Showing papers in "Research-technology Management in 2015"

Digitalized Product-Service Systems in Manufacturing Firms: A Case Study Analysis

Abstract: The merging trends of digitalization and servitization harbor extensive and largely unexplored potential for manufacturing firms. Digital systems can be linked with product-service bundles to build...

Digitalized Product-Service Systems in Manufacturing Firms: A Case Study Analysis: Linking Digital Systems with Physical Products to Create Novel Product-Service Bundles That Provide Services Independently and Proactively Can Enable Advanced Services and Promote Growth

Abstract: The term servitization has been used in recent years to describe a growing service orientation among product manufacturers, who are increasingly moving from simply selling products to offering supportive services tailored to the product (Baines et al. 2009; Wise and Baumgartner 1999; Vandermerwe and Rada 1988). These services range from traditional product-related services such as maintenance, repair, and training to advanced customer-oriented services (Lay 2014; Oliva and Kallenberg 2003; Mathieu 2001). Advanced services typically take the form of product-service systems (PSS), or physical products bundled with intangible services in a customized manner to fulfill highly individual customer needs (Tukker and Tischner 2006; Goedkoop et al. 1999). These innovative, individualized product-service bundles increase the value delivered to the customer and hence increase the competitiveness of the provider (Boyt and Harvey 1997). The move toward servitization has coincided with a rising trend toward digitalization, with manufacturers equipping products with intelligent digital systems that allow the products to operate independently of human intervention and communicate with other machines. As a logical consequence of the confluence of servitization with this trend toward intelligent machines, an increasing number of manufacturers are using digital systems to support their services (Minister and Meiren 2011), creating totally new industrial product-service offerings, such as comprehensive remote services that bring digital and physical systems together to pave the way for, for instance, availability guarantees. These new kinds of offerings may in turn lead to far-reaching reconfigurations of the mechanisms of value creation in manufacturing. Thus, manufacturers cannot afford to ignore these emerging forces, which have the power to completely reshape the industrial landscape. Companies that do not keep up with these developments may find themselves threatened with extinction in the near future, as competitors with more customized, responsive offerings gain advantage. Three practical case studies from our joint research projects on servitization show how companies can combine digital systems with PSS to harvest value and build competitive advantage. Services Innovation and Digitalization Previous studies of servitization have assumed that manufacturers move from product manufacturer to solution provider along a defined transformation path (Gebauer, Fleisch, and Friedli 2005; Gebauer 2004). This transition path is typically described as taking place in stages, with each stage offering different potentials for differentiation (see, for example, Matthyssens and Vandenbempt 2010; Gebauer, Bravo-Sanchez, and Fleisch 2008; Matthyssens and Vandenbempt 2008; Penttinen and Palmer 2007; Oliva and Kallenberg 2003; More 2001). At the end of the path, manufacturers offer innovative PSS, such as availability guarantees or build-operate-transfer (BOT) models, which increase customer value on the one hand and create competitive advantage for the provider on the other (Brady, Davies, and Gann 2005; Boyt and Harvey 1997). While PSS have been widely discussed--see Velamuri, Neyer, and Moslein (2011) for a review of the literature--the effect of the digital revolution on this servitization pathway has been less well explored. Most articles have dealt with the new challenges and impacts of digitalized services, focusing on how they differ from more traditional product-related services. What is missing in the literature is a comprehensive framework bringing together the emerging trends of servitization and digitalization in one conceptual structure. The integration of digitalization with services innovation has important implications for services. For instance, because digital services can be provided independent of manufacturer and customer location, traditional service characteristics like perishability and inseparability do not apply to digital service creation (Holtbriigge, Holzmuller, and von Wangenheim 2007). …

From Cost to Frugal and Reverse Innovation: Mapping the Field and Implications for Global Competitiveness

Abstract: Product and service innovations aimed at resource-constrained customers in emerging markets have recently attracted much research and management attention. Despite the prominence of this topic, however, there are some misconceptions around the different innovation types in this domain that may limit managers' ability to derive informed implications for strategy and operations. This article analyzes the different types of resource-constrained innovation-cost, good-enough, frugal, and reverse innovation-conceptualizes the distinctions between them, and discusses the implications for strategy providing a framework for managers to systematically analyze their own approaches to resource-constrained innovation and craft proper development processes. By highlighting the differences between the various types of resourceconstrained innovation, this article also provides the conceptual grounds for further systematic research.

Improved Product Development Performance through Agile/Stage-Gate Hybrids: The Next-Generation Stage-Gate Process?

Abstract: OVERVIEW:Product development at manufacturing companies is increasingly complex. Linear product development processes, including the traditional Stage-Gate process, cannot support the iterative cycles and external collaboration that characterize today's product development efforts. Hybrid processes combining elements of Agile and Stage-Gate models offer a more flexible alternative to conventional systems. A comparative case study of seven technology-intensive companies shows how combining Stage-Gate models, at the strategic level, with the Agile method Scrum, implemented at the execution level, can offer performance improvements and other advantages over even improved Stage-Gate processes. The key contribution of this study is a generic Agile/Stage-Gate hybrid process based on best practices as identified in the case companies.

