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EDWARD B. ROBERTS is the David Sarnoff Professor of the Management of Technology at the Massachusetts Institute of Technology's Sloan School of Management. He is the founder and chair of the MIT Entrepreneurship Center and chairs the Sloan's faculty of management of technological innovation and entrepreneurship. He is the author of Entrepreneurs in High Technology.

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Innovation represents the most important articles on the topic of innovation and features contributions from some of the world's top experts including Jordan J. Baruch, John Seely Brown, Anil Khurana, Constantinos Markides, Marc H. Meyer, Michael E. Porter, James Brian Quinn, Edward B. Roberts, Stephen R. Rosenthal, Harbir Singh, Robert I. Sutton, Karl Ulrich, James M. Utterback, Eric A. von Hippel, and others.

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Innovation

Jossey-Bass

Introduction

Innovations, whether of product, process, or market, always move through two quite different stages. First, someone has to come up with the new idea. Then someone (often someone other than the idea originator) has to refine, focus, and implement that idea. And most of the resources are applied during this latter implementation period. Furthermore, my own studies indicate that in the majority of cases, the initiating idea comes from outside the implementing organization. In many cases, the innovator is simply adapting someone else's invention to a different set of circumstances.

Most often, the original ideas that lead to these innovations emerge from a perceived market or production need rather than from the push of underlying technology. Science is far less frequently the direct organizational root of an innovation, and then usually in a field like biotechnology, advanced materials, or optics, where the lab is close to the market implementation of change.

Thus, for an organization to innovate effectively, it must construct strong channels to those outside worlds that are sources of ideas for change. At the same time, strong internal connections must exist between the market-facing parts of the company (sales and marketing, distribution, and field service) and the technology-creating parts (engineering, scientific research, manufacturing, and operations).

The MIT Sloan Management Review (SMR) has always presented its readers with leading ideas about managing the innovation process. Years ago I edited a collection of SMR articles on the same subject, Generating Technological Innovation. Now, after more than a decade in which the topic of managing innovation, especially technology-based innovation, has been the dominant issue in maintaining worldwide competitiveness, I revisit it in this new anthology of SMR's best thinking on the subject.

In three sections, this book explores the key managerial issues of the innovation process. Part One focuses on the critical behaviors that must occur within a firm to conceive and eventually implement technological and market changes. Part Two discusses the radical shift from innovating almost entirely with a firm's own resources to collaborating with external partners who provide technological, marketing, distribution, and manufacturing capabilities. And Part Three explores perspectives on how software, user communities, and innovation families can be applied to driving the innovative process.

In Chapter One Constantinos Markides highlights internal innovative processes from a strategic perspective, emphasizing especially those approaches that at the overall business level cause a new game to be played in the marketplace. "Companies," Markides writes, "do new or even crazy things, like using a new distribution method in the industry (Hanes), a new selling approach (Bank One), a new manufacturing method (Toyota), or totally bypassing distribution intermediaries (Dell Computer)." Markides concentrates on ways to attack established industry leaders without the help of radical technological innovation. In Chapter Two John Seely Brown and Paul Duguid, drawing on life experience in organizations with a reputation for being innovative (such as BBN Technologies and the Xerox Palo Alto Research Center), affirm the need for organizations to maintain the "explore-exploit" conflict. Overly emphasizing creativity may produce a series of brilliant inventions, such as those that emanated from the Xerox Palo Alto Research Center, only to have them commercialized by new start-up companies with no economic ties to Xerox. In contrast, overly emphasizing the push to commercialize may quickly drain whatever creative juices once existed in a firm. Anil Khurana and Stephen R. Rosenthal, in Chapter Three, examine in depth the creative front end of product development processes. They do not want to leave to chance the "cross-functional front-end strategic, conceptual, and planning activities that typically precede the detailed design and development of a new product." In seeking to achieve Markides's market-oriented change goals, Khurana and Rosenthal provide a well-engineered front-end process to try to satisfy customers who buy not only the tangible product but also a package that includes "the company, the brand image, the sales interaction, the delivery process, the after-sales service, and the follow-up relationship."

