Managing Technological Innovation for the Next 25 Years

Managing Technological Innovation for the Next 25 Years

56 Abstracts / The Journal of Product Innovation Management 18 (2001) 51–58 7. Quality/excellence–the product overall is superior or excellent on one...

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Abstracts / The Journal of Product Innovation Management 18 (2001) 51–58 7. Quality/excellence–the product overall is superior or excellent on one or more key attributes. BBs were superior to many of their lower-quality, lower-priced imitators, and they were selectively distributed and carefully exhibited at retail to promote quality connotations. 8. Association–the item is tightly linked to other people, places, organizations, activities, events, issues, other brands, or images. BBs were linked to special events such as the 1996 Summer Olympics games and to special people such as Princess Diana. 9. Social visibility and image congruence– being seen by others using the item is congruent with the user’s self-identity. Ty encouraged the use of BBs in educational settings and developed a wide variety of BB personalities. 10. Price risk–the degree to which the consumer might be concerned about the purchase price, replacement price, or other expenses associated with the product. BBs were created to be affordable for children and promoted the long-term collectability of the product.

By incorporating these attributes, Ty, like other manufacturers studied in the earlier research, has benefited from greater customer satisfaction and trust, which has led to higher purchase volumes, brand loyalty, and positive word-of-mouth recommendations. This study used the same rating instrument as that in the earlier study to have college students evaluate the degree to which BBs have the attributes of high-involvement, relationship-prone brands. It was found that BBs exhibited fairly high levels of involvement across the ten attributes. Although the article’s description of BBs performance on each of the ten attributes is too detailed to abstract here, the authors offer some suggestions for engineering high involvement in other brands of interest to new products professionals: Y To evaluate the relational potency of their own brands, managers of other firms could easily replicate the methodology used to measure customer perceptions of Ty’s product attributes. Y Linking a brand with a consumer’s past might increase its nostalgic value. For instance, package designs from an earlier era can be reintroduced, as was done by Coca-Cola with their distinctive curvilinear bottles. Use a familiar concept (e.g., low-tech toys like BBs in a high-tech era). Y A brand can be personified by attributing human characteristics to it or designing it with subtle human-like features (e.g., Mr. Clean). Y Brands can be made unique via developing distinctive brand images, meaningfully differentiating the brand from competitors, or extending the line. Possibilities include using and promoting distinctive, high-quality ingredients or demonstrating alternative uses for the brand not promoted by competitors. Y Consumers can be shown how a brand will facilitate achieving goals or engage in valued behavior. Y Brands can be designed to be more engaging by requiring consumer interactivity (e.g., adding an egg to a recipe, inserting batteries, assembling components, or performing routine maintenance tasks). Y Appealing to the senses, testing its sensory appeal, and inviting prospects to experience its sensory impact can enhance the brand’s esthetic appeal. Y An image of quality and excellence can be crafted for the brand by attention to product design, careful review of quality standards and manufacturing processes, clear communication of quality standards to suppliers, controlled growth plans, and evaluation and screening of channel members (especially retailers, as Ty did by using nontraditional toy retailers and limiting supply). Y Association can be built between the brand with higher-involvement people, places, events, issues, and so on. Positioning the brand as an ideal gift establishes a cherished link between the item and giftgiver. Carefully consider the image of prospective spokespeople, events sponsored, causes, cosponsors, and targeted media before linking with them. Y Social visibility and image congruence can be built via encouraging

brand usage in socially visible settings, stimulating word of mouth, and creating a unique brand image with which target market members can identify. Y Positioning the item as a collectible, thereby demonstrating the long-term brand value, can reduce price risk. Speak in terms of “purchase investments” and “agreements” rather than “costs” and “contracts.” Promote resale value and help create and manage a resale market.