Mastering the transition to product-service provision : Insights into business models, learning activities, and capabilities

Abstract: OVERVIEW:Traditional manufacturing companies are increasingly offering industrial services in order to secure their position in the globally competitive environment. However, little is known about the extent and effect of this transition. Based on a large-scale survey of Finnish manufacturing companies, this study offers descriptive statistics for current industrial service offerings. Merely adding on simple services to a current product offering is shown to be negatively associated with financial performance. Rather, our statistical analysis suggests a thorough and comprehensive organizational transformation is required to generate significant financial value. In addition, qualitative data from globally recognized Swedish and Finnish frontrunner manufacturing companies offer insights into how these market leaders have successfully navigated the organizational challenges of such a transformation to offer successful industrial product-service systems. Based on the data, we outline four distinctive capabili...

Servitization and Competitive Advantage: The Importance of Organizational Structure and Value Chain Position

Abstract: Servitization represents a business-model change and organizational transformation from selling goods to selling an integrated combination of goods and services. Competitive advantage is one outcome of this shift. During servitization, companies follow stages to realize services as an opportunity to differentiate from goods and achieve higher customer satisfaction. This study analyzes this transition from base, intermediate, and advanced services by presenting results from 102 senior executives in multinational companies. Our results suggest increasing interest in service-led strategies in manufacturing companies. The results also show that increasing differentiation and high customer satisfaction are fundamental to achieving competitive advantage and superior performance with services. The analysis also indicates the importance of a company’s position in the value chain and the organizational structure it selects to support services in successful servitization.

A Fad or a Phenomenon?: The Adoption of Open Innovation Practices in Large Firms

Abstract: OVERVIEW:We surveyed 125 large firms in Europe and the United States with annual sales in excess of $250 million to examine the extent to which large firms are now practicing open innovation. Our results showed that open innovation is not a passing fad: 78 percent of the firms report practicing open innovation, none have abandoned it, and 82 percent of those practicing open innovation report that it is practiced more intensively today than three years ago. We also asked about specific practices for “outside-in” and “inside-out” open innovation. We found that customer co-creation, informal networking, and university grants were the three leading inbound practices in 2011; crowdsourcing and open innovation intermediary services were rated lowest in importance. Joint ventures, selling market-ready products, and standardization were the three leading outbound practices; donations to commons and spinoffs were least frequently used. We also found that large firms are more likely to receive freely revealed infor...

Developing Global Service Innovation Capabilities: How Global Manufacturers Address the Challenges of Market Heterogeneity

Abstract: OVERVIEW:As multinational manufacturing companies pursue service innovation toward global markets, their back-end development units—headquarters R&D—face immense challenges due to market heterogeneity. Our extensive studies of 13 leading multinational companies in service innovation have identified, analyzed, and ranked challenges to reveal the key steps to building necessary capabilities. Based on our analysis, we inductively identified four competencies in global service innovation capabilities (developing customer insights, integrating global knowledge, creating global service offerings, and building a digitalization capability) and the activities associated with them. Global service innovation requires companies to develop capabilities that support increased relationship intensity and interaction between headquarters R&D and local units, customers, and service partners. In developing these capabilities, the headquarters units progressively learn to collaborate, integrate, and orchestrate processes and...

Servitization and Competitive Advantage: The Importance of Organizational Structure and Value Chain Position: A Survey of Multinational Companies Shows That Increased Differentiation and High Customer Satisfaction Are Fundamental to Achieving Competitive Advantage with Services

Abstract: Manufacturing strategy has traditionally been based on one, or a combination, of three paradigms: vertical integration of supplier-buyer production and delivery of processes for controlling and predicting the flow of inputs and outputs, investment in research to bring to market products that are superior to the competition's, or the generation of a sustainable market position to strengthen economies of scale (Wise and Baumgartner 1999). As manufacturers move to service-focused strategies, which require additional and valuable capabilities for firms and reshape value creation channels, those foundations must be revisited. The addition of services, or the reconception of products as services, allows manufacturers to create value across the entire product life cycle and capture it, not just from the firm's current position in the value chain but along the entire value chain, generating new revenue streams (Vandermerwe and Rada 1988). From this perspective, servitization of business can be seen as a strategic alternative that generates superior performance. However, it is not clear how servitization strategies are related to performance. We undertook an extensive quantitative study to explore the mechanisms by which servitization delivers improved performance and sustainable competitive advantage. Background Servitization is an organizational change process that generates new revenue streams through the provision of services associated with a firm's traditional goods (Vandermerwe and Rada 1988). Firms are increasingly exploring the value of integrating goods and services (Baines and Lightfoot 2013), motivated by anticipated improvements in profit margins and the prospect of locking competitors out of their customer base (Bustinza, Parry, and Vendrell-Herrero 2013). Servitization offers the opportunity to generate sustainable competitive advantage, since it frees firms from competing on cost alone (Porter and Ketels 2003), allowing for greater differentiation and increased customer satisfaction. As a special issue of International Journal of Production Economics (Baines, Bustinza, and Vendrell-Herrero, forthcoming) makes clear, recent studies analyzing the relationship between servitization and performance have shown a complex relationship between various performance measures and developing service innovations. Suarez, Cusumano, and Kahl (2013), analyzing the performance of 464 US software firms from 1990 to 2006, found a U-shaped relationship between service revenue and profit margin, with initial service sales leading to growth in profit margins followed by a dip in margins as service sales grow and a subsequent return to growth as service offerings mature. Kohtamaki et al. (2013) found a similar U-shaped relationship between industrial service offerings and sales growth. Kastalli and Van Looy (2013), looking at 44 subsidiaries of a multinational firm for the period 2001-2007, also found a complex relationship between service sales and performance: initial increments of service sales had a positive impact on the subsidiary's performance, but this effect gradually decreased with the growth of service sales and then increased again once service sales became large. All of these studies reveal a positive, though nonlinear relationship, between an increasing scale of service inclusion and a company's performance. Overall, researchers generally agree that moving to a services focus can provide long-term advantages for manufacturers. Generally, companies provide services at three broad levels (Baines and Lightfoot 2013): base (product/equipment provision, spare parts provision), intermediate (help desk, training, maintenance, repair, overhaul), and advanced (customer support agreements, outcome-based contracts). Kastalli, Wiengarten, and Neely (forthcoming) argue that coupling servitization with product innovation processes, as advanced service offerings would require, can enhance long-term profitability. …

