Innovation is a beautiful thing. It is a force with both aesthetic and pragmatic appeal: It unleashes our creative spirit, opening our minds to hitherto undreamed of possibilities, while simultaneously accelerating economic growth and providing advances in such crucial human endeavors as medicine, agriculture, and education. For industrial organizations, the primary engines of innovation in the Western world, innovation provides both exceptional opportunities and steep challenges. While innovation is a powerful means of competitive differentiation, enabling firms to penetrate new markets and achieve higher margins, it is also a competitive race that must be run with speed, skill, and precision. It is not enough for a firm to be innovative—to be successful it must innovate better than its competitors. As scholars and managers have raced to better understand innovation, a wide range of work on the topic has emerged and flourished in disciplines such as strategic management, organization theory, economics, marketing, engineering, and sociology.
This work has generated many insights about how innovation affects the competitive dynamics of markets, how firms can strategically manage innovation, and how firms can implement their innovation strategies to maximize their likelihood of success. A great benefit of the dispersion of this literature across such diverse domains of study is that many innovation topics have been examined from different angles. However, this diversity also can pose integration challenges to both instructors and students.
This book seeks to integrate this wide body of work into a single coherent strategic framework, attempting to provide coverage that is rigorous, inclusive, and accessible. Organization of the Book
The subject of innovation management is approached here as a strategic process. The outline of the book is designed to mirror the strategic management process used in most strategy textbooks, progressing from assessing the competitive dynamics of the situation, to strategy formulation, and then to strategy implementation. The first part of the book covers the foundations and implications of the dynamics of innovation, helping managers and future managers better interpret their technological environments and identify meaningful trends. The second part of the book begins the process of crafting the firm’s strategic direction and formulating its innovation strategy, including project selection, collaboration strategies, and strategies for protecting the firm’s property rights. The third part of the book covers the process of implementing innovation, including the implications of organization structure on innovation, the management of new product development processes, the construction and management of new product development teams, and crafting the firm’s deployment strategy.
While the book emphasizes practical applications and examples, it also provides systematic coverage of the existing research and footnotes to guide further reading.
Complete Coverage for Both Business and Engineering Students
This book is designed to be a primary text for courses in the strategic management of innovation and new product development. Such courses are frequently taught in both business and engineering programs; thus, this book has been written with the needs of business and engineering students in mind. For example, Chapter Six (Defining the Organization’s Strategic Direction) provides basic strategic analysis tools with which business students may already be familiar, but which may be unfamiliar to engineering students. Similarly, some of the material in Chapter Eleven (Managing the New Product Development Process) on computer-aided design or quality function deployment may be review material for information system students or engineering students, while being new to management students.
Though the chapters are designed to have an intuitive order to them, they are also designed to be self-standing so instructors can pick and choose from them “buffet style” if they prefer.
New for the Fifth Edition
This fifth edition of the text has been comprehensively revised to ensure that the frameworks and tools are rigorous and comprehensive, the examples are fresh and exciting, and the figures and cases represent the most current information available.
Some changes of particular note include:
Six New Short Cases
Tesla Motors. The new opening case for Chapter Three is about Tesla Motors. In 2015, Tesla Motors was a $3.2 billion company on track to set history. It had cre- ated two cars that most people agreed were remarkable. Consumer reports had rated Tesla’s Model S the best car it had ever reviewed. Though it was not yet posting profits (see Exhibits 1 and 2), sales were growing rapidly and analysts were hopeful that profits would soon follow. It had repaid its government loans ahead of the major auto conglomerates. Most importantly, it looked like it might survive. Perhaps even thrive.
This was astonishing as there had been no other successful auto manufacturing start
up in the United States since the 1920s. However, getting the general public to adopt
fully electric vehicles still required surmounting several major hurdles. A Battle Emerging in Mobile Payments. Chapter Four now opens with a case describing the mobile payment systems that are emerging and competing around the world.
