Technology & Innovation...

100 Slides

The
The Early Mainstream
Market Market
The
Chasm
Te Pr
c Vis Co Sk
En hnol io ag
ma n ser ep
thu og na ti cs
sia y rie tis va
sts s ts tiv
es

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 Key Words...
Entrepreneurship Venture Models Driving Forces
Venture Capital Growth Phases Technology
Life Cycle The Chasm Model The Transilience
Map Diffusion Curve Technology Strategies
Knowledge Creation Process Innovation
Management First Mover Advantage Technology
Acquisition Core Technologies Technology
Portfolio Patent Management Intellectual
Property Innovation Types Kano Model R&D
New Technologies Risk Bubble Diagram
Technology Evolution E-Business Models Growth
Strategies Start-up Private Equity Financing
Life Cycle Product Innovation Process
 Who is the Entrepreneur?

High

Inventor Entrepreneur

CREATIVITY
AND
INNOVATION
Manager,
Promoter
Administrator

Low High

GENERAL MANAGEMENT SKILLS, BUSINESS

KNOW-HOW, AND NETWORKS
 Fit of Entrepreneur and Venture Capital

High Low

Potential for singles Potential for triples

or doubles, but many and home runs
strike out
ATTRACTIVENESS
OF VENTURE
OPPORTUNITY

Not hat and no cattle Big hat, no cattle

Low High

ENTREPRENEURS FIT AND BALANCE

Central Issues in Entrepreneurial Finance

Shareholders

Value Creation Customers

Employees

Allocating risks
and returns
Slicing the value pie
Cash-Risk-Time

Debt: Take control

Covering risk
Equity: Staged
commitments
 Dominant Venture Modes

Seed/Startup High Growth Maturity

Most Most

Higher potential, Higher potential,

growth-minded ventures growth-minded ventures

ENTREPRENEURIAL CHANGE AND

UNCERTAINTY

Lifestyle, Mom and Mature, bureaucratic

Pop ventures dinosaurs

Least Least
Least Most

ADMINISTRATIVE

Entrepreneurial domain
Administrative domain
 Principle Driving Forces

Seed/Startup High Growth Maturity

Most Driven by: Driven by: Most
Collaboration within the firm Rejuvenators and innovators
Opportunity focus Opportunity focus
Resource requirements expanding Resource ownership

Organization: Informal; fluid Organization: Formal

ENTREPRENEURIAL CHANGE AND
Driven by: Driven by: UNCERTAINTY
Few owners Administration/trustees
A specific product Product focus
Burdensome resource requirements Resource ownership

Least Organization: None or too rigid Organization: Formal Least

Least Most

ADMINISTRATIVE

Entrepreneurial domain
Administrative domain
 Financial Strategy Framework

Opportunity

Financial strategy Sources and deal Business strategy

structure
Degrees of strategic freedom: Marketing
Dept Operations
Time to OOC Equity Finance
Time to close Other Value creation
Future alternatives
Risk/Reward
Personal concerns
Financial
requirements
Driven by:

Burn rate
Operating needs
Working capital
Asset requirements
and sales
The Five Tasks of Strategic Management
Fund conception
Target investment opportunities

Raise capital for investment

Generate deal flow

New and young companies with
high potential

Fund conception
Target investment opportunities

Fund conception
Target investment opportunities

Add value via:

Strategy development
Acitve board membership
Attract outside expertise
Typically Attract later round investors
5 to 10 year Attract other stakeholders, management
window Provide contacts, access to info, people, institutions

Craft and execute

exit strategies
Sale Liquidation
IPO Alliances
Merger
 Flows of Venture Capital

Investors Venture Capital Firms Portfolio Companies

Provide capital Identity and screen opportunities Use capital

Transact and close deals
Monitor and add value
Harvest
Raise additional funds
MONEY MONEY

Limited partners Opportunity

2-3% ANNUAL FEE Creation
Pension funds
recognition and
Individuals
General partners execution
Corporations
Insurance companies 15-25% of capital gains
Foreign Endowments Entrepreneurs
IPOs/Mergers/Alliances

Return of principal Value-creation

plus 75-85% of and harvest
EQUITY
capital gain
 Growth Phases

Phase 1 Phase 2 Phase 3 Phase 4 Phase 5

Large
5. Crisis of ?

