Simulation Innovation III: Managing Intellectual Capital to Drive Innovation Roger Smith SPARTA Inc. rsmith@sparta.com 407.380.0076 © Copyright 2005,

Simulation Innovation III: Managing Intellectual Capital to Drive Innovation

Roger SmithSPARTA Inc.

rsmith@sparta.com407.380.0076

© Copyright 2005, Roger Smith

Simulation Innovation

1947 1985 2005

Innovation & New Technology Displace Established Technology & Practitioners

Innovation

Disruptive Innovation 3-Phase Innovation Intellectual Capital

Disruptive Innovation

Time

Pro

du

ct P

erfo

rman

ce

Progre

ss due to

sustaining technologies

Performance demanded at the low end of the market

Performance demanded at the high end of the market

Christensen’s Disruptive Innovation

Progre

ss due to

disruptiv

e technologies

Market disruption opportunity

Christensen, C. (1997). The Innovator’s Dilemma. Harvard Business Press.

Squeezed OutNicheUpper Half

Share Low EndOwn the Market

Time

Pro

du

ct P

erfo

rman

ce

Progress = Waves of Disruption

High-end Customer Demand

Low-end Customer Demand

Defense S

imulatio

n

D 3 = W

ireless

Games

SIMNET

CCTT

OOSForterraAW-VTT

Google

Closer Than You Think!

D 1 = P

C Games

D 2 = W

eb Games

America’s Army

SpearheadMS Flight

Smith, R. (2005). Simulation Innovation: Disruptive Effects of Innovation. VisTech Conference 2005.

Disruptive Forces in Simulation

Customer Perspective Societal Immersion in Games Military Acceptance of Games

Computer Technology Graphics Cards Game Companies & Market

Physical Devices Theme Park Ride Technology Electric vs. Hydraulic Motion

Actuators

Squeezed OutNicheUpper Half

Share Low EndOwn the Market

Simulation:Weather, Markets, Medical

Corporate Training, Education

Time

Growth StrategyP

rod

uct

Per

form

ance

Defense S

imulatio

n

D 1 = P

C Games

D 2 = C

onsole G

ames

D 3 = W

eb Servi

ces

Move Up: Change Customers

Move Vertical:

Change Technology

Move Down: Change Industries

Defense Training& Analysis

Recommendations

Disruptive innovations move through markets

Move Vertical to new technologies Move Up to new customers Move Down to new industries

3-Phase Innovation in Industry

Fluid Phase

Explosion of different designs, Era of radical product innovation

TransitionalPhase

Standardization of design, Emergence of process innovation

Specific Phase

Contraction of competitors, Era of incremental innovation

Rate of Major Innovation

time

Utterback’s 3-Phases of Innovation

Product Innovation

Process Innovation

Lowest CostDominant Design

Utterback, J. (1996). Mastering the Dynamics of Innovation. Harvard Business School Press.

Fluid Phase

Explosion of different designs, Era of radical product innovation

TransitionalPhase

Standardization of design, Emergence of process innovation

Specific Phase

Contraction of competitors, Era of incremental innovation

Product Innovation

Process Innovation

Rate of Major Innovation

time

Simulation Innovation Examples

Dominant DesignSim: LVC

Games: Genres (FPS, RTS, etc)

Military Simulation

SeriousGames

GameWeb

GameWireless

Fluid Phase TransitionalPhase

Specific Phase

Product Innovation

Rate of Major Innovation

time

Unsuccessful Path: Stay The Course

Successful Path: Jump Industries

Computer Simulation

Serious Games

Serious Web Games

Expertise

Expertise

Expertise

Fluid: R&D, New Products

Expertise

Expertise

Expertise

Transitional: Mass Production

Expertise

Expertise

Expertise

Specific: Services

Wireless Games

Fluid Phase

Product Innovation

Process Innovation

Rate of Major Innovation

time

TransitionalPhase

Specific Phase

(1) Open with rapid and prolific innovation

(3) Push standards and build community around yours

(4) Focus on low-cost products and services

Successful Path: Skate the Top

(2) Create and own the dominant design

DominantDesign

LowestCost

Every Organization Will Not Survive

85%Stay the Course

10%Jump Industries

5%Skate the Top

Recommendations

Flexible Change the company to follow the market Fluid >> Transitional >> Specific

Specialized Jump across domains to grow specific

expertise Retain your specialized expertise

Immovable Stay the Course Until Extinction Most companies follow this path

Applying Intellectual Capital

2 Types of Innovation

Incremental “build on and reinforce the applicability

of existing knowledge” “improving and exploiting an existing

technological trajectory” Radical (a.k.a. Disruptive)

“destroy the value of an existing knowledge base”

“disrupt an existing technological trajectory”

Leifer, R. et al. (2000). Radical Innovation: How mature companies can outsmart upstarts. Harvard Business School Press.

Incremental Innovation – The Pen

Radical Innovation

“I will now claim -- until dispossessed -- that I was the first person in the world to apply the typewriter to literature.”

-- Mark Twain, 1875

“There is no reason for any individual to have a computer in his home.”

-- Ken Olson, 1977

“Either write something worth reading or do something worth writing.”

-- Benjamin Franklin, 1706

Incremental & Radical Innovation

Radical Invention

Incremental Innovation Radical Innovation

Radical and Incremental Waves

Time

Inn

ova

tio

n &

Ben

efit

s

Leifer, R. et al. (2000). Radical Innovation: How mature companies can outsmart upstarts. Harvard Business School Press.

Radical

Incremental

3 Types of Intellectual Capital

Human Social Organizational

Innovation from Intellectual Capital

Which flavors of IC promote radical innovation vs. incremental innovation

Radical Innovation

Incremental Innovation

Subramaniam, M. & Youndt, M. (June 2005). The Influence of intellectual capital on the types of innovative capabilities. Academy of Management Journal, 48(3), 450-463.

Organizational Capital = Incremental Innovation

Organizational Capital

Incremental Innovation

Social Capital = Incremental Innovation

Social Capital

Incremental Innovation

Human Capital = Radical Innovation

Human Capital

Radical Innovation

Human + Social = Radical Innovation

Human Capital

Social Capital

Radical Innovation

Effective investments in IC

Human Resources Management Captures & Nurtures Human Capital

Information Technology Fosters Social Capital

Research & Development Generates Organizational Capital Motivates Human and Social Capital

IC and Innovation a System View

Human Capital

Social Capital

Organizational Capital

Radical Innovation

Incremental Innovation

+

-+

+ ++

No Effect

Human Resource Mgt

IT R&D

IC Recommendations

Investments in Social Capital are essential for both Incremental and Radical Innovation

Human Capital must be supplemented with Social Capital to have a positive impact on Radical Innovation

Organizational Capital is Strongly Correlated with Incremental innovation

References Christensen, C. (1997). The Innovator’s Dilemma: When new

technologies cause great firms to fail. Harvard Business School Press.

Christensen, C. & Raynor, M. (2003). The Innovator’s Solution: Creating and sustaining successful growth. Harvard Business School Press.

Utterback, J. (1996). Mastering the Dynamics of Innovation. Harvard Business School Press.

Subramaniam, M. & Youndt, M. (June 2005). The Influence of intellectual capital on the types of innovative capabilities. Academy of Management Journal, 48(3), 450-463.

Leifer, R. et al. (2000). Radical Innovation: How mature companies can outsmart upstarts. Harvard Business School Press.