Carnegie Mellon Qatar ©2006 - 2011 Robert T. Monroe Course 70-446 Updated Class Schedule (Also Posted On Wiki Tuesday 3/22: Gate 3 - Making Go/No-Go Decisions.

Carnegie Mellon Qatar ©2006 - 2011 Robert T. Monroe Course 70-446

Updated Class Schedule (Also Posted On Wiki

• Tuesday 3/22: Gate 3 - Making Go/No-Go Decisions• Thursday 3/24: Product Development Process Case Study• Tuesday 3/29: Final project workshop• Thursday 3/31: Mechanics of a product launch: go-to-market• Tuesday 4/5: Timing market entry and product portfolios• Thursday 4/7: Building an innovative product organization• Tuesday 4/12: Final projet workshop• Thursday 4/14: Innovation for social good I• Tuesday 4/19: Innovation for social good II• Thursday 4/21: Final project presentations


Building and Managing anInnovative Product Organization

Robert Monroe

Innovative Product Development

April 7, 2011


By The End Of Class Today, You Should:


Final Project


Product Innovation Portfolios


Remember: Innovation Resources Are Limited

ResourcesAvailable forNew ProductDevelopment


Key Idea: Don’t Consider Innovation Projects In Isolation

• Companies should deliberately manage their mix of innovation products to reflect the organizations:– Overall business strategy

– Resource constraints

– Core competencies

– Desired risk profile (along several dimensions)

• A product innovation portfolio allows an organziation to:– Identify and track all of the innovation projects it is working on

– Understand relative investments across areas and innovation types

– Manage organizational risks

– Allocate resources effectively


Visualizing Innovation Portfolios: Aligned Spectra

Process ProductProcess Product

Incremental RadicalIncremental Radical

Competence-Enhancing Competence-DestroyingCompetence-Enhancing Competence-Destroying

Component Architectural

Evolutionary Disruptive

Lower Risk Higher Risk


Example: Apple iPod in 2001








Example: Toyota Prius (Hybrid Petrol/Electric Car)








Example: Qatar Petroleum and LNG








Example: Oxo Goodgrips Peeler








Example: Microsoft Hotmail in 2002 (vs. Exchange Server)








Visualizing Innovation Portfolios: The 2x2 MatrixD

imen

sion 1

High

Low

HighLow

Dimension 2


Innovation Portfolio Example

Radical

Incremental

ArchitecturalComponent

Size of circle

indicatessize of

investment

P1P1

P2P2

P3P3

P4P4


Innovation Portfolio Example: Toyota Prius

Radical

Incremental


Size of circle

indicatessize of

investment

HybridPlatformHybrid

Platform

P2P2

P3P3

Li+

BatteriesLi+

Batteries

Regenerating Brakes

EngineControl

Software


Innovation Portfolio Example: Toyota Prius (alt)

CompetenceDestroying

CompetenceEnhancing


Size of circle

indicatessize of

investment

HybridPlatformHybrid

Platform

P2P2

P3P3

Li+

BatteriesLi+

Batteries

Regenerating Brakes

EngineControl

Software


Discussion:

• What should the 2x2 matrices for visualizing the product portfolios look like for companies following these strategies?– First-Movers?

– Fast Followers?

– Foot-Draggers?

– Late Entrants?

• How about with the aligned spectra visualization model?


Organizing For Innovation


Remember: Organizational Resources Are Finite


A Fundamental Tension

Why are these in opposition?… and how can we manage both?


Designing Organizations For Innovation

Small LargeSmall Large

Decentralized CentralizedDecentralized Centralized

Informal (flexible) Formal (standardized)Informal (flexible) Formal (standardized)

Localized Centralized

Organic Mechanistic

Firm Size

Locus of Control

Work norms

Globalization strategy

StructuralEvolution


Achieving Innovation And Efficiency

• Some common approaches– Vary norms for different groups within the organization

– “Skunk works”

– Spin off subsidiaries

– Vary incentives by project and organizational roles

• These are all trickier to do in practice than they sound– Why?


Encouraging Innovation: Google

“One of the things that we’ve tried very hard to avoid at Google is the sort of divisional structure that prevents collaboration across units. It’s difficult. So I understand why people want to build business units, and have their presidents. But by doing that you cut down the informal ties that, in an open culture, drive so much collaboration. If people in the organization understand the values of the company, they should be able to self organize to work on the most interesting problems”– Eric Schmidt, Google CEO [Sch10] page 212

• Google technical personnel are required to spend 20% of their time on innovative projects of their own choosing

• Embracing ‘the perpetual beta’


Encouraging Innovation: Apple

“Q: How do you systematize innovation? A: The system is that there is no system. That doesn't mean we don't have process.

Apple is a very disciplined company, and we have great processes. But that's not what it's about. Process makes you more efficient.

But innovation comes from people meeting up in the hallways or calling each other at 10:30 at night with a new idea, or because they realized something that shoots holes in how we've been thinking about a problem. It's ad hoc meetings of six people called by someone who thinks he has figured out the coolest new thing ever and who wants to know what other people think of his idea.

And it comes from saying no to 1,000 things to make sure we don't get on the wrong track or try to do too much. We're always thinking about new markets we could enter, but it's only by saying no that you can concentrate on the things that are really important.”

– Steve Jobs, Apple CEO [BW12_4]

• Intense focus on product excellence – nothing goes out until it is ‘insanely great’• Very careful and strategic selection of a small number of products

– Pours massive resources and energy into them• Apple product teams are often discouraged from mingling to insure secrecy


Encouraging Innovation: Google vs. Apple

• Which of these approaches is best? Why?

• Which organization would you rather work at?– Does that matter? Why or why not?

• What can other organizations learn from these two?– What are some lessons that other organizations should

probably not take away from these case studies?


Discussion Questions

• For what types of innovation activities are large firms likely to outperform small firms?– And the other way around?

• Can you think of (other) examples of firms that are both operationally excellent – efficiency and productivity, and also very innovative?– Are those firms the exception or the rule?– Why do you think that is?

• Are innovation activities necessarily better done at small, organic, informal, localized firms, or can firms at the other end of these spectrums be successful innovators also?


Wrap Up


For Tuesday 4/12


References

[CE09] Robert G. Cooper and Scott Edgett, Successful Product Innovation, Product Development Institute, 2009, ISBN: 978-1-4392-4918-5.

[Chr97] Christensen, Clayton M., The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail. Harvard Business Press, 1997, ISBN 9780875845852

[Sch10] Melissa A. Schilling, Strategic Management of Technological Innovation, 3rd Edition, McGraw Hill, 2010, ISBN: 978-0-07-338156-5 Chapter 13

[BW12_04] "The Seeds of Apple's Innovation", Bloomberg BusinessWeek, October 12, 2004.

http://www.businessweek.com/bwdaily/dnflash/oct2004/nf20041012_4018_db083.htm

Carnegie Mellon Qatar ©2006 - 2011 Robert T. Monroe Course 70-446 Updated Class Schedule (Also Posted On Wiki Tuesday 3/22: Gate 3 - Making Go/No-Go Decisions.

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