Technology ,Innovation

and
New Product Management
MBAFT-7411
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 INNOVATION=
Invention + commercialization

Innovation is an idea or invention that has been exploited

commercially.

Innovation is to think out of box and think differently. It’s all about
finding new things, ideas, concepts, developments, improvements,
and ways to do things and to obtain strategic advantages.
 The US federal advisory committee defines innovation as follows:

“The design, invention, development and /or implementation of new or

altered products, services, process, systems, organizational structure or
business models for the purpose of creating new value for customers and
financial returns of the firm”.

 Peter Drucker‟s (1993) definition of Innovation, defines Innovation in

business terms as the fundamental to the quest for profitable and
sustainable growth.
Precisely one of the important business competencies needed for the
future, it implies that innovation is not all about marginal improvements on
some unimportant products.
Importance of Innovation
 It is important to correctly identify the full spectrum of
innovation types before building skills on how to manage
business’ innovation processes and pipeline.

 There are a number of innovation typologies that look at

different dimensions of innovation.
INNOVATION PYRAMID
 What is Creativity
Creativity is the ability of generating novel and useful
ideas.

Creativity is the building block of innovation.

Innovation and creativity
 creativity is manifested in the production of a creative work
innovation begins with creative ideas, creativity by
individuals and teams is a starting point for innovation; the first
is a necessary but not sufficient condition for the second
-What makes some people more
creative than others?

-Can we enhance the creativity of

people?
Divergent thinking
and
convergent thinking
Divergent and Convergent Thinking
 Divergent thinking –Breaks the patterns ,does not work on
automatic scripts and schemas. It creates new connections.

Convergent Thinking- After divergent thinking lot of ideas are

there but not all can be implemented since resources are limited
and some may not be good ideas. So ideas are organised using
convergent thinking.
 Factors important for people to become creative

 Expertise
- Technical Components of creativity:
- Procedural  Fluency
- Intellectual knowledge
 Originality
 Motivation
- Intrinsic  Flexibility
- Extrinsic
 Elaboration
 Creative thinking skills
- Personal traits
 Ability to redefine
- Environment problems

 Various tools may be used to enhance individual creativity- SCAMPER ,Design

Thinking ,Left Brain Right Brain Alteration.

 Creativity is considered a function of Knowledge ,curiosity , Imagination and

evalauation.
 Organizational Creativity Vs
Individual Creativity
High
Organizations based on Successful organizations
continuous development, High rate of innovations
on systematic research of
efficiency
Organizational
Creativity Few innovations, just Low rate of innovations,
imitations sometimes radical, based on
entrepreneurial spirit of
Low
individuals

Low High
Individual Creativity
Tools to Enhance Creativity
SCAMPER
 Creative Brainstorm Technique
 Checklist Creativity Technique
 One of the easiest and most direct method.
 Alex Osborn ,Bob Eberle
 It is a nemonics for
S ubstitute
C ombine
A dapt
M odify
P ut to another use
E liminate
R everse /Rearrange
Developing Personal Creativity
 Power of observation
 Enhance knowledge
 Don’t limit your perception
 Power of Ideation (Imagination and Incubation)
 Redefine problem
 Look where others are not looking
TECHNOLOGY ,
INNOVATION
AND
NEW PRODUCT
MANAGEMENT
M BA F T- 7 4 1 1
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INNOVATION MANAGEMENT
 INNOVATION MANAGEMENT

Innovation management involves the process of managing an

organization's innovation procedure, starting at the initial stage of
ideation, to its final stage of successful implementation. It
encompasses the decisions, activities and practices of devising and
implementing an innovation strategy.
 MANAGING
UNCERTAINTY
PEARSON’S UNCERTAINITY MAP
DILEMMA OF INNOVATION
MANAGEMENT
NEED FOR CREATIVITY VS EFFICIENCY
TYPES OF INNOVATION
• Incremental Innovation-Making small
changes that have short-term impact on
growth.
• Radical Innovation-Making changes that
have large ‘step’ changes in growth.
 TYPES OF INNOVATION
• Henderson and Clark’s four types of innovation

They divided the technological knowledge along two dimensions.

Knowledge of the components and knowledge of linkage between them which was called
architectural knowledge
DISRUPTIVE INNOVATION
Different Elements of Disruptive Innovation
framework
• Every product of every company in every industry is traversing a
performance trajectory. Each point in this trajectory is a bundle of
features. With each movement on this trajectory, you provide an
enhanced set of features to your customers, and with that increase
your margins.

• Catalyst to disruption is the defining characteristic of that innovation

that enters the market. A disruptive innovation is typically inferior to
main stream product, It has a feature set that does not cater to main
stream customers. It delivers much lower margins than your product.

