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Innovation Management (ISMT 537)
Instructor: J. Christopher Westland, Professor, ISMT
Text: Westland, J.C., Global Innovation Strategy, Palgrave / MacMillan 2007
Contact: Office: 852 2358 7643 Fax: 852 2358 2421 Email: [email protected] URL: http://teaching.ust.hk/~ismt537/
Organization of Course Materials
M ar k et E n tr yC h 7
O p p o r tu n it iesC h 1 , 2 & 3
C o m p eten c esC h 4 , 5 & 6
Ad ap tiv e E x ec u tio n
As s es s in g y o u r C o m p eten c es
Understanding Innovation
And who does it well?
Changing the Current Business Model
This is the Key to Innovation Innovation = Invention +
Commercialization The Inventions are already there
90% of the time The Commercialization (Business
Model) is what is new
Redesign: Keep it Simple
The simplest way to change a business model Is to redesign your current products and
services Objective for redesign is:
One that so appeals to your target customers That they feel almost compelled to buy from
you
The Purpose of a Business is to Create a Customer
-- Peter Drucker
Even if you create marvelous inventions Your customers won’t care Unless that is exactly what they need
Business customers are especially impatient With any product that doesn’t help them
gain competitive advantage
Creative Tension: Opportunities vs. Capabilities
The Innovator’s Challenge develop products and services That fully utilize the firm’s core
competences And deliver what the customer
wants
Creative Tension: Opportunities vs. Capabilities
Samsung is a great example: Core competence is Memory Chips Digital televisions, phones and MP3 players
were markets that were heavy users of Memory Chips
Samsung developed these products to take advantage of its own core competences
Core CompetencesThe Resource View of Firm Strategy
Each company is a collection of capabilities.
From resource-based view: a firm's unique resources and capabilities
provide the basis for a product strategy
E n v ir o n m en t 'sR es o u r c e S u p p ly C u r v e
& C o n s tr a in ts
O w n er o fS tr a teg y
( R - P - V S o u r c eo f C o m p etit iv e
Ad v an tag e)
E n v ir o n m en t 's D em an dC u r v e & C o n s tr a in ts
Valu eF lo w
{ v alu e t , v o lu m e t}
Valu eF lo w
{ v alu e t , v o lu m e t}
Valu e Ad d ed b y S tr a teg y( d if f e r en c e b e tw een tw o v a lu e f lo w s )
Finding Core Competences
To be successful a firm’s organizational structure has to effectively coordinate and integrate: R&D Design Strategy Manufacturing Assets and Competences Marketing
The Innovation Process is Holistic
Ne w Pro du ct :
L o w c o s tI m p r o v ed q u a lit iesN ew q u alit ies
C o m pe te n ce sa n d
A s s e t s
Ne wTe ch n o lo g ica l
k n o wle dg e
Ne w M a rk e tK n o wle dg e
Weakness in a Marketing-Centric View
Situation: Sales force sets product strategy Problems:
1. Competences don’t support cost effective production and distribution
2. R&D can’t satisfy lead times, product quality
Examples: Apple’s Newton Sony’s Blue Ray / PSP3
Weakness of a Techno-Centric View
Situation: R&D sets product strategy Problems:
1. Competences don’t support cost effective production and distribution
2. There is no market (i.e., no money) for what R&D wants to make
Examples: Iridium (Motorola)
Weakness of a Competence-Centric View
Situation: “Stick to your knitting” Problems:
1. There is no motivation to proactively “evolve” firm competences to meet consumer demands
2. R&D pursues useless work
3. Potential for disruptive innovations to destroy the firm in a very short time period
Example: Norton sandpaper
Weakness of a Product-Centric View
Situation: Product success deters exploration for new product strategies
(yet ‘change happens’) Problems:
1. Competences don’t ‘evolve’2. R&D focuses on ‘tweaking’ existing products 3. The reason even smart companies don’t survive
disruptive innovation
Example: Kodak Film
Case Study:
Viagra
Build a Better Product
By Managing the Consumption Chain
Viagra:
Competences
Pfizer developed several new competences in the process of bringing Viagra to market List three of them Explain how each of these new competences
was developed and implemented Explain the marketing significance of each (can
you put a dollar figure on their value?)
Viagra:
Marketing
In what ways is Pfizer’s marketing challenge different than Toyota’s (for example) List two of them Explain how each of these can be managed Explain how each difference influences
customer demand
Toolsets
Quizzing
Detailed look at customer usage and decision making regarding your product
Looks for ideas to Change the Customer’s Experience i.e., to redifferentiate your product
Remember: Experience is dynamic So are the questions in quizzing
How to Quiz
Ask QuestionsWho?
… is with customers while hey use the product How much influence do they have
If we could arrange it, who would we want the customer to be with …
What? … Do our customers experience when the use the product … needs provoked our offering
What else? … might customers have on their minds When? … do our customers use this .. Where? … are our customers when they use this How? … do customers learn to use the product ..