4. Crisis of
RED TAPE 5. Growth through
COLLABORATION
3. Crisis of
CONTROL 4. Growth through
SIZE OF
COORDINATION
ORGANIZATION 2. Crisis of
AUTONOMY
3. Growth through
1. Crisis of DELEGATION
LEADERSHIP
2. Growth through
Evolution stages
DIRECTION
Revolution stages
Small 1. Growth through
CREATVITY
Young Mature
AGE OF ORGANIZATION
 A Way to Think about Potential

Not Obvious

Black Holes Home Runs

CONCEPT

Filling Stations Squirrel Cages

Obvious

Small Large
GROWTH / ULTIMATE FINANCIAL POTENTIAL
Four Archetypal Structural Approaches to
Coordination

High

Laissez-faire Professional
Management Management

DELEGATION OF
RESPONSIBILITY

Entrepreneurial Bureaucratic
Management Management

Low
Low High

USE OF FORMAL CONTROL MECHANISMS

The Technology Adoption Life Cycle

Innovators Technology Enthusiasts

Early Adopters Visionaries
Early Majority Pragmatists
Late Majority Conservatives
Laggards Skeptics
 The Chasm

The
The Early Mainstream
Market Market
The
Chasm
Te Vis Pr
c Co Sk
En hno ion ag
ma ns e ep
thu log ari rv a tic
s ia y es ti s ts tiv s
sts e s
 Amar Bidh Framework

Regular
Start-ups

Promising Revolutionary
High

VC Backed
UNCERTAINTY Startups

Marginal Corporate

Low Regular
Corporation
Low High
SCALE

Uncertainty: unqualifiable and immeasurable risk

Scale: expected total profit from opportunity
 On Innovation
Why do firms innovate?

Novelty Appropriability
Product
(patent, secrecy...)
innovation Escaping from
perfect competition

Consumers accept to
pay a higher price

Price > marginal cost

Monopoly rent

Economic
value Rent X market share (trade off)

Monopoly rent

Price > marginal cost

Costs are decreasing

Escaping from
perfect competition
Process
innovation Novelty Appropriability
(patent, secrecy...)
 Framework for Investigating the Impact of
Innovation on Growth and Employment
TECHNOLOGICAL CHANGE
Industry-specific opportunities for innovation in firms

Behavior of firms: NON INNOVATING FIRMS INNOVATING FIRMS INNOVATING

FIRMS MAINLY IN PROCESSES MAINLY IN PRODUCTS

Innovative strategy High R&D and innov. exp.

No R&D and innov. exp. Some R&D and innov. exp.
of firms: mainly for new products
mainly for investment
Growing productivity
Stable productivity Growing productivity
through higher quality
through restructuring
Expans. of market share
Cost savings, Defence of market shares
Search for new markets
low quality through cost reductions
and monopoly profits

Competitive strategy: Passive Active Technological

price competitiveness price competitiveness competitiveness
External conditions
Stagnant Growing Stagnant Growing Stagnant Growing
of markets and demand:
Stable or slow growing Fast growing
Outcomes for the firm: Losing out to Falling or stable market shares market shares
competitors market shares (at the expense Developm. of
of competitors) new markets
Stable
Outcomes for the industry: Strong fall of Slow growth of Strong growth
value added,
value added, stable of value added,
value added falling employm.
employm. with growth some employm.
and employm. with growth
of productivity growth
of productivity
Types of Lock-In and Types of Switching
Costs
Type of lock-in Switching costs
Contractual commitments Compensatory or liquidated damages

Replacement or equipment; tends to

Durable purchases decline as the durable ages

Learning a new system, both direct costs

Brand-specific training and lost productivity; tends to decline as
people learn to learn

Converting data to new format; tends to

Information and data bases rise over time as collection grows

Funding of new supplier; may rise over

Specialized suppliers time if capabilities are hard to find

Combined buyer and seller search costs;

Search costs includes learning about quality of
alternatives

Any lost benefits from incumbent

Loyalty programs supplier, plus need to rebuild cumulative
use
 The Transilience Map

