1. Technological innovation is now the single most important competitive driver in many industries. Many firms receive more than 1/3 of their sales and profits from products developed within the past five years.

2. The increasing importance of innovation has been driven largely by the globalization of markets and the advent of advanced technologies that enable more rapid product design and allow shorter production runs to be economically feasible.

3. Technological innovation has a number of important effects on society, inclusing fostering increased GDP, enabling greater communication and mobility, and improving medical treatment. 

4.. Technological innovation may also pose some negative externalities, including pollution, resource depletion, and other unintended consequences of technological change.

5. While government plays a significant role in innovation, industry provides the majority of R&D funds that are ultimately applied to technological innovation.

6. Successful innovation requires an in-depth understanding of the dynamics of innovation, a well-crafted innovation strategy, and well-developed processes for implementing the innovation strategy.

1. Creativity is the underlying process for innovation. Creativity enables individuals and organizations to generate new and useful ideas. Creativity is considered a function of intellectual abilities, knowledge, thinking styles, personality traits, intrinsic motivation, and environment.

2. Innovation sometimes originates with individual inventors. The most prolific inventors tend to be trained in multiple fields, be highly curious, question previously made assumptions, and view all knowledge as unified. The most well-known inventos tend to have both inventive and entrepreneurial traits.

3. Innovation can also originate with users who create solutions to their own needs. The rise of the snowboarding industry provides a rich example.

4. Firms' research and development is considered a primary driver of innovation. In the US, firms spend significantly more on R&D than government institutions spend on R&D, and firms consider their in-house R&D their most important source of innovation.

5. Firms often collaborate with a number of external organizations (or individuals) in their innovation activities. Firms are most likely to collaborate with customers, suppliers, and universities, though they also may collaborate with competitors, producers of complements, government laboratories, nonprofit organizations and other research institutions.

6. Many universities have a research mission, and in recent years universities have become more active in setting up technology transfer activities to directly commercialize the inventions of faculty. Universities also contribute to innovation through the publication of research findings.

7. Government also plays an active role in conducting research and development (in its own laboratories), fundint the R&D of other organizations, and creating institutions to foster collaboration networks and to nurture start-ups (e.g., science parks and incubators). In some countries, government-funded research and development exceeds that of industry-funded research.

8. Private nonprofit organizations (such as research institutes and nonprofit hospitals) are another source of innovation. These organizations both perform their own R&D and fund R&D conducted by others.

9. Probably the most significant source of innovation does not come from individual organizations or people, but from the collaborative networks that leverage resources and capabilities across multiple organizations or individuals. Collaborative networks are particularly important in high-technology sectors.

10. Collaboration is often facilitated by geographical proximity, which can lead to regional technology clusters.

11. Technology spillovers are positive externality benefits of R&D, such as when the knowledge acquired through R&D spreads to other organizations.

1. Different dimensions have been used to distinguish types of innovation. Some of the most widely used dimensions include product versus process innovation, radical versus incremental innovation, competence-enhancing versus competence-destroying innovation, and architectural versus component innovation.

2. A graph of technology performance over cumulative effort invested often exhibits an s-shape curve. This suggests that performance improvement in a new technology is initially difficult and costly, but, as the fundamental principles of the technology are worked out, it then begins to accelerate as the technology becomes better understood, and finally diminishing returns set in as the technology approaches its inherent limits.

3. A graph of a technology’s market adoption over time also typically exhibits an s-shape curve. Initially the technology may seem uncertain and there may be great costs or risks for potential adopters. Gradually, the technology becomes more certain (and its costs may be driven down), enabling the technology to be adopted by larger market segments. Eventually the technology’s diffusion slows as it reaches market saturation or is displaced by a newer technology.

4. The rate at which a technology improves over time is often faster than the rate at which customer requirements increase over time. This means technologies that initially met the demands of the mass market may eventually exceed the needs of the market. Furthermore, technologies that initially served only low-end customers (segment zero) may eventually meet the needs of the mass market and capture the market share that originally went to the higher-performing technology.

