1. Management of Technology (OM476) Collaborative Strategies April 5, 2006 S. Fisher

2. Agenda  Why collaboration?  Various forms of collaboration to enhance innovation  Current examples

3. Criteria for Determining Best Collaboration Strategy  Speed  Cost  Control  Potential for Leveraging existing competencies Developing new competencies Accessing other firms’ competencies  See Figure 8.5 on page 155

4. Strategic Alliances  Allows a firm to gain access to valuable resources of another firm Share risk Enhance flexibility Knowledge transfer  Capability complementation vs. transfer

5. Joint Ventures  Formal arrangement  Equity investment from both sides  E2-home Joint venture between Electrolux and Ericsson to develop smart appliances Electrolux wanted Ericsson’s expertise in electronics and mobile communications

6. 8 th Continent  Joint venture between General Mills and DuPont  Produces soy milk  Motivation for each company? Source: Tischler, L. (May 2002). Deep pockets, open mind. Fast Company. P. 32.

7. Research Consortia  Trade associations, university-based centers, private research firms Center for Automotive Research (www.cargroup.org)www.cargroup.org Center for Research on Polymers (http://www.pse.umass.edu/cumirp/)http://www.pse.umass.edu/cumirp/ American Gas Association (www.aga.org)  Share expenses on research projects that will benefit multiple companies

8. Entering into Alliances for Funding  Venture Capital Firms that invest in projects with rapid growth potential Often comes with equity stake in the new firm  Angel investors Wealthy individuals Usually smaller funding than VCs  Government grants and loans

9. Licensing  Reaping benefits from ownership of the technology  More transaction, less relationship- oriented  Passive vs. aggressive multiple licensing Passive – Performance Indicator Aggressive - JVC

10. Outsourcing Innovation  Hottest new cell phone designers HTC Flextronics Cellon  Outsourcing of manufacturing has led to outsourcing of design  Efforts to cut costs, design time  Similar to what we saw in the RLK Media case Key question – what is core technology and what has become a commodity?

11. palmOne Collaboration  Outsources mechanical and electrical design to HTC in Taiwan  Still has in-house designers for look and feel, display, core chips, specification of performance requirements  Outcomes Reduced development times by months Reduced defects by 50% Increased gross margins approximately 20% Source: Engardio and Einhorn (March 21, 2005). Outsourcing innovation. Business Week, 82-94.

12. Risks of outsourcing innovation  Fostering new competitors  Losing in-house R&D capability Becoming “hollow”  Negative reactions from customers and investors Source: Engardio and Einhorn (March 21, 2005). Outsourcing innovation. Business Week, 82-94.

13. Procter and Gamble’s Connect and Develop Strategy  Acquiring innovations from outside the firm 35% of new products 45% of projects in the NPD portfolio Goal is 50%  Examples Printing process for Pringles ® Prints Mr. Clean Magic Eraser Source: Huston and Sakkab (March 2006). Connect and develop: Inside Procter and Gamble’s new model for innovation. Harvard Business Review, 58-66.

14. Connecting Tools  NineSigma Company identifies problem to solve Submits problem to network of innovators Anyone can submit a proposal back to the company  InnoCentive Founded by Eli Lilly 75,000 contract scientists who can solve very specific problems  YourEncore Network of retired scientists and engineers Short term contract assignments

15. Caveats to Connect and Develop  Need cultural commitment, buy-in for the approach Consistent with need to speed up NPD Was initially inconsistent with P&G’s resistance to ideas not invented internally  “Ready to go” ideas usually aren’t; they still need some further development  Easy to underestimate the R&D resources needed for connect and develop Source: Huston and Sakkab (March 2006). Connect and develop: Inside Procter and Gamble’s new model for innovation. Harvard Business Review, 58-66.

16. For next class  Monday, April 10: Technology transfer Compilation of many of the concepts we have been discussing In-class exercise  Wed., April 12: Our last formal case presentation