S. Maital. B6055 Value Based Innovation Nanyang Business School October 2013
Nanyang Business School MBA Program
B6055 Value Based Innovation
How to Convert an Idea
Into Marketplace Success
Professor Shlomo Maital
October 28-Nov. 2/2013
Overview
The main focus of this 38-hour course, a version of which was taught for 20
summers in MIT’s Management of Technology M.Sc. program, and for over a
decade at Nanyang Business School, is this:
Successful innovation is like a series of Russian “matryoshka” nesting dolls.
The inner doll is the idea. The dolls that enfold it are: strategy, marketing,
finance, production, pricing, cost control – in other words, the business
design. No ideas, however brilliant, ever succeed in the marketplace
without solid business designs around them. Innovation and creativity in
business design is as crucial as creativity in new product ideas.
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S. Maital. B6055 Value Based Innovation Nanyang Business School October 2013
The objective of this course is to provide tools that enable entrepreneurs and
innovators to generate marketplace success from innovative new-product ideas,
by constructing creative business designs. Creativity is as vital in the design of
businesses as in the ideas for services and products from which such businesses
spring. A main theme is that successful innovation requires two conflicting
skills: head-in-the-clouds imagination, feet-on-the-ground management.
Course Objectives
 To provide students with an individual toolbox useful in the realm of
innovation management, specifically to build a Personal Creativity Machine;
 To practice applying these tools to a wide variety of key management
decisions encountered in innovation;
 To apply these tools to participants’ own ideas, to explore how to
implement management tools in successful innovation;
 To instill the business- and market-oriented way of thinking in participants’
mindsets;
 To familiarize students with the key elements of business design: how to
wrap a winning business model around an innovative idea.
 To help each student explore their own dreams, passions and goals for
changing the world, and find practical ways to implement them
Reading, preparation and assignments:
 Text: S. Maital, D.V.R. Seshadri. Second Edition: Innovation Management:
Strategies, Concepts & Tools for Profit & Growth (Response Books: SAGE:
India 2012
Recommended Reading:
A. Ruttenberg, S. Maital, The Imagination Elevator: Zoom in/Zoom out/Zoom
in for More Creativity, Fun & Success (pdf version, 2013).
Final Assignment:
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S. Maital. B6055 Value Based Innovation Nanyang Business School October 2013
Study teams will prepare a poster presentation, showing their new
product idea and the business model that will be used to bring it successfully
to market, for potential investors, on the morning of Saturday Nov. 2.
Identifying a new product or service innovation and building a business
plan around it will be a key action-learning exercise during the course.
Final Grade: 10% “Quiz”; 40% Poster; 50% business plan, to be
submitted by email, to smaital@mit.edu, by Saturday Nov. 16/2013.
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Course Content, by Session
Part One. Ideation.
Why innovate? What to innovate? How to innovate? Who innovates?
Strategies and Concepts
Monday Oct. 28
Session No. 1. Why innovate?
VIDEO: Powers of 10 (Zoom in/Zoom out). How innovation creates
sustained competitive advantage, growth and profitability. Innovation during the
global downturn: Why the 2008-12 crisis is an ideal time for innovative ideas.
Paradigm shifts in leading industries. Social entrepreneurship: Meeting social
needs with business skills. What is your passion: The 8 da Vinci Power
Questions.
Reading: Chapter One.
Video: Simon Sinek. Start with Why: The Golden Circle
Session No. 2. What to innovate?
How to find real market needs and meet them with focused innovations.
Integrating geopolitics, economics, lifestyle and technology. "Pull" innovation
based on proven needs, rather than 'push' innovation based on technology
'magic'. How to identify needs that are unrecognized and unexpressed.
Drucker's Theory of Business. Strategic paradigm shift - your industry: what are
its new rules?
Reading: Chapter Two. GELT: Model for Systematic Innovation (Maital).
Session No. 3. How to innovate?
Systematic approaches to innovation. The four voices: Voice of product,
voice of organization, voice of customer, 'inner voice' of intuition. SIT:
add/subtract/multiply/divide. Hamel: What is a business concept?
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S. Maital. B6055 Value Based Innovation Nanyang Business School October 2013
Reading: Chapter Three..
Video: Guy Kawasaki, The Art of the Start
Tuesday, Oct. 29
Session No. 4. Who innovates?
How to identify creative people, and how to build your own creativity
'muscles'. What we can learn from history's most creative individuals: da Vinci,
Einstein, Edison. The Laws of Simplicity.