Function of Consumption Chain Analysis
A complement to quizzing … Quizzing is random
Consumption Chain Analysis Time sequenced
From the time customers first become aware of their need for your product or service
To the time thy finally dispose of the remnants of the used up product
The Attribute or Feature Map
Formalizes market position of innovation In a way that allows it to be explored For compatibility with
Competences R&D Customer needs and current products Competitors and Barriers
You can start a general review of a product with a rough assessment of the attribute map for the product
Assessing Customer Attitudes
The Attribute Map Compares your product to those of others
Basic Discriminator Energizer
Positive Nonnegotiable Differentiator Exciter
Negative Tolerable Dissatisfier Enrager
Neutral So What? Parallel
Consumption Chain Analysis
Aw ar en es so f n eed
S to r ag e an dtr as p o r t
In s ta lla t io na n d A s s e mb ly
R ec eip t
F in an c in g
P ay m en t
D eliv er y
O r d er an dp u r c h as e
S e lec tio nS ear c h
F in a l d is p o s a l
R ep air s an dR etu r n s
S er v ic e
Us e
More Attribute Maps
Each step on the consumption chain has an attribute map
These determine whether the potential customer proceeds to the next step Or leaves the consumption process (not good)
C o n tin u e
Lea
ve
The Purpose of a Business is to Create a Customer
-- Peter Drucker
Even if you create marvelous inventions Your customers won’t care unless that is exactly what
they need
Business customers are especially impatient With any product that doesn’t help them gain
competitive advantage
CCA is about keeping your customer at each step
Every Link in the Consumption Chain has its Own Attribute Map
The Attribute Map compares your product to those of others
Basic Discriminator Energizer
Positive Nonnegotiable Differentiator Exciter
Negative Tolerable Dissatisfier Enrager
Neutral So What? Parallel
Attribute Maps
Are applied: Before CCA At each step of the consumption chain
This can get complex This forces you to simplify Minimize strategy drivers Minimize essential features
Summary: Steps for Redifferentiating
1. For each customer segment sketch the consumption chain2. Identify the trigger events that precipitate customer
movement from link to link3. Put in place procedures to alert you when the trigger is pulled
(and plan your response)4. Quiz to assess needs that may not be met currently5. Create an attribute map for each significant link in the
Consumption Chain6. Use your knowledge of Customer Experience to create
Blockbuster Products7. Put the ideas you generate into your opportunity register
Repeat this process for each class of stakeholders
Design Innovations
Landmark Designs from years past
Henry Dreyfuss: Form follows function
“Streamlining”It’s first uses applications were practical
Loewy’s Streamlining
McCormick-Deering Creamerbefore and after Loewy’s 1945 redesign to streamline, and eliminate fragile parts
Streamlining Household Appliances (Loewy)
Transformation:Functioning invention to Marketable product
Which is Faster?
Utility + Human Interface
Lessons from 3M and Norton
A study in Innovation ContrastsCase Study from Jim Collins & Jerry Porras, Built to Last, 1997
Success from Failure
Detailed plans fail, because circumstances inevitably change
Military theorist Karl von Clausewitz
3M began life as a failure (1904) Its corundum (e.g.,rubies and sapphires) mining operations
failed It moved to abrasives to develop a use for all its low-grade
grit
William McKnight’s Strategy Diversify products Develop the lab to do so.
Norton
Same industry same time period as 3M
Financially stronger
Took the conservative approach Of only servicing successful
customers and products
Comparison of history: 3M & Norton
‘Culture’
3M’s culture of innovation transcended McKnight, Okie, Drew and Carlton
Consider the ‘Mechanisms’ that define the culture
3M and Norton
Lessons Learned 3M has come up with many management
innovations to make its technology company work
‘Mechanisms’= The Ticking Clock that continues to operate despite management / personnel changes
Management Innovation
"Give it a try—and quick!"
When in doubt, vary, change, solve the problem, seize the opportunity, experiment, try something new (consistent, of course, with the core ideology) even if you can't predict precisely how things will
turn out Do something. If one thing fails, try another.
Fix. Try. Do. Adjust. Move. Act. No matter what, don't sit still.
Management Innovation
"Accept that mistakes will be made"
You can't tell ahead of time which variations will prove to be favorable You have to accept mistakes and failures Darwin's key phrase: "Multiply, vary, let the strongest live, and the
weakest die."
In order to have healthy evolution, you have to try enough experiments (multiply) of different types (vary), keep the ones that work (let the strongest live), and discard the ones that don’t (let the weakest die).
Failures are valuable in certain ways.... You can learn from success, but you have to work at it;
A visionary company tolerates mistakes (but only where you learn from them)
Management Innovation
"Take small steps."
It's easier to tolerate failed experiments when they are just that—experiments, not massive corporate failures.
small incremental steps can form the basis of significant strategic shifts.
If you want to create a major strategic shift in a company, you might try becoming an "incremental revolutionary"
harnessing the power of small, visible successes to influence overall corporate strategy.
Management Innovation
“Give people the room they need."
A key step that enabled unplanned variation.
When you give people a lot of room to act, you can't predict precisely what they'll do
This is good.
Visionary companies decentralized more and provided greater operational autonomy than the comparison companies in twelve out of eighteen of Porros and Collins cases. (Five were indistinguishable.)
Corollary: Allow people to be persistent.
Management Innovation
Leadership tone
Managers often underestimate the importance
of building lasting mechanisms to translate objectives into results
They erroneously think that if they just set the right "leadership tone,"
people will experiment and try new things.
Management Innovation
3M’s Ticking Clock
Some Questions How could you improve 3M?
3M seems to be quite lenient with managers whose projects fail to meet ROI targets. Can you think of a way to prevent 3M’s
product failures and keep generating profitable products?
What would such a strategy look like?
Some Questions
3M’s relaxed environment is likely to attract freeloaders and deadwood to their staff. How should 3M manage these problem
employees?
Is there a Human Resources strategy that can prevent the accumulation of non-performing employees in a relaxed, self-motivating work environment like 3M’s?
Innovation Workout
Quiz, Consumption Chain Analyze and Feature Map an Innovation
Quizzing and Mind Maps
