Showing papers in "Research-technology Management in 2011"

Frugal Innovation in Emerging Markets

Abstract: OVERVIEW:The quality and number of innovations developed by multinational companies from emerging countries is increasing dramatically. In particular, frugal innovations—“good-enough,” affordable products that meet the needs of resource-constrained consumers—have created tremendous demand in emerging markets. While the development of such products has largely been the domain of local corporations in emerging countries, Western corporations have recently started to engage in frugal innovation as well. This is a difficult task for Western firms, however, because their business models and organizational structures are traditionally designed for the development of advanced products for the affluent few at the top of the economic pyramid. Using Swiss weighing-instrument manufacturer Mettler Toledo as a case example, this article suggests that frugal innovations are largely developed by local R&D subsidiaries of Western firms in emerging countries. A substantial degree of autonomy for those local R&D subsidiari...

The Three Faces of Business Model Innovation: Challenges for Established Firms

Abstract: OVERVIEW:Business model innovation represents a significant opportunity for established firms, as demonstrated by the considerable success of Apple's iPod/iTunes franchise. However, it also represents a challenge, as evidenced by Kodak's failed attempt to dominate the digital photography market and Microsoft's difficulty gaining share in the gaming market, despite both companies' huge financial investments. We developed a business model innovation typology to better explain the complex set of factors that distinguishes three types of business model innovations and their associated challenges.

Lead-User Research for Breakthrough Innovation

Abstract: The best companies often work closely with their customers to uncover needs and wants that can be translated into new or improved product or service offerings. The lead-user research method goes a ...

Building an Innovation Community

Abstract: OVERVIEW:Companies are increasingly using social media and other technologies to broaden the approach to idea generation and innovation both within and outside the walls of the organization. However, managers can tend to focus on installing the technology, rather than on designing a socio-technical system that can meet the organization's goals and foster authentic participation. In 2008, Pitney Bowes, a $5.4 billion provider of technology and services for mail and digital communications, initiated an effort to build an employee innovation community aimed at driving organic growth and fostering a culture of innovation among its 30,000 employees around the globe. The Pitney Bowes Employee Innovation Program team took a human-centered approach and used primary research and co-creation with individuals across all levels of the organizational hierarchy to design a program that both met company objectives and satisfied a value proposition for managers and employees. The resulting program delivered measurable va...

Corporate Venture Capital Investments for Enhancing Innovation: Challenges and Solutions

Abstract: OVERVIEW:Corporate venture capital investments are a powerful tool to explore and exploit innovative opportunities with start-up companies. Successfully implementing a corporate venturing program presents a number of challenges, from setting the right mixture of strategic goals and operational implementation to measuring outcomes and capturing value. Working from a series of nine case studies of corporate venturing units in large corporations, this article examines the challenges and presents practical solutions drawn from detailed analysis of the case studies.

THE RISE OF THE REST: HOTBEDS OF INNOVATION IN EMERGING MARKETS The rise of emerging markets will force Western companies to recognize new competitors and rethink their own innovation approaches.

Abstract: Conventional wisdom has long held that innovation is the strength of the West and that what gets developed in the West is modified and transferred to "the Rest." But the reality of recent years does not support this assumption. In point of fact, we're seeing a rise in the number of innovations coming from emerging markets, and we're seeing even more in the way of influence from emerging markets in the way that innovation is conceived of, executed, and delivered. Innovation happens where need meets opportunity. In emerging markets, these needs are often very basic, particularly for those at the bottom of the economic pyramid (Prahalad 2004). As creative ideas for meeting those basic needs are translated into compelling innovations, emerging markets are becoming hotbeds of innovation in areas ranging from healthcare to water to transportation. And innovation activities in emerging markets are having profound impacts on the West; indeed, products created in and for emerging markets are now finding eager buyers in developed nations. Once called reverse innovation (Immelt, Govindarajan, and Trimble 2009), and now also known as frugal or constraint-based innovation (Economist 2010), this reversal of the traditional flow of innovation is both reshaping consumer demands and forcing Western companies to rethink their ideas about innovation and how it happens. [FIGURE 1 OMITTED] "Emerging markets" have often been associated with the BRIC countries--Brazil, Russia, India, and China--but companies seeking to better understand emerging markets and frugal innovation must now look much further afield, as regions around the world emerge as incubators of innovation. This article highlights some recent developments in emerging markets and provides some insight into how the innovation model driving these emerging markets differs from the model invoked by their Western counterparts. Innovation Hotbeds What does a desalinization project in Israel or the United Arab Emirates have in common with mobile banking in Kenya or the Tata Nano car in India? At first blush, very little. But these places, and these products, are emblematic of the innovation power that has been fermenting in the rest of the world and that is now poised to take full advantage of globalization. Bloomberg Business Week's 2010 ranking of the 50 most innovative companies included 15 Asian companies; more than one fifth of the entrants on the list were anchored in emerging economies (Amdt and Einhom 2010). [ILLUSTRATION OMITTED] Many of those markets are evolving specializations in areas that are particularly important for their home economies (Figure 1). We' ve chosen to emphasize four areas: mobile banking, microfinance, and social media; transportation; energy and natural resources; and healthcare. In calling out innovation hotbeds, we're not attempting to be all-inclusive, but rather to highlight the confluence of factors that is now driving the emergence of truly innovative products and services from unexpected comers of the world. Mobile Banking, Microfinance, and Social Media Want to be at the center of mobile banking and the mobile wallet? Go to Kenya. The M-PESA program, a joint venture between Vodaphone and Safaricom, has revolutionized the way that local farmers and small business owners manage their money. These entrepreneurs and farmers go to market with goods and keep track of purchases and expenditures using their cell phones. Cell phones replace the bricks-and-mortar bank, providing the unbanked access to credit, an easy way of paying bills, and seamless tracking of their expenditures and incremental wealth accumulations--all via text messages. The underlying enablers of this mobile banking revolution lie not only in a rethinking of the way financial institutions work, but also in innovations in cell phones to accommodate the habits of emerging-market users, such as phones that can store multiple contact lists to allow multiple users to share a phone. …

