Post on 20-Dec-2015
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Classic linear model of innovation
Powerful, simple conceptualization; useful but not the whole story
Science base=> basic research=> applied research=> invention=> prototype=> development=> commercialization=> diffusion=> technical progress=> econ growth
Example of new drug
Basic research: microbiology Applied research: screening
compounds, testing on animals Invention: lab success Development: clinical trials Commercialization: package, market Diffusion: spreads to doctors and
patient populations
Linear model of innovation Science base=> basic research=> applied
research=> invention=> prototype=> development=> commercialization=> diffusion=> technical progress=> econ growth
Which segments are “innovation”? What purposes served by this model? How exogenous is science?
Limits of linear model Feedback loops & backward linkages
Applied research/innovation=> science Commercialization=> new innovation Invention/innovation=> science base via
improvements in instrumentation “Learning by doing” in manufacturing
Chemicals, airframes, semiconductors “Learning by using” user feedback
Software, skateboards
Uncertainty and chance
Many examples in history of technology of innovations under-appreciated at the time Laser, radio, computer
Laser (Light Amplification by Stimulated Emission of Radiation) Invented at Bell Labs circa 1960 Lawyers didn’t apply for patents, not useful Now used in fiber-optic cables as well as
navigation, CDs, surgery, navigation etc.
Linear model and organization
Linear model => Closed industrial model of innovation: Focused internal R&D, clear firm boundaries, IP rights, virtuous cycles of reinvestment
Examples: AT&T Bell Labs, Xerox PARC
Open innovation
Open innovation: combine external and internal R&D into architectures and systems whose requirements are defined by a business model; blurs boundaries of firm R&D
Examples: Silicon Valley, Hollywood, P&G
Closed v. open innovation All smart people in the
field work for us To profit from R&D
must discover, develop & ship
We can get to market first if we innovate
First company to market will win
If we create most and best ideas, we’ll win
We must control our IP
There are smart people outside & inside
External R&D can add value alongside internal
We need not originate research to benefit
Building better business model more important than first to market
We win if we make best use internal & external
We can profit from others’ use of our IP and benefit from theirs when appropriate
Democratizing innovation
User-centered innovation offers advantages over traditional producer-centered innovation, which concentrates innovation support resources on just a few pre-selected potential innovators
Users can develop what they want, enhances motivation
Users need not develop everything they need; they can benefit from innovations developed and freely shared with others
User and producer-centered Economies of scale v. economies of scope
(heterogeneous info & resources among users) Producers integrate themselves into user-
centric innovation model Provide custom production or “foundry”
services to users: faster, better, cheaper; Produce user-developed innovations
commercially; Sell product-development platforms or sell
other complementary products For information products, no manufacturer is
required & general distribution occurs mainly through communities
Democratization of design Why now? Increasingly capable & cheaper tools that
require less skill and training to use Tools for communication make it easier for
user-innovators to gain access to rich libraries of modifiable innovations and components that have been placed in the public domain Today users design sophisticated new products,
services, music and art Open source software movement as key example Web 2.0 explicitly recognizes users add value
Service innovation: new markets
Market-creating service innovations v. incrementally improved services
Examples: Cirque du Soleil, University of Phoenix
Service v. product innovation1. Service providers part of innovation2. Local delivery capacity required for in-
person services3. No physical product to brand
Market-creating service innovations
1. Flexible solutions FedEx eBay CNN
2. Controllable convenience Google Netflix Skype
Market-creating service innovations
3. Comfortable gains Starbucks Cirque du Soleil Barnes & Noble
4. Respectful access Ball Memorial Hospital Southwest Airlines Hertz #1 Club Gold
Typology of service innovation
1. Business model innovation:Substantial change how revenues and profits earned (business model); often accompanied by organizational changes
2. Process/system innovation:Changes in how information exchanged between customer and service provider, bus processes
3. Service product innovation:Introduction of entirely new services
In reality all 3 are interrelated; an iterative process
Creation networks “Networks of creation:” hundreds or thousands
of participants from diverse institutions collaborate to create new knowledge, learn from one another, and appropriate and build on one another’s work—under guidance of a network organizer. Rather than protecting and hoarding
knowledge, offer to others to gain access to broader knowledge flows.
Opportunity to jointly create new knowledge and deliver innovations to market by collaborating closely; long-term, interactive relationships with networks of suppliers, customers, specialists, even amateurs
Coordination challenges
Three primary challenges in creation process:1. Access and develop highly distributed talent2. Provide appropriate contexts for participants
to come together, collaborate to experiment, tinker, and innovate (least actively managed)
3. Effectively integrate the creations of diverse participants into shared releases (most actively managed)
Central importance of performance requirements and feedback loops to insure continuous improvement
Product development in new era
1. Rapid movement from concept to prototype (rapid prototyping)
2. Define early and frequent rounds of performance tests to learn quickly and adapt designs
3. Establish broad-based communications mechanisms to share performance data
“Managers must move their focus beyond narrow efficiency gains …and embrace the possibilities that uncertainty creates.” J.S. Brown & J. Hagel (2006)
What is Web 2.0? (Tim O’Reilly) Strategic positioning
The web as a platform (Google v. Netscape) User positioning
You control your own data (Data is the next Intel Inside)
Core competencies Services, not packaged software Architecture of participation (RSS) Cost-effective scalability Re-mixable data source and transformations Software above level of single device (iPod/iTunes) Collective intelligence (hyperlinks, users as co
developers)