IPPTChap002_rev_6th_ed_MDOforstudents.pptx

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Chapter 2
Sources of Innovation

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The Rise of “Clean Meat” 1
In late 2017, Bill Gates, Jeff Bezos, Jack Ma and others began funding efforts to grow “clean meat”.
Growth in demand for meat expected to outpace supply.
Animal production has large negative impacts environment: greenhouse gasses, heavy water and energy use.
Animal production is inefficient: 1 calorie of beef requires 23 calories of inputs versus 3 required for one calorie of “clean meat”.
Developing clean meat.
Jason Matheny founded New Harvest to promote research; collaborated with Dutch scientist and government.
Early efforts were very expensive ($1200 for first meatball).
By 2016 there were several startups and Tyson and Cargill were investing in it.

Impossible Burger 2.0

The Rise of “Clean Meat” 2
Discussion Questions:
What were the potential advantages of developing clean meat?
What were the challenges of developing it and bringing it to market?
What kinds of organizations were involved in developing clean meat?
What were the different resources that each kind of organization brought to the innovation?
Do you think people will be willing to eat clean meat? Can you think of other products or services that faced similar adoption challenges?

Overview
Innovation can arise from many different sources and the linkages between them.

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Creativity
Creativity: The ability to produce work that is useful and novel.
Individual creativity is a function of:
Intellectual abilities (e.g., ability to articulate ideas)
Knowledge (e.g., understand field, but not wed to paradigms)
Style of thinking (e.g., choose to think in novel ways)
Personality (e.g., confidence in own capabilities)
Motivation (e.g., rely on intrinsic motivation)
Environment (e.g., support and rewards for creative ideas)
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Creativity
Organizational Creativity is a function of:
Creativity of individuals within the organization
Social processes and contextual factors that shape how those individuals interact and behave
Methods of encouraging/tapping organizational creativity:
Idea collection systems (e.g., suggestion box; Google’s idea management system)
Creativity training programs
Culture that encourages (but doesn’t directly pay for) creativity.

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Theory in Action
Inspiring Innovation at Google
Google uses a range of formal and informal mechanisms to encourage its employees to innovate, including:
20% Time (all engineers are encouraged to spend 20% of their time working on their own projects)
Recognition awards
Google Founders’ Awards
Ad sense Ideas Contest
Innovation reviews

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Google Garage

Translating Creativity into Innovation
Innovation is the implementation of creative ideas into some new device or process.
Requires combining creativity with resources and expertise.
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Translating Creativity into Innovation
Inventors
One ten-year study found that inventors typically:
Have mastered the basic tools and operations of the field in which they invent, but they will have not specialized solely on that field.
Are curious, and more interested in problems than solutions.
Question the assumptions made in previous work in the field.
Often have the sense that all knowledge is unified. They will seek global solutions rather than local solutions, and will be generalists by nature
Such individuals may develop many new devices or processes but commercialise few.
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Theory in Action
Dean Kamen
The Segway HT: A self-balancing, two-wheeled scooter.
Invented by Dean Kamen
Described as tireless and eclectic
Kamen held more than 150 U.S. and foreign patents
Has received numerous awards and honorary degrees
Never graduated from college
To Kamen, the solution was not to come up with a new answer to a known problem, but to instead reformulate the problem
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Transforming Creativity into Innovation
Innovation by Users
Users have a deep understanding of their own needs, and motivation to fulfill them.
While manufacturers typically create innovations to profit from their sale, user innovators often initially create innovations purely for their own use.
E.g., Laser sailboat developed by Olympic sailors; Indermil tissue adhesive based on Superglue; early snowboards
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Transforming Creativity
into Innovation
Research and Development by Firms
Research refers to both basic and applied research.
Basic research aims at increasing understanding of a topic or field without an immediate commercial application in mind.
Applied research aims at increasing understanding of a topic or field to meet a specific need.
Development refers to activities that apply knowledge to produce useful devices, materials, or processes.

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Transforming Creativity into Innovation
Research and Development by Firms
Science Push approaches suggest that innovation proceeds linearly:
Scientific discovery  inventionmanufacturing  marketing
Demand Pull approaches argued that innovation originates with unmet customer need:
Customer suggestions  invention  manufacturing
Most current research argues that innovation is not so simple, and may originate from a variety of sources and follow a variety of paths.

