Description Course Learning Outcomes-Covered Explain of the concepts, models for formulating strategies,

Description\n \n\n\n\n\n\n\n\n\n\n Course Learning Outcomes-Covered\n \n\n\n\n\n Explain of the concepts, models for formulating strategies, defining the organizational strategic directions and crafting a deployment strategy.\n \n\n\n\n\n Reference Source:\n \n\n\n\n\n Textbook:-\n \n\n\n\n\n Schilling M.A (2020),\n \n Strategic Management of Technology Innovation (6th Edition)\n \n . Mc-Graw Hill Education. Electronic Version: ISBN-13: 978-1260087956 ISBN-10: 1260087956, Printed Version: ISBN-13: 978-1260087956 ISBN-10: 1260087956\n \n\n\n\n\n\n\n\n Assignment 2\n \n\n\n\n\n\n Students are requested to read chapter 9 “Protecting Innovation” from their book Strategic Management of Technological Innovation.\n \n\n\n\n\n\n\n\n\n\n\n\n Based on the conceptual knowledge and understanding obtained from the readings: -\n \n\n\n\n\n\n\n\n\n\n\n\n 1 -Select a world-renowned company give a brief introduction and identify the legal protection mechanisms (patents copyright, trademarks & service marks) used by it to safeguard its innovations. (Max 750- Min 500 Words)\n \n\n\n\n\n\n\n\n\n\n\n\n 2 -\n \n\n\n\n What factors do you believe influenced the choice of protection mechanisms used to safeguard its innovations? Do you think the strategy was a good choice? (Max 750 – Min 500 Words)\n \n\n\n\n\n\n\n\n\n\n\n\n 3- With a thorough research of your selected company identify and explain an incident when trade secrets were more useful than the legal protection measures identified above. (Max 750 – Min 500 Words)\n \n\n\n\n\n\n\n\n\n\n\n\n Note :-\n \n\n\n\n\n\n\n Only reading the textbook will not be enough to score grades or answer the questions appropriately.\n \n\n\n\n\n\n Do adhere to the word limit strictly, mere one or two sentence answers will not be entertained, they need to be supported with further explanation and facts.\n \n\n\n\n\n\n It is mandatory to support each answer with at least two scholarly, peer-reviewed journals.\n \n\n\n\n\n\n\n\n\n\n\n Directions:\n \n\n\n\n\n All students are encouraged to use their own words.\n \n\n Use Saudi Electronic University academic writing standards and APA style guidelines.\n \n\n Use proper referencing (APA style) to reference, other styles will not be accepted.\n \n\n Support your submission with course material concepts, principles, and theories from the textbook and at least two scholarly, peer-reviewed journal articles unless the assignment calls for more.\n \n\n It is strongly encouraged that you submit all assignments into the safe assignment Originality Check prior to submitting it to your instructor for grading and review the grading rubric to understand how you will be graded for this assignment.\n \n\n\n\n\n\n\n\n\nInstructions – PLEASE READ THEM CAREFULLY\n• The Assignment must be submitted on Blackboard (WORD format only) via allocated\nfolder.\n• Assignments submitted through email will not be accepted.\n• Students are advised to make their work clear and well presented, marks may be\nreduced for poor presentation. This includes filling your information on the cover page.\n• Students must mention question number clearly in their answer.\n• Late submission will NOT be accepted.\n• Avoid plagiarism, the work should be in your own words, copying from students or\nother resources without proper referencing will result in ZERO marks. No exceptions.\n• All answered must be typed using Times New Roman (size 12, double-spaced) font.\nNo pictures containing text will be accepted and will be considered plagiarism).\n• Submissions without this cover page will NOT be accepted.\nCourse Learning Outcomes-Covered\n➢ Explain of the concepts, models for formulating strategies, defining the organizational\nstrategic directions and crafting a deployment strategy.\nReference Source:\nTextbook:Schilling M.A (2020),Strategic Management of Technology Innovation (6th Edition). McGraw Hill Education. Electronic Version: ISBN-13: 978-1260087956 ISBN-10:\n1260087956, Printed Version: ISBN-13: 978-1260087956 ISBN-10: 1260087956\nAssignment 2\nStudents are requested to read chapter 9 “Protecting Innovation” from their book\nStrategic Management of Technological Innovation.\nBased on the conceptual knowledge and understanding obtained from the readings: 1 -Select a world-renowned company give a brief introduction and identify the legal\nprotection mechanisms (patents copyright, trademarks & service marks) used by it to\nsafeguard its innovations. (Max 750- Min 500 Words)\n2 – What factors do you believe influenced the choice of protection mechanisms used to\nsafeguard its innovations? Do you think the strategy was a good choice? (Max 750 – Min\n500 Words)\n3- With a thorough research of your selected company identify and explain an incident\nwhen trade secrets were more useful than the legal protection measures identified above.\n(Max 750 – Min 500 Words)\nNote :➢ Only reading the textbook will not be enough to score grades or answer the\nquestions appropriately.\n➢ Do adhere to the word limit strictly, mere one or two sentence answers will not be\nentertained, they need to be supported with further explanation and facts.\n➢ It is mandatory to support each answer with at least two scholarly, peer-reviewed\njournals.\nDirections:\n✓ All students are encouraged to use their own words.\n✓ Use Saudi Electronic University academic writing standards and APA style\nguidelines.\n✓ Use proper referencing (APA style) to reference, other styles will not be accepted.\n✓ Support your submission with course material concepts, principles, and theories from\nthe textbook and at least two scholarly, peer-reviewed journal articles unless the\nassignment calls for more.\n✓ It is strongly encouraged that you submit all assignments into the safe assignment\nOriginality Check prior to submitting it to your instructor for grading and review the\ngrading rubric to understand how you will be graded for this assignment.\nStrategic\nManagement of\nTechnological\nInnovation\nStrategic\nManagement of\nTechnological\nInnovation\nSixth Edition\nMelissa A. Schilling\nNew York University\nFirst Pages\nSTRATEGIC MANAGEMENT OF TECHNOLOGICAL INNOVATION\nPublished by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2020 by McGraw-Hill\nEducation. All rights reserved. Printed in the United States of America. No part of this publication may be reproduced or\ndistributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent\nof McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission,\nor broadcast for distance learning.\nSome ancillaries, including electronic and print components, may not be available to customers outside the\nUnited States.\nThis book is printed on acid-free paper.\n1 2 3 4 5 6 7 8 9 LCR 21 20 19\nISBN 978-1-260-56579-9\nMHID 1-260-56579-3\nCover Image: ©Shutterstock/iSam iSmile\nAll credits appearing on page or at the end of the book are considered to be an extension of the copyright page.\nThe Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not\nindicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the\naccuracy of the information presented at these sites.\nmheducation.com/highered\nsch65793_fm_ise.indd iv\b\n12/04/18 11:25 AM\nAbout the Author\nMelissa A. Schilling, Ph.D.\nMelissa Schilling is the John Herzog family professor of management and organizations at New York University’s Stern School of Business. Professor Schilling teaches\ncourses in strategic management, corporate strategy and technology, and innovation management. Before joining NYU, she was an Assistant Professor at ­Boston\n­University (1997–2001), and has also served as a Visiting Professor at INSEAD\nand the Bren School of Environmental Science & Management at the University of\nCalifornia at Santa Barbara. She has also taught strategy and innovation courses at\nSiemens ­Corporation, IBM, the Kauffman Foundation Entrepreneurship Fellows\n­program, Sogang University in Korea, and the Alta Scuola Polytecnica, a joint institution of Politecnico di Milano and Politecnico di Torino.\nProfessor Schilling’s research focuses on technological innovation and knowledge creation. She has studied how technology shocks influence collaboration activity and innovation outcomes, how firms fight technology standards battles, and how\nfirms utilize collaboration, protection, and timing of entry strategies. She also studies how product designs and organizational structures migrate toward or away from\nmodularity. Her most recent work focuses on knowledge creation, including how\nbreadth of knowledge and search influences insight and learning, and how the structure of knowledge networks influences their overall capacity for knowledge creation.\nHer research in innovation and strategy has appeared in the leading academic journals\nsuch as ­Academy of Management Journal, Academy of Management Review, Management Science, Organization Science, Strategic Management Journal, and Journal\nof ­Economics and Management Strategy and Research Policy. She also sits on the editorial review boards of Academy of Management Journal, Academy of Management\nDiscoveries, Organization Science, Strategy Science, and Strategic Organization.\nShe is the author of Quirky: The Remarkable Story of the Traits, Foibles, and Genius\nof Breakthrough Innovators Who Changed the World, and she is coauthor of Strategic\nManagement: An Integrated Approach. Professor Schilling won an NSF CAREER\naward in 2003, and Boston University’s Broderick Prize for research in 2000.\nv\nPreface\nInnovation is a beautiful thing. It is a force with both aesthetic and pragmatic appeal:\nIt unleashes our creative spirit, opening our minds to hitherto undreamed of possibilities, while accelerating economic growth and providing advances in such crucial human\nendeavors as medicine, agriculture, and education. For industrial organizations, the primary engines of innovation in the Western world, innovation provides both exceptional\nopportunities and steep challenges. While innovation is a powerful means of competitive\ndifferentiation, enabling firms to penetrate new markets and achieve higher margins, it is\nalso a competitive race that must be run with speed, skill, and precision. It is not enough\nfor a firm to be innovative—to be successful it must innovate better than its competitors.\nAs scholars and managers have raced to better understand innovation, a wide range\nof work on the topic has emerged and flourished in disciplines such as strategic management, organization theory, economics, marketing, engineering, and sociology.\nThis work has generated many insights about how innovation affects the competitive\ndynamics of markets, how firms can strategically manage innovation, and how firms\ncan implement their innovation strategies to maximize their likelihood of success. A\ngreat benefit of the dispersion of this literature across such diverse domains of study\nis that many innovation topics have been examined from different angles. However,\nthis diversity also can pose integration challenges to both instructors and students.\nThis book seeks to integrate this wide body of work into a single coherent strategic\nframework, attempting to provide coverage that is rigorous, inclusive, and accessible.\nOrganization of the Book\nThe subject of innovation management is approached here as a strategic process. The\noutline of the book is designed to mirror the strategic management process used in\nmost strategy textbooks, progressing from assessing the competitive dynamics of the\nsituation, to strategy formulation, and then to strategy implementation. The first part\nof the book covers the foundations and implications of the dynamics of innovation,\nhelping managers and future managers better interpret their technological environments and identify meaningful trends. The second part of the book begins the process of crafting the firm’s strategic direction and formulating its innovation strategy,\nincluding project selection, collaboration strategies, and strategies for protecting the\nfirm’s property rights. The third part of the book covers the process of implementing\ninnovation, including the implications of organization structure on innovation, the\nmanagement of new product development processes, the construction and management of new product development teams, and crafting the firm’s deployment strategy. While the book emphasizes practical applications and examples, it also provides\nsystematic coverage of the existing research and footnotes to guide further reading.\nComplete Coverage for Both Business\nand Engineering Students\nvi\nThis book is designed to be a primary text for courses in the strategic management of\ninnovation and new product development. Such courses are frequently taught in both\nPreface vii\nbusiness and engineering programs; thus, this book has been written with the needs\nof business and engineering students in mind. For example, Chapter Six (Defining the\nOrganization’s Strategic Direction) provides basic strategic analysis tools with which\nbusiness students may already be familiar, but which may be unfamiliar to engineering students. Similarly, some of the material in Chapter Eleven (Managing the New\nProduct Development Process) on computer-aided design or quality function deployment may be review material for information system students or engineering students,\nwhile being new to management students. Though the chapters are designed to have\nan intuitive order to them, they are also designed to be self-standing so instructors can\npick and choose from them “buffet style” if they prefer.\nNew for the Sixth Edition\nThis sixth edition of the text has been comprehensively revised to ensure that the\nframeworks and tools are rigorous and comprehensive, the examples are fresh and\nexciting, and the figures and cases represent the most current information available.\nSome changes of particular note include:\nSix New Short Cases\nThe Rise of “Clean Meat”. The new opening case for Chapter Two is about the\ndevelopment of “clean meat”—meat grown from animal cells without the animal\nitself. Traditional meat production methods are extremely resource intensive and\nproduce large amounts of greenhouse gases. Further, the growing demand for meat\nindicated an impending “meat crisis” whereby not enough meat could be produced\nto meet demand. “Clean meat” promised to enable meat production using a tiny\nfraction of the energy, water, and land used for traditional meat production. Its\nproduction would create negligible greenhouse gases, and the meat itself would\nhave no antibiotics or steroids, alleviating some of the health concerns of traditional meat consumption. Furthermore, it would dramatically reduce animal suffering. If successful, it would be one of the largest breakthroughs ever achieved in\nfood production.\nInnovating in India: The Chotukool Project. Chapter Three opens with a case about\nthe Chotukool, a small, inexpensive, and portable refrigerator developed in India. In\nrural India, as many as 90 percent of families could not afford household appliances,\ndid not have reliable access to electricity, and had no means of refrigeration. Godrej\nand Boyce believed that finding a way to provide refrigeration to this segment of the\npopulation offered the promise of both a huge market and making a meaningful difference in people’s quality of life.\nUberAIR. Chapter Five now opens with a case about UberAIR, Uber’s new service\nto provide air transport on demand. Uber had already become synonymous with\n­on-demand car transport in most of the Western world; it now believed it could\ndevelop the same service for air transport using electric vertical take-off and landing\naircraft (eVTOLs). There were a lot of pieces to this puzzle, however. In addition to\nthe technology of the aircraft, the service would require an extensive network of landing pads, specially trained pilots (at least until autonomous eVTOLs became practical), and dramatically new air traffic control regulations and infrastructure. Was the\ntime ripe for on-demand air transport, or was UberAIR ahead of its time?\nviii Preface\nTesla Inc. in 2018. Chapter Six opens with a new case on Tesla, no longer just an\nelectric vehicle company. This case reviews the rise of Tesla, and then explores the\nnew businesses Tesla has entered, including solar panel leasing and installation (Solar\nCity), solar roof production, and energy storage systems (e.g., Powerwall). Why did\nthe company move into these businesses, and would synergies betweeen them help to\nmake the company more successful?\nWhere Should We Focus Our Innovation Efforts? An Exercise. Chapter Seven now\nopens with an exercise that shows how firms can tease apart the dimensions of value\ndriving technological progress in an industry, map the marginal returns to further\ninvestment on each dimension, and prioritize their innovation efforts. Using numerous\nexamples, the exercise helps managers realize where the breakthrough opportunities\nof the future are likely to be, and where the firm may be currently overspending.\nScrums, Sprints, and Burnouts: Agile Development at Cisco Systems. Chapter Eleven\nopens with a case about Cisco’s adoption of the agile development method now commonly used in software development. The case explains what agile development is,\nhow it differs from other development methods (such as stage-gated methods), and\nwhen (and why) a firm would choose agile development versus gated development for\na particular innovation.\nCases, Data, and Examples from around the World\nCareful attention has been paid to ensure that the text is global in its scope. The\nopening cases and examples feature companies from China, India, Israel, Japan, The\n­Netherlands, Kenya, the United States, and more. Wherever possible, statistics used in\nthe text are based on worldwide data.\nMore Comprehensive Coverage and Focus on Current Innovation Trends\nIn response to reviewer suggestions, the new edition now provides an extensive\ndiscussion of modularity and platform competition, crowdsourcing and customer\n­co-creation, agile development strategies, and more. The suggested readings for each\nchapter have also been updated to identify some of the more recent publications that\nhave gained widespread attention in the topic area of each chapter. Despite these additions, great effort has also been put into ensuring the book remains concise—a feature\nthat has proven popular with both instructors and students.\nSupplements\nThe teaching package for Strategic Management of Technological Innovation is available online from Connect at connect.mheducation.com and includes:\n∙\tAn instructor’s manual with suggested class outlines, responses to discussion questions, and more.\n∙\tComplete PowerPoint slides with lecture outlines and all major figures from the\ntext. The slides can also be modified by the instructor to customize them to the\ninstructor’s needs.\n∙\tA testbank with true/false, multiple choice, and short answer/short essay questions.\n∙ A suggested list of cases to pair with chapters from the text.\nStudents—study more efficiently, retain more\nand achieve better outcomes. 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Ask your\nMcGraw-Hill representative for more information.\n©Hill Street Studios/Tobin Rogers/Blend Images LLC\nSolutions for your challenges.\nA product isn’t a solution. Real solutions are affordable,\nreliable, and come with training and ongoing support\nwhen you need it and how you want it. Our Customer\nExperience Group can also help you troubleshoot\ntech problems—although Connect’s 99\\% uptime\nmeans you might not need to call them. See for\nyourself at\nFor Students\nEffective, efficient studying.\nConnect helps you be more productive with your\nstudy time and get better grades using tools like\nSmartBook, which highlights key concepts and creates\na personalized study plan. Connect sets you up for\nsuccess, so you walk into class with confidence and\nwalk out with better grades.\n©Shutterstock/wavebreakmedia\nI really liked this app it\n“\nStudy anytime, anywhere.\nmade it easy to study when\n—\nDownload the free ReadAnywhere app and access your\nonline eBook when it’s convenient, even if you’re offline.\nAnd since the app automatically syncs with your eBook in\nConnect, all of your notes are available every time you open\nit. Find out more at www.mheducation.com/readanywhere\nyou don’t have your textbook in front of you.\n”\n- Jordan Cunningham,\nEastern Washington University\nNo surprises.\nThe Connect Calendar and Reports tools\nkeep you on track with the work you need\nto get done and your assignment scores.\nLife gets busy; Connect tools help you\nkeep learning through it all.\n13\n14\nChapter 12 Quiz\nChapter 11 Quiz\nChapter 13 Evidence of Evolution\nChapter 11 DNA Technology\nChapter 7 Quiz\nChapter 7 DNA Structure and Gene…\nand 7 more…\nLearning for everyone.\nMcGraw-Hill works directly with Accessibility Services\nDepartments and faculty to meet the learning needs of all\nstudents. Please contact your Accessibility Services office\nand ask them to email accessibility@mheducation.com, or\nvisit www.mheducation.com/about/accessibility.html for\nmore information.\nAcknowledgments\nThis book arose out of my research and teaching on technological innovation and\nnew product development over the last decade; however, it has been anything but a\nlone endeavor. I owe much of the original inspiration of the book to Charles Hill, who\nhelped to ignite my initial interest in innovation, guided me in my research agenda,\nand ultimately encouraged me to write this book. I am also very grateful to colleagues\nand friends such as Rajshree Agarwal, Juan Alcacer, Rick Alden, William Baumol,\nBruno Braga, Gino Cattanni, Tom Davis, Sinziana Dorobantu, Gary Dushnitsky,\nDouglas Fulop, Raghu Garud, Deepak Hegde, Hla Lifshitz, Tammy Madsen, Rodolfo\nMartinez, Goncalo Pacheco D’Almeida, Joost Rietveld, Paul Shapiro, Jaspal Singh,\nDeepak Somaya, Bill Starbuck, Christopher Tucci, and Andy Zynga for their suggestions, insights, and encouragement. I am grateful to director Mike Ablassmeir and\nmarketing manager Lisa Granger. I am also thankful to my editors, Laura Hurst Spell\nand Diana Murphy, who have been so supportive and made this book possible, and to\nthe many reviewers whose suggestions have dramatically improved the book:\nJoan Adams\nBaruch Business School\n(City University of New York)\nShahzad Ansari\nErasmus University\nDeborah Dougherty\nRutgers University\nCathy A. Enz\nCornell University\nRajaram B. Baliga\nWake Forest University\nRobert Finklestein\nUniversity of Maryland–University\nCollege\nSandy Becker\nRutgers Business School\nSandra Finklestein\nClarkson University School of Business\nDavid Berkowitz\nUniversity of Alabama in Huntsville\nJeffrey L. Furman\nBoston University\nJohn Bers\nVanderbilt University\nCheryl Gaimon\nGeorgia Institute of Technology\nPaul Bierly\nJames Madison University\nElie Geisler\nIllinois Institute of Technology\nPaul Cheney\nUniversity of Central Florida\nSanjay Goel\nUniversity of Minnesota in Duluth\nPete Dailey\nMarshall University\nAndrew Hargadon\nUniversity of California, Davis\nRobert DeFillippi\nSuffolk University\nSteven Harper\nJames Madison University\nxi\nxii Acknowledgments\nDonald E. Hatfield\nVirginia Polytechnic Institute and State\nUniversity\nGlenn Hoetker\nUniversity of Illinois\nSanjay Jain\nUniversity of Wisconsin–Madison\nTheodore Khoury\nOregon State University\nRajiv Kohli\nCollege of William and Mary\nAija Leiponen\nCornell University\nVince Lutheran\nUniversity of North\nCarolina—Wilmington\nSteve Markham\nNorth Carolina State University\nSteven C. Michael\nUniversity of Illinois\nMichael Mino\nClemson University\nRobert Nash\nVanderbilt University\nAnthony Paoni\nNorthwestern University\nJohannes M. Pennings\nUniversity of Pennsylvania\nRaja Roy\nTulane University\nMukesh Srivastava\nUniversity of Mary Washington\nLinda F. Tegarden\nVirginia Tech\nOya Tukel\nCleveland State University\nAnthony Warren\nThe Pennsylvania State University\nI am also very grateful to the many students of the Technological Innovation and\nNew Product Development courses I have taught at New York University, INSEAD,\nBoston University, and University of California at Santa Barbara. Not only did these\nstudents read, challenge, and help improve many earlier drafts of the work, but they\nalso contributed numerous examples that have made the text far richer than it would\nhave otherwise been. I thank them wholeheartedly for their patience and generosity.