Acquisition and development of technological competencies Internal R&D: implies project financing to increase the necessary competencies; launch

spinoff by developing competencies (both sides have advantages); firm vs garage dilemma (small businesses extern R&D) Corporate venturing: the Co behaves as a venture capital investor and takes up stakes in small, innovative firms (spinoffs or not). Purposes: innovation venturing, ecosystem venturing (finance to firms providing complementary products), harvest venturing (makes excess internal resources look for revenue in the market), private equity venturing (financial diversification). Innovation venturing is a hybrid between internal R&D, acquisition and joint venture. Hiring experts: it is a hybrid between internal R&D and acquisition. Problem due to the capacity to integrate individual competencies; this grows with the number of resources acquired (problem on individual integration) Strategic Alliances: agreement between 2 or more Cos, contractual links not institutional; free riding (reduction of engagement of some allies, hoping that the other does it all) Joint-Venture: a new organizational and legal entity is created from the union of the participant Cos; greater financial and organizational commitment with respect to the other type of acquisitions; it is used, from the technical point of view, for radical innovations; from the economical point of view to exploit research results transforming the J-V in a real Co that does development-pr oduc tioncommercialization. Co-development (financing component suppliers R&D activities): provide sufficient incentive to pursue the development of the own competencies (if financed Co does not have enough resources); sometimes it is a stake in Venture Capital. Acquisition of firm: fast but risk for 2 motives: difficulty and time required for integration with acquiring Co (routine, organizational differences, Human Resources retention); risk of having to pay a price to be delivered to the shareholders of the acquired Co. Outsourcing R&D to third-party organizations: usually given to Universities, Research Centers, Consulting Societies. The Co increases its own competencies only if the knowledge generated is explicit and formalized. License acquisition: the Co abdicates to acquire the skills in a direct way; exploits, at the beginning, the imitation. Total outsourcing: more marked abdication to the development of the desired skills; the Co does not designs and doesnt produce the components that require the missing skills; private labeling (acquire from the outside and put owns label) ANSOFF MATRIX (Productlau Portfolio Management) The Co is seen as a portfolio of financial activities each one corresponding to a type of product. The Co strategy coincides with the capacity of optimizing the profitability of this portfolio implementing go-kill decisions. Ansoff identified 2 dimensions on which to value the products, Time in market (1) and Time of Technology (2): New-Existing: Market development New-New: Diversification Existing-Existing: Market penetration Existing-New: Product development Bass Diffusion Model (Sales forecasting with diffusion) The Bass model can be interpreted as a survival model. It studies the diffusion of a new product under the following constraints: innovative product, no replacement ratio or complementary; durable product, study the sales of a monopolist,; for the whole life cycle the marketing levers are kept constant; the adoption process is binary (buy or not) which restricts sales to the consumer market (excluding that of business). n(t)=p*[M-N(t)]+q*[N(t)/M]*[M-N(t)]. At any moment the new regulations are due to the sum of 2 effects: - Innovative phenomenon: linked to customers who depend on coeff p and of the share of customers who havent adopted yet. - Imitative phenomenon linked to customers who adopt for reasons related to diffusion, depends on the coefficient q, the proportion of customers who havent still adopted and on the share of customers [N (t) / M] that have adopted giving rise to the phenomenon of imitative if I prevail on innovative development of logistics (diffusion imitative) BCG MATRIX (Product Portfolio Mgmt) Boston Consulting Group propose an instrument of analysis of the product portfolio, the products are analyzed over 2 dimensions: the capacity to generate cash flow (1)(mkt share/ mkt share of 1st competitor) and the capacity to absorb the cash flow (growth rate). (1)High-(2)High: Star (pdts that posess a high market share in a growing market) 1High-2Low: Question Mark (low market share with strong growing rate, represent the future stars or cash cow. Low-High: Cash cow (the cash flows generated are invested in ? Low-Low: Dog (pdt with low mkt share in mature industries, will be abandoned)

