Prof' Horst O' Bender, Ph'D'

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TECHNOLOGY AND INNOVATION STRATEGY
Prof. Horst O. Bender, Ph.D. Rotterdam School of
Management Erasmus University (NL) THESEUS
Institute (F) hobender_at_B2B-MSI.com
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THE TECHNOLOGICAL DIMENSION OF COMPETITIVE
STRATEGY
RD INVESTMENT
NEW TECHNOLOGY
NEW PRODUCTS Timing of entry
TECHNOLOGY DEVELOPMENT AND SYNTHESIS
Suppliers Scientific community
Licensing Mergers acquisitions
RD ORGANIZATION ANDPOLICY
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THE ESSENCE OF STRATEGY VALUE, COST AND SPEED
CUSTOMER
VALUE/ SPEED
VALUE/ SPEED
COST/ SPEED
COMPE- TITOR
COMPANY
DIFFERENTIAL ADVANTAGE ? VALUE ? COST ?
SPEED
THE CRITICAL QUESTION HOW CAN WE INNOVATETO
CREATE VALUE, REDUCE COSTS AND GENERATE SPEED?
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HOW CAN WE INNOVATE TO CREATE VALUE, REDUCE
COSTS, AND GENERATE SPEED?
A. IN THE COMPANY
R D
Marketed
Purchased
Produced
Good
Good
Good
Marketing,
Manufacturing/
Sales,
Procurement
Operations
Service
B. IN THE VALUE CHAIN
Produced
Produced
Marketed
Marketed
Purchased
Purchased
Produced
Marketed
Alignment
Alignment
Purchased
Good
Good
Good
Good
Good
Good
Good
Good
Good
Alignment
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THE INNOVATION PIPELINE

• Scientific
• Discovery
• Faradays demonstration Electrical
• of electrical induction in 1831 Industry
• Shockleys theory of electrons Semiconductorand
  holes in semiconductors Industry
• FACTORS
• Government RD spending- Industry RD spending
• RD efficiency and effectiveness

Innovation Entrepreneurship
Average
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NETWORKS, NOT PIPELINES

• Scientists
• Entrepreneurs/intrapreneurs
• Marketers
• Sponsors
• Venure capital
• Service infrastructure firms
• Legal framework
• - Patent system- Intellectual property
• Basic research
• Societal support

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INNOVATION DYNAMICS SHORTENING MAJOR INNOVATION
CYCLES (KONDRATIEFF, SCHUMPETER)

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THE FOUR INNOVATION WAVES
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INNOVATION DYNAMICSTECHNOLOGY LIFE CYCLE AND
TECHNOLOGY S-CURVE
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INNOVATION DYNAMICSINTERRELATEDNESS OF PRODUCT
AND PROCESS INNOVATION
Rate of Product/ Process Innovation
Emergence of Dominant Design
Process Innovation
Product Innovation
0
Specific
Fluid
Transition
Stage of Development of the Manufacturing Process
The Interrelatedness of Product and Process
Innovation
Source Abernathy and Utterback, 1975
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TECHNOLOGY LIFE CYCLE
Source Foster
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INNOVATION COST AND ABILITYTO INFLUENCE OUTCOME
Ability to influence product outcome
Study
Design
Develop-ment
Marke- ting
Produc- tion
60
Activity profile of a typical CEO
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4
1
The Typical Role of a Chief Executive Officer in
New Product Programs
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INCREMENTAL AND RADICAL INNOVATION
MAGNITUDE OF THE INNOVATION
High Radical Innovation
Low Incremental Innovation
Impact of theDisruptive Change
Differential AdvantageUnlikely to Result
Company
Industry
Industry Transformation
Company Transformation
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INNOVATION MAGNITUDE

• TECHNOLOGICAL THRUST INNOVATION TYPE WHO CREATES
  IDEA? WHO WINS?
• Sustaining technology Incremenal innovation
  Industry leader Industry leader Established
  firms Customers

Incremental Product Innovation
? Value, Price
Profit
Incremental Process Innovation
? Costs
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INNOVATION MAGNITUDE

• TECHNOLOGICAL THRUST INNOVATION TYPE WHO CREATES
  IDEA? WHO WINS?Disruptive technology Radical
  innovation Outside challengers Outside
  challenger Contrarians (Industry
  leader) Not customers

? Value, Price
Radical Product Innovation
Profit
Radical Process Innovation
? Costs
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PATTERNS OF RADICAL INNOVATIONS

• 1. The technological threat often originates
  outside of the industry - It is often pioneered
  by a new, outside firm - Initially crude and
  expensive, it expands through successive
  sub-markets, with overall growth following an
  S-shaped curve - Sales of the old technology
  may continue to expand for a few years, but
  then usually decline, the new technology
  passing the old one within 5-14 years of its
  introduction
• 2. The traditional firms fight back in two ways
  - Trough attempting to improve the old
  technology (investment into incremental
  product and process innovations) - Through
  attempting to master the new technology

