    firms to be of value
  • Petroleum has little use without internal
    combustion engines
  • Or Cars without Roads (US Road costs are around
    5-10 per gallon of gasoline)
  • Or Electricity without Electric Motors
  • Or iPods without MP3s
  • … you get the idea

22
What sort of people are Innovators?
  • Idea Generators
  • Can sift through large quantities of
    technological and market data to identify
    innovations
  • Gatekeepers Boundary Spanners
  • Conduits for knowledge from other firms and labs
  • Champions (Entrepreneurs, Evangelists)
  • Sell the innovation to the firm
  • Sponsors (Coach, Mentor)
  • Senior level manager who provides behind the
    scenes support, access to resources, and
    protection from political foes
  • Project Managers
  • Planners with discipline one-stop decision
    making shop

23
Market side innovation
  • What is Innovation? Chapter 1
  • Framing the Challenge Business Needs and
    Models Chapter 2 Blockbuster Innovations
    Chapter 3
  • Redifferentiating Resegmentinb Chapter 4
  • Techniques Quizzing, Attribute Maps and
    Consumption Chain Analysis
  • Practicums False Faces
  • Slice and Dice
  • Think Bubbles

24
The Opportunity Register
  • Concept Always keep an inventory of possible
    opportunities so that you are unlikely to run out
    of ideas for making the next competitive move or
    capturing the next prospect for growth
  • Fields
  • Business concept
  • Relevant trends
  • Key industry data
  • Obstacles and barriers
  • Company position
  • Competition and Substitutes
  • Sources for your information
  • What type of opportunity is this?
  • Timing of proposed actions

25
Commercialization Defines your market
  • Who is the target customer for the companys
    product (age, income, medical history, and other
    demographics)
  • Support this with Attribute Maps and Consumption
    Chains
  • What will differentiate your innovation from
    competitors in the customers minds?

26
Quizzing
  • Detailed look at target customer usage and
    decision making regarding your product
  • Looks at the customers stream of consciousness
  • Through a series of questions
  • Looks for ideas to Change the Customers
    Experience (i.e., redifferentiate your product)
  • Remember Experience is dynamic
  • So are the questions in quizzing
  • Over a time period prior to the first time
    customer is exposed to the product
  • To a time well after the customer has stopped
    using it

27
Quizzing
  • Who?
  • … is with customers while hey use the product
  • How much influence do they have
  • If we could arrange it, who would we want the
    customer to be with …
  • What?
  • … Do our customers experience when the use the
    product
  • … needs provoked our offering
  • What else? … might customers have on their minds
  • When? … do our customers use this ..
  • Where? … are our customers when they use this
  • How? … do customers learn to use the product ..

28
Summarize your Quizzing by the Attributes of the
Innovation that are important to the Customer
  • This provides a heuristic for Functional
    Innovation (Eric von Hippel)

29
Consumption Chain Analysis
30
Function of Consumption Chain Analysis
  • A complement to quizzing …
  • And (perhaps) quizzing done from a different
    (more graphical) perspective
  • Consumption Chain Analysis
  • Works from the premise that
  • opportunities for redifferentiation
  • lurk at every step and decision that your
    customers take
  • From the time they first become aware of their
    need for your product or service
  • To the time thy finally dispose of the remnants
    of the used up product
  • Rather than stream of consciousness
  • It is time-sequential

31
Consumption Chain Analysis
  • A complement to quizzing …
  • And (perhaps) quizzing done from a different
    (more graphical) perspective
  • Consumption Chain Analysis
  • Works from the premise that
  • opportunities for redifferentiation
  • lurk at every step and decision that your
    customers take
  • From the time they first become aware of their
    need for your product or service
  • To the time thy finally dispose of the remnants
    of the used up product
  • Rather than stream of consciousness
  • It is time-sequential
  • It provides a Heuristic for Circumstantial
    Innovation (Eric von Hippel)

32
Every Link in the Consumption Chain has its Own
Attribute Map
  • The Attribute Map compares your product to those
    of others

33
What To Do with the Opportunity Register When
Competences start to matter
  • Assuming youve been religiously adding to your
    Opportunity Register
  • You should by this time have a lot of different
    ideas for new and marketable products
  • Then the question becomes
  • Which projects should you take on emphasize
    continue?
  • The answer depends on your competences
  • This is the point where Demand and Supply side of
    Innovation Meet

34
Business Models Matter
  • Telling a good story
  • Part of selling your strategy / investment
  • Tying Narrative to Numbers
  • Strategy becomes less philosophy
  • More performance and outcome
  • When business models dont work
  • Its because the fail either
  • The Narrative test
  • Or the Story test

35
Business Models Matter A business model is not
strategy
  • It doesnt describe external forces
  • Competition
  • Environment
  • Scaling
  • It only depicts the systems that will be put into
    place to achieve a strategic objective
  • A good model is not enough
  • The boxes on the value map need to be understood
    in depth
  • In order to develop a good strategy

36
Framing the Challenge Targets and Goals
  • If I were to do something in the next 3-5 years
  • That I, my boss and my companys investors would
    regard as a major win
  • What would this performance record have to look
    like?
  • If I were to do something in the next 3-5 years
  • That my customers would regard as a major
    (disruptive) innovation
  • How would I change their lives?
  • How would my relation with customers affect my
    performance?