BREAKTHROUGH

Niche creation Architectural

Technology Market
Customers Production

Regular Revolutionary

CONTINUITY
Organizational Capabilities

A B C
SM SM SM

F1 F2 F3 F4 F1 F2 F3 F4 F1 F2 F3 F4

P P1
P2
P
P3

Functional Functional matrix Balanced matrix

D E F
SM SM SM

P1 P2 P3 P4 P1 P2 P3 P4
P4 F1 F2
P3 F3 F1
P2 F4 F2
P1
F3
F4

Project matrix Project-led Project-based

organization organization
 A New Kind of Competition:
Winner-Take-All

100

Winner

MARKET SHARE
50 Battle zone
(in %)

Loser
0
TIME
The Classical Diffusion Curve

Adoption Dynamics

Saturation

Takeoff
NUMBER
OF
USERS

Launch

TIME
 Positive Feedback's Should not be
Confused with Growth

Popularity Adds Value in a Network Industry

Virtuous
cycle

VALUE
TO USER Vicious
cycle

NUMBER OF COMPATIBLE USERS

The Whole Product Model

Potential Product

Augmented Product

Expected Product

Generic Product
The Simplified Whole Product Model

Standards
and Additional
Procedures Software

Training Additional
Generic Anything else
and Hardware
Product you would need
Support
to achieve your
compelling reason
to buy
System
Cables Integration

Installation
and
Debugging
The Competitive-Positioning Compass

SUPPORTERS

Product Company

Visionaries Conservative

Mainstream Market
C
th ros
Developing the

Developing the
Early Market
e C si
SPECIALIST ha ng GENERALIST
sm

Technology Pragmatist
Enthusiasts

Technology Market

SKEPTICS
 Define the Battle
SUPPORTERS

Benchmarks Revenues and profits

Product Reviews
Design wins
Initial sales volumes
Trade press coverage
Visionary endorsements
Strategic partners
Top tier customers
Full product line
Business press coverage
Financial analyst endorsements

Product Company
SPECIALIST GENERALIST
Technology Market

Architecture Market share

Schematics Third party support
Demos Standards certification
Trials Applications proliferation
Technology press coverage Vertical press coverage
Guru endorsements Industry analyst endorsements

SKEPTICS
 Discontinuity and Life Cycle

High Prototypes Early Market

Pure Chasm
Science
Technology Visionaries
Enthusiasts

PARADIGM
SHOCK

Conservatives Pragmatists
End of Bowling
Life Alley

Low Main Street Tornado

Low High
APPLICATION
BREAKTHROUGH
Development of Technological
Entrepreneurial Regions

Academic Scientific/
Institutions Technical
Knowledge

Technological Trained
Available Capital Venture Capital
Enterprise Individuals

Service Enterprise
Growth
Economic &
Employment
Growth

Successful Unsuccessful

Spin-Off
Enterprise
 Technological Enterprise Space

High

TECHNOLOGY

Future
New
Low MARKET
Emerging
Existing
Incremental Radical
Existing New Generation

INNOVATION
 Technological Strategic Planning Model

Core Competencies Evaluation of:

Overall Organizations
Strategic Business - Strengths
Units - Weaknesses
Environmental
- Opportunities
- Threats
Corporate Strategy Technological Action
Vision, Objectives, Goals Strategy Plan
Environmental Emerging
Analysis Technologies
Internal Assessment
External Technological
Forecast
Knowledge Creation Pyramid

Competitive
Advantage

Continuous
Innovation

Knowledge
Creation
Technology Strategy Risk-Return Space

High Cost
Reduction
Technology
Peripheral

Pull Push

RETURN
Product Line
Extension

Low Trend High

Expanding
Market Trend
Low or
Mature
Negative
Market
RISK
 Two-Dimensional Technological Space

Radical

New Generation

TECHNOLOGY
Incremental

Existing

Existing Emerging New Future

MARKET
Innovation Feedback Process

Expertise

Technology, customers, markets,

expertise, patents, trademarks, trade
secrets

Market
Invention Implementation
Penetration

Market space,
competitors, suppliers

Economic Power
Nested Enterprise Strategy Sets

Strategy

Mission

Vision
 Key Elements of Business and
Technological Strategy Domains

Business Technology
Elements Elements

Market Technology
Forecasts Forecasts
Programs Enterprise
Objectives
Technological
Mission Space
Space