5. Technological change often follows a cyclical pattern. First, a technological discontinuity causes a period of turbulence and uncertainty and producers and consumers explore the different possibilities enabled by the new technology. As producers and customers begin to converge on a consensus of the desired technological configuration, a dominant design emerges. The dominant design provides a stable benchmark for the industry, enabling producers to turn their attention to increasing production efficiency and incremental product improvements. This cycle begins again with the next technological discontinuity.

6. The first design based on the initial technological discontinuity rarely becomes the dominant design. There is usually a period in which firms produce a variety of competing designs of the technology before one design emerges as dominant.

7. The dominant design rarely embodies the most advanced technological features available at the time of its emergence. It is instead the bundle of features that best meets the requirements of the majority of producers and customers.

1. Many technologies demonstrate increasing returns to adoption, meaning that the more they are adopted, the more valuable they become.

2. One primary source of increasing returns is learning-curve effects. The more a technology is produced and used, the better understood and developed it becomes, leading to improved performance and reduced costs.

3. Another key factor creating increasing returns is network externality effects. Network externality effects arise when the value of a good to a user increases with the size of the installed base. This can be due to a number of reasons, such as need for compatibility or the availability of complementary goods.

4. In some industries, the consumer welfare benefits of having a single standard have prompted government regulation, such as the European Union's mandate to use the GSM cellular phone standard.

5. Increasing returns can lead to winner-take-all markets where one or a few companies capture nearly all the market share.

6. The value of a technology to buyers is multidimensional. The stand-alone value of a technology can include many factors (productivity, simplicity, etc.) and the technology's cost. In increasing returns industries, the value will also be significantly affected by the technology's installed base and availability of complementary goods.

7. Customers weigh a combination of objective and subjective information. Thus, a customer's perceptions and expectations of a technology can be as important as (or more important than) the actual value offered by the technology.

8. Firms can try to manage customers' perceptions and expectations through advertising and public announcements of preorders, distribution agreements, and so on.

9. The combination of network externality returns to market share and technological utility will influence at what level of market share one technology will dominate another. For some industries, the full network externality benefits are attained at a minority market share level; in these industries, multiple designs are likely to coexist.

1. A first mover may be able to build brand loyalty and a reputation for technological leadership, preemptively capture scarce resources, and exploit buyer switching costs.

2. First movers may also benefit from increasing returns to adoption due to learning curve effects and network externalities.

3. Some studies, however, argue that first movers may have higher failure rates. First movers have to bear the brunt of R&D expenses and may face considerable consumer ambiguity. Second movers can capitalize on the R&D and marketing efforts of the first mover, producing a technology that costs less to develop and that corrects for any of the first mover’s mistakes.

4. First movers may also face poorly developed supplier markets, distribution channels, and availability of complementary goods, all of which can increase the challenge of successfully launching their new product or service. Enabling technologies may also be immature, hindering the new technology’s performance.

5. The biggest disadvantage many first movers face is uncertainty over customer requirements. Customers themselves may be uncertain about what features or form they desire in a new innovation. A firm may have to withstand significant losses before customer preferences become more certain.

6. The optimal timing of entry is thus a function of several factors, including the margin of advantage offered by the new innovation, the state of enabling technologies and complements, the state of customer expectations, the threat of competitive entry, whether the industry faces increasing returns, and a firm’s resources.

7. Firms that have fast-cycle development processes have more options when it comes to timing. Not only does a fast-cycle developer have an advantage in introducing innovations earlier, but it also can be its own fast follower by quickly introducing refined versions of its own technology.

1. The first step in establishing a coherent strategy for the firm is assessing the external environment. Two commonly used models of external analysis are Porter’s five-force model and stakeholder analysis.

2. Porter’s five-force model entails assessing the degree of existing rivalry, threat of potential entrants, bargaining power of suppliers, bargaining power of customers, and threat posed by substitutes. Recently Porter added a sixth force, the role of complements.

3. Stakeholder analysis involves identifying any entity with an interest in the firm, what it wants from the company, and what claims it can make on the company.