Business Model Innovation in Practice

Abstract: OVERVIEW:Business model innovation is often the key to capturing value from innovation within corporations. Developing and implementing new business models in practice, however, is difficult and fraught with risk. This paper discusses a systematic approach to developing new business models and identifies concrete steps to reduce the risks associated with them. It draws on literature on elements of the process as well as experience developing and implementing new business models at Goodyear.

Charting the Innovation Ecosystem

Abstract: As Victor Hwang noted in an April 2014 article for Forbes , the term ecosystem has become "the next big business buzzword." Hwang's Google Ngrams demonstrate a dramatic increase in the use of the word in phrases like "business ecosystem" and "innovation ecosystem" in the last 10 years. Increasingly, authors, bloggers, and commentators use the term in place of such one-time favorites as network and cluster . The ecosystem- whether it's a business ecosystem, an innovation ecosystem, or a startup ecosystem-shows every sign of becoming the next business fad.Except, Hwang suggests, perhaps this is more than a fad. Perhaps it reflects a fundamental change in the way we think about business in general and innovation specifically. Although some writers use the term interchangeably with other words, ecosystem carries a very different set of connotations and implications than network or cluster . Networks and clusters are constructed; communications run along definable lines and it's mostly clear how activity in one part of the system will affect conditions elsewhere. They may be com plicated- consisting of many different parts and relationships-but they are not especially complex. An ecosystem, in contrast, is a complex, dynamic, emergent system that constantly adapts, sometimes in unexpected ways. As blogger Alastair Brett described it in a March 2014 blog post, ecosystems are "nonlinear complex adaptive systems where the same inputs don't always produce the same outputs, where the behavior of a system is not the sum of its individual parts, where there are disruptions and emergence, and where effects occur in far-from-equilibrium states."Perhaps one reflection of the organic, adaptive nature of the ecosystem is the lack of a single clear definition for "innovation ecosystem." The idea of an ecosystem is, of course, borrowed from biology where, as Deborah Jackson described it in a paper for the National Science Foundation, it refers to "a complex set of relationships among the living resources, habitats, and residents of an area, whose functional goal is to maintain an equilibrium sustaining state." A biological ecosystem is modeled by tracing the energy exchanges across the system, from plant to predator, to prey, and then back to the soil.The use of the ecosystem concept to describe the business environment originated with James Moore, who offered a definition of "business ecosystem" in his 1996 book The Death of Competition . In part, Moore describes a business ecosystem as "an economic community supported by a foundation of intera cting organizations and individuals-the organisms of the business world." In the business ecosystems, companies occupy niches, just as species do in a biological ecosystem, and the various members of the ecosystem co-evolve and tend to align themselves.A plethora of definitions has grown from the application of this basic concept to innovation. For Jackson, an innovation ecosystem is driven by economic dynamics rather than energy exchanges and is comprised of two separate, weakly coupled economies: the knowledge economy and the commercial economy. Erkko Autio and Llewellyn D. W. Thomas survey several definitions in their chapter in The Oxford Handbook of Innovation Management , each focusing on a slightly different set of characteristics and indicators, as do Susanne Durst and Petro Poutanen in their paper, "Success Factors of Innovation Ecosystems." Taken together, these surveys seem to converge to a particular set of elements that appear in most definitions of the concept: Innovation ecosystems are dynamic, purposive communities with complex, interlocking relationships built on collaboration, trust, and co-creation of value and specializing in exploitation of a shared set of complementary technologies or competencies. Strong innovation ecosystems, according to Autio and Thomas, are productive-they translate knowledge into increased value-and they are robust-resistant to disruption. …

T-Shaped Innovators: Identifying the Right Talent to Support Service Innovation

Abstract: (2015). T-Shaped Innovators: Identifying the Right Talent to Support Service Innovation. Research-Technology Management: Vol. 58, No. 5, pp. 12-15.

