Innovation
Management
Assist. Prof. Meral DÜLGER TAŞKIN
meraldulger@gmail.com
@mrldlg
Textbook
• Try:
• amazon.com
• abebooks.com
• pandora.com.tr
To understand
ALL of your
courses better
Watch national and
international
politics/business/e
conomy specials on
news channels
Read the
business/economy
sections of national
and international
newspapers
Influential
columnists
A business student
has to be regularly
reading:
• Take your pick at:
• yazaroku.com
• Dünya Gazetesi
• The Economist
• The Guardian
• Forbes
To understand this course better
4
But the most important tools are..
CURIOSITY
CANDOR
COURTESY
COURAGE
Candor
As a group, we need to
talk about issues
candidly.
I want to make sure we get to
hear from the diverse
perspectives and diverse voices
in our class.
That level of openness
and candor is not just
encouraged, it’s
expected.
That means we might hear opinions
that we’ve never heard before, or that
are drastically different from—or are
even in direct opposition to—ours.
Courtesy
We need to be able to
voice our perspectives
respectfully.
A lot of times, important
conversations don’t
happen because we fear
that we might offend
someone—that others will
react harshly in some
way!!
And we need to listen and respond
respectfully to those who have
different perspectives.
We’re not going to let that fear
stop us because we’re going to
always operate from a place of
good intentions.
We must remind ourselves that our classmates
have the best intentions when they’re raising
different opinions, and we must pursue our
intellectual curiosity with kindness and courtesy.
Courage
It takes courage to openly
voice our opinions and our
perspectives.
However, it takes even more
courage to be able to listen,
really listen, and understand
the perspectives that are
different from ours, that
contradict our perspective.
Listening and understanding
isn’t the same as agreeing.
It’s how learning happens:
LEARNING TAKES COURAGE!!
ART &
CREATIVITY
Creativity isn't just
about making art-- it's
a way of approaching
life.
• Resourceful
• Inspired
• Thinking ingeniously
• Making things happen
• Designing your days in big
and small ways...
«Formal education will
provide you a living. Selfeducation will make you a
FORTUNE. Successful
people NEVER STOP
LEARNING.»
THE IDEA OF LIVING LIFE AS ART,TREATING EVERYTHING
AS A CREATIVE ENDEAVOR, CAN BE A GAME-CHANGER!!
What will we learn?
Beginning of the
Fall Semester
What is innovation?
Role, impact &
economy
Creativity)
Case Discussions (1
week)
People &
Organization
New Product
Development
Disruptive
Innovation &
Commercialization
Innovation Strategy
Risk Management
Boosting Innovation
Performance & The
Future
Case Discussions
(2 Weeks)
End of the Spring
Semester
Class Schedule
and Topics
Class Material
Direct Link: https://drive.google.com/drive/folders/1zTaLmAJx13uemTiDaTP4AN74dPBQf0W3?usp=sharing
I need a class
representative
Course
Assessment
Mid-term Exam
• Multiple choice
•
90% of the questions will be about how well you
learned the concepts through examples
•
Will include topics we’ve covered in class
•
Will be quite difficult
Course
Assessment
Final Exam
• A combination of multiple choice, matching or fill in the
blanks, etc..
• 60-70% of the questions will be about how well you learned
the concepts through examples
• 30-40% will test whether you are careful about details and
the logic behind innovation management
• Will include topics we’ve covered in class
• Will be difficult
Grading
Mid-term Exam
50%
Final Exam
50%
_______________________
Total
100%
You need to score at least 40 points in the final to pass the course!
+
The exam average also counts!!
Hope to have a
productive and
beneficial
semester!!!
24
Application
of
knowledge
to work
21st
Century
Economics
Creation of value
•Efficiency
(i.e.Price!)
•Innovation
Dyson gives glimpse of secret
robot prototypes which appear to
carry out household chores
https://www.youtube.com/watch
?v=2Bh61aY8ncg
Meanwhile…
https://twitter.com/cb_doge/status/1529172165634838528
Invention describes the discovery of
any new product, process, or idea, or
the modification and recombination of
existing ones
Invention vs.
Innovation
Innovation concerns the
commercialization of the invention
An innovation needs to be novel,
useful, and successfully implemented
in order to help firms gain and sustain a
competitive advantage
Some examples of
innovation
Introduction of
new
goods/services
Increasing the
quality of those
goods /services
Opening a new
market/industry
New sources of
supply
New/better/faster
method of
production
New organization
of an industry
Innovation
A specific function of
entrepreneurship
The process by which
entrepreneurs convert ideas into
marketable opportunities
To be successful, innovation should offer both
newness and market value.
Novelty alone will not secure market
acceptance or a satisfactory return on
investment!
•
Source: Osterwalder, A., Pigneur, Y., Smith, A., & Etiemble, F. (2020). The Invincible Company: How to Constantly Reinvent Your Organization with Inspiration From the World's Best Business Models (Vol. 4).
John Wiley & Sons.
Innovation Requirements
Technical Skills
Marketing Skills
Strategic Skills
Mindset for Innovation
Freedom from
conditioning
Full of love
and
compassion
Flexible
Open
Happy
Curious
Alive
Now, customers
Know a lot more than they did
50 years ago,
Have many specific
requirements and demands,
Expect companies to do things
their way
Success lies in doing
business the way
customers want.
Many markets will
evolve, traditional
market segments will
dissappear
**As basic needs are
met, there’s an
additional challenge
to innovation
Companies will have to
adjust their offerings
accordingly
Determining customers’
hidden (latent) needs
Have too many options on the
market,
Are not loyal to brands.
Changing Customers and Needs
Home markets are threatened by
“foreign competition”
Intensified
Competition
Competition may
emerge from
outside of a given
industry
Panasonic also owns
Nippon Bicycle which
makes highly customized
mountain bikes
• Expertise comes from
Panasonic’s previous
experience in consumer
electronics industry
Who creates innovations?
Entrepreneurs
Scientists/Engineers
Profit-oriented
Managers
Inventors-innovators live on in the
many small business
entrepreneurs who
continue to follow a dream or
creative problem-solving process
producing successful innovations
from small laboratories or
backyard workshops
Involves a predetermined plan to
follow established research
methodologies and formal
patterns for developing new
technology
Focused on the satisfaction of
customer or market demand and
relatively fast returns to
investment in any new innovation
Ex: Bell Laboratories and Thomas
Edison’s systematic approach to
new technology
Less focused on technological
brilliance of the innovation
Sources of Innovation
Unexpected
occurrences
Incongruities
Ex: The unexpected
failure of the Ford
Edsel allowed Ford to
compete with General
Motors and leading to
the design of the
Mustang.
It is important to seek
ideas within the
existing process and
economic realities of
established industries.
Ex: Overnight package
delivery by Federal
Express is another
example.
Process needs
Adapting existing
innovations to new
processes to fill new
market opportunities
Ex: Sugar-free and
caffeine-free products
Industry and
market changes
Demographic
changes
Changes in
perception
Ex: Home health care
offer new innovations.
Ex: The building of
rest homes for the
elderly; robotics do
the jobs of blue-collar
workers.
Ex: The exercise,
health and diet
industries have all
seen innovation
opportunities due to a
growing concern for
fitness among the
ageing and frequently
overweight
population of the
developed world.
New knowledge
Ex: Many companies/
governments working
on COVID19/cancer/Alzhemer’s
vaccine/medicine
New technologies often create
new industries
Ex: Radio Frequency
Identification Labels (RFID);
Nano Technology – A
multidisciplinary innovation
(Physics & Chemistry)
New applications of advanced
technologies are constantly
emerging
Ex: Sophisticated electronics
are an important aspect of car
design
Technological Advances
Technology is also important
in the services industry
Ex: Banks and GSM companies
develop technologies to
provide customized services to
specific consumer segments
Mini Case: Amazon Go
Amazon Go is a new kind
of store with no checkout
required created the
world’s most advanced
shopping technology.
The checkout-free
shopping experience is
made possible by the
same types of
technologies used in selfdriving cars: computer
vision, sensor fusion, and
deep learning.
When you’re done
shopping, you can just
leave the store. A little
later, Amazon sends a
receipt and charge the
shopper’s Amazon
account.
It offers ready-to-eat
breakfast, lunch, dinner,
and snack options along
with a wide selection of
grocery Essentials.
«Just Walk Out
Technology»
automatically detects
when products are taken
from or returned to the
shelves and keeps track
of them in a virtual cart
* Innovation must contain a degree of novelty, and the type of
innovation can be new to the firm, to the market or to the world.
A Typology
of
Innovation
Source: Kuratko & Hodgetts (2004)
Generating Innovation
Source: Mazzarol & Reboud S. (2020)
To sustain a competitive advantage,
however, a firm must continuously
innovate
Continuous innovation is the engine
behind Apple, 3M, Xiaomi, Google,
HP, Intel, P&G, and Samsung..