\nMelissa A. Schilling\nBrief Contents\nPreface   vi\n1\nIntroduction   1\nPART ONE\nIndustry Dynamics of Technological Innovation   13\n2\nSources of Innovation   15\n3\nTypes and Patterns of Innovation   43\n4\nStandards Battles, Modularity, and Platform Competition   67\n5\nTiming of Entry   95\nPART TWO\nFormulating Technological Innovation Strategy   113\n6\nDefining the Organization’s Strategic Direction   115\n7\nChoosing Innovation Projects   141\n8\nCollaboration Strategies   167\n9\nProtecting Innovation   197\nPART THREE\nImplementing Technological Innovation Strategy   223\n10\nOrganizing for Innovation   225\n11\nManaging the New Product Development Process   249\n12\nManaging New Product Development Teams   277\n13\nCrafting a Deployment Strategy   297\nINDEX   327\nxiii\nContents\nChapter 1\nIntroduction   1\nThe Importance of Technological\nInnovation   1\nThe Impact of Technological Innovation\non Society   2\nInnovation by Industry: The Importance of\nStrategy   4\nThe Innovation Funnel   4\nThe Strategic Management of Technological\nInnovation   6\nSummary of Chapter   9\nDiscussion Questions   10\nSuggested Further Reading   10\nEndnotes   10\nPART ONE\nINDUSTRY DYNAMICS\nOF TECHNOLOGICAL\nINNOVATION   13\nChapter 2\nSources of Innovation   15\nThe Rise of “Clean Meat”   15\nOverview   19\nCreativity   20\nIndividual Creativity   20\nOrganizational Creativity   22\nTranslating Creativity Into Innovation   24\nThe Inventor   24\nInnovation by Users   26\nResearch and Development by Firms   27\nFirm Linkages with Customers, Suppliers,\nCompetitors, and Complementors   28\nxiv\nUniversities and Government-Funded\nResearch   30\nPrivate Nonprofit Organizations   32\nInnovation in Collaborative Networks   32\nTechnology Clusters   33\nTechnological Spillovers   36\nSummary of Chapter   37\nDiscussion Questions   38\nSuggested Further Reading   38\nEndnotes   39\nChapter 3\nTypes and Patterns of Innovation   43\nInnovating in India: The Chotukool Project   43\nOverview   46\nTypes of Innovation   46\nProduct Innovation versus Process\nInnovation   46\nRadical Innovation versus Incremental\nInnovation   47\nCompetence-Enhancing Innovation versus\nCompetence-Destroying Innovation   48\nArchitectural Innovation versus Component\nInnovation   49\nUsing the Dimensions   50\nTechnology S-Curves   50\nS-Curves in Technological Improvement   50\nS-Curves in Technology Diffusion   53\nS-Curves as a Prescriptive Tool   54\nLimitations of S-Curve Model as a Prescriptive\nTool   55\nTechnology Cycles   56\nSummary of Chapter   62\nDiscussion Questions   63\nSuggested Further Reading   63\nEndnotes   64\nContents xv\nChapter 4\nStandards Battles, Modularity,\nand Platform Competition   67\nA Battle for Dominance in Mobile\nPayments   67\nOverview   71\nWhy Dominant Designs Are Selected   71\nLearning Effects   72\nNetwork Externalities   73\nGovernment Regulation   76\nThe Result: Winner-Take-All Markets   76\nMultiple Dimensions of Value   77\nA Technology’s Stand-Alone Value   78\nNetwork Externality Value   78\nCompeting for Design Dominance\nin Markets with Network Externalities   83\nModularity and Platform Competition   87\nModularity   87\nPlatform Ecosystems   89\nSummary of Chapter   91\nDiscussion Questions   92\nSuggested Further Reading   92\nEndnotes   93\nChapter 5\nTiming of Entry   95\nUberAIR   95\nOverview   98\nFirst-Mover Advantages   98\nBrand Loyalty and Technological\nLeadership   98\nPreemption of Scarce Assets   99\nExploiting Buyer Switching Costs   99\nReaping Increasing Returns Advantages   100\nFirst-Mover Disadvantages   100\nResearch and Development Expenses   101\nUndeveloped Supply and Distribution\nChannels   101\nImmature Enabling Technologies and\nComplements   101\nUncertainty of Customer Requirements   102\nFactors Influencing Optimal Timing of\nEntry   104\nStrategies to Improve Timing Options   108\nSummary of Chapter   108\nDiscussion Questions   109\nSuggested Further Reading   109\nEndnotes   110\nPART TWO\nFORMULATING TECHNOLOGICAL\nINNOVATION STRATEGY   113\nChapter 6\nDefining the Organization’s Strategic\nDirection   115\nTesla, Inc. in 2018   115\nOverview   123\nAssessing the Firm’s Current\nPosition   123\nExternal Analysis   123\nInternal Analysis   127\nIdentifying Core Competencies and Dynamic\nCapabilities   131\nCore Competencies   131\nThe Risk of Core Rigidities   132\nDynamic Capabilities   133\nStrategic Intent   133\nSummary of Chapter   137\nDiscussion Questions   138\nSuggested Further Reading   139\nEndnotes   139\nChapter 7\nChoosing Innovation Projects   141\nWhere Should We Focus Our Innovation\nEfforts? An Exercise   141\nOverview   146\nThe Development Budget   146\nQuantitative Methods For Choosing\nProjects   149\nDiscounted Cash Flow Methods   149\nReal Options   152\nDisadvantages of Quantitative\nMethods   154\nxvi Contents\nQualitative Methods for Choosing\nProjects   154\nScreening Questions   155\nThe Aggregate Project Planning Framework   157\nQ-Sort   159\nCombining Quantitative and Qualitative\nInformation   159\nConjoint Analysis   159\nData Envelopment Analysis   161\nSummary of Chapter   163\nDiscussion Questions   163\nSuggested Further Reading   164\nEndnotes   164\nChapter 8\nCollaboration Strategies   167\nEnding HIV? Sangamo Therapeutics and Gene\nEditing   167\nOverview   175\nReasons for Going Solo   175\n1. Availability of Capabilities   176\n2. Protecting Proprietary Technologies   176\n3. Controlling Technology Development\nand Use   176\n4. Building and Renewing Capabilities   177\nAdvantages of Collaborating   177\n1. Acquiring Capabilities and Resources\nQuickly   177\n2. Increasing Flexibility   178\n3. Learning from Partners   178\n4. Resource and Risk Pooling   178\n5. Building a Coalition around a Shared\nStandard   178\nTypes of Collaborative Arrangements   178\nStrategic Alliances   179\nJoint Ventures   181\nLicensing   182\nOutsourcing   183\nCollective Research Organizations   184\nChoosing a Mode of Collaboration   184\nChoosing and Monitoring Partners   187\nPartner Selection   187\nPartner Monitoring and Governance   191\nSummary of Chapter   192\nDiscussion Questions   193\nSuggested Further Reading   193\nEndnotes   194\nChapter 9\nProtecting Innovation   197\nThe Digital Music Distribution\nRevolution   197\nOverview   201\nAppropriability   202\nPatents, Trademarks, and Copyrights   202\nPatents   203\nTrademarks and Service Marks   207\nCopyright   208\nTrade Secrets   210\nThe Effectiveness and Use of Protection\nMechanisms   211\nWholly Proprietary Systems versus Wholly Open\nSystems   212\nAdvantages of Protection   213\nAdvantages of Diffusion   215\nSummary of Chapter   218\nDiscussion Questions   219\nSuggested Further Reading   219\nEndnotes   220\nPART THREE\nIMPLEMENTING TECHNOLOGICAL\nINNOVATION STRATEGY   223\nChapter 10\nOrganizing for Innovation   225\nOrganizing for Innovation at Google   225\nOverview   227\nSize and Structural Dimensions of the\nFirm   228\nSize: Is Bigger Better?   228\nStructural Dimensions of the Firm   230\nCentralization   230\nFormalization and Standardization   231\nMechanistic versus Organic Structures   232\nSize versus Structure   234\nThe Ambidextrous Organization: The Best of Both\nWorlds?   234\nContents xvii\nModularity and “Loosely Coupled”\nOrganizations   236\nModular Products   236\nLoosely Coupled Organizational\nStructures   237\nManaging Innovation Across Borders   240\nSummary of Chapter   243\nDiscussion Questions   244\nSuggested Further Reading   244\nEndnotes   245\nChapter 11\nManaging the New Product Development\nProcess   249\nScrums, Sprints, and Burnouts: Agile\nDevelopment at Cisco Systems   249\nOverview   252\nObjectives of the New Product Development\nProcess   252\nMaximizing Fit with Customer\nRequirements   252\nMinimizing Development Cycle Time   253\nControlling Development Costs   254\nSequential versus Partly Parallel\nDevelopment Processes   254\nProject Champions   257\nRisks of Championing   257\nInvolving Customers and Suppliers in the\nDevelopment Process   259\nInvolving Customers   259\nInvolving Suppliers   260\nCrowdsourcing   260\nTools for Improving the New Product\nDevelopment Process   262\nStage-Gate Processes   262\nQuality Function Deployment (QFD)—The House\nof Quality   265\nDesign for Manufacturing   267\nFailure Modes and Effects Analysis   267\nComputer-Aided Design/Computer-Aided\nEngineering/Computer-Aided Manufacturing   268\nTools for Measuring New Product Development\nPerformance   269\nNew Product Development Process Metrics   271\nOverall Innovation Performance   271\nSummary of Chapter   271\nDiscussion Questions   272\nSuggested Further Reading   272\nEndnotes   273\nChapter 12\nManaging New Product Development\nTeams   277\nInnovation Teams at the Walt Disney\nCompany   277\nOverview   279\nConstructing New Product Development\nTeams   280\nTeam Size   280\nTeam Composition   280\nThe Structure of New Product Development\nTeams   285\nFunctional Teams   285\nLightweight Teams   286\nHeavyweight Teams   286\nAutonomous Teams   286\nThe Management of New Product\nDevelopment Teams   288\nTeam Leadership   288\nTeam Administration   288\nManaging Virtual Teams   289\nSummary of Chapter   292\nDiscussion Questions   292\nSuggested Further Reading   293\nEndnotes   293\nChapter 13\nCrafting a Deployment Strategy   297\nDeployment Tactics in the Global Video Game\nIndustry   297\nOverview   306\nLaunch Timing   306\nStrategic Launch Timing   306\nOptimizing Cash Flow versus Embracing\nCannibalization   307\nLicensing and Compatibility   308\nPricing   310\nxviii Contents\nDistribution   312\nSelling Direct versus Using Intermediaries   312\nStrategies for Accelerating Distribution   314\nMarketing   316\nMajor Marketing Methods   316\nTailoring the Marketing Plan to Intended\nAdopters   318\nUsing Marketing to Shape Perceptions and\nExpectations   320\nSummary of Chapter   323\nDiscussion Questions   324\nSuggested Further Reading   324\nEndnotes   325\nIndex   327\nChapter One\nIntroduction\nTHE IMPORTANCE OF TECHNOLOGICAL INNOVATION\ntechnological\ninnovation\nThe act of\n­introducing a\nnew device,\nmethod, or\nmaterial for\napplication to\ncommercial\nor practical\nobjectives.\nIn many industries, technological innovation is now the most important driver of\ncompetitive success. Firms in a wide range of industries rely on products developed\nwithin the past five years for almost one-third (or more) of their sales and profits.\nFor example, at Johnson & Johnson, products developed within the last five years\naccount for over 30 percent of sales, and sales from products developed within the past\nfive years at 3M have hit as high as 45 percent in recent years.\nThe increasing importance of innovation is due in part to the globalization of\nmarkets. Foreign competition has put pressure on firms to continuously innovate\nin order to produce differentiated products and services. Introducing new products\nhelps firms protect their margins, while investing in process innovation helps firms\nlower their costs. Advances in information technology also have played a role in\nspeeding the pace of innovation. Computer-aided design and computer-aided manufacturing have made it easier and faster for firms to design and produce new products, while flexible manufacturing technologies have made shorter production runs\neconomical and have reduced the importance of production economies of scale.1\nThese technologies help firms develop and produce more product variants that\nclosely meet the needs of narrowly defined customer groups, thus achieving differentiation from competitors. For example, in 2018, Toyota offered 22 different\npassenger vehicle lines under the Toyota brand (e.g., Camry, Prius, Highlander, and\nTundra). Within each of the vehicle lines, Toyota also offered several different models (e.g., Camry L, Camry LE, Camry SE, Camry Hybrid SE, etc.) with different\nfeatures and at different price points. In total, Toyota offered 193 car models ranging in price from $15,635 (for the Yaris ­three-door liftback) to $84,315 (for the\nLand Cruiser), and seating anywhere from three passengers (e.g., Tacoma Regular\nCab truck) to eight passengers (Sienna Minivan). On top of this, Toyota also produced a range of luxury vehicles under its Lexus brand. Similarly, in 2018 Samsung\nproduced more than 30 unique smartphones. Companies can use broad portfolios\nof product models to help ensure they can penetrate almost every conceivable market niche. While producing multiple product variations used to be expensive and\n1\n2 Chapter 1 Introduction\ntime-consuming, flexible manufacturing technologies now enable firms to seamlessly transition from producing one product model to the next, adjusting production\nschedules with real-time information on demand. Firms further reduce production\ncosts by using common components in many of the models.\nAs firms such as Toyota, Samsung, and others adopt these new technologies\nand increase their pace of innovation, they raise the bar for competitors, triggering\nan industry-wide shift to shortened development cycles and more rapid new product introductions. The net results are greater market segmentation and rapid product\nobsolescence.2 Product life cycles (the time between a product’s introduction and\nits withdrawal from the market or replacement by a next-generation product) have\nbecome as short as 4 to 12 months for software, 12 to 24 months for computer hardware and consumer electronics, and 18 to 36 months for large home appliances.3\nThis spurs firms to focus increasingly on innovation as a strategic imperative—a\nfirm that does not innovate quickly finds its margins diminishing as its products\nbecome obsolete.\nTHE IMPACT OF TECHNOLOGICAL INNOVATION ON SOCIETY\ngross\n­domestic\nproduct (GDP)\nThe total annual\noutput of an\neconomy as\nmeasured by its\nfinal purchase\nprice.\nIf the push for innovation has raised the competitive bar for industries, arguably making success just that much more complicated for organizations, its net effect on society\nis more clearly positive. Innovation enables a wider range of goods and services to be\ndelivered to people worldwide. It has made the production of food and other necessities more efficient, yielded medical treatments that improve health conditions, and\nenabled people to travel to and communicate with almost every part of the world. To\nget a real sense of the magnitude of the effect of technological innovation on society,\nlook at Figure 1.1, which shows a timeline of some of the most important technological innovations developed over the last 200 years. Imagine how different life would be\nwithout these innovations!\nThe aggregate impact of technological innovation can be observed by looking at\ngross domestic product (GDP). The gross domestic product of an economy is its\ntotal annual output, measured by final purchase price. Figure 1.2 shows the average\nGDP per capita (i.e., GDP divided by the population) for the world from 1980 to\n2016. The figures have been converted into U.S. dollars and adjusted for inflation.\nAs shown in the figure, the average world GDP per capita has risen steadily since\n1980. In a series of studies of economic growth conducted at the National Bureau of\nEconomic Research, economists showed that the historic rate of economic growth\nin GDP could not be accounted for entirely by growth in labor and capital inputs.\nEconomist Robert Merton Solow argued that this unaccounted-for residual growth\nrepresented technological change: Technological innovation increased the amount of\noutput achievable from a given quantity of labor and capital. This explanation was\nnot immediately accepted; many researchers attempted to explain the residual away\nin terms of measurement error, inaccurate price deflation, or labor improvement.\nChapter 1 Introduction 3\nFIGURE 1.1\nTimeline\nof Some of\nthe Most\nImportant\nTechnological\nInnovations\nin the Last\n200 Years\nexternalities\nCosts (or benefits)\nthat are borne\n(or reaped) by\nindividuals\nother than those\nresponsible\nfor creating\nthem. Thus, if a\nbusiness emits\npollutants in a\ncommunity, it\nimposes a negative externality\non the community members;\nif a business\nbuilds a park in\na community, it\ncreates a positive externality\nfor community\nmembers.\n1800 -\n1800—Electric battery\n1804—Steam locomotive\n1807—Internal combustion engine\n1809—Telegraph\n1817—Bicycle\n1820 -\n1821—Dynamo\n1824—Braille writing system\n1828—Hot blast furnace\n1831—Electric generator\n1836—Five-shot revolver\n1840 -\n1841—Bunsen battery (voltaic cell)\n1842—Sulfuric ether-based anesthesia\n1846—Hydraulic crane\n1850—Petroleum refining\n1856—Aniline dyes\n1860 -\n1862—Gatling gun\n1867—Typewriter\n1876—Telephone\n1877—Phonograph\n1878—Incandescent lightbulb\n1880 -\n1885—Light steel skyscrapers\n1886—Internal combustion automobile\n1887—Pneumatic tire\n1892—Electric stove\n1895—X-ray machine\n1900 -\n1902—Air conditioner (electric)\n1903—Wright biplane\n1906—Electric vacuum cleaner\n1910—Electric washing machine\n1914—Rocket\n1920 -\n1921—Insulin (extracted)\n1927—Television\n1928—Penicillin\n1936—First programmable computer\n1939—Atom fission\n1940 -\n1942—Aqua lung\n1943—Nuclear reactor\n1947—Transistor\n1957—Satellite\n1958—Integrated circuit\n1960 -\n1967—Portable handheld calculator\n1969—ARPANET (precursor to Internet)\n1971—Microprocessor\n1973—Mobile (portable cellular) phone\n1976—Supercomputer\n1980 -\n1981—Space shuttle (reusable)\n1987—Disposable contact lenses\n1989—High-definition television\n1990—World Wide Web protocol\n1996—Wireless Internet\n2000 -\n2003—Map of human genome\nBut in each case the additional variables were unable to eliminate\nthis residual growth component.\nA ­consensus gradually emerged\nthat the residual did in fact capture technological change. Solow\nreceived a Nobel Prize for his work\nin 1981, and the residual became\nknown as the Solow Residual.4\nWhile GDP has its shortcomings\nas a measure of standard of living,\nit does relate very directly to the\namount of goods consumers can\npurchase. Thus, to the extent that\ngoods improve quality of life, we\ncan ascribe some beneficial impact\nof technological innovation.\nSometimes technological innovation results in negative ­externalities.\nProduction technologies may ­create\npollution that is harmful to the\nsurrounding communities; agricultural and fishing technologies\ncan result in erosion, elimination\nof natural habitats, and depletion of\nocean stocks; medical technologies\ncan result in unanticipated consequences such as antibiotic-resistant\nstrains of bacteria or moral ­dilemmas\nregarding the use of genetic modification. However, technology is, in\nits purest essence,­ knowledge—­\nknowledge to solve our problems\nand pursue our goals.5 Technological innovation is thus the creation\nof new knowledge that is applied\nto practical problems. Sometimes\nthis knowledge is applied to problems hastily, without full consideration of the consequences and\nalternatives, but overall it will\nprobably serve us better to have\nmore knowledge than less.\n4 Chapter 1 Introduction\nFIGURE 1.2\nGross\n­Domestic\nProduct per\nCapita, 1989–\n2016 (in Real\n2010 $US\nBillions)\n90,000\nSource: USDA Economic Research Service,\nwww.ers.usda.gov,\naccessed April 16th,\n2018.\n50,000\n80,000\n70,000\n60,000\n40,000\n30,000\n20,000\n10,000\n00\n20\n02\n20\n04\n20\n06\n20\n08\n20\n10\n20\n12\n20\n14\n20\n16\n98\n20\n96\n19\n94\n19\n92\n19\n90\n19\n88\n19\n86\n19\n84\n19\n82\n19\n19\n19\n80\n–\nINNOVATION BY INDUSTRY: THE IMPORTANCE OF STRATEGY\nAs will be shown in Chapter Two, the majority of effort and money invested in technological innovation comes from industrial firms. However, in the frenetic race to\ninnovate, many firms charge headlong into new product development without clear\nstrategies or well-developed processes for choosing and managing projects. Such firms\noften initiate more projects than they can effectively support, choose projects that are\na poor fit with the firm’s resources and objectives, and suffer long development cycles\nand high project failure rates as a consequence (see the accompanying Research Brief\nfor a recent study of the length of new product development cycles). While innovation is popularly depicted as a freewheeling process that is unconstrained by rules and\nplans, study after study has revealed that successful innovators have clearly defined\ninnovation strategies and management processes.6\nThe Innovation Funnel\nMost innovative ideas do not become successful new products. Many studies suggest\nthat only one out of several thousand ideas results in a successful new product: Many\nprojects do not result in technically feasible products and, of those that do, many fail\nto earn a commercial return. According to a 2012 study by the Product Development\nand Management Association, only about one in nine projects that are initiated is successful, and of those that make it to the point of being launched to the market, only\nabout half earn a profit.7 Furthermore, many ideas are sifted through and abandoned\nbefore a project is even formally initiated. According to one study that combined data\nfrom prior studies of innovation success rates with data on patents, venture capital\nChapter 1 Introduction 5\nResearch Brief   How Long Does New Product\nDevelopment Take?a\nIn a large-scale survey administered by the Product Development and Management Association\n(PDMA), researchers examined the length of time it\ntook firms to develop a new product from initial concept to market introduction. The study divided new\nproduct development projects into categories representing their degree of innovativeness: “radical”\nprojects, “more innovative” projects, and “incremental” projects. On average, incremental projects took\nonly 33 weeks from concept to market introduction.\nMore innovative projects took significantly longer,\nclocking in at 57 weeks. The development of radical\nproducts or technologies took the longest, averaging\n82 weeks. The study also found that on average, for\nmore innovative and radical projects, firms reported\nsignificantly shorter cycle times than those reported\nin the previous PDMA surveys conducted in 1995\nand 2004.\na\n Adapted from Markham, S. K., and H. Lee, “Product Development and Management Association’s 2012 Comparative Performance Assessment Study,” Journal of Product\n­Innovation Management 30, no. 3 (2013): 408–29.\nfunding, and surveys, it takes about 3000 raw ideas to produce one significantly new\nand successful commercial product.8 The pharmaceutical industry demonstrates this\nwell—only one out of every 5000 compounds makes it to the pharmacist’s shelf, and\nonly one-third of those will be successful enough to recoup their R&D costs.9 Furthermore, most studies indicate that it costs at least $1.4 billion and a decade of research to\nbring a new Food and Drug Administration (FDA)–approved pharmaceutical product\nto market!10 The innovation process is thus often conceived of as a funnel, with many\npotential new product ideas going in the wide end, but very few making it through the\ndevelopment process (see Figure 1.3).\nFIGURE 1.3\nThe New Product Development Funnel in\nPharmaceuticals\n5000\nCompounds\n125\nLeads\nDiscovery & Preclinical\n3–6 years\n2–3 drugs tested\nClinical Trials\n6–7 years\n1 drug\nApproval\n½–2 years\nRx\n6 Chapter 1 Introduction\nThe Strategic Management of Technological Innovation\nImproving a firm’s innovation success rate requires a well-crafted strategy. A firm’s\ninnovation projects should align with its resources and objectives, leveraging its core\ncompetencies and helping it achieve its strategic intent. A firm’s organizational structure and control systems should encourage the generation of innovative ideas while\nalso ensuring efficient implementation. A firm’s new product development process\nshould maximize the likelihood of projects being both technically and commercially\nsuccessful. To achieve these things, a firm needs (a) an in-depth understanding of the\ndynamics of innovation, (b) a well-crafted innovation strategy, and (c) well-designed\nprocesses for implementing the innovation strategy. We will cover each of these in turn\n(see Figure 1.4).\nIn Part One, we will cover the foundations of technological innovation, gaining an\nin-depth understanding of how and why innovation occurs in an industry, and why\nsome innovations rise to dominate others. First, we will look at the sources of innovation in Chapter Two. We will address questions such as: Where do great ideas come\nfrom? How can firms harness the power of individual creativity? What role do customers, government organizations, universities, and alliance networks play in creating\ninnovation? In this chapter, we will first explore the role of creativity in the generation\nof novel and useful ideas. We then look at various sources of innovation, including\nthe role of individual inventors, firms, publicly sponsored research, and collaborative\nnetworks.\nIn Chapter Three, we will review models of types of innovation (such as ­radical\n­versus incremental and architectural versus modular) and patterns of innovation\n(including s-curves of technology performance and diffusion, and technology cycles).\nWe will address questions such as: Why are some innovations much harder to create\nand implement than others? Why do innovations often diffuse slowly even when they\nappear to offer a great advantage? What factors influence the rate at which a technology tends to improve over time? Familiarity with these types and patterns of innovation\nwill help us distinguish how one project is different from another and the underlying\nfactors that shape the project’s likelihood of technical or commercial success.