4. To analyze the internal environment, firms often begin by identifying strengths and weaknesses in each activity of the value chain. The firm can then identify which strengths have the potential to be a source of sustainable competitive advantage.

5. Next the firm identifies its core competencies. Core competencies are integrated combinations of abilities that distinguish the firm in the marketplace. Several core competencies may underlie each business unit, and several business units may draw upon the same core competency.

6. Sometimes core competencies can become core rigidities that limit the firm’s ability to respond to a changing environment.

7. Dynamic capabilities are competencies that enable a firm to quickly reconfigure the firm’s organizational structure or routines in response to change in the firm’s environment or opportunities.

8. A firm’s strategic intent is the articulation of an ambitious long-term (10 to 20 years out) goal or set of goals. The firm’s strategic intent should build upon and stretch its existing core competencies.

9. Once the firm articulates its strategic intent, managers should identify the resources and capabilities that the firm must develop or acquire to achieve its strategic intent.

10. The balanced scorecard is a measurement system that encourages the firm to consider its goals from multiple perspectives (financial, customer, business process, and innovation and learning), and establish measures that correspond to each of those perspectives.

1. Firms often use a combination of quantitative and qualitative methods to evaluate which projects should be funded. Though some methods assume that all valuable projects will be funded, resources are typically constrained and firms must use capital rationing.

2. The most commonly used quantitative methods of evaluating projects are discounted cash flow methods such as net present value (NPV) or internal rate of return (IRR). While both methods enable the firm to create concrete estimates of returns of a project and account for the time value of money, the results are only as good as the cash flow estimates used in the analysis (which are often unreliable). Both methods also tend to heavily discount long-term or risky projects, and can undervalue projects that have strategic implications that are not well reflected by cash flow estimates.

3. Some firms now use a real options approach to assessing projects. Real options better account for the long-run strategic implications of a project. Unfortunately, many new product development investment decisions do not conform to the assumptions inherent in an options valuation approach.

4. One commonly used qualitative method of assessing development projects is to subject the project to a series of screening questions that consider the project from multiple angles. These questions may be used merely to structure the discussion of a project or to create rating scales that are then utilized in an approach that combines qualitative and quantitative assessment.

5. A company's portfolio of projects typically includes projects of different types (e.g., advanced R&D, breakthrough, platform, and derivative projects) that have different resource requirements and different rates of return. Companies can use a project map to assess what their balance of projects is (or should be) and allocate resources accordingly.

6. Q-sort is a qualitative method of assessing projects whereby individuals rank each project under consideration according to a series of criteria. Q-sort is most commonly used to provide a format for discussion and debate.

7. Conjoint analysis is method of converting qualitative assessments of a choice into quantitative weights of the different criteria underlying the choice. It is most often used for assessing how customers value different product attributes.

8. Data envelopment analysis (DEA) is another method that combines qualitative and quantitative measures. DEA enables projects that have multiple criteria in different measurement units to be ranked by comparing them to a hypothetical efficiency frontier.

Which of the following statements is true regarding flexible manufacturing technologies?

A) They have increased the importance of production economies of scale.

B) They help companies differentiate their products and services from those of their competitors.

C) They make the process of developing product variations expensive and time-consuming.

D) They are unable to adjust production schedules to real-time information on demand.

Technological innovation has contributed to 

A)[image]longer product life cycles.

B)[image]increased costs.

C)[image]rapid product obsolescence.

D)[image]reduced competition in the marketplace.

Which of the following is not essential for a firm to develop a technically and commercially feasible product?

A) A well-crafted innovation strategy

B) An in-depth understanding of the dynamics of innovation

C) Well-designed processes for implementing the innovation strategy

D) A stronghold on the marketplace.

___________ is the underlying process for innovation.

A) Creativity

B) Knowledge

C) Development

D) Agglomeration

Which of the following is not a function of creativity?

A) Environment

B) Knowledge

C) Intellectual Ability

D) Attention to Detail

Which of the following is not a characteristic of an inventory?

A) They are curious and more interested in problems than solutions.

B) They question the assumptions made in previous work in the field.