General Needs Technologies

Increasing Detail
Specific Technological
Requirements Applications

Projects
Drives
Bounds
 Technological Risk Domain

High

RISK Moderate

Low

Existing Incremental New Radical

Improvement Generation

TECHNOLOGY
Trilogy of Strategic Technology Decisions

Which Way to Go
Decision

Leadership Team

Technological Potential

Make or Buy Keep or

Technologies Structures
Decision Sell Decision

Processes

Product, Process System

$
or Service Functions
Relationship of Needs, Core Technologies
and Competencies

Needs Market Products,

Processes or Services

Technologies to
Meet Needs Core
Technologies

Defining
Capabilities
Core
Competencies
 Strategic Technology Position

Core
Technology
Region
New
Technology
Vector
TECHNOLOGICAL
ATTRACTIVENESS

Aging
Technology

0 10
COMPETITIVE
TECHNOLOGICAL STRENGTHS
Technological SWOT Analysis Diagram
Numerous
Enterprise
Environmental
Opportunities

Turnaround Aggressive
Strategy Strategy

Critical Substantial
Enterprise Enterprise
Technological Technological
Weaknesses Strengths

Defensive Diversification
Strategy Strategy

Major
Technological
Environmental
Threats
 Technological Strategic Clusters

Emerging technology
market with rapid growth

(Go-for-it) (Niche)

Strong technological I II Weak technological

competitive position IV III competitive position

(Partnering) (No-Go or
Change it)

Existing technology market with

slow to moderate growth
 Internal and External Interactions for
Technological Strategy Development
External Environment

External Forces

Enterprise
Differentiating Business Strategy
Capabilities Technological Organizational
Competencies and Strategy Learning
Technologies

Internal Culture

Enterprise Internal Environment

Components of a Competitive Analysis

What drives the What the competition is

competition? doing and can do?
? ?
?? ? ?? ?
? ?
Future Current
Goals Strategy

Competitors
Response Profile

Strengths Weaknesses

Opportunity Threats

Assumptions Capabilities
Held about itself Strengths and
and the industry weaknesses
 Impact of Competitive Advantage

SIZE OF TECHNOLOGICAL
COMPETITVE ADVANTAGE

Small Large
Stalemate Volume
ROI ROI
Few

NUMBER OF WAYS Market share Market share

TO ACHIEVE Technological
TECHNOLOGICAL Competitive
COMPETITIVE Fragmented Specialization Differentiation
ADVANTAGE ROI ROI

Many

Market share Market share

Barriers of Entry to
Technological Market Space
 First Mover Advantage Model
Environmental Opportunity
Attractiveness

Competitive First-Mover Later-Entrant Competitive

Strategy Distinctive Competencies Distinctive Competencies Strategy
Resources Resources
First-Mover Positional Advantages
Cost Differentiation
Later-Entrant
Economic Pre-emption Technological Behavioral
Advantages
Factors Factors Factors Factors
Imitation Costs
Technological Free-Rider Effects
Demand Pre-emptive
Innovation Nature of Good Scope Economics
Uncertainty Investment Characteristics Learning from
Entry Product
Technological Pioneers Mistakes
Change & Market Type
Scale Characteristics Discontinuity
Efficient
Market
Scale-to-
Market Size Evolution

Advertising Buyers
Intensity Investment in
Cospecialized
Response Assets
Time

Scope
Economies

Overall Magnitude of First-Mover Advantage

Market Share Performance Profitability Performance

Absolute Return on Assets
Relative Return on Sales
 Financing Life Cycle
Venture
FFF & Angels Investment Banks &
Capitalist
Banks