• The third defining characteristic of disruptive innovations is that they

rarely stay where they start. The goal product rapidly adds features to
improve its performance and intersect with the incumbent's
mainstream performance trajectory.
 Technology-led industry
disruptions.
How technology-led products, services, and
business models are disrupting industries and
fundamentally altering business functions.
 OPEN INNOVATION

• Closed innovation
• Open innovation

• Chesbrough, H., “Open Innovation”, Harvard Business

School Publishing, Boston MA, 2003
Chesbrough H.W.: The Era of Open Innovation, MIT Sloan Management Review,
Spring 203, p. 35 - 41
MODELS OF INNOVATION
CYCLIC INNOVATION MODEL
 CYCLIC INNOVATION MODEL

• The most important feature is that the model architecture is not a chain but a
circle: innovations build on innovations. Ideas create new concepts, successes
create new challenges, and failures create new insights.
• The new ideas may start anywhere in the circle, causing a wave that propagates
clockwise and anti-clockwise through the circle.
• innovation model portrays a system of dynamic processes – circle of change –
with four “nodes of change”: scientific research, technological change, product
development, and market transitions.
• Between these nodes there are “cycles of change” by which the dynamic
processes in the nodes influence each other.
• Innovation is more than just a technical invention: economic, social and cultural
aspects are often decisive. It is the symbiosis of these components that will
determine what is a true innovation
TECHNOLOGY ,INNOVATION
AND
NEW PRODUCT
MANAGEMENT
MBAFT-7411
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 CREATING
INNOVATIVE
ORGANISATIONAL
CLIMATE
 JCB- J.C.Bamford Excavation ltd.
 JCB Chairman-Sir Anthony Bamford
 Construction and agricultural vehicle
 Company Culture –creative new ideas flourish
 Thousand staff suggestions every year

Evolve into 100 product ideas

Distilled into 15-20 project proposal

8-10 Reaching production

JCB rose to the challenge
■ From Construction and
agricultural vehicle to
industrial handling sector.
■ Establish a presence in
market space for Forklift
truck.
■ Market for forklift truck-
mature and fiercely
competitive.
■ 40 different companies in
Europe
■ Within 4 weeks a dedicated
12 member team produced
a Business plan.
■ Moved personnel from
previously unfamiliar areas
of work
■ Adopted a radical approach
■ Single telescopic arm from
existing JCB digger
machine

This had a far stronger user appeal than

conventional forklift trucks
 JCB rose to the challenge

This had a far stronger user appeal than

conventional forklift trucks
The initial projections suggested the proposal for new forklift the teletruck would not be in profit for several
years but Bamford’s View was “If strategy is right we will find the way to get the numbers right.”
AA Roadside and Breakdown Assistance

Murphy's Law says your car will break down in the worst possible place, at
the worst possible time. AA Road service team is ready to help whenever
you need .

 AA was facing a  It reduced the average wait time

growing threat to its to 33 min
roadside repair (which is less than that of
service London ambulance service)

 They reached 90% of breakdowns

within the hour
 92% were mobilized at the
roadside.
ORGANISING INNOVATION
IN THE COMPANY…
Innovation Diamond Model

Innovation Diamond- presented in the work of Robert G.

Cooper.

It provides integrated set of processes designed to build

innovation capability within organizations.

It helps to build an innovation capability in a way that links

the top and bottom of organizations and also the present
and future?

Innovation has to be made sustainable.

 Central framework
of
Innovation Diamond
 The Innovation Diamond Model

• Innovation strategy
• Portfolio
management
• Culture of
innovation
• Stage-gate
innovation process
Portfolio Planning
In contrast to organizations who
tend to say yes to too many new
projects on an ad hoc basis,
portfolio management creates:

• Strategic alignment,
• maximizes the financial value
& social impact
• Balances risk/reward across
multiple horizons
(Short , medium, Long)
• Ensures there are enough
projects to achieve the
innovation strategy goals.
Strategic Buckets
Portfolio Management (Strategic and Tactical )

• Inherit Business and portfolio strategies

1.

• Determine Innovation Budget

2.

• Establish Strategic Buckets

3.
• Select projects to do within each bucket upto available resources
4.

• Assess overall portfolio in terms of 5 goals of portfolio management

5.
 Effective portfolio management

1.Create strategic alignment between project selection and

business and innovation strategy
2. Maximize the financial value and/or social impact of the
portfolio across short, mediumand long-term horizons
3. Balance innovations against risk/reward, time horizon, and
stage of development
4. Promote sufficiency – ensuring there are enough projects to
achieve the innovation strategy goals
5. And finally, matching the right number of projects to available
resources
CULTURE OF INNOVATION

For any organization pursuing a

vision and strategy
with a focus on innovation ,
creating and sustaining a culture to support it is a key foundation
stone.
CULTURE OF INNOVATION

Vision

Symbols

Behaviour

Rewards and Management

Business context
Dyson-A Restless Company
■ DC03 Vaccum cleaner- awarded Millenium product status by Design
Council