The Evolution of Open Innovation: An Interview with Henry Chesbrough

Abstract: (2011). The Evolution of Open Innovation: An Interview with Henry Chesbrough. Research-Technology Management: Vol. 54, No. 5, pp. 13-18.

The Rise of the Rest: Hotbeds of Innovation in Emerging Markets

Abstract: The rise of emerging markets will force Western companies to recognize new approaches. competitors and rethink their own innovation Conventional wisdom has long held that innovation is the strength of the West and that what gets developed in the West is modified and transferred to "the Rest." But the reality of recent years does not support this assumption. In point of fact, we're seeing a rise in the number of innovations coming from emerging markets, and we're seeing even more in the way of influence from emerging markets in the way that innovation is conceived of, executed, and delivered. Innovation happens where need meets opportunity. In emerging markets, these needs are often very basic, particularly for those at the bottom of the economic pyramid ( Prahalad 2004 ). As creative ideas for meeting those basic needs are translated into compelling innovations, emerging markets are becoming hotbeds of innovation in areas ranging from healthcare to water to transportation. And innovation activities in emerging markets are having profound impacts on the West; indeed, products created in and for emerging markets are now finding eager buyers in developed nations. Once called reverse innovation ( Immelt, Govindarajan, and Trimble 2009 ), and now also known as frugal or constraint-based innovation ( Economist 2010 ), this reversal of the traditional flow of innovation is both reshaping consumer demands and forcing Western companies to rethink their ideas about innovation and how it happens. "Emerging markets" have often been associated with the BRIC countries-Brazil, Russia, India, and China-but companies seeking to better understand emerging markets and frugal innovation must now look much further afield, as regions around the world emerge as incubators of innovation. This article highlights some recent developments in emerging markets and provides some insight into how the innovation model driving these emerging markets differs from the model invoked by their Western counterparts. Innovation Hotbeds What does a desalinization project in Israel or the United Arab Emirates have in common with mobile banking in Kenya or the Tata Nano car in India? At first blush, very little. But these places, and these products, are emblematic of the innovation power that has been fermenting in the rest of the world and that is now poised to take full advantage of globalization. Bloomberg BusinessWeek 's 2010 ranking of the 50 most innovative companies included 15 Asian companies; more than one fifth of the entrants on the list were anchored in emerging economies ( Arndt and Einhorn 2010 ). Many of those markets are evolving specializations in areas that are particularly important for their home economies ( Figure 1 ). We' ve chosen to emphasize four areas: mobile banking, microfinance, and social media; transportation; energy and natural resources; and healthcare. In calling out innovation hotbeds, we're not attempting to be all-inclusive, but rather to highlight the confluence of factors that is now driving the emergence of truly innovative products and services from unexpected corners of the world. Mobile Banking, Microfinance, and Social Media Want to be at the center of mobile banking and the mobile wallet? Go to Kenya. The M-PESA program, a joint venture between Vodaphone and Safaricom, has revolutionized the way that local farmers and small business owners manage their money. These entrepreneurs and farmers go to market with goods and keep track of purchases and expenditures using their cell phones. Cell phones replace the bricks-and-mortar bank, providing the unbanked access to credit, an easy way of paying bills, and seamless tracking of their expenditures and incremental wealth accumulations-all via text messages. The underlying enablers of this mobile banking revolution lie not only in a rethinking of the way financial institutions work, but also in innovations in cell phones to accommodate the habits of emerging-market users, such as phones that can store multiple contact lists to allow multiple users to share a phone. …

