Slide 5.1                    Managing intellectual property                                Chapters 5 and 6            htt...
Slide 5.2               http://www.ausinnovation.org/articles/creating                -an-innovation-mindset.html        ...
Slide 5.3                            Learning objectives               Understand the role of intellectual property in   ...
Slide 5.4                             Profiting from innovation               For an innovation to be profitable:        ...
Slide 5.5                       Mechanisms of appropriability               Secrecy                   Trade secrets     ...
Slide 5.6                                   Trade secrets               Often applied to ways of working, price costings ...
Slide 5.7                                                                   Trade secrets                                 ...
Slide 5.8                        Types of intellectual property              Intellectual property                        ...
Slide 5.9                                    Copyright ©               Applies to:                   Original literary, ...
Slide 5.10                                                                   Copyright                 "Dan Brown copied f...
Slide 5.11                                Registered design                Intended for designs with aesthetic appeal    ...
Slide 5.12             Registered design                Paul Trott, Innovation Management and New Product Development, 4th...
Slide 5.13                             Registered trademark ®                Distinctive names, marks and symbols identif...
Slide 5.14                                                         Trademarks                                             ...
Slide 5.15                                           Patents                20-year monopoly to make, use or sell        ...
Slide 5.16                              Limitations of patents                Annual fees required                Nation...
Slide 5.17                                                  Limitations of patents                                        ...
Slide 5.18                       Use of patents in innovation                Patent information is available to the publi...
Slide 5.19                 Do patents foster or hinder innovation?                In case of HIV research there are over ...
Slide 5.20                          Trademarks & Brands                Differentiates company‟s products                ...
Slide 5.21                              Brand extentions                Brands symbolise quality and image that can be   ...
Slide 5.22                        Chapter 6             Managing organisational knowledge                        Paul Trot...
Slide 5.23                   Managing organisational knowledge             1.   Introduction: The importance of technology...
Slide 5.24                    The importance of technology             • The battle of Trafalgar 1805             • Nelson...
Slide 5.25                          Technology as an asset             Product technology advantages             • Pfizer‟...
Slide 5.26                 Technology as an asset (Continued)             Process technologies             • Enterprise Re...
Slide 5.27             The resource-based view of the firm (RBV)             The resource based view of the firm (RBV) is ...
Slide 5.28                     The resource-based view of the                         firm (RBV) (Continued)             R...
Slide 5.29                            Prahalad and Hamel                In 1990 Prahalad and Hamel changed the           ...
Slide 5.30                            Prahalad and Hamel             Recommended that the organisation                   ...
Slide 5.31                       Core Competency: Examples                Sonys core competency was miniaturisation and t...
Slide 5.32                   The Resource Based View (RBV)             Since Prahalad and Hamel‟s article was published, m...
Slide 5.33                      Perspectives on Competitive                                Strategy                       ...
Slide 5.34                     RBV and Core Competencies                A key feature of the RBV is the search for core  ...
Slide 5.35             RBV Framework              Paul Trott, Innovation Management and New Product Development, 4th Editi...
Slide 5.36                     The Resource Based View (RBV)             Market Based Resources include:             Cult...
Slide 5.37              The Core Competency             Concept; Some Definitions              Paul Trott, Innovation Mana...
Slide 5.38                 Core Competencies Vs Strengths              Understanding core competencies makes             ...
Slide 5.39             Core Competencies: Some Definitions                        Paul Trott, Innovation Management and Ne...
Slide 5.40                  Core Competencies: Some Definitions             What the theorists say             “Few compan...
Slide 5.41                   Core Competencies: Some Definitions             What the practitioners say                   ...
Slide 5.42                    Core Competencies: Some Definitions             What the practitioners say             “ Fir...
Slide 5.43                   Core Competencies: Some Definitions             What the practitioners say             “Core ...
Slide 5.44                          The Identification Problem                A key task for management is to identify wh...
Slide 5.45                 Core Competencies Vs Strengths             Identifying core competencies is not just a        ...
Slide 5.46                       Core Competencies             At least three tests can be applied             [to interna...
Slide 5.47                       Access to Broad Markets              A core competency must exist in more than one or   ...
Slide 5.48                      Access to Broad Markets                            (Example)             Black & Decker‟s...
Slide 5.49       Significant Contribution to Customer Benefits             A core competency must make a significant     ...
Slide 5.50                 Significant Contribution to Customer Benefits                                   (Example)      ...
Slide 5.51                      Difficult for Competitors to Imitate             Core competencies should be:             ...
Slide 5.52                     Difficult to Imitate (Example)             Dell Computers has several core competencies    ...
Slide 5.53              A Framework for Identifying                  Core Competencies                                    ...
Slide 5.54                                Distinctions             “It is essential to make the distinction between      ...
Slide 5.55                     Core Competencies                Core competencies are skills or                 assets   ...