Wanted to break into

• European market -which did not
buy upright cleaners.
•UK Market- which had never
bought slim-line Light weight uprights
Has been instrumental in growing
upright cleaner market in Europe.
Within a year it became U.K’s
second highest selling cleaner
Vision James Dyson’s visionary commitment to a ‘CAN DO’ ethic.
Dyson took the ethic of ‘doing everything ourselves ‘ to heart
of business.
The company employees 1800 people inhouse to do
everything from advertising to patent application.
Symbols Dyson’s emphasis on informal dress ,building design , flexible
working . Face to face communications .
Dyson’s focus on building the focus from within
Behaviours At induction every employee builds a vaccum cleaner
Instead of emails and memos people are encouraged to discuss
ideas in person
No formal presentation to Dyson simply freedom to talk to him
Employees no consultants (Advertising ,PR and technical
developments are all carried out in-hse)
Rewards and Valuing people for their contribution.
measurements Staff turnover very low because of abundance of internal
opportunities and creative atmosphere.
No bonus schemes
Business Context Dyson sites the importance of recruitment policies and
procedures to enable free flow of ideas. Recruitment are –bright
young people with right spirit and often without experience are
favoured.
 REED- Recruitment Firm
■ How did this U.K based job vaccancy website came into being.
■ online recruitment still in its infancy
■ In response, employee Paul suggested that Reed open up its website
so that any company - including Reed customers and Reed's direct
competitors - could advertise jobs free of charge, converting the site
from a walled garden into an aggregator.
■ Alec Reed later cited the move as the company’s "breakthrough" online.
Calling this strategy Freecruitment.
■ Reed believes that it is only by encouraging staff to come up with such
ideas can companies achieve real competitive advantage.
STAGE GATE PROCESS

Kill /stop/back /Go

The Innovation Diamond is useful for
medium to large sized organizations
when they need to develop processes and
structures to make innovation
sustainable, where there is a desire for
further growth or impact through
innovation and where resources are
limited.
 Key areas of a systemic innovation
capability

Source: Loewe, Dominiquini, 2006: 26.

To build sustainable internal competence for innovation as a continuous process, not incidental, short term.
Strategic Commitment

 Vital

 Strategic vision

 Creativity may surface naturally but innovation will not be delivered

 People and skills
■ Success of innovation will ultimately depend on communication of innovators
vision to those staff whose support is needed to realise it.
■ Employees should be kept informed throughout the change process and their
feedback sought to have a common ownership of project.
■ We are in creative economy where peoplism (people as the key assets) is the
secret ingredient to success. Enterprising people has become increasingly
central to creation of value specially in services.
■ Once on payroll give them freedom to make suggestion without ridicule.
■ Instill the desire to be Innovator
– A reward system
– An environment that allows failure
– Flexible operations
– Development of venture teams.
 Processes and Tools
■ Quality of design and management within operations is an
essential part innovation management.
■ Understanding the basics of good design by perhaps ‘keeping
things simple’ and looking at your goods and sevices as your
customer receive them will help to deliver a continual stream of
new product and service improvement.
■ Triggers for innovation in process
Gap Analysis
Quality Circles and Process Improvement teams
Total Quality Management
Quality function Deployment
■ Design of organisation and its suppliers.
■ Business Process Reengineering
Organisational Characteristics
and innovation process
■ Growth Orientation
■ Organisational heritage and innovation experience
■ Vigilance and external links
■ Commitment to technology and R&D intensity
■ Acceptance of risks
■ Cross- functional cooperation and co-ordination with organisational structure
■ Receptivity
■ Space for creativity
■ Strategy towards innovation
■ Co-ordination of Diverse range of skills
Organisational structure and Innovation
process
■ Level of Formalisation
■ Level of Complexity
■ Centralisation
■ Organisational size
 Key Individuals in innovation process

 Technical innovator
 Technical/commercial scanners
 Gatekeepers
 Product Champions
 Project leader
 sponsor
 TECHNOLOGY ,INNOVATION
AND
NEW PRODUCT MANAGEMENT
M B A F T- 7 41 1
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 DYNAMICS OF
OF
TECHNOLOGICAL INNOVATION
Compressing Technology
Cycles
Shorter lag between knowledge
generation and commercialisation
 Technological Innovation in a Competitive
Environment

