Quản trị kinh doanh - Technology - Based industries & the management of innovation

Technology-based Industries &  the Management of InnovationCompetitive advantage in technology-intensive IndustriesAppropriating the returns to innovationStrategies to exploit innovationAlternative approachesTiming: to lead or to follow?Managing riskCompeting for standardsImplementing technology strategyThe conditions for creativityFrom invention to innovationOUTLINEThe Development of Technology: From Knowledge Generation to DiffusionBasic KnowledgeInventionInnovationDiffusionIMITATIONADOPTIONSupply sideDemand sideThe Development of Technology: Lags Between Knowledge Generation and Commercialization BASIC FIRST PRODUCT IMITATION KNOWLEDGE PATENTS LAUNCH Xerography late 19th and 1940 1958 1974 early 20th centuriesJet Engines 17th-- early 1930 1957 1959 20th centuries Fuzzy logic 1960’s 1981 1987 1988controllersAppropriation of Value:- How are the Benefits from Innovation Distributed?CustomersSuppliersImitators and other “followers”InnovatorThe Profitability of Innovation Legal protection Complementary resources Imitability of the technology Lead time Profits from InnovationValue of the innovationInnovator’s ability to appropriate the value of the innovationLegal Protection of Intellectual PropertyPatents —exclusive rights to a new product, process, substance or design.Copyrights —exclusive rights to artistic, dramatic, and musical works.Trademarks — exclusive rights to words, symbols or other marks to distinguish goods and services; trademarks are registered with the Patent Office. Trade Secrets — protection of chemical formulae, recipes, and industrial processes.Also, private contracts between firms and between a firm and its employees can restrict the transfer of technology and know how.Complementary Resources Bargaining power of owners of complementary resources depends upon whether complementary resources are generic or specialized.ManufacturingDistributionServiceComplementarytechnologiesOtherOtherMarketingFinanceCoretechnological know-howLead TimeIf rivals can imitate-- time lag is the major advantage of the innovator.But maintaining lead-time advantage requires continuous innovationLead time is reinforced by learning effectsU.S. Managers’ Perceptions of the Effectiveness of Different Mechanisms for Protecting Innovation Processes Products Patents to prevent duplication 3.52 4.33 Patents to secure royalty income 3.31 3.75 Secrecy 4.31 3.57 Lead time 5.11 5.41 Moving quickly down the learning 5.02 5.09 curve Sales or service efforts 4.55 5.59 1 = not at all effective 7 = very effectiveSource: Levin, Klevorick, Nelson & Winter. Brookings Papers on Economic Activity, 1987.Risk & ReturnCompetingResourcesExamplesLicensingOutsourcing certain functionsStrategic AllianceJoint Venture Internal CommercializationSmall risk, but limited returns also (unless patent position very strongLimits investment, but dependence on suppliers & partnersBenefits of flexibility; risks of informal structureShares investment & risk. Risk of partner conflict & culture clashBiggest risks & benefits. Allows complete controlFewAllows outside resources & capabilitiesTo be accessedPermits pooling of the resources/capabilities of more than one firmSubstantial resource requirementsKonica licensing its digital camera to HPPixar’s movies (e.g. “Toy Story”) marketed & distributed by Disney.Apple and Sharp build the “Newton” PDA Microsoft and NBC formed MSNBCTI’s development of Digital Signal Processing ChipsAlternative Strategies for Exploiting InnovationThe Comparative Success of Leaders and FollowersPRODUCT INNOVATOR FOLLOWER WINNERJet Airliners De Havilland (Comet) Boeing (707) FollowerFloat glass Pilkington Corning LeaderX-Ray Scanner EMI General Electric FollowerOffice P.C. Xerox IBM FollowerVCRs Ampex/Sony Matsushita FollowerDiet Cola R.C. Cola Coca Cola FollowerInstant Cameras Polaroid Kodak LeaderPocket Calculator Bowmar Texas Instruments FollowerMicrowave Oven Raytheon Samsung FollowerPlain Paper Copiers Xerox Canon Not clearFiber Optic Cable Corning many companies LeaderVideo Games Players Atari Nintendo//Sony FollowersDisposable Diapers Proctor & Gamble Kimberly-Clark LeaderWeb browser Netscape Microsoft FollowerPDA Psion, Apple Palm FollowerMP3 music players Diamond Multimedia Sony (&others) FollowersThe Strategic Management of Technology:-To Lead or to FollowKey considerations:Is innovation appropriable and protectable against imitation?If so, advantages in leadership.The role of complementary resourcesFollowers may be able to avoid investing in complementary resources due to better- established industry infrastructureFirms possessing complementary resources have the luxury of waitingIs owning/ controlling industry standard critical to competitive advantage?if so, advantage in being a leader. Uncertainty & Risk Management in Tech-based IndustriesSources ofuncertaintyTechnologicaluncertaintySelection process for standards and dominant designs emerge is complex and difficult to predict, e.g. future of 3GCustomer acceptance and adoption ratesof innovations notoriously difficult to predict, e.g. PC, Xerox copier, WalkmanMarketuncertaintyStrategies formanaging riskCooperating with lead users early identification of customer requirements assistance in new product development Flexibility—keep options open—use speed of response to adapt quickly to new information—learn from mistakesLimiting risk exposure—avoid major capital commitments (e.g. lease don’t buy)—outsource—alliances to access other firms’ resources & capabilities—keep debt low The Emergence of StandardsEmergence of a dominant design paradigmModel T in autosIBM 360 in mainframesDouglas DC3 in passenger aircraftEmergence of technical standardsEmerge in industries where there are network extremitiesEntrenchment of the dominant designs and technical standardsLearning effects: incremental improvement of the dominant designSwitching costsNeed for coordinated action by multiple playersSources of Network ExternalitiesUser linkages, e.g. Telephone systems—only value of telephone is connection to other usersVideo game consoles—same platform allows users to exchange games and play interactivelyOn-line auction—value of auction depends on number of buyers and sellers participatingAlso, social identification—listening to same music, watching same TV shows, wearing same clothes in order to conformAvailability of complementary products, e.g. Most PC applications software written for Windows, not Mac.In economy autos, easier to get parts and repair for a Ford Focus than for a Maruti or ProtonEconomizing on switching costs, e.g.In suites of office software, users of Microsoft Office more likely to avoid switching costs that users of Lotus SmartSuite when they move jobs Companies that Own Technical StandardsCOMPANY PRODUCT CATEGORY STANDARD Microsoft/Intel PC operating systems “Wintel” (Windows OS & Intel *86 series processors Matsushita Videocassette recorders VHS system Iomega High capacity PC disk drives Zip drives Intuit Software for on-line financial transactions Quicken Rockwell/ 3Com 56K modems V90Dolby Laboratories Sound processing systems Dolby sound reductionQualcomm Digital wireless telecom signals CDMAAdobe Systems Common file format for creating and viewing documents AcrobatCompeting for Standards:Value Appropriation vs. Market Acceptance Maximize value appropriationMaximize market acceptanceLOOSETIGHTVHSIBM-PCMacBetamaxFighting Standards WarsDetermine the potential for standards emergence—analyze network externalitiesBuilding a bandwagon—enlist partners (requires licensing & sharing returns from the technology)Pre-empting the market—Build user base quickly: May require sharing benefits with consumers (penetration pricing) Manage expectations (the Microsoft advantage)What if you’re a loser? (a) ensure compatibility (b) go for nicheHow can the winner sustaining the standard? --Don’t fall behind on technology --Ensure backward compatibility --Meet threat of disruptive technology by offering customers a migration path --Reinforce standard with other resources—e.g. brandThe Conditions for Creativity:“Operating” and “Innovating” OrganizationsStrategy Implementation: Invention to InnovationWhile invention depends upon creativity, successful innovation requires integrating new knowledge with multiple business functions.Need to link R&D departments with other functions (the problem of Xerox’s PARC)The role of cross-functional new product development teams as vehicles for integrationThe role of product champions--in achieving integration and counteracting organizational inertia.