Professional Documents
Culture Documents
Product Development
Contents
1. Technology and Strategy (Part I - Intro)
2. Technology and Corporate Planning (Reading I-2)
3. Management Criteria for Effective Innovation
(Reading I-4)
4. Core Competence (Reading I-3)
Overall differentiation
Focus-segment cost
leadership
Focus-segment
differentiation
Product technological
change
Product development to
reduce product cost
by lowering
materials content,
facilitating ease of
manufacture,
simplifying
logistical
requirements, etc.
Product development to
enhance product
quality, features,
deliverability, or
switching costs
Product development to
design only enough
performance for the
segment's needs
Process technological
change
Process development to
support high
tolerances, greater
quality control,
more reliable
scheduling, faster
response time to
orders, and other
dimensions that improve
the ability to perform
Process development to
tune production
and delivery
system to segment
needs in order to
lower cost
Process development to
tune the production
and delivery
system to segment
need in order to
improve
performance
Technological policies
High
Bet
Draw
Cash in
Fold
Low
High
Low
10
High
High
Low
Low
High
Competitive position
ss e ne vit artt A
Low
High
Low
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Elements in planning
Industry, competition, organizational resources...
Technology can result from inside or outside
Questions: How are technological issues recognized by
management? How has technology been used to
implement strategic objectives? How has technology
been monitored? How are technology-related activities
recognized and organized?
New Product Management
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Management
Innovation
Criteria
for
Effective
Two sides
technological (new and good) and business
(embodiment, operational consequences and market
dynamics)
Technical potential
What fundamental technical constraints limiting prior art
are lifted?
What new technical constraints are inherent?
How favourable is the trade-off?
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Management
Innovation
Criteria
for
Effective
Embodiment
Is the end product enhanced by additional technology
and components required to use innovation?
Is the innovation enhand or diluted by embodiment?
Does the embodiment offer potential for further
inventive enhancement?
Operations
What operations are displaced or weakened?
What new operations are needed?
What is the tradeoff?
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Management
Innovation
Criteria
for
Effective
Market
Does the product provide enhanced effectiveness
serving the final user?
Does the operation reduce cost of delivery?
Does latent demand expansion or price elasticity
expansion determine characteristics of new markets?
Example analyses
Transistors (Exhibit 1)
Jet turbines (Exhibit 2)
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Core competence
Collective learning, coordinate production skills, bring
together technologies, organization of work, delivery of
value
Sony: miniaturization, Philips: optical-media, 3M: sticky
tape
New Product Management
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Strategic architecture
Establish objectives for competence building
How long could we stay in this business if we lose it?
How central to customer value? Future opportunities
foreclosed?
Architecture provides logic for product and market
diversification (Does it add to overall goal? Does it
exploit/add to core competencies?)
New Product Management
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Contents
1. Technology Strategy (Part II - Intro)
2. Technological Innovation and the S-Curve (Reading
II-1, II-2 and II-3)
3. Disruptive and Sustaining Innovations (Reading II-4
and II-5)
4. Organizational Adaptation (Reading II-13)
5. Strategic Dynamics (Reading II-16)
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Technological
capabilities
Technology
strategy
Experience
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Strategic
action
Organizational
context
Technology
strategy
Technology
evolution
Industry
context
Integrative Mechanisms
Generative Mechanisms
Determinants
of Technology
Strategy
External Environment
New Product Management
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Dominant culture
Reflects distinctive competence
Science vs. engineering vs. manufacturing
Reflects product architecture
Can reflect founders
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Lessons
Difference component / architecture curves
Architecture often closely coupled with market, new
entrants often successful
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Organizational Adaptation
Evolutionary focus on strategy
How does it come about and evolve?
From outside (environmental determinism) or inside
(strategic choice)?