Managing the Front End of Innovation—Part I: Results From a Three-Year Study

Abstract: OVERVIEW:An IRI Research-on-Research project looked at effective practices in the front end of innovation through a study of practices in 197 large US-based companies over a three-year period. The research team used a holistic framework that evaluated front-end activities through the lens of the New Concept Development (NCD) model. Analysis of the data revealed that organizational attributes—senior management commitment, vision, strategy, resources, and culture—were of most importance to front-end performance, explaining 53 percent of the variance in performance among participating companies. All of the organizational attributes had correlations ranging from 15 percent for senior management commitment to 24 percent for vision, which suggests that all of the organizational attributes are important to a company's front-end performance.

Visualizing Roadmaps: A Design-Driven Approach

Abstract: OVERVIEW:Because they are highly visual, roadmaps can be a strong enabler of communication between different stakeholder groups and across organizations. However, the visual design of roadmaps has been largely overlooked, with little attention given to their graphic design, undermining their value as communication tools. A design-driven approach to developing a roadmap template can help practitioners create a roadmap whose visual elements support their communication goals. The design process methodology begins by eliciting the key information that needs to be conveyed by the roadmap, so that content can be aligned to audience requirements. This distills a common voice and a set of consistent messages. The approach finishes with the design of tailored visual representations that can be used to present clear and meaningful narratives to specific stakeholders.

Knowing Communities in the Front End of Innovation

Abstract: Drawing on a case study at Ubisoft, a major creative firm in the videogame industry, this article shows how a firm can nurture and engage with its knowing communities to fuel the front end of innov...

The Birth of 3D Printing

Abstract: (2015). The Birth of 3D Printing. Research-Technology Management: Vol. 58, No. 6, pp. 25-30.

Open Innovation at NASA: A New Business Model for Advancing Human Health and Performance Innovations

Abstract: OVERVIEW:This paper describes a new business model for advancing NASA human health and performance innovations and demonstrates how open innovation, including the use of crowdsourcing and technology solution sourcing services, shaped its development. A 45 percent research and technology development budget reduction drove formulation of a strategic plan grounded in collaboration. We describe the strategy execution, including adoption and results of open innovation initiatives, the challenges of culture change, and the development of a knowledge management tool to educate and engage the workforce in the new strategy and promote culture change.

Regulating Innovation in the New Economy

Abstract: The big digital innovation story of the last couple of years has been the rise of the sharing economy. In the sharing economy, individuals rent out resources they're not using, via a set of apps that allow people to connect with each other to engage in peer-to-peer transactions. It has been sold by its supporters (and by the startups powering it) as a social good--a way to help people access the value of underused resources (why shouldn't someone else be driving your car for the 22 hours a day you're not using it?), avoid waste (why buy a drill when your neighbor has one you can borrow, for a small fee?), and strengthen communities by returning to an earlier era, one in which the primary currency was reputation. (For two typically exuberant overviews of the sharing economy, see Wired's April 2014 cover article, "Trust Me," and the February 2013 Forbes article "Airbnb and the Unstoppable Rise of the Share Economy.") But the sharing economy has run into trouble in the last year, as its biggest names face legal and regulatory challenges. Airbnb, which allows users to rent short-term accommodations from private owners, fought legislators in New York and elsewhere, who argued that the service was essentially a hotel business that should be taxed and regulated as such. The ride-sharing app Uber was banned in several countries and faced sharp inquiries elsewhere, as drivers were accused of assault and worse and its surge-pricing algorithm produced outsized fares for short rides. Other sharing-economy apps ran into trouble for other reasons--several articles have explored the real difficulty of making even a poverty-level wage from TaskRabbit, for instance--but Uber and Airbnb are the vanguard of an evolution that is bringing a fundamental change in the nature of Internet innovation, a change that extends far beyond the sharing economy. These apps interact with the physical world in tangible ways, facilitating transactions that require one-on-one interactions. They are products of the increasing convergence of our physical and digital worlds, and the questions raised by these companies and their practices will only become more urgent as that convergence accelerates and spreads, catalyzed by the growing Internet of things, wearable electronics, and a host of other technologies. Much of the controversy stems from the fact that these new businesses have managed to operate outside established regulatory frameworks--without governmental permission. Vint Cerf has called this "permissionless innovation," and he sees the openness it represents as "the mainspring of the Internet's economic power. By giving anyone connected the ability to communicate with anyone else on the network, the Internet has decreased barriers to entry and democratised access to opportunities once reserved for a privileged few: opportunities to speak and be heard, but also opportunities to turn a good idea into a business, to compete for customers, or to help build a better tomorrow." Adam Thierer, who is widely quoted on the topic, defines permissionless innovation as "the notion that experimentation with new technologies and business models should generally be permitted by default. Unless a compelling case can be made that a new invention will bring serious harm to society, innovation should be allowed to continue unabated and problems, if they develop at all, can be addressed later." His original March 2014 blog post offers some nuance, presenting three options: permissionless innovation; permissioned innovation, which offers "general freedom to experiment and innovate, but with possibility that innovation may later be restricted in some fashion"; and the precautionary principle, under which innovations are "curtailed or disallowed until developers can prove they will not cause any harms." But his e-book Permissionless Innovation, which he describes as a development from the blog post, argues that there are two options: the precautionary principle or permissionless innovation--the intermediary third option is gone. …