Cannibalization between vertically differentiated products It is the subtraction of market share to high-end products from low-end products. If utility curves for two segments do not cross, you have cannibilization (sensitivity to quality is different for the two segments) A is better off purchasing the low quality product. Avoiding cannibalization: Reduce price of high quality product, A gets the same surplus as with B (profits suffer), Make the sensitivity curve for A steeper (marketing), Degrade the low quality product (locate it to the left of the intersection between lines, Differentiate A and B horizontally, Give B features that B likes and A dislikes (e.g. a consumer product with predefined functions and no flexibility for professional use), Sell either A or B (niche strategy), Launch A before B Christensen - Why can innovations be disruptive? why do incum bent firms fail to face them? 1.Old technology does not keep pace with growing or new customer needs for performance, while new technology does combined with misaligned resources and organizational inertia. (competence destruction and competency traps) 2.New technology satisfies unmet customer needs or entirely new markets combined with focus on reference markets and powerful customers. The problem lies especially with resource allocation and project selection, generally driven by market demand (market risk is overweighed with respect to technical risk. Middle managers, who are in the position of testing new technologies but cant change the givens (market, org , manufacturing, facilities, etc),. Some often start their own new companies. Christensen and Bower highlight that the inability of incumbents to successfully face radical innovations is due to an excessive focus on current needs of the market. When a radical innovations appear the services offered by the new technology are generally lower than those offered by the existing technology and lower than the market needs, so the incumbent considers the new entrants as distant threats, but ignoring the possibility that the new technology is able to meet the needs of a new market, with fewer demands and more cost conscious. In this way the new technology improves performance and attacks the previous market. oncurrent Engineering Advantages and Disadavantages It consists in exploring different parallel solutions causing an increase in development costs but a decrease in the risk in terms of costs and time, as determined at the beginning, when I decide how many alternatives make leave. Upstream and downstream activities are overlapped in time and the flows of info between them occur through small packages. Advantages Time reduction: time-tomarket, fast entry in the market (first-mover advantage), incorporation of superior technology in the product. Qty improvement. Disadvantages: Downstream designers must work on imprecise and vague information; They must also often revise their work when upstream information changes (incentives are needed in order to avoid having them wait for the design freeze); The project becomes more complex so it is difficult to use formal project management techniques, the best practice suggests using inter-functional and colocated teams ( lower efficiency and low effectiveness in large-scale projects) Cooper Model (Sales forecast with stationary demand) Satisfaction with PPM is associated to the quality of the process and the alignment to needs of management. Vendite= (domanda a livello di mercato)*(quota di mercato potenziale)*awarness*availability Questo modello si riscontra soprattutto con prodotti maturi regolati da domanda stabile, le previsioni sono fatte estrapolando la serie storica della domanda passata. CORE COMPETENCIES (Danneels-Helfat and Raubistek) Core competencies are those capabilities that are critical to a business achieving competitive advantage. They are a sort of mixture of the specific traditional technological discipline of the org. The org starts from these competencies to det. their products and their potential markets. Thanks to diversification based on a common technological core the Co will enjoy of economies of scale on R&D, while focusing on core competencies will lead to decouple the technology from the market. Daneels says that the company has 3 types of competencies: Product portfoliomanaged: many technologies, many markets; synergies in cash, some infrastructure and management culture. Technological core competence-led: core technologies, many markets, synergies in technologies. Market core competence-led: many technologies, core markets, synergies in markets. From the development of these competencies the Co will have a diversification first by markets and then by product managing this portfolio in coherence with its core competencies as well as the economic benefits. The Co focused on the core competencies will have strong economies of scale on investment in base research. Spillover accumulated experience in a market that is applied with little effort in different markets. Helfat e Raubistek (Competencies and products co-evolve) sustain that R&D and marketing allow the growth of the competencies of the Co and its strategic positioning. The development plan for market/products has a double interaction with the competencies of the Co and with the learning system, and represents the output of the innovation process and the governance tool of the inn process.