Developing new technology platforms for new business models: Syngenta?s partnership with the University of Manchester

Abstract: Evidence from academic studies and national-level policy reports suggests that university-industry relationships are now widely practiced in many countries and increasing in importance. University innovation centers (UICs) offer one mechanism for managing these relationships. UICs are an instrument to mobilize a critical mass of researchers to build new technology platforms and enable the corporate partner to explore new business opportunities, a process that requires work on new business models to be carried out in parallel with technological research. As an example, the paper analyzes the partnership between agribusiness Syngenta AG and the University of Manchester (UK) to establish a UIC focused on the introduction of sensors and informatics into agriculture (?agri-electronics?).

Innovation in Emerging Markets

Abstract: (2011). Innovation in Emerging Markets. Research-Technology Management: Vol. 54, Innovation in Emerging Markets, pp. 8-9.

Selling Technological Knowledge: Managing the Complexities of Technology Transactions

Abstract: OVERVIEW:With the diffusion of the open-innovation paradigm, more companies are selling their technological knowledge, disembodied from physical artifacts, to other organizations in an attempt to maximize the rent-yield potential of the innovation process. However, extracting revenues from technology sale remains a challenge for most firms due to the peculiarities of technological knowledge as an object of commerce. A study of 30 companies actively involved in technology sale and 75 single transactions illuminates two key aspects of technology transactions: (1) the challenges that the technology sale process entails, and (2) the practices that can be adopted to manage the complexities of technology transactions. CTOs and R&D and technology managers can use these insights to build a firm-level capability in selling technological knowledge.

Managing Uncertainty during R&D Projects: A Case Study: The Project Portfolio Option-Value Method Offers a Way to Assess and Manage Risk and Demonstrate Interdependency among R&D Projects

Abstract: The economic return of a portfolio of RD Verworn 2009). Development efforts sometimes fail, customers' preferences are difficult to predict, and competitors act differently than expected. Fortunately, RD Santiago 2008; Salomo, Weise, and Gemuenden 2007; Chien 2002). A number of models have been developed in an attempt to meet these needs, but they have fallen short in key aspects. In particular, real options and option-tree models have been developed for situations characterized by uncertainty and managerial flexibility (e.g., Athwal, Harmantzis, and Tanguturi 2010; Benaroch 2001 ; Luo, Sheu, and Hu 2008; Santiago 2008; Santiago and Bifano 2005; Schneider et al. 2008; Huchzermeier and Loch 2001). Several authors have described pragmatic methods for implementing real-options models (e.g., Mathews 2009; Paulson, O'Connor, and Robeson 2007; Raynor and Leroux 2004). But, as continuous-time models, real-options models are not well suited for application in complex technology-focused settings. The assumptions underlying these models are not very realistic for most R&D projects, and the setting of large R&D portfolios is too complex to fit standard-option models. When the models are expanded to more-complex decision settings, any hope for analytical results, which is one of the main reasons to work in continuous time, is lost. These complex models also tend to sacrifice transparency, which critical to help in bringing together information from different functional areas and, ultimately, convincing senior management (Rollwagen, Hofmann, and Schneider 2008). Nonspecialists often perceive complex real-options models as impenetrable black boxes, which obstructs their use as a transparent communication tool. Option-tree models were introduced to address some of these concerns. However, while option trees may reflect uncertainties and choices in R&D projects in a more intuitive way, such models quickly become unfeasible in the face of a proliferation of uncertainties and decisions. A tree that relies on a detailed specification of the sequence of events will result in an unmanageable number of branches. In several years of working with a large, technology-focused R&D department, we have developed a method for valuing R&D projects that supports risk management by clearly demonstrating the effect of uncertainty on the value of R&D projects and illustrating the effects of interdependencies among projects in a portfolio. In this paper, we demonstrate the application of the project portfolio option-value (PPO) method to guide decision making with regard to a complex and highly uncertain technology program. The Project Portfolio Option-Value Method R&D projects are characterized by uncertainty and constrained by various kinds of quantitative and qualitative criteria (Tritle, Scriven, and Fusfeld 2000). The PPO method works to represent uncertainty "naturally" and identify which criteria must be satisfied in order to attain a particular scenario and its associated value. …

Implementation Steps for Successful Out-Licensing

Abstract: OVERVIEW:In addition to acquiring external technology, many industrial firms now seek to license their technology out to external partners. These technology out-licensing activities promise important monetary and non-monetary benefits that allow firms to profit from technologies beyond their traditional business lines. Some pioneering companies achieve major benefits from active out-licensing programs. Most other firms, however, experience managerial difficulties in implementing active out-licensing strategies. This article builds on expert interviews with managers in 30 industrial firms to highlight three organizational approaches for implementing active out-licensing programs: structural organization, project organization, and participatory organization. Based on evidence from the interviews, the article presents a six-step procedure for successfully executing an active out-licensing program.

