1. Strategic imlications of Innovation Management

2. Close Vs. Open Innovation
A paradigm shift
Close:
Inward focused.
Fully integrated
The notion of ’total control’
Industry was the primary source of research funding and the commercial use of science and industry R&D was the primary locus of industrial research
One could not wait for the external scientific community to become interested in practical applications of science

3. Close Vs. Open Innovation
The creation of your own internal R&D organization
started with the collaboration between university and corporations
University based R&D was up to 1985 primarily funded by gov’t. After 1985 it was industry funded
Investments in longterm internal R&D became an effective barrier to entry
The firm would rely on itself for its critical technologies
NIH – not invented here!

4. Close Innovation
Patterns of deep, vertically integrated R&D organizations
Inside path for new ideas
No leakage out of the system
A perfect vacuum
Focus on current markets

5. The Knowledge landscape
Company A
Company B
Current
Market

6. Research AND Development
Research is about exploring new frontiers, insights, which lead to new discoveries
cannot be predicted in advance
cannot be scheduled
highly trained people
attractive salaries
freedom to publish their results
specialized skills
Development takes the output of R as an input to its own processes
lead by engineers, trained to solve problems within time and budget
takes R’s idea and makes products to be sold
predictable
minimize risks
part of a business unit

7. Research AND Development
Research organization
Cost centre
Discovery: Why?
Hard to predict
Hard to schedule
Create possibilities
Identify problems and how to think about them
Development organizations
Profit centres
Execution: How?
Hit targets
Hit schedules
Minimize risk
Solve problems within constraints

8. Erosion of CI Increasing availability and mobility of workers
Venture capital market
External options for ideas sitting on the shelf
The increasing capabilities of external suppliers
external start-up and new markets
Advances in science and knowledge

9. Open Innovation Primary driver: Diffusion of knowledge
How to access useful knowledge
Diffusion of knowledge
patents are an OUTCOME of a knowledge process
R&D by size of enterprise
rise of university graduates
NIH – need not reinvent the wheel – rely on external resources and be effective!
Manage your Intellectual Property

10. Open Innovation Company A Company B New market Current Market

11. A new Business Model?? Business Model Function
Articulate the value proposition
Identify a market segment
Define the firm’s value chain
Specify the revenue generating mechanisms
cost structures and target margins
Describe the position within the value network
linking suppliers and customers and including complementary firms and competitors
Formulate the competitive strategy - sustainable

12. Business Model Business Model Economic Technical Target market Outputs
Value proposition
Value chain
How paid
Costs/margin
Value network
Competitive strategy
Economic
Outputs
Value
Price
Profit
Other mea-
sures
Technical
Inputs
Feasibility
Performance
Other mea-
sures
The Technical
Domain
The Social
Domain

13. Crafting a strategic map of innovations
Where have the important ideas in your company and your industry come from in the past five years? How have they fitted with your business model?
What role have start-up firms played? Have they been able to access the market? Where have their ideas come from? What is their business model?
What role do VCs and other private equity investors play in your industry? Are they active investors? What explains their bets that they are making? How do these bets compare?
What role do universities play in contributing knowledge and understanding to your company and your industry? In what areas of importance to your comapny are the key departments in those universities working? Who are the top professors in those areas?

14. Advancing your current business
Build your innovation roadmap
fill in the gaps in your current business
find blind spots in your current business
review external technologies with external experts

15. Filling the Gaps with external technologies
Current
Market
and Business
Model
Development
Research
Internal R&D
project
External R&D
Venture
investing
Technology
in-licensing
acquisition

16. Growing new businesses
Development
Research
Other Firms’ market and BM
New Market and BM for your Firm
Current
Market
and Business
Model
Research
projects

17. New strategic capital from value creation
Company and Product- Individual and Experience-centric
centric value creation Co-creation of Value
View of value Value is associated with a Value is associated with experience;
company’s offerings. The Prod&serv. facilitate experiences. The
competitive space is based competitive space is based on experiences
products/services
Role of Company To define and create value To engage the consumer in defining and
for the consumer co-creating unique value.
Role of consumer Passive pocket of demand Consumer as active player in seeking,
for firm-defined offerings creating, and extracting value
View of value Value is created by the firm; The consumer co-creates value with the
creation consumers have a choice - firm and other consumers
the variety offered by the firm

18. Sources of competence Stage 1 Pre-1990 Stage 2 1990 onward Stage 3
Business unit
as the source
of knowledge
Corporation as
a portfolio of
competence
Supplier base
and partners as a
source of compe-
tence
Consumers as a
source of
competence
Stage 1
Pre-1990
Stage 2
1990 onward
Stage 3
1995 onward
Stage 4
2000 onward

19. The Locus of Core Competencies
The Firm Family/Network of Enhanced Network
Companies
Unit of The company The extended enterprise The whole system – the comapny suppliers
Analysis and value network – the company, partners AND consumers
suppliers and partners
Resource What is available Access to the competence and Access to conumser competence and invest-
Base in the firm investment capacity of Co’s in ment of time and effort from consumers +
the network the resource base
Basis for Internal Co-specific Privileged access to companies Infrastructure for active, ongoing with diverse
Access to processes within the network consumers
Compe-
tences
Value Ad- Nurture and build Manage collaborative partner- Harness consumer competence, co-create
ded by personalized experiences, co-shape managers customer experience
Value creat. Autonomous Collaboration Co-creation
Source of BU autonomy vs. Partner is Collaborator and competi- Consumer is collaborator and competitor for
Man.tension core comeptencies tor for value value

20. Experience Economy Competitive Position Pricing Customer Needs
Differentiated
Competitive
Position
Undifferentiated
Pricing
Market
Premium
Customer
Needs
Relevant to
Irrelevant to
Extract
Commodities
Make
Goods
Deliver
Services
Stage
Experiences

21. The new competitive space
Supply
chains
Product
Innovation
Networks
System
Integration
Solutions
Experience
Personalization
Enahnced
network
of compe-
tence +
consumers
Extended
enterprise
The firm and
its supply
base
Product space Solution Experience
space space