Description\n \n\n\n\n\n\n\n\n Week 11: Interactive activity\n \n\n\n Week 11: Interactive activity\n \n\n\n\n 11.1\n \n\n Learning Outcomes:\n \n\n\n\n Develop an understanding of how team composition (e.g., size, diversity) impacts its potential for problem solving as well as its coordination and communication costs.\n \n\n\n\n Have an insight into the different ways that teams can be structured, how structure influences performance of the team, and how team structure can be matched to project type. the factors that impact team success including size, diversity, structure and leadership.\n \n\n\n\n Understand the role of team leadership and administration in ensuring the team has access to the resources it needs and that team members feel committed to team goals.\n \n\n\n\n\n\n\n\n 11.2 Action Required:\n \n\n\n\n\n\n\n\n\n Read chapter 12 of your book – Book attachedAs\n \n\n\n\n\n\n\n\n\n 11.3 Test your Knowledge (Question):\n \n\n\n\n\n\n\n\n Discuss in detail, the factors that affect the new product development team’s performance.\n \n\n\n\n 11.4 Instructions\n \n\n\n\n Answer the question in test your knowledge section.\n \n\n\n Post your answer in the discussion board using the discussion link below\n \n\n (Week11: Interactive learning Discussion)\n \n\n\n\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 firstname.lastname@example.org, 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,” Technology Review\n105, no. 8 (2002), pp. 68–73.\nc\n Ibid.\nd\n The Great Inventor. Retrieved November 19, 2002, from\nwww.cbsnews.com.\n3. They question the assumptions made in previous work in the field.\n4. They often have the sense that all knowledge is unified. They seek global solutions\nrather than local solutions, and are generalists by nature.22\nThese traits are demonstrated by Dean Kamen, inventor of the Segway Human\nTransporter and the IBOT Mobility System (a technologically advanced wheelchair),\nprofiled in the Theory in Action section on Dean Kamen. They are also illustrated in\nthe following quotes by Nobel laureates. Sir MacFarlane Burnet, Nobel Prize–winning\n25\n26 Part One Industry Dynamics of Technological Innovation\nimmunologist, noted, “I think there are dangers for a research man being too well trained\nin the field he is going to study,”23 and Peter Debye, Nobel Prize–winning chemist,\nnoted, “At the beginning of the Second World War, R. R. Williams of Bell Labs came to\nCornell to try to interest me in the polymer field. I said to him, ‘I don’t know anything\nabout polymers. I never thought about them.’ And his answer was, ‘That is why we\nwant you.’”24 The global search for global solutions is aptly illustrated by Thomas Edison, who did not set out to invent just a lightbulb: “The problem then that I undertook to\nsolve was . . . the production of the multifarious apparatus, methods, and devices, each\nadapted for use with every other, and all forming a comprehensive system.”25\nSuch individuals may spend a lifetime developing numerous creative new devices\nor processes, though they may patent or commercialize few. The qualities that make\npeople inventive do not necessarily make them entrepreneurial; many inventors do not\nactively seek to patent or commercialize their work. Many of the most well-known\ninventors (e.g., Alexander Graham Bell, Thomas Alva Edison, Albert Einstein, and\nBenjamin Franklin), however, had both inventive and entrepreneurial traits.26\nInnovation by Users\nInnovation often originates with those who create solutions for their own needs.\nUsers often have both a deep understanding of their unmet needs and the incentive to\nfind ways to fulfill them.27 While manufacturers typically create new product innovations in order to profit from the sale of the innovation to customers, user innovators\noften have no initial intention to profit from the sale of their innovation––they create the innovation for their own use.28 Users may alter the features of existing products, approach existing manufacturers with product design suggestions, or develop new\nproducts themselves. For example, the extremely popular small sailboat, the Laser,\nwas designed without any formal market research or concept testing. Instead it was\nthe creative inspiration of three former Olympic sailors, Ian Bruce, Bruce Kirby, and\nHans Vogt. They based the boat design on their own preferences: simplicity, maximum\nperformance, transportability, durability, and low cost. The resulting sailboat became\nhugely successful; during the 1970s and ’80s, 24 Laser sailboats were produced daily.29\nAnother dramatic example is the development of Inderm… \nPurchase answer to see full\nattachment
APA paper format
The American Psychological Association (APA) format is a widely used style for writing academic papers in the social sciences. The APA format provides specific guidelines for formatting papers, including margins, font size and type, spacing, and the use of headings. These guidelines ensure that papers written in the APA format are visually consistent and easy to read.
In the APA format, papers are typically double-spaced and written in 12-point Times New Roman font. The margins should be 1 inch on all sides, and the text should be left-aligned. Headings are used to organize the paper into sections, with different levels of headings used to indicate the hierarchy of information.
In-text citations are an essential aspect of the APA format, and they must be included whenever information from an outside source is used in the paper. The reference page is also an important component of an APA paper, as it lists all of the sources used in the paper. The reference page should be formatted according to the APA guidelines, including the use of a hanging indent for each reference and the use of italics for book titles.
It is important to note that the APA format is not just a matter of style, but it is also a way of communicating research findings and ideas. The use of the APA format helps to ensure that the information presented in a paper is clear, concise, and easy to understand.
In conclusion, the APA format is a widely used style for writing academic papers in the social sciences. It provides specific guidelines for formatting papers, including margins, font size and type, spacing, and the use of headings. By following the APA format, students can ensure that their papers are visually consistent, easy to read, and meet academic standards.
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