Early Later
Seed Capital Growth Growth
& Early Stage

Enterprise Enterprise
Cash Flow Mezzanine Public Financing
3rd Market
2nd

1st Initial
Public
Offering

Time
Valley Break-even
of Death point

Emerging Growth
 Break-Even Regions

Cash flow

Returned capital Cumulative revenue

breakeven

Cash flow breakeven

$
EVA breakeven

Opportunity cost based on

capital risk assumed

P&L breakeven
 Financial Strategy Framework

Due dilligence process Investor Investment strategy Alternative Investments

Time to close deal Risk/Reward Space

Financial Strategy Opportunity

Debt
Entrepreneurial concerns
Sources and Deal
Time to out of cash Equity
Structure
Future alternatives Other
Burn Rate

Operating Financial Business Strategy

Requirements Requirements
Working Capital

Market Strategy Technological Strategy

Asset Requirement
 Financing Space

Highest cost for Highest risk for investors

enterprise but lower potential risk to
enterprise

Preferred Stock
Lowest risk for
stock
investors but highest
potential risk to
Options enterprise
Subordinated
Debt

Lowest cost
for enterprise

Senior Debt RISK PLANE

COST PLANE
Investor Perceived Risk-Return Space

Angels
High
FFF

VCs
Entrepreneur
PERCEIVED
Moderate
RETURN Realistic
Investors

Banks
Low

Low Moderate High

PERCEIVED RISK
Technological Risk-Return Space

High

RISK Moderate

High
Low Moderate RETURN
Low
Incremental Radical
Existing New Generation

TECHNOLOGY
 Technological Market Risk Space

High

Moderate
RISK

New
MARKET
Low Developing DEVELOPMENT
Existing STAGE
Low Moderate High

POTENTIAL
MARKET GROWTH
 Enterprise Risk-Return Space

100

80

ANNUAL 60
RETURN
(%)
40

20
High
Moderate RISK
0
Low
Seed & Early Later
Mezzanine Buy-out
Early Stage Growth Growth or IPO

ENTERPRISE
STAGE
Davenports Investment Risk-Return
Space
100
Data from
Venture
Capitalist
80

Davenports Risk/
EXPECTED 60 Return Space
ANNUAL
RETURN
(%)
40

20

0
Low Moderate Risky Most
Risky
INVESTMENT RISK
New Enterprise Growth Space

Ability to Grow

Low
Life-style High-growth
Propensity for Growth

Successful
Marginal and
growing
High
Three-Dimensional Technological
Management Model

Management skills

Management roles

SKILLS &
EXPERTISE Critical functions

Managerial functions

Functional Management

Technology buildup
Preproject Resources Procedures Structure Strategy Culture

Project
ASSETS
Production

Marketing PROCESSES

Service
Internal-External Technology Acquisition
Model

Technology Relatedness
Degree of Competitiveness
Decision
Core Enterprise Technology
Mechanism
Degree of Protection

Managerial Capabilities
Life of Technology
Enterprise Experience with External Technology

External
Technology
Acquisition
 Technology Leadership Space

Life Team
High style focus
HUMAN
focus
RESOURCES Public Enterprise
ORIENTATION
Growth
Authority DEVELOPMENT
Low Unfocused
focus Early Stage STAGE

Start-up
Low High

GROWTH ORIENTATION
Enterprise Management Process

Decision
Process

Mission & Enterprise

Strategy Structure

Customer
Satisfaction

Value Enterprise
Improvement Learning

Benchmarking
The 7 Elements Overview

Focus on
Strategic customer
framework benefits
not on customer

Controlling of
project portfolio
(innovation
controlling)

Management Fast
of pre-project project
phase realization

Tools
(methods)

Create innovative
environment
 Technological Challenges

Managing the Managing the

USE of Technology CREATION of Technology

Rapidly Managing organizational response

Managing highly skilled
Changing to the introduction of rapidly
technologists to create new
Technologies changing technologies e.g.:
technologies e.g.:
Identifying and using IT
Managing R&D labs
Using technology for new
Marketing high-tech products
services

Managing the most efficient and

Developing organizations that can
cost-effective creation of new
Slowly make the most efficient and cost-
products e.g.:
Changing effective use of established
Technologies technologies e.g.: World-class, low-tech
manufacturing
Labor-intensive retailing and
Consumer-oriented prod. design
service organizations
& marketing
 Timing and Impact of Management
Attention and Influence

