Innovation Management
Notes from Melissa Schillings’ Strategic Management of Technological Innovation (Ed. 6) & Mandatory Articles
Week 1 2
Chapter 1: Introduction 2
Chapter 2: Sources of Innovation 3
Chapter 3: Types and Patterns of Innovation 7
Week 2 11
Chapter 6: Defining the Organisation’s Strategic Decision 11
Chapter 7: Choosing Innovation Projects 14
Chapter 8: Collaboration Strategies 18
Week 3 22
Chapter 4: Standards Battles, Modularity, and Platform Competition 22
Chapter 5: Timing of Entry 28
Multi-Mode Interaction Among Technologies by C. W. I. Pistorius & J. M. Utterback (1997) 32
Aging, Obsolescence, and Organisational Innovation by J. B. Sørensen & T. E. Stuart (2000) 33
Week 5 35
Structural Holes and Good Ideas by R. S. Burt (2004) 35
Brokerage, Boundary Spanning, & Leadership in Open Innovation Communities by Fleming & Waguespack (2007) 36
Week 6 38
Chapter 9: Protecting Innovation 38
Chapter 10: Organizing for Innovation 44
Chapter 11: Managing the New Product Development Process 50
Week 7 57
Chapter 12: Managing New Product Development Teams 57
Chapter 13: Crafting a Deployment Strategy 61
Bonus Article – Collaboration and Creativity: The Small World Problem by B. Uzzi & J. Spiro (2005) 68
,Week 1
Chapter 1: Introduction
The Importance of Technological Innovation
• Technological innovation: The act of introducing a new device, method, or material for application to
commercial or practical objectives
o Important driver of competitive success
• The increasing importance of innovation is due in part to the globalization of markets.
o Foreign competition pressure to continuously innovate differentiation
• Introducing new products helps firms protect their margins; investing in process innovation helps lower costs
• Advances in information technology have played a role in speeding the pace of innovation.
o Computer-aided design and computer-aided manufacturing easier and faster for firms to design
and produce new products
o Flexible manufacturing technologies made shorter production runs economical and have reduced
the importance of production economies of scale enable firms to seamlessly transition from
producing one product model to the next
• New technologies increase pace of innovation raise the bar for competitors industry-wide shift to
shortened development cycles rapid new product introductions
• Product life cycles: the time between a product’s introduction and its withdrawal from the market or
replacement by a next-generation product
o 4 to 12 months for software, 12 to 24 months for computer hardware and consumer electronics, 18
to 36 months for large home appliances
o spurs firms to focus increasingly on innovation as a strategic imperative
No quick innovation diminishing margins obsolete products
The Impact of Technological Innovation on Society
• Innovation enables a wider range of goods and services to be delivered to people worldwide.
• The aggregate impact of technological innovation can be observed by looking at GDP.
o The gross domestic product (GDP) of an economy is its total annual output, measured by final
purchase price.
o Technological innovations increase the gross domestic product of an economy.
• The historic rate of economic growth in GDP could not be accounted for entirely by growth in labour and
capital inputs.
o Unaccounted-for residual growth represents technological change Solow Residual
The Solow residual is the portion of an economy's output growth that cannot be attributed
to the accumulation of capital and labour, the factors of production.
represents output growth that happens beyond the simple growth of inputs.
o Technological innovation ↑ amount of output achievable from a given quantity of labour and capital.
• Sometimes technological innovation results in negative externalities.
o Externalities: Costs (or benefits) that are borne (or reaped) by individuals other than those
responsible for creating them.
Negative externality: business emits pollutants in a community,
• E.g. electronic waste residuals for the disposal of technological goods.
Positive externality: a business builds a park in a community
o Production technologies pollution harmful to the surrounding communities;
o Agricultural/fishing technologies erosion, elimination of natural habitats, depletion of ocean stocks
o Medical technologies unanticipated consequences such as antibiotic-resistant strains of bacteria or
moral dilemmas regarding the use of genetic modification.
• Technology = knowledge to solve our problems and pursue our goals.
• Technological innovation: The creation of new knowledge that is applied to practical problems.
Innovation by Industry: The Importance of Strategy
• Successful innovators have clearly defined innovation strategies and management processes.
• The Innovation Funnel
o Many studies suggest that only one out of several thousand ideas result in a successful new product
o Many ideas are sifted through and abandoned before a project is even formally initiated.
o It takes about 3000 raw ideas to produce one significantly new and successful commercial product.
o Innovation process = a funnel While there are many potential new product ideas going on in the
wide end, very few make it through the development process.
, • The Strategic Management of Technological Innovation
o Improving a firm’s innovation success rate requires…
(a) an in-depth understanding of the dynamics of innovation,
(b) a well-crafted innovation strategy,
(c) well-designed processes for implementing the innovation strategy.
Chapter 2: Sources of Innovation
Overview
• Innovation: The practical implementation of an idea into a new device or process.
• Can arise from individuals, firms, universities, governments, or private non-profit organisations
• One primary engine of innovation is firms.
o typically have greater resources than individuals and a management system to marshal those
resources toward a collective purpose.
o face strong incentives to develop differentiating new products and services, which may give them
an advantage over non-profit or government-funded entities.
• An even more important source of innovation arises from the linkages between the different sources
o networks of innovators
Creativity
• Innovation begins with the generation of new ideas (something imagined or pictured in the mind).