Technological Competitive
Change Advantage

Technological Industry
Change Structure

Decisions about technology and innovation are very strategic and

managers need to approach them in a systematic way.
Technological Innovation
• Technology - as a process, technique, or methodology embodied in a
product design or in a manufacturing or service process which transforms
inputs of labor, capital, information, material, and energy into outputs of
greater value.
• Typically thought of as a new product, technological innovation may also
be a new process of production; a substitution of a cheaper material,
newly developed for a given task, in an essentially unaltered product; or
the reorganization of production, internal functions, or distribution
arrangements, leading to increased efficiency, better support for a given
product, or lower costs.
• Technological innovations often involve both tools and procedures,
products and processes, interacting in new ways
 TECHNOLOGICAL INNOVATION
Innovation Technological innovation
Generate or realise a new idea (invention Generate or realise a new idea, based on
and creativity) technology capability or knowledge (Invention)
• Develop this idea into a reality or product • Develop this into a reality or product (realisation)
(realisation)
• Diffuse, implement and market this new idea,
• Implement and market this new idea technology , capability or knowledge (implementation)
(implementation)

Technological innovation is the successful commercial

exploitation of inventions as they become embodied into
new products and processes.
EIGHT STAGES OF TECHNOLOGICAL INNOVATION
•Basic research
(for general nature laws)
•Applied research
(for specific problems)
•Technology Development
(design for prototyping)
•Technology Implementation
(design for assembly)
•Production
(design for efficiency & quality)
•Marketing
(design for acceptance & affordability)
•Proliferation
(design for diffusion)
•Technology Improvement &
enhancement (design for sustainability)
Development
of Technology
from
Knowledge
creation to
Diffusion
 Technology strategy is a firm's approach
to the development and use of technology

Technology strategy must address three

TECHNOLOGY broad issues:
STRATEGY
Choice of technology to develop
Choice of technological leadership
Choice of technology exploitation/
licensing and acquiring technologies
CHOICE OF TECHNOLOGY TO DEVELOP

The technologies that should be developed are those that

would most contribute to a firm’s generic strategy
Both product and process technological change can have a
role in supporting each of the generic strategies.
Technology pervades a firm's value chain , a systematic
examination of all a firm's technologies will reveal areas in which
to reduce cost or enhance differentiation.
 Improving established technology vs investing in new
technology
 Building and managing portfolio of firms technologies

Emerging technologies - are still under

development and thus are unproved
Pacing technologies- have yet to prove
their full value but have the potential
to alter the rules of competition by
providing significant advantage.
Key technologies –create
sustainable and long lasting
competitive advantage.
Base technologies-those widely
diffused technologies which are vital
to the business But offer little
potential competitive advantage
Technology Life Cycle
CHOICE OF TECHNOLOGICAL LEADERSHIP
Technological leadership is that a firm seeks to be the first to introduce
technological changes that support its generic strategy
Choice of whether to be a technological leader or follower in an
important technology is based on three factors:
• Sustainability of the technological lead
• First-mover advantages
• First-mover disadvantages
All three factors interact to determine the best choice for a particular
firm. They address the wider question of how timing translates into
competitive advantage or disadvantage.
 SUSTAINABILITY OF THE TECHNOLOGICAL LEAD.
The degree to which a firm can sustain its lead over competitors in a
technology.
Technological leadership is favored if the technological lead can be
sustained because competitors cannot duplicate the technology, or the
firm innovates as fast or faster than competitors can catch up.
Sustainability of a technological lead is a function of factors
1) The source of technological change.
2) Relative technological skills.
3) Rate of technology diffusion
The rate of technological diffusion is partly intrinsic to an industry and partly under a
firm's control. Some factors that slow down the rate of diffusion are as follows:
• Patenting of the firm's technology and related technologies
• Secrecy
• In-house development of prototypes and production equipment
• Vertical integration into key parts that embody or give clues to the technology
• Personnel policies that retain employees
First-mover advantages First-mover disadvantages
Reputation and Position Pioneering Costs
Gain regulatory approvals
Defining standards
Compliances
Early Profits
Educate the buyers
Learning curve Infrastructure Development
Channel selection Developing Complimentary products

Scarce resource Demand Uncertainity and Changing Demand

Switching cost Technology Discontinuity

Low cost Imitations
BROAD INNOVATION STRATEGIES CATEGORY

• Leader/Offensive

• Fast Follower/Defensive

• Imitation/Cost minimisation
RC Cola
• A small beverage company that was the first to introduce cola in a
can, and the first to introduce diet cola.
• Both Coca Cola and Pepsi followed almost immediately and deprived
RC of any significant advantage from its innovation.
The scanner which EMI developed was of a technical sophistication much higher than would normally be found
in a hospital, requiring a high level of training, support, and servicing. EMI had none of these capabilities,
could not easily contract for them, and was slow to realize their importance. It most probably could have
formed a partnership with a company like Siemens to access the requisite capabilities. Its failure to do so was
a strategic error compounded by the very limited intellectual property protection which the law afforded the
scanner. Although subsequent court decisions have upheld some of EMI's patent claims, once the product was in
the market it could be reverse engineered and its essential features copied.
Two competitors, GE and Technicare, already possessed the complementary capabilities that the scanner
required, and they were also technologically capable. In addition, both were experienced marketers of
medical equipment, and had reputations for quality, reliability and service. GE and Technicare were thus able
to commit their R&D resources to developing a competitive scanner, borrowing ideas from EMI’s scanner, which
they undoubtedly had access to through cooperative hospitals, and improving on it where they could while
they rushed to market. GE began taking orders in 1976 and soon after made inroads on EMI.
In 1977 concern for rising health care costs caused the Carter Administration to introduce "certificate of need'
regulation, which required HEW's approval on expenditures on big ticket items like CAT scanners. This severely
cut the size of the available market.
FOLLOWERS/IMITATORS WHO WIN