Managing Disruption: An Interview with Clayton Christensen

Abstract: Clayton Christensen talks with James Euchner about how companies can anticipate disruption and the challenges of managing disruptive change. Clay Christensen is best known for formulating "the innovator's dilemma": the observation that the same behaviors that sustain a company-listening to customers and investing in innovations to meet those customers' needs-can ultimately lead to failure. Focusing too heavily on current customers' needs can blind the company to a disruptive innovation, one that starts in new markets and changes the way customers perceive the current product. Since he articulated the problem in The Innovator's Dilemma and described how well-managed companies fail precisely because they do what rational analysis would dictate, Christensen has worked with many companies confronting disruptive change. We spoke with him about how companies can anticipate disruptive forces, the tactics they can use for moving before customers do, and the organizational challenges associated with confronting disruption. James Euchner [JE]: Thank you, Clay, for spending the time with me this morning. Clayton Christensen [CC]: Oh, I'm delighted. Thank you. JE: As those responsible for innovation in our organizations, we're very interested in how people get close to their customers, understand what their customers' needs are, and then innovate into them. You've studied this in great depth, and you caution people that you can get too close to your customers or listen too much to your customers. Can you comment on that? CC: Sure. If you look across the sweep of business history, the big new waves of growth have been started by companies that actually develop what I call "disruptive innovation," and a disruptive innovation is an innovation that makes it so much simpler and so much more affordable to own and use a product that a whole new population of people can now have one-people who, historically, didn't have the money or skill to be in the market. Some examples of these sorts of disruptive innovations are the personal computer, the router, Toyota's automobiles, Kodak's original camera, Xerox's original photocopier, Canon's desktop photocopier. All of these innovations made something so much simpler and more affordable that a new population of customers got pulled into the market. In every one of those cases, though, the performance of the disruptive products wasn't anywhere near as good as the performance of the established products that were being sold to the players in the market. For example, when Canon disrupted Xerox, their most important customers operated high-speed photocopy centers, and they needed even faster, ever more fully featured machines. These little tabletop copiers [from Canon] could do three or four copies a minute. They couldn't collate; they couldn't enlarge or reduce or do grayscale replication. But they made it so much simpler to make photocopies that many people actually had two copiers for a while. For the simple things, we had a little Canon around the corner from our office, and for the high-volume jobs, we still took the work to the corporate photocopy center. When Xerox listened to its [photocopy center] customers, it got no signal from them that this little tabletop thing was important. But then Canon, little by little, made it better and faster and more capable and more convenient to use until, ultimately, an entirely new market was created. Now it seems that to be within 15 seconds of a high-speed photocopy machine is almost a constitutional right, you know? And Xerox missed most of that growth. Oddly, it's because they listened to their customers rather than doing a deeper analysis of, "Well, what is the job that the customer is really trying to get done?" JE: In that case, it was actually the same customer-the large enterprise customer-that used both products. How could Xerox have picked up the weak signal as it was coming out? …

Why Prize? the Surprising Resurgence of Prizes to Stimulate Innovation: Well-Designed Prizes Leverage the Principles of Competition to Motivate Afield of Solvers to Attack a Particular Challenge. All Kinds of Organizations Can Use Prizes to Engage User Communities, Enhance Their R&D Portfolios, and Jump-Start Innovation