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Transforming Creativity
into Innovation
Firm Linkages with Customers, Suppliers, Competitors, and Complementors
Most frequent collaborations are between firm and their customers, suppliers, and local universities.
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Transforming Creativity
into Innovation
Firm Linkages with Customers, Suppliers, Competitors, and Complementors
External versus Internal Sourcing of Innovation
External and internal sources are complements
Firms with in-house R&D also heaviest users of external collaboration networks
In-house R&D may help firm build absorptive capacity that enables it to better use information obtained externally.
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Transforming Creativity into Innovation
Universities and Government-Funded Research
Universities
Many universities encourage research that leads to useful innovations
Bayh-Dole Act of 1980 allows universities to collect royalties on inventions funded with taxpayer dollars
Led to rapid increase in establishment of technology-transfer offices.
Revenues from university inventions are still very small, but universities also contribute to innovation through publication of research results.
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Transforming Creativity into Innovation
Universities and Government-Funded Research
Governments invest in research through:
Their own laboratories
Science parks and incubators
Grants for other public or private research organizations
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Total R&D Expenditures and Percent of R&D Funds by Performing Sector, by Country 2015

Transforming Creativity
into Innovation
Private Nonprofit Organizations
Many nonprofit organizations do in-house R&D, fund R&D by others, or both.
The top nonprofit organizations that conduct a significant amount of R&D include organizations such as the Howard Hughes Medical Institute, the Mayo Foundation, the Memorial Sloan Kettering Cancer Center, and SEMATECH.
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Innovation in Collaborative Networks
Collaborations include (but are not limited to):
Joint ventures
Licensing and second-sourcing agreements
Research associations
Government-sponsored joint research programs
Value-added networks for technical and scientific exchange
Informal networks
Collaborative research is especially important in high-technology sectors where individual firms rarely possess all necessary resources and capabilities
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Innovation in
Collaborative Networks
As firms forge collaborative relationships, they weave a larger network that influences the diffusion of information and other resources.
The size and structure of this network changes over time due to changes in alliance activity.

1995 2000
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Innovation in
Collaborative Networks
Technology Clusters are regional clusters of firms that have a connection to a common technology.
May work with the same suppliers, customers, or complements.
Agglomeration Economies:
Proximity facilitates knowledge exchange.
Cluster of firms can attract other firms to area.
Supplier and distributor markets grow to service the cluster.
Cluster of firms may make local labor pool more valuable by giving them experience.
Cluster can lead to infrastructure improvements (for example, better roads, utilities, schools, etc.).
Agglomeration downsides:
Increased competition, knowledge leakage, congestion and pollution.
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Innovation in
Collaborative Networks
Likelihood of innovation activities being geographically clustered depends on:
The nature of the technology
e.g., its underlying knowledge base or the degree to which it can be protected by patents or copyright, the degree to which its communication requires close and frequent interaction;
Industry characteristics
e.g., degree of market concentration or stage of the industry lifecycle, transportation costs, availability of supplier and distributor markets; and,
The cultural context of the technology
e.g., population density of labor or customers, infrastructure development, national differences in how technology development is funded or protected.
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Innovation in
Collaborative Networks
Technological spillovers occur when the benefits from the research activities of one entity spill over to other entities.
Likelihood of spillovers is a function of:
Strength of protection mechanisms (e.g., patents, copyright, trade secrets)
Nature of underlying knowledge base (e.g., tacit, complex)
Mobility of the labor pool
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Research Brief
Knowledge Brokers
Hargadon and Sutton point out that some firms (or individuals) play a pivotal role in the innovation network – that of knowledge brokers.
Knowledge brokers are individuals or firms that transfer information from one domain to another in which it can be usefully applied. Thomas Edison is a good example.
By serving as a bridge between two separate groups of firms, brokers can find unique combinations of knowledge possessed by the two groups.

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Chapter 2 Summary
Creativity is the underlying process for innovation.
Innovation sometimes originates with individual inventors.
Innovation can also originate with users who create solutions to their own needs.
A firms’ research and development is considered a primary driver of innovation.
Firms often collaborate with a number of external organizations
Many universities have a research mission
Government also plays an active role in conducting research and development

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Discussion Questions
1. What are some of the advantages and disadvantages of a) individuals as innovators, b) firms as innovators, c) universities as innovators, d) government institutions as innovators, e) nonprofit organizations as innovators?

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Discussion Questions
2. What traits appear to make individuals most creative? Are these the same traits that lead to successful inventions?

