Innovation Management (ISMT 537)

1. 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: westland@ust.hk URL: http://teaching.ust.hk/~ismt537/

2. Organization of Course Materials

3. Understanding Innovation And who does it well?

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. The Innovation Process is Holistic

12. Weakness in a Marketing-Centric View • Situation: Sales force sets product strategy • Problems: • Competences don’t support cost effective production and distribution • R&D can’t satisfy lead times, product quality • Examples: • Apple’s Newton • Sony’s Blue Ray / PSP3

13. Weakness of a Techno-Centric View • Situation: R&D sets product strategy • Problems: • Competences don’t support cost effective production and distribution • There is no market (i.e., no money) for what R&D wants to make • Examples: • Iridium (Motorola)

14. Weakness of a Competence-Centric View • Situation: “Stick to your knitting” • Problems: • There is no motivation to proactively “evolve” firm competences to meet consumer demands • R&D pursues useless work • Potential for disruptive innovations to destroy the firm in a very short time period • Example: • Norton sandpaper

15. Weakness of a Product-Centric View • Situation: Product success deters exploration for new product strategies • (yet ‘change happens’) • Problems: • Competences don’t ‘evolve’ • R&D focuses on ‘tweaking’ existing products • The reason even smart companies don’t survive disruptive innovation • Example: • Kodak Film

16. Case Study:Viagra Build a Better Product By Managing the Consumption Chain

17. 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?)

18. 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

19. Toolsets

20. 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

21. How to Quiz Ask Questions Who? • … 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 ..

22. 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

23. 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

24. Assessing Customer Attitudes • The Attribute Map • Compares your product to those of others

25. Consumption Chain Analysis

26. 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)

27. 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

28. Every Link in the Consumption Chain has its Own Attribute Map • The Attribute Map compares your product to those of others

29. 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

30. Summary: Steps for Redifferentiating • For each customer segment sketch the consumption chain • Identify the trigger events that precipitate customer movement from link to link • Put in place procedures to alert you when the trigger is pulled (and plan your response) • Quiz to assess needs that may not be met currently • Create an attribute map for each significant link in the Consumption Chain • Use your knowledge of Customer Experience to create Blockbuster Products • Put the ideas you generate into your opportunity register Repeat this process for each class of stakeholders

31. Design Innovations Landmark Designs from years past

32. Henry Dreyfuss: Form follows function

33. “Streamlining”It’s first uses applications were practical

34. Loewy’s Streamlining

35. McCormick-Deering Creamerbefore and after Loewy’s 1945 redesign to streamline, and eliminate fragile parts

36. Streamlining Household Appliances (Loewy)

37. Transformation:Functioning invention to Marketable product

38. Which is Faster?

39. Utility + Human Interface

40. Lessons from 3M and Norton A study in Innovation Contrasts Case Study from Jim Collins & Jerry Porras, Built to Last, 1997

41. 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.

42. Norton • Same industry • same time period as 3M • Financially stronger • Took the conservative approach • Of only servicing successful customers and products

43. Comparison of history: 3M & Norton

44. ‘Culture’ • 3M’s culture of innovation transcended McKnight, Okie, Drew and Carlton • Consider the ‘Mechanisms’ that define the culture

45. 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

46. 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.

47. 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)

48. 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.

49. 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.

50. Management InnovationLeadership 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.