Business Models Outside the Core: Lessons Learned from Success and Failure

Abstract: OVERVIEW:Leaders at incumbent firms increasingly recognize that in order to sustain growth and protect their companies from disruption, they must innovate “outside the core”—beyond the familiar markets and competencies on which the company has built its existing business. Outside-the-core innovation projects, which target new customers or non-consumers in new markets, can lead to high growth. However, they are also very risky: the odds of success for outside-the-core projects rapidly drop with each step outside the core. In a study of six outside-the-core projects using a business model perspective, we found that, contradictory to common wisdom, the likelihood of failure is not related to how many steps the project is outside the core. Instead, the risk of failure is influenced by false assumptions about the distribution channels, cost structure, unit margins, and velocity elements of the innovation, which are often carried over from the incumbent business model.

Unstructured Text Analytics to Support New Product Development Decisions

Abstract: OVERVIEW:This article describes how to use unstructured text analytics to support critical product development decisions. It clarifies the difference between structured and unstructured data and proposes an analytical process for using big data and natural language processing tools for unstructured text analytics to support managerial decision-making. The usefulness of unstructured data for product development decisions is demonstrated in real cases. In particular, we illustrate the use of text analytics to develop services, to find new customers, and to assess new product viability. Results and outcomes are presented, and practical considerations for selecting and adopting text analytic capabilities are examined.

Creating sustainable value through service offerings

Abstract: An increasing number of enterprises are pursuing sustainability because it can not only bring operational benefits such as cost savings and waste reduction but also improve innovation performance. For many companies, making products and services sustainable means promoting environmentally friendly design; well-known examples include packaging reduction initiatives and maintenance services intended to extend the life of products. However, the concept of sustainability actually encompasses a broader set of issues, including social concerns, human rights issues, and resource conservation, among others (Gobble 2012). In order to effectively incorporate sustainable values into their offerings, companies need to understand how all these issues can be addressed in the context of the customer's regard for sustainability as a product attribute. To embrace more comprehensive ways of actualizing sustainable value, product-centric companies can offer sustainability-focused services to extend the scope and variety of their offerings. Products per se generate sustainable value mainly by incorporating eco-friendly attributes, such as durability or biodegradable materials; nevertheless, sustainability relies more on changes in people's thinking and behavior than on technology development (Clark et al. 2009). Via the interaction required to deliver services, companies can interact with customers more closely and more frequently and follow them more closely, and thus have more opportunities to promote sustainable attitudes and lifestyles. In this way, service offerings can be a powerful vehicle for delivering on sustainability values that reflect real customer concerns. However, although sustainability has become a business vision for many enterprises, it is not clear how companies can integrate this vision into service strategies and then generate innovative offerings that solve customer problems. Value propositions and the customer context are two crucial factors that must be considered in determining the development of sustainability-led service offerings. To embed a wider range of sustainability values in service offerings, we suggest that companies expand their attention to customer problems beyond the immediate context of product use. Recognizing the institutional and cultural contexts behind customer problems will aid companies in developing offerings that bring not only environmental and social good but also business potential. Sustainable Value and Service Offerings Economy, environment, and society are the three essential components of sustainability (Elkington 1997; Gobble 2012); they involve a wide range of issues, such as investment, waste management, education, and health care. To bring sustainable value to their customers, companies must connect these issues with customer needs. Product innovation may aid companies in developing green products, but products typically contribute to sustainability in limited ways, such as using more environmentally friendly materials or being more energy efficient. Service offerings, in contrast, can deliver companies' sustainability values in a more comprehensive way while addressing customer needs. Services can provide real business benefits, by supporting product sales, helping build customer loyalty, increasing revenues, and sustaining companies' competitive advantage (Shelton 2009). Services also offer real opportunities to deliver on the other two prongs of sustainability, environmental sustainability and social good. Repair and maintenance programs can provide environmental benefits by extending product life cycles, reducing waste, and increasing the efficiency of products in use; home delivery services provided through an efficient logistical system can help reduce gas consumption and carbon emissions by cutting driving (see Manzini and Vezzoli 2003). Sharing and rental services can reduce the financial burden of accessing a product, providing social good by extending the reach of a product to the poor (Clark et al. …