A major shift that has occurred in many firms' innovation efforts has been the recognition that a company must step back from just creating individual products, however attractive, if it is to ensure a continuing flow of new products that transform markets. Instead, it needs to build strong platforms that rest on its core capabilities, from which individual products can then be rolled out time and time again, with dramatically decreased lead time. In Chapter Four Marc H. Meyer and James M. Utterback detail the insights and practices needed to initiate a product platform process and to go from platforms to product families. They use as examples such prolific flows as the Sony Walkman's 160 variations over a decade and Black & Decker's overall transformation of its power tools business. Through mapping product families and assessing core competencies, the authors seek to eliminate "two essential problems: redundancy of both technical and marketing effort and lack of long-term consistency and focus." Chapter Five, by David Robertson and Karl Ulrich, follows this theme. It provides a detailed presentation of platform tools that permit planning for both product commonality, which saves costs and time, and product differentiation, which maximizes attractiveness to customers.

Part Two discusses a revolution that has occurred in product-market innovation. As my recent global benchmarking study of the world's top four hundred R&D-spending companies found, 85 percent of these giants are now relying heavily on external sources of technology as part of their overall innovation process. These moves to the outside create both dependency constraints and risks while leveraging flexibility and other benefits. Fortunately, the data show that most of the firms have gained in their performance effectiveness from accessing these external resources. Chapter Six, by Edward B. Roberts and Wenyun Kathy Liu, adds an external-resourcing perspective to the work of my MIT colleague, James M. Utterback, in addressing the changing nature of innovation requirements over the long life cycle of a new technology. The authors show "that a company should use, in a timely and appropriate way, every form of business development-alliances, joint ventures, licensing, equity investments, mergers, and acquisitions-in order to perform optimally over its underlying technology life cycle." They point out that "doing so requires integrated technology and market and financial planning that may be beyond most companies." James Brian Quinn goes even further, arguing in Chapter Seven that, beyond partnering, the actual outsourcing of various stages of the innovation process has become necessary because of the specialist knowledge required in fields such as pharmaceuticals, networking equipment, and even corporate services. Quinn contends that "the supplier side of the process has become the major source of new high-tech jobs, new companies, and economic growth worldwide." In Chapter Eight Jeffrey H. Dyer, Prashant Kale, and Harbir Singh examine the strategic-alliance practices of two hundred companies, reporting that almost half of all alliances fail. But the authors' analyses demonstrate great benefits for carrying out these partnerships. With regard to alliances, they explain that "the ability to form and manage them more effectively than competitors can become an important source of competitive advantage." In Chapter Nine, using data from seventeen member countries of the Organization for Economic Cooperation and Development over the past quarter century, Michael E. Porter and Scott Stern offer a different twist on the concept of innovating in combination with outside resources. "Innovation," the authors find, "is strongly affected by location: the external environment for innovation.... Choosing R&D locations ... should not be driven by input costs, taxes, subsidies, or even the wage rates for scientists and engineers.... Instead, R&D investments should flow preferentially to the most fertile locations for innovation."

Part Three explores three very new perspectives on the overall innovative process. In Chapter Ten James Brian Quinn, Jordan J. Baruch, and Karen Anne Zien examine the potential of software to improve the innovation process. Unlike Michael A. Cusumano and Richard W. Selby in Microsoft Secrets, Quinn, Baruch, and Zien do not focus on innovating in software products or in software development per se. Instead, they are intrigued by the possibility of overall acceleration of technology-based innovation by employing software as a critical tool. "Software," they suggest, "is especially helpful in allowing workers, technologists, and managers to visualize solutions and work together on complex systems." They propose that the right software can enhance a company's innovative potential by allowing fewer people to do more: "Properly designed software systems allow smaller, more flexible teams to perform at greater levels of sophistication than larger teams can without them." Eric A. von Hippel is also interested in software, but more as a current prominent example of what he sees as a fundamental change in innovation. In Chapter Eleven von Hippel goes far beyond his earlier findings that users, not manufacturers, are the sources of key innovations in a number of different fields, such as scientific instruments and software tools. He now shows that in a diverse range of fields communities of users are coming together to account for evolution of innovations and the building of innovation families. In Chapter Twelve Robert I. Sutton returns in a vital way to the themes discussed by Markides in Chapter One. Both Sutton and Markides are seeking to learn how companies can achieve dramatic innovation inside the firm as well as in its markets, without concentrating on deep technological change. Sutton's last words are wise, not weird: "Ultimately, anything that brings in new knowledge, helps people see old things in new ways, or helps a company break from the past will do the trick."

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Excerpted from Innovation Copyright © 2002 by Edward B. Roberts. Excerpted by permission.
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