1
Summary Strategic Management of Technological
Innovation
Chapter 1: Introduction / Importance of innovation
THE IMPORTANCE OF TECHNOLOGICAL INNOVATION
- Technological innovation = the act of introducing a new device, method, or materials for
application to commercial or practical objectives
- increasing importance of innovation is due in part to the globalization of markets Foreign
competition has put pressure on firms to continuously innovate in order to produce
differentiated products and services
- Computer-aided design and computer-aided manufacturing have made it easier and faster
for firms to design and produce new products
o flexible manufacturing technologies have made shorter production runs economical
and have reduced the importance of production economies of scale
- Flexible manufacturing technologies now enable firms to seamlessly transition from
producing one product model to the next, adjusting production schedules with real-time
information on demand.
THE IMPACT OF TECHNOLOGICAL INNOVATION ON SOCIETY
- The aggregate impact of technological innovation can be observed by looking at gross
domestic product (GDP)
o GDP = the total annual output of an economy as measured by its final purchase price.
- Technological innovation increased the amount of output achievable from a given quantity of
labor and capital.
INNOVATION BY INDUSTRY: THE IMPORTANCE OF STRATEGY
- innovation depicted as a freewheeling process that is unconstrained by rules and plans, study
revealed that successful innovation have clearly defined innovation strategies and
management processes.
The innovation funnel
- innovation process is often conceived of as a funnel (= triechter), with many potential new
product ideas going in the wide end, but very few making it through the development
process.
The strategic management of technological innovation
- to improve a firm’s innovation success rate a well-crafted strategy is required:
o A firm’s innovation projects should align with its resources and objectives
o A firm’s organizational structure and control systems should encourage the
generation of innovative ideas while also ensuring efficient implementation.
o A firm’s new product development process should maximize the likelihood of
projects being both technically and commercially successful.
- To achieve these things, a firm needs:
o An in-depth understanding of the dynamics of innovation.
o A well-crafted innovation strategy.
o A well-designed processes for implementing innovation strategy.
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Chapter 2: Sources of innovation
OVERVIEW
- Innovation = the practical implementation of an idea into a new device or process.
- Innovation can arise from many different sources:
o Individuals
o Universities
o Government funded research
o Private nonprofits
o Firms
CREATIVITY
- Innovations begins with the generation of new ideas.
Individual creativity
- individual’s creative ability is a function of his or her intellectual abilities, knowledge, style of
thinking, personality, motivation and environment
o most important intellectual abilities include the ability to look at problems in
unconventional ways, the ability to analyze which ideas worth pursuing and which
are not, and the ability to articulate those ideas to others and convince others that
the ideas are worthwhile
- If individual has too little knowledge of a field, he or she is unlikely to understand it well
enough to contribute meaningfully to it
o if an individual knows a field too well, that person can become trapped in the
existing logic and paradigms
Organizational creativity
- creativity of the organization is a function of creativity of the individuals within the
organization
o organization’s structure, routines, and incentives could thwart individual creativity or
amplify it.
- Idea collection systems (such as suggestion boxes) are relatively easy and inexpensive to
implement, but only a first step in unleashing employee creativity
o Today, encourage managers to develop verbal and nonverbal cues that signal
employees that their thinking and autonomy are respected
TRANSLATING CREATIVITY INTO INNOVATION
- Innovation requires combining a creative idea with resources and expertise that make it
possible to embody the creative idea in a useful form.
The inventor
- The most successful inventors possess the following traits:
o 1. They have mastered the basic tools and operations of the field in which they
invent, but they have not specialized solely in that field
o 2. They are curious and more interested in problems than solutions.
o 3. They question the assumptions made in previous work in the field.
, 4
o 4. They often have the sense that all knowledge is unified. They seek global solutions
rather than local solutions, and are generalists by nature.
Innovation by users
- user innovators have no initial intention to profit from the sale of their innovation – they
create the innovation for their own use
o User innovations can also blossom into new industries.
Research and development by firms
- Basic research = effort directed at increasing understanding of a topic or field without a
specific immediate commercial application in mind.
- Applied research = directed at increasing understanding of a topic to meet a specific need
specific commercial objectives.
- Development = activities that apply knowledge to produce useful devices, materials, or
processes.
- Firms consider their in-house R&D to be their most important source of innovation
o 1950s and 1960s: science-push approach to R&D.
o mid-1960s: demand-pull model of R&D.
- Firms that are successful innovation utilize multiple sources of information and ideas,
including:
o In-house research and development, including basic research.
o Linkages to customers or other potentials users of innovations.
o Linkages to an external network of firms that may include competitors,
complementors, and suppliers.
o Linkages to other external sources of scientific and technical information, such as
universities and government laboratories.
Firms linkages with customers, suppliers, competitors, and complementors
- Firms often form alliances with customers, suppliers, complementors, and even competitors
to jointly work on an innovation project or to exchange information and other resources in
pursuit of innovation.
o Collaborators can pool resources such as knowledge and capital, and they can share
the risk of a new product development project.
- Doing in-house R&D helps to build the firm’s absorptive capacity, enabling it to better
assimilate and utilize information obtained externally.
Universities and government-funded research
- Another important source of innovation comes from public research institutions such as
universities, government laboratories, and incubators.
- universities have established technology transfer offices
o offices designed to facilitate the transfer of technology developed in a research
environment to an environment where it can be commercially applied.
- Governments of many countries actively invest in research through their own laboratories,
the formation of science parks and incubators, and grants for other public or private research
entities
o Science parks = regional districts, typically set up by government, to foster R&D
collaboration between government, universities, and private firms.