A classic example is IBM with its PC, a great success since the time
it was introduced in 1981. Neither the architecture nor components
embedded in the IBM PC were considered advanced when
introduced; nor was the way the technology was packaged a
significant departure from then-current practice. Yet the IBM PC
was fabulously successful and established MSDOS as the leading
operating system for 16-bit PCs. By the end of 1984, IBM has
shipped over 500000 PCs, and many considered that it had
irreversibly eclipsed Apple in the PC industry.
Distribution of profits between innovator and
follower

A coherent framework to explain the distribution

of outcomes:
• Regimes of appropriability
• The dominant design paradigm
• Complementary assets
Acquisition of technology and
Exploitation/ licensing of technology
high

Low
Exploitation of Technology
• A company that owns a technology should include technology
exploitation as a component of it’s technology strategy.

• The methods of technology exploitation resemble those used for

acquisition.
 Of
exploitation

Contract out
Mfg & mkt
Critical factors in managing Technology
Innovation
• Innovation strategy
• Strategic sourcing-make/buy decision
• Go it alone strategy to Octopus strategy
• Technology scanning
• Exploitation of technological innovations
• Time lag between different stage of innovation cycle
• Environmental scanning
• Time to market in case of internal R&D
• Technology trajectory
• Level of technological competence
 Strategic
evaluation of
technology
investments
 MANAGING TECHNOLOGY
It implies managing the systems that enable creation ,acquisition ,and
exploitation of technology.
It is an interdisciplinary field
Its domain involves both strategic and operational interests of the
organisation
Management of technology has become critical and very important to have
technology strategy aligned with business strategy.

Why is there increasing requirement of managing technology ?

MANAGEMENT OF TECHNOLOGY

Why is there increasing requirement of managing technology ?

 Technology ,Innovation
and
New Product Management
MBAFT-7411

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Chief Technology Officer (CTO)
• He is the orchestrator of company’s technology strategy and is deeply
involved in it’s co-ordination with the business strategy as well as its
implementation.

• He sees the comprehensive technology planning that extends

beyond R&D.

• CTO co-ordinates- forecasting ,auditing ,building , acquisition ,

licensing, exploitation ,gatekeeping of all the technologies in the
companies technology portfolio.
 Technology Planning
• Technology planning encompasses assessment, Creation ,
acquisition, exploitation ,diffusion and protection of technology.

• GE ,Motorola , Wipro ,Nokia view technology planning vital to their

ability to offer customers superior value based on superior
technology.

• The process used in planning is in itself at lease as important as the

plan developed. It should involve top down ,bottom up and
sideway participation.
Technology Forecasting
Those who forecast well can seize opportunity in time manner and reap the rewards of future change.
Technology forecaster should consider these for Forecasting:
1) Technology Life cycle
2) Factors that effect technological development
3) Rate of Innovation
Various methods used for forecasting- Monitoring ,Expert Opinion , Trend Analysis , Modelling and
Sceniaro’s
TIFAC –Technology Information, forecasting and assessment council.It to strive for technology development
in the country by leveraging technology innovation through sustained and concerted programmes in close
association with industry and academia.

Technology Scanning and Critical Technologies

• Planning needs deep understanding of the changes in technological scene. It
involved scanning the horizon for emerging critical technologies.
• Task of identifying critical technologies must be undertaken both at macro level
of nations and micro level of firms.
Technology Audits
A technology audit is to assess the firms position in technology in
relation to it’s competitors and the state of the art.

It details all technologies and sub technologies used in entire value chain owned by the
company and those owned by outside companies.

Purpose :
• To identify the strength and weakness of the technological assets of an organisation.
• Company’s Flexibility of Migrating from one technology to other
• Company’s environment of innovation

Technology audit is a continuous process of assessment and can be complex .