\nIn Chapter Four, we will turn to the particularly interesting dynamics that emerge\nin industries characterized by network externalities and other sources of increasing returns that can lead to standards battles and winner-take-all markets. We will\naddress questions such as: Why do some industries choose a single dominant standard rather than enabling multiple standards to coexist? What makes one technological innovation rise to dominate all others, even when other seemingly superior\ntechnologies are offered? How can a firm avoid being locked out? Is there anything\na firm can do to influence the likelihood of its technology becoming the dominant\ndesign? When are platform ecosystems likely to displace other forms of competition\nin an industry?\nIn Chapter Five, we will discuss the impact of entry timing, including first-mover\nadvantages, first-mover disadvantages, and the factors that will determine the firm’s\noptimal entry strategy. This chapter will address such questions as: What are the advantages and disadvantages of being first to market, early but not first, and late? What\ndetermines the optimal timing of entry for a new innovation? This chapter reveals a\nnumber of consistent patterns in how timing of entry impacts innovation success, and\nChapter 1 Introduction 7\nFIGURE 1.4\nThe Strategic Management of Technological Innovation\nPart 1: Industry Dynamics of\nTechnological Innovation\nChapter 2\nSources of\nInnovation\nChapter 3\nTypes and Patterns\nof Innovation\nChapter 4\nStandards Battles,\nModularity, and\nPlatform Competition\nChapter 5\nTiming of Entry\nPart 2: Formulating Technological\nInnovation Strategy\nChapter 6\nDefining the Organization’s\nStrategic Direction\nChapter 7\nChoosing Innovation\nProjects\nChapter 8\nCollaboration\nStrategies\nChapter 9\nProtecting Innovation\nPart 3: Implementing Technological\nInnovation Strategy\nChapter 10\nOrganizing for\nInnovation\nChapter 11\nManaging the New\nProduct Development\nProcess\nFeedback\nChapter 12\nManaging New\nProduct\nDevelopment Teams\nChapter 13\nCrafting a\nDeployment\nStrategy\n8 Chapter 1 Introduction\nit outlines what factors will influence a firm’s optimal timing of entry, thus beginning\nthe transition from understanding the dynamics of technological innovation to formulating technology strategy.\nIn Part Two, we will turn to formulating technological innovation strategy.\n­Chapter Six reviews the basic strategic analysis tools managers can use to assess the\nfirm’s current position and define its strategic direction for the future. This chapter\nwill address such questions as: What are the firm’s sources of sustainable competitive\nadvantage? Where in the firm’s value chain do its strengths and weaknesses lie? What\nare the firm’s core competencies, and how should it leverage and build upon them?\nWhat is the firm’s strategic intent—that is, where does the firm want to be 10 years\nfrom now? Only after the firm has thoroughly appraised where it is currently can it\nformulate a coherent technological innovation strategy for the future.\nIn Chapter Seven, we will examine a variety of methods of choosing innovation\nprojects. These include quantitative methods such as discounted cash flow and options\nvaluation techniques, qualitative methods such as screening questions and balancing\nthe research and development portfolio, as well as methods that combine qualitative\nand quantitative approaches such as conjoint analysis and data envelopment analysis.\nEach of these methods has its advantages and disadvantages, leading many firms to\nuse a multiple-method approach to choosing innovation projects.\nIn Chapter Eight, we will examine collaboration strategies for innovation. This\nchapter addresses questions such as: Should the firm partner on a particular project or\ngo solo? How does the firm decide which activities to do in-house and which to access\nthrough collaborative arrangements? If the firm chooses to work with a partner, how\nshould the partnership be structured? How does the firm choose and monitor partners? We will begin by looking at the reasons a firm might choose to go solo versus\n­working with a partner. We then will look at the pros and cons of various partnering\n­methods, including joint ventures, alliances, licensing, outsourcing, and participating in ­collaborative research organizations. The chapter also reviews the factors that\nshould influence partner selection and monitoring.\nIn Chapter Nine, we will address the options the firm has for appropriating the\nreturns to its innovation efforts. We will look at the mechanics of patents, copyright,\ntrademarks, and trade secrets. We will also address such questions as: Are there ever\ntimes when it would benefit the firm to not protect its technological innovation so\nvigorously? How does a firm decide between a wholly proprietary, wholly open, or\npartially open strategy for protecting its innovation? When will open strategies have\nadvantages over wholly proprietary strategies? This chapter examines the range of\nprotection options available to the firm, and the complex series of trade-offs a firm\nmust consider in its protection strategy.\nIn Part Three, we will turn to implementing the technological innovation strategy.\nThis begins in Chapter Ten with an examination of how the organization’s size and\nstructure influence its overall rate of innovativeness. The chapter addresses such questions as: Do bigger firms outperform smaller firms at innovation? How do formalization, standardization, and centralization impact the likelihood of generating innovative\nideas and the organization’s ability to implement those ideas quickly and efficiently?\nIs it possible to achieve creativity and flexibility at the same time as efficiency and\nreliability? How do multinational firms decide where to perform their development\nChapter 1 Introduction 9\nactivities? How do multinational firms coordinate their development activities toward\na common goal when the activities occur in multiple countries? This chapter examines\nhow organizations can balance the benefits and trade-offs of flexibility, economies of\nscale, standardization, centralization, and tapping local market knowledge.\nIn Chapter Eleven, we will review a series of “best practices” that have been identified in managing the new product development process. This includes such questions\nas: Should new product development processes be performed sequentially or in parallel? What are the advantages and disadvantages of using project champions? What\nare the benefits and risks of involving customers and/or suppliers in the development\nprocess? What tools can the firm use to improve the effectiveness and efficiency of its\nnew product development processes? How does the firm assess whether its new product development process is successful? This chapter provides an extensive review of\nmethods that have been developed to improve the management of new product development projects and to measure their performance.\nChapter Twelve builds on the previous chapter by illuminating how team composition and structure will influence project outcomes. This chapter addresses questions\nsuch as: How big should teams be? What are the advantages and disadvantages of\nchoosing highly diverse team members? Do teams need to be colocated? When should\nteams be full time and/or permanent? What type of team leader and management practices should be used for the team? This chapter provides detailed guidelines for constructing new product development teams that are matched to the type of new product\ndevelopment project under way.\nFinally, in Chapter Thirteen, we will look at innovation deployment strategies. This\nchapter will address such questions as: How do we accelerate the adoption of the technological innovation? How do we decide whether to use licensing or OEM agreements? Does it make more sense to use penetration pricing or a market-skimming\nprice? When should we sell direct versus using intermediaries? What strategies can\nthe firm use to encourage distributors and complementary goods providers to support the innovation? What are the advantages and disadvantages of major marketing\nmethods? This chapter complements traditional marketing, distribution, and pricing\ncourses by looking at how a deployment strategy can be crafted that especially targets\nthe needs of a new technological innovation.\nSummary\nof\nChapter\n1. Technological innovation is now often the single most important competitive\ndriver in many industries. Many firms receive more than one-third of their sales\nand profits from products developed within the past five years.\n2. The increasing importance of innovation has been driven largely by the globalization of markets and the advent of advanced technologies that enable more rapid\nproduct design and allow shorter production runs to be economically feasible.\n3. Technological innovation has a number of important effects on society, including fostering increased GDP, enabling greater communication and mobility, and\nimproving medical treatments.\n10 Chapter 1 Introduction\n4. Technological innovation may also pose some negative externalities, including\npollution, resource depletion, and other unintended consequences of technological\nchange.\n5. While government plays a significant role in innovation, industry provides the\nmajority of R&D funds that are ultimately applied to technological innovation.\n6. Successful innovation requires an in-depth understanding of the dynamics of\ninnovation, a well-crafted innovation strategy, and well-developed processes for\nimplementing the innovation strategy.\nDiscussion\nQuestions\n1. Why is innovation so important for firms to compete in many industries?\n2. What are some advantages and disadvantages of technological innovation?\n3. Why do you think so many innovation projects fail to generate an economic return?\nSuggested\nFurther\nReading\nClassics\nArrow, K. J., “Economic welfare and the allocation of resources for inventions,” in The\nRate and Direction of Inventive Activity: Economic and Social Factors, ed. R. Nelson\n(Princeton, NJ: Princeton University Press, 1962), pp. 609–25.\nBaumol, W. J., The Free Market Innovation Machine: Analyzing the Growth Miracle\nof Capitalism (Princeton, NJ: Princeton University Press, 2002).\nMansfield, E., “Contributions of R and D to economic growth in the United States,”\nScience CLXXV (1972), pp. 477–86.\nSchumpeter, J. A., The Theory of Economic Development (1911; English translation,\nCambridge, MA: Harvard University Press, 1936).\nRecent Work\nAhlstrom, D., “Innovation and Growth: How Business Contributes to Society,”\n­Academy of Management Perspectives (August 2010): 10–23.\nLichtenberg, F. R., “Pharmaceutical Innovation and Longevity Growth in 30 Developing and High-Income Countries, 2000–2009,” Health Policy and Technology\n3 (2014):36–58.\n“The 25 Best Inventions of 2017,” Time (December 1, 2017).\nSchilling, M. A., “Towards Dynamic Efficiency: Innovation and Its Implications for\nAntitrust,” Antitrust Bulletin 60, no. 3 (2015): 191–207.\nEndnotes\n1. J. P. Womack, D. T. Jones, and D. Roos, The Machine That Changed the World (New York:\nRawson Associates, 1990).\n2. W. Qualls, R. W. Olshavsky, and R. E. Michaels, “Shortening of the PLC—An Empirical Test,”\nJournal of Marketing 45 (1981), pp. 76–80.\n3. M. A. Schilling and C. E. Vasco, “Product and Process Technological Change and the Adoption of\nModular Organizational Forms,” in Winning Strategies in a Deconstructing World, eds. R. Bresser,\nM. Hitt, R. Nixon, and D. Heuskel (Sussex, England: John Wiley & Sons, 2000), pp. 25–50.\nChapter 1 Introduction 11\n4. N. Crafts, “The First Industrial Revolution: A Guided Tour for Growth Economists,” The\n­American Economic Review 86, no. 2 (1996), pp. 197–202; R. Solow, “Technical Change and\nthe Aggregate Production Function,” Review of Economics and Statistics 39 (1957), pp. ­312–20;\nand N. E. Terleckyj, “What Do R&D Numbers Tell Us about Technological Change?” A\n­ merican\nEconomic Association 70, no. 2 (1980), pp. 55–61.\n5. H. A. Simon, “Technology and Environment,” Management Science 19 (1973), pp. 1110–21.\n6. S. Brown and K. Eisenhardt, “The Art of Continuous Change: Linking Complexity Theory\nand Time-Paced Evolution in Relentlessly Shifting Organizations,” Administrative Science\nQuarterly 42 (1997), pp. 1–35; K. Clark and T. Fujimoto, Product Development Performance\n(Boston: Harvard Business School Press, 1991); R. Cooper, “Third Generation New Product\nProcesses,” Journal of Product Innovation Management 11 (1994), pp. 3–14; D. Doughery,\n“Reimagining the Differentiation and Integration of Work for Sustained Product Innovation,”\nOrganization Science 12 (2001), pp. 612–31; and M. A. Schilling and C. W. L. Hill, “­Managing\nthe New Product Development Process: Strategic Imperatives,” Academy of Management Executive 12, no. 3 (1998), pp. 67–81.\n7. Markham, SK, and Lee, H. “Product Development and Management Association’s 2012 comparative performance assessment study,” Journal of Product Innovation Management 30 (2013),\nissue 3:408–429.\n8. G. Stevens and J. Burley, “3,000 Raw Ideas Equals 1 Commercial Success!” Research Technology Management 40, no. 3 (1997), pp. 16–27.\n9. Standard & Poor’s Industry Surveys, Pharmaceutical Industry, 2008.\n10. DiMasi, J. A., H. G. Grabowski, and R. W. Hansen, “Innovation in the Pharmaceutical Industry:\nNew Estimates of R&D Costs,” Journal of Health Economics 47 (May 2016):20–33.\nPart One\nIndustry Dynamics of\nTechnological Innovation\nIn this section, we will explore the industry dynamics of technological innovation,\nincluding:\n∙ The sources from which innovation arises, including the roles of individuals,\norganizations, government institutions, and networks.\n∙ The types of innovations and common industry patterns of technological evo-\nlution and diffusion.\n∙ The factors that determine whether industries experience pressure to select a\ndominant design, and what drives which technologies to dominate others.\n∙ The effects of timing of entry, and how firms can identify (and manage) their\nentry options.\nThis section will lay the foundation that we will build upon in Part Two, Formulating Technological Innovation Strategy.\nIndustry Dynamics of Technological Innovation\nPart 1: Industry Dynamics of\nTechnological Innovation\nChapter 2\nSources of\nInnovation\nChapter 3\nTypes and Patterns\nof Innovation\nChapter 4\nStandards Battles,\nModularity, and\nPlatform Competition\nChapter 5\nTiming of Entry\nPart 2: Formulating Technological\nInnovation Strategy\nChapter 6\nDefining the Organization’s\nStrategic Direction\nChapter 7\nChoosing Innovation\nProjects\nChapter 8\nCollaboration\nStrategies\nChapter 9\nProtecting Innovation\nPart 3: Implementing Technological\nInnovation Strategy\nChapter 10\nOrganizing for\nInnovation\nChapter 11\nManaging the New\nProduct Development\nProcess\nFeedback\nChapter 12\nManaging New\nProduct\nDevelopment Teams\nChapter 13\nCrafting a\nDeployment\nStrategy\nChapter Two\nSources of Innovation\nThe Rise of “Clean Meat”a\nIn late 2017, Microsoft founder Bill Gates and a group of other high-powered\ninvestors—who comprise Breakthrough Energy Ventures, such as Amazon’s\nJeff Bezos, Alibaba’s Jack Ma, and Virgin’s Richard Branson—announced their\nintention to fund a San Francisco–based start-up called Memphis Meats with\nan unusual business plan: it grew “clean” meat using stem cells, eliminating the\nneed to breed or slaughter animals. The company had already produced beef,\nchicken, and duck, all grown from cells.b\nThere were many potential advantages of growing meat without animals. First,\ngrowth in the demand for meat was skyrocketing due to both population growth\nand development. When developing countries become wealthier, they increase\ntheir meat consumption. While humanity’s population had doubled since 1960,\nconsumption of animal products had risen fivefold and was still increasing. Many\nscientists and economists had begun to warn of an impending “meat crisis.” Even\nthough plant protein substitutes like soy and pea protein had gained enthusiastic followings, the rate of animal protein consumption had continued to rise. This\nsuggested that meat shortages were inevitable unless radically more efficient\nmethods of production were developed.\nLarge-scale production of animals also had a massively negative effect on\nthe environment. The worldwide production of cattle, for example, resulted\nin a larger emissions of greenhouse gases than the collective effect of the\nworld’s automobiles. Animal production is also extremely water intensive: To\nproduce each chicken sold in a supermarket, for example, requires more than\n1000 gallons of water, and each egg requires 50 gallons. Each gallon of cow’s\nmilk required 900 gallons of water. A study by Oxford University indicated that\nmeat grown from cells would produce up to 96 percent lower greenhouse gas\nemissions, use 45 percent less energy, 99 percent less land, and 96 percent\nless water.c\nScientists also agreed that producing animals for consumption was simply\ninefficient. Estimates suggested, for example, that it required roughly 23 calories worth of inputs to produce one calorie of beef. “Clean” meat promised to\nbring that ratio down to three calories of inputs to produce a calorie of beef—\nmore than seven times greater efficiency. “Clean” meat also would not contain\n15\n16 Part One Industry Dynamics of Technological Innovation\nantibiotics, steroids, or bacteria such as E. coli—it was literally “cleaner,” and that\ntranslated into both greater human health and lower perishability.\nThe Development of Clean Meat\nIn 2004, Jason Matheny, a 29-year-old recent graduate from the John Hopkins\nPublic Health program decided to try to tackle the problems with production of\nanimals for food. Though Matheny was a vegetarian himself, he realized that\nconvincing enough people to adopt a plant-based diet to slow down the meat\ncrisis was unlikely. As he noted, “You can spend your time trying to get people\nto turn their lights out more often, or you can invent a more efficient light bulb\nthat uses far less energy even if you leave it on. What we need is an enormously\nmore efficient way to get meat.”d\nMatheny founded a nonprofit organization called New Harvest that would be\ndedicated to promoting research into growing real meat without animals. He\nsoon discovered that a Dutch scientist, Willem van Eelen was exploring how to\nculture meat from animal cells. Van Eelen had been awarded the first patent on\na cultured meat production method in 1999. However, the eccentric scientist\nhad not had much luck in attracting funding to his project, nor in scaling up his\nproduction. Matheny decided that with a little prodding, the Dutch government\nmight be persuaded to make a serious investment in the development of meatculturing methods. He managed to get a meeting with the Netherland’s minister\nof agriculture where he made his case. Matheny’s efforts paid off: The Dutch\ngovernment agreed to invest two million euros in exploring methods of creating\ncultured meat at three different universities.\nBy 2005, clean meat was starting to gather attention. The journal Tissue Engineering published an article entitled “In Vitro-Cultured Meat Production,” and\nin the same year, the New York Times profiled clean meat in its annual “Ideas\nof the Year.” However, while governments and universities were willing to invest\nin the basic science of creating methods of producing clean meat, they did not\nhave the capabilities and assets needed to bring it to commercial scale. Matheny\nknew that to make clean meat a mainstream reality, he would need to attract the\ninterest of large agribusiness firms.\nMatheny’s initial talks with agribusiness firms did not go well. Though meat\nproducers were open to the idea conceptually, they worried that consumers\nwould balk at clean meat and perceive it as unnatural. Matheny found this criticism frustrating; after all, flying in airplanes, using air conditioning, or eating meat\npumped full of steroids to accelerate its growth were also unnatural.\nProgress was slow. Matheny took a job at the Intelligence Advanced Research\nProjects Activity (IARPA) of the U.S. Federal Government while continuing to run\nNew Harvest on the side. Fortunately, others were also starting to realize the\nurgency of developing alternative meat production methods.\nEnter Sergey Brin of Google\nIn 2009, the foundation of Sergey Brin, cofounder of Google, contacted Matheny\nto learn more about cultured meat technologies. Matheny referred Brin’s\nChapter 2 Sources of Innovation 17\nfoundation to Dr. Mark Post at Maastricht University, one of the leading scientists\nfunded by the Dutch government’s clean meat investment. Post had succeeded\nin growing mouse muscles in vitro and was certain his process could be replicated with the muscles of cows, poultry, and more. As he stated, “It was so clear\nto me that we could do this. The science was there. All we needed was funding to actually prove it, and now here was a chance to get what was needed.”e\nIt took more than a year to work out the details, but in 2011, Brin offered Post\nroughly three quarters of a million dollars to prove his process by making two\ncultured beef burgers, and Post’s team set about meeting the challenge.\nIn early 2013, the moment of truth arrived: Post and his team had enough cultured beef to do a taste test. They fried up a small burger and split it into thirds\nto taste. It tasted like meat. Their burger was 100 percent skeletal muscle and\nthey knew that for commercial production they would need to add fat and connective tissue to more closely replicate the texture of beef, but those would\nbe easy problems to solve after passing this milestone. The press responded\nenthusiastically, and the Washington Post ran an article headlined, “Could a TestTube Burger Save the Planet?”f\nGoing Commercial\nIn 2015, Uma Valeti, a cardiologist at the Mayo Clinic founded his own cultured-­\nmeat research lab at the University of Minnesota. “I’d read about the inefficiency of meat-eating compared to a vegetarian diet, but what bothered me\nmore than the wastefulness was the sheer scale of suffering of the animals.”g\nAs a heart doctor, Valeti also believed that getting people to eat less meat\ncould improve human health: “I knew that poor diets and the unhealthy fats\nand refined carbs that my patients were eating were killing them, but so many\nseemed totally unwilling to eat less or no meat. Some actually told me they’d\nrather live a shorter life than stop eating the meats they loved.” Valeti began\nfantasizing about a best-of-both-worlds alternative—a healthier and kinder\nmeat. As he noted, “The main difference I thought I’d want for this meat I was\nenvisioning was that it’d have to be leaner and more protein-packed than a\ncut of supermarket meat, since there’s a large amount of saturated fat in that\nmeat. . . . Why not have fats that are proven to be better for health and longevity, like omega-3s? We want to be not just like conventional meat but healthier\nthan conventional meat.”h\nValeti was nervous about leaving his successful position as a cardiologist—\nafter all, he had a wife and two children to help support. However, when he sat\ndown to discuss it with his wife (a pediatric eye surgeon), she said, “Look, Uma.\nWe’ve been wanting to do this forever. I don’t ever want us to look back on why\nwe didn’t have the courage to work on an idea that could make this world kinder\nand better for our children and their generation.”i And thus Valeti’s company,\nwhich would later be named Memphis Meats, was born.\nBuilding on Dr. Post’s achievement, Valeti’s team began experimenting with\nways to get just the right texture and taste. After much trial and error, and a growing number of patents, they hosted their first tasting event in December 2015.\nOn the menu: a meatball. This time the giant agribusiness firms took notice.\n18 Part One Industry Dynamics of Technological Innovation\nAt the end of 2016, Tyson Foods, the world’s largest meat producer, announced\nthat it would invest $150 million in a venture capital fund that would develop\nalternative proteins, including meat grown from self-reproducing cells. In\nAugust of 2017, agribusiness giant Cargill announced it was investing in Memphis Meats, and a few months later in early 2018, Tyson Foods also pledged\ninvestment.\nThat first meatball cost $1200; to make cultured meat a commercial reality\nrequired bringing costs down substantially. But analysts were quick to point out\nthat the first iPhone had cost $2.6 billion in R&D—much more than the first cultured meats. Scale and learning curve efficiencies would drive that cost down.\nValeti had faith that the company would soon make cultured meat not only\n­competitive with traditional meat, but more affordable. Growing meat rather than\nwhole animals had, after all, inherent efficiency advantages.