Knowledge Concept Basic Prototype Pilot Manufacturing

PHASES Acquisition Investigation Design Building Production Ramp-Up

High

Ability
to Influence
Outcome

INDEX OF
ATTENTION
AND INFLUENCE

Actual
Management Activity
Profile

Low
 Priority Issues in Technology and
Innovation Management

200 GROWING Linking Technology

IMPORTANCE to Business
180 Building
Seamless
Innovation
160
Processes
140 Changing Culture
IMPORTANCE Building/Leveraging and Values in R&D
LEVEL 120 Competences
(NEXT 5 YEARS)
100
Managing for
Managing R&D R&D Efficiency
80
in a Global World
60
Rethinking
Technology Management DECLINING
40 IMPORTANCE

40 60 80 100 120 140 160 180 200

IMPORTANCE LEVEL (PAST 5 YEARS)

 Technological Progress I

Base
Technology

Key
PERFORMANCE Technology
OF THE
TECHNOLOGY

Pacemaker
Technology

CUMMULATED R&D SPENDING

 Technological Progress II

Higher
Potential
PERFORMANCE
OF THE New
Old
TECHNOLOGY Technology
Technology

CUMMULATED R&D SPENDING

 Core Competencies:
Open Markets, Difficult to Imitate

Processes

Core
Competencies

Technologies Capabilities
Core Competencies: Market and
Resources

Low Company View High

Competency 1
Competency 5
High

Competency 4
Market View

Competency 6

Competency 2
Competency 3
Low
 A Consumer Products Competency Map

Customer Core Competency

Care

Trade Service End Customer Capabilities

Partnering Excellence Delight

Space and Electronic Expectation Delight and

Trade Service Processes
Replenishment Data Trend Loyalty
Marketing Innovation
Management Interchange Management Measurement

Category Space Promo Sub-Processes

Management Management Management

Customer Customer Resources

Partners Database
 Technology Portfolio: 5 Generic
Strategies

Investing

Pilot project

STRATEGIC
RELEVANCE Optimizing

Observation
Desinvesting

TECHNOLOGICAL MATURITY/
STRENGTH (INTERNAL VIEW)
Platforms Link Technology and Market

INTEGRATION OF MARKET AND TECHNOLOGIES

VIA PRODUCT PLATFORM

Technologies

Technical
core competencies

Market- Product Technology

Information platforms flow
flow

Product groups
Individual products
Market segments

Customer needs
Platforms: Management Focus

Vision

IN THE PAST TODAY

Platforms

Product family

Individual products
 Value vs. Volume

Value
Decisions

Knowledge

Information

Volume
Data
Innovation & Distinctive Capability =
Competitive Advantage

Innovation

Patent Secret Strategy

Valium Coke Sony Walkman

Competitive
Advantage
A Model of a Knowledge Company

INTELLECTUAL CAPITAL

Human
Intellectual
Resources
Assets

STRUCTUAL CAPITAL
A Model of Intellectual Capital

Intellectual
Human Assets
Resources
Intellectual
Property
The Intellectual Capital of the Firm

Intellectual Assets

Documents
Drawings
Programs
Human Capital Data
Inventions
Processes
Experiences

Know-how

Skills
Intellectual Property
Creativity Patents
Copyrights
Trademarks
Trade Secrets
Semiconductor Masks
 Knowledge Management Strategies
Unfocused Strategy
Codification Strategy Increase the absolute level of codification
across all dimensions of codification and
knowledge.
Tacitness Strategy Decrease the absolute level of
codification across all dimensions of
codification and organizational
knowledge.
Focused Strategy
For each type of organizational knowledge
decrease the level of codification on those
dimensions of codification which transfer
knowledge fastest and most accurately.
For each type of organizational knowledge
decrease the level of codification on those
dimensions of codification which pose
greatest risks of involuntary transfer of
knowledge.
 Intellectual Property Management
Patent selling,
buying, licensing
Defending Identification of
Patents Patent weaknesses

Infringement of Work with external

Patents Patent Consultants

Patent analysis for

technology trends Intellectual Patent strategy
Property Management

Patent search
Patent abstracts

Patent Mapping
with competitors
patents Brain Maps
Patent Key Know How holder maps
writing (competitors)
 Positioning and Evaluating Assets

Technology Push
Technology Risk
Clear
Extension
for Existing Business
Eastman
MARKETS

Known to
Industry

Unknown Technology
Market to Market Push
Market Risk & Market Push-
World Large Risk

Incremental New to Eastman New to the World

for Eastman
TECHNOLOGY TYPE
Separate Pre-project and Implementation:
Open vs. Tight

Concept and planning Implementation

Project
planning

Specs and business plan Detailed specs

Market &
Generation of ideas Product concept Detail Design Prototype etc.