“Sustainable”
Innovation
Many firms have dominated an early
wave of innovation only to be
destroyed by the next wave
Innovation Management is a complex process..
No “quick fixes”
No “universal
solutions”
May ideas that are
effective in an
organization cannot
be transferred to
another
No “adoption of best
practices”
Instead, managers need to
ADAPT ideas to their own
unique situation
Too many companies
focus on only one
aspect of IM:
Idea generation
• There’s much more to IM
than just that, companies
need a broader vision
Innovation Requirements
Inputs
Knowledge
management
Innovation
strategy
Organization
and culture
Portfolio
management
Project
management
Commercialisation
People, physical and
financial resources,
tools
Idea generation,
knowledge
repository, and
information flows
Strategic orientation
and leadership
Culture and
structure
Risk/return balance,
optimisation tool
use
Project efficiency
tools,
communications
and collaboration
Market research,
market testing,
marketing and sales
Ex: Significant
changes in
techniques,
equipment and/or
software.
Implementation of a
new marketing
method
Implementation of a
new organizational
method
Ex: Significant
changes in product
design or packaging,
product placement,
product promotion or
pricing.
Ex: In a firm’s
business practices,
workplace
organization or
external relations.
Organizational
innovation
Ex: Significant
improvements in
technical
specifications,
components and
materials,
incorporated
software, user
friendliness or other
functional
characteristics.
Implementation of a
new or significantly
improved product or
delivery method
Marketing innovation
Introduction of a
good or service that
is new or significantly
improved with
respect to its
characteristics or
intended uses.
Process innovation
Product innovation
Types of Innovation
Product Innovations
Most product innovations are
incremental, involving minor
changes or enhancements to existing
technologies.
These are usually
made in response to
Increasing
competition
Still, there are many
breakthrough innovations
as well ☺
Customer
feedback
The expected
outcome is etiher
Continuously
improving
quality OR
Lowering costs
via enhanced
productivity or
reduced cost
*
Dimensions of Innovation in Manufacturing
Product
Innovation
Not sustainable!!
• Ex: Gilette vs. Tetley
Service
Innovation
Process
Innovation
Business Process
Innovation
Business Model
Innovation
Manufacturing and
delivery process
Make it easier for
customers to do
business with a given
company
Anything that enables
the company to
achieve profits
• Ex: Order
fulfillment
Ex: Amazon.com
Mini Case: Gillette
Gillette ‘Mach 3’ razor is
a first-to market product
Developed at a very high
cost
A UK supermarket chain
was quickly able to
produce a good copy at a
fraction of the original
cost
Gillette have been more
dependent therefore on
expensive television
advertising to protect
sales of their product
When products are easy
to copy, competitors can
‘leapfrog’ original
features and Wilkinson
Sword Company have
now introduced a 4
blade razor
Mini Case:
Tetley’s
Teabags
Tetley is a
market leader
and the
originator of
the round
teabag
Advertising was
based around a
better cup of
tea that would
result from
bags where the
tea could
circulate better
Knew that
competitors
would try and
copy
When new product was
introduced competitors
were unable to obtain
similar manufacturing
equipment quickly and
Tetley maintained its
lead
Hired
consultants to
develop a new
manufacturing
line for round
teabags
Dimensions of Innovation in Services
New product
Customer
profiling
Ex: Insurance policy,
account type
To contact customers
with a unique value
proposition
• Should be hard to
copy
3rd party
contribution
Use of different
sales channels
Internet vs. Brokers
Creation of
better services
Degrees of
Product
Innovation
Incremental
Radical
Transformational
Old / New
Product
Development
Degree of Product Innovation
1.
Improvement
products
and
revisions
of
existing
Old
2.
New products that provide
performance at lower cost
similar
Old
3.
Existing products that are targeted to new
markets
Old
4.
Addition of products to an existing product
line
New
5.
Creation of new product lines
New
6.
New-to-the-world products
New
Source: Booz-Allen and Hamilton, New Products Management for the 1980s, (New York: Booz-Allen and Hamilton Inc., 1982).
Competence - Enhancing Innovation
• Builds on the existing knowledge base
• Ex: each generation of Intel’s microprocessors (e.g., 286,
386, 486, Pentium, Pentium II, Pentium III, Pentium 4)
builds on the technology underlying the previous
generation
Competence – Destroying Innovation
• If the innovation does not build on the firm’s existing
competencies or renders them obsolete
• Ex: Innovation of digital camera by Kodak made their reel
camera technology obsolete
Competence-Enhancing Innovation vs.
Competence-Destroying Innovation
Component Innovation
Entails changes to one or more
components, but does not significantly
affect the overall configuration of the
system
• Ex: an innovation in bicycle seat technology
(such as the incorporation of gel-filled material
for additional cushioning) does not require any
changes in the rest of the bicycle architecture
Architectural Innovation
Entails changing the overall design of
the system or the way that
components interact with each other
• Ex: When digital photography emerged, the
likes of Kodak and Polaroid were forced to
master completely new competences in solidstate electronics, camera design, software, and
display technology
Component Innovation vs. Architectural
Innovation
R&D
Source of innovation
BUT relying solely on this
function is not enough!
Identify customer needs through
creative market research
Innovation
throughout
the
Organization
The functional areas that
should be involved are:
Marketing
Should be involved in product
definition,pricing, positioning,
launch
Operations
A good place for process
innovation
Finance & Accounting
Can calculate ROI for
innovation projects
Human Resources
Management
Hiring, developing and
motivating employees that will
innovate
Creating an innovation
“culture”
Open innovation
Outside Resources
Universities, research
institutes
WHERE CHANGE,
INNOVATION,
PRODUCTIVITY,
EXCITEMENT, MAGIC
HAPPENS
COMFORT
ZONE OF THE
BUSINESS
WORLD
PASSION
CREATIVITY
TAKING INITIATIVE
EXPERTISE
DILIGENCE
OBEDIENCE
Source: https://www.azor-solutions.com/blog/insan-okuryazarligini-gelistirebilmek-turkiye-nin-konfor-alani-arastirmasi-2021/
The
Development
Funnel
Ideas ‘filtered out’
Rejected concepts
Projects terminated
(‘killed’)
Ideas
Idea
Generation
Phase
Ideas…
Choice of
Best Ideas
Concepts…
‘Recycled ideas’
Ideas from open innovation
Implementation
Projects…
Market
- New Products
- New Services
- New Processes
- New Business
Processes
Example: The New
Product
Development
Funnel in
Pharmaceuticals
The Innovation Pentathlon Framework
The
Pentathlon
Framework
in Context
Market Forces
Competitive Forces
New Technology
The Organizational
Context
Partnerships
Suppliers
Innovation Networks
Sources of Knowledge
(universities, technical
institutes)
A Weakness &
Strength
Tool...
Innovation Strategy
Ideas
(Weakness)
Prioritization
Implementation
(Weakness)
Market
- Products
- Processes
- Services
People and Organization
Innovation Strategy
Ideas
(Strength)
Prioritization
Implementation
(Weakness)
People and Organization
(Strength)
Market
- Products
- Processes
- Services
Innovation and Economics
Assist. Prof. Meral DÜLGER TAŞKIN
Spring 2023
Economic Measures of Innovation
**As companies have
a profit motive, they
need to measure
performance of the
activities/factors that
they believe are
profitable
3 main
measures:
Innovation is
no exception
Number of
patents per
employee or
over time
R&D
expenditure as
a percentage of
sales
Number of new
products
Company Size and Innovation
Larger companies are advantageous
Due to economies of scale in R&D, available funds and
resources, knowledge of markets and technology,
experience
R&D expenditures rise when firm size expands
Size & age determine the number of products produced
Larger companies have more patents
STILL, even if larger companies have the
mentioned advantages, smaller ones
end up being more innovative!
Small companies are the most important innovators
The number of new products developed in smaller
companies are proportionally higher
Ex: Bagless vacuum cleaner invented by Dyson, not market
leader Hoover
Why?
Percentage of
global research
and development
spending in 2021,
by industry
Source: statista.com
The Worl’d
Biggest R&D
Spenders in 2022
(in billion U.S.
dollars)
Source: statista.com
Government
Policies and
Innovation
Support for innovation should
become an integral part of
government policies
Developed countries invest a
considerable portion of their budgets in
supporting research and technology
development in science and industry
• On the other hand, we spend ~ $20BN
to import technology in Turkey!