\nSome skeptics believed the bigger problem was not production economies,\nbut consumer acceptance: would people be willing to eat meat grown without animals? Sergey Brin, Bill Gates, Jeff Bezos, Jack Ma, and Richard Branson\nwere willing to bet that they would. As Branson stated in 2017, “I believe that in\n30 years or so we will no longer need to kill any animals and that all meat will\neither be clean or plant-based, taste the same and also be much healthier for\neveryone.”j\nDiscussion Questions\n1. What were the potential advantages of developing clean meat? What were\nthe challenges of developing it and bringing it to market?\n2. What kinds of organizations were involved in developing clean meat? What\nwere the different resources that each kind of organization brought to the\ninnovation?\n3. Do you think people will be willing to eat clean meat? Can you think of\nother products or services that faced similar adoption challenges?\na\nAdapted from a NYU teaching case by Paul Shapiro and Melissa Schilling.\nFriedman, Z., “Why Bill Gates and Richard Branson Invested in ‘Clean’ Meat,” Forbes (August 2017).\nc\nTuomisto, H. L., and M. J. de Mattos, “Environmental Impacts of Cultured Meat Production,” Environmental\nScience and Technology 14(2011): 6117–2123.\nd\nShapiro, P. Clean Meat: How Growing Meat without Animals Will Revolutionize Dinner and the World\n(New York: Gallery Books, 2018), 35.\ne\nShapiro, P. Clean Meat: How Growing Meat without Animals Will Revolutionize Dinner and the World\n(New York: Gallery Books, 2018), 60.\nf\n“Could a Test-Tube Burger Save the Planet?” Washington Post, August 5, 2013.\ng\nShapiro, P. Clean Meat: How Growing Meat without Animals Will Revolutionize Dinner and the World\n(New York: Gallery Books, 2018), 113.\nh\nShapiro, P. Clean Meat: How Growing Meat without Animals Will Revolutionize Dinner and the World\n(New York: Gallery Books, 2018), 115.\ni\nShapiro, P. Clean Meat: How Growing Meat without Animals Will Revolutionize Dinner and the World\n(New York: Gallery Books, 2018), 118.\nj\nFriedman, Z., “Why Bill Gates and Richard Branson Invested in ‘Clean’ Meat,” Forbes (August 2017).\nb\nChapter 2 Sources of Innovation 19\nOVERVIEW\ninnovation\nThe practical\nimplementation\nof an idea into\na new device or\nprocess.\nInnovation can arise from many different sources. It can originate with individuals, as in the familiar image of the lone inventor or users who design solutions for\ntheir own needs. Innovation can also come from the research efforts of universities, government laboratories and incubators, or private nonprofit organizations.\nOne primary engine of innovation is firms. Firms are well suited to innovation\nactivities because they typically have greater resources than individuals and a\nmanagement system to marshal those resources toward a collective purpose.\nFirms also face strong incentives to develop differentiating new products and services, which may give them an advantage over nonprofit or government-funded\nentities.\nAn even more important source of innovation, however, does not arise from any\none of these sources, but rather the linkages between them. Networks of innovators\nthat leverage knowledge and other resources from multiple sources are one of the most\npowerful agents of technological advance.1 We can thus think of sources of innovation as composing a complex system wherein any particular innovation may emerge\nprimarily from one or more components of the system or the linkages between them\n(see Figure 2.1).\nIn the sections that follow, we will first consider the role of creativity as the underlying process for the generation of novel and useful ideas. We will then consider how\ncreativity is transformed into innovative outcomes by the separate components of the\ninnovation system (individuals, firms, etc.), and through the linkages between different components (firms’ relationships with their customers, technology transfer from\nuniversities to firms, etc.).\nFIGURE 2.1\nSources of\nInnovation as a\nSystem\nFirms\nIndividuals\nPrivate\nNonprofits\nUniversities\nGovernmentFunded Research\n20 Part One Industry Dynamics of Technological Innovation\nCREATIVITY\nidea\nSomething imagined or pictured\nin the mind.\ncreativity\nThe ability to\nproduce novel\nand useful work.\nInnovation begins with the generation of new ideas. The ability to generate new and\nuseful ideas is termed creativity. Creativity is defined as the ability to produce work\nthat is useful and novel. Novel work must be different from work that has been previously produced and surprising in that it is not simply the next logical step in a series\nof known solutions.2 The degree to which a product is novel is a function both of how\ndifferent it is from prior work (e.g., a minor deviation versus a major leap) and of the\naudience’s prior experiences.3 A product could be novel to the person who made it,\nbut known to most everyone else. In this case, we would call it reinvention. A product\ncould be novel to its immediate audience, yet be well known somewhere else in the\nworld. The most creative works are novel at the individual producer level, the local\naudience level, and the broader societal level.4\nIndividual Creativity\nAn individual’s creative ability is a function of his or her intellectual abilities,\n­knowledge, personality, motivation, and environment.\nThe most important intellectual abilities for creative thinking include intelligence, memory, the ability to look at problems in unconventional ways, the ability\nto analyze which ideas are worth pursuing and which are not, and the ability to\narticulate those ideas to others and convince others that the ideas are worthwhile.\nOne important intellectual ability for creativity is a person’s ability to let their mind\nengage in a visual mental activity termed primary process thinking.5 Because of its\nunstructured nature, primary process thinking can result in combining ideas that are\nnot typically related, leading to what has been termed remote associations or divergent thinking. Sigmund Freud noted that primary process thinking was most likely\nto occur just before sleep or while dozing or daydreaming; others have observed\nthat it might also be common when distracted by physical exercise, music, or other\nactivities. Creative people may make their minds more open to remote associations\nand then mentally sort through these associations, selecting the best for further\nconsideration. Having excellent working memory is useful here too—individuals\nwith excellent working memory may be more likely or more able to search longer\npaths through the network of associations in their mind, enabling them to arrive at a\nconnection between two ideas or facts that seem unexpected or strange to others.6 A\nconnection that appears to be random may not be random at all—it is just difficult\nfor other people to see the association because they are not following as long of a\nchain of associations.\nConsistent with this, studies by professors Mathias Benedek and Aljoscha Neubauer found that highly creative people usually follow the same association paths as\nless creative people—but they do so with such greater speed that they exhaust the\ncommon associations sooner, permitting them to get to less common associations earlier than others would.7 Benedek and Neubauer’s research argues that highly creative\npeople’s speed of association is due to exceptional working memory and executive\ncontrol. In other words, the ability to hold many things in one’s mind simultaneously\nChapter 2 Sources of Innovation 21\nand maneuver them with great facileness enables a person to rapidly explore many\npossible associations.8\nThe impact of knowledge on creativity is somewhat double-edged. If an individual\nhas too little knowledge of a field, he or she is unlikely to understand it well enough\nto contribute meaningfully to it. On the other hand, if an individual knows a field\ntoo well, that person can become trapped in the existing logic and paradigms, preventing him or her from coming up with solutions that require an alternative perspective. Thus, an individual with only a moderate degree of knowledge of a field\nmight be able to produce more creative solutions than an individual with extensive\n­knowledge of the field, and breakthrough innovations are often developed by outsiders to a field.9\nConsider, for example, Elon Musk. Elon Musk developed a city search Web portal called Zip2 in college, then founded an Internet financial payments company that\nmerged with a rival and developed the PayPal financial payment system. Then after\nselling PayPal, Musk decided to found SpaceX to develop reusable rockets, and also\nbecame part of the founding team of Tesla Motors, an electric vehicle company.\nTesla subsequently acquired Solar City (a solar panel company that Elon Musk had\nhelped his cousins create) and diversified into energy storage and more. Musk crosses\nboundaries because he enjoys tackling new, difficult problems. He has been able to be\nsuccessful in a wide range of industries in part because he challenges the traditional\nmodels in those industries.10 For example, SpaceX was able to dramatically decrease\nthe price of rocket components by building them in-house, and Solar City was able to\ndramatically increase solar panel adoption by offering a business model based on leasing that gave customers the option of putting no money down and paying for the panels\nwith part of their energy savings.\nAnother great example is provided by Gavriel Iddan, a guided missile designer\nfor the Israeli military who invented a revolutionary way to allow doctors to see\ninside a patient’s gastrointestinal system. The traditional approach for obtaining\nimages inside the gut is a camera on the end of a long flexible rod. This method is\nquite uncomfortable, and cannot reach large portions of the small intestine, but it\nwas the industry standard for many decades. Most gastroenterologists have invested\nin significant training to use endoscopic tools, and many have also ­purchased\nendoscopic equipment for their clinics. Not surprisingly then, most innovation in\nthis domain has focused on incremental improvements in the rod, cameras, and\nimaging software. Iddan, however, approached the problem of viewing the inside\nof the gut like a guided missile designer—not a gastroenterologist. He did not have\nthe same assumptions about the need to control the camera with a rod, nor to transmit images with a wire. Instead, he invented a capsule (called the PillCam) with\na power source, a light source, and two tiny cameras that the patient can swallow.\nThe patient then goes about her day while the camera pill broadcasts images to a\nvideo pack worn by the patient. Roughly eight hours later, the patient returns to the\ndoctor’s office to have the images read by a software algorithm that can identify\nany locations of bleeding (the camera pill exits naturally). The PillCam has proven\nto be safer and less expensive than traditional endoscopy (the PillCam costs less\nthan $500), and it is dramatically more comfortable. For patients, the camera pill\n22 Part One Industry Dynamics of Technological Innovation\nwas a no brainer; getting doctors to adopt it has been slower because of their existing investment and familiarity with endoscopy. The PillCam is now sold in more\nthan 60 countries, and several companies now offer competing products. The camera pill is a remarkable solution to a difficult problem, and it is easy to see why it\ncame from an outsider, rather than an endoscope producer.11\nOutsiders often face resistance and skepticism. People tend to discount generalists\nand are suspicious of people who engage in activities that seem inconsistent with their\nidentity. Outsiders like Musk, however, bring an advantage that insiders and industry\nveterans often lack. They aren’t trapped by the paradigms and assumptions that have\nlong become calcified in industry veterans, nor do they have the existing investments\nin tools, expertise, or supplier and customer relationships that make change difficult\nand unappealing.\nThe personality trait most often associated with creativity is “openness to\n­experience.”12 Openness to experience reflects an individual’s use of active imagination, aesthetic sensitivity (e.g., the appreciation for art and literature), attentiveness\nto emotion, a preference for variety, and intellectual curiosity. It is assessed by asking\nindividuals to rate their degree of agreement or disagreement with statements such\nas “I have a vivid imagination,” “I enjoy hearing new ideas,” “I have a rich vocabulary,” “I rarely look for deeper meaning in things” (reversed), “I enjoy going to art\nmuseums,” “I avoid philosophical discussions” (reversed), “I enjoy wild flights of\nfantasy,” and more. Individuals who score high on the openness to experience dimension tend to have great intellectual curiosity, are interested in unusual ideas, and are\nwilling to try new things.\nIntrinsic motivation has also been shown to be very important for creativity.13\nThat is, individuals are more likely to be creative if they work on things they are\ngenuinely interested in and enjoy. In fact, several studies have shown that creativity\ncan be undermined by providing extrinsic motivation such as money or awards.14\nThis raises serious questions about the role played by idea collection systems in\norganizations that offer monetary rewards for ideas. On the one hand, such extrinsic rewards could derail intrinsic motivation. On the other hand, if the monetary\nrewards are small, such systems may be primarily serving to invite people to offer\nideas, which is a valuable signal about the culture of the firm. More research is\nneeded in this area to know exactly what kind of solicitation for ideas, if any, is\nmost effective.\nFinally, to fully unleash an individual’s creative potential usually requires a supportive environment with time for the individual to explore their ideas independently,\ntolerance for unorthodox ideas, a structure that is not overly rigid or hierarchical, and\ndecision norms that do not require consensus.15\nOrganizational Creativity\nThe creativity of the organization is a function of creativity of the individuals within the\norganization and a variety of social processes and contextual factors that shape\nthe way those individuals interact and behave.16 An organization’s overall creativity\nlevel is thus not a simple aggregate of the creativity of the individuals it employs. The\norganization’s structure, routines, and incentives could thwart individual creativity or\namplify it.\nChapter 2 Sources of Innovation 23\nintranet\nA private\nnetwork, accessible only to\nauthorized\nindividuals. It is\nlike the Internet\nbut operates only\nwithin (“intra”)\nthe organization.\nThe most familiar method of a company tapping the creativity of its individual\nemployees is the suggestion box. In 1895, John Patterson, founder of National Cash\nRegister (NCR), created the first sanctioned suggestion box program to tap the ideas of\nthe hourly worker.17 The program was considered revolutionary in its time. The originators of adopted ideas were awarded $1. In 1904, employees submitted 7000 ideas, of\nwhich one-third were adopted. Other firms have created more elaborate systems that\nnot only capture employee ideas, but incorporate mechanisms for selecting and implementing those ideas. Google, for example, utilizes an idea management system whereby\nemployees e-mail their ideas for new products and processes to a company-wide database where every employee can view the idea, comment on it, and rate it (for more\non how Google encourages innovation, see the Theory in Action on Inspiring Innovation at Google). Honda of America utilizes an employee-driven idea system (EDIS)\nwhereby employees submit their ideas, and if approved, the employee who submits\nthe idea is responsible for following through on the suggestion, overseeing its progress\nfrom concept to implementation. Honda of America reports that more than 75 percent of all ideas are implemented.18 Bank One, one of the largest holding banks in the\nUnited States, has created an employee idea program called “One Great Idea.” Employees access the company’s idea repository through the company’s intranet. There they\ncan submit their ideas and actively interact and collaborate on the ideas of others.19\nThrough active exchange, the employees can evaluate and refine the ideas, improving\ntheir fit with the diverse needs of the organization’s stakeholders.\nAt Bank of New York Mellon they go a step further—the company holds enterprise-­\nwide innovation competitions where employees form their own teams and compete in\ncoming up with innovative ideas. These ideas are first screened by judges at both the\nregional and business-line level. Then, the best ideas are pitched to senior management in a “Shark Tank” style competition that is webcast around the world. If a senior\nexecutive sees an idea they like, they step forward and say they will fund it and run\nwith it. The competition both helps the company come up with great ideas and sends a\nstrong signal to employees about the importance of innovation.20\nIdea collection systems (such as suggestion boxes) are relatively easy and inexpensive to implement, but are only a first step in unleashing employee creativity.\nToday companies such as Intel, Motorola, 3M, and Hewlett-Packard go to much\ngreater lengths to tap the creative potential embedded in employees, including\ninvesting in creativity training programs. Such programs encourage managers to\ndevelop verbal and nonverbal cues that signal employees that their thinking and\nautonomy are respected. These cues shape the culture of the firm and are often\nmore effective than monetary rewards—in fact, as noted previously, sometimes\nmonetary rewards undermine creativity by encouraging employees to focus on\nextrinsic rather than intrinsic motivation.21 The programs also often incorporate\nexercises that encourage employees to use creative mechanisms such as developing alternative scenarios, using analogies to compare the problem with another\nproblem that shares similar features or structure, and restating the problem in a\nnew way. One product design firm, IDEO, even encourages employees to develop\nmock prototypes of potential new products out of inexpensive materials such as\ncardboard or styrofoam and pretend to use the product, exploring potential design\nfeatures in a tangible and playful manner.\nTheory in Action   Inspiring Innovation at Google\nGoogle is always working on a surprising array of projects, ranging from the completely unexpected (such as\nautonomous self-driving cars and solar energy) to the\nmore mundane (such as e-mail and cloud services).a\nIn pursuit of continuous innovation at every level of\nthe company, Google uses a range of formal and\ninformal mechanisms to encourage its employees to\ninnovate:b\n20 Percent Time: All Google engineers are encouraged\nto spend 20 percent of their time working on their own\nprojects. This was the source of some of Google’s most\nfamous products (e.g., Google Mail, Google News).\nRecognition Awards: Managers were given discretion\nto award employees with “recognition awards” to celebrate their innovative ideas.\nGoogle Founders’ Awards: Teams doing outstanding work could be awarded substantial stock grants.\nSome employees had become millionaires from these\nawards alone.\nAdsense Ideas Contest: Each quarter, the Adsense online\nsales and operations teams reviewed 100 to 200 submissions from employees around the world, and selected\nfinalists to present their ideas at the quarterly contest.\nInnovation Reviews: Formal meetings where managers present ideas originated in their divisions directly to\nfounders Larry Page and Sergey Brin, as well as to CEO\nEric Schmidt.c\na\n Bradbury, D. 2011. Google’s rise and rise. Backbone,\nOct:24–27.\nb\n Groysberg, B., Thomas, D.A. & Wagonfeld, A.B. 2011. Keeping Google “Googley.” Harvard Business School Case\n9:409–039.\nc\n Kirby, J. 2009. How Google really does it. Canadian Business,\n82(18):54–58.\nTRANSLATING CREATIVITY INTO INNOVATION\nInnovation is more than the generation of creative ideas; it is the implementation of\nthose ideas into some new device or process. Innovation requires combining a creative\nidea with resources and expertise that make it possible to embody the creative idea in\na useful form. We will first consider the role of individuals as innovators, including\ninnovation by inventors who specialize in creating new products and processes, and\ninnovation by end users. We then will look at innovation activity that is organized by\nfirms, universities, and government institutions.\nThe Inventor\nThe familiar image of the inventor as an eccentric and doggedly persistent ­scientist\nmay have some basis in cognitive psychology. Analysis of personality traits of\ninventors suggests these individuals are likely to be interested in theoretical and\nabstract thinking, and have an unusual enthusiasm for problem solving. One 10-year\nstudy of inventors concludes that the most successful inventors possess the following characteristics:\n1. They have mastered the basic tools and operations of the field in which they\ninvent, but they have not specialized solely in that field; instead they have pursued\ntwo or three fields simultaneously, permitting them to bring different perspectives\nto each.\n2. They are curious and more interested in problems than solutions.\n24\nTheory in Action   Dean Kamen\nIn January 2001, an Internet news story leaked that\niconoclastic inventor Dean Kamen had devised a fantastic new invention—a device that could affect the way\ncities were built, and even change the world. Shrouded\nin secrecy, the mysterious device, code-named “Ginger”\nand “IT,” became the talk of the technological world\nand the general public, as speculation about the technology grew wilder and wilder. In December of that\nyear, Kamen finally unveiled his invention, the Segway\nHuman Transporter.a Based on an elaborate combination of motors, gyroscopes, and a motion control\nalgorithm, the Segway HT was a self-balancing, twowheeled scooter. Though to many it looked like a toy,\nthe Segway represented a significant advance in technology. John Doerr, the venture capitalist behind Amazon.com and Netscape, predicted it would be bigger\nthan the Internet. Though the Segway did not turn out\nto be a mass market success, its technological achievements were significant. In 2009, General Motors and\nSegway announced that they were developing a twowheeled, two-seat electric vehicle based on the Segway\nthat would be fast, safe, inexpensive, and clean. The car\nwould run on a lithium-ion battery and achieve speeds\nof 35 miles per hour.\nThe Segway was the brainchild of Dean Kamen, an\ninventor with more than 150 U.S. and foreign patents,\nwhose career began in his teenage days of devising\nmechanical gadgets in his parents’ basement.b Kamen\nnever graduated from college, though he has since\nreceived numerous honorary degrees. He is described\nas tireless and eclectic, an entrepreneur with a seemingly boundless enthusiasm for science and technology.\nKamen has received numerous awards for his inventions, including the Kilby award, the Hoover Medal, and\nthe National Medal of Technology. Most of his inventions\nhave been directed at advancing health-care technology. In 1988, he invented the first self-service dialysis\nmachine for people with kidney failure. Kamen had\nrejected the original proposal for the machine brought\nto him by Baxter, one of the world’s largest medical\nequipment manufacturers. To Kamen, the solution was\nnot to come up with a new answer to a known problem,\nbut to instead reformulate the problem: “What if you\ncan find the technology that not only fixes the valves\nbut also makes the whole thing as simple as plugging a\ncassette into a VCR? Why do patients have to continue\nto go to these centers? Can we make a machine that\ncan go in the home, give the patients back their dignity,\nreduce the cost, reduce the trauma?”c The result was\nthe HomeChoice dialysis machine, which won Design\nNews’ 1993 Medical Product of the Year award.\nIn 1999, Kamen’s company, DEKA Research, introduced the IBOT Mobility System, an extremely advanced\nwheelchair incorporating a sophisticated balancing system that enabled users to climb stairs and negotiate\nsand, rocks, and curbs. According to Kamen, the IBOT\n“allowed a disabled person, a person who cannot\nwalk, to basically do all the ordinary things that you\ntake for granted that they can’t do even in a wheelchair, like go up a curb.”d It was the IBOT’s combination of balance and mobility that gave rise to the idea\nof the Segway.\na\n J. Bender, D. Condon, S. Gadkari, G. Shuster, I. Shuster, and\nM. A. Schilling, “Designing a New Form of Mobility: Segway\nHuman Transporter,” New York University teaching case, 2003.\nb\n E. I. Schwartz, “The Inventor’s Play-Ground,” Tech… \nPurchase answer to see full\nattachment

Popular Research Topics in Healthcare

Healthcare is a vast and constantly evolving field, with a wide range of research topics. Some of the most popular research topics in healthcare include:

Chronic diseases: such as diabetes, heart disease, and cancer. Researchers are looking for ways to prevent, diagnose, and treat these conditions.