Technology Audit model

• Developed by Garcia Arreola (1996) that include important areas to

be included in technology Audit. (**Only for reference)
 TAM
Structure
Every Organisation’s technological strategy and
planning effort should ensure these critical issues:

• Technology Creation through R&D (Internal)

• Acquire the needed technologies (Acquisition of Technology)
• Exploit their own technologies (Exploitation of Technology)
• Absorption and adoption
• Protection of Technology
Technology Creation through R&D

• Rise in organised R&D activities

• Role of Government , Private industry , Academic Institutions
• Technology portfolio
-Generic Vs Targeted research
-Market driven reseach vs technology driven research
-Short term vs Long term
Strategy Echoes “ Don’t put all your eggs in one basket”
Stages of technology development

• Basic research
• Generic knowledge
• Exploration of curiosity
• Applied research
• Specific knowledge for mission purposes or breakthrough
• Development
• Proprietary knowledge of novel application systems, or
products
• Technological enhancement
• Continuous innovation for market value
Technology portfolio
• Diversity of technology investments

Emerging Basic/applied Research

stage Emerging technology

New generation technology

Growing Product/process innovation
stage
Technology transfer

Mature Maintenance of competitive advantage

stage (product/process/market)
Justification of R&D expenditure

Commitment Low Middle

Exploration Large
oriented R&D
Uncertainty

High Overhead
expense

Middle Options of Commercialization

Strategic R&D oriented R&D

Low Return of
investment
Changing Trends in R&D
Jain and Triandis proposed the following R&D needs which apply to
any company technology portfolio
• Normative Needs
• Comparative Needs
• Forecast Needs

Corporations use R&D to lead and support innovation in areas like

product innovation , material innovations , Process Innovations ,
Market Innovations for new business development ,Services
Innovation.
Internal Technology Source

Advantage Disadvantage
• Technological Growth • Longer time to market
• Exclusivity/Competitive • May lack the capability
advantage • Higher risk of failure

Cost
External Technology Source

Advantage Disadvantage
• Reduced time to market • Low technological growth
• Reduced Risk • Give up exclusivity advantage
• Add internal capabilities • Have to adapt to technology

Cost
Open Innovation
• Some of the PARC scientists, though, sensed that
more could be done.
• They questioned the pace at which Xerox was
pursuing commercialization of their inventions,
or disagreed with the company’s commitment to
proprietary standards.
• In pursuit of what they regarded as
underexploited, latent value, they chose to leave
Xerox to found new companies to exploit
individual component technologies.
30- 35 projects left Xerox after funding
for the work had ended within Xerox.
Xerox judged that there was little or no
additional value to be gained from
continuing this work.

Xerox even gave a license for the

technology to the some of spin-off.

11 of the projects, each of which

developed under a very different
business model from that of Xerox, there
turned out to be substantial value. The
collective market value of the companies
that emerged from these 11 projects
turned out to exceed the total market
value of Xerox.
 Left PARC in 1983.

To commercialize a page
description software that
became their first product,
PostScript.
The technology embodied in
PostScript came from Interpress, a
page description software developed
at Xerox PARC.

(PostScript allows printers to use digital

fonts to reproduce a wide variety of
characters generated from a PC.)
Interpress was an internal, proprietary protocol used to print fonts generated from Xerox
workstations on Xerox printers. But its latent value was limited to that of an important
component in a larger system.
Warnock and Geschke argued with Robert Adams, then the head of Xerox’s printing division,
over whether to make Interpress into an open standard
Not everything we start ends up fitting with our businesses later on.
Many of the ideas we work on here involve a paradigm shift in order to
deliver value.
So sometimes we must work particularly hard to find the “architecture
of the revenues.” … here at Xerox, there has been a growing
appreciation for the struggle to create a value proposition for our
research output, and for the fact that this struggle is as valuable as
inventing the technology itself.

John Seely Brown, Chief Scientist of the Xerox Corporation and

Director of the Xerox Palo Alto Research Center
IBM……A story of transformation due to open innovation.
IBM is another company that practiced closed innovation for a long time. It used to be in the business of selling
computers and servers. And, until it realized that it need to open up its business model. Being in the product
business for a long time where the products have been commoditized. It needed to look beyond its products and
look into other services. They hired a new CEO who came and he changed the business model from a product to
a service business.

Open innovation means knowledge has to flow out, knowledge also has to flow in.
Outflow of knowledge through, by helping others be instrumented, interconnected, and intelligent. Through the
IP that it has in its inventory.And so it got into other businesses, like smart cities, IBM Watson, and in enabling
other companies and other entities to go forward and creating value for itself. So this is the outflow, inside out.

How is IBM able to capture knowledge from the outside?

IBM does this by collaborating with about 5,000 universities world wide. It appointed a director for global
universities and programs with a scout for ideas from universities. They believe that the future is already here
and it's at the universities. And so through this kind of collaboration, IBM is able to bring in outside knowledge in
and also take its own knowledge and put it out.
Open Innovation
Open innovation is an
interactive and
collaborative
innovation process with
external partners.