3.Could firms identify people with greater capacity for creativity or inventiveness in their hiring procedures?

4. To what degree do you think the creativity of the firm is a function of the creativity of individuals, versus the structure, routines, incentives, and culture of the firm? Can you give an example of a firm that does a particularly good job at nurturing and leveraging the creativity of its individuals?
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5. Several studies indicate that the use of collaborative research agreements is increasing around the world. What might be some of the reasons that collaborative research is becoming more prevalent?
Discussion Questions

Hewlett-PackardCo
IBMCorp
MotorolaInc
BayerAG
CSIRO
ElanCorpPLC
HitachiLtd
MagazineHouseCoLtd
MatsushitaElectricIndustrial
MicrosoftCorp
MonsantoCo
QUALCOMMInc
Seven-ElevenJapanCoLtd
StressgenBiotechnologiesCorp
SunMicrosystemsInc
ToyotaMotorCorp
Advantages Disadvantages
Individuals Many creative ideas originate individuals;
Users may best understand their own unmet
needs;
Users may have great incentive to solve their
own problems;
Etc.
Individuals often have very
limited capital resources to
invest in an innovation
project;
Many innovations require a
broader range of
knowledge and skills than
any individual possesses;
Etc.
Firms Significant capital to invest;
Complementary assets to produce, distribute,
etc.;
Management systems to organize innovative
efforts,
Etc.
May reject projects that
don’t appear to have an
immediate commercial
return;
May base project choices
on commercial return
rather than importance to
customers or society;
Etc.
Universities Typically have extensive knowledge and other
resources;
Can often invest in long-term or risky projects
for purposes of advancing science (rather than
being pressured for immediate commercial
return);
Often have ties to multiple other external entities
(e.g., government, non-profits, etc.)
May pursue esoteric
projects rather than those
with immediate
applications;
May lack skills or
resources to implement
innovations in the
marketplace,
Etc.
Lack of financial discipline
may lead to less efficient
development processes.
Government Like universities, may have extensive knowledge
and other resources; and
Can often invest in long-term or risky projects
for purposes of advancing science (rather than
being pressured for immediate commercial
return);
Typically has great influence over other
stakeholders or contributors to innovation (e.g.,
universities, firms, non-profits);
Etc.

May lack complementary
resources to implement
innovation in the
marketplace;
Lack of financial discipline
may lead to less efficient
development processes,
Etc.
Nonprofits Often have ties to multiple other external entities
(e.g., universities, non-profits, etc.);
May have mission-based focus that enables them
to pursue long-term or risky projects;
May be reliant on external
sources of funding such as
charitable donations or
grants, which can constrain

Advantages

Disadvantages

Individuals

Many creative ideas originate individuals;
Users may best understand their own unmet needs;
Users may have great incentive to solve their own problems;
Etc.

Individuals often have very limited capital resources to invest in an innovation project;
Many innovations require a broader range of knowledge and skills than any individual possesses;
Etc.

Firms

Significant capital to invest;
Complementary assets to produce, distribute, etc.;
Management systems to organize innovative efforts,
Etc.

May reject projects that don’t appear to have an immediate commercial return;
May base project choices on commercial return rather than importance to customers or society;
Etc.

Universities

Typically have extensive knowledge and other resources;
Can often invest in long-term or risky projects for purposes of advancing science (rather than being pressured for immediate commercial return);
Often have ties to multiple other external entities (e.g., government, non-profits, etc.)

May pursue esoteric projects rather than those with immediate applications;
May lack skills or resources to implement innovations in the marketplace,
Etc.
Lack of financial discipline may lead to less efficient development processes.

Government

Like universities, may have extensive knowledge and other resources; and
Can often invest in long-term or risky projects for purposes of advancing science (rather than being pressured for immediate commercial return);
Typically has great influence over other stakeholders or contributors to innovation (e.g., universities, firms, non-profits);
Etc.

May lack complementary resources to implement innovation in the marketplace;
Lack of financial discipline may lead to less efficient development processes,
Etc.

Nonprofits

Often have ties to multiple other external entities (e.g., universities, non-profits, etc.);
May have mission-based focus that enables them to pursue long-term or risky projects;
May have credibility advantages for eliciting the cooperation of other stakeholders;
Etc.

May be reliant on external sources of funding such as charitable donations or grants, which can constrain capital resource;
May lack complementary resources to implement innovation in the marketplace;
Etc.