Managing Technological Innovation for the Next 25 Years Richard N. Foster, Research-Technology Management, JanuaryFebruary 2000, pp. 29 – 45. We have witnessed enormous turmoil in US business over the last 25 years. Many new corporations came into being, while others disappeared (often due to acquisition). Technologically-intense new companies such as Microsoft have created huge market value; other newcomers such as Federal Express applied newer approaches to old methods. The United States is the single greatest public market for innovation, is the most computer-literate country in the world, provides the most venture capital, and has the most aggressive entrepreneurial culture. Small wonder, then, that the US is going to be hugely affected by technological and innovational progress in the foreseeable future. In this article, Richard N. Foster notes that the creation of substantial and transformational innovation is the key to survival for firms, and that this innovation must be balanced against operational excellence. Since these can be conflicting objectives, firms will need to develop new ways of organizing themselves to pursue both simultaneously. Marketing and R&D will need to continue to improve their working relationships. Many firms will shed manufacturing, offloading it to other firms that specialize in it. Companies may indeed become smaller rather than larger. The skills of anticipation and adaptation will need to be finely developed, and firms will need to be prepared to shift direction if strategic potential of current businesses dries up. All of these changes are due to forces within the economy, which will cause R&D VPs to think closely about the role of R&D within the corporation. Since there is a direct, long-term positive relationship between R&D spending and shareholder return in only about one-third of US industries, R&D VPs will have to challenge their current working assumptions. The remainder of this article is a series of short essays by key writers in the area: Graham R. Mitchell, Deb Chatterji, Robert G. Cooper, and D. Bruce Merrifield. Mitchell suggests a redefinition of the role of R&D directors, from managing the R&D function to managing the system of technological innovation. He notes three trends that will have great influence on industrial research strategy in the years to come: the shift in industrial R&D intensity toward the information and health sectors; the growth in the use of the Internet for acquisition and development of technical knowledge; and top management’s recognition of technological innovation as a key factor in corporate growth and survival. Since the early 1980s, R&D funding and aggregate R&D intensity has been increasing. Looking beyond the aggregate numbers, one notes that from 1980 to 1986, the largest R&D spending growth was in the electronics/information sector, while in the early 1990s, growth was predominantly in the drugs/medicine sector. The implication is that the traditional model of the industrial R&D laboratory will apply in fewer industries. In drugs and medicines, for example, the industry has a unique relationship with the US National Institutes of Health, which has important regulatory consequences. Service-sector industries such as banking and wholesale/retail trade are exhibiting their own unique R&D practices as well. The impact of the Internet on value creation cannot be ignored. Firms can, for example, allow customers to track packages, perform banking and trading activities, and buy products and services over the Internet. Firms can increasingly go outside their core organization (to, say, other R&D labs working on comparable problems) using the Internet, in order to increase efficiency and further create value. Finally, the most important long-term challenge for today’s R&D director is to manage the impact of technological innovation

Abstracts / The Journal of Product Innovation Management 18 (2001) 51–58 on the corporation: this might more correctly by the function of a Chief Technical Officer or CTO. Briefly, shorter product life cycles, continuous improvement, reengineering, and focus on quality require innovative application of new models and systems; Mitchell refers to this as the “new technology of management.” Chatterji’s essay focuses on the passing from the industrial age to the information age. Rapid advances in information and communication technologies have led to pervasive new products and services that permeate our lives; Chatterji refers to this as an “information-communication ether.” There are five impacts of this ether on industrial R&D. First and most obvious is the shrinking of time and distance: researchers on the same project team can be located around the world and work around-the-clock on projects, due to on-line meetings, videoconferencing, on-line brainstorming, and so on. A second impact is lower cost and increasing output. More intelligent use of information and communication technologies (i.e., computer-aided design, molecular modeling, process modeling and simulation) reduces activity cost and increases work output. Trial-and-error in R&D is being reduced through the use of computers and robots together with statistical planning of experiments. A third impact is an increase in organizational networking and learning. Network-based tools such as e-mail, search engines, and web crawlers make it much easier to access and share knowledge and to form organizational networks within and outside R&D. Intranets allow rapid access and exchange, and also create computerized information archives. As a result, organizational knowledge is accumulating rapidly, without incurring the costs of librarians, gatekeepers, or editors. The fourth impact is the bringing-together of technologies in novel ways. In the 1990s especially, we have seen a wide variety of innovations resulting from the convergence of multiple technologies: the video camera, ATM, digital phone, DVD, the Internet, and so on. Finally, the fifth impact is the blurring of traditional boundaries, exemplified by increasing cross-functional and cross-organizational collaboration. This impact is probably most clearly indicated by the new enterprise resource-planning (ERP) systems being rapidly adopted by large firms. This essay concludes with several suggestions to R&D leaders: Y Embrace and leverage the information-communication revolution, since there is “no turning back”. Y Pursue every opportunity to use information-communication technologies to support the innovation process. Y Take the lead in “knowledge management” for the corporation. Y Recognize the phenomenon of multiple technology convergence, and capitalize on it. Y Establish close working relationships with the other functional areas and key stakeholders. Based on his benchmarking study of 160 businesses, Robert Cooper notes that there are three cornerstones that distinguish the high performers: having a new product process that works, having the right resources devoted to product innovation, and having a new product and technology strategy for the business. While the first two are well-known, he found that the third was often missing: firms often were lacking clear goals, a strategic focus, and a long-term thrust for new product endeavors. To succeed at product innovation, firms need to be able to do projects right, and also do the right projects. Doing projects right means employing cross-functional teams, including the voice of the customer, doing the up-front homework, and so on. Just as important, however, is doing the right projects. Firms that choose too many projects, too many “little” projects, or the wrong projects need to improve their project selection procedures. Cooper suggests the use of portfolio management to maximize the value of the product portfolio, to achieve the right balance of projects, and to make sure that strategic priorities are being followed. In order to achieve the goals of portfolio management, a firm needs a Product Innovation and Technology Strategy, or “PITS.” The PITS is the driver of the portfolio management process, and includes: goals for product development, the role of product development in achieving firm objectives, the arenas of strategic focus or thrust, deployment or spending allocation across these arenas, and the attack plan. Looking briefly at each of these


