TTMG 5001 Principles of Management for Engineers Section T Session 9: November 9 Fall 2011

2 Session 9 objectives Upon completion of the session, you will know about managerial literature on innovation, growth and evolution of i. product markets, ii. companies, and iii. networks and you will be able to recognize the differences between the academic and managerial literature

3 Agenda 1.Presentations of first draft of assignment 2 1.Summary of assigned readings 1.Questions to which we want answers and comments

Gate 0 presentations Assignment 2 presentations will take place during Session 10, Nov 16* in room 4359 ME Make available slides to be presented before 5 p.m. on Nov 15; professor will post slides by 6 p.m. Topics will be posted on TTMG 5001 web site Nov 16 presentations will not be graded, but Nov 30 presentations of assignment 2 will be graded Each presentation is restricted to 10 minutes max, how time is used is up to the group Stick to the template provided We will prepare a list of what needs to be done so quality of presentations is 2X better next time

5 Gate 0 slide deck template Title slide Objective and deliverables Value of the deliverables Method to produce deliverables Relevance Literature review Lessons learned Unit of analysis and data to be collected How data will be collected How data will be analyzed References

Summary Session 9 assigned articles Objectives Deliverables, contribution and relevance Lessons learned

7 Session 9 assigned articles Anderson, J. C., Narus, J. A., & van Rossum, W Customer value propositions in business markets. Harvard Business Review, 84(3): Johnson, M., Christensen, C., & Kagermann, H Reinventing your business model. Harvard Business Review, 86(12): Yoffie, D., & Kwak, M With friends like these: The art of managing complementors. Harvard Business Review, 84(9): Chakravorti, B The new rules for bringing innovations to market. Harvard Business Review, 82(3): Sargut, G, & McGrath, R Learning to live with complexity. Harvard Business Review, 89(9/10): 69-76

8 About the articles Five articles written for managers Anderson et al. (2006) focus on value propositions Johnson et al. (2008) focus on business models Yoffie & Kwak (2006) and Chakravorti (2004) focus on ecosystems Sargut & McGrath (2011) focus on complexity

9 Objectives

10 Objectives (continued)

11 Deliverables

12 Deliverables (continued)

13 Contributions

14 Contributions (continued)

15 Relevant to researchers and students because

16 Relevant to TMT and project managers because

17 Lessons learned - General Articles written for managers: Lack evidence that their points of view are correct Easier to read Provide concrete examples and stories Plagued by definition problems

18 Lessons learned – Anderson et al. (2006) Three kinds of value propositions: –All benefits: Why should customers buy from you? –Favorable points of difference: Why should customers buy from you, instead from your competitors? –Resonating focus: How does your offer add most value to customers? Avoids pitfalls of the other two strategies: benefit assertion and value presumption, and adds point of parity Stressing points of parity where customers presume competitors to have advantages can be effective

19 Lessons learned – Anderson et al. (2006) continued

20 Lessons learned – Johnson et al. (2008) Need to understand your existing business model in order to replace it with a new one Identify whether a new business model is needed to exploit opportunities or respond to changes –Opportunity to address unmet needs of users –Opportunity to use a new technology or a new way of using a proven technology (eg military technology to consumer) –Current solution do not address job to be done –Need to fight off low-price disrupters –Need to respond to changes in competition (eg entrants that offer “good enough” solution to customer problems)

21 Lessons learned – Johnson et al. (2008) continued

22 Lessons learned – Yoffie & Kwak (2006) Success of your product depends on only on its merits, but also on presence of complementors Two ways to influence complementors: hard power (coercion) and soft power Soft power can deliver same results at lower cost through sharing information, supporting a community, and entering commitments with complementors Decision whether to use hard or soft power also depends on capacity to exercise hard power, importance of having a variety of complementors, and severity of holdup threat

23 Lessons learned – Yoffie & Kwak (2006) continued Framework for deciding on whether to create your own complements or rely on third parties

24 Lessons learned – Chakravorti (2004) In a networked market, strategies that focus on advertizing, promotion or sales are less effective; relationship skills differentiate companies To enter a networked market: 1)Reason back from the desired endgame 2)Complement power players 3)Orchestrate incentives to switch for three types of players: complementors, channel partners, and adopters 4)Maintain flexibility (defer decisions)

25 Lessons learned – Chakravorti (2004) continued

26 Lessons learned – Sorgut & McGrath (2011) Managers of complex systems face unintended consequences (from individual decisions, aggregate decisions, policy interactions) and difficulty making sense of a situation (vantage point, cognitive limits, inattentional blindness, rare events)

27 Lessons learned – Sorgut & McGrath (2011) continued Forecasting should not focus on average behavior, but on low-probability, high-impact events Limit need for accurate predictions eg by deferring investments and gathering early feedback Use a real option approach to make smart trade-offs: make small investments to reduce uncertainties Hire people that maximize cognitive variety

Questions to which we want answers

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