C) They often have the sense that all knowledge is unified.

D) They are specialists by nature.

Which of the following is the correct sequence of steps for the demand-pull approach to research and development?

A) Customers express an unmet need, R&D develops the product to meet that need, the product is produced, and marketing promotes the product.

B) Scientific discovery leads to an innovation, engineering designs the product, it is manufactured and then marketing promotes it.

C) R&D comes up with the product concept which is refined by engineering, manufacturing produces it, and marketing sales it.

D) Manufacturing sees a way to improve a product, R&D takes teh suggestions and expands on it, engineering redesigns it, manufacturing implements the change and marketing promotes it.

Which of the following is an example of the cultural context of technology?

A) The degree to which technology can be protected by patents or copyrighted.

B) The availability of supplier and distributor markets

C) The population density of labor or customers.

D) The degree of market concentration

The Acme Mattress Company discovered that it could more cheaply use polyurethane foam for its matress than traditional stuffing materials. This is an example of a(n) ______ innovation.

A) architectural

B) radical

C) component

D) competence destroying

When handheld calculators replaced slide rules

A) the specific phase had been reached.

B) a technological discontinuity had occurred

C) technological continuity existed

D) an incremental change had occurred.

Which of the following statements is true regarding the use of the S-curve as a prescriptive tool?

A) The performance limits of a technology can be predetermined.

B) The shape of a technology's s-curve is absolute.

C) Firms cannot control the shape of the s-curve

D) Unexpected market changes can shorten or extend the life cycle of a technology.

D) Unexpected market changes can shorten or extend the life cycle of a technology.

Donald is extremely adventurous when it comes to buying new gadgets and gizmos. He has sufficient financial resources and is at ease in complex and uncertain situations. According to this description, Donald is most likely a(n)

A) early adopter

B) innovator

C) member of the early majority

D) member of the late majority

During the era of incremental change

A) firms attempt to simplify product design

B) firms invest in learning about alternative design architecture

C) firms are more capable of identifying and responding to major architectural innovation.

D) firms focus on achieve breakthrough capabilities

The standard form of the learning curve is formulated as y=ax^-b, where a is the

A) number of direct labor hours required to produce the xth unit.

B) number of direct labor hours required to produce the first unit

C) cumulative number of units produced.

D) learning rate

The availability of complementary goods and the size of the installed base are

A) negatively correlated

B) positively correlated

C) inversely proportional

D) unrelated

Increasing returns is

A) when gross returns from a product or process increases with the size of its installed base.

B) when the rate of return from a product or process increases with the size of its installed base.

C) when the rate return from a product or process increases as the cost per unit decreases

D) when gross returns from a product or process increases as the cost per unit decreases

Products that are not available in the market and that may not even exist but are advertised anyway are known as

A) technological figments

B) works in progress

C) anticipatory innovations

D) vaporware

Network externality benefits

A) refer to the value customers reap as a larger portion of the market adopts the same good

B) refer to the costs users bear as a large portion of the market adopts the same good

C) refer to the value organizations generate as their product becomes the dominant design.

D) refer to the value firms generate by advancing their technological platforms.

StarTech Enterprise was the first company to introduce a GPS-enabled shoe which was targeted at tourists, trekkers, and runners. The shoe was a best seller and, with no other competitors expected to the market, StarTech was able to increase the price of the shoe without losing much of its customer base. This is an example of

A) monopoly rents

B) product domination

C) enabling technologies

D) switching costs

Julie currently drives an automatic car. Her husband Max, however, insists she change to a manual transmission (stick shift) car as it will help them reduce their fuel expenses. Julie is against the idea as it will take her a considerable amount of time to learn how to drive a manual car. This is an example of

A) high switching costs
B) incumbent inertia

C) high monopoly costs

D) decreasing returns to adoption

Sony Corporation has long been considered as the pioneer of portable music devices with the release of its highly successful Sony Walkman. However, when consumer preferences switched to MP3 players, Sony was slow to respond to this need resulting in loss of revenues and market share and ultimately culminating in the domination of Apple's iPod. This is an example of

A) monopoly costs

B) incumbent inertia

C) high switching costs

D) enabling technologies

If you enter the market too late, the risk is that

A) the demand for the technology may exceed the supply

B) competitors control the market and make success practically impossible

C) you will face legal challenges of violating patent laws

D) no one will understand your technology

B) competitors control the market and make success practically impossible

The development cycle time for a new product can be shortened by using

A) combined qualitiative techniques

B) parallel development processes

C) smaller development teams.