Intraorganizational perspective: initiatives emerge and
compete
Variation selection - retention
Internal and external selection
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Organizational Adaptation
Selection: knowledge about strategy often located at
top, as firm becomes larger, communication difficult, so
participants might perceive different strategies as best
for them and firm (reason for variation), top
management needs to establish internal selection
mechanisms to maintain coherence (administrative
rules, control systems, rewards, cultural rituals,
norms), should be in line with external (market)
selection pressures
Variation: induced process targeted at preserving
coupling of initiatives at operational level with strategy,
might lead to reduction of variation, depends on growth
opportunities in current domain
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Organizational Adaptation
Autonomous strategic process
Variation: some people willl try to get firm to engage in
activities outside current strategy, derive from new
combinations of skills, capabilities, competences, more
often from lower level, reasons: self-image that risk is
not greater, career prospects, start-up
Selection: clear up importance in context of current
strategy, usually outside normal selection process
through champions and top management, may lead to
change in strategy, difficult processes, often some
alternate funding reserved for demonstrating viability
Retention: autonomous strategic process allows firm to
become aware of environmental variations, autonomous
initiatives can lead to new companies or stretch
resources too thin, but open up strategic options
New Product Management
49
Organizational Adaptation
Organizational adaptation
Relative inertia: adaptation necessary (reliability,
legitimation), but reduces apatability to changes,
consistent with induced strategic process, strategy
evolution slow, internal selection needs to be open, free
championship and challenging of ideas, role of founders
and rule of knowledge and facts over position
Adjustment: leave overall strategy in place and changes
peripheral features, deliberate, non-random, generally
increases life chance of firm, consistent with induced
process
Reorientation: major changes, upsets induced process,
generally by environmental selection (would reduce
chance for survival)
New Product Management
50
Organizational Adaptation
Strategic renewal: major changes through autonomous
process if internal selection (strategic context
determination) works well
Exhibit 2
Success factors
Top management builds quality of induced and
autonomous process
Maintain top-driven strategic intent and bottom-up
internal experimentation and selection processes
Successful reorientation preceded by internal
experimentation and selection processes
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Strategic Dynamics
Decision making and game theory
Game theory is concerned with other parties that have
own strategies and goals, decision making generally
only with the environment
Game defined by players, available strategies, payoffs
and rules (repeated games, memory, information)
Prisoners' dilemma probably most famous example...
Proposal
Corporate longevity depends on matching cycles of
autonomous and induced strategy with strategic
dynamics
Strategic leadership means balancing those cycles
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Strategic Dynamics
Corporate longevity
Fortune 100: from 1965, 19 remain in 2005
Most of the time, companies operate in stable
environment, and strategy making process is geared
towards linear strategic dynamics
Sometimes (quite often newcomers) nonlinear dynamics
change rules of game (normative rules laws, customs
etc., economic rules, technological rules, cognitive rules
industry recipe), outcomes difficult to predict
Strategic dynamics
Actions of company and environment (other players,
suppliers, technological change, government,...)