Abstract: In this era of social networks and globalization, successful organizations are learning to take a broad view of innovation, recognizing that yesterday's protest "Not Invented Here!" is today's battle cry. Of the many tools available to broad-minded organizations looking to source ideas from outside their usual teams, prizes offer perhaps the most compelling formula, bringing together maverick ideas, broad engagement, high leverage, a results-oriented mentality, and heroic story arcs built around the quest for the prize and flashbulb-worthy winning moments. Innovation competitions are not the right answer to every challenge, but where they fit, they are an incredibly powerful tool for attracting innovative solutions. History of Prizes Prizes are not a new tool in the innovation manager's toolkit; indeed, they have been around for hundreds of years. Napoleon famously crowdsourced the invention of canning to preserve food in response to the challenges posed by the need for his army, "marching on their stomachs," to be fueled through the winter months. Charles Lindbergh did not cross the Atlantic on a whim, but revolutionized aviation in response to the $25,000 Orteig Prize. And the invention of modern timekeeping and maritime navigation began with eighteenth-century British cabinetmaker John Harrison, responding to the British Parliament's Longitude Prize, awarded for solving the problem of determining a ship's longitude at sea. When the Ansari X PRIZE was launched in 1996, it harkened back to this long heritage of prizes to spur invention, offering $10 million for the first private team to launch a three-passenger vehicle into space (100 kilometers) twice in two weeks. This challenge, which brought innovators into human spaceflight, a domain thought to be the exclusive territory of governments, spurred 26 teams from seven different countries to spend a total of over $100 million trying to win the $10 million purse. In 2004, SpaceShipOne, built by aviation pioneer Burt Rutan, rocketed out of the California desert to claim the oversized check; in addition to the prize, Rutan landed a contract from Virgin founder Richard Branson to supply the vehicles for a newly imagined Virgin Galactic. Over $1.5 billion in investments later, the private spaceflight industry is a bona fide commercial venture and a cornerstone of the U.S. national space policy. All catalyzed by a prize. On the heels of this success, a veritable industry of competitions has emerged, valued at over $1 billion and growing (McKinsey 2009). The intersection of this risk capital (to fund the prizes) with a highly connected and highly engaged global audience has resulted in tremendous yields, creating a vibrant marketplace for tough challenges and bright, creative solvers, independent of location and pedigree. Philanthropic donors, corporate R&D organizations, marketing teams, and even government agencies are getting in on the action. In response, a broad set of service providers have sprung up to support these challenges, allowing those who hold the purse strings the freedom to contract out everything from scoping a compelling challenge to writing the rules, recruiting competitors and judges, managing contest operations, and marketing the challenge. With this support, it is now easier than ever for any organization to launch a successful prize. Benefits of Prize Competitions Many different competitive inducement mechanisms exist for fostering innovation and engagement. While retrospective awards, such as the Nobel Prizes, are effective at recognizing success and associating a brand with excellence, their post hoc nature limits the amount of direct impact they can have on a community. Inducement prizes, on the other hand, challenge competitors to meet specific success criteria, driving forward a given agenda. Inducement prizes are notable for at least five features that differentiate them from other procurement mechanisms: 1. …

Why Prize? the Surprising Resurgence of Prizes to Stimulate Innovation

Abstract: Pairing a clear, measurable end goal with a variety of motivators, well-designed prizes leverage the principles of competition to bring afield of solvers to bear on a given challenge. Prizes offer ...

R&D Strategies in Emerging Economies: Results from the McKinsey Global Survey

Abstract: Economies such as China, India, and Brazil are emerging from the global recession with high expectations for growth, presenting global companies with new markets, ongoing access to lower costs, and unprecedented opportunities to broaden their research and development efforts in the coming years. Yet in our third annual McKinsey survey on RD among those pursuing innovation for emerging markets, 39 percent cite access to customer insights (Figure 3). Forty percent of respondents say their companies adjust product features to meet the needs of emergingmarket consumers, while just 16 percent say their companies develop entirely new products for these customers (Figure 4). Companies focusing on R&D for innovation in emerging economies are somewhat more likely to develop new products (24 percent), while respondents at companies headquartered in some of the largest emerging economies--notably India--are likelier still to say they're developing new products for emerging-market consumers. …

Accelerating Corporate Innovation: Lessons from the Venture Capital Model: What Can Corporate Innovators Learn from the Innovation Practices of Agile Start-Ups?

Abstract: As we enter this century's second decade, the rate of business innovation is accelerating, challenging all incumbents' ability to maintain their competitive edge. The model of the industrial enterprise that excels through internal innovation has been shattered by the reality of new ventures that achieve true scale and competitive advantage through rapid cycles of innovation, experimentation, and distribution. These patterns are most evident in Internet-related disruptions, such as Google, Facebook, and Groupon. The current cycle of disruptive innovation is shaking every industry to its core, be it energy, manufacturing, transportation, health care, hospitality, media, consumer products, fashion, or natural resources. Managing innovation for an enterprise is no longer a simple matter of new-product development, something for those fellows in RD Dell's mass customization approach to PC retailing made buying off the shelf seem second best; and the Spanish retailer Zara, with its ultrafast product development cycles and weekly inventory turnovers, changed the very idea of a fashion season, from something that happens four times a year to a weekly event. Software vendors have become solutions providers, using software-as-a-service (SaaS) business models to convert old-line direct-sales businesses into service enterprises. New intermediaries such as EnerNOC, exploiting technical innovations such as smart meters, have arisen to help electrical utilities convert their customers from mere consumers of power to partners in energy management. Some of the most disruptive innovations do not rely on significant technical breakthroughs at all, but rather on the creation of applications for emerging platforms (such as software solutions distributed via the SaaS business model over the Internet or entertainment applications, games, and utilities for the iPhone or the iPad distributed via the iTunes App Store) or the recombination of existing capabilities (for instance, Netflix's metamorphosis from CD rental outlet to streaming media content provider). …

