Technology and Innovation Management Introduction PDF

Technische Universität München Technology and Innovation Management: Introduction Module 1: Introduction Lecture in Munich Prof. Dr. Joachim Henkel Dr. Theo Schöller-Stiftungslehrstuhl für Technologie- und Innovationsmanagement Lecture in Straubing Pr...

Technische Universität München Technology and Innovation Management: Introduction Module 1: Introduction Lecture in Munich Prof. Dr. Joachim Henkel Dr. Theo Schöller-Stiftungslehrstuhl für Technologie- und Innovationsmanagement Lecture in Straubing Prof. Dr. Claudia Doblinger Head of Professorship for Innovation and Technology Management at TUM Campus Straubing Figure: CC license Today, we will… ▪ … briefly skim the general outline of this class ▪ … look at definitions of innovation to see why it is both a process and the outcome of a process ▪ … illustrate why innovation (management) matters, and why it is so difficult TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 2 Innovation: Progress and Profits Source: Hellerhoff (2017), https://commons.wikimedia.org/wiki/File:Foramen_in_der_Falx_86jw_-_MRT_T1KM_und_T2.png TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 3 Three big questions for this lecture series ▪ Where does innovation come from? ? – What defines “innovation”? – Who innovates and why? ▪ Why, and what for should the firm innovate? – Innovation as a part of firm strategy? – How can a firm secure profits from an innovation? ▪ How do you implement innovation? – How do you design an innovation process? – Which tools and techniques to use? – How do you manage the process, people, interfaces, etc.? TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 4  WHAT IS INNOVATION – AND WHY DOES IT MATTER!? TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 5 Views in Europe “Innovation is, for modern economies, the main driver for growth. The OECD estimates that for high-income countries investments in innovation – intangible assets like skills, R&D, software – account for 60-70% of labour productivity growth. Innovation is also good for jobs: the stronger the innovation performance of EU Member States, the higher their employment rates.” European Commission – State of the Innovation Union, 2015 Similar views expressed by national governments around the globe Source: European Commission TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 6 Innovation: Creative Destruction “The competition from the new commodity, the new technology, the new source of supply, the new type of organization… competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives.” J. A. Schumpeter (1942) (b. 1883 – d. 1950) TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 7 Innovation: Competitiveness & Growth ▪ “Virtually all of the economic growth that has occurred since the eighteenth century is ultimately attributable to innovation.” ▪ “…under capitalism, innovative activity … becomes mandatory, a life-and-death matter for the firm and innovation has replaced price as the name of the game in a number of important industries.” William Baumol (2002) [b. 1922 – d. 2017] TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 8  TUM School of Management Technische Universität München Why are innovation and capitalism linked so tightly? 9 TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 c. 1900 TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 11  “The prices and weight of all goods are clearly marked. You just take what you want.” TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 12  c. 1950 TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 13  c. 2000 TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 14  c. 2019 TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 15  TUM School of Management Technische Universität München What do these changes mean for people’s lives? TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 16 Innovation can be hugely profitable… Prozac generic on the market (8/2001) Anti-depressant, by Eli Lilly & Company Marketed since spring of 1988 One of the biggest-selling drugs ever 1988 – 2001: US$21 billion turnover Contributed about a third to the total turnover of the company. Source: http://www.chemicalnewsflash.de/en/news/140801/news3.htm (Download 4.2.04) TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 17 … but may also lead to financial disaster Iridium More than $6 billion in losses Of those, some $3.5 billion for Motorola Goal: phone connections anywhere at any time Technology: Success (more or less), beginning operations in late 1998 Business: complete failure - $3,000 price for an Iridium phone - international calling rates of up to $7 a minute - only 15,000 customers before going bust. Source: Chicago Tribune, 31.10.00, http://www.heavens-above.com/iridiumdemise.asp TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 18 Not every invention becomes an innovation Gas-filled umbrella Cheese-flavored cigarette Self-kicking for fun TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 19 The best innovation may be “low-tech” In 1899 John Mast (Woodstream Inc, PA) filed for a patent on his now-familiar snap-trap It has remained largely unchanged since Over 4,400 mousetrap patents at USPTO Only ~20 of these have ever made any money TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 20  TUM School of Management Technische Universität München What does it take to make money from an innovation? TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 21 Definitions ▪ “Innovations are qualitatively new products or processes that differ significantly [...] from what existed before.” (Hauschildt) ▪ “A new way of doing things that is commercialized.” (Porter) ▪ “The adoption of ideas that are new to the adopting organization” (Afuah) ▪ Innovation management is the creation of processes that aim at creating and exploiting new things. TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 22 Innovation is also a process, not only the output Innovation disco- re- develop- inven- market exploi- idea very search ment tion launch tation Invention Source: