Innovation

Developing the right strategy for product innovation requires a fundamental understanding of how technical modularity affects R&;D. In a modular design, a change in one component of a product has relatively little influence on the performance of the system. In a nonmodular, or coupled, design, the components are highly interdependent, and the result is that a minor change in one part can cause an unexpectedly huge difference in the functioning of the overall system. Generally speaking, modular designs make R&;D more predictable, but they tend to result in incremental product improvements instead of important advances. Coupled designs are riskier to work with, but they are more likely to lead to breakthroughs. This trade-off between predictability and innovation can be visualized as a technology landscape, with gently sloping hills corresponding to incremental product improvements that are based on modular components & #8212; and with soaring, craggy peaks representing breakthrough inventions that rely on tightly coupled parts. Developing new products requires a search across such technology terrain, and companies should first choose the type of landscape that suits them best and then develop the appropriate strategy for navigating that topography.

In recent years, many companies have learned to use the Internet as a powerful platform for collaborating directly with customers on innovation. But direct interactions & #8212; facilitated by customer advisory panels, online communities and product-design tool kits & #8212; have limitations. They don’t always allow companies to reach the right customers at the right time and in the right context. Thus, to fully exploit the Internet as an enabler of innovation, companies need to complement their direct channels of customer interaction by using third parties that can help them bridge gaps in customer knowledge. The authors call this process of indirect, or mediated, innovation innomediation and the third-party actors at the center of it innomediaries. In their research, the authors identified three distinct types of innomediary and observed how each one can help companies acquire different forms of customer knowledge. Using case studies, they suggest ways in which companies can begin to think about exploiting the power of these emerging intermediaries. For businesses that learn to use customer knowledge from both direct and indirect sources, the Internet holds the key to a multichannel innovation strategy.

To maintain growth, a company muståÊlaunch disruptiveåÊnew businesses whenåÊits core units are strong.

A pair of new research studies points to strategies for making the most of technology acquisitions.

Managers don’t have to be told that to innovate they need to embrace drastically different practices from the ones they use for routine work. So why don’t they do it? According to Robert I. Sutton, co-director of Stanford University’s Center for Work, Technology and Innovation, when business leaders see what innovation actually requires, they often recoil. The right practices seem strange, even wrongheaded. Understandably, it’s hard for any executive to take action that will lose money today in order to test ideas that might never make money & #8212; in hopes one idea will make money tomorrow. Nevertheless, Sutton contends, that is just what cutting-edge companies do, bravely tackling ideas that at first blush seemed weird. From his research on such organizations, Sutton has developed eight techniques to move teams and companies from working by rote to innovating. The first two techniques are designed to provoke emotions that interrupt mindless action (provoke unpleasant emotions in others; make yourself uncomfortable). The second two are for smashing mindsets (treat everything like a temporary condition; ignore the experts). The third two help people identify and reject their dearest beliefs (plan to do something ridiculous; hold a sacred “cow” workshop). The last two are for exploding the composition of organizations and teams (bring in some slow learners; keep changing the composition of teams). Sutton cautions, however, that the exact methods a company uses to spark novel ideas and actions should differ depending on the situation. He recommends giving people freedom to play around with a wide variety of offbeat notions until bringing in new knowledge and helping people see old things in new ways finally enables the company to break from the past.

User innovation communities present a great advantage over manufacturer-centered development systems.

The external environment for innovation is an important driver, and industrial clusters offer special advantages.

Strategically outsourcing innovation can put a company in a sustainable leadership position.