The Innovator's Method: Bringing the Lean Startup into Your Organization

Abstract: The Innovator's Method: Bringing the Lean Startup into Your Organization Nathan Furr and Jeff Dyer (Boston, MA: Harvard Business Review Press)In The Innovator's Method, respected innovation researchers Nathan Furr and Jeff Dyer outline a process for reducing the risks associated with moving new ideas from concept to commercialization in large companies. Such a method is necessary, they argue, because traditional management techniques, designed to solve large-company management problems, often kill novel ideas and impede innovation. These practices are, Furr and Dyer contend, incompatible with the uncertainty that characterizes true innovation. New methods are needed if corporations are to innovate successfully and remain competitive.The "innovator's method" Furr and Dyer recommend consists of four phases: 1) insight, 2) problem defi nition, 3) solution prototyping, and 4) business model creation. Born out of the authors' extensive research with hundreds of established companies and startups, the method integrates many popular concepts related to innovation and entrepreneurship, including Eric Ries's Lean Startup, the business model canvas from Alex Osterwalder and Yves Pigneur's Business Model Generation, and the Net Promoter Score developed by Fred Reichheld, Bain & Company, and Satmetrix. What makes this book unique is the seamless integration of these concepts and tools into one cohesive, actionable system.After an introductory chapter that makes the case for a new method, the bulk of the book is devoted to detailed explanations of the four phases of the model. Each chapter includes extensive cases, concrete "tools" and "test," and defined outcomes to be achieved. The authors make extensive use of case studies and diagrams to illustrate key concepts; detailed examples demonstrate the steps managers can use to test the commercial viability of new ideas.In the insight phase, the authors describe four key actions that generate insight that leads to problems worth solving: questioning, observing, networking, and experimenting. They make a convincing case for searching broadly versus taking a narrower approach. Expanding the range of possibilities and opening up the process, Furr and Dyer argue, will increase the likelihood of uncovering "breakthrough insights." Next, the authors provide advice on how companies can narrow down the field of ideas to select the most promising ones. For example, the "vote test" asks customers to vote for the idea or problem they would like the company to pursue-a crowdsourcing form of market research. Another test asks employees to indicate which idea they would volunteer their time to pursue.Identifying the problem, the authors assert, begins with finding a "monetizable job"-a need or problem experienced by a large group of people who are willing and able to pay for a solution. Here, the authors introduce the practice of "pain-storming" to build a deep understanding of the problem and the customer, as well as the use of customer profiles (also known as personas), root-cause analysis tools, and interviewing techniques. "Cold-call" and "smoke" tests help determine whether a monetizable job has been identified. Each of these tools and techniques is explained in detail, with specifi c actionable steps and examples. …

From the editor: exploring service innovation and the servitization of the manufacturing firm

Abstract: Manufacturing and service industries are often seen as largely independent. Whether in national economies, business classifications, education, training, or employment, they tend to be thought of as separate. Indeed, the growing role of services in developed economies has been the topic of much discussion over the past decade or so. Yet manufacturers can offer services; in fact, they can, and increasingly do, base entire competitive strategies on service innovation-finding ways to rethink their offerings and replace one-time product sales with ongoing, value-creating relationships. This is the process of servitization; icons in this mode are companies such as Rolls-Royce Aerospace, with its Powerby-the-Hour model; Xerox, with its document management solutions; and Alstom, with its Train-Life services. Internationally, there is a growing recognition that manufacturers serving developed economies are moving away from concentrating their efforts on products and production and toward a services focus. The terminology for this development, however, has varied. In Germany, researchers, policy makers, and industry leaders are engaged in a debate around Industry 4.0; in Scandinavia, the term of choice is product-service systems. UK companies focus on servitization and the circular economy, while in the US, industry talks about servitization and service innovation, much of it powered by the Internet of Things (IoT). While the terminology might vary across these countries, the underlying message is very clear: innovation of services is becoming more and more important to manufacturing firms worldwide. The process of servitization (or service innovation or creating product-service systems) invariably implies not simply the development of a service offering for the customer but also the adoption of new technology and a widespread organizational transformation. The kinds of advanced services offered by Rolls-Royce, Xerox, and the like incorporate maintenance, repair, and overhaul contracts that link revenue generation directly to asset availability, reliability, and performance. Providing this kind of cradle-to-grave service requires dedication, flexibility, and a will to collaborate across the entire organization. A key element underpinning the transformation, and servitization more broadly, is heightened customer intimacy. In the traditional manufacturing world, products were designed and produced, then sent to a showroom in anticipation of a sales transaction. Designs were informed by analysis of customer trends, innovation was centered around product features, and satisfaction was recorded by after-sale surveys. To manufacturers in this world, service meant order fulfillment, on time and on budget, and an associated warranty program. Customers were relatively remote. Servitization, in contrast, promotes intense customer relationships. With advanced services in particular, the focus is on the customers' internal business processes; the manufacturer goes beyond simply offering a product to provide offerings that target efficient and effective operations. The manufacturer bundles together products and services to deliver a capability that provides a defined outcome for the customer. Typically these offerings manifest as 10-year service contracts under which the manufacturer takes some responsibility (or risk) for fulfillment and the customer pays as the capability is consumed. A practical example of such an advanced service is the use by Hoyer, a German logistics company based in the United Kingdom, of trucks provided by MAN on a pay-as-you-go basis. Costs are based on miles driven, so Hoyer only incurs expense when it is generating revenue. Service innovation is demanding for manufacturers. Yet, the successful development and delivery of advanced services offers significant rewards, including: * Improved commercial resilience. Services position manufacturers to respond more effectively and efficiently to the needs of their customers, helping to lock in customers and preventing competitors from gaining a foothold in their markets. …