Open innovation is “the

use of purposive inflows
and outflows of
knowledge to accelerate
internal innovation”
(Chesbrough et al., 2006).
Some of the companies
who are embracing the
open innovation
framework:

Apple
Google
Amazon
Skype
Salesforce.com
Eli Lilly
P&G (Procter &
Gamble)
BASF
DuPont
Dow Chemical
General Mills
Kimberly-Clark
GSK (Glaxo Smith Kline)
Closed innovation
All the best people are working for us
R&D creates profit only when we invent,
develop and market everything ourselves.
If we develop the product ourselves, we will
be the first on the market.
Winner is who gets the innovation to the
market first.
We will win if we develop most of the ideas
(an the best of them).
We must have our intellectual property
under control so that our competitors can
make advantage of it.
Open innovation
Not all the best people are working for us .
We must work with clever people within
and outside our company.
External R&D can create remarkable value;
to employ it, we need absorption capacity,
often as internal R&D.
R&D can create profit even if we do not
initialize and perform it ourselves.
To develop better business model is more
important than to be the first in the market.
We will win if we make best use of internal
and external ideas.
We must be able to profit from others using
our intellectual property and we must
license the intellectual property if it
supports our business model.
Closed innovation Open innovation
Examples: nuclear industry, Examples : PC, movies
mainframe computers

Mostly internal ideas Many external ideas

Low workforce mobility High workforce mobility

Low role of the venture capital Active venture capital

Few new businesses, weak ones Many new businesses

 There are at least three reasons for companies to start shifting from
Closed to Open Innovation in their business practice.

1. Open Innovation gives companies opportunity to examine a much

wider range of available technologies, a number of benefits may arise
“How can
shifting from for companies from early involvement into new technologies/
Closed business opportunities, when investments are small and reversible.
Innovation to
Open 2. Open Innovation allows companies to postpone entry and financial
Innovation commitment. Companies gain more flexibility about when to start the
improve the
results of internal part of the innovation process as it involves external sources of
NPD, and new idea generation-universities, suppliers etc. unlike, Closed
contribute to
the creation Innovation, companies always begin with the internally developed
of ideas
competitive
advantage?” 3. Open Innovation offers companies the advantage of an early exit as
they can always try to license or sell technologies that do not seem
profitable or fit into the business model
Drawbacks
• Open Innovation can be a genius and very advantageous tool to gain,
however, not without exposing the businesses to a higher level of risk.
Thus, companies should cautiously consider when and where to use
Open Innovation, what external partners to approach, and the nature
of the relations, as a method to create superior products while
minimizing costs.
• Being able to utilize Open Innovation requires development of
particular competences, focused on how to control the external part
of the NPD process and ensure company rights.
 More recent definition acknowledges
that open innovation is not solely firm-
centric: it also includes creative
consumers and communities of user
innovators.
Originally Defined "a paradigm that assumes that firms can and should use external ideas as well as internal ideas,
and internal and external paths to market, as the firms look to advance their technology".

More recently, it is defined as "a distributed innovation process based on purposively managed knowledge flows
across organizational boundaries, using pecuniary and non-pecuniary mechanisms in line with the organization's
business model".
The boundaries between a firm and its environment have become more permeable; innovations can easily transfer
inward and outward between firms and other firms and between firms and creative consumers, resulting in impacts
at the level of the consumer, the firm, an industry, and society.
 Creating your own IP is not a prerequisite or determinant for
success.

75% to 95% of patented technologies stay on the shelf and go

to waste. Not to mention the fact that 90% of all products fail.
Moreover, if your IP management policy prohibits

Open reassignment, then your patents are not assets

. With rising technology development costs and increasingly

Innovation shorter product life cycles, the risk of innovation is almost
certain. Technology life cycle has gone from 4-5 years, from a
decade ago, to 6-9 months. Having your innovation, business
model, and community aligned is more important.
Strategic advantages of Henry Chesbrough- open business
models. Companies big and small are learning that many of
their best ideas, approaches, and solutions come from the
outside. Moreover, by adopting the open innovation model,
companies can dramatically reduce the pitfalls, costs, and risks
associated with closed innovation.

Generating Innovation- There are four types of organizations

that primarily generate innovation: innovation explorers,
merchants, architects and missionaries.
Open Innovation
Benefits to companies operating on a program of
global collaboration:
• Reduced cost of conducting research and
development
• Potential for improvement in development
productivity
• Incorporation of customers early in the
development process
• Increase in accuracy for market research and
customer targeting
• Potential for synergism between internal and
external innovations
• Potential for viral marketing
Disadvantages
Implementing a model of open innovation is
naturally associated with a number of risks and
challenges, including:
• Possibility of revealing information not
intended for sharing
• Potential for the hosting organization to lose
their competitive advantage as a
consequence of revealing intellectual
property
• Increased complexity of controlling
innovation and regulating how contributors
affect a project
• Devising a means to properly identify and
incorporate external innovation
• Realigning innovation strategies to extend
beyond the firm in order to maximize the
return from external innovation
Technology Transfer
• Technology transfer is a process that permits flow
of technology from a source to receiver.
• Source is the owner or the holder of the
knowledge, recipient is beneficiary of this
knowledge.
• Source could be an individual , a company or a
country.
Technology Transfer
• Technology transfer usually involves some source of technology, group
which posses specialized technical skills, which transfers the technology to
a target group of receptors who do not possess those specialized technical
skills, and who therefore cannot create the tool themselves
• WIPO says technology transfer (TOT) is: “defined as transfer of new
technologies from universities and research institutions to parties capable
of commercialization "or in the sense of transfer of technologies across
international borders, generally from developed to developing countries.
• Transfer of technology is defined as “ a logical procedure that controls the
transfer of any process together with its documentation and professional
expertise between development and manufacture or between
manufacture sites.
The transferring level
• International
transfer
• Regional transfer
• Cross Industrial
transfer
• Interfirm
transfer
• Intrafirm
transfer
Dimensions of Technology Transfer :
The time and resources required to transfer a given technology
depends upon :