• Creativity: The ability to generate new (novel) and useful ideas/work.
• Degree of novelty: a function of how different it is from prior work and of the audience’s prior experiences.
o Product could be novel to the person who made it, but known to most everyone else reinvention
o Product could be novel to its immediate audience yet be well known somewhere else in the world.
• Individual Creativity
o An individual’s creative ability is a function of his or her intellectual abilities, knowledge, personality,
motivation, and environment.
o Intellectual abilities: intelligence, memory, ability to look at problems in unconventional ways, ability
to analyse which ideas are worth pursuing and which are not, and ability to articulate those ideas to
others and convince others that the ideas are worthwhile.
Primary process thinking: ability to let their mind engage in a visual mental activity
• Because of its unstructured nature, primary process thinking can result in combining
ideas that are not typically related, leading to what has been termed remote
associations or divergent thinking.
Individuals with excellent working memory may be more likely or more able to search longer
paths through the network of associations in their mind, enabling them to arrive at a
connection between two ideas or facts that seem unexpected or strange to others.
o The impact of knowledge on creativity is somewhat double-edged.
Too little knowledge of field unlikely to understand it well enough to contribute
meaningfully to it.
Too much knowledge of field a field become trapped in the existing logic and paradigms,
preventing him or her from coming up with solutions that require an alternative perspective.
Outsiders often face resistance and scepticism.
• However, they aren’t trapped by the paradigms and assumptions (like industry
veterans), nor do they have the existing investments in tools, expertise, or supplier
and customer relationships that make change difficult and unappealing.
o The personality trait most often associated with creativity is “openness to experience.”
Openness to experience: an individual’s use of active imagination, aesthetic sensitivity,
attentiveness to emotion, a preference for variety, and intellectual curiosity.
Individuals who score high on the openness to experience dimension tend to have great
intellectual curiosity, are interested in unusual ideas, and are willing to try new things.
o Intrinsic motivation has also been shown to be very important for creativity.
More likely to be creative if one works on things they are genuinely interested in and enjoy.
Creativity can be undermined by providing extrinsic motivation such as money or awards.
If the monetary rewards are small, idea collection systems may be primarily serving to invite
people to offer ideas, which is a valuable signal about the culture of the firm.
o To fully unleash an individual’s creative potential usually requires a supportive environment with
, time for the individual to explore their ideas independently,
tolerance for unorthodox ideas,
a structure that is not overly rigid or hierarchical,
and decision norms that do not require consensus.
• Organisational Creativity
o Creativity of the organisation = creativity of the individuals within the organisation + a variety of social
processes and contextual factors that shape the way those individuals interact and behave.
o The organisation’s structure, routines, and incentives could thwart individual creativity or amplify it.
o Idea collection systems (such as suggestion boxes) are relatively easy and inexpensive to implement
Method of a company tapping the creativity of its individual employees suggestion box
Google employees e-mail ideas for new products and processes to a company-wide
database where every employee can view the idea, comment on it, and rate it.
o Creativity training programs
Encourage managers to develop verbal and nonverbal cues that signal employees that their
thinking and autonomy are respected.
Often incorporate exercises that encourage employees to use creative mechanisms
Translating Creativity into Innovation
• The Inventor
o The most successful inventors possess the following characteristics:
They have mastered the basic tools and operations of the field in which they invent, but they
have not specialized solely in that field; instead they have pursued two or three fields
simultaneously, permitting them to bring different perspectives to each.
They are curious and more interested in problems than solutions.
They question the assumptions made in previous work in the field.
They often have the sense that all knowledge is unified.
They seek global solutions rather than local solutions and are generalists by nature.
o The qualities that make people inventive do not necessarily make them entrepreneurial; many
inventors do not actively seek to patent or commercialize their work.
o Many of the most well-known inventors, however, had both inventive and entrepreneurial traits.
• Innovation by Users
o Innovation often originates with those who create solutions for their own needs.
o Users have a deep understanding of their unmet needs and the incentive to find ways to fulfil them.
o Users may alter the features of existing products, approach existing manufacturers with product
design suggestions, or develop new products themselves.
• Research and Development (R&D) by Firms
o One of the most obvious sources of firm innovation is the firm’s own R&D efforts.
o Research can refer to both basic research and applied research.
Basic research: effort directed at increasing understanding of a topic or field without a
specific immediate commercial application in mind focuses on principles
• This research advances scientific knowledge, which may (or may not) turn out to
have long-run commercial implications.
• E.g. mRNA method of genetic sequencing discovered in 1961.
Applied research: effort directed at increasing understanding of a topic to meet a specific
need focuses on solutions
• In industry, this research typically has specific commercial objectives
• E.g. effect of herbicides on plant growth
o Development: activities that apply knowledge to produce useful devices, materials, or processes.
E.g. Pfizer conducted their COVID-19 vaccine first clinical trial in mid-2020.
o R&D: range of activities early exploration of a domain to specific commercial implementations.
A firm’s R&D intensity (its R&D expenditures as a percentage of its revenues) has a strong
positive correlation with its sales growth rate, sales from new products, and profitability.
o During the 1950s and 1960s, scholars of innovation emphasized a science-push approach to R&D
This approach assumed that innovation proceeded linearly from scientific discovery, to
invention, to engineering, then manufacturing activities, and finally marketing.
According to this approach, the primary sources of innovation were discoveries in basic
science that were translated into commercial applications by the parent firm.