considered, can be rule-abiding or -changing
New Product Management
53
Strategic Dynamics
Rule-abiding means additive, linear, fairly predictable
change
Rule-changing materially change strategic context for
others, nonlinear, difficult to predict
Exhibit 1
Strategic recognition important, seeing rule-changing
implications quickly, reaction time, constant alertness
Player-independent change: problematic, e.g. rebates
against new manufacturing
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Strategic Dynamics
Link to induced and autonomous strategy process
Example Intel: Independent industry change (DRAM
came, Intel slow to withdraw, but autonomous strategy
had provided microprocessor option), controlled change
(Centrino based on autonomous strategy), runaway
industry (RISC vs. CISC, internal civil war)
Resource accumulation: firms engage in quite a lot
autonomous processes (exploration mode), often funded
by middle management faced by problems using
resources from mature business not absorbed by
induced process
Scaling up: experimentation and selection of
autonomous processes, middle management tries, role
of cash reserves (Exhibit 2)
New Product Management
55
Strategic Dynamics
Balance
Limited change: continue induced, but manage
autonomous (slight rebalancing)
Independent change: autonomous process key
Controlled change: induced process key
Runaway industry change: management decides based
on whether bet available
Exhibit 3
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Case: Kindle
eReading: Amazon's Kindle (HBS)
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Case: Geox
Geox: Breathing Innovation into Shoes (HBS)
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Contents
1. Developing Innovative Capabilities (Part III - Intro)
2. Corporate R&D (Reading III-2 & III-3)
3. Invention to Innovation and Research to
Development (Reading II-4 & II-5)
4. Absorptive Capacity (Reading III-6)
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Diversifying to new
applications and markets
Intelligence
Human resources
Technology transfer
Identifying acquisition
candidates with needed
technological expertise
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Autonomous process
Corporate researchBusiness research interface:
entrepreneurial task, needs market link, business
researchers generally more ad-hoc, less structured,
more external time pressure
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Open
Personal
Personal
Administrative
Closed
Closed
Open
Closed
Open
Tight
coupling
Open
No
coupling
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Assessing opportunities
High uncertainty (usefulness unclear, depends on
complementaries or total system, often new uses, ability
to link to need)
Questions (I): Are first-class researchers available? Is
major investment going to return major result? How
many years to useful results? How many
failures/successes did others have in that area?
New Product Management
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Corporate R&D
Case study: Xerox Palo Alto Research Center
(PARC)
Located in Silicon Valley near Stanford University
Xerox spent hundreds of millions, but many ideas were
turned into products by start-ups
Still successful (copiers, CAD, laser printers)
Especially computerized office systems (original reason)
not cashed in on (business at Xerox makes loss)
Problems: slow decision making due to size and being a
one-product company, organizational flaws (weak ties to
rest of company, generally no marketing channels for
such products)
Problems have also led to people leaving frustrated
New Product Management
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Corporate R&D
Founded in 1969 for Xerox to become architect of
information in the office
Top people attracted (blank check and 10 years no
corporate interference)
50% computer science, 50% physical sciences
Image of scientists / hackers basically from there
(beards, T-shirts,...)
PARC became leader in human-computer interaction
Pioneered windows and mouse for interactions
Hands-off management led to overstepping (developed
Alto open - as PC product, other divison developed Star
- closed)
Text editor Bravo developed (outside charter), nobody
saw market potential became MS Word
New Product Management
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Corporate R&D
Visitor Steve Jobs got some ideas for Apple from
Smalltalk
Ethernet developed at PARC
Xerox strategy was complete office systems to increase
lock on customers (open PC was not a good fit), and bigbank (build the best, not something better)
Reorientation at PARC to increase transfer out and
management attention / links
PARC was transformed in 2002 into an independent,
wholly owned subsidiary company dedicated to
developing and maturing advances in science and
business concepts with the support of commercial
partners and client
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Corporate R&D
Cross-pollination
Idea of mixing things up to get creative results
Cross- or interdisciplinary teams
Value on average lower, but breakthroughs of unusually
high value
Depending on alignment of disciplines (e.g. economics
and physics quite near, economics and psychology
farther apart)
Exhibit 1
Rules: pairings of well-established fields, deep expertise
people
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Invention to Innovation
Innovation means welding marketplace
opportunities with inventive technology and new
technical knowledge
Complex decision making how to make a product out
of break-through?
Also involves consistency with firm corporate interest
(fabric)
Elements to be brought together: technical competency,
market need and corporate interest
How is this process of linking done? By whom?
74
Invention to Innovation
Evolution and patterns
Corporate R&D established (scientists), market
specialists seen as advisor to be brought in, then
became a separate function in R&D: Should they take
lead or work together?