• What is actually transferred

• The mode of transfer
• The absorption capabilities of the recipient enterprise
• The capabilities and motivation of the supplier enterprises
• Technology gap between supplier and the recipient.
 What is actually transferred
Product Technology- Provision of proprietary product know--how ,Transfer of product designs
and technical specifications ,Technical consultants with suppliers to help them master new
technologies.

Process Technology- Production technique and plant layout include blue prints and
flowcharts ,formulas and recipes ,process sheets ,fabrication instructions ,tools and fixtures design
,operational procedures and material specifications. Provision of machinery and equipment to
suppliers, Technical support on production planning, quality management ,inspection and testing

Management system-various plans ,layout and technical control system, Quality control and
testing ,material procurement, inventory control ,equipment maintenance ,and machine loading
techniques.
Assistance with inventory management and the use of just in time and other systems.
Assistance in implementing quality assurance systems ( including ISO certifications)
Modes of technology transfer
• Passive mode-There is no direct communication from originator ,self
teaching manuals ,how to do it guide , users collect technology
information from third party
• Semi Active Mode- Role of technology transfer agent ,Agent acts as
an interpreter or communicator of information for new technology
but the agent will not participate in the application of technology
• Active mode- Technology agent and his team is fully involved and
they act as a bridge in technology transfer from technology source to
enterprise.
Technology absorption capability of recipient enterprise
• The absorptive capability of the recipient enterprise depend upon its
resources and capabilities embodied in technical ,managerial skills as
well as financial strengths
• Constraints to technology absorption
• Human Factors-Lack of leadership , support for innovation ,workforce attitude
,resistance to learn new technology
• Technology- Performance ,cost ,reliability proof of value
• Time- Changes ,adjustment, training
• User Acceptance
• Social Implications
 The capabilities and motivation of the supplier
enterprises.
• Transfer capability and motivation of enterprises supplying the industrial
technology have an important bearing upon the effectiveness and
efficiency of technology transfer.
• The competence of the transfer agents, including their ability to design
an easily transferable technology package, is an important factor.
• The supplier enterprises and its transfer package represents a
combination of documentation, training and technical assistance.
• Motivation of technology supplier depends largely on the transfer
mode and potential return the supplier hopes to realise from an
effective and efficient transplant.
Pricing of Technology
Transfer Process
• It can be differentiated into two different stages
- Technology Relocation (This phase is easy to measure)
- Identification of a specific technology and donor organisation
- Negotiation between the parties involved
- Legal agreement to accomplish the transfer
- Actual relocation of the ‘hard’ technology to a foreign site
- Technology Absorbtion
- Is lengthier
- Has no specific background
- Subjectively measured

The process begins after the technology arrives in the foreign country and is completed when the
receiver masters that technology. This technological mastery is the most important aspect of entire
transfer process.

Channels of Public dissemination ,Reverse engineering ,Planned

Channels-Licensing, Franchise ,Joint venture, Turnkey project ,FDI
,Technological consortium & joint R&D
Absorption
,Adaption
and
adoption of
Technology
Diffusion of
Innovations
theory
 Diffusion of Innovations theory
Everett M. Rogers is considered a founder of the Diffusion of Innovations theory. He analysed the
diffusion of several agricultural innovations in a rural community in Iowa.

Rogers was convinced that the adoption of innovations follows a universal process of social change. It
originated in communications to explain how, over time, an idea or product gains momentum and
spreads (or diffuses, hence the name) through a specific population or social system.

A process through which a new product moves from initial introduction to regular purchase and use

There are four main interacting elements of the key concept:

Diffusion of an innovation communicated through

certain channels over time and among members of a
social system.
 1. INNOVATION
Attributes of Innovation-Why some innovations more successful than others

The characteristics of innovations as perceived by individuals ,help to explain their different rates of adoption.
Innovations that are perceived by individuals as having greater relative advantage ,compatibility ,triability
,observability and less complexity will be adopted more rapidly than other innovations.
2. Channels of Communication
3. Time
4. Social System