Mental health: including depression, anxiety, and substance abuse. Researchers are looking for ways to improve treatment and prevent these conditions.

Aging and geriatrics: as the population continues to age, researchers are studying ways to improve the health and well-being of older adults.

Telemedicine: the use of technology, such as teleconferencing, to provide healthcare services remotely.

Personalized medicine: using genetic and other health data to tailor treatments to individual patients.

Infectious diseases: including the study of new and emerging infections, as well as finding ways to prevent and treat existing infections.

Health equity: examining the ways in which social and economic factors contribute to health disparities, and finding ways to improve access to care for all populations.

These are just a few of the many popular research topics in healthcare. As healthcare continues to evolve and change, new research topics will emerge and current topics will become more complex and multifaceted.

Unformatted previewDescription Course Learning Outcomes-Covered Explain of the concepts, models for formulating strategies, defining the organizational strategic directions and crafting a deployment strategy. Reference Source: Textbook:- Schilling M.A (2020), Strategic Management of Technology Innovation (6th Edition) . Mc-Graw Hill Education. Electronic Version: ISBN-13: 978-1260087956 ISBN-10: 1260087956, Printed Version: ISBN-13: 978-1260087956 ISBN-10: 1260087956 Assignment 2 Students are requested to read chapter 9 “Protecting Innovation” from their book Strategic Management of Technological Innovation. Based on the conceptual knowledge and understanding obtained from the readings: - 1 -Select a world-renowned company give a brief introduction and identify the legal protection mechanisms (patents copyright, trademarks & service marks) used by it to safeguard its innovations. (Max 750- Min 500 Words) 2 - What factors do you believe influenced the choice of protection mechanisms used to safeguard its innovations? Do you think the strategy was a good choice? (Max 750 – Min 500 Words) 3- With a thorough research of your selected company identify and explain an incident when trade secrets were more useful than the legal protection measures identified above. (Max 750 – Min 500 Words) Note :- Only reading the textbook will not be enough to score grades or answer the questions appropriately. Do adhere to the word limit strictly, mere one or two sentence answers will not be entertained, they need to be supported with further explanation and facts. It is mandatory to support each answer with at least two scholarly, peer-reviewed journals. Directions: All students are encouraged to use their own words. Use Saudi Electronic University academic writing standards and APA style guidelines. Use proper referencing (APA style) to reference, other styles will not be accepted. Support your submission with course material concepts, principles, and theories from the textbook and at least two scholarly, peer-reviewed journal articles unless the assignment calls for more. It is strongly encouraged that you submit all assignments into the safe assignment Originality Check prior to submitting it to your instructor for grading and review the grading rubric to understand how you will be graded for this assignment. Instructions – PLEASE READ THEM CAREFULLY• The Assignment must be submitted on Blackboard (WORD format only) via allocatedfolder.• Assignments submitted through email will not be accepted.• Students are advised to make their work clear and well presented, marks may bereduced for poor presentation. This includes filling your information on the cover page.• Students must mention question number clearly in their answer.• Late submission will NOT be accepted.• Avoid plagiarism, the work should be in your own words, copying from students orother resources without proper referencing will result in ZERO marks. No exceptions.• All answered must be typed using Times New Roman (size 12, double-spaced) font.No pictures containing text will be accepted and will be considered plagiarism).• Submissions without this cover page will NOT be accepted.Course Learning Outcomes-Covered➢ Explain of the concepts, models for formulating strategies, defining the organizationalstrategic directions and crafting a deployment strategy.Reference Source:Textbook:Schilling M.A (2020),Strategic Management of Technology Innovation (6th Edition). McGraw Hill Education. Electronic Version: ISBN-13: 978-1260087956 ISBN-10:1260087956, Printed Version: ISBN-13: 978-1260087956 ISBN-10: 1260087956Assignment 2Students are requested to read chapter 9 “Protecting Innovation” from their bookStrategic Management of Technological Innovation.Based on the conceptual knowledge and understanding obtained from the readings: 1 -Select a world-renowned company give a brief introduction and identify the legalprotection mechanisms (patents copyright, trademarks & service marks) used by it tosafeguard its innovations. (Max 750- Min 500 Words)2 – What factors do you believe influenced the choice of protection mechanisms used tosafeguard its innovations? Do you think the strategy was a good choice? (Max 750 – Min500 Words)3- With a thorough research of your selected company identify and explain an incidentwhen trade secrets were more useful than the legal protection measures identified above.(Max 750 – Min 500 Words)Note :➢ Only reading the textbook will not be enough to score grades or answer thequestions appropriately.➢ Do adhere to the word limit strictly, mere one or two sentence answers will not beentertained, they need to be supported with further explanation and facts.➢ It is mandatory to support each answer with at least two scholarly, peer-reviewedjournals.Directions:✓ All students are encouraged to use their own words.✓ Use Saudi Electronic University academic writing standards and APA styleguidelines.✓ Use proper referencing (APA style) to reference, other styles will not be accepted.✓ Support your submission with course material concepts, principles, and theories fromthe textbook and at least two scholarly, peer-reviewed journal articles unless theassignment calls for more.✓ It is strongly encouraged that you submit all assignments into the safe assignmentOriginality Check prior to submitting it to your instructor for grading and review thegrading rubric to understand how you will be graded for this assignment.StrategicManagement ofTechnologicalInnovationStrategicManagement ofTechnologicalInnovationSixth EditionMelissa A. SchillingNew York UniversityFirst PagesSTRATEGIC MANAGEMENT OF TECHNOLOGICAL INNOVATIONPublished by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2020 by McGraw-HillEducation. All rights reserved. Printed in the United States of America. No part of this publication may be reproduced ordistributed in any form or by any means, or stored in a database or retrieval system, without the prior written consentof McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission,or broadcast for distance learning.Some ancillaries, including electronic and print components, may not be available to customers outside theUnited States.This book is printed on acid-free paper.1 2 3 4 5 6 7 8 9 LCR 21 20 19ISBN 978-1-260-56579-9MHID 1-260-56579-3Cover Image: ©Shutterstock/iSam iSmileAll credits appearing on page or at the end of the book are considered to be an extension of the copyright page.The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does notindicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee theaccuracy of the information presented at these sites.mheducation.com/higheredsch65793_fm_ise.indd iv\b12/04/18 11:25 AMAbout the AuthorMelissa A. Schilling, Ph.D.Melissa Schilling is the John Herzog family professor of management and organizations at New York University’s Stern School of Business. Professor Schilling teachescourses in strategic management, corporate strategy and technology, and innovation management. Before joining NYU, she was an Assistant Professor at ­Boston­University (1997–2001), and has also served as a Visiting Professor at INSEADand the Bren School of Environmental Science & Management at the University ofCalifornia at Santa Barbara. She has also taught strategy and innovation courses atSiemens ­Corporation, IBM, the Kauffman Foundation Entrepreneurship Fellows­program, Sogang University in Korea, and the Alta Scuola Polytecnica, a joint institution of Politecnico di Milano and Politecnico di Torino.Professor Schilling’s research focuses on technological innovation and knowledge creation. She has studied how technology shocks influence collaboration activity and innovation outcomes, how firms fight technology standards battles, and howfirms utilize collaboration, protection, and timing of entry strategies. She also studies how product designs and organizational structures migrate toward or away frommodularity. Her most recent work focuses on knowledge creation, including howbreadth of knowledge and search influences insight and learning, and how the structure of knowledge networks influences their overall capacity for knowledge creation.Her research in innovation and strategy has appeared in the leading academic journalssuch as ­Academy of Management Journal, Academy of Management Review, Management Science, Organization Science, Strategic Management Journal, and Journalof ­Economics and Management Strategy and Research Policy. She also sits on the editorial review boards of Academy of Management Journal, Academy of ManagementDiscoveries, Organization Science, Strategy Science, and Strategic Organization.She is the author of Quirky: The Remarkable Story of the Traits, Foibles, and Geniusof Breakthrough Innovators Who Changed the World, and she is coauthor of StrategicManagement: An Integrated Approach. Professor Schilling won an NSF CAREERaward in 2003, and Boston University’s Broderick Prize for research in 2000.vPrefaceInnovation is a beautiful thing. It is a force with both aesthetic and pragmatic appeal:It unleashes our creative spirit, opening our minds to hitherto undreamed of possibilities, while accelerating economic growth and providing advances in such crucial humanendeavors as medicine, agriculture, and education. For industrial organizations, the primary engines of innovation in the Western world, innovation provides both exceptionalopportunities and steep challenges. While innovation is a powerful means of competitivedifferentiation, enabling firms to penetrate new markets and achieve higher margins, it isalso a competitive race that must be run with speed, skill, and precision. It is not enoughfor a firm to be innovative—to be successful it must innovate better than its competitors.As scholars and managers have raced to better understand innovation, a wide rangeof work on the topic has emerged and flourished in disciplines such as strategic management, organization theory, economics, marketing, engineering, and sociology.This work has generated many insights about how innovation affects the competitivedynamics of markets, how firms can strategically manage innovation, and how firmscan implement their innovation strategies to maximize their likelihood of success. Agreat benefit of the dispersion of this literature across such diverse domains of studyis that many innovation topics have been examined from different angles. However,this diversity also can pose integration challenges to both instructors and students.This book seeks to integrate this wide body of work into a single coherent strategicframework, attempting to provide coverage that is rigorous, inclusive, and accessible.Organization of the BookThe subject of innovation management is approached here as a strategic process. Theoutline of the book is designed to mirror the strategic management process used inmost strategy textbooks, progressing from assessing the competitive dynamics of thesituation, to strategy formulation, and then to strategy implementation. The first partof the book covers the foundations and implications of the dynamics of innovation,helping managers and future managers better interpret their technological environments and identify meaningful trends. The second part of the book begins the process of crafting the firm’s strategic direction and formulating its innovation strategy,including project selection, collaboration strategies, and strategies for protecting thefirm’s property rights. The third part of the book covers the process of implementinginnovation, including the implications of organization structure on innovation, themanagement of new product development processes, the construction and management of new product development teams, and crafting the firm’s deployment strategy. While the book emphasizes practical applications and examples, it also providessystematic coverage of the existing research and footnotes to guide further reading.Complete Coverage for Both Businessand Engineering StudentsviThis book is designed to be a primary text for courses in the strategic management ofinnovation and new product development. Such courses are frequently taught in bothPreface viibusiness and engineering programs; thus, this book has been written with the needsof business and engineering students in mind. For example, Chapter Six (Defining theOrganization’s Strategic Direction) provides basic strategic analysis tools with whichbusiness students may already be familiar, but which may be unfamiliar to engineering students. Similarly, some of the material in Chapter Eleven (Managing the NewProduct Development Process) on computer-aided design or quality function deployment may be review material for information system students or engineering students,while being new to management students. Though the chapters are designed to havean intuitive order to them, they are also designed to be self-standing so instructors canpick and choose from them “buffet style” if they prefer.New for the Sixth EditionThis sixth edition of the text has been comprehensively revised to ensure that theframeworks and tools are rigorous and comprehensive, the examples are fresh andexciting, and the figures and cases represent the most current information available.Some changes of particular note include:Six New Short CasesThe Rise of “Clean Meat”. The new opening case for Chapter Two is about thedevelopment of “clean meat”—meat grown from animal cells without the animalitself. Traditional meat production methods are extremely resource intensive andproduce large amounts of greenhouse gases. Further, the growing demand for meatindicated an impending “meat crisis” whereby not enough meat could be producedto meet demand. “Clean meat” promised to enable meat production using a tinyfraction of the energy, water, and land used for traditional meat production. Itsproduction would create negligible greenhouse gases, and the meat itself wouldhave no antibiotics or steroids, alleviating some of the health concerns of traditional meat consumption. Furthermore, it would dramatically reduce animal suffering. If successful, it would be one of the largest breakthroughs ever achieved infood production.Innovating in India: The Chotukool Project. Chapter Three opens with a case aboutthe Chotukool, a small, inexpensive, and portable refrigerator developed in India. Inrural India, as many as 90 percent of families could not afford household appliances,did not have reliable access to electricity, and had no means of refrigeration. Godrejand Boyce believed that finding a way to provide refrigeration to this segment of thepopulation offered the promise of both a huge market and making a meaningful difference in people’s quality of life.UberAIR. Chapter Five now opens with a case about UberAIR, Uber’s new serviceto provide air transport on demand. Uber had already become synonymous with­on-demand car transport in most of the Western world; it now believed it coulddevelop the same service for air transport using electric vertical take-off and landingaircraft (eVTOLs). There were a lot of pieces to this puzzle, however. In addition tothe technology of the aircraft, the service would require an extensive network of landing pads, specially trained pilots (at least until autonomous eVTOLs became practical), and dramatically new air traffic control regulations and infrastructure. Was thetime ripe for on-demand air transport, or was UberAIR ahead of its time?viii PrefaceTesla Inc. in 2018. Chapter Six opens with a new case on Tesla, no longer just anelectric vehicle company. This case reviews the rise of Tesla, and then explores thenew businesses Tesla has entered, including solar panel leasing and installation (SolarCity), solar roof production, and energy storage systems (e.g., Powerwall). Why didthe company move into these businesses, and would synergies betweeen them help tomake the company more successful?Where Should We Focus Our Innovation Efforts? An Exercise. Chapter Seven nowopens with an exercise that shows how firms can tease apart the dimensions of valuedriving technological progress in an industry, map the marginal returns to furtherinvestment on each dimension, and prioritize their innovation efforts. Using numerousexamples, the exercise helps managers realize where the breakthrough opportunitiesof the future are likely to be, and where the firm may be currently overspending.Scrums, Sprints, and Burnouts: Agile Development at Cisco Systems. Chapter Elevenopens with a case about Cisco’s adoption of the agile development method now commonly used in software development. The case explains what agile development is,how it differs from other development methods (such as stage-gated methods), andwhen (and why) a firm would choose agile development versus gated development fora particular innovation.Cases, Data, and Examples from around the WorldCareful attention has been paid to ensure that the text is global in its scope. Theopening cases and examples feature companies from China, India, Israel, Japan, The­Netherlands, Kenya, the United States, and more. Wherever possible, statistics used inthe text are based on worldwide data.More Comprehensive Coverage and Focus on Current Innovation TrendsIn response to reviewer suggestions, the new edition now provides an extensivediscussion of modularity and platform competition, crowdsourcing and customer­co-creation, agile development strategies, and more. The suggested readings for eachchapter have also been updated to identify some of the more recent publications thathave gained widespread attention in the topic area of each chapter. Despite these additions, great effort has also been put into ensuring the book remains concise—a featurethat has proven popular with both instructors and students.SupplementsThe teaching package for Strategic Management of Technological Innovation is available online from Connect at connect.mheducation.com and includes:∙\tAn instructor’s manual with suggested class outlines, responses to discussion questions, and more.∙\tComplete PowerPoint slides with lecture outlines and all major figures from thetext. The slides can also be modified by the instructor to customize them to theinstructor’s needs.∙\tA testbank with true/false, multiple choice, and short answer/short essay questions.∙ A suggested list of cases to pair with chapters from the text.Students—study more efficiently, retain moreand achieve better outcomes. Instructors—focuson what you love—teaching.SUCCESSFUL SEMESTERS INCLUDE CONNECTFor InstructorsYou’re in the driver’s seat.Want to build your own course? No problem. Prefer to use our turnkey,prebuilt course? Easy. Want to make changes throughout the semester?Sure. And you’ll save time with Connect’s auto-grading too.65\\%Less TimeGradingThey’ll thank you for it.Adaptive study resources like SmartBook® help yourstudents be better prepared in less time. You cantransform your class time from dull definitions to dynamicdebates. Hear from your peers about the benefits ofConnect at www.mheducation.com/highered/connectMake it simple, make it affordable.Connect makes it easy with seamless integration using any of themajor Learning Management Systems—Blackboard®, Canvas,and D2L, among others—to let you organize your course in oneconvenient location. Give your students access to digital materialsat a discount with our inclusive access program. Ask yourMcGraw-Hill representative for more information.©Hill Street Studios/Tobin Rogers/Blend Images LLCSolutions for your challenges.A product isn’t a solution. Real solutions are affordable,reliable, and come with training and ongoing supportwhen you need it and how you want it. Our CustomerExperience Group can also help you troubleshoottech problems—although Connect’s 99\\% uptimemeans you might not need to call them. See foryourself atFor StudentsEffective, efficient studying.Connect helps you be more productive with yourstudy time and get better grades using tools likeSmartBook, which highlights key concepts and createsa personalized study plan. Connect sets you up forsuccess, so you walk into class with confidence andwalk out with better grades.©Shutterstock/wavebreakmediaI really liked this app it“Study anytime, anywhere.made it easy to study when—Download the free ReadAnywhere app and access youronline eBook when it’s convenient, even if you’re offline.And since the app automatically syncs with your eBook inConnect, all of your notes are available every time you openit. Find out more at www.mheducation.com/readanywhereyou don’t have your textbook in front of you.”