Research has found that available
credit can affect innovations
• Many governments are encouring
the improvement of the credit
mechanisms
Even if the governments do their
best, it is still up to the individual
firms to come up with innovations
and manage them
*2018
Countries by gross
research and
development
(R&D) expenditure
worldwide in 2021
Source: Statista.com
Innovation
and
Business
Cycles
Innovation drives
economic development
and often implies
irreversible changes in
the way things are done
«Creative
destruction»
Novel ideas coupled with
disrupted markets and
industries
Mini Case: IBM’s product innovation problems
During the 1960s IBM was the dominant player in the computing industry
Its experience with the 360 mainframe computers helped the company become
the global leader the end of that decade
1970s-1980s: Technological changes challenged its leadership
Minicomputers (Digital/NEC),
Super computers (Cray)
Personal microcomputers (Apple)
Even if IBM created the IBM PC, it was in serious trouble by the 1990s because it was late
to adapt
IBM’s primary mistake was not seeing these new emerging technologies as serious threats
to its existing business.
Sources: Heller (1994), Mazzarol (2013)
Mini Case: Nokia’s missed opportunities
Nokia Corporation entered the mobile phone industry in the 1990s and by
2006 was the world’s market leader
The launch of the Apple iPhone in 2007 disrupted the existing mobile telephony market
making traditional 2G phones obsolete
Even though Nokia had identified the emergence of the smartphone as a technological
trend, it did not move fast enough to configure its product innovation pipeline to match
Apple and other competitors such as Samsung
By 2012–2013 Nokia had lost billions and sold its mobile phone business to Microsoft at a
bargain price
Sources: Heller (1994), Mazzarol (2013)
There’s often a time lag
between an invention and
its widespread adoption
Innovation and
Business Cycles
Ex: The invention of
automobile in 1886
and its diffusion
during the 1920s
The few who are lucky
The number of inventions enough to
are high BUT the number commercialize their
inventions are called
of innovaions is
enterpreneurconsiderably lower
innovators
Diffusion of
Innovations
The way in which innovations
spread through populations
The
Adoption
Life Cycle
The Early Adopters are
interested in innovations
that will give them serious
competitive advantage
Competitive
Chasm
The Early Majority is seeking to
make an improvement in their
businesses, not a revolution!
They will demand hard proof that an
innovation can deliver it
In between the two
phases there’s a
“competitive chasm”
Associated with the technological
feasibility and the market demand
for the technology
If you miss it, the innovation will not
be adopted!
Sales of radically new products
often start well but then stall or
even collapse at the end of the
Innovator/Early Adopter phase
Relative advantage
Compatibility
Complexity
Take the electric
car and interpret
the meaning of
Trialability
Observability
Usefulness and
Ease of Use
Subjective
Influences
Class Exercise Time!
The Failure of
Innovation
Diffusion
Failure of an innovation is due to
• The inability of those seeking to commercialise the new
technology OR
• A market-focused and customer centered entry strategy
is a must!
• The innovation must be diffused in such a way that the
customers and suppliers are satisfied
• Only focusing on technical and scientific issues is a
huge mistake!
• Not analyzing social, economic, technical or cultural factors
required for diffusion properly
Example: DuPont’s diffusion of nylon in the 1940
• DuPont identified women’s hosiery and underwear as a
market niche and essentially created a new market for
nylon products in this area.
• By doing so, DuPont secured a strong strategic position
with a clear point of differentiation.
New products and services have positive
influence on employment
Innovation and
Employment
• These opportunities may be in another region, or even
in another country
BUT, improvements in processes may reduce
labor requirements
Creative destruction leads to the loss of
industries with old technologies
• Ex: Typewriters, analog cameras are easy to find
anymore
Jobs that will
Dissappear in the Next
15 Years Due to AI
Printers/
Drivers
Farmers
Travel Agents
Manufacturing
Workers
Dispatchers
Waiting Tables
& Bar Tending
Bank Tellers
Data Analystis
Content
Creators
Military Pilots &
Soliders
Fast Food
Workers
Telemarketers
Accountants
and Tax
Auditors
Stock Traders
Construction
Workers
Surgeons
Fiction Authors
**Movie Stars
Publishers
Cashiers
Product
Innovation and
Growth
Product innovation seems to
be closely related to market
share and increased product
quality
Innovating companies also
grow fast
Earn most of their revenues from their
more recent “new” products
SO, companies are increasingly
rely on new products for
profitability
Critical Views of Innovation
Innovation can be
driven by profitseeking motives of
dominant actors,
leading to a focus
on short-term gains
and serving their
own interests
rather than longterm societal
benefits.
Innovation can lead
to job displacement
and income
inequality as
automation and
technological
advances replace
human labor.
Innovation can
have negative
environmental
consequences, such
as increased
resource depletion,
pollution, and
climate change.
Innovation can
create new forms
of inequality and
exclusion, as those
without access to
new technologies
or the skills needed
to use them are left
behind.
Innovation can lead
to a loss of privacy
and autonomy as
individuals and
societies become
increasingly
dependent on
technology and
data.
Case Study
Given Imaging’s Camera Pill
Gabriel Iddan was an electrooptical engineer who was
developing the “eye” of a
guided missile, which leads
the missile to its target.
In 1981, Iddan traveled to
Boston on sabbatical and
befriended a
gastroenterologist (a
physician who focuses on
digestive diseases) named
Eitan Scapa.
Scapa taught Iddan about the
technologies used to view
the interior lining of the
digestive system.
The existing technologies had a
number of significant limitations,
particularly with respect to viewing
the small intestine.
The small intestine is the locale of a
number of serious disorders:
bleeding, Crohn’s disease, celiac
disease, chronic diarrhea, irritable
bowel syndrome, and small bowel
cancer
Scapa thus urged
Iddan to try to
come up with a
better way to
view the small
intestine, but at
that time Iddan
had no idea how
to do it.
The nature of the
small intestine
makes it a difficult
place to diagnose
and treat such
disorders.
The small intestine (or “small bowel”) is about 5 to 6 meters long
and is full of twists and turns.
X-rays do not enable the physician to view the lining of the
intestine
Endoscopes (small cameras attached to long, thin, flexible poles)
can reach only the first third of the small intestine and can be
quite uncomfortable for the patient.
The remaining option, surgery, is very invasive and can be
impractical if the physician does not know which part of the
small intestine is affected.
Ten years later, Iddan visited
the United States again, and
Scapa again inquired whether
there was a better
technological solution for
viewing the small intestine.
• By this time, very small image
sensors— charge-coupled devices
(CCDs)—had been developed
Iddan wondered if perhaps it
would be possible to create a
very small missile-like device
that could travel through the
intestine
Like the missiles Iddan developed, this
device would have a camera “eye.”
If the device were designed well, the
body’s natural peristaltic action
would propel the camera through
the length of the intestine.
When Iddan returned
home, he placed a
transmitting antenna
inside a store-bought
chicken and a
receiving antenna
outside the chicken.
The results indicated that it
was possible to transmit a
clear video image.
Then, he set about
overcoming the
battery life problem:
The small CCD
sensors consumed so
much energy that
their batteries were
often depleted within
10 minutes.
Fortunately, advances in
semiconductors promised a
solution
Iddan began
developing a
prototype based and
applied for an initial
patent on the device
in 1994.
In 1995, he presented
his product idea to
the CEO of Applitec
Ltd., a company that
made small
endoscopic cameras.
The CEO thought the
project was a fascinating
idea, and founded Given
Imaging (GI for
gastrointestinal, V for video,
and EN for endoscopy) to
develop and market the
technology.
Without knowing what Iddan
and Meron was up to, another
team of scientists (a physician, C.
Paul Swain; a bioengineer, Tim
Mills; and a doctoral student,
Feng Gong) in the U.K. was also
working on a method for
wireless endoscopy.
By 1994 they were developing simple
devices to see if they could transmit
moving images from within the gut using
microwave frequencies.
By 1996 they had succeeded in their first
live animal trial.
Their next hurdle was to develop
a device that could be
swallowed instead of surgically
inserted.
In the fall of 1997, Gavriel
Meron met Dr. Swain at a
conference in Birmingham,
England, and they concluded
that their progress would be
much faster if they joined forces.
Swain’s team had superior expertise in
anatomy and the imaging needs of
diagnosing small intestine disorders, while
Iddan’s CMOS-based sensors enabled the
production of a smaller device with lower
power requirements.
The teams thus had complementary
knowledge that each knew would be
crucial to producing a successful capsule
endoscope.
In 1999, the team conducted
their first human trial.
Dr. Swain swallowed the prototype
capsule.
The first images were of poor quality
because of the team’s inexperience at
holding the receiving antenna in an
optimal position.
The team was not sure how
far the capsule had traveled,
so they used a radiograph to
find the position of the
capsule.
The radiograph revealed that the
device had reached Swain’s colon,
and thus had successfully traversed
the entire length of the small
intestine.