In the developing world, mobile payment systems promise to help bring the unbanked and underbanked access to fast and efficient funds transfer and better opportunities for saving. In the developed world, competing mobile payment standards were battling to achieve dominance, and threatening to obviate the role of the major credit card companies—putting billions of dollars of transaction fees at stake. Reinventing Hotels: citizen M. Chapter Six opens with a case about how Michael Levie, Rattan Chadha, and Robin Chadha set out to create a fundamentally different kind of hotel. Levie and the Chadhas dramatically reduced or eliminated key features typically assumed to be standard at upscale hotels such as large rooms, in-house restaurants, and a reception desk, while increasing the use of technology at the hotel and maintaining a modern and fresh aesthetic. This enabled them to create a stylish hotel that was significantly less expensive than typical upscale hotels. This case pairs very well with the new Research Brief in Chapter Six on Blue Ocean Strategy.
The Mahindra Shaan: Gambling on a Radical Innovation. Chapter Seven opens with a case about the decision of Mahindra & Mahindra to make a very unusual tractor. Mahindra & Mahindra had long made traditional tractors and focused on incremental innovation. However, in the late 1990s, Mahindra’s management decided to try to find the way to meet the needs of smaller farmers, who could not afford a regular tractor. They ended up creating the Shaan, a tractor/transporter hybrid that could serve for farming, personal transportation, and for transporting goods (a job small farmers performed in the off season to earn additional income). Developing the tractor was a major break with their traditional innovation choices, and this case details how they were able to get this unusual project approved, and nurture it through the new product development process. Ending HIV? Sangamo Biosciences and Gene Editing. Chapter Eight opens with a case ripped straight from the headlines—the development of ways to alter a living person’s genes to address critical ailments. Sangamo Biosciences has developed a way to edit a person’s genes with Zinc Finger Nucleases (ZFNs). This innovation has the potential to eliminate monogenic diseases such as hemophilia or Huntington’s disease. Even more intriguingly, Sangamo was exploring a way to use ZFNs to cure HIV by giving people a mutation that renders people naturally immune to the disease.
In the case, Sangamo must decide how to address this huge—but incredibly risky opportunity. It already has partnerships with major pharma companies for some of its other projects, but it is unclear whether the pharma companies would want to participate in the HIV project, and whether Sangamo would want to go this route. Managing Innovation Teams at Disney. Chapter Twelve now opens with a case about how Disney creates and manages the teams that develop animated films. Disney, and Pixar (from whom it acquired several of its current innovation practices) are world renown for their ability to develop magically innovative animated films. This opening case highlights the roles of having a small team size, being collocated, and instilling a culture of brutally honest peer feedback.
Cases, Data, and Examples from Around the World
Careful attention has been paid to ensure that the text is global in its scope. The opening cases feature companies from India, Israel, Japan, The Netherlands, Kenya, and the United States, and many examples from other countries are embedded in the chapters themselves. Wherever possible, statistics used in the text are based on worldwide data. More Comprehensive Coverage and Focus on Current Innovation Trends
In response to reviewer suggestions, the new edition now provides more extensive discussions of topics such as crowdsourcing and customer co-creation, patenting strategies, patent trolls, Blue-Ocean Strategy, and more. The suggested readings for each chapter have also been updated to identify some of the more recent publications that have gained widespread attention in the topic area of each chapter. Despite these additions, great effort has also been put into ensuring the book remains concise feature that has proven popular with both instructors and students.
The teaching package for Strategic Management of Technological Innovation is available online from the book’s Online Learning Center at www.mhhe.com/schilling5e and includes:
∙ An instructor’s manual with suggested class outlines, responses to discussion questions, and more.
∙ Complete PowerPoint slides with lecture outlines and all major figures from the text. The slides can also be modified by the instructor to customize them to the instructor’s needs.
∙ A testbank with true/false, multiple choice, and short answer/short essay questions.
∙ A suggested list of cases to pair with chapters from the text.
1 Introduction 1
Industry Dynamics of Technological Innovation 13
2 Sources of Innovation 15
3 Types and Patterns of Innovation 43
4 Standards Battles and Design Dominance 67
5 Timing of Entry 89
Formulating Technological Innovation Strategy 107
6 Defining the Organization’s Strategic Direction 109
7 Choosing Innovation Projects 129
8 Collaboration Strategies 153
9 Protecting Innovation 183
Implementing Technological Innovation Strategy 209
10 Organizing for Innovation 211
11 Managing the New Product Development Process 235
12 Managing New Product Development Teams 265
13 Crafting a Deployment Strategy 283