D) a mechanistic organizational structire

Which of the following is an example of an exit barrier?

A) Government regulation

B) Brand loyalty

C) Advertising

D) Fixed capital investments

D) Fixed capital investments

LeatherTown has recently opened up its own tannery which supplies the leather it uses in its wallets, bags, belts and jackets.  This is an example of

A) backward vertical integration

B) forward vertical integration

C) horizontal integration

D) horizontal expansion

Bower bargaining power increases when

A) there are few firms and several buyers

B) the firm's product is highly differentiated

C) the buyer's can threaten to vertically integrate backwards

D) the buyer faces switching costs

Which of the following is a support activity according to Michael Porter's model of the value chain?

A) Storage of raw materials

B) After-sales service

C) Recruitment

D) Marketing

When the relationship between a resource and the outcome it produces is poorly understood, then it is said to be

A) tacit

B) socially complex

C) causally ambiguous

D) tactically vague

Which of the following statements is true regarding venture capital?

A) Venture capital firms specialize in particular industries.

B) Venture capital firms are more likely to provide seed stage funding

C) Venture capital firms accept a vast majority of the proposals considered

D) Venture capital is often considered for projects that require less than $1 million.

___ is the discounted cash inflows of a project minus the discounted cash outflows.

A) Present value of cash flow

B) Net present value

C) Annuity present value

D) Perpetuity present value

Calculating the IRR of a project typically must be done by trial and error, substituting progressively ______ interest rates into the NPV equation until the NPV is ________.

A) higher, negative

B) lower, negative

C) higher, zero

D) lower, zero

If a particular stock is worth more than the exercise price, the holder of a call option on that stock will

A) allow the option to expire

B) lose the amount of money paid for the option

C) choose not to exercise the option

D) exercise the option by buying the stock

Which of the following screening questions is related to a firm's existing capabilities?

A) Will the firm need to hire employees with new skills

B) If the firm misses its target deadlines, what impact will this have on the potential value of the project?

C) Do one or more competitors have better capabilities for developing this project?

D) Where will the customer buy the product?

A) Will the firm need to hire employees with new skills

-Technology Used

-R&D Budget/spending

-Types of products

-Patent Portfolio

Technology Push = trying to PUSH into Market

Market Pull = Understand what market wants and PULL from the company

How to balance?  Need to integrate interface with marketing so market can define what technology needs and develop something within these parameters.

Why is it important to balance both?

1) Some customers do not know what they want/ need

2) Issues that can be associated with being First-to-Market

An opportunity includes:

1) an idea that is embedded in enduring customer need

2) ability to delivery a product at regular q.q.m. (quality, quantity, margin)

1) Need to assess and quantify (ROI/ NPV)

2) understand/communicate opportunities

3) concept/ definitions

Focus on how to create value and recognize an Opportunity!

Need Science & Eng, Project Mgt, General Management, and Behavior skills = MOT (Manager of Technology)

∑C/ (1 + r) ^ 2

Sum of Cash Flow/ Risk

1) analyze by companies on their ability to deliver

2) specify what company needs to absorb in order to deliverr

3) how much capacity does this org have to absorb?

Case 1:

Sources of Innovation

Camera Pill

Discussion Questions:

1) What factors do you think enabled Iddan, an engineer with no medical background, to pioneer the development of wireless endoscopy?

2) To what degree would you characterize Given's development of the camera pill as "science-push" vs. "demand-pull"?

3) What were the advantages and disadvantages of Iddan and Meron collaborating with Dr. Swain's team?

1)  Factors that enabled the development of this technology with no medical background include having a different framework to work with (process), different mindset/ way of thinking, and the ability to network with other individuals outside of the medical field.