The first capsule had transmitted for
only about 2 hours before its battery
life was depleted
The team was thrilled at this
victory, and urged Swain to
swallow another capsule
Now that the team was more
practiced at optimizing the receiving
antennas, they achieved much betterquality images.
The second capsule transmitted for
more than 6 hours, and the team
knew they had obtained quality
images of a substantial length of
small intestine.
April 2000: they had used the
device to find a small intestinal
bleeding source in three patients
with “obscure recurrent
gastrointestinal bleeding” (a
difficult problem to diagnose and
treat).
August 2001: the device had
received FDA clearance
By October of 2001 Given Imaging
had gone public, raising $60
million in its initial public offering!
Given Imaging marketed its device as a system that included a workstation,
proprietary software, wearable video recording packs, and the swallowable
capsules (called “PillCams”).
After swallowing the $450 PillCam, the patient goes about the day while the
PillCam broadcasts images to a video recording pack the patient wears around
the waist.
When the patient returns the pack to the physician, the physician uploads the
images and can both view them directly and utilize Given’s computer software,
which employs algorithms that examine the pixels in the images to identify
possible locations of bleeding.
The PillCam exits the patient naturally ☺
Encouraged by their success, the developers
at Given Imaging began working on PillCams
for the esophagus (PillCam ESO) and for the
colon (PillCam COLON).
Whereas Given estimated the global market
potential for small bowel capsule endoscopy
(PillCam SB) was $1 billion, it believed that
the global market opportunity for PillCam
COLON could be a multi-billion-dollar
opportunity due to widespread routine
screening for colon cancer!!
By 2013, Given had also developed PillCam
SB3, which offered sharper images and
adaptive frame rate technology that enables
it to snap more pictures, more quickly.
By 2015, numerous studies had shown
that PillCams compared favorably to
traditional endoscopy in terms of safety:
While use of capsule endoscopy could result
occasionally in the camera becoming lodged
and not exiting the body naturally (roughly
eight cases of this happening had been
identified by 2015), traditional endoscopy
bore a risk of tearing the gastrointestinal wall,
which could quickly lead to deadly infections.
At $500, PillCams were also less
expensive than traditional
gastrointestinal endoscopy procedures,
which ran from $800 to $4000 or more.
A View to the Future . . .
Colonoscopy was the
largest category of the
endoscopy market—in
the United States alone,
14 million patients
undergo colonoscopy a
year
The market has potential!
Many in the industry, however,
suspected that the camera pill
would eventually supplant all
traditional colonoscopy.
In February of 2014,
Dublin-based medical
device maker Covidien
had acquired Given
Imaging for roughly $860
million!
Then in early 2015,
medical equipment giant
Medtronic acquired
Covidien for $49.9
billion!!
Currently, Medtronic is
valued at $123.08BN!
Given would now have
access to much greater
capital resources and
larger (and more
geographically
distributed)
salesforces—if it could
continue to get its
Pillcams approved for
more applications and in
more countries, it was
positioned to transform
the market for
gastrointestinal
endoscopy.
Generating Creative
Customer Focused
Ideas
Assist. Prof. Meral DÜLGER TAŞKIN
Spring 2023
ART &
CREATIVITY
Creativity isn't just
about making art-- it's
a way of approaching
life.
• Resourceful
• Inspired
• Thinking ingeniously
• Making things happen
• Designing your days in big
and small ways...
DRAWING, SINGING, WRITING, KNITTING…
LOSE YOURSELF IN SOMETHING CREATIVE TO
FIND INNER CALM. YOU MIGHT ALSO COME UP
WITH SOLUTIONS TO PROBLEMS
There’s more to innovation than
just idea generation..
Companies generally
focus on idea
generation to become
more innovative
Creativity
Not just “Eureka!” moments,
also needed to solve common
problems
Not enough!
The application of knowledge
Effectively recognizing
customer requirements
Protection of resulting ideas
Is NOT synonymus with
innovation
The
Components
of Creatvitiy
Source: Amabile, 1998
The creative
thinking
process
Source: Kuratko and Hodgetts, 1998
Business Creativity
Inventions that are
commercialized
Exploratory
Identification of
new
opportunities
Normative
Identifying and
clarifying problems
to focus on
Original thinking
to solve known
problems
Serendipitious
Required for
process
innovation
Problems with service
delivery or low quality
production at a
manufacturing facility
Accident or
good fortune
creativity
Ex: 3M’s Post-It
Hard to manage
Class Exercise Time!
Individual Creativity
Creativity can be the result of
individuals
In many organizations individuals
play a key role
But it does not stop at the
individual level
**Innovations may begin in a
single mind, but to generate
valuable products/services they
need to be developed by a
community of thinkers – The
Economist Intelligence Unit, 2009
To be creative experience,
acces to relevant information
and experts is needed (aka.
“knowledge domains”)
Ex: In pharmaceutical research,
one person cannot rememeber all
the relevant data for thousands of
chemicals and their combinations
• Knowledge management is a
must!
Creativity Techniques for Innovation
Brainstorming
To find a conclusion for a
specific problem by
gathering a list of ideas
spontaneously contributed
by a group or an individual
• Downside: Some people
may dominate the
session
Left-Right Brain
Alterations
Five Ws, One H
Technique (5N1K)
Attribute Association
Analytical (left brain) vs.
Emotional (right brain)
Who, what, where, when,
why and how questions for
a given topic
Creating a list of attributes
for a
product/service/process
• Ex: What is the core
product? vs. How does
the customer feel about
the product?
• Ws give insight, H
provides ways to
implement
• Good for product
problems on service
complaints
Team Creativity and Organizational Culture
Companies need to create a culture of
creativity in which innovation project
teams can excel
The vast majority of innovation projects
involve teams
Team diversity is a must for team creativity to
avoid groupthink
Managing Knowledge
Knowledge Management
• How an organization can stimulate and effectively utilize
knowledge
Forms of knowledge:
• Explicit
• Formal, systematic, easily communicated and shared
• Ex: Instruction manuals, text books
• Tacit
• Hard to express, formalize or write down
• Can be highly personal
• Ex: A cook making a dish without measuring the ingredients
• Both types can be found in an organization
• Both are important for innovation
Capturing Tacit Knowledge
Socialization
Ex: Apprenticeship
• In organizations: Mentor
programs
Externalization
Converting tacit knowledge
to explicit
• Ex: Tutorial sessions,
metaphors, analogies
**Capturing tacit
knowledge from
employees is
important
BUT tapping
customers’ tacit
knowledge is just as
important
Mini Case: Miele
Focusing on ‘application
segments’
- Vacuum cleaner
packages
Usability
Recognizing customers’
hidden needs
- Allergy market
product line
‘Listen and watch’
teams
Ideas and Innovation
Innovations often
fail
34 to 90 % of new product
development projects do not
fully reach their business
objectives
Reasons include
Demand for innovations is inherently
uncertain
SOLUTION:
Product might not be well adapted to
customer needs because of poor design
and/or poor quality
Tight integration among R&D,
production, and marketing
with customer-focus
Poor positioning strategy
• ** Especially dicovering
customers’ hidden needs
• Price, distribution, promotion and
advertising, and product features (OR the 4
P’s)
Mistake of marketing a technology for which
there is not enough demand
Slow “cycle time”
Empathic Design
Techniques such as observation,
contextual interviews and putting
product designers «in the shoes
of users» are used to gather data
Enables to focus on users’
problems
An in-depth understanding of how customers
and users utilize products
User Interface & User Experience
UI:
DESIGNS THE
PRODUCT
DESIGNS THE
EXPERIENCE
UX:
Mini Case: Clarks
Company planned to enter the
walking boots segment
Conducted ethnographic market
research into both the usage of
walking boots and the buying
decision: “I needed to understand
the buying habits, end use and
expectations of our new
customer” (Product Manager)
Identified that potential buyers
will try on only about 2-3 pairs of
boots
Designed the tongue of the boot
so that potential buyers perceived
the boots to be particularly
comfortable
Ways to come up with creative ideas
LEAD USERS
EXPERIMENTATION
VIRTUAL
COMMUNITIES
Lead Users
“Lead Users” are
groups of
customers/users
that face more
challenging
requirements
Their needs may be
ahead of the market
Identifying such
users in the
current market
may open new
horizons!
Usually,
workshops are
run with such
users to develop
product concepts
Workshops can
stimulate creativity
**Identifying
lead users might
be hard
Lead user vs.
End-user
perspectives!
Mini Case: Lego Mindstorms
40,000 kits
sold per year
since 1998
Lego Brickfest
annual
conference
Lead users
recruited (peer
recognition)
August 2006
new Robolab
version
Experimentation
Customers are
presented with early
prototypes of
products/servicer and
base their
suggestions on these
Actually, seeing and using a
product/service often
enables customers and
users to articulate thier
views better
Observing how
customers react to
product/service ideas
is very valuable in
new product
development process
Can be combined
with the lead user
approach
It is hard to prototype
services
Leaders such as HSBC Bank
prototype their services
and collect reactions.
