Innovation Management

Manuel Sosa Associate Professor of Technology and Operations Management

INSEAD

Which are the most innovative companies today?

Most Innovative Companies

Apple Google

Microsoft IBM

Toyota Amazon

LG Electronics BYD GE

Sony

Bloomberg BusinessWeek, April 25 2010

Uncovering Opportunities in a Global Organization

•  Nypro’s background -  What’s the innovation challenge?

•  Innovation process at Nypro -  How does it work? How is it managed?

•  The NovaPlast Decision

•  Coffee break and group exercise

•  Wrap-up discussion

Nypro’s Background

Source: www.nypro.com

Nypro’s Background

Clinton, MA

Puerto Rico

Chicago North Carolina

Germany Singapore

Innovation Process at Nypro

Knowledge Evolution Cycle

GENERATION • Scanning

• Recombination

SELECTION • Evaluation

• Legitimization

REPLICATION • Knowledge sharing • Adaptive variation • Problem solving

RETENTION • Enactment • Routinization

Adapted from Zollo, M. and Winter, S.G. 2002. “Deliberate

learning and the evolution of dynamic capabilities.” Org. Sci. 13 (3), 339-351.

External Stimuli & Feedback

Excerpted from Innovation Tournaments by C. Terwiesch and K. Ulrich, Harvard Business Press, 2009

Excerpted from Innovation Tournaments by C. Terwiesch and K. Ulrich, Harvard Business Press, 2009

Excerpted from Innovation Tournaments by C. Terwiesch and K. Ulrich, Harvard Business Press, 2009

Innovation at Intel

•  CEO Grove’s view on his role in decisions to continue to support or not a business activity:

“You need to be able to be ambiguous in some circumstances. You dance around it a bit, until a wider and wider group in the company becomes clear about it. That’s why continued argument is important. Intel is a very open system. No one is ever told to shut up, but you are asked to come up with better arguments. People are allowed to be persistent.”

Burgelman, R.A. 1991. “Intraorganizational ecology of strategy making and organizational adaptation: Theory

and field research.” Org. Sci. 2 (3), 239-261.

NovaPlast Decision

•  Why do they want to try NovaPlast machines?

NovaPlast Decision

Alternative 1

•  Build a new plant that uses ONLY Novaplast machines

Alternative 2 •  Install a few

Novaplast machines in every plant

Alternative 3 •  Install a Novaplast

machine in a single plant

•  Let the “internal innovation market” spread the innovation throughout the company

Your Group Assignment

•  Make a simple “sketch or diagram” to represent visually each alternative

•  What do you think Lankton did? WHY?

•  What would you do? WHY?

•  Bring summary of your thoughts in one flip chart

Organizational Capabilities

Sustaining or Disruptive?

•  Internet commerce •  Digital photos •  mp3 format

•  Flash memory •  E-books

•  Open-source development •  Total quality management

Types of Innovation

The Case of Nokia

•  Suffered an attacked from architectural innovation -  Clamshell designs

Source: The New York Times, Sept 26, 2010

“It was very early days, and no one really knew anything about the touch screen’s potential,” Mr. Hakkarainen explained. “And it was an expensive device to produce, so there was more risk involved for Nokia. So management did the usual. They killed it.”

•  Suffering an attack from radical-disruptive innovation - Touchscreen in smartphones

Reverse Innovation at GE

•  A surgical C-arm -  “A high-quality, high-priced product designed for

hospital in wealthy countries.” -  A proposal to “develop, manufacture, and sell a

simpler, easier-to-use, and substantially cheaper product in India.”

Source: Immelt, Govindarajan, and Trimble. “How GE is Disrupting Itself.” Harvard Business Review. October 2009.

“…to no one’s surprise, it was not approved”

• “A simple, streamlined global product line was much more efficient than custom offerings” • “fears that a lower-priced product would weaken the GE brand and cannibalize existing sales” • “lower-priced products would drag down overall margins” • “why the energies of GE’s scientists and engineers should be diverted from [top dollar] projects”

Reverse Innovation at GE

Source: Immelt, Govindarajan, and Trimble. “How GE is Disrupting Itself.” Harvard Business Review. October 2009.

• A (cheap) portable, PC-based ultrasound machine

- “The products owe their successful development to an organizational anomaly in GE…” - Developed by an independent unit, within the ultrasound business unit, based in Wuxi, China.

Key Lessons

•  Discovering innovation opportunities by solving problems

•  Two distinct strategies to discover and deploy innovation opportunities -  Top-down (deliberate)

-  Bottom-up (emergent)

-  Each strategy require different organizational mechanisms to implement it

•  Customer choice is a critical decision because it determines the capabilities to develop

•  Understanding current organizational capabilities is critical

-  When is an organization, as opposed to the individuals within it, incapable of implementing certain type of innovations?

  A new lens to evaluate innovations: sustaining vs disruptive

Nypro Today

•  Still focused on precision injection molding -  “The vast majority of Nypro's machines are less than five

years old-all and are high precision machines”

•  Employs over 17000 people •  Has over 1500 machines in 44 manufacturing locations in 15

countries around the world •  Sales have reached the billion dollar level •  It is one of the largest ESOP (Employee Stock Ownership Plan)

in USA •  Recently re-organized into market-focused global business

units that “create direct interface between customers and Nypro managers at all levels”

Adapted from http://www.nypro.com

Implications for Your Organization

•  Where are innovation opportunities coming from at your organization?

-  Who generates those innovation opportunities? -  How do you select which innovations to work on?

-  What’s the process to generate and select innovations? -  What are the assumptions and limitations of such a process?

-  How can you help?

•  What are the limits of the core capabilities of your organization? –  What sorts of innovations are sustaining to your organization? –  Which ones are disruptive? –  How can you disrupt your competitors?