Summary Strategic Management of Technological
Innovation
Chapter 1: Introduction / Importance of innovation
THE IMPORTANCE OF TECHNOLOGICAL INNOVATION
- Technological innovation = the act of introducing a new device, method, or materials for
application to commercial or practical objectives
- increasing importance of innovation is due in part to the globalization of markets Foreign
competition has put pressure on firms to continuously innovate in order to produce
differentiated products and services
- Computer-aided design and computer-aided manufacturing have made it easier and faster
for firms to design and produce new products
o flexible manufacturing technologies have made shorter production runs economical
and have reduced the importance of production economies of scale
- Flexible manufacturing technologies now enable firms to seamlessly transition from
producing one product model to the next, adjusting production schedules with real-time
information on demand.
THE IMPACT OF TECHNOLOGICAL INNOVATION ON SOCIETY
- The aggregate impact of technological innovation can be observed by looking at gross
domestic product (GDP)
o GDP = the total annual output of an economy as measured by its final purchase price.
- Technological innovation increased the amount of output achievable from a given quantity of
labor and capital.
INNOVATION BY INDUSTRY: THE IMPORTANCE OF STRATEGY
- innovation depicted as a freewheeling process that is unconstrained by rules and plans, study
revealed that successful innovation have clearly defined innovation strategies and
management processes.
The innovation funnel
- innovation process is often conceived of as a funnel (= triechter), with many potential new
product ideas going in the wide end, but very few making it through the development
process.
The strategic management of technological innovation
- to improve a firm’s innovation success rate a well-crafted strategy is required:
o A firm’s innovation projects should align with its resources and objectives
o A firm’s organizational structure and control systems should encourage the
generation of innovative ideas while also ensuring efficient implementation.
o A firm’s new product development process should maximize the likelihood of
projects being both technically and commercially successful.
- To achieve these things, a firm needs:
o An in-depth understanding of the dynamics of innovation.
o A well-crafted innovation strategy.
o A well-designed processes for implementing innovation strategy.
,2
,3
Chapter 2: Sources of innovation
OVERVIEW
- Innovation = the practical implementation of an idea into a new device or process.
- Innovation can arise from many different sources:
o Individuals
o Universities
o Government funded research
o Private nonprofits
o Firms
CREATIVITY
- Innovations begins with the generation of new ideas.
Individual creativity
- individual’s creative ability is a function of his or her intellectual abilities, knowledge, style of
thinking, personality, motivation and environment
o most important intellectual abilities include the ability to look at problems in
unconventional ways, the ability to analyze which ideas worth pursuing and which
are not, and the ability to articulate those ideas to others and convince others that
the ideas are worthwhile
- If individual has too little knowledge of a field, he or she is unlikely to understand it well
enough to contribute meaningfully to it
o if an individual knows a field too well, that person can become trapped in the
existing logic and paradigms
Organizational creativity
- creativity of the organization is a function of creativity of the individuals within the
organization
o organization’s structure, routines, and incentives could thwart individual creativity or
amplify it.
- Idea collection systems (such as suggestion boxes) are relatively easy and inexpensive to
implement, but only a first step in unleashing employee creativity
o Today, encourage managers to develop verbal and nonverbal cues that signal
employees that their thinking and autonomy are respected
TRANSLATING CREATIVITY INTO INNOVATION
- Innovation requires combining a creative idea with resources and expertise that make it
possible to embody the creative idea in a useful form.
The inventor
- The most successful inventors possess the following traits:
o 1. They have mastered the basic tools and operations of the field in which they
invent, but they have not specialized solely in that field
o 2. They are curious and more interested in problems than solutions.
o 3. They question the assumptions made in previous work in the field.
, 4
o 4. They often have the sense that all knowledge is unified. They seek global solutions
rather than local solutions, and are generalists by nature.
Innovation by users
- user innovators have no initial intention to profit from the sale of their innovation – they
create the innovation for their own use
o User innovations can also blossom into new industries.
Research and development by firms
- Basic research = effort directed at increasing understanding of a topic or field without a
specific immediate commercial application in mind.
- Applied research = directed at increasing understanding of a topic to meet a specific need
specific commercial objectives.
- Development = activities that apply knowledge to produce useful devices, materials, or
processes.
- Firms consider their in-house R&D to be their most important source of innovation
o 1950s and 1960s: science-push approach to R&D.
o mid-1960s: demand-pull model of R&D.
- Firms that are successful innovation utilize multiple sources of information and ideas,
including:
o In-house research and development, including basic research.
o Linkages to customers or other potentials users of innovations.
o Linkages to an external network of firms that may include competitors,
complementors, and suppliers.
o Linkages to other external sources of scientific and technical information, such as
universities and government laboratories.
Firms linkages with customers, suppliers, competitors, and complementors
- Firms often form alliances with customers, suppliers, complementors, and even competitors
to jointly work on an innovation project or to exchange information and other resources in
pursuit of innovation.
o Collaborators can pool resources such as knowledge and capital, and they can share
the risk of a new product development project.
- Doing in-house R&D helps to build the firm’s absorptive capacity, enabling it to better
assimilate and utilize information obtained externally.
Universities and government-funded research
- Another important source of innovation comes from public research institutions such as
universities, government laboratories, and incubators.
- universities have established technology transfer offices
o offices designed to facilitate the transfer of technology developed in a research
environment to an environment where it can be commercially applied.
- Governments of many countries actively invest in research through their own laboratories,
the formation of science parks and incubators, and grants for other public or private research
entities
o Science parks = regional districts, typically set up by government, to foster R&D
collaboration between government, universities, and private firms.