Virtual Communities
Internet has enabled
people with common
interests to exchange
ideas easily
Such communities are
sought after by companies
for product development
Open Source
Crowdsourcing
Users and customers are
intimately involved in
product development
Use by companies of virtual
communities
• Especially software
• Ex: Linux
• Facebook translates its
web pages to other
languages with the help
of users
Biggest advantage is
the opportunity to
tap collective
intelligence
Protecting Ideas
To gain maximum
advantage from their
innovations, firms need to
protect and exploit their
knowledge
The most obvious
mechanism is patents
Prevents others from using the
idea for about 20 years
Other options are:
Copyright
• Protects against copying music, art, etc. and
commercial circulation of the copies
Design right
• Ex: Coca-Cola bottle shape cannot be copied
Trademark
• Any name, symbol, special font, script, color
that distinguishes a prodcut or service
• Respresents marketing innovations!
Risk Management in Innovation,
Selecting and Managing an Innovation Portfolio
Assist. Prof. Meral DÜLGER TAŞKIN
Spring 2023
Main task
Make sure to
build
something
that the
customers
want!
So what should the innovator do?
Reduce risk (or de-risk) by
learning as much as possible
(about the industry, market,
customer, competiton) BEFORE
committing to build the final
version of the product/service
Prologue
The more radical and disruptive the
innovation, the more uncertainty and
potential risk is created
Thus, the management of risk remains an
important issue in the commercialisation of
innovation.
Uncertainty vs. Risk
Uncertainty is a condition caused
by having insufficient information
or knowledge to make accurate
predictions about the likely
outcome or future state of an
action or event.
Risk is something that can be
measured in a quantitative
manner and assessed. However,
uncertainty is not so readily
quantitatively measured.
If you can determine the odds of
something happening, you can
assess the risk of gain or loss and
make a rational choice. However,
where uncertainty exists you
cannot assess the risk so clearly.
Risk
A perception of the
variation in future
outcomes of an action
+
Their likelihood of
occurring and
subjective value
Risk can be measured
quantitatively by
estimating the likely
cost or loss that can
arise where an event
takes place.
Risk =
(Probability of an
event) x (Possible
losses)
Future Investment Considerations
Uncertainty of
the outcome
Expected
outcome if the
investment is
successful
Potential of
the outcome
to return high
profits or
losses
Ex: How bad can it
get?
Managerial
characteristics
*Perception of the
level of risk being
faced
Experience
Competence
Firm’s task
environment
Uncertainty?
Turbulance?
Organizational
configuration
Established/New?
Large/Small?
Complex/Simple?
Impact of Risk
in Planning
Behavior
Source: Mazzarol and Reboud, 2009
Increasing levels of
information reduce
uncertainty and perceived
risk.
Business planning and
formalization is a mechanism
to provide information that
can assist in reducing the
level of perceived risk to a
point at which it is
acceptable to proceed with
future investment.
An Example of Risk Management
Source: Schnepple (2005)
Anchored
Scales
Source: Davis et al. (2001)
Spreading the Risk: Portfolio Approach
Any organization is likely to have a
number of innovation projects
running at any one time
• Allocating resources between
them to achieve optimum
returns is difficult
• Especially in uncertain times!
Points to Consider…
Choosing and
managing a
portfolio is a
dynamic
activity
Innovation projects
change as they
proceed
• Some have to be
pushed, some
have to be stopped
Setting and
managing
priorities is
important
A key difficulty
is selecting the
right
innovation
projects in an
uncertain
setting
A great deal of
preparation is
needed
Project
selection is not
a single
Start/Stop
decision
An interim decision
followed by a review
or many
Embrace
uncertainty
and aim to
turn it into an
advantage!
High Level Goals in Portfolio Management
Value Maximization
Balance
Selecting projects so as to maximize sum of the
values or commercial worth’s of all active
projects in your pipeline in terms of long-term
profitability, economic value added, return-oninvestment, likelihood of success, or some other
strategic objectives, etc.
Long-term projects versus short ones
High risk versus lower risk projects
Across various markets, technologies, product
categories, and project types
• Ex: New products, improvements, cost reductions,
maintenance and fixes, and fundamental research
High Level Goals in Portfolio Management (cont’d)
Strategic Direction
Right Number of Projects
The final portfolio of projects truly reflects the
business’s strategy
If companies have too many projects underway for the limited
resources tat they have
• The breakdown of spending across projects,
areas, markets, etc., is directly related to
overall business strategy
• Pipeline gridlock: projects end up in a queue; they take longer
and longer to get to market; and key activities within projects –
for example, doing the up-front homework – are omitted
because of a lack of people and time.
Thus, an over-riding goal is to ensure a balance between resources
required for the “GO” projects and resources available
Managers face 3 problems
Valuation Problem
Balance Problem
Deciding which projects are
intirinsically worth doing
Deciding on the portfolio of
projects that best meets the
needs of the organization
Retaining the
commitment and
understanding of people
involved
Especially when their projects are
rejected!
Principles of Portfolio
Management
Portfolio
management is
about making the
right decisions
about which
projects to start
ALSO, it means
reviewing those
decisions regularly
and make the
necessary changes
if needed
Accorging to the
Pentathlon idea,
there should
always be more
ideas available
than those finally
used
The more novel the idea,
the more work is needed
• Sometimes, nothing
works, all the work that
you’ve done might be
wasted → not easy!
“Fail soon to
succeed quicker”
All key issues need
to be understood
and debated and in
the end, they
should encourage
clarity
Most importantly,
use judgement!
Management Issue
Business
Impact of
Poor Project
Selection
Process
Resulting Problems
Slow decision-making
▪ Projects that start late will be late
to complete
▪ Late to market means lost profit
▪ Rush to make up for lost time causes
excess cost and temptation to cut corners
▪ Frustrated staff
Unadventurous, lowimpact projects
▪ Poor profitability
▪ Lost opportunities to gain market share
▪ Poor morale
Too many projects
▪ Resources stretched so that some or all
projects run late
▪ Lack of management attention
▪ Bottlenecks
Poor projects not killed ▪ Waste of money and time
early
▪ Lack of resources for good projects
Elements of a Good Portfolio
Valuation Criteria
Portfolio Balance Criteria
Management Criteria
Each individual project should
represent good value to the
organization
High-risk projects must be
balanced with low-risk ones and
balance the projects across the
areas of the business
The management process should
be as open as possible
The collection of projects must
make use of scarce resources and
how the allocation is to be done
must be determined
The innovation portfolio must fit
and respond to the company’s
strategic needs
The information on which decisions
are made should be collected with
care to minimize bias
When ongoing projects are
cancelled, the staff motivation has
to be retained
Financial Valuation Methods
The most obvious way of
valuing a project is by
financial analysis
Most commonly it is
often the only method
used
Still, there’s a need to
supplement it with
other techniques
especially in the
beginning of the
projects where financial
data are usually
unrealiable
Still, financial
assessment should
dominate the decision
Non-financial Methods
Actually, financial calculations is all one
needs when selecting a portfolio
An more broadly based approach is to
consider:
BUT financial info available at the early stages of
innovative projects are usually incomplete and
unreliable
Market size and growth rate,
• Future is uncertain
• It’s not easy to come up with financial data for a
project that is at the conceptual phase
• It is hard to make “realistic” financial projections
• One research: When selecting projects, managers
had the least faith in financial projections
Level of competition
How well the project fits the overall company
strategy
Other industry specific criteria
CUSTOMERS!
Valuing Large and Small Portfolios of Projects
Real Options*, **
An option on a stock is a contract that allows –
but does not compel – the holder to buy that
stock at a fixed price at some point in the future
• If the stock price goes up, the holder makes
money
• If it doesn’t the holder loses the amount to buy
the “option”
Many innovation projects
are carried out with the
same logic
Management is given an option – but not an
obligation – to take the innovation forward
after each stage
• Enables flexibility
*Check out this video by Özgür Demirtaş https://www.youtube.com/watch?v=UBKh7tpTAgM
** Also you can watch Eat the Rich: The Game Stop Saga on Netflix
Risk and Reward
Organizations should take on
high-risk, high-reward projects
only if they have a sufficient
number of low-risk projects
going on at the same time
Risk-averse companies, on the
other hand, may undertake too
few long-term, innovative
projects that have high returns
The risk-reward diagram is a
convenient way to display the
balance of risks among the
projects
Ususally value and uncertainty are the
dimensions
Time and Resources
The projects in the
portfolio must be
balanced with respect to
completion times
To provide a limit to how much
change an organization can
manage at one time
A steady flow of new
producs is generaly
more motivating for the
sales force and easier to
handle than a glut
followed by famine
Still, there might be
good reasons to launch
some innovations
together to maximize
their impact
Ex: Usually, several products are
needed for a trade show
Time Balance in a Project Portfolio
Mini Case: Selection and
Portfolio Management at
GlaxoSmithKline
Controlling advocacy in
project selection
‘Figures can’t lie but
liars can figure’
Four proposals: ‘baseline’; ‘buy-up’; ‘buy-down’;
and ‘minimal’ (avoids all or nothing advocacy)
• Discussed by senior managers
• Information collected; reviewed by separate panel
• Portfolio proposed by separate group
• Final selection
Innovation Strategy
Assist. Prof. Meral DÜLGER TAŞKIN
Spring 2023
Innovation strategy is a
part of overall business
strategy
Determines when and
where innovation is
needed to meet the
aims of the organization
• New products?