Reading: Chapter Four;
Video: ABC Nightline: “Deep Dive” (IDEO)
Action Learning: In your study teams, define a market need based on 'life
style' and changes in life style, and develop a new product or service aimed at
meeting this need. Use the tools learned during the day's discussions in class.
Part Two.
Innovation Management: Ten Essential Tools
Session No. 5
Innovation Management: Cost-Price-Value.
Topics for Class Session: the cost-price-value framework; how do successful
companies create value? How does YOUR idea create unique value for your
customers? Using the cost-price-value triangle to benchmark your idea against
competitors. Analyzing your value chain. What business am I in now, and
what business SHOULD I be in 10 years from now? Value creation vs. cost
reduction; Case study: Viewmax (LG).
Reading: Chapter Five
Wednesday Oct. 30
Session No. 6.
Cost Functions and Hidden Costs.
Topics for Class Session: Defining and measuring hidden costs; sunk costs and
the sunk cost fallacy; measuring opportunity cost of shareholder capital; Return
on Shareholders Equity; EVA as a management tool; Cost functions; average
marginal and total cost; variable and fixed costs; how to build a cost function
and use it as a management tool.
The concept of economic efficiency; technical efficiency vs. economic
efficiency; measuring the efficiency frontier, or tradeoff curve. Using tradeoff
curves in product design. Value profiles. Intel "Centrino" - trading off
performance for less power, heat; Short run vs. long run efficiency and tradeoffs.
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S. Maital. B6055 Value Based Innovation Nanyang Business School October 2013
The use of "even-swaps" in tradeoff decisions. The Balanced Scorecard: juggling
tradeoffs between short-run and long-run. Case study: Kodak. Social
entrepreneurship.
Reading: Chapter Six, Seven, Eight
Session No. 7. Human Capital Management.
Topics for discussion: How to measure and manage human capital;
measuring productivity; Free Lunch Productivity growth. Incentive schemes.
Choosing and developing talent.
Three Tools for Business Innovation: Porter (Activity Maps); Kaplan
(Balanced Scorecard/Strategy Map); Hamel (“Four Boxes”).
Reading: Chapter Nine.
Session No. 8. Scale and Scope; Learning Curves & Breakeven
Analysis
Topics for discussion; measuring and identifying economies of scale and
scope; mass production vs. mass customization; climbing the value ladder.
Value chains. How to resist commoditization through sustained innovation.
Definition of learning curves; how learning curves are computed; learning curve
coefficients; history of learning curves; the arithmetic of learning curves; The
"magic circle" - lower costs, lower price, raise market share, and lower costs;
Case studies: JVC and the VHS technology; Model T; the motorcycle industry
and the demise of Villiers-Triumph; AMRAAM missiles; The attacker's advantage
- when to abandon a comfortable learning curve for a risky one; "limits of the
learning curve - the case of Ford"; how to create a learning organization; the
truth-telling organization; learning curves for services; Alternate approaches to
project evaluation (cost-benefit analysis); the breakeven point approach; three
different breakeven concepts; use of learning curves in breakeven analysis. The
role of cost-of-capital in breakeven analysis. VIDEO: Stew Leonard's Dairy;
3M
Reading: Chapters Ten, Eleven
Thursday Oct. 31
Session No. 8. Risk & the Cost of Capital
Topics for Class Session: The economic model of decisions under
uncertainty; expected value, expected utility, probability; framing
decisions using decision trees; a decision-tree example: should I take an
option on a new technology? Decision trees and the cost of capital. The
psychology of behavior toward risk; Using decision trees to estimate
‘option value’. "Real options" approach to evaluating projects; why
managers must quantify risk as well as return. The cost of equity capital;
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S. Maital. B6055 Value Based Innovation Nanyang Business School October 2013
cost of debt capital; weighted average of cost-of-capital "WACC".
Alternate approaches to project evaluation (cost-benefit analysis); the
breakeven point approach; three different breakeven concepts; use of
learning curves in breakeven analysis. The role of cost-of-capital in
breakeven analysis. Case study: L-1011 Tristar. Investing in technology
and R&D as a real option: quantitative example.
Reading: Chapter 13
Session No. 9. Markets and Demand
Topics for Class Session: The 13 aspects of demand; demographics;
customer age; brand loyalty - switch or fight (Marlboro Friday); price
sensitivity of demand - Sony, Euro-Disney; 2 rules of thumb for estimating
price elasticity; price wars; market research; when to ignore your
customer. Hedonic price indexes -- finding product attributes that are
value-drivers. Orit Gadiesh’s “Profit Pool” diagram; Stan Shih’s “Acer
smile”; value migration; estimating the value of brand assets.