37
Framing the Challenge Strategy Drivers
  • E.g., Lucents Performance Targets
  • Sales from 1 growth to the high teens
  • RD from 8 to 11 if Sales
  • Reduce SGA from 27 to 19
  • Reduce tax rate 4 points
  • Lift
  • ROA from 0 to 1

38
New Life from Old Competences
  • Redifferentiating and resegmenting

39
Redifferentiating Products The Dialectic
  • Innovation involves a dialectic
  • On the one-side are arguments about what the
    customer wants (demand-side)
  • Remember that the customer doesnt care about us
    or our products
  • We have to make them care
  • On the other-side are arguments about what we can
    do (supply-side)
  • These are determined by our core competences
  • Which are to some extent determined by Mission
    and Vision statements, and our Business Models

40
Resegmenting and Reconfiguring
  • Resegmenting
  • Focusing on and better serving existing market
    segment
  • Reconfiguring
  • Completely changing the existing basis for
    segmentations
  • By reconfiguring existing value maps
  • Or introducing entirely new kinds of solutions

41
Reconfiguring your Market
  • Reconfiguration is about
  • Breaking down the Barriers (technological,
    regulatory or organizational)
  • That set limits on the Attributes you can offer
  • Or on the way that Consumption Chains can be
    configured
  • It builds on your insights from the Consumption
    Chain Analysis and Attribute Map
  • Looking to remove the Limitations imposed by your
    existing Core Competences

42
How to Resegment
  • Resegmentation addresses the Dynamics of Customer
    Usage of a Product
  • It builds on your insights from the Consumption
    Chain Analysis and Attribute Map
  • Looking for new Segments to market to
  • Observe behavior
  • To Uncover existing Customers Needs
  • To find new Customer Groups within your existing
    customers
  • Keep them from moving to competitors products

43
Market-side Practicums
44
Practicum (prak-ti-k?m)
45
False Faces An Escape from Looking at Problems
in the Traditional Way
  • BLUEPRINT
  • State your challenge.
  • List your assumptions.
  • Challenge your fundamental assumptions.
  • Reverse each assumption. Write down the opposite
    of each one.
  • Record differing viewpoints that might prove
    useful to you.
  • Ask yourself how to accomplish each reversal.
    List as many useful viewpoints and ideas as you
    can.
  • Which line is longer, AB or CD?
  • Link the nine dots below with no more than three
    straight lines which will cross through all nine
    dots, without lifting your pencil (think outside
    the box)

46
Slice and Dice
  • Which figure is the widest?
  • Consider the bicycle
  • Frame.
  • Handlebars.
  • Pedals.
  • Brakes.
  • Tires.
  • Chain.
  • Drive sprocket.
  • Improved attributes
  • Lightweight frames made out of new materials.
  • Racing handlebars replacing traditional
    handlebars.

?
47
Think Bubbles an aid to Quizzing
  • Mind mapping is an idea generator. It does not
    supply raw material, so your map may show areas
    where you need to collect more information
  • Mind Maps to Recognize the Potential of an
    Innovation share five basic characteristics
  • 1.Organization. Mapping presents information
    organized in the way you think it. It displays
    the way your mind works, complete with patterns
    and interrelationships, and has an amazing
    capacity to convey precise information, no matter
    how crudely drawn.
  • 2. Key words. Ignore all irrelevant words and
    phrases and concentrate only on expressing the
    essentials, and what associations these
    "essences" excite in your mind.
  • 3.Association. Make connections, links, and
    relationships between seemingly isolated and
    unconnected pieces of information. These
    connections open the door to more possibilities.
    You can feel free to make any association you
    wish, without worrying whether or not others will
    understand you.
  • 4.Clustering. The map's organization comes close
    to the way your mind clusters concepts, making
    the mapped information more accessible to the
    brain. Once your ideas are clustered, try to
    adopt the viewpoint of a critic seeing the ideas
    for the first time. This allows you to test your
    associations, spot missing information, and
    pinpoint areas where you need more and better
    ideas..
  • 5.Conscious involvement. Making the map requires
    you to concentrate on your challenge, which helps
    get information about it transfered from
    short-term to long-term memory. In addition,
    continuous conscious involvement allows you to
    group and regroup concepts, encouraging
    comparisons. Moving think bubbles around into new
    juxtapositions often provokes new ideas.
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