Innovation Portfolio Architecture-Part 2: Attribute Selection and Valuation: A "Sufficiently Simple" Valuation Philosophy Quickly Identifies the Most Valuable Concepts in an Innovation Portfolio While Minimizing Analytical Time and Cost

Abstract: As opposed to a project portfolio, which is focused on managing and delivering projects in development (Cooper, Edgett, and Kleinschmidt 2000, 2002b), an innovation portfolio is used to analyze and manage early-stage concepts (O'Connor and Ayers 2005; Paulson, O'Connor, and Robeson 2007; Roseno 2008). Unlike a project portfolio, which is managed primarily as a linear process and which typically has a low attrition rate, an innovation portfolio is a complex and emergent process, in part because of the high uncertainty regarding the concepts included in the portfolio and consequent high attrition rates. The innovation portfolio architecture must help shape an evolving strategy leveraged by small, incremental investments in the most promising concepts and concomitant abandonment of other, less promising or less relevant concepts at each phase of analysis (MacMillan 2002; Cooper and Edgett 2007). (1) Why is an innovation portfolio necessary? Couldn't a knowledgeable manager simply select the best concepts and dispense with the portfolio process, saving time and money? In fact, there is significant value for early-stage, unproven concepts in having a structured decision-making process coupled with transparent investment justification (Terwiesch and Ulrich 2008). An innovation portfolio process can increase the number and quality of innovative concepts entering the downstream project portfolio. And the process has another important benefit: the generation and substantiation of a matured strategy that emerges from the innovation portfolio's internal decision-making processes, significantly improving the likelihood that the project portfolio will produce successful outcomes (Say, Fusfeld, and Parish 2003). To achieve this goal at minimal cost, the innovation portfolio process must provide a rapid, unbiased decision-making structure that quickly identifies the most valuable concepts among the hundreds that may originate in ideation events or through other mechanisms. The innovation portfolio model we have developed at Boeing accomplishes this through the generation of simple metrics based on a minimal set of relevant, measurable attributes that allow widely divergent concepts to be effectively compared while being funneled through three phases of analysis. Real-option methods provide the overall philosophy for selecting attributes and a guide to the metrics of valuation. These same attributes simultaneously provide for other valuation approaches, such as net present value (NPV). The innovation portfolio design incorporates some of the latest technology in the fields of complex adaptive systems and real option models. Boeing is still experimenting with this portfolio model, which has been evaluated as an operational prototype. Structuring the Innovation Portfolio The innovation portfolio architecture is aligned with and designed to accommodate the nonlinear innovation process. A structure of phased information transitions accommodates the complex and emergent process of maturing concepts within an innovation portfolio. The phase structure emphasizes that collecting and organizing information about an innovative concept is as important as tracking its maturation. The information threshold for each phase is set as low as possible so as to minimize the resources required to gather the data necessary to derive the value metrics needed for decision making. The type of information to be gathered is defined by the set of attributes that form the basis for strategically differentiating among the concepts in the portfolio. Phases differ from "gates," the stop/go locks of project management oversight (Cooper, Edgett, and Kleinschmidt 2002a), in that, although phases are numbered, concept transitions from one phase to another may not adhere to a linear progression, and the transitions do not require a go/ no-go decision. Staged gate reviews are unwieldy in the context of an innovation portfolio that includes small investments in scores of constantly evolving concepts. …

Building Innovation Subsidiaries in Emerging Markets: The Experience of Novo Nordisk

Abstract: OVERVIEW:Innovation subsidiaries increasingly follow manufacturing subsidiaries into emerging markets. Compared to well-established Western economies, emerging markets present unique challenges for the development of innovation management capabilities at subsidiaries. This paper distinguishes between implementer and innovator subsidiaries and provides suggestions on how to transform an implementer subsidiary to an innovator. This transformation may start as a strategic priority within the company and then be translated into specific actions. Suggestions for actions are based on the experience of a large multinational pharmaceutical company, Novo Nordisk. Lessons learned include assigning the subsidiary responsibility for a self-contained piece of work while maintaining a central R&D function, balancing local and in-company management, using local innovation talent, and educating new hires into the company culture.