Reading: Chapter 14.
Reading: Chapter 12.
4:30 pm PCM
Each student will write, in class, a short essay, titled “My Personal Creativity
Machine”, describing the structured process he or she will use, in future, to
generate an endless stream of creative ideas, based on tools and concepts
discussed in this class.
Friday Nov 1
Session No. 10.
“Coopetition”: Competing by Cooperating
Topics for Class Session: Managers as orchestra conductors (Deming); why
cooperation is replacing "competition" as a key management skill; the link
between organizational culture and cooperative collaborative behavior; basic
game theory: modeling conflict as a 2x2 matrix; examples of conflict matrices prisoner's dilemma, chicken, critical mass; the case of the "converging circles"
in multimedia (computer, print, entertainment); why innovations usually
succeed better and faster when strategic partners are found.
Reading: HBS Case Study: NSK Case 9-298-071 ; Seahorse business plan.
11-12 noon: QUIZ: Students will complete a one-hour short-answer quiz.
The 10-question quiz will consist of questions that provide data and require
participants to solve numerical problems, using each of the 10 tools. The quiz is
“closed book” but a set of equations and formulae will be supplied.
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S. Maital. B6055 Value Based Innovation Nanyang Business School October 2013
Session No. 11. Integrating the Tools: Building a winning business design.
The Case of NSK (Nacht Schwed Kramer, aka Checkpoint).
The Case of SeaHorsePower
Simplify your Design!
4 pm
Preparation of Posters.
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S. Maital. B6055 Value Based Innovation Nanyang Business School October 2013
Saturday Nov. 3
POSTER SESSION – GRAND FINALE
Teams present their business models and business ideas as Posters –
9:30 – 12:30.
Participants present their business models, built around their
new product idea, as a poster presentation. The presentations will be
‘paper’, not digital, and will include a very short ‘elevator speech’.
They will be graded on the basis of originality, clarity, and potential for
business success. Feedback will be given by an invited expert.
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Poster Assignment
1. During the course, study teams are asked to develop an idea for a
new product, service or process, and describe it briefly in writing.
2. During the course, the “ten tools” of innovation management will be
applied in class, and in the breaks, by the teams, to developing the business
model that will bring the new product idea to market successfully.
3. In the final Poster presentation, on Saturday morning, each team
will mount a Poster, describing their idea and related business design.
The objective of the Poster is to present a convincing business case for
the idea, in order to attract interest on the part of investors. The poster
should include a description of the product or service; demonstration of need;
statement of ‘differentiators’; finance needs; management team; project plan
(when R&D is needed); pricing plan; and some indication of cash flow over
time.
A prototype is often a powerful ‘persuader’ for angel investors and venture
capitalists. Where possible: a prototype, even a crude model, should be
shown.
Sample business plans and poster presentations from MBA students in
other countries will be provided.
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S. Maital. B6055 Value Based Innovation Nanyang Business School October 2013
Shlomo Maital is senior research associate at the Samuel Neaman
Institute for Advanced Studies in Science & Technology, Technion-Israel
Institute of Technology, and professor (emeritus). He was the academic
director of TIM-Technion Institute of Management, Israel's leading
executive leadership development institute and a pioneer in actionlearning methods, from 1998 - 2009. At TIM he worked with over 200
high-tech established and startup firms. He was summer Visiting
Professor for 20 years in MIT Sloan School of Management's
Management of Technology M.Sc. program, teaching over 1,000 R&D
engineers from 40 countries. He is the author, co-author or editor of 12
books, including Technion Nation (2012), Global Risk/Global Opportunity
(SAGE 2009), Innovation Management (Sage, 2007; 2nd edition, 2012);
and Executive Economics (The Free Press 1994), translated into seven
languages. He was co-founder of SABE-Society for Advancement of
Behavioral Economics.
Shlomo Maital is married, with four children and 12 grandchildren. He
completed the New York marathon in 1985 in 3 hours and 51 minutes, and
in April 2006, completed the Boston marathon in about 5 hours. In
February 2008 he climbed Mt. Kilimanjaro and reached Uhuru Summit. In
2010 he climbed Mt. Kazbek in Georgia.
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S. Maital. B6055 Value Based Innovation Nanyang Business School October 2013
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