American industry is renowned for its technical and scientific breakthroughs - and equally famous for its inability to commercialize its own technology. This report examines the root causes of "technophobia" in companies whose industries are driven by innovation. Drawing on many examples of companies that have been successful at managing innovation, the authors demonstrate how new ideas can be transformed into products efficiently and systematically by removing the barriers that surround innovative technology.
Profiting from Innovation
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Book Description
Editorial Reviews
Review
Donald N. Frey Northwestern University Former CEO, Bell & Howell Company The U.S. has lost too much market share to foreign manufacturers of high quality, technologically superior products. This book will help recreate or reinvent our companies through educating a new generation of managers. -- Review
Excerpt. © Reprinted by permission. All rights reserved.
Chapter 1
Why This Book?
Many leaders are blind to the potentials, company pitfalls, and day-to-day challenges presented by technical change. Managers, financiers, and entrepreneurs generally appreciate the value of experienced management, an educated work force, abundant low-cost capital, a good location, or a recognized brand name. They are often less comfortable with technology, too often regarded as simply "R&D" or "patents." Most managers regard technology as important in some undefined way, but not as pressing a concern as meeting next month's sales targets or structuring the company so that it is unattractive to hostile takeover artists. This attitude, bred of a lack of sophistication about the uses, management, and pervasive effect of technology on the structure and competitive environment of business, can cripple a company.
Profiting from Innovation is intended to help managers make informed judgments about managing innovation to add value in a technologically dynamic world. It is meant to help company leaders make better decisions about investing in or managing technologies that can add value to products, processes, or services. The focus is not necessarily on producing new or technologically advanced products, processes, and services, but on ways of effectively applying and managing innovation for profit. The goal of using technology in business is not just technological excellence, but business success. Such business success may arise serendipitously from a truly new technology, but more likely it will follow from a focused program of technical and business work and from making improvements to existing products and processes faster and more effectively than competitors.
Microelectronics, gene splicing, computer communications, and efficient airfoil design are technologies pregnant with possibilities. It is, however, the products that result from their application that produce business success. These technologies have spawned a host of new products and services, such as personal computers, bioengineered pharmaceuticals, networked computer applications, and jumbo jets, that could not have existed 25 years ago.
Often the range of products and services that incorporate such new technologies quickly grows beyond the capacity of a single firm to exploit. With rare exception, knowledge that products based on a technology are market successes spreads quickly and belongs to the world almost immediately-knowledge that a technology is effective in production diffuses only a little more slowly.
This forms an important baseline for thinking about managing technology: Static monopoly of a given technology and its applications is unsustainable in the long haul. As disconcerting as this may be, it is important to realize that there is no safe or permanent success in technological or business matters. Success is only the opportunity to compete in the next round. Thus, the challenge of profiting from innovation lies in understanding how to transform new ideas efficiently and routinely into marketplace advantage -- in mastering a dynamic process.
Profiting from Innovation seeks to encourage business success in two ways. First, it is an introduction to four patterns for incorporating innovative technical ideas in new products, processes, and services. It also discusses management practices that are important in creating the drive to use technology effectively. A key to realizing the business potential of technology lies in understanding the nature of commercialization processes -- their driving forces, pace, risks, and impact. Technological advance is not separable from its uses or from the organizations, people, and markets it affects. Managers and entrepreneurs must understand the complex web of interactions between technology and people, markets and organizations. They need to know where their products, processes, and services fit technologically and in the market, the best way to structure and prosecute commercialization activities, and how internal capabilities can be used to match external opportunities. Profiting from Innovation provides a basis for harnessing innovation by describing the nature of several types of commercialization activities. Knowledge of when specific commercialization activities are under way and understanding the characteristics of those activities are important elements in effective commercialization management. This is not exclusively, or even predominantly, an issue for high-technology industries. It is as true of the paper clip business as it is of microelectronics.
Second, Profiting from Innovation will help a manager or entrepreneur recognize and act on opportunities for adding value, opportunities that differ at various stages in the life of products, processes, and services. At the outset, value lies in the search for applications and means, and the benefits come from being early to market. Later, value comes from executing product, process, quality, or service improvements sooner than others do. Still later, value comes from correctly managing maturity. As simple as it sounds, there are many ways to be distracted. We will discuss tools and techniques to help managers keep on track and not lose sight of commercialization goals in the confusion of day-to-day activities.
The insights, ideas, and analysis in this book can provide an alternative to what some business observers have called the triumph of paper over product. In his 1989 book The Resurgent Liberal, Robert Reich, a scholar and prominent critic of U.S. business strategy, drew the following distinction:
Paper entrepreneurs -- trained in law, finance, accountancy-manipulate complex systems of rules and numbers. They innovate by using the systems in novel ways: establishing joint ventures, consortia, holding companies, mutual funds; finding companies to acquire, "white knights" to be acquired by, stock-index and commodity futures to invest in, tax shelters to hide in; engaging in proxy fights, tender offers, antitrust suits, stock splits, leveraged buy-outs, divestitures; buying and selling notes, junk bonds, convertible debentures; going private, going public, going bankrupt.
Product entrepreneurs -- inventors, design engineers, production engineers, production managers, marketers, owners of small businesses -- produce goods and services people want. They innovate by creating better products at less cost; establishing more-efficient techniques of manufacture, distribution, sales; finding cheaper sources of materials, new markets, consumer needs; providing better training of employees, attention-getting advertising, speedier consumer service and complaint handling, more-reliable warranty coverage and repair.
Our economic system needs both. Paper entrepreneurs ensure that capital is allocated efficiently among product entrepreneurs. They also coordinate the activities of product entrepreneurs, facilitating readjustments and realignments in supply and demand.
But paper entrepreneurs do not directly enlarge the economic pie; they only arrange and define the slices. They provide nothing of tangible use. For an economy to maintain its health, entrepreneurial rewards should flow primarily to product, not paper.
Yet paper entrepreneurialism is on the rise. It dominates the leadership of our largest corporations. It guides government departments and agencies. It stimulates platoons of lawyers and financiers. It preoccupies some of our best minds, attracts some of our most talented graduates, embodies some of our most creative and original thinking, spurs some of our most energetic wheeling and dealing.
Our focus is on exploiting technological opportunities for organizing design and production activities, and for encouraging innovation in design, creation, and delivery of products and services. The object may
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