New business
processes? New
approach to the
market?
The degree of
change required
Work out
• Most difficult task
because the need
for innovation
often arises mostly
from outside the
immediate scope of
the business
Which
dimension of
innovation is
needed
Understand
Where
innovation is
most needed
Determine
Identify
Steps to Develop An Innovation Strategy
How best to
defend the
innovation from
competition
Product/service Innovation:
Kano’s Feature Analysis
3 features of a product
according to the effect
they have on customer
satisfaction
Basic Features
Performance Features
Excitement Features
(Delighters)
Basic Features
Attributes without which a product or a service would
be simply unacceptable
• Ex: Cars should start readily or detergents should take stains off
Failure to provide them would cause dissatisfaction
• *Providing extra boost to the basic requirement gives no extra
satisfaction to the customer
Performance Features
Features that provide a real benefit to the customer and
every improvement to them leads to greater satisfaction
Ex: Lower
price,higher
quality, fuel
economy in
a car,
battery life
in a smart
phone
For many products, reliability or ease of use
will also be performance feature
Important, becuase they are the long term
focus of competition
Excitement Features (Delighters)
Unlikely to be
demanded but
when offered, the
customer is pleased
• Ex: AI chatbot
integration in online
shopping
Seat warmers for cars
Provides a short
term advantage
because these can
be easily copied
Kano Model: Features and Satisfaction
Customer satisfaction
Delight
Excitement needs
(Seldom expressed:
new to the world)
Immediate
happiness
Performance needs
(Generally expressed.
e.g. miles per gallon)
Not
unhappy
Basic needs (hygiene)
(Not always expressed.
e.g. safety, car will start,
food non-poisoned)
Disappointed
Poor
Good
Source: Noriaki Kano et al 1984,1996
Degree of feature
implementation
Customer Satisfaction: Feature Fatigue
According to the Kano diagram, over
time,
Continuing to develop basic features as
if they were still performance features
can be disastrous because:
Delighters eventually lose their impact and become
performance features
Extra but useless performance can add unnecessary
cost or complexity to the product
• Ex: TV Remote controls, camera in cell phones
Performance feature themselves become basic
The chance to pursue features that will be of real
interest to the customer are foregone
• Ex: Accuracy of clocks/wathces, resolution of
desktop printers
The company may become vulnerable to an
alternative technology
Mini Case:
Formule 1 Hotels, France
Launched in 1985,
new concept for lowcost hotels
Customers just
wanted a good nights’
sleep
Just provide basic facilities – no
traditional features, e.g. lounges,
eating facilities, receptionist,
spacious rooms, etc
Market leader in the
sector
Within 10 years market
share exceeded that of its
5 nearest rivals combined
Technology
Only acquiring
technology, by
itself, does not
mean anything!
Outputs
• Customer Value
• Competitive
advantage
Goal
achievement
Mini Case: Zara
Spanish fashion
retailer - major part of
the Inditex Group
90% of goods made in own
factories in northern Spain and
Portugal transported to over
2000 Zara and 500 Zara Home
stores in 96 countries
15% return on sales – 5
times the typical level in
the sector – and still
growing strongly
Described as “possibly
the most innovative
and devastating
retailer in the world”
Key to Zara’s success is the speed
with which it can get new designs
to market – 2-3 weeks, the norm in
the sector being 5-10 months
Technology S-Curve
All technologies have a
natural upper bound on
their performance
Viewed over a sufficient
length of time, the
progress of any
technology is likely to
follow this curve
The Capability Ceiling
Arises when an organization can no longer
move its products and services up to the
performance curve on the Kano Diagram at
the rate demanded by customers
• Organization can become vulnerable to
competitors with a better approach
• A need to identify and confront why the
organization is hitting the capability ceiling
The
Technology
S-Curve
Performance
Base
A company here is vulnerable!!
Ex: Fuel engines → Electric engines!
Key
Pacing
Emerging
Source: Based on Foster, 1986.
Total Investment
An Alternative Perspective: Dominant Design
When a new type of product is launched, a period of experimentation with different designs
follows
Eventually, a dominant design arises and becomes the standard which dominant players adopt
• When it emerges, the competitive focus should move to cost, quality and brand value and new excitement features
• Ex: Automotive industry:
• The dominant design has petrol engine, four wheels
• But competition brought on subsidiary features such as parking sensors and entertainment systems
• These continued alongside brand and price differentiation
Design standardization enables manufacturers to use common components
• Ex: Sony’s Betamax vs. JBL’s VHS → Blu-Ray vs. HD-DVD
Strategic Convergence
This is what
happens as we all
read the same
books, follow the
same information,
hire the same
consultants and
use the same case
studies ;-)
For further info, please check: https://www.alexmurrell.co.uk/articles/the-age-of-average
Disruptive Innovation (Technology)
New technology that gets its start away from the mainstream of a market and then, as its
functionality improves over time, invades the main market
• Disruptive because they revolutionize industry structure and competition, often causing the decline of
established companies who may struggle in adapting to new circumstances
Established companies are often aware of the new technology but do not invest in it
• Their customers do not want it
• Initially they served such small market niches that it seemed unlikely that they would have an impact on the
company’s revenues and profits
• New technology requires a new business model totally different from the company’s established model
• Nokia vs. Apple
• ChatGPT vs. Google Search
Strategic Management of Technology
The power is likely to be
concentrated around the CEOs and
their team
Planning is usually the
responsibility of the entrepreneur
in small firms, but in larger firms, a
“strategic planning system” is
needed
• BUT a strong attention should be given to
market development
• Financial, marketing, HRM, production and
innovation should be balanced
• Role of marketing!
Issues in
Strategic
Technology
Management – 1
The introduction of new
technology does not always
Totally extinguish existing
technologies
In dealing with the problem
of technology substitution, a
continuous search for the
sources of new technologies
is needed
Lead to immediate financial
returns
Issues in
Strategic
Technology
Management – 2
Products proliferate
as new technologies
advance
More success can
be obtained by
focusing on the
needs of the
customer or the
market, rather than
on the
technological
strengths of the
competing product
Customers
frequently want a
pause in the
advance of
technologies and a
consolidation of
products to ensure
that they offer
superior benefits to
the market
Issues in
Strategic
Technology
Management – 3
Firms that continue to
pursue new technologies
for their own sake risk
finding themselves unable
to sustain long term
market share and profits
The level of senior
management commitment
is really important!
Mini Case:
Electric-Powered Cars
The lead initially
held by start-up
companies
New dominant
design
A disruptive
technology
Major architectural
change for the
incumbents
Value-destroying
innovation
How will the investment affect success in
customer acquisition and customer
loyalty?
How will it improve insights and help to
better present your value proposition?
Value Innovation: Blue Ocean
Strategies
Competing in the same game is not always the best policy
Sometimes the best innovation
is to define a new market
space
Companies can succeed not by
battling competitors, but
rather by creating ″blue
oceans″ of uncontested
market space.
These strategic moves create a leap in value for the
company, its buyers, and its employees, while unlocking
new demand and making the competition irrelevant
The scope can be detected by
“Value Gap Analysis”
Compares the perceived
performance offered by
companies in the market
Red Ocean
Industry
boundaries
All the
are defined
industries in
and
existence
accepted,
today – the
and the
known
competitive
market
rules of the
space.
game are
known.
Companies
try to
As the
Cutthroat
outperform
market
competition
their rivals
space gets
turns the
crowded,
ocean
to grab a
greater
prospects
bloody;
share of
for profits
hence, the
product or and growth
term red
service
are reduced.
oceans
demand.