DFMA Methods and instruments for implementing it A methodology and tool set used to determine how to simplify a current or future product design and/or manufacturing process to achieve cost savings. DFMA allows for improved supply chain cost management, product quality and manufacturing, and communication between Design, Manufacturing, Purchasing and Management. Methods: authorizations from downstream, past projects, databases, Computer aided programs, design manuals, checklists and design scorecards. DFMA deals with many phases: Supply of components, parts identification, skills movement, development, inspection and disassembly. Goal is to unify the components that must not be done in different materials, and that united does not represent an obstacle for the assembling of other components. Differentiation Vertical Horizontal Horizontal: by varying product features, utility increases for some customers and decreases for others (e.g. taste of food products). Allows you to get close to the maximum utility of a given segment (you can ask for a higher price) Vertical: by varying product features, utility increases or decreases in the same sense for all customers, albeit with varying degrees (e.g. fuel consumption of a car). Price discrimination allows higher profits. Risk of cannibalization Dual Ladder In which context does it introduction make sense? Some Cos use dual ladder paths in case that the hierarchical promotion of a gatekeeper is risky because it involves the growing of managerial responsibility and the decrease in those techniques. Dual ladder are career paths parallel in which it is possible, according to the ability, make grow the responsibility level, splitting managerial and technical aspects. It is a solution to the problem of the gatekeeper career path, in which it is difficult to find equilibrium of the 2 figures. Except for the Cos in which the matrix structure allows a different placement of the 2 career paths (for functions in the technical path, for project in the managerial path). DYNAMICS OF INNOVATION (Abernathy-Utterback)It applies to nonassembled goods (process industry) and services. It has 3 phases.Fluid (incubation): experimental period with several architectural typologies. Main strategic challenges: entering with the right technology, trying to make your design dominant. Switching technology Competitive emphasis: functional performance Innovation stimulated by opportunities in: market and technology Predominant type of innovation: radical on product Production processes: flexible Equipment: general purpose, requires skilled labor Materials: generally available Plant: small scale Organization control: informal and entrepreneurial. Transitional (diffusion): Main strategic challenges: managing growth and surviving the shakeout. Competitive emphasis: product variation Innovation stimulated by opportunities in internal technical capability Predominant type of innovation: radical on process Production processes: becoming rigid Equipment: islands of automation Materials: specialized, from suppliers or through vertical integration Plant: Growing Organization control: large-scale SpecificMain strategic challenges: looking for further innovations Competitive emphasis: cost and qty Innovation stimulated by opportunities in: pressure to reduce cost and improve qty Predominant type of innovation: incremental on product and process Production processes: rigid Equipment: special-purpose and highly automated Materials: specialized, sometimes through vertical integration Plant: large-scale Organization control: bureaucratic GATEKEEPERSAn organization cannot give up access to the technical competencies in development abroad. Solutions: personal mobility (adaptation problems, routines, language) and / or technological gatekeeper. These figures are the center of information flows; internal and external to the working team; is the person most exposed to the info from the outside; ability to consult the literature, even the least accessible thanks to a deep specialized knowledge; learns knowledge, he investigates and interprets its according to culture, language and to the needs of the enterprise in order to make them usable

Helfat & Raubitschek Competencies and products co-evolve Propose one schema in which the R&D and marketing activities compete to define the growth of the Cos competencies and of its strategic positioning. There is a double interaction between competencies of the Co (integrative and core) and the development plan of market/produc t. The development plan is used to increase the competencies already possessed (incremental learning or competencies enhacing) INFORMATION CHANNELS IN INNOVATION Allen His studies say that there are 2 phases of research: Twin projects (to study different problem-solving strategies) and Communication network analysis (to study interaction between personnel engaged in product design and development). Phase 1 The role of literature: Hypothesis that it has a key role in suggesting technical solutions. There is a wide variety of sources being used, this use depends on the specific objective. The closer a source is to the experience of the firm, the higher the probability of being used. Extremely limited use. Main source are personal contact with clients and other individuals; conditions in negative way the success of