Technology push (scientists, based on technology), need
pull (marketing, based on demand and markets) or
cooperation
Technology push
Mostly based on scientists, aware of corporate interests
Exhibit 1
Problems: tends to focus on easy applications, locked in
to one technology, biased user selection, getting funding
(bootleg research)
New Product Management
75
Invention to Innovation
Need pull
Targeted research by specific market goals (not too
broad and not too narrow - focusing)
Exhibit 2
Problems: absence of true believer or champion,
continues to change target (miss opportunity)
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Invention to Innovation
Successful conceptualization
Synthesizers, almost simultaneous linking of all three
dimensions
Steve Jobs and Smalltalk
Exhibit 4
Better conceptualisations result from flexibility and
modifications (do not get locked in)
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Invention to Innovation
Successful transfer: moved from research to
development and resulted in product
Unsuccessful transfer: left research but no product
Nontransfer: intended for transfer but not accepted in
development
Primary success factors
Technical understanding: main technical issues need
to be understood before passing on
Feasibility: demonstration necessary (agreement
what that means), might imply user acceptance and
therefore real users
Advanced development overlap: research must
deterime whether to maitain activity (support or
defend), or to explore related and advanced
technologies
New Product Management
78
Invention to Innovation
Growth potential: too narrow aim without technical or
market growth potential, new technology might
become obsolete by old ones stretching in
competition
Existence of an advocate: someone in research
selling it, looking after it
Advanced technology activities at development lab:
helpful and often necessary, sometimes provides
hurdle (competitive, skeptical) but in the end
beneficial as leads to thorough work and involvement
External pressures: same technology at competitor
lab or announcement
Joint programs
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Invention to Innovation
Secondary success factors
Timeliness
Internal users: creates pressure and demand
Government contracts
High-level involvement: research sometimes turns to
top management
Individual corporate responsibility: corporate
watchdog
Proximity: no major factor generally, might be
convenient and saves money, but transfer does not
depend
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Absorptive Capacity
Outside sources often critical to innovation
process
Ability to evaluate, recognize value, asssimilate and
utilize outside knowledge important
Factor of prior related knowledge (basic skills, shared
language etc.), based on cognitive learning (associate
learning by linking, learning is cumulative and based on
richness of knowledge structure)
Absorptive capacity
Byproduct of doing research (sometimes manufacturing
production experience)
Can also be directly generated trainings etc.
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Absorptive Capacity
Organizational absorptive capacity
Based on members' absorptive capacities
Not simply the sum, but also based on transfers on
knowledge within
Not only direct interface to outside, but also structure of
communication within and distribution of expertise
Interface can be diffused or centralized (people may act
as gatekeepers or boundary spanners) depends on
speed and uncertainty of change
Internal communication based on languages, codes etc.
- developing them can make this communication more
efficient, but make outside-in more difficult (notinvented-here syndrom, tends to increase with group
tenure)
New Product Management
82
Absorptive Capacity
Knowledge structure: some overlap between individuals
necessary for communication, diversity also important
(tradeoff of specialization)
Cross-function interfaces, job rotations etc.
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Absorptive Capacity
Path dependence
Set of decisions one faces for any given circumstance is
limited by the decisions one has made in the past
history matters
Accumulating in one period will increase accumulation in
the next
Absorptive capacity allows to see trends, which will lead
to build absorptive capacity (expectation formulation)
Ceasing to invest in absorptive capacity can lead to
lockout (NIH-syndrom too far away), confines firm to
work in a particular domain based on early decisions
Self-reinforcing cycle with high absorptive capacity: sees
opportunities, aspires to them (proactive instead of
reactive)
New Product Management
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Absorptive Capacity
Competence destroying technical change
Radical change can destroy competence, building new
ones can be difficult due to accumulation effects, or may
be blind to developments
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Case: NEC
What is your assessment of new technology
strategy? What will it take to succeed?
How can the new site best contribute?
What is your assessment of performance to date?
How should management ensure long-term
survivial and growth of the center?
What should Mr. Shinoda do next?
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Product Changes
Research
and
advanced
development
New core
product
Next generation
of core product
Addition to
Product family
Add-ons and
enhancements
Process Changes
New core
process
Next
generation
process
Tuning
Single
and
dept.
upgrade incremental
Unique
radical
Platform or
next generation
Enhancements,
hybrids, and
derivatives
Sustaining
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Communication in NPD
Extensive communication between engineering
and production critical
Informal communication: beer busts, technical
symposia, offsite, multiday discussion meetings etc.