- Jordan Cunningham,Eastern Washington UniversityNo surprises.The Connect Calendar and Reports toolskeep you on track with the work you needto get done and your assignment scores.Life gets busy; Connect tools help youkeep learning through it all.1314Chapter 12 QuizChapter 11 QuizChapter 13 Evidence of EvolutionChapter 11 DNA TechnologyChapter 7 QuizChapter 7 DNA Structure and Gene…and 7 more…Learning for everyone.McGraw-Hill works directly with Accessibility ServicesDepartments and faculty to meet the learning needs of allstudents. Please contact your Accessibility Services officeand ask them to email accessibility@mheducation.com, orvisit www.mheducation.com/about/accessibility.html formore information.AcknowledgmentsThis book arose out of my research and teaching on technological innovation andnew product development over the last decade; however, it has been anything but alone endeavor. I owe much of the original inspiration of the book to Charles Hill, whohelped to ignite my initial interest in innovation, guided me in my research agenda,and ultimately encouraged me to write this book. I am also very grateful to colleaguesand friends such as Rajshree Agarwal, Juan Alcacer, Rick Alden, William Baumol,Bruno Braga, Gino Cattanni, Tom Davis, Sinziana Dorobantu, Gary Dushnitsky,Douglas Fulop, Raghu Garud, Deepak Hegde, Hla Lifshitz, Tammy Madsen, RodolfoMartinez, Goncalo Pacheco D’Almeida, Joost Rietveld, Paul Shapiro, Jaspal Singh,Deepak Somaya, Bill Starbuck, Christopher Tucci, and Andy Zynga for their suggestions, insights, and encouragement. I am grateful to director Mike Ablassmeir andmarketing manager Lisa Granger. I am also thankful to my editors, Laura Hurst Spelland Diana Murphy, who have been so supportive and made this book possible, and tothe many reviewers whose suggestions have dramatically improved the book:Joan AdamsBaruch Business School(City University of New York)Shahzad AnsariErasmus UniversityDeborah DoughertyRutgers UniversityCathy A. EnzCornell UniversityRajaram B. BaligaWake Forest UniversityRobert FinklesteinUniversity of Maryland–UniversityCollegeSandy BeckerRutgers Business SchoolSandra FinklesteinClarkson University School of BusinessDavid BerkowitzUniversity of Alabama in HuntsvilleJeffrey L. FurmanBoston UniversityJohn BersVanderbilt UniversityCheryl GaimonGeorgia Institute of TechnologyPaul BierlyJames Madison UniversityElie GeislerIllinois Institute of TechnologyPaul CheneyUniversity of Central FloridaSanjay GoelUniversity of Minnesota in DuluthPete DaileyMarshall UniversityAndrew HargadonUniversity of California, DavisRobert DeFillippiSuffolk UniversitySteven HarperJames Madison Universityxixii AcknowledgmentsDonald E. HatfieldVirginia Polytechnic Institute and StateUniversityGlenn HoetkerUniversity of IllinoisSanjay JainUniversity of Wisconsin–MadisonTheodore KhouryOregon State UniversityRajiv KohliCollege of William and MaryAija LeiponenCornell UniversityVince LutheranUniversity of NorthCarolina—WilmingtonSteve MarkhamNorth Carolina State UniversitySteven C. MichaelUniversity of IllinoisMichael MinoClemson UniversityRobert NashVanderbilt UniversityAnthony PaoniNorthwestern UniversityJohannes M. PenningsUniversity of PennsylvaniaRaja RoyTulane UniversityMukesh SrivastavaUniversity of Mary WashingtonLinda F. TegardenVirginia TechOya TukelCleveland State UniversityAnthony WarrenThe Pennsylvania State UniversityI am also very grateful to the many students of the Technological Innovation andNew Product Development courses I have taught at New York University, INSEAD,Boston University, and University of California at Santa Barbara. Not only did thesestudents read, challenge, and help improve many earlier drafts of the work, but theyalso contributed numerous examples that have made the text far richer than it wouldhave otherwise been. I thank them wholeheartedly for their patience and generosity.Melissa A. SchillingBrief ContentsPreface   vi1Introduction   1PART ONEIndustry Dynamics of Technological Innovation   132Sources of Innovation   153Types and Patterns of Innovation   434Standards Battles, Modularity, and Platform Competition   675Timing of Entry   95PART TWOFormulating Technological Innovation Strategy   1136Defining the Organization’s Strategic Direction   1157Choosing Innovation Projects   1418Collaboration Strategies   1679Protecting Innovation   197PART THREEImplementing Technological Innovation Strategy   22310Organizing for Innovation   22511Managing the New Product Development Process   24912Managing New Product Development Teams   27713Crafting a Deployment Strategy   297INDEX   327xiiiContentsChapter 1Introduction   1The Importance of TechnologicalInnovation   1The Impact of Technological Innovationon Society   2Innovation by Industry: The Importance ofStrategy   4The Innovation Funnel   4The Strategic Management of TechnologicalInnovation   6Summary of Chapter   9Discussion Questions   10Suggested Further Reading   10Endnotes   10PART ONEINDUSTRY DYNAMICSOF TECHNOLOGICALINNOVATION   13Chapter 2Sources of Innovation   15The Rise of “Clean Meat”   15Overview   19Creativity   20Individual Creativity   20Organizational Creativity   22Translating Creativity Into Innovation   24The Inventor   24Innovation by Users   26Research and Development by Firms   27Firm Linkages with Customers, Suppliers,Competitors, and Complementors   28xivUniversities and Government-FundedResearch   30Private Nonprofit Organizations   32Innovation in Collaborative Networks   32Technology Clusters   33Technological Spillovers   36Summary of Chapter   37Discussion Questions   38Suggested Further Reading   38Endnotes   39Chapter 3Types and Patterns of Innovation   43Innovating in India: The Chotukool Project   43Overview   46Types of Innovation   46Product Innovation versus ProcessInnovation   46Radical Innovation versus IncrementalInnovation   47Competence-Enhancing Innovation versusCompetence-Destroying Innovation   48Architectural Innovation versus ComponentInnovation   49Using the Dimensions   50Technology S-Curves   50S-Curves in Technological Improvement   50S-Curves in Technology Diffusion   53S-Curves as a Prescriptive Tool   54Limitations of S-Curve Model as a PrescriptiveTool   55Technology Cycles   56Summary of Chapter   62Discussion Questions   63Suggested Further Reading   63Endnotes   64Contents xvChapter 4Standards Battles, Modularity,and Platform Competition   67A Battle for Dominance in MobilePayments   67Overview   71Why Dominant Designs Are Selected   71Learning Effects   72Network Externalities   73Government Regulation   76The Result: Winner-Take-All Markets   76Multiple Dimensions of Value   77A Technology’s Stand-Alone Value   78Network Externality Value   78Competing for Design Dominancein Markets with Network Externalities   83Modularity and Platform Competition   87Modularity   87Platform Ecosystems   89Summary of Chapter   91Discussion Questions   92Suggested Further Reading   92Endnotes   93Chapter 5Timing of Entry   95UberAIR   95Overview   98First-Mover Advantages   98Brand Loyalty and TechnologicalLeadership   98Preemption of Scarce Assets   99Exploiting Buyer Switching Costs   99Reaping Increasing Returns Advantages   100First-Mover Disadvantages   100Research and Development Expenses   101Undeveloped Supply and DistributionChannels   101Immature Enabling Technologies andComplements   101Uncertainty of Customer Requirements   102Factors Influencing Optimal Timing ofEntry   104Strategies to Improve Timing Options   108Summary of Chapter   108Discussion Questions   109Suggested Further Reading   109Endnotes   110PART TWOFORMULATING TECHNOLOGICALINNOVATION STRATEGY   113Chapter 6Defining the Organization’s StrategicDirection   115Tesla, Inc. in 2018   115Overview   123Assessing the Firm’s CurrentPosition   123External Analysis   123Internal Analysis   127Identifying Core Competencies and DynamicCapabilities   131Core Competencies   131The Risk of Core Rigidities   132Dynamic Capabilities   133Strategic Intent   133Summary of Chapter   137Discussion Questions   138Suggested Further Reading   139Endnotes   139Chapter 7Choosing Innovation Projects   141Where Should We Focus Our InnovationEfforts? An Exercise   141Overview   146The Development Budget   146Quantitative Methods For ChoosingProjects   149Discounted Cash Flow Methods   149Real Options   152Disadvantages of QuantitativeMethods   154xvi ContentsQualitative Methods for ChoosingProjects   154Screening Questions   155The Aggregate Project Planning Framework   157Q-Sort   159Combining Quantitative and QualitativeInformation   159Conjoint Analysis   159Data Envelopment Analysis   161Summary of Chapter   163Discussion Questions   163Suggested Further Reading   164Endnotes   164Chapter 8Collaboration Strategies   167Ending HIV? Sangamo Therapeutics and GeneEditing   167Overview   175Reasons for Going Solo   1751. Availability of Capabilities   1762. Protecting Proprietary Technologies   1763. Controlling Technology Developmentand Use   1764. Building and Renewing Capabilities   177Advantages of Collaborating   1771. Acquiring Capabilities and ResourcesQuickly   1772. Increasing Flexibility   1783. Learning from Partners   1784. Resource and Risk Pooling   1785. Building a Coalition around a SharedStandard   178Types of Collaborative Arrangements   178Strategic Alliances   179Joint Ventures   181Licensing   182Outsourcing   183Collective Research Organizations   184Choosing a Mode of Collaboration   184Choosing and Monitoring Partners   187Partner Selection   187Partner Monitoring and Governance   191Summary of Chapter   192Discussion Questions   193Suggested Further Reading   193Endnotes   194Chapter 9Protecting Innovation   197The Digital Music DistributionRevolution   197Overview   201Appropriability   202Patents, Trademarks, and Copyrights   202Patents   203Trademarks and Service Marks   207Copyright   208Trade Secrets   210The Effectiveness and Use of ProtectionMechanisms   211Wholly Proprietary Systems versus Wholly OpenSystems   212Advantages of Protection   213Advantages of Diffusion   215Summary of Chapter   218Discussion Questions   219Suggested Further Reading   219Endnotes   220PART THREEIMPLEMENTING TECHNOLOGICALINNOVATION STRATEGY   223Chapter 10Organizing for Innovation   225Organizing for Innovation at Google   225Overview   227Size and Structural Dimensions of theFirm   228Size: Is Bigger Better?   228Structural Dimensions of the Firm   230Centralization   230Formalization and Standardization   231Mechanistic versus Organic Structures   232Size versus Structure   234The Ambidextrous Organization: The Best of BothWorlds?   234Contents xviiModularity and “Loosely Coupled”Organizations   236Modular Products   236Loosely Coupled OrganizationalStructures   237Managing Innovation Across Borders   240Summary of Chapter   243Discussion Questions   244Suggested Further Reading   244Endnotes   245Chapter 11Managing the New Product DevelopmentProcess   249Scrums, Sprints, and Burnouts: AgileDevelopment at Cisco Systems   249Overview   252Objectives of the New Product DevelopmentProcess   252Maximizing Fit with CustomerRequirements   252Minimizing Development Cycle Time   253Controlling Development Costs   254Sequential versus Partly ParallelDevelopment Processes   254Project Champions   257Risks of Championing   257Involving Customers and Suppliers in theDevelopment Process   259Involving Customers   259Involving Suppliers   260Crowdsourcing   260Tools for Improving the New ProductDevelopment Process   262Stage-Gate Processes   262Quality Function Deployment (QFD)—The Houseof Quality   265Design for Manufacturing   267Failure Modes and Effects Analysis   267Computer-Aided Design/Computer-AidedEngineering/Computer-Aided Manufacturing   268Tools for Measuring New Product DevelopmentPerformance   269New Product Development Process Metrics   271Overall Innovation Performance   271Summary of Chapter   271Discussion Questions   272Suggested Further Reading   272Endnotes   273Chapter 12Managing New Product DevelopmentTeams   277Innovation Teams at the Walt DisneyCompany   277Overview   279Constructing New Product DevelopmentTeams   280Team Size   280Team Composition   280The Structure of New Product DevelopmentTeams   285Functional Teams   285Lightweight Teams   286Heavyweight Teams   286Autonomous Teams   286The Management of New ProductDevelopment Teams   288Team Leadership   288Team Administration   288Managing Virtual Teams   289Summary of Chapter   292Discussion Questions   292Suggested Further Reading   293Endnotes   293Chapter 13Crafting a Deployment Strategy   297Deployment Tactics in the Global Video GameIndustry   297Overview   306Launch Timing   306Strategic Launch Timing   306Optimizing Cash Flow versus EmbracingCannibalization   307Licensing and Compatibility   308Pricing   310xviii ContentsDistribution   312Selling Direct versus Using Intermediaries   312Strategies for Accelerating Distribution   314Marketing   316Major Marketing Methods   316Tailoring the Marketing Plan to IntendedAdopters   318Using Marketing to Shape Perceptions andExpectations   320Summary of Chapter   323Discussion Questions   324Suggested Further Reading   324Endnotes   325Index   327Chapter OneIntroductionTHE IMPORTANCE OF TECHNOLOGICAL INNOVATIONtechnologicalinnovationThe act of­introducing anew device,method, ormaterial forapplication tocommercialor practicalobjectives.In many industries, technological innovation is now the most important driver ofcompetitive success. Firms in a wide range of industries rely on products developedwithin the past five years for almost one-third (or more) of their sales and profits.For example, at Johnson & Johnson, products developed within the last five yearsaccount for over 30 percent of sales, and sales from products developed within the pastfive years at 3M have hit as high as 45 percent in recent years.The increasing importance of innovation is due in part to the globalization ofmarkets. Foreign competition has put pressure on firms to continuously innovatein order to produce differentiated products and services. Introducing new productshelps firms protect their margins, while investing in process innovation helps firmslower their costs. Advances in information technology also have played a role inspeeding the pace of innovation. Computer-aided design and computer-aided manufacturing have made it easier and faster for firms to design and produce new products, while flexible manufacturing technologies have made shorter production runseconomical and have reduced the importance of production economies of scale.1These technologies help firms develop and produce more product variants thatclosely meet the needs of narrowly defined customer groups, thus achieving differentiation from competitors. For example, in 2018, Toyota offered 22 differentpassenger vehicle lines under the Toyota brand (e.g., Camry, Prius, Highlander, andTundra). Within each of the vehicle lines, Toyota also offered several different models (e.g., Camry L, Camry LE, Camry SE, Camry Hybrid SE, etc.) with differentfeatures and at different price points. In total, Toyota offered 193 car models ranging in price from $15,635 (for the Yaris ­three-door liftback) to $84,315 (for theLand Cruiser), and seating anywhere from three passengers (e.g., Tacoma RegularCab truck) to eight passengers (Sienna Minivan). On top of this, Toyota also produced a range of luxury vehicles under its Lexus brand. Similarly, in 2018 Samsungproduced more than 30 unique smartphones. Companies can use broad portfoliosof product models to help ensure they can penetrate almost every conceivable market niche. While producing multiple product variations used to be expensive and12 Chapter 1 Introductiontime-consuming, flexible manufacturing technologies now enable firms to seamlessly transition from producing one product model to the next, adjusting productionschedules with real-time information on demand. Firms further reduce productioncosts by using common components in many of the models.As firms such as Toyota, Samsung, and others adopt these new technologiesand increase their pace of innovation, they raise the bar for competitors, triggeringan industry-wide shift to shortened development cycles and more rapid new product introductions. The net results are greater market segmentation and rapid productobsolescence.2 Product life cycles (the time between a product’s introduction andits withdrawal from the market or replacement by a next-generation product) havebecome as short as 4 to 12 months for software, 12 to 24 months for computer hardware and consumer electronics, and 18 to 36 months for large home appliances.3This spurs firms to focus increasingly on innovation as a strategic imperative—afirm that does not innovate quickly finds its margins diminishing as its productsbecome obsolete.THE IMPACT OF TECHNOLOGICAL INNOVATION ON SOCIETYgross­domesticproduct (GDP)The total annualoutput of aneconomy asmeasured by itsfinal purchaseprice.If the push for innovation has raised the competitive bar for industries, arguably making success just that much more complicated for organizations, its net effect on societyis more clearly positive. Innovation enables a wider range of goods and services to bedelivered to people worldwide. It has made the production of food and other necessities more efficient, yielded medical treatments that improve health conditions, andenabled people to travel to and communicate with almost every part of the world. Toget a real sense of the magnitude of the effect of technological innovation on society,look at Figure 1.1, which shows a timeline of some of the most important technological innovations developed over the last 200 years. Imagine how different life would bewithout these innovations!The aggregate impact of technological innovation can be observed by looking atgross domestic product (GDP). The gross domestic product of an economy is itstotal annual output, measured by final purchase price. Figure 1.2 shows the averageGDP per capita (i.e., GDP divided by the population) for the world from 1980 to2016. The figures have been converted into U.S. dollars and adjusted for inflation.As shown in the figure, the average world GDP per capita has risen steadily since1980. In a series of studies of economic growth conducted at the National Bureau ofEconomic Research, economists showed that the historic rate of economic growthin GDP could not be accounted for entirely by growth in labor and capital inputs.Economist Robert Merton Solow argued that this unaccounted-for residual growthrepresented technological change: Technological innovation increased the amount ofoutput achievable from a given quantity of labor and capital. This explanation wasnot immediately accepted; many researchers attempted to explain the residual awayin terms of measurement error, inaccurate price deflation, or labor improvement.Chapter 1 Introduction 3FIGURE 1.1Timelineof Some ofthe MostImportantTechnologicalInnovationsin the Last200 YearsexternalitiesCosts (or benefits)that are borne(or reaped) byindividualsother than thoseresponsiblefor creatingthem. Thus, if abusiness emitspollutants in acommunity, itimposes a negative externalityon the community members;if a businessbuilds a park ina community, itcreates a positive externalityfor communitymembers.1800 -1800—Electric battery1804—Steam locomotive1807—Internal combustion engine1809—Telegraph1817—Bicycle1820 -1821—Dynamo1824—Braille writing system1828—Hot blast furnace1831—Electric generator1836—Five-shot revolver1840 -1841—Bunsen battery (voltaic cell)1842—Sulfuric ether-based anesthesia1846—Hydraulic crane1850—Petroleum refining1856—Aniline dyes1860 -1862—Gatling gun1867—Typewriter1876—Telephone1877—Phonograph1878—Incandescent lightbulb1880 -1885—Light steel skyscrapers1886—Internal combustion automobile1887—Pneumatic tire1892—Electric stove1895—X-ray machine1900 -1902—Air conditioner (electric)1903—Wright biplane1906—Electric vacuum cleaner1910—Electric washing machine1914—Rocket1920 -1921—Insulin (extracted)1927—Television1928—Penicillin1936—First programmable computer1939—Atom fission1940 -1942—Aqua lung1943—Nuclear reactor1947—Transistor1957—Satellite1958—Integrated circuit1960 -1967—Portable handheld calculator1969—ARPANET (precursor to Internet)1971—Microprocessor1973—Mobile (portable cellular) phone1976—Supercomputer1980 -1981—Space shuttle (reusable)1987—Disposable contact lenses1989—High-definition television1990—World Wide Web protocol1996—Wireless Internet2000 -2003—Map of human genomeBut in each case the additional variables were unable to eliminatethis residual growth component.A ­consensus gradually emergedthat the residual did in fact capture technological change. Solowreceived a Nobel Prize for his workin 1981, and the residual becameknown as the Solow Residual.4While GDP has its shortcomingsas a measure of standard of living,it does relate very directly to theamount of goods consumers canpurchase. Thus, to the extent thatgoods improve quality of life, wecan ascribe some beneficial impactof technological innovation.Sometimes technological innovation results in negative ­externalities.Production technologies may ­createpollution that is harmful to thesurrounding communities; agricultural and fishing technologiescan result in erosion, eliminationof natural habitats, and depletion ofocean stocks; medical technologiescan result in unanticipated consequences such as antibiotic-resistantstrains of bacteria or moral ­dilemmasregarding the use of genetic modification. However, technology is, inits purest essence,­ knowledge—­knowledge to solve our problemsand pursue our goals.5 Technological innovation is thus the creationof new knowledge that is appliedto practical problems. Sometimesthis knowledge is applied to problems hastily, without full consideration of the consequences andalternatives, but overall it willprobably serve us better to havemore knowledge than less.4 Chapter 1 IntroductionFIGURE 1.2Gross­DomesticProduct perCapita, 1989–2016 (in Real2010 $USBillions)90,000Source: USDA Economic Research Service,www.ers.usda.gov,accessed April 16th,2018.50,00080,00070,00060,00040,00030,00020,00010,0000020022004200620082010201220142016982096199419921990198819861984198219191980–INNOVATION BY INDUSTRY: THE IMPORTANCE OF STRATEGYAs will be shown in Chapter Two, the majority of effort and money invested in technological innovation comes from industrial firms. However, in the frenetic race toinnovate, many firms charge headlong into new product development without clearstrategies or well-developed processes for choosing and managing projects. Such firmsoften initiate more projects than they can effectively support, choose projects that area poor fit with the firm’s resources and objectives, and suffer long development cyclesand high project failure rates as a consequence (see the accompanying Research Brieffor a recent study of the length of new product development cycles). While innovation is popularly depicted as a freewheeling process that is unconstrained by rules andplans, study after study has revealed that successful innovators have clearly definedinnovation strategies and management processes.6The Innovation FunnelMost innovative ideas do not become successful new products. Many studies suggestthat only one out of several thousand ideas results in a successful new product: Manyprojects do not result in technically feasible products and, of those that do, many failto earn a commercial return. According to a 2012 study by the Product Developmentand Management Association, only about one in nine projects that are initiated is successful, and of those that make it to the point of being launched to the market, onlyabout half earn a profit.7 Furthermore, many ideas are sifted through and abandonedbefore a project is even formally initiated. According to one study that combined datafrom prior studies of innovation success rates with data on patents, venture capitalChapter 1 Introduction 5Research Brief   How Long Does New ProductDevelopment Take?aIn a large-scale survey administered by the Product Development and Management Association(PDMA), researchers examined the length of time ittook firms to develop a new product from initial concept to market introduction. The study divided newproduct development projects into categories representing their degree of innovativeness: “radical”projects, “more innovative” projects, and “incremental” projects. On average, incremental projects tookonly 33 weeks from concept to market introduction.More innovative projects took significantly longer,clocking in at 57 weeks. The development of radicalproducts or technologies took the longest, averaging82 weeks. The study also found that on average, formore innovative and radical projects, firms reportedsignificantly shorter cycle times than those reportedin the previous PDMA surveys conducted in 1995and 2004.a Adapted from Markham, S. K., and H. Lee, “Product Development and Management Association’s 2012 Comparative Performance Assessment Study,” Journal of Product­Innovation Management 30, no. 3 (2013): 408–29.funding, and surveys, it takes about 3000 raw ideas to produce one significantly newand successful commercial product.8 The pharmaceutical industry demonstrates thiswell—only one out of every 5000 compounds makes it to the pharmacist’s shelf, andonly one-third of those will be successful enough to recoup their R&D costs.9 Furthermore, most studies indicate that it costs at least $1.4 billion and a decade of research tobring a new Food and Drug Administration (FDA)–approved pharmaceutical productto market!10 The innovation process is thus often conceived of as a funnel, with manypotential new product ideas going in the wide end, but very few making it through thedevelopment process (see Figure 1.3).FIGURE 1.3The New Product Development Funnel inPharmaceuticals5000Compounds125LeadsDiscovery & Preclinical3–6 years2–3 drugs testedClinical Trials6–7 years1 drugApproval½–2 yearsRx6 Chapter 1 IntroductionThe Strategic Management of Technological InnovationImproving a firm’s innovation success rate requires a well-crafted strategy. A firm’sinnovation projects should align with its resources and objectives, leveraging its corecompetencies and helping it achieve its strategic intent. A firm’s organizational structure and control systems should encourage the generation of innovative ideas whilealso ensuring efficient implementation. A firm’s new product development processshould maximize the likelihood of projects being both technically and commerciallysuccessful. To achieve these things, a firm needs (a) an in-depth understanding of thedynamics of innovation, (b) a well-crafted innovation strategy, and (c) well-designedprocesses for implementing the innovation strategy. We will cover each of these in turn(see Figure 1.4).In Part One, we will cover the foundations of technological innovation, gaining anin-depth understanding of how and why innovation occurs in an industry, and whysome innovations rise to dominate others. First, we will look at the sources of innovation in Chapter Two. We will address questions such as: Where do great ideas comefrom? How can firms harness the power of individual creativity? What role do customers, government organizations, universities, and alliance networks play in creatinginnovation? In this chapter, we will first explore the role of creativity in the generationof novel and useful ideas. We then look at various sources of innovation, includingthe role of individual inventors, firms, publicly sponsored research, and collaborativenetworks.In Chapter Three, we will review models of types of innovation (such as ­radical­versus incremental and architectural versus modular) and patterns of innovation(including s-curves of technology performance and diffusion, and technology cycles).We will address questions such as: Why are some innovations much harder to createand implement than others? Why do innovations often diffuse slowly even when theyappear to offer a great advantage? What factors influence the rate at which a technology tends to improve over time? Familiarity with these types and patterns of innovationwill help us distinguish how one project is different from another and the underlyingfactors that shape the project’s likelihood of technical or commercial success.In Chapter Four, we will turn to the particularly interesting dynamics that emergein industries characterized by network externalities and other sources of increasing returns that can lead to standards battles and winner-take-all markets. We willaddress questions such as: Why do some industries choose a single dominant standard rather than enabling multiple standards to coexist? What makes one technological innovation rise to dominate all others, even when other seemingly superiortechnologies are offered? How can a firm avoid being locked out? Is there anythinga firm can do to influence the likelihood of its technology becoming the dominantdesign? When are platform ecosystems likely to displace other forms of competitionin an industry?In Chapter Five, we will discuss the impact of entry timing, including first-moveradvantages, first-mover disadvantages, and the factors that will determine the firm’soptimal entry strategy. This chapter will address such questions as: What are the advantages and disadvantages of being first to market, early but not first, and late? Whatdetermines the optimal timing of entry for a new innovation? This chapter reveals anumber of consistent patterns in how timing of entry impacts innovation success, andChapter 1 Introduction 7FIGURE 1.4The Strategic Management of Technological InnovationPart 1: Industry Dynamics ofTechnological InnovationChapter 2Sources ofInnovationChapter 3Types and Patternsof InnovationChapter 4Standards Battles,Modularity, andPlatform CompetitionChapter 5Timing of EntryPart 2: Formulating TechnologicalInnovation StrategyChapter 6Defining the Organization’sStrategic DirectionChapter 7Choosing InnovationProjectsChapter 8CollaborationStrategiesChapter 9Protecting InnovationPart 3: Implementing TechnologicalInnovation StrategyChapter 10Organizing forInnovationChapter 11Managing the NewProduct DevelopmentProcessFeedbackChapter 12Managing NewProductDevelopment TeamsChapter 13Crafting aDeploymentStrategy8 Chapter 1 Introductionit outlines what factors will influence a firm’s optimal timing of entry, thus beginningthe transition from understanding the dynamics of technological innovation to formulating technology strategy.In Part Two, we will turn to formulating technological innovation strategy.