The Effectiveness of the Chief Technology Officer

Abstract: OVERVIEW:The significant role of technology in strategic business activities and new-product development has driven companies to create a Chief Technology Officer (CTO) position to lead and direct technology development activities. The CTO is a new and evolving role, having been first utilized only within the last few decades. Although the position is becoming more widely used, there is still a lack of understanding as to the specific benefits a CTO position can bring to an organization. There has been little research to date focusing on the CTO role and even less with empirical data. The purpose of this paper is to fill an important gap by analyzing a number of innovation and financial metrics to assess the impact of the CTO on an organization's performance. An analysis of the data shows that the CTO role is effective in promoting both innovation and financial improvements. This provides support for the creation and continued use of the CTO position in companies. An unexpected outcome of this research wa...

Effective Strategies to Catch Up in the ERA of Globalization: Experiences of Local Chinese Telecom Equipment Firms

Abstract: OVERVIEW:Firms in emerging markets have traditionally followed one of two strategies to catch up with multinational enterprises (MNEs): developing customized products, services, or innovative business models or buying and absorbing technology from MNEs. In the era of globalization, these strategies are no longer effective. The new strategy to succeed is innovation-based differentiation, developing core technologies and advanced product offerings that are delivered at a low cost and with excellent customer service. Using this strategy, leading local firms are quickly catching up with MNEs in market development, technology development, or both.

Managing Uncertainty during R&d Projects: A Case Study

Abstract: Firms make signifi cant investments in RD in which the order in which uncertainties are resolved and decisions will be made cannot be specifi ed in advance; in which interdependencies exist among RD and where transparency is vital.

Breaking Away: An Innovation Model for Sustainable Growth

Abstract: OVERVIEW:When most people think of innovation they think huge—lightbulb or Internet huge. While we'd all love to be a part of something that transforms the world, the fact is, few of us will have that chance. That doesn't mean remarkable innovation is beyond reach—far from it. Based on over five decades of combined experience in the innovation trenches and research into more than 50 companies around the globe, we introduce a new model that portrays innovation as a multilevel construct. In this model, innovation is organized into four levels: transformational, category, marketplace, and operational. Each level offers tremendous opportunities to revolutionize an industry, a market, or the company itself. In addition, we introduce the concept of “cascading,” the phenomenon by which one innovation inspires ideas for others in a natural progression. Adopting the multilevel view of innovation can help develop a blueprint for building the ultimate innovation team—one that is cross-functional, collaborative, and ...

Optimizing the R&D Process Using Spin-Outs: Case Studies from the Pharmaceutical Industry: R&D Spin-Outs Can Offer an Attractive Mechanism for Increasing the Effectiveness and Reach of R&D Activities While Maintaining the Focus of the Core Business. A Study of 42 Spin-Outs in the European Pharmaceutical Industry Reveals the Attributes That Lead to Successful Spin-Outs and Illustrate the Possible Advantages of Spin-Outs

Abstract: The number of corporate RD Chemmanur and Yan 2004; Dewdney and Smith 1998). This may be the result of several market forces currently reshaping the industry including rising RD Bergh and Lira 2008). A spin-out can also be used to reduce capital requirements and risk, if RD van Gils et al. 2009). RD Jagersma and van Gorp 2003). They can more easily pick up external impulses and serve as a mechanism to explore revolutionary ideas in a setting apart from mainstream business (Parhankangas and Arenius 2003; Jagersma and van Gorp 2003). We attempted to ascertain the real effect of RD spin-outs with mainly marketing or production activities were not considered. Within R&D spin-outs, we analyzed two subgroups: 1. Intellectual property-oriented spin-outs focused on creating intellectual property (IP) and even original drug candidates in different phases of the drug discovery and development process. 2. Service-oriented spin-outs providing drug discovery and development services for pharmaceutical companies based on a fee-for-service-model (for instance, lead optimization, toxicology, analytics, clinical studies, or formulation services). Hybrid companies with both IP-oriented and service-oriented businesses were placed into one of the two groups based on their major business. Within the analysis of this study, there is no differentiation between drug discovery spin-outs (focused on basic research and drug discovery) and drug development spin-outs (focused on preclinical and clinical development). The empirical data and case examples were obtained during two independent investigations based on desk research and interviews. …

Innovation Portfolio Architecture—Part 2: Attribute Selection and Valuation

Abstract: OVERVIEW:This article presents a “sufficiently simple” valuation philosophy that quickly elicits the most valuable concepts in an innovation portfolio while minimizing analytical time and labor cost. Extending from the initial article, published in the November/December 2010 issue, this article focuses on three areas: 1) accommodating the nonlinear progression of early-stage concepts within an innovation portfolio through the use of phases rather than staged gates, 2) selecting a minimum set of uniform and broadly comparable attributes, and 3) calculating value metrics to assess the relative value of individual concepts in the portfolio. Real option methods provide the overall philosophy for capturing the relationship of concept value, investment, and risk.

