Technology, Innovation, Timing

Types of Innovation Types of Innovation Incremental Innovation Architectural Innovation Modular Innovation Radical/Disruptive Innovation

Technology Life Cycle First Mover / Follower Perform Potential time emergent growth mature decline First Mover / Follower

Characteristics in Life Cycle

First-Mover Advantages Disadvantages

First-Mover Advantages Disadvantages Create the standard Low-cost position Intellectual property Tie up resources Increase switching costs for producer Increase switching costs for customer Disadvantages Advantages can be short-lived Higher development costs Competitors violate intellectual property Greater uncertainty Consumer reluctance

First Mover vs Follower Pioneers gain significant sales advantages but incur larger cost disadvantages relative to a fast follower entrant ROI pioneers < ROI fast followers First mover more likely to attain strategic resource (Starbucks busy corner strategy)

First-Mover vs Follower With insufficient information early entrance can lead to large costs Too long, firm may lose the first-mover advantage

First-Mover vs Follower Cash Flow Innovation No Competition Low Competition Strong Competition Window of Opportunity First Mover Follower

First Mover vs Follower Beta vs VHS Prodigy, CompuServe, AOL When is a first mover strategy called for ?

Tom Peters Innovation Easy Markets Underserved

Class Exercise What issues would you like to see solved? Break in groups of 3 or 4

Value Net and Alliances Complements to a product Hot dogs & mustard Starbucks and Barnes & Noble Partnerships Calyx & Corolla partners FedEx (floral delivery) MicroSoft & Mac – spreadsheet & graphical apps (allowed MicroSoft to exploit Apple’s graphical interface & create windows)

Technology & Innovation Strategy Innovation is commercialized invention 6% of independent inventions make it to market Success rate for inventions in established firms 4 times as high Invention to Venture can be a long road (Chester Carlson invented photocopier in 1942. Xerox introduced first copier in 1960).

Dimensions of Tech. Innovations Importance Radicalness Patent Scope

Dimensions of Tech. Innovations Importance Magnitude of economic value of invention Radicalness Market effect of the commercialized invention (disruptive innovation) Patent Scope Breadth of intellectual property protection

5 Expected Trajectory Current performance of the innovation Innovation Strategies 5 Disruptive or radical innovations introduce a set of attributes to a marketplace different than the ones that mainstream customers historically have valued, and the products often initially perform unfavorably along one or two dimensions of performance that are particularly important to those customers. The Expected Trajectory of a Disruptive Innovation High Range of performance required in the mainstream market Performance Expected Trajectory Current performance of the innovation Low Now Time Chapter 5: Figure 5.7 Technology Ventures: From Idea to Enterprise

New Technology New Invention Characteristics Importance Radicalness Patent Scope Avail Resources Commercialize New Firm Capabilities / Knowledge of Entrepreneurial Team Of Industry No Yes

Tech Innovation Strategy Innovation based on invention & creativity and is defined as invention that has produced economic value in the marketplace. Innovation based on commercialization of new technology Skis – Snowboards Schwinn bicycles to mountain bikes Weird Video

Sources of Innovation Lead users Product ideas but not average users Sliced peanut butter Build it & they will come (often fails) Assumes customer will do what they say (fertilizer vs organic fertilizer) Market analysis

Creativity & Invention Describe The Problem Incubate observe problem Brainstorm Insights Inventive think Build / Test Prototype Evaluate / Test Ideas Start

New Technology Ventures Neither the first companies to use technology nor the companies with the best technology win Companies with right application for the technology win

Technology Factors Feasibility Performance Manufacturability Business Factors Vision Target Market Value Proposition Strategy Industry/Competitor Analysis Expected Competitive Adv. Expected Economic Results Revenue / Profitability Return on Capital Time to profitability