­Chapter Six reviews the basic strategic analysis tools managers can use to assess thefirm’s current position and define its strategic direction for the future. This chapterwill address such questions as: What are the firm’s sources of sustainable competitiveadvantage? Where in the firm’s value chain do its strengths and weaknesses lie? Whatare the firm’s core competencies, and how should it leverage and build upon them?What is the firm’s strategic intent—that is, where does the firm want to be 10 yearsfrom now? Only after the firm has thoroughly appraised where it is currently can itformulate a coherent technological innovation strategy for the future.In Chapter Seven, we will examine a variety of methods of choosing innovationprojects. These include quantitative methods such as discounted cash flow and optionsvaluation techniques, qualitative methods such as screening questions and balancingthe research and development portfolio, as well as methods that combine qualitativeand quantitative approaches such as conjoint analysis and data envelopment analysis.Each of these methods has its advantages and disadvantages, leading many firms touse a multiple-method approach to choosing innovation projects.In Chapter Eight, we will examine collaboration strategies for innovation. Thischapter addresses questions such as: Should the firm partner on a particular project orgo solo? How does the firm decide which activities to do in-house and which to accessthrough collaborative arrangements? If the firm chooses to work with a partner, howshould the partnership be structured? How does the firm choose and monitor partners? We will begin by looking at the reasons a firm might choose to go solo versus­working with a partner. We then will look at the pros and cons of various partnering­methods, including joint ventures, alliances, licensing, outsourcing, and participating in ­collaborative research organizations. The chapter also reviews the factors thatshould influence partner selection and monitoring.In Chapter Nine, we will address the options the firm has for appropriating thereturns to its innovation efforts. We will look at the mechanics of patents, copyright,trademarks, and trade secrets. We will also address such questions as: Are there evertimes when it would benefit the firm to not protect its technological innovation sovigorously? How does a firm decide between a wholly proprietary, wholly open, orpartially open strategy for protecting its innovation? When will open strategies haveadvantages over wholly proprietary strategies? This chapter examines the range ofprotection options available to the firm, and the complex series of trade-offs a firmmust consider in its protection strategy.In Part Three, we will turn to implementing the technological innovation strategy.This begins in Chapter Ten with an examination of how the organization’s size andstructure influence its overall rate of innovativeness. The chapter addresses such questions as: Do bigger firms outperform smaller firms at innovation? How do formalization, standardization, and centralization impact the likelihood of generating innovativeideas and the organization’s ability to implement those ideas quickly and efficiently?Is it possible to achieve creativity and flexibility at the same time as efficiency andreliability? How do multinational firms decide where to perform their developmentChapter 1 Introduction 9activities? How do multinational firms coordinate their development activities towarda common goal when the activities occur in multiple countries? This chapter examineshow organizations can balance the benefits and trade-offs of flexibility, economies ofscale, standardization, centralization, and tapping local market knowledge.In Chapter Eleven, we will review a series of “best practices” that have been identified in managing the new product development process. This includes such questionsas: Should new product development processes be performed sequentially or in parallel? What are the advantages and disadvantages of using project champions? Whatare the benefits and risks of involving customers and/or suppliers in the developmentprocess? What tools can the firm use to improve the effectiveness and efficiency of itsnew product development processes? How does the firm assess whether its new product development process is successful? This chapter provides an extensive review ofmethods that have been developed to improve the management of new product development projects and to measure their performance.Chapter Twelve builds on the previous chapter by illuminating how team composition and structure will influence project outcomes. This chapter addresses questionssuch as: How big should teams be? What are the advantages and disadvantages ofchoosing highly diverse team members? Do teams need to be colocated? When shouldteams be full time and/or permanent? What type of team leader and management practices should be used for the team? This chapter provides detailed guidelines for constructing new product development teams that are matched to the type of new productdevelopment project under way.Finally, in Chapter Thirteen, we will look at innovation deployment strategies. Thischapter will address such questions as: How do we accelerate the adoption of the technological innovation? How do we decide whether to use licensing or OEM agreements? Does it make more sense to use penetration pricing or a market-skimmingprice? When should we sell direct versus using intermediaries? What strategies canthe firm use to encourage distributors and complementary goods providers to support the innovation? What are the advantages and disadvantages of major marketingmethods? This chapter complements traditional marketing, distribution, and pricingcourses by looking at how a deployment strategy can be crafted that especially targetsthe needs of a new technological innovation.SummaryofChapter1. Technological innovation is now often the single most important competitivedriver in many industries. Many firms receive more than one-third of their salesand profits from products developed within the past five years.2. The increasing importance of innovation has been driven largely by the globalization of markets and the advent of advanced technologies that enable more rapidproduct design and allow shorter production runs to be economically feasible.3. Technological innovation has a number of important effects on society, including fostering increased GDP, enabling greater communication and mobility, andimproving medical treatments.10 Chapter 1 Introduction4. Technological innovation may also pose some negative externalities, includingpollution, resource depletion, and other unintended consequences of technologicalchange.5. While government plays a significant role in innovation, industry provides themajority of R&D funds that are ultimately applied to technological innovation.6. Successful innovation requires an in-depth understanding of the dynamics ofinnovation, a well-crafted innovation strategy, and well-developed processes forimplementing the innovation strategy.DiscussionQuestions1. Why is innovation so important for firms to compete in many industries?2. What are some advantages and disadvantages of technological innovation?3. Why do you think so many innovation projects fail to generate an economic return?SuggestedFurtherReadingClassicsArrow, K. J., “Economic welfare and the allocation of resources for inventions,” in TheRate and Direction of Inventive Activity: Economic and Social Factors, ed. R. Nelson(Princeton, NJ: Princeton University Press, 1962), pp. 609–25.Baumol, W. J., The Free Market Innovation Machine: Analyzing the Growth Miracleof Capitalism (Princeton, NJ: Princeton University Press, 2002).Mansfield, E., “Contributions of R and D to economic growth in the United States,”Science CLXXV (1972), pp. 477–86.Schumpeter, J. A., The Theory of Economic Development (1911; English translation,Cambridge, MA: Harvard University Press, 1936).Recent WorkAhlstrom, D., “Innovation and Growth: How Business Contributes to Society,”­Academy of Management Perspectives (August 2010): 10–23.Lichtenberg, F. R., “Pharmaceutical Innovation and Longevity Growth in 30 Developing and High-Income Countries, 2000–2009,” Health Policy and Technology3 (2014):36–58.“The 25 Best Inventions of 2017,” Time (December 1, 2017).Schilling, M. A., “Towards Dynamic Efficiency: Innovation and Its Implications forAntitrust,” Antitrust Bulletin 60, no. 3 (2015): 191–207.Endnotes1. J. P. Womack, D. T. Jones, and D. Roos, The Machine That Changed the World (New York:Rawson Associates, 1990).2. W. Qualls, R. W. Olshavsky, and R. E. Michaels, “Shortening of the PLC—An Empirical Test,”Journal of Marketing 45 (1981), pp. 76–80.3. M. A. Schilling and C. E. Vasco, “Product and Process Technological Change and the Adoption ofModular Organizational Forms,” in Winning Strategies in a Deconstructing World, eds. R. Bresser,M. Hitt, R. Nixon, and D. Heuskel (Sussex, England: John Wiley & Sons, 2000), pp. 25–50.Chapter 1 Introduction 114. N. Crafts, “The First Industrial Revolution: A Guided Tour for Growth Economists,” The­American Economic Review 86, no. 2 (1996), pp. 197–202; R. Solow, “Technical Change andthe Aggregate Production Function,” Review of Economics and Statistics 39 (1957), pp. ­312–20;and N. E. Terleckyj, “What Do R&D Numbers Tell Us about Technological Change?” A­ mericanEconomic Association 70, no. 2 (1980), pp. 55–61.5. H. A. Simon, “Technology and Environment,” Management Science 19 (1973), pp. 1110–21.6. S. Brown and K. Eisenhardt, “The Art of Continuous Change: Linking Complexity Theoryand Time-Paced Evolution in Relentlessly Shifting Organizations,” Administrative ScienceQuarterly 42 (1997), pp. 1–35; K. Clark and T. Fujimoto, Product Development Performance(Boston: Harvard Business School Press, 1991); R. Cooper, “Third Generation New ProductProcesses,” Journal of Product Innovation Management 11 (1994), pp. 3–14; D. Doughery,“Reimagining the Differentiation and Integration of Work for Sustained Product Innovation,”Organization Science 12 (2001), pp. 612–31; and M. A. Schilling and C. W. L. Hill, “­Managingthe New Product Development Process: Strategic Imperatives,” Academy of Management Executive 12, no. 3 (1998), pp. 67–81.7. Markham, SK, and Lee, H. “Product Development and Management Association’s 2012 comparative performance assessment study,” Journal of Product Innovation Management 30 (2013),issue 3:408–429.8. G. Stevens and J. Burley, “3,000 Raw Ideas Equals 1 Commercial Success!” Research Technology Management 40, no. 3 (1997), pp. 16–27.9. Standard & Poor’s Industry Surveys, Pharmaceutical Industry, 2008.10. DiMasi, J. A., H. G. Grabowski, and R. W. Hansen, “Innovation in the Pharmaceutical Industry:New Estimates of R&D Costs,” Journal of Health Economics 47 (May 2016):20–33.Part OneIndustry Dynamics ofTechnological InnovationIn this section, we will explore the industry dynamics of technological innovation,including:∙ The sources from which innovation arises, including the roles of individuals,organizations, government institutions, and networks.∙ The types of innovations and common industry patterns of technological evo-lution and diffusion.∙ The factors that determine whether industries experience pressure to select adominant design, and what drives which technologies to dominate others.∙ The effects of timing of entry, and how firms can identify (and manage) theirentry options.This section will lay the foundation that we will build upon in Part Two, Formulating Technological Innovation Strategy.Industry Dynamics of Technological InnovationPart 1: Industry Dynamics ofTechnological InnovationChapter 2Sources ofInnovationChapter 3Types and Patternsof InnovationChapter 4Standards Battles,Modularity, andPlatform CompetitionChapter 5Timing of EntryPart 2: Formulating TechnologicalInnovation StrategyChapter 6Defining the Organization’sStrategic DirectionChapter 7Choosing InnovationProjectsChapter 8CollaborationStrategiesChapter 9Protecting InnovationPart 3: Implementing TechnologicalInnovation StrategyChapter 10Organizing forInnovationChapter 11Managing the NewProduct DevelopmentProcessFeedbackChapter 12Managing NewProductDevelopment TeamsChapter 13Crafting aDeploymentStrategyChapter TwoSources of InnovationThe Rise of “Clean Meat”aIn late 2017, Microsoft founder Bill Gates and a group of other high-poweredinvestors—who comprise Breakthrough Energy Ventures, such as Amazon’sJeff Bezos, Alibaba’s Jack Ma, and Virgin’s Richard Branson—announced theirintention to fund a San Francisco–based start-up called Memphis Meats withan unusual business plan: it grew “clean” meat using stem cells, eliminating theneed to breed or slaughter animals. The company had already produced beef,chicken, and duck, all grown from cells.bThere were many potential advantages of growing meat without animals. First,growth in the demand for meat was skyrocketing due to both population growthand development. When developing countries become wealthier, they increasetheir meat consumption. While humanity’s population had doubled since 1960,consumption of animal products had risen fivefold and was still increasing. Manyscientists and economists had begun to warn of an impending “meat crisis.” Eventhough plant protein substitutes like soy and pea protein had gained enthusiastic followings, the rate of animal protein consumption had continued to rise. Thissuggested that meat shortages were inevitable unless radically more efficientmethods of production were developed.Large-scale production of animals also had a massively negative effect onthe environment. The worldwide production of cattle, for example, resultedin a larger emissions of greenhouse gases than the collective effect of theworld’s automobiles. Animal production is also extremely water intensive: Toproduce each chicken sold in a supermarket, for example, requires more than1000 gallons of water, and each egg requires 50 gallons. Each gallon of cow’smilk required 900 gallons of water. A study by Oxford University indicated thatmeat grown from cells would produce up to 96 percent lower greenhouse gasemissions, use 45 percent less energy, 99 percent less land, and 96 percentless water.cScientists also agreed that producing animals for consumption was simplyinefficient. Estimates suggested, for example, that it required roughly 23 calories worth of inputs to produce one calorie of beef. “Clean” meat promised tobring that ratio down to three calories of inputs to produce a calorie of beef—more than seven times greater efficiency. “Clean” meat also would not contain1516 Part One Industry Dynamics of Technological Innovationantibiotics, steroids, or bacteria such as E. coli—it was literally “cleaner,” and thattranslated into both greater human health and lower perishability.The Development of Clean MeatIn 2004, Jason Matheny, a 29-year-old recent graduate from the John HopkinsPublic Health program decided to try to tackle the problems with production ofanimals for food. Though Matheny was a vegetarian himself, he realized thatconvincing enough people to adopt a plant-based diet to slow down the meatcrisis was unlikely. As he noted, “You can spend your time trying to get peopleto turn their lights out more often, or you can invent a more efficient light bulbthat uses far less energy even if you leave it on. What we need is an enormouslymore efficient way to get meat.”dMatheny founded a nonprofit organization called New Harvest that would bededicated to promoting research into growing real meat without animals. Hesoon discovered that a Dutch scientist, Willem van Eelen was exploring how toculture meat from animal cells. Van Eelen had been awarded the first patent ona cultured meat production method in 1999. However, the eccentric scientisthad not had much luck in attracting funding to his project, nor in scaling up hisproduction. Matheny decided that with a little prodding, the Dutch governmentmight be persuaded to make a serious investment in the development of meatculturing methods. He managed to get a meeting with the Netherland’s ministerof agriculture where he made his case. Matheny’s efforts paid off: The Dutchgovernment agreed to invest two million euros in exploring methods of creatingcultured meat at three different universities.By 2005, clean meat was starting to gather attention. The journal Tissue Engineering published an article entitled “In Vitro-Cultured Meat Production,” andin the same year, the New York Times profiled clean meat in its annual “Ideasof the Year.” However, while governments and universities were willing to investin the basic science of creating methods of producing clean meat, they did nothave the capabilities and assets needed to bring it to commercial scale. Mathenyknew that to make clean meat a mainstream reality, he would need to attract theinterest of large agribusiness firms.Matheny’s initial talks with agribusiness firms did not go well. Though meatproducers were open to the idea conceptually, they worried that consumerswould balk at clean meat and perceive it as unnatural. Matheny found this criticism frustrating; after all, flying in airplanes, using air conditioning, or eating meatpumped full of steroids to accelerate its growth were also unnatural.Progress was slow. Matheny took a job at the Intelligence Advanced ResearchProjects Activity (IARPA) of the U.S. Federal Government while continuing to runNew Harvest on the side. Fortunately, others were also starting to realize theurgency of developing alternative meat production methods.Enter Sergey Brin of GoogleIn 2009, the foundation of Sergey Brin, cofounder of Google, contacted Mathenyto learn more about cultured meat technologies. Matheny referred Brin’sChapter 2 Sources of Innovation 17foundation to Dr. Mark Post at Maastricht University, one of the leading scientistsfunded by the Dutch government’s clean meat investment. Post had succeededin growing mouse muscles in vitro and was certain his process could be replicated with the muscles of cows, poultry, and more. As he stated, “It was so clearto me that we could do this. The science was there. All we needed was funding to actually prove it, and now here was a chance to get what was needed.”eIt took more than a year to work out the details, but in 2011, Brin offered Postroughly three quarters of a million dollars to prove his process by making twocultured beef burgers, and Post’s team set about meeting the challenge.In early 2013, the moment of truth arrived: Post and his team had enough cultured beef to do a taste test. They fried up a small burger and split it into thirdsto taste. It tasted like meat. Their burger was 100 percent skeletal muscle andthey knew that for commercial production they would need to add fat and connective tissue to more closely replicate the texture of beef, but those wouldbe easy problems to solve after passing this milestone. The press respondedenthusiastically, and the Washington Post ran an article headlined, “Could a TestTube Burger Save the Planet?”fGoing CommercialIn 2015, Uma Valeti, a cardiologist at the Mayo Clinic founded his own cultured-­meat research lab at the University of Minnesota. “I’d read about the inefficiency of meat-eating compared to a vegetarian diet, but what bothered memore than the wastefulness was the sheer scale of suffering of the animals.”gAs a heart doctor, Valeti also believed that getting people to eat less meatcould improve human health: “I knew that poor diets and the unhealthy fatsand refined carbs that my patients were eating were killing them, but so manyseemed totally unwilling to eat less or no meat. Some actually told me they’drather live a shorter life than stop eating the meats they loved.” Valeti beganfantasizing about a best-of-both-worlds alternative—a healthier and kindermeat. As he noted, “The main difference I thought I’d want for this meat I wasenvisioning was that it’d have to be leaner and more protein-packed than acut of supermarket meat, since there’s a large amount of saturated fat in thatmeat. . . . Why not have fats that are proven to be better for health and longevity, like omega-3s? We want to be not just like conventional meat but healthierthan conventional meat.”hValeti was nervous about leaving his successful position as a cardiologist—after all, he had a wife and two children to help support. However, when he satdown to discuss it with his wife (a pediatric eye surgeon), she said, “Look, Uma.We’ve been wanting to do this forever. I don’t ever want us to look back on whywe didn’t have the courage to work on an idea that could make this world kinderand better for our children and their generation.”i And thus Valeti’s company,which would later be named Memphis Meats, was born.Building on Dr. Post’s achievement, Valeti’s team began experimenting withways to get just the right texture and taste. After much trial and error, and a growing number of patents, they hosted their first tasting event in December 2015.On the menu: a meatball. This time the giant agribusiness firms took notice.18 Part One Industry Dynamics of Technological InnovationAt the end of 2016, Tyson Foods, the world’s largest meat producer, announcedthat it would invest $150 million in a venture capital fund that would developalternative proteins, including meat grown from self-reproducing cells. InAugust of 2017, agribusiness giant Cargill announced it was investing in Memphis Meats, and a few months later in early 2018, Tyson Foods also pledgedinvestment.That first meatball cost $1200; to make cultured meat a commercial realityrequired bringing costs down substantially. But analysts were quick to point outthat the first iPhone had cost $2.6 billion in R&D—much more than the first cultured meats. Scale and learning curve efficiencies would drive that cost down.Valeti had faith that the company would soon make cultured meat not only­competitive with traditional meat, but more affordable. Growing meat rather thanwhole animals had, after all, inherent efficiency advantages.Some skeptics believed the bigger problem was not production economies,but consumer acceptance: would people be willing to eat meat grown without animals? Sergey Brin, Bill Gates, Jeff Bezos, Jack Ma, and Richard Bransonwere willing to bet that they would. As Branson stated in 2017, “I believe that in30 years or so we will no longer need to kill any animals and that all meat willeither be clean or plant-based, taste the same and also be much healthier foreveryone.”jDiscussion Questions1. What were the potential advantages of developing clean meat? What werethe challenges of developing it and bringing it to market?2. What kinds of organizations were involved in developing clean meat? Whatwere the different resources that each kind of organization brought to theinnovation?3. Do you think people will be willing to eat clean meat? Can you think