The Greater Philadelphia Innovation Cluster for Energy-Efficient Buildings: A new model for public-private partnerships

Abstract: The Greater Philadelphia Innovation Cluster (GPIC) for Energy-Efficient Buildings is breaking new ground on how public-private research partnerships are conducted. A consortium of public, private, ...

Open Services Innovation: An Interview with Henry Chesbrough: Henry Chesbrough Talks to James Euchner about How Open Innovation Can Be Applied in the Services Sector-And Why It Should Be

Abstract: Henry Chesbrough is best known for his work on open innovation, which has grown in popularity and impact since the publication of his book by that title in 1993. He has recently turned his attention to services innovation, and his book Open Services Innovation: Rethinking Your Business to Grow and Compete in a New Era was published in January 2011 by Jossey-Bass. I spoke to Henry at IRI's Member Summit in October about the evolution of open innovation and his latest work. In this installment flora our lengthy conversation, we discuss services innovation, its likely impact on the evolution of business, what it takes to succeed with services innovation, and the connection between services innovation and the open-innovation model. James Euchner [JE]: Your latest work looks at services innovation. What attracted you to that area? Why innovation in services? Henry Chesbrough [HC]: My interest was prompted by a few observations. First, when I talked about open innovation, I got a lot of questions from service businesses. They asked, "What does this mean for me?" My earlier work in open innovation really focused on high-tech companies making products and technologies. It was not entirely clear what it meant for services, which are intangible and are not well tracked in the accounting system. Services really get into managing knowledge, and there seemed to be a question: will open innovation work in services? A second motivator was a look at trends across the globe. In all of the advanced economies, more than half of the economy is coming from services rather than products and technologies. That made it even more important to address the gap. [ILLUSTRATION OMITTED] My third motivator was a conversation I had in 2004 with the head of IBM's research at the time, Paul Hom. When I asked him what his biggest problem was, he told me that he was concerned because he worked in an organization that got more than half its revenue from its services business, but his 3,000-person research staff was working on stuff related to new products and new technology. He understood that he couldn't sustain his research effort if he wasn't working directly on things that were going to impact the other half of the revenue stream of the company. When I heard that and put the other pieces together, I said, "You know, this is something that really needs attention." So that's when I got the desire to really figure it out. JE: What do you mean when you talk about services innovation? HC: In researching my book, I have been looking at what companies in service businesses are doing to innovate. United Parcel Service is an interesting one. They now offer to come in and take over the functions of the shipping department of your company, whether the parcel is going to go out through the US Postal Service or FedEx or UPS. UPS takes over all of the responsibility for these accounts for customers. When UPS takes over the [shipping] facility, they badge the employees and put them on UPS's payroll. This gives them much more insight into what their customers are actually doing to generate the shipments. It gives them ideas for, let's say, working upstream in the supply chain to help optimize logistics that the shipping department didn't even know about because they were simply working from shipping documents on individual parcels to get them out. That's an example where a company with tremendous logistics capability is partnering with its customers to help them get shipments of their products out to the market. But then, later on, as they learn more, they're working back upstream to optimize the supply chain as well. The key idea is that both UPS and its customer are opening up. The customer is sharing more of its internal processes with an outsider, UPS. And UPS is taking on more responsibility and sharing more of its internal processes (such as its information technology) with its customers. …

Optimizing the R&D Process Using Spin-Outs: Case Studies from the Pharmaceutical Industry

Abstract: RD Chemmanur and Yan 2004; Dewdney and Smith 1998). This may be the result of several market forces currently reshaping the industry-including rising RD Bergh and Lim 2008). A spin-out can also be used to reduce capital requirements and risk, if RD van Gils et al. 2009). RD Jagersma and van Gorp 2003). They can more easily pick up external impulses and serve as a mechanism to explore revolutionary ideas in a setting apart from mainstream business (Parhankangas and Arenius 2003; Jagersma and van Gorp 2003). …

Open Services Innovation: An Interview with Henry Chesbrough

Abstract: (2011). Open Services Innovation: An Interview with Henry Chesbrough. Research-Technology Management: Vol. 54, No. 2, pp. 12-17.