2) A little of both.  Science push = trying to push product into the market.  Demand pull = understanding what the market needs are and pull from the company.  

3) Advantages of collaborating:

- allowed project to move faster

- combine technologies

        - ability to network

Disadvantages of collaborating:

- loss of control

1) mastered basic tools and operations in the filed in which they invent, but they have not specialized solely in that field; instead they have pursued two or three fields simultaneously, permitting them to bring different perspectives to each.

2) They are curious and more interested in problems than solutions

3) They question the assumptions made in previous work in the field

4) They often have the sense that all knowledge is unified.  They seek global solutions rather than local, and are generalists by nature.

Center Innovation Management Studies : Innovation Management

 3 Dimensions of Framework:

1) Levels:  Firm, Industry, Macro-Environment

2) Dimensions: Strategy, Org & Culture, Process, Techniques & Tools, Metrics

3) Competences:  Idea Mgt, Market Mgt, Portfolio Mgt, Platform Mgt, Project Mgt

This framework breaks IM down into elements that can be learned, practiced, measured, and improved.

Idea = recognition that something has commercial value

Opportunity = an idea grounded in enduring user/ customer needs and capability to delivery

Ideas are political - Opportunities are analytical

TPM is the ability to elaborate on product ideas with a disciplined process of market segmentation for best commercial application of the technical capabilities.  Establish logical links between technical capabilities and ensuring customer needs by means of the product attributes, which unite technologies and markets.

**typically facilitated by the Champion

Case 4:

Standard Battles and Design Dominance

Blu-ray vs. HD-DVD

Discussion Questions:

1) What factors do you think influenced whether (1) consumers, (2) retailers, or (3) movie producers supported Blue-ray vs. HD-DVD?

2) Why do you think Toshiba and Sony would not cooperate to produce a common standard?

3) If HD-DVD had not pulled out of the market, would the market have selected a single winner or would both formats have survived?

4) Does having a single video format standard benefit or hurt consumers?  Does it benefit or hurt consumer electronics producers?  Does it benefit or hurt movie producers?

1a) consumers influenced the support of Blu-ray based on brand loyalty.  They were more comfortable w/ the Sony brand.  In addition, consumers did not wan to make a decision until"standards" were set.  Dominant design had less to do w/ technology.  Everything had to do with content.

1b) Retailers did not want the additional inventory of having two products.  In addition, 2 different formats would affect the production costs (sell same qty, would need to balance demand of two different formats).  Sony was buying up content (in this case movies) and had enough control to drive decisions.

1c) Movie producers  would most likely follow consumer/retailers decision

2) Both companies thought that they had the dominant design.  Greed could also be the cause.

3) No, consumers won't buy 2 different operating systems.  Eventually there would be a single winner in the market.

4) Benefits = complementary goods

     Hurt = may slow down improvements, create a monopoly

1) Brand Loyalty and Technological Leadership

2) Preemption of Scarce Assets (ability to capture resources such as key locations, govt permits, access to distribution channels, and relationships with key suppliers)

3) Exploiting Buyer Switching Costs

4) Reaping Increasing Returns Advantages (powerful advantages being an early provider; a technology that is adopted early may rise in market power through self-reinforcing positive feedback mechanism, culminating its entrenchment as a dominant design)

First Mover Disadvantages

1) Research and Development Expenses

2) Undeveloped Supply and Distribution Channels

3) Immature Enabling Technologies and Complements

4) Uncertainty of Customer Requirements

1) How Certain are Customer Preferences?

2) How much improvement does the innovation provide over previous Solutions?

3) Does the innovation require enabling technologies, and are these technologies sufficiently mature?

4) Do complementary goods influence the value of the innovation, and are they sufficiently available?

5) how high is the threat of competitive entry?

6) Is the industry likely to experience increase returns to adoption?

7) Can the firm withstand early losses?

8) Does the firm have resources to accelerate market acceptance?

9) Is the firm's reputation likely to reduce the uncertainty of customers, suppliers, and distributors?