Digitalized Product-Service Systems in Manufacturing Firms

Abstract: The term servitization has been used in recent years to describe a growing service orientation among product manufacturers, who are increasingly moving from simply selling products to offering supportive services tailored to the product ( Baines et al. 2009 ; Wise and Baumgartner 1999 ; Vandermerwe and Rada 1988 ). These services range from traditional product-related services such as maintenance, repair, and training to advanced customer-oriented services ( Lay 2014 ; Oliva and Kallenberg 2003 ; Mathieu 2001 ). Advanced services typically take the form of product-service systems (PSS), or physical products bundled with intangible services in a customized manner to fulfill highly individual customer needs ( Tukker and Tischner 2006 ; Goedkoop et al. 1999 ). These innovative, individualized product-service bundles increase the value delivered to the customer and hence increase the competitiveness of the provider ( Boyt and Harvey 1997 ).The move toward servitization has coincided with a rising trend toward digitalization, with manufacturers equipping products with intelligent digital systems that allow the products to operate independently of human intervention and communicate with other machines. As a logical consequence of the confluence of servitization with this trend toward intelligent machines, an increasing number of manufacturers are using digital systems to support their services ( Munster and Meiren 2011 ), creating totally new industrial productservice offerings, such as comprehensive remote services that bring digital and physical systems together to pave the way for, for instance, availability guarantees. These new kinds of offerings may in turn lead to far-reaching reconfigurations of the mechanisms of value creation in manufacturing.Thus, manufacturers cannot afford to ignore these emerging forces, which have the power to completely reshape the industrial landscape. Companies that do not keep up with these developments may find themselves threatened with extinction in the near future, as competitors with more customized, responsive offerings gain advantage. Three practical case studies from our joint research projects on servitization show how companies can combine digital systems with PSS to harvest value and build competitive advantage.Services Innovation and DigitalizationPrevious studies of servitization have assumed that manufacturers move from product manufacturer to solution provider along a defined transformation path ( Gebauer, Fleisch, and Friedli 2005 ; Gebauer 2004 ). This transition path is typically described as taking place in stages, with each stage offering different potentials for differentiation (see, for example, Matthyssens and Vandenbempt 2010 ; Gebauer, Bravo- Sanchez, and Fleisch 2008 ; Matthyssens and Vandenbempt 2008 ; Penttinen and Palmer 2007 ; Oliva and Kallenberg 2003 ; More 2001 ). At the end of the path, manufacturers offer innovative PSS, such as availability guarantees or build-operate-transfer (BOT) models, which increase customer value on the one hand and create competitive advantage for the provider on the other ( Brady, Davies, and Gann 2005 ; Boyt and Harvey 1997 ).While PSS have been widely discussed-see Velamuri, Neyer, and Moslein (2011) for a review of the literature-the effect of the digital revolution on this servitization pathway has been less well explored. Most articles have dealt with the new challenges and impacts of digitalized services, focusing on how they differ from more traditional product-related services. What is missing in the literature is a comprehensive framework bringing together the emerging trends of servitization and digitalization in one conceptual structure. The integration of digitalization with services innovation has important implications for services. For instance, because digital services can be provided independent of manufacturer and customer location, traditional service characteristics like perishability and inseparability do not apply to digital service creation ( Holtbrugge, Holzmuller, and von Wangenheim 2007 ). …

The Case Against Disruptive Innovation

Abstract: We are, as a culture, obsessed with innovation--as a national characteristic, as an economic engine, as a certain guarantor of national and corporate leadership--if we can only find the formula to guarantee it. For Jill Lepore, writing in the New Yorker in June 2014, innovation is more than a business imperative, even more than a cultural meme. It is a "theory of history," a 20th-century version of 18th- and 19th-century ideas about progress and evolution. Innovation is how we move forward. The 21st-century version of innovation, for Lepore at least, is disruption--"a theory of history founded on a profound anxiety about financial collapse, an apocalyptic fear of global devastation, and shaky evidence." With that last phrase, Lepore takes aim at the author of the theory of disruption, embarking on a close, and highly controversial, critique of Clayton Christensen's first book, The Innovator's Dilemma. Accusing Christensen of handpicking case studies to match his preconceptions and of ignoring evidence that contradicts his theory, Lepore attempts to systematically debunk the very idea of disruptive innovation. For those who don't have time or access to read Lepore's full 6,000-word article, Slate's Will Oremus offers a fair summary of the piece--with a small dose of snarky commentary--under the title "The New Yorker Thinks Disruptive Innovation is a Myth." The response to Lepore's pointed analysis--of Christensen's work in The Innovator's Dilemma and of the idea of disruption itself--has been remarkably emotional (and often unnecessarily personal) on both sides. Christensen himself responded via a short interview with BusinessWeek that fairly vibrates with fury. Richard Feloni, writing for Business Insider, offers an overview of the immediate responses, including insightful Twitter posts from Marc Andreesen and Steven Sinofsky (formerly president of Microsoft's Windows division). In a post on Bloomberg View, Clive Crook called Lepore's work "incompetent." In Forbes, Clark Gilbert described it as "cleverly written but substantively lacking" and Steve Denning complimented Lepore on her "well-crafted sentences" but dismissed the larger argument as "total nonsense," describing Lepore's reasoning as "flights of fancy" that are "wildly misguided." Lepore's defenders have been similarly extreme, describing the article as "an absolutely devastating takedown of disruptive innovation" (Jonathan Rees, on his More or Less Bunk blog), and, more moderately, "a careful takedown" (Paul Krugman, in the New York Times). Haydn Shaughnessy said Lepore had "dismantled" disruptive innovation, praising her for piercing the "elite bubble" around Christensen's work. Given this kind of extremism, it's tempting to dismiss the firestorm as another Internet-bred eruption that will subside if ignored. Those actually working in the trenches of innovation, day to day, have little attention to spare for such apparently academic debates. But there have been considered responses, on both sides, that deserve attention for the way they invite a reconsideration of the concept of disruption and how it shapes the way we think about innovation. Slate writer Will Oremus puts it, in a commentary on Christensen's response to Lepore, "I'd like to think ... that the whole dustup could have the effect of prodding people to think more carefully about Christensen's theory before spouting the relevant buzzwords." That "disruption" has become a buzzword, taking on so many meanings that it has become essentially meaningless, is one thing both sides agree on. In the BusinessWeek interview in which he responds to Lepore's article, Christensen admits that use of the word has become "almost random ... used to justify whatever anybody--an entrepreneur or a college student--wants to do." In a piece for New York magazine, Kevin Roose goes so far as to suggest we all just stop using the word: "But when everything is disruptive, nothing is." The use of the term as "an all-purpose rhetorical bludgeon," he argues, "can distract us from the real issues with emergent products and companies. …