Freezing Point /
Release of
Potential influence
tools any jigs
Product specifications
and costs

Few structured activities Structured processes

 Types of Innovation:
Cost of Change is Important

High
Aircraft
turbines

Software
Multimedia
Cars
electronics
TECHNOLOGY
INTENSITY

New restaurant
Cosmetics concept
Low

Low High

COST OF ENGINEERING CHANGE AT LATE STATE

 Selection of the Right Project
Organization
Coordination Team
Functional (Lightweight team) (Heavyweight team) Task-Force

+ Specialists Specialists Management Clear priority

Coordination Rapid Rapid

_ Slow Slow Line / Project Subculture

Big control circ Project leader Spec know-how
difficult position

Fire brigade
Stable environment Integration Pressure of time
New business
Indicators of Horizontal Relations
Between Core Firms
Position of the other

Independent Independent Interdependent Dependent Dependent

with with without
Influence Influence Influence

Cooperation Compliance Coalition Direct Structural

or Competition Control Control
One directional technology flow Attitude of
(second sourcing, licensing) core firm
System integration
(common standards)
Controlling (minority)
share in core firm
Technology/patent exchange
(cross-licensing, technology share)
Joint R&D (research, pacts,
joint development)
Production consortium and/or
cartel (joint production)
Merger, Joint Venture (50/50)
Direct investment,
minority share
Acquisition
OEM agreement
Distribution
Five Major Trends Drive the Evolution of
R&D Organization

Synergy

Polycentric
Decentral Integrated
decentralized
R&D R&D Network
R&D Competences

Costs

R&D Hub
Tapping Model

Central Ethnocentric Geocentric

R&D

centralized centralized
R&D External R&D
Orientation

Competition Cooperation
 Survey of R&D Tools

Product = Process Planning Product = Process Realization Production

Product Integration Pilot

Ideas Strategy Concept Goals Development Introduction
program and test lot

Target Costing

Marketing information system Cost reduction for existing products

Cost management for suppliers

Quality Function Deployment

Creativity techniques Statistical Process Control

Failure Mode and Effect Analyses

Conjoint Analysis Design for ...

Computer aided ...

Database-, Simulation-, Expert Systems

Design of Experiments
The Kano Model

CUSTOMER SATISFACTION

Excitement

Performance

DEGREE
OF
ACHIEVEMENT

Basic
 New Product from the Pipeline -
Market and Competence Driven
Corporate Strategies
Navigator Book
Corporate Product Strategy

Market Market
Pull Requirements
Field Operations
Customers Product
Management
Product
Creation New
Process Products
Core Technology
Competencies Management
Skills
Technology Technologies
Push Resources

Product Planning
Harmonization with Field Operations
Resources Check
Idea Backlog
The Core Competence Process:
Actions are Important!

Identification of actual Technology Forecasting

Core Competencies Market Strategy

Definition of Future
Core Competencies

Evaluation of
Gap-Analysis
Technology Portfolio

Actions

Road Maps, Resource R&D Human Outsourcing

R&D projects Allocation Organization Resources
 Portfolio of Technical Competencies

High Invest
Long-term investments within
Pilot project core competencies
ROI must be lined up in the
Strategic impact is recognized
long term, short-term success
Pilot projects with scantly budgets,
rather not possible
High-Risk-High-Impact-Projects
External partner helps to build up
internal competence Optimize
STRATEGIC Core Competence, but strategic
IMPACT impact is medium or rather
decreasing
ROI should be lined up in the
short term
Observation
No budget available
Desinvestment
Technology-owner is responsible
Visit exhibitions, congresses No competitive advantages
Study magazines within the next 5 or 10 years
Cooperation with universities Resources should decrease
and be freed for new
Low technology potentials