Blue Ocean
Blue ocean
All the
is an
industries
There is
Competition analogy to
not in
ample
is irrelevant describe the
existence
Demand is
opportunity because the
wider,
created
today – the
for growth rules of the
deeper
rather than
unknown
potential of
that is both
game are
fought over.
market
market
profitable
waiting to
space,
space that is
and rapid.
be set.
untainted by
not yet
competition.
explored
The Market Space
Feature Analysis for Airlines
Customer Rating
Low-Cost
Carriers
Traditional
Carriers
Meals
Global
Connections
Seating
Comfort and
Choice
Cabin
Staff
Low
Cost
Many
Destinations
Ticketing
Feature
Profit & Growth Consequences of Creating Blue Oceans
BUSINESS LAUNCH
86%
REVENUE IMPACT
PROFIT IMPACT
Launches within red ocean
14%
62%
39%
38%
61%
launches for creating blue oceans
Protecting the Value
Disruptive technologies and Value
Innovations need to be protected from
competitive response as they alter the
whole business model
Ability to profit from an innovation
generally depends on a company’s strength
in many other business capabilities
Complementary assets
Open Innovation
Organizations can and should look
outside thier own doors both for
innovative ideas and ways for exploiting
them
Working with design houses, consultencies and
universities
Subcontract, through joint development projects
and licensing, joint ventures and acquisitions
• These all require different management skills
Many companies are now reducing their
in-house research teams and spending
more on outside expertise and ideas
Ex: P&G’ targets to originate 50% of its new
products from outside
Ex: Intel sets up mini-labs in or near universities to
tap into their expertise
Mini Case: Microsoft X Box
Microsoft had little competence
in the design of many of the key
elements that go to make up a
games console.
For a successful entry into this
established and competitive market
Microsoft would have to assemble a
coalition of suppliers, whose work
would make or break the project.
Microsoft had one technical card
to play: a suite of software called
Direct X that made it easy to
write games.
Microsoft now provides only the
business and design concept, the
finance, the styling, and the core
operating software. All the key
components and the manufacturing
were subcontracted.
The X Mini was launched in
November 2001, by mid 2004
they had sold 14 million units
Disruptive Innovation and the
Commercialization of Technology
Assist. Prof. Meral DÜLGER TAŞKIN
Spring 2023
Source: World Economic Forum, The Future of Jobs, 2020.
Source: World Economic Forum, The Future of Jobs, 2020.
Source: World Economic Forum, The Future of Jobs, 2020.
Source: World Economic Forum, The Future of Jobs, 2020.
A Global Perspective is Critical
This will require
It is an increasingly
interconnected
world with new
players.
Entrepreneurs/organizations
seeking to commercialize
radical innovations are going
to have to deal directly with a
global market from the outset.
• Securing access to global
markets
• Protecting IP rights in multiple
jurisdictions
• Benchmarking any new
inventions and technology
against international best
practice
Defining Technological Innovation
Technological
innovations are
different than
conventional
innovations
Substantially and objectively
measurable new or improved
benefits to the customer or
associated work methods
Technological product
innovation
The implementation/commercialization
of a product with improved
performance characteristics
• Delivering objectively new or
improved services to the consumer
Technological process
innovation
The implementation/adoption
of new or significantly
improved production or
delivery methods.
Ex: Changes in equipment,
human resources, working
methods, or a combination
Commercialization
The process of taking an
innovation from the initial idea
stage to eventual market
diffusion
Commercialization is one of
the most important elements
in the management of
innovation.
A critical first step in the
commercialization process is
the creation of new products
and services
Crossing the chasm from the initial
invention and prototype development,
through the securing of patents and
investors, to the eventual creation of a
successful company
It is driven by the firm’s expectation
that it can gain a competitive advantage
in the marketplace for an innovative
product/process/service
(NPD)
The attempt to profit from innovation
through the sale or use of new
products/processes/services
Successful Commercialization
Involves the ability to find a ready
market for a product or service
innovation and this requires a
realistic market assessment with
evidence of real customers willing
to buy sufficient quantities to
justify the investment.
There should be a clear market
pathway, and opportunities for
growth and returns on investment
that are superior to alternative
investment choices.
There should also be evidence of a
unique IP asset base that can be
commercially protected as well as
the existence of a management
team for the venture that works
well together and shares a
common vision
*Investment in R&D, and the NPD process, is inherently risky and many new products fail!
The process of discovery, NPD and commercialization
Source: Adapted from Koen et al. 2002
Types of Technology Levels
Low technology industries
Medium technology
industries
High technology industries
Technology that lasts throughout the
demand life cycle
Basic technology remains unchanged
but still subject to substitution
Technology is subject to frequent
substitution threats
Relatively low levels of product or
technology substitution
Products proliferate with numerous
incremental differentials designed to
achieve competitive advantage
Product proliferation levels are high
Has little difficulty with the
management of technology
Ex: Food processing, textile, iron and
steel
Ex: Ship construction, plastics, motor
vehicles
Ex: Aircraft, pharmaceuticals,
software
Disruptive Technologies
Sustaining Technology
• An innovation that compliments or integrates into the existing technological or market
paradigm
Disruptive Technology
• An innovation that challenges the existing status quo
Disruptive technologies are often attractive to customers that are not themselves
attracted to the established market players
• This allows the new entrant firm to secure a niche
The opportunity for new growth can be found in disruptive technologies due to the lack
of interest that is often shown by established firms towards such innovations
• Ex: Tesla
Market Adoption of Technological Innovation
By their nature, disruptive or
radical technologies are often
difficult to evaluate as a customer
and may carry with them a higher
level of risk due to their newness
They are not necessarily highly
complex in nature but are generally not
compatible with the existing
technologies in use by the market
Thus, they may not be able to readily
meet the perceived innovation
characteristics so that they might not
be immediately adopted
The Industrial Revolutions
The Impact of the Fourth Industrial Revolution (cont’d)
Manufacturing
Products
Business Models
Geographic decentralization
Individual customization rather than
mass-produced standardization
Integration of customers and
suppliers in the value chain
• Modular products that are able to
be adapted to suit different end
user needs
Products that possess embedded
systems that will allow them to be
monitored, tracked and supported
• Positive side: Significant levels of
productivity, reduced wastage, less
work health and safety problems,
and value creation for customers.
• Negative side: Significant loss of
existing jobs, and require a
substantial transformation of the
workforce and the organisations
that employ them
Dispersal of production facilities
Autonomous control
• Make predictions and respond
more rapidly to externally driven
changes in supply or demand
Evolution of Strategic Technology Management
Entrepreneurial industry founders
Focused on process innovations
Ex: Henry Ford (the Ford Motor Company)
Ex: Bill Gates (Microsoft), Steve Jobs
(Apple), Jeff Bezos (Amazon) or Mark
Zuckerberg (Facebook)
«Technopreneurs»
«single function-orientation»
«multi function-orientation»
1900-1960
today
Production driven – with a key focus on efficiency
and cost reduction
Market driven – with the primary focus on
differentiation of products
CISCO, Microsoft, Intel and Dell emerged
1980s
Marketing for Disruptive Technologies
Traditional marketing approaches
are not usually useful for disruptive
technologies/innovations
This is because
customers don’t
really know how to
respond to the new
opportunity, and
they find it difficult
to know how to
evaluate it.
2 ways are available:
Creating radical and innovative marketing
strategy associated with the new
technology
Creating new markets
• A process really challenging to achieve
• But still doable. More on that later… ☺
Organizational Structure for Disruptive Technologies
New disruptive
technologies do better
in the hands of small,
independent teams
rather than bureaucratic
structures
Creating a spin-out and keep the innovation within a small, entrepreneurial team
when seeking to develop disruptive technology in the large organization
Works great with start
ups
Ex: Japan’s NTT DoCoMo (10,625 employees) and the development of the G3
telecommunications network.
But what about large organizations?
To develop its new 3rd
generation mobile telephone
system, it created an entirely
new organisation GBD (70
employees) and gave it
responsibility for developing
the new product
* GBD was strongly
supported by the top
management
**Strong ties with other
companies such as Sony,
Sun Microsystems as well
as the end customers
Strategies for Disruptive
Technologies
It is important to find the market niche where
customers have had a problem working within
the established industry paradigm.
• Offering solutions that customers can quickly adopt using
the new technology is important to facilitate diffusion into
the market.
Maintaining simplicity and ease of use in the
new product is important especially during early
market entry.
2 Screening Tests to Build Successful Strategies
for Disruptive Technologies
1: Are the existing products good
enough?
If existing technologies are being improved,
the customers will continue to pay a premium
to established market players for new
incremental improvements
• The opportunities for disruptive
technologies are likely to be low
2: Is the disruptive technology
substantially better so that a new
business model can be developed?