Formal communication also essential
Tasks: introducing new products to manufacturing,
providing optimum level of documentation on products,
facilitating orderly and effective changes to products in
production
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Communication in NPD
Prototyping: first in engineering for testing (lab & field)
using different materials etc., then pilot production with
normal design joint responsibility
Design freeze: done before full-scale production (in
agreement), later changes only through notices and
formally, can be sequential for parts
Skunk works: multidisciplinary teams with own facilities
(high prestige, resources, fast, but might be disruptive)
Following engineers: some design engineers move to
production for some time (job rotation)
Multiple products: more difficult balance of maintenance
engineering and development, standardization of
components becomes issue
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Communication in NPD
Engineering documentation
Product and process documentation (designs, lists,...)
Level of detail: costly to produce but important, more
documentation necessary with high-volumes, unskilled
labour, much automation
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Product development
Often fails because of misunderstanding of markets (lack
of distinctiveness) or own technology, mismatches
between functions
Planning and mapping necessary
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Case: Apple
Design Thinking and Innovation at Apple (HBS)
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Contents
1. Profiting from Technological Innovation (Reading I-1)
Case:
Case:
Case:
Case:
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Case analyses
EMI CAT scanner: needed assets like training, servicing,
should have found a partner like Siemens
IBM PC: needed cospecialized assets like software, chose
open system approach, induced even without contracts,
help of name to reduce risks for others
Nutrasweet: tight appropriability, but patents will run out,
created brand and manufacturing in-house, let supplier
contracts expire
New Product Management
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Case: StubHub
Describe the initial minimum winning game of
StubHub and the strategic environment.
Discuss the changes necessary to move to the
next step.
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Case: Lumni
Felipe Vergara and Lumni: Launching an
Innovation in a Developing Economy (HBS)
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Themes of success
Business focus: tight focus on one field (Xerox, Kodak,
IBM,...), closely related products / product lines, focused
R&D (high amount ddue to size or proportion 8-15% of
sales), consistent priorities and behaviour, also helps in
close interaction with customers
New Product Management
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NVDcorporate management
interfaces
Strategic interferences
Administrative/cultural
frictions
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Implications:
Dimensions:
Strategic
importance
Degree of
control
Administrative
linkages
(authority)
Organizational
design
alternatives
Operational
relatedness
Efficiency
considerations
Operational
linkages
(networking)
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135
6
Independent
business
units
9
Complete
spin-off
Partly
related
2
New product
department
5
New
venture
division
8
Contracting
Strongly
related
1
Direct
integration
4
Micro new
venture
department
7
Nurturing
and
contracting
Operational relatedness
Unrelated
Very
important
Uncertai
n
Not important
Strategic importance
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Implementation issues
Tool for clarification between entrepreneur and
corporate management
Corporate management needs to develop measurement
and reward system for different alternatives
New information could alter perceived strategic
importance and operational relatedness renegotitation
of organization design
139
Major problems
Top management has limited insight and time (due to
importance), mid-level R&D management not used to
business environment, venture manager still unclear
Exhibit 2
140
Problems in impetus
ICV becomes venture (often with champion as manager)
Continued growth depends on manager strategic forcing
Needs to demonstrate sales volume and profit quickly
Generalists replaced by specialist, efficiency
considerations growth versus organization
Mid-level at the same time strategy building to fit
venture in it (and coach)
New Product Management
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Overlaying process
Objective often unclear, mid level management
delineates boundaries of venture, strategic context often
unclear (mid level management engages in
organizational championship)
Due to time lag and windows often small chance of
establishing venture, as strategies and top management
change
Deducts time from mid-level, can not coach venture
New Product Management
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Case: HP
Innovation at HP: The Role of the Innovation
Program Office (IPO) (HBS)
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