Resource Revolution: How to Capture the Biggest Business Opportunity in a Century

Abstract: Resource Revolution: How to Capture the Biggest Business Opportunity in a Century Stefan Heck and Matt Rogers (New York: Houghton Mifflin Harcourt, 2014) In Resource Revolution, Stefan Heck and Matt Rogers bring their expertise in cleantech and energy, accrued through their work as directors at McKinsey & Company, and link the growth of prosperity in Europe, the United States, Russia, and Japan to the technological progress of the first and second industrial revolutions The world is poised, they argue, to launch a third industrial revolution, driven by the demands for energy, water, and food in China, India, Brazil, and other emerging economies That third revolution, Heck and Rogers predict, will be a productivity revolution, driven by increased efficiency in resource utilization, which will draw 37 percent of the world's population--25 billion people, mostly in Asia and South America--into the industrial world for the first time The first industrial revolution radically improved labor productivity, as workers moved from the fields to the factories, and inventions such as the steam engine and spinning frame allowed a single factory worker to perform tasks that had once taken many people The second industrial revolution, which was made possible by the widespread availability of oil, electricity, and steel, radically improved the productivity of capital, with changes in management practice, the rise of the Corporation, and accelerated capital formation Accounting standards were developed, corporate RD in the next step, the Internet will provide a channel for machines to talk to each other--this is what is referred to as the Internet of Things …

Bridging the Risk Gap: The Failure of Risk Management in Information Systems Projects

Abstract: OVERVIEW:New product development projects are highly risky technical undertakings. Organizations frequently seek to manage the risk involved using standard risk management procedures, knowing that a company that better manages risks is less vulnerable. Nevertheless, NPD projects continue to fail to meet expectations for delivery time, budget, and outcomes. In this paper, we explore reasons why, despite employing self-evidently correct risk management procedures, adversities occurred in 19 major information systems projects. Project managers focused on the familiar, the measurable, the favorable, the noncommittal, and the controllable while excluding other risks that significantly affected their project performance. We have characterized this tendency as a series of five lures that leave projects vulnerable to risks.

How to Thrive in the Era of Collaborative Services Entrepreneurship

Abstract: OVERVIEW:Services have been steadily displacing products in industrialized economies for a half century—which is not to say that products are going away; rather, they are going into services. Cheap sensors and ubiquitous connectivity are accelerating this trend. For technology-based firms, these conditions create many opportunities to participate in product-service business ecosystems. For industrial firms to thrive in this environment, they must be able to explore in the market with partners and customers. That is, they must learn to navigate partner uncertainty and end user uncertainty at the same time. This balancing act can be thought of as collaborative services entrepreneurship. The keys to success are establishing the firm's strategic boundaries and developing early business-model validation methods. This article illuminates those capabilities and shows how two (or more) firms can act in concert while each acts in its own self-interest.

The Repertory Grid Technique as a Customer Insight Method

Abstract: The success of new products and services relies on meeting customer needs, but it is very difficult to identify hidden needs since customers have difficulty articulating them or do not recognize them at all. A number of methods have been applied to help identify hidden needs, including ethnography, empathic design, and lead-user innovation. In this paper, we discuss the use of the repertory grid technique (RGT), a method adopted from psychology that has been used in new product development to help uncover customers' hidden needs. Three case studies from our own work show that it can be applied effectively at different stages of the product development process, resulting in entirely new products, product improvements, and new approaches to marketing.