the project and is associated to the development of inferior technical solutions (because who access it are planners with less experience); minimum effort needed. Phase 2 Communication Network Analysis: Communication diversity has a positive impact on the project??? Technological Gatekeepers: see dedicated paragraph Organization and office layout: There is a strong relationship between physical proximity and probability of communication (even after controlling for organizational proximity). Companies sometimes build facilities for R&D with the objective of supporting communication flows. Open space l ayouts ( flexibility, proximity, high utilization rate of surface, lack of privacy) Areas used as nodes of attraction and communication (passageways, or service areas) Nonterritorial office, divided according to function (quite radical approach, has seldom been used but is coming back) Desks for individual work Benches for small-group work Meeting rooms Lounges for thinking Project rooms and situation rooms Personal Contact: best information source, internal or external; internal doesnt, however, represent a factor likely to determine a significant difference of the success of the project (different dimensions projects); the variable that can be mostly associated with the success of the project is the diversity of communication. The best performance is obtained looking for informational contacts outside of the organizational context. KNOWLEDGE FORMS Factual knowledge (know what): contains data relative to facts and events, it is explicit, codified and incorporated into the capital. Causal knowledge (know why): expresses the cause of the phenomena by scientific methods or empirical approaches; depending in the process that has generated it can be tacit and non codifiable or explicit and codifiable. Procedural knowledge (know how): form that allows to develop the activity (explicit or cod. Or tacit and non cod.) Positional knowledge (know who): has by object position and place of incorporation of other knowledge; allows to identify in an org or in a wider context what has determined knowledge (explicit and cod. Or tacit) KNOWLEDGE DIMENSIONS (Features) Embedded in people vs. incorporated capital: stored and used by man or embedded in physical media (books-manuals-filesdatabase) Possible to codify vs. non codifiable: codification allows to explicitly, store and transmit it; the non codificable can be transmitted only by imitation or by observation of the acts of those who transmit to those who receive (learning by doing) Tacit vs. Explicit: who possess it can use it but cant express it formally (sometimes you cant recognize that you own it); explicit: if the possessor is able to recognize it or express it. Public vs. private good: Pubblico: when its enjoyment by an individual dont reduce the enjoyment of the other (the possibility to enjoy it depends on the marginal cost of duplication of those who incorporate and of the correlated links. Private: tacit knowledge non codifiable, its availability to others depends on the possibility that they have to interact. Kotlers Theorem (Demand Forecasting) Market share models are usually based on Kotlers theorem (market share si depends on the attractiveness Ai of all competing goods). Technical features of the product must be associated to its attractiveness.

Axiom 1: Ai 0, > 0 Axiom 2: Ai = 0 si = 0 Axi om 3: Ai = Aj si = sj Axiom 3: if Ai := Ai + , sj is a function of , not of I LENS MODEL It is a model that tells Choice is based on a perceptual process of product quality (intrinsically and relative to competition) It is a model that indicates how the consumer does a focusing process starting from the awareness of his need up to the purchase decision. Follows a research of information of products that can help meet those needs. The info gathered by the consumer is subject to 1 perception process. Man cant handle lots of data and tend to aggregate in a small number of perceptual dimensions. Consumer implement a comparison on the basis of these perceptions to form their preferences. LOCK-IN PHENOMENON Once a standard is in a superior product but not complying with it will have little possibilities of success on the market. This phenomenon called the lock-in is due to the fact that the purchase of a complying product implies investment only partially recoverable if the standard changes. These investments discourage the introduction of an alternative standard unless it provides really good advantages or low conversion costs. For this reason the attempt to replace a standard with another can succeed only if, together with the technical performance, attention is paid to favor the transition granting the compatibility with the older standard. Lock-in is an industrial policy problem when a lower technical standard makes slow the development of an industry. It is a problem of industry economic efficiency when fixing rapidly a standard anticipates the growth of the industry, but at the same time have the risk that a superior technology may emerge and be discarded afterwards. Leave the market the task of choosing a standard often takes to an inferior choice, because the org will have the incentive to launch the product before to anticipate the competitors with an inferior performance level.

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