Offering attractive new products/services at
the lower end of the market
• BUT this strategy depends a new business
model that allows good profit margin to be
secured while offering customers lower
costs or enhanced value
Commercialisation of Disruptive Technologies
Consider the Readiness
of the Market
Consider the End User
Beware of the Existing
Market Players
Look for Market Gaps
Mini Case: Red Bull
Red Bull would have had little chance to compete directly with Coca Cola or
Pepsi
The key target customers:
• Sports people to assist their training
• Fire fighters and construction workers
• Young urban workers who go to night clubs looking for a good substitute for traditional drinks
Red Bull’s mix of caffeine (80 mgs per can), B vitamins and taurine, plus its
sweet lemony taste, were a welcome substitute for coffee, Coke or Pepsi.
For young trendy consumers, the cola drinks not “cool” and associated with the
mainstream
• Smaller sized cans sell at a premium price to reflect a more sophisticated image
“Viral” marketing
• Targeted trendy clubs and sports centres
• Sold to local opinion leaders and left them to promote the product word of mouth
• Sponsoring extreme sports
What should be raised?
What are the gaps in the
existing
product/market?
How can extra value be
provided to customers
by increasing the
industry standard?
What should be
reduced?
What should be
created?
What should be
eliminated?
Are existing
products/services overly
complex? Expensive?
What did the existing
products/services never
offered?
What factors/features do
the
customers/companies
take for granted?
Creating New Market Space*
*It firstly requires analyzing the existing market structure
Value
Innovation in
a Blue Ocean
strategy
Source: Kim and Mauborgne 2004
New Product Development and
Commercialization
The process of new product
development is a holistic process that
requires attention to both the market
and technical development issues.
Determining which innovations
are selected for future
development requires a
systematic screening process
A strong focus should also be put on
learning and implementation to ensure
that the lessons of unsuccessful product
initiatives are not lost and to allow for
adequate planning and preparation of the
more complex phase of market
development.
New Product Development Process Model
Source: Mazzarol & Reboud S. (2020)
Risk Reduction in NPD: The
Lean Start-Up Process
Improving quality and
reducing cost and risk in
NPD through the
application of a
systematic process
The focus on “Lean” is
the recognition that a
good system would
reduce waste and
improve efficiency
The Lean Start-Up Process
Implementation including
New Product Development
Assist. Prof. Meral DÜLGER TAŞKIN
Spring 2023
Project Management
Turning an idea into an
innovation is a
“project”
Needs is its own objectives,
resources and leadership
Thus, successful
implementation of an
innovation is good
Project Management
New Product
Development (NPD) is
the most frequent type
of innovation project
for most companies
A professional discipline
But there’s a problem: Managing
complex projects that demand
learning and experimentation on
the route to a novel result
Check out: https://www.pmi.org/certifications/project-management-pmp
Project Management (cont’d)
Implementation is shown at
the end of the innovation
funnel in the Pentathlon
framework
Design factory is a term used
to describe a department –
such as R&D – that is devoted
to innovation projects
The idea selection phase may involve
investigations, trials and pilot studies
Enables the firm to capture lessons
from previous experience and guide it
next time
What is learned at each stage may
change the aims and direction of the
project plan, even the company
Implementing innovative
projects is inevitably a team
matter which should
essentially be a crossfunctional one
Project Management Phases
Concept Phase
Design Phase
Planning Phase
Implementation Phase
Aims and deliverables of
the project are worked
out
Detailed design work is
done
Implementation is
planned in detail
The job is actually done
Should end with most of
technical and commercial
uncertainities removed
• Easier said than done!
Commitment %
Development of
committed cost,
expenditure and
management
attention in a
typical project
Cost
Committed
Expenditure
(and often management attention)
Concept
Planning
Implementation
Roll-out
Project phase
File: Diagram7.1. p
The Project
Management
Triangle
Every project is essentially defined by
The task itself
(the specification)
The time allowed
The cost of doing
the work
Setting Project Aims and Trade-Offs
If something happens to any one
of these three factors it can
generally be recovered only by
changing one of the others
Example: If a part of the project runs significantly
late, the time can generally be recovered only by
adding extra resources and so increasing the cost
OR altering the deliverables.
Similarly, a change to the project specification will
impact either time or cost.
There is no
escaping this
So, a project
charter should be
set and it should
state clearly what
the trade-off
strategy will be
Things should not be left
to be worked out at the
heat of the moment
**Spend more
money on the
development
process OR
Choose a
cheaper design
if it will speed
up delivery
Project
Trade-Offs
Source: Reinertsen 1983
Impact of Late Launch or Reduced Specifications
Difficult to calculate the
effect on the commercial
benefits!
Studies have shown that the
time taken to bring a new
product or a service to
market often has the greatest
impact on profitability
Example: A late launch
reduces
The life-time of total sales
The opportunities for premium
pricing as a leading product in the
market
Task
Main Task 1
(e.g. design)
Successful
Implementation:
Work Breakdown
Structure
Task
Task
Task
Task
Task
Task
PROJECT
Main Task 2
(e.g.
implementation)
Task
Task
Task
Task
Task
Task
Main Task 3
(e.g. marketing)
Task
Task
*Lists all the tasks and the relationships among them!
Task
The ordering is vitally
important but it is not always
straightforward to work out
• Some tasks maybe done at any time while
others cannot be started until earlier ones
are complete
Critical path
• Most projects will contain several such
consequences of tasks but there will always be one
chain that is longer than the rest
• This is important because the sum of the times
required to complete all the work packages on
the critical path defines the minimum length of
the project
• Managers usually try find ways to decrease the
time it takes to complete the critical path
The Project Schedule
Usually a Gantt chart is
used to summarize the
activities
The Resource Plan
The next stage is to ensure
that the required resources
can be made available and
that they are used efficiently
The first thing is to analyse
the requirements for
different types of resources,
especially people
The analysis will usually show
peaks when some people or
resources will be overloaded
Obviously, this means that some tasks
may run late
If these are on the critical path, the
whole project is jeopardized
• A need for extra resources
The Resource Plan
Relevant for projects that
proceeds by a series of
exploratory steps rather
than by defining a goal and
going for it
This is obviously so in the early
stages of innovative projects
Example: Software
engineering
It is usually impractical to specify every
detail of how the interface with the user
should work in advance
The best way to proceed is to quickly build
a prototype, test and evaluate it and build
what was learnt into a new version
(a.k.a. SCRUM)
Small, usable segments of
the product are specified,
developed and tested in
manageable, two- to fourweek cycles. (a number of
iterations)
Linking Customer Needs to Product Design
Embedding the Features:
Quality Function Deployment
In designing an innovation it is vital to
ensure that
• The customer’s needs drive the choices that are
made in the design
• The elements contribure effectively to satisfy
them
5
Conflicts
Specification
Customer
needs
2
The House of
Quality
Interaction
matrix
1
3
Specification
priority scores
4
Managing Project Risks
Innovation projects often
face high levels of
uncertainty, so risk
management techniques
are important
Example: Toyota’s &
Xerox’s risk management
processess led to 30 – 40%
reductions in costs and
lead times in R&D projects
It is the first and crucial stage of
risk management where a
complete picture of the risks
facing the project as much as
possible
Not easy!
Information is speculative
Difficult to maintian negative point of view
especailly in the face of opposition by a
charismatic boss
Teams quickly become overconfident
(remember “groupthink”)
Risk Element
Target market clearly defined and agreed
Market targets based on convincing research data
Example Risk
Checklist
(Marketing
Factors)
Direct feedback from key customers documented
Specification meets consumer standards
Fits consumer habits and/or conditions
Non-intended use by customers adequately anticipated
Communication about new product can be based on realistic product claims
Target consumers attitudes will remain stable during development period
Product will provide easy-in-use advantages compared with the competition
Niche marketing available if required
Source: After Keizer, Halman and Song, 2002
Causes of Innovation Failure
Failure to anticipate
and act with
sufficient speed to
changes in the
external market and
industry
environment
«Inward looking» senior
management
Love of firms’s incumbent
technology (Remember
Nokia, AGAIN ☺)
Failure to
develop
appropriate
product
development
road maps and
project
management
systems
Failure to
develop
coherent
business models
A need to to link marketing, R&D,
production, financing and intellectual
property (IP) rights management with
NPD
Failure to secure
technology/product/
service leadership
Failure to gain
access to the
market
Innovation Success Formula
Source: Ad Huijser, former President of Philips Research
Mini Case: Apple
The convergence of
multimedia technologies into
portable hand-held smart
phones
• Nokia was not agile
In addition, Apple had an
existing global market of loyal
customers who owned iPods
and Apple iTunes accounts.
Apple’s success was enabled
by its existing software and
hardware technology
platforms, that enabled it to
rapidly “put an aerial in an
iPod”, and bring to market
a leading product design in the
iPhone.
The company’s brand equity
was readily transferrable from
the iPod to the iPhone as
Apple entered the mobile
telecommunications market.