Low High
INTERNAL RESOURCES
Tasks of IT in Dispersed R&D Teams

Rational Level:
Information richness

Emotional Level:
Social Presence
INFORMATION
Explicit EXCHANGE
Knowledge
high

COORDINATION high CREATIVITY

SUPPORT low PROMOTION
high

high
Tacit
DEVELOPMENT OF Knowledge
INFORMAL NETWORK
Project Categories: Market / Technologies

N
High ne ew
w p
c o lat
r e fo
pr r m
od /
im pro N uc
pr du ew t
ov ct
ed li
RELEVANCE FOR NEW pl ne
at /
MARKETS / MARKET Variants for
SEGMENT m

Va Variants
ria
nt
s

Low

Low High

INTRODUCTION OF
NEW TECHNOLOGIES
A Balanced Portfolio - The Risk-Reward
Diagrams

High
Bread and Butter Pearls

TECHNICAL SUCCESS
PROBABILITY OF
0 10M

REWARD (NPV)

White Elephants
Oysters
(difficult to kill) Low
 Market and Technology Risk Bubble
Diagram

Very high

MARKET
Moderate
RISK

Very low

Very low Moderate Very high

TECHNOLOGY RISK
 Rohm and Haas - Strategic Intent Bubble
Diagram

Project A
Food/Pharm

Project B
Sugar
Project D
Cat/Chem Project C
Process
Project F
MARKET Nuclear
SEGMENTS

Drink Water

Industrial
Water

Project E
Other

Defend Grow New New Fundamental

Application Business

STRATEGIC INTENT
 The New Business Enthusiasm Curve

Costs are
The field better
trail worked We have They
Ecstasy like it
Yes an order!
and orders
it is!
and the
The New costs and inventory
Well approvals
customers look great
like it! It make it Documentation
works! done! We have all
the sizes

We have
a fix Installation
Costs are problem!
It too high We need
works! Its not documentation
proprietary
It
doesnt No, he
always loves it
They
need
all the Deliveries
Sounds great sizes are late
The market
estimate
We dont Serveral
was wrong
have enough failures
Despair I have an idea resources reported
We need help
Failures in Time
The boss hates
field trail
the project
 Possible Timeline for Transmission
Technology Evolution

Japan PDC W-CDMA

Personal Digital Cellular Wideband CDMA

GSM GPRS UTMS

Europe Universal Mobile Telecommunications
Global System for Mobile communication Global Packet Radio Service
System (same as W-CDMA)

TDMA EDGE
Enhanced Data rates for
Time Division Multiple Access
Global Evolution
USA

CDMA upgrade CDMA 2000

Code Division Multiple Access CDMA 3G Standard

1997 1998 1999 2000 2001 2002 2003 2004 2005

Key: 2 G 2.5 G 3G
 The Virtual Marketplace Model

B2B Marketplace

Buyer 1 Platform 1
Buyer 2 Seller 1
Platform 2 Seller 2
Buyer 3 Platform 3
Buyer 4 Seller 3
Platform 4 Seller 4

Infomediary: Multiple buyers to multiple sellers

Competitive bidding: Auction / Exchange / Reverse auction / Grouped buying

 Illustrative Map of E-Enabled Business
Processes

E-
Online
procurement
R&D

E-shop
Online
Suppliers: Information
construction E-monitoring E-trading Customers:
facilitator Exchanger
Energy online Large
Equipment billing
E-trans- Risk Small/Medium
Non-core Online Idea web-
mission manager Residential
products Meter reading generator
control online Online
Customer
Service
Finance
B2E ASP
 Illustrative Map of E-Business Models in
Part of Traditional Value Chain

E-
procurement E-mail
Market
Network forecaster
Negotiation Retail
market
place
Network Marketing Sales
companies Capacity Risk Aggregator
broker management
Value chain
integrator Billing Sale agt Customers:
Energy price
producers E-trade & Energy comparer
auctions purchasing
Product Customer Energy
development Service saver

Consumption Virtual
analyst Community
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