following Hauschildt, but: strongly simplified “Innovationsmanagement“, p. 19-22 order of phases may vary boundaries between phases fluid feedback-loops excluded TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 23 Most basically: a combination of solutions and needs Minoxidil PC; marketing against penicillin baldness projector LCD with computer R&D improved screen; light IBM 370 low high low high newness of solution Source: following Pearson, “Innovation Strategy“, in : Technovation, 1990, p. 186 TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 24 “99% perspiration” (Edison) Edison’s search for an electric filament Cotton Tar paper Absorbent cotton Flax Wrapping paper Rattan Silk Cardboard California redwood Hemp Tissue paper Raw jute Horsehair Parchment Corn silk Fishing line Holly wood New Zealand flax Teak Linen twine Hair from the beards of lab workers Spruce Boxwood Vulcanized rubber Cork Celluloid Grass fibers TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 25 Different types of innovation exist… ▪ Product or service innovation – to generate / increase sales – must be established on the market ▪ Process innovation – to enable / improve production of goods or services – must be established inside the organization ▪ Business model innovation – Reshuffling of value proposition, processes, products, services, … – Example: Ikea selling unassembled furniture ▪ BUT: clear delineation not always possible – product and process innovation often go hand in hand (e.g., production of new types of turbine blades using 3D printing) – distinction often difficult (e.g. in pharmaceutical industry; services) – product innovation for supplier can be a process innovation for buyer TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 26 In summary, innovation… ▪ is risky (technology, demand, competition) + can be very costly + leads to spillovers to other parties; can be copied + needs protection (not necessarily patents) + often (usually?) happens outside routine business operations + is “creative destruction”; often causes resistance + usually requires cooperation of many actors + can be “better” if it’s low-tech rather than high-tech + is a new combination of needs and technical solution = Really, really difficult! ➔ The management of innovation requires different skills, tools, incentives, and organization than other functions. TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 27 THE MACRO LEVEL Research and Development (R&D) as a source of innovation ▪ Huge economic and societal importance – 2012 R&D spending surpassed USD 1.1 trillion in OECD countries and stood at USD 330 billion in the BRIICS (Brazil, Russia, India, Indonesia, China and South Africa) – In most countries, 10% to 20% of business R&D are publicly funded ▪ Basic research between 5-20%, Applied research 15-25% and experimental development 65-85% of total R&D expenditures – Most basic research is funded by government and most experimental development is funded by industry – Amazon, Alphabet, Volkswagen, and Samsung each spent more than $15 billion in 2018 – R&D funding is concentrated in large firms – Small firms’ R&D activities are often poorly measured – informal in character TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 28  Top 20 R&D spenders Source:TIM Strategy& (2019) Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 29 R&D by sector of world top 600 R&D performers Source: Strategy& (2018), Bloomberg, Capital IQ data TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 30  Innovation is not at all easy… EXAMPLES OF PROBLEMS IN INNOVATION TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 31 Principal-Agent problems ▪ What problem is apparent in these cartoons? ▪ What are parallels in the real world? ▪ How could these problems be solved? ©: Scott Adams, Inc./Dist. by UFS, Inc. TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 32 Organizational problems: The Vasa ▪ In 1625 the Swedish king ordered new warships, among them the Vasa. ▪ The Vasa was built by an experienced shipbuilder. ▪ It was to be the mightiest warship in the world. ▪ Innovation: it was armed with 64 guns on two gun decks. Sources of pictures: http://www.modelships.de/Wasa/VASA_eng_for_sale.htm TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 33 The Vasa: Disaster strikes ▪ Vasa's maiden voyage: 1628 ▪ After a few minutes of sailing the ship began to heel over. ▪ Then the glorious and mighty warship suddenly sank! ▪ After the disaster inquiries took place. ▪ Complication: the shipbuilder had died the year before the Vasa was completed. ▪ In the end no one was condemned. It was found that the ship was well built – but badly proportioned: The two gun decks meant that the center of mass was very high, which made the ship unstable. TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 34 The Vasa: Interface problems ▪ The Vasa example is prototypical for innovation projects with “bad” endings: – When the problems start … nobody dares to voice concerns, or those that do are not listened to or even punished ▪ Why is it that nobody is held accountable (in the Vasa case, but also in general in innovation projects)? ➔ As in the 17th century, also today a lack of open communication spells disaster for uncounted innovation projects. TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 35 Wrap-up ▪ Innovation is both an output and a process ▪ Successful innovation usually combines a need and a solution – We will see later in the course that holding “need-related” and “solution- related” knowledge has important consequences ▪ Many types of innovation: product, process, service… ▪ Tremendous impact of innovation on firms and society ▪ R&D as essential driver of innovative activity, but not the only one – Usually, it’s only producing solution-related knowledge – Not all sectors have formal R&D ▪ Innovation is risky and difficult to manage – However, since so much is it stake, it must be managed – Characteristics of innovation suggest it has to be managed “differently” TIM Introduction - M1 - Prof. Henkel/Prof. Doblinger/Dr. Stiller - ST 2024 36