ofother products or services that faced similar adoption challenges?aAdapted from a NYU teaching case by Paul Shapiro and Melissa Schilling.Friedman, Z., “Why Bill Gates and Richard Branson Invested in ‘Clean’ Meat,” Forbes (August 2017).cTuomisto, H. L., and M. J. de Mattos, “Environmental Impacts of Cultured Meat Production,” EnvironmentalScience and Technology 14(2011): 6117–2123.dShapiro, P. Clean Meat: How Growing Meat without Animals Will Revolutionize Dinner and the World(New York: Gallery Books, 2018), 35.eShapiro, P. Clean Meat: How Growing Meat without Animals Will Revolutionize Dinner and the World(New York: Gallery Books, 2018), 60.f“Could a Test-Tube Burger Save the Planet?” Washington Post, August 5, 2013.gShapiro, P. Clean Meat: How Growing Meat without Animals Will Revolutionize Dinner and the World(New York: Gallery Books, 2018), 113.hShapiro, P. Clean Meat: How Growing Meat without Animals Will Revolutionize Dinner and the World(New York: Gallery Books, 2018), 115.iShapiro, P. Clean Meat: How Growing Meat without Animals Will Revolutionize Dinner and the World(New York: Gallery Books, 2018), 118.jFriedman, Z., “Why Bill Gates and Richard Branson Invested in ‘Clean’ Meat,” Forbes (August 2017).bChapter 2 Sources of Innovation 19OVERVIEWinnovationThe practicalimplementationof an idea intoa new device orprocess.Innovation can arise from many different sources. It can originate with individuals, as in the familiar image of the lone inventor or users who design solutions fortheir own needs. Innovation can also come from the research efforts of universities, government laboratories and incubators, or private nonprofit organizations.One primary engine of innovation is firms. Firms are well suited to innovationactivities because they typically have greater resources than individuals and amanagement system to marshal those resources toward a collective purpose.Firms also face strong incentives to develop differentiating new products and services, which may give them an advantage over nonprofit or government-fundedentities.An even more important source of innovation, however, does not arise from anyone of these sources, but rather the linkages between them. Networks of innovatorsthat leverage knowledge and other resources from multiple sources are one of the mostpowerful agents of technological advance.1 We can thus think of sources of innovation as composing a complex system wherein any particular innovation may emergeprimarily from one or more components of the system or the linkages between them(see Figure 2.1).In the sections that follow, we will first consider the role of creativity as the underlying process for the generation of novel and useful ideas. We will then consider howcreativity is transformed into innovative outcomes by the separate components of theinnovation system (individuals, firms, etc.), and through the linkages between different components (firms’ relationships with their customers, technology transfer fromuniversities to firms, etc.).FIGURE 2.1Sources ofInnovation as aSystemFirmsIndividualsPrivateNonprofitsUniversitiesGovernmentFunded Research20 Part One Industry Dynamics of Technological InnovationCREATIVITYideaSomething imagined or picturedin the mind.creativityThe ability toproduce noveland useful work.Innovation begins with the generation of new ideas. The ability to generate new anduseful ideas is termed creativity. Creativity is defined as the ability to produce workthat is useful and novel. Novel work must be different from work that has been previously produced and surprising in that it is not simply the next logical step in a seriesof known solutions.2 The degree to which a product is novel is a function both of howdifferent it is from prior work (e.g., a minor deviation versus a major leap) and of theaudience’s prior experiences.3 A product could be novel to the person who made it,but known to most everyone else. In this case, we would call it reinvention. A productcould be novel to its immediate audience, yet be well known somewhere else in theworld. The most creative works are novel at the individual producer level, the localaudience level, and the broader societal level.4Individual CreativityAn individual’s creative ability is a function of his or her intellectual abilities,­knowledge, personality, motivation, and environment.The most important intellectual abilities for creative thinking include intelligence, memory, the ability to look at problems in unconventional ways, the abilityto analyze which ideas are worth pursuing and which are not, and the ability toarticulate those ideas to others and convince others that the ideas are worthwhile.One important intellectual ability for creativity is a person’s ability to let their mindengage in a visual mental activity termed primary process thinking.5 Because of itsunstructured nature, primary process thinking can result in combining ideas that arenot typically related, leading to what has been termed remote associations or divergent thinking. Sigmund Freud noted that primary process thinking was most likelyto occur just before sleep or while dozing or daydreaming; others have observedthat it might also be common when distracted by physical exercise, music, or otheractivities. Creative people may make their minds more open to remote associationsand then mentally sort through these associations, selecting the best for furtherconsideration. Having excellent working memory is useful here too—individualswith excellent working memory may be more likely or more able to search longerpaths through the network of associations in their mind, enabling them to arrive at aconnection between two ideas or facts that seem unexpected or strange to others.6 Aconnection that appears to be random may not be random at all—it is just difficultfor other people to see the association because they are not following as long of achain of associations.Consistent with this, studies by professors Mathias Benedek and Aljoscha Neubauer found that highly creative people usually follow the same association paths asless creative people—but they do so with such greater speed that they exhaust thecommon associations sooner, permitting them to get to less common associations earlier than others would.7 Benedek and Neubauer’s research argues that highly creativepeople’s speed of association is due to exceptional working memory and executivecontrol. In other words, the ability to hold many things in one’s mind simultaneouslyChapter 2 Sources of Innovation 21and maneuver them with great facileness enables a person to rapidly explore manypossible associations.8The impact of knowledge on creativity is somewhat double-edged. If an individualhas too little knowledge of a field, he or she is unlikely to understand it well enoughto contribute meaningfully to it. On the other hand, if an individual knows a fieldtoo well, that person can become trapped in the existing logic and paradigms, preventing him or her from coming up with solutions that require an alternative perspective. Thus, an individual with only a moderate degree of knowledge of a fieldmight be able to produce more creative solutions than an individual with extensive­knowledge of the field, and breakthrough innovations are often developed by outsiders to a field.9Consider, for example, Elon Musk. Elon Musk developed a city search Web portal called Zip2 in college, then founded an Internet financial payments company thatmerged with a rival and developed the PayPal financial payment system. Then afterselling PayPal, Musk decided to found SpaceX to develop reusable rockets, and alsobecame part of the founding team of Tesla Motors, an electric vehicle company.Tesla subsequently acquired Solar City (a solar panel company that Elon Musk hadhelped his cousins create) and diversified into energy storage and more. Musk crossesboundaries because he enjoys tackling new, difficult problems. He has been able to besuccessful in a wide range of industries in part because he challenges the traditionalmodels in those industries.10 For example, SpaceX was able to dramatically decreasethe price of rocket components by building them in-house, and Solar City was able todramatically increase solar panel adoption by offering a business model based on leasing that gave customers the option of putting no money down and paying for the panelswith part of their energy savings.Another great example is provided by Gavriel Iddan, a guided missile designerfor the Israeli military who invented a revolutionary way to allow doctors to seeinside a patient’s gastrointestinal system. The traditional approach for obtainingimages inside the gut is a camera on the end of a long flexible rod. This method isquite uncomfortable, and cannot reach large portions of the small intestine, but itwas the industry standard for many decades. Most gastroenterologists have investedin significant training to use endoscopic tools, and many have also ­purchasedendoscopic equipment for their clinics. Not surprisingly then, most innovation inthis domain has focused on incremental improvements in the rod, cameras, andimaging software. Iddan, however, approached the problem of viewing the insideof the gut like a guided missile designer—not a gastroenterologist. He did not havethe same assumptions about the need to control the camera with a rod, nor to transmit images with a wire. Instead, he invented a capsule (called the PillCam) witha power source, a light source, and two tiny cameras that the patient can swallow.The patient then goes about her day while the camera pill broadcasts images to avideo pack worn by the patient. Roughly eight hours later, the patient returns to thedoctor’s office to have the images read by a software algorithm that can identifyany locations of bleeding (the camera pill exits naturally). The PillCam has provento be safer and less expensive than traditional endoscopy (the PillCam costs lessthan $500), and it is dramatically more comfortable. For patients, the camera pill22 Part One Industry Dynamics of Technological Innovationwas a no brainer; getting doctors to adopt it has been slower because of their existing investment and familiarity with endoscopy. The PillCam is now sold in morethan 60 countries, and several companies now offer competing products. The camera pill is a remarkable solution to a difficult problem, and it is easy to see why itcame from an outsider, rather than an endoscope producer.11Outsiders often face resistance and skepticism. People tend to discount generalistsand are suspicious of people who engage in activities that seem inconsistent with theiridentity. Outsiders like Musk, however, bring an advantage that insiders and industryveterans often lack. They aren’t trapped by the paradigms and assumptions that havelong become calcified in industry veterans, nor do they have the existing investmentsin tools, expertise, or supplier and customer relationships that make change difficultand unappealing.The personality trait most often associated with creativity is “openness to­experience.”12 Openness to experience reflects an individual’s use of active imagination, aesthetic sensitivity (e.g., the appreciation for art and literature), attentivenessto emotion, a preference for variety, and intellectual curiosity. It is assessed by askingindividuals to rate their degree of agreement or disagreement with statements suchas “I have a vivid imagination,” “I enjoy hearing new ideas,” “I have a rich vocabulary,” “I rarely look for deeper meaning in things” (reversed), “I enjoy going to artmuseums,” “I avoid philosophical discussions” (reversed), “I enjoy wild flights offantasy,” and more. Individuals who score high on the openness to experience dimension tend to have great intellectual curiosity, are interested in unusual ideas, and arewilling to try new things.Intrinsic motivation has also been shown to be very important for creativity.13That is, individuals are more likely to be creative if they work on things they aregenuinely interested in and enjoy. In fact, several studies have shown that creativitycan be undermined by providing extrinsic motivation such as money or awards.14This raises serious questions about the role played by idea collection systems inorganizations that offer monetary rewards for ideas. On the one hand, such extrinsic rewards could derail intrinsic motivation. On the other hand, if the monetaryrewards are small, such systems may be primarily serving to invite people to offerideas, which is a valuable signal about the culture of the firm. More research isneeded in this area to know exactly what kind of solicitation for ideas, if any, ismost effective.Finally, to fully unleash an individual’s creative potential usually requires a supportive environment with time for the individual to explore their ideas independently,tolerance for unorthodox ideas, a structure that is not overly rigid or hierarchical, anddecision norms that do not require consensus.15Organizational CreativityThe creativity of the organization is a function of creativity of the individuals within theorganization and a variety of social processes and contextual factors that shapethe way those individuals interact and behave.16 An organization’s overall creativitylevel is thus not a simple aggregate of the creativity of the individuals it employs. Theorganization’s structure, routines, and incentives could thwart individual creativity oramplify it.Chapter 2 Sources of Innovation 23intranetA privatenetwork, accessible only toauthorizedindividuals. It islike the Internetbut operates onlywithin (“intra”)the organization.The most familiar method of a company tapping the creativity of its individualemployees is the suggestion box. In 1895, John Patterson, founder of National CashRegister (NCR), created the first sanctioned suggestion box program to tap the ideas ofthe hourly worker.17 The program was considered revolutionary in its time. The originators of adopted ideas were awarded $1. In 1904, employees submitted 7000 ideas, ofwhich one-third were adopted. Other firms have created more elaborate systems thatnot only capture employee ideas, but incorporate mechanisms for selecting and implementing those ideas. Google, for example, utilizes an idea management system wherebyemployees e-mail their ideas for new products and processes to a company-wide database where every employee can view the idea, comment on it, and rate it (for moreon how Google encourages innovation, see the Theory in Action on Inspiring Innovation at Google). Honda of America utilizes an employee-driven idea system (EDIS)whereby employees submit their ideas, and if approved, the employee who submitsthe idea is responsible for following through on the suggestion, overseeing its progressfrom concept to implementation. Honda of America reports that more than 75 percent of all ideas are implemented.18 Bank One, one of the largest holding banks in theUnited States, has created an employee idea program called “One Great Idea.” Employees access the company’s idea repository through the company’s intranet. There theycan submit their ideas and actively interact and collaborate on the ideas of others.19Through active exchange, the employees can evaluate and refine the ideas, improvingtheir fit with the diverse needs of the organization’s stakeholders.At Bank of New York Mellon they go a step further—the company holds enterprise-­wide innovation competitions where employees form their own teams and compete incoming up with innovative ideas. These ideas are first screened by judges at both theregional and business-line level. Then, the best ideas are pitched to senior management in a “Shark Tank” style competition that is webcast around the world. If a seniorexecutive sees an idea they like, they step forward and say they will fund it and runwith it. The competition both helps the company come up with great ideas and sends astrong signal to employees about the importance of innovation.20Idea collection systems (such as suggestion boxes) are relatively easy and inexpensive to implement, but are only a first step in unleashing employee creativity.Today companies such as Intel, Motorola, 3M, and Hewlett-Packard go to muchgreater lengths to tap the creative potential embedded in employees, includinginvesting in creativity training programs. Such programs encourage managers todevelop verbal and nonverbal cues that signal employees that their thinking andautonomy are respected. These cues shape the culture of the firm and are oftenmore effective than monetary rewards—in fact, as noted previously, sometimesmonetary rewards undermine creativity by encouraging employees to focus onextrinsic rather than intrinsic motivation.21 The programs also often incorporateexercises that encourage employees to use creative mechanisms such as developing alternative scenarios, using analogies to compare the problem with anotherproblem that shares similar features or structure, and restating the problem in anew way. One product design firm, IDEO, even encourages employees to developmock prototypes of potential new products out of inexpensive materials such ascardboard or styrofoam and pretend to use the product, exploring potential designfeatures in a tangible and playful manner.Theory in Action   Inspiring Innovation at GoogleGoogle is always working on a surprising array of projects, ranging from the completely unexpected (such asautonomous self-driving cars and solar energy) to themore mundane (such as e-mail and cloud services).aIn pursuit of continuous innovation at every level ofthe company, Google uses a range of formal andinformal mechanisms to encourage its employees toinnovate:b20 Percent Time: All Google engineers are encouragedto spend 20 percent of their time working on their ownprojects. This was the source of some of Google’s mostfamous products (e.g., Google Mail, Google News).Recognition Awards: Managers were given discretionto award employees with “recognition awards” to celebrate their innovative ideas.Google Founders’ Awards: Teams doing outstanding work could be awarded substantial stock grants.Some employees had become millionaires from theseawards alone.Adsense Ideas Contest: Each quarter, the Adsense onlinesales and operations teams reviewed 100 to 200 submissions from employees around the world, and selectedfinalists to present their ideas at the quarterly contest.Innovation Reviews: Formal meetings where managers present ideas originated in their divisions directly tofounders Larry Page and Sergey Brin, as well as to CEOEric Schmidt.ca Bradbury, D. 2011. Google’s rise and rise. Backbone,Oct:24–27.b Groysberg, B., Thomas, D.A. & Wagonfeld, A.B. 2011. Keeping Google “Googley.” Harvard Business School Case9:409–039.c Kirby, J. 2009. How Google really does it. Canadian Business,82(18):54–58.TRANSLATING CREATIVITY INTO INNOVATIONInnovation is more than the generation of creative ideas; it is the implementation ofthose ideas into some new device or process. Innovation requires combining a creativeidea with resources and expertise that make it possible to embody the creative idea ina useful form. We will first consider the role of individuals as innovators, includinginnovation by inventors who specialize in creating new products and processes, andinnovation by end users. We then will look at innovation activity that is organized byfirms, universities, and government institutions.The InventorThe familiar image of the inventor as an eccentric and doggedly persistent ­scientistmay have some basis in cognitive psychology. Analysis of personality traits ofinventors suggests these individuals are likely to be interested in theoretical andabstract thinking, and have an unusual enthusiasm for problem solving. One 10-yearstudy of inventors concludes that the most successful inventors possess the following characteristics:1. They have mastered the basic tools and operations of the field in which theyinvent, but they have not specialized solely in that field; instead they have pursuedtwo or three fields simultaneously, permitting them to bring different perspectivesto each.2. They are curious and more interested in problems than solutions.24Theory in Action   Dean KamenIn January 2001, an Internet news story leaked thaticonoclastic inventor Dean Kamen had devised a fantastic new invention—a device that could affect the waycities were built, and even change the world. Shroudedin secrecy, the mysterious device, code-named “Ginger”and “IT,” became the talk of the technological worldand the general public, as speculation about the technology grew wilder and wilder. In December of thatyear, Kamen finally unveiled his invention, the SegwayHuman Transporter.a Based on an elaborate combination of motors, gyroscopes, and a motion controlalgorithm, the Segway HT was a self-balancing, twowheeled scooter. Though to many it looked like a toy,the Segway represented a significant advance in technology. John Doerr, the venture capitalist behind Amazon.com and Netscape, predicted it would be biggerthan the Internet. Though the Segway did not turn outto be a mass market success, its technological achievements were significant. In 2009, General Motors andSegway announced that they were developing a twowheeled, two-seat electric vehicle based on the Segwaythat would be fast, safe, inexpensive, and clean. The carwould run on a lithium-ion battery and achieve speedsof 35 miles per hour.The Segway was the brainchild of Dean Kamen, aninventor with more than 150 U.S. and foreign patents,whose career began in his teenage days of devisingmechanical gadgets in his parents’ basement.b Kamennever graduated from college, though he has sincereceived numerous honorary degrees. He is describedas tireless and eclectic, an entrepreneur with a seemingly boundless enthusiasm for science and technology.Kamen has received numerous awards for his inventions, including the Kilby award, the Hoover Medal, andthe National Medal of Technology. Most of his inventionshave been directed at advancing health-care technology. In 1988, he invented the first self-service dialysismachine for people with kidney failure. Kamen hadrejected the original proposal for the machine broughtto him by Baxter, one of the world’s largest medicalequipment manufacturers. To Kamen, the solution wasnot to come up with a new answer to a known problem,but to instead reformulate the problem: “What if youcan find the technology that not only fixes the valvesbut also makes the whole thing as simple as plugging acassette into a VCR? Why do patients have to continueto go to these centers? Can we make a machine thatcan go in the home, give the patients back their dignity,reduce the cost, reduce the trauma?”c The result wasthe HomeChoice dialysis machine, which won DesignNews’ 1993 Medical Product of the Year award.In 1999, Kamen’s company, DEKA Research, introduced the IBOT Mobility System, an extremely advancedwheelchair incorporating a sophisticated balancing system that enabled users to climb stairs and negotiatesand, rocks, and curbs. According to Kamen, the IBOT“allowed a disabled person, a person who cannotwalk, to basically do all the ordinary things that youtake for granted that they can’t do even in a wheelchair, like go up a curb.”d It was the IBOT’s combination of balance and mobility that gave rise to the ideaof the Segway.a J. Bender, D. Condon, S. Gadkari, G. Shuster, I. Shuster, andM. A. Schilling, “Designing a New Form of Mobility: SegwayHuman Transporter,” New York University teaching case, 2003.b E. I. Schwartz, “The Inventor’s Play-Ground,” Tech… Purchase answer to see fullattachment Popular Research Topics in Healthcare Healthcare is a vast and constantly evolving field, with a wide range of research topics. Some of the most popular research topics in healthcare include: Chronic diseases: such as diabetes, heart disease, and cancer. Researchers are looking for ways to prevent, diagnose, and treat these conditions. Mental health: including depression, anxiety, and substance abuse. Researchers are looking for ways to improve treatment and prevent these conditions. Aging and geriatrics: as the population continues to age, researchers are studying ways to improve the health and well-being of older adults. Telemedicine: the use of technology, such as teleconferencing, to provide healthcare services remotely. Personalized medicine: using genetic and other health data to tailor treatments to individual patients. Infectious diseases: including the study of new and emerging infections, as well as finding ways to prevent and treat existing infections. Health equity: examining the ways in which social and economic factors contribute to health disparities, and finding ways to improve access to care for all populations. These are just a few of the many popular research topics in healthcare. As healthcare continues to evolve and change, new research topics will emerge and current topics will become more complex and multifaceted.

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