Sources Cooper and Schendel, Christensen
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PATTERNS OF RADICAL INNOVATIONS

• 3. The odds are against them in both instances
  - The value-generating potential of the new
  technology vastly surpasses that of the
  established one after the pioneering stage
• - The new field proves to be difficult
  Different capability and skill requirements
  The marketplace is likely to be dynamically
  competitive
• Telegraph versus telephone
• Vacuum tubes versus transistors
• Steam locomotives versus diesel electric
• Fountain pens versus ballpoint pens
• Safety razors versus electric razors
• Aircraft propeller versus jet engines
• Typewriters versus word processing

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EXAMPLES OF RADICAL INNOVATIONS

• ESTABLISHED TECHNOLOGY RADICAL INNOVATION
• Mini computers PCs
• Silver halide photography Digital photography
• Wireline telephony Mobile telephony
• Wireline and mobile telephony Internet telephony
• Circuit-switched telecommunication
  networks Packet-switched telecommunication
  networks
• Full-service stock brokerage On-line stock
  brokerage
• Bricks-and-mortar travel agencies E-travel
  agencies (Expedia.com)
• Bricks-and-mortar retailing Online retailing
• Executive MBA education Corporate universities
• Standard textbooks Custom-assembled, digital
  textbooks
• Offset printing Digital printing
• Manned fighter and bomber aircraft Unmanned
  aircraft
• MS Windows operating system Linux operating
  system
• General hospitals Outpatient clinics, in-home
  patient care
• Open surgery Arthroscopic and endoscopic surgery
• Cardiac bypass surgery Angioplasty
• MRI and Computer Tomography Ultrasound

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ISSUES IN MANAGING RADICAL INNOVATIONS

• Capturing radical ideas in the Fuzzy Front End
• Managing radical innovation projects
• Learning about markets for radical innovation
• Resolving uncertainty in the business model
• Bridging resource and competence gaps
• Making the transition to operations
• Engaging individual initiative

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ISSUES THE PRODUCT INNOVATION STRATEGY MUST
ADDRESS

• The link with corporate strategy - Overall
  goals for the business new product effort
• The role of product development - How do new
  products tie into the business overall strategic
  goals
• Coverage of the three arenas of strategic focus-
  Markets - Product technologies - Production
  technologies and technology platforms
• Deployment of resources - Spending allocations
  - Splits across arenas RD
  funds People Marketing and capital resources
  needed for development
• Development of attack strategies for each arena
  in order to win

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SUMMARY TWELVE CRUCIAL INNOVATION RULES (I)

• Innovation is todays major source of sustainable
  competitive advantage
• Innovation means turning creativity into bottom
  line results. Its not enough to just be
  creative
• There are four types of innovation -
  Product - Process- Marketing -
  ManagementProduct innovation is important, but
  its certainly not the only kind of innovation
  that can make a big difference in your company
• Ordinary people can be made highly creative by
  giving them the right environment and meeting
  their psychological needs
• In addition to the general environmental required
  factors to enhance creativity, put in place some
  basic infrastructure to support ideation

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SUMMARY TWELVE CRUCIAL INNOVATION RULES (II)

• You need an innovation process. Research shows
  that those firms with a formal process for
  managing innovation do much better than those
  which dont
• The Stage-Gate process is the current
  state-of-the-art innovation process
• A wide range of tools and techniques is available
  to make the most of the Discovery stage where the
  ideas are generated to feed the rest of the
  project
• Powerful and effective go/kill gates must be
  constructed and used. Its as important to figure
  out which project wont do as it is to select the
  projects you will do

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SUMMARY TWELVE CRUCIAL INNOVATION RULES (III)

• Every project requires an effective Business
  Case. The steps in creating the business case for
  each new product project are- Demonstrate fit
  with corporate strategy- Conduct a user needs
  and wants study- Perform a competitive
  analysis- Perform a detailed market
  assessment- Perform a detailed technical
  assessment- Conduct a concept test of the new
  product as defined- Create a financial Business
  Analysis - Develop a plan of action for
  developing and launching the product
• Big launch and rollout decisions come late in
  the process, but by using the approach
  recommended you begin planning for them very
  early, so surprises are minimized
• Implementing the stage-gate process correctly can
  be tricky. Approach it with the care and
  discipline you would use in launching a major new
  product

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DIAGNOSTICS
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TO WHAT EXTENT DO WE FOLLOW THE TEN RULES FOR
RADICAL INNOVATION?

• Set unreasonable expectations .....
• Create an elastic business definition .....
• Define a cause, not a business .....
• Listen to new voices .....
• Create an open market for ideas .....
• Create an open market for capital .....
• Create an open market for talent .....
• Engage in low-risk experimentation .....
• Practice cellular division .....
• Allow for personal wealth accumulation .....
• 0-10 Scale 10 best