points, the PITS helps the firm answer the question “how do new products and product innovation fit into the firm’s overall plan?” Arenas can be defined in terms of market segments, product types, or technology platforms. A plan of attack could specify if the firm is to be an industry innovator or a “fast follower”; a low cost player, differentiator, or niche player; and so on. Cooper links the attack plan to spending decisions regarding how much is to be spent on different types of projects. He refers to this as the establishment of “strategic buckets” or spending allocations by project types. He concludes by noting that, in order to do a better job at picking the right projects, firms need to do two things: adopt a new product process that yields the information required to make better project selection decisions, and implement an effective portfolio management process that ranks projects objectively and allocates resources appropriately. The last essay is by Bruce Merrifield, and examines the generation of sustainable competitive advantage. The US has an excellent environment for innovation, due to the enormous investment in universities and government labs. The opportunities have been described in terms of certain key areas such as material sciences, electronic and communication sciences, biosciences, energy systems, and engineering and manufacturing sciences. These can be strategically exploited for developing and maintaining competitive advantage in world markets. Timely access to needed skills and resources will be essential to success, thus strategic alliances with component suppliers or end users may be strategically very important. Acquisitions and mergers can obtain skills and resources but can also dilute shareholder equity, require divestments, and take months to put together. Joint ventures or consortial arrangements can allocate the needed resources and skills while maintaining the corporate identity and the autonomy of the participants. A Limited Liability Corporation can create a virtual organization of limited partners, and provide tax advantages and insulation from antitrust issues. Managing the innovation process is challenging and demanding. Merrifield suggests the appointment of a dedicated coordinator-integrator, possessing both business and technical skills, to guide he process of turning a basic discovery into a commercial product. Among this person’s tasks would be careful literature and patent search, market segment analysis, initial cost projections, and development work to ascertain technical feasibility. It is important to keep in mind that it is no longer enough to focus just on annual, incremental improvements to existing operations. While good for short-term profitability, a firm that relies solely on a “fastfollower” strategy will find it difficult to survive. “Next-generation” opportunities that represent technological leaps will be increasingly important. Virtual corporations, or consortia, that represent the pooling of skills and resources need to be structured to manage the continually changing technical capabilities as well as diverse legal, financial, marketing and production capabilities. Merrifield notes that this kind of “concurrent engineering” is not well or widely practiced yet, and may be in opposition to the traditional US entrepreneurial culture that likes to “do everything alone.”

Ernie: Four Years of Online Consulting Brian J. Baum, Consulting to Management, Volume 11, No. 1, May 2000, 25–29. Ernie is Ernst & Young’s online consulting venture, launched in May 1996 and designed to provide business advice to small and medium-sized companies. Currently, 5000 companies are subscribers to Ernie, and that base now includes a fair number of Fortune 1000 firms. The motivation behind Ernie was to develop a cost-effective way to deliver solutions to smaller firms ($10-$200 million annual revenues) that could not afford the traditional face-to-face consulting services provided by Ernst & Young. Due to the rapid growth and future potential of the Internet, the company quickly decided that would be the best way to reach the smaller-firm market. To be precise, an Internet/intranet hybrid was used: clients reach Ernie via Internet, while the Ernst & Young intranet routes the question to the appropriate individuals. Potential users can submit questions directly to Ernie, or scan the