Slide 5.56                           Core Products             Core products are the physical embodiment of             o...
Slide 5.57                       End Products             End products are the finished articles               which are s...
Slide 5.58                           The Tree Analogy             The corporation, like a large tree, grows from its      ...
Slide 5.59             The Tree Analogy                                           End Products                            ...
Slide 5.60                                  Conclusions                The core competency concept provides an           ...
Slide 5.61                                Conclusions             The Resource Based View:              takes account of ...
Slide 5.62                              Firm‟s capabilities                        Intellectual                        Fir...
Slide 5.63                              Tacit knowledge             We often know more than we can tell . . .             ...
Slide 5.64                                                       Core competencies                                        ...
Slide 5.65                      Turning technology into profits                      Low    Negligible                    ...
Slide 5.66             Technology development effort required?              Technology life cycles and              S-curv...
Slide 5.67             Knowledge embedded in relationships             shared knowledge             embedded in relationsh...
Slide 5.68             Internal knowledge accumulation process                                   Informal and formal discu...
Slide 5.69                      The degree of innovativeness             •   Leader/offensive             •   Fast followe...
Slide 5.70                   Product              Pioneer(s)                          Imitator/later entrant(s)           ...
Slide 5.71                      Habits of Innovative Companies             1.   Deep understanding of the customer and    ...
Slide 5.72                                     Habits 2             3. An Open Innovation model: Open collaboration       ...
Slide 5.73             6. Human intellect/creativity:                Development of skills;                Knowledge bas...
Slide 5.74                      Some definitions of innovation                "Innovation . . . is generally understood a...
Slide 5.75                                  Definitions 2                "All innovation begins with creative ideas. It i...
Slide 5.76                                Definitions 3                Creative insights leading to significant          ...
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Lecture 3 organisational knowledge

  1. 1. Slide 5.1 Managing intellectual property Chapters 5 and 6 http://www.ausinnovation.org/articles/ted-sixth-sense-technology.html Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  2. 2. Slide 5.2  http://www.ausinnovation.org/articles/creating -an-innovation-mindset.html  http://www.ausinnovation.org/articles/ted-sixth- sense-technology.html Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  3. 3. Slide 5.3 Learning objectives  Understand the role of intellectual property in appropriating gains from innovation  Understand different forms of protection available for intellectual assets  Appreciate the limitations of the patent system Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  4. 4. Slide 5.4 Profiting from innovation  For an innovation to be profitable:  The technology underlying the product must work  The product must create value for the customer/consumer  The innovator must be able to appropriate (capture) enough of the value to make a profit  Value can be lost to competitors, buyers, suppliers, etc. (Winter, 2000) Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  5. 5. Slide 5.5 Mechanisms of appropriability  Secrecy  Trade secrets  Legally protected intellectual assets are termed intellectual property (IP)  Control of complementary assets  Other assets such as distribution, service capability, customer/supplier relationships, complementary products  Lead time  First-mover advantage (Winter, 2000) Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  6. 6. Slide 5.6 Trade secrets  Often applied to ways of working, price costings or business strategies  Also applied to products (e.g. Coca Cola)  Legal definition unclear  Maintain secrecy during product development  Risk of information leakage?  Inhibits internal knowledge transfer?  Limits inter-company collaboration?  Difficult to maintain once marketed  Reverse-engineering by competitors?  No protection against independent invention by others Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  7. 7. Slide 5.7 Trade secrets No sign of the recipe on the can! “The secret to one of the worlds most famous brands lies deep in a bank vault somewhere in Georgia, US. Its exact location is reportedly known only to between two and four Coca-Cola executives. It is rumoured that measures are employed to protect the chosen few – the executives never travel together, and must approve a successor should one of them die. Outlets which make the drink are simply supplied with syrups and other ingredients from Coca-Cola – but not the original recipe. People have revealed what they claim to be the official recipe after analysing the drink, but Coca-Cola remains tight-lipped.” Source: Tom Geoghegan, „What we still don‟t know‟, bbc.co.uk/1/hi/business 2 nd June 2005 Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  8. 8. Slide 5.8 Types of intellectual property Intellectual property Key features Patent Offers a 20-year monopoly; for new products or manufacturing processes, or improvements to an existing product or process, which was not previously known Copyright Provides exclusive rights to creative individuals for the protection of their literary or artistic productions Registered design Registration of the outward appearance of an article; provides exclusive rights for up to 25 years Registered trademark A distinctive name, mark or symbol identified with a company‟s products Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  9. 9. Slide 5.9 Copyright ©  Applies to:  Original literary, dramatic, musical and artistic works (70 years a.d.)  Sound recordings, films, broadcasts and cable programmes (50 years post publication)  Typographical arrangements or layout of a published edition (50 years post publication)  Automatic protection  Cannot copyright ideas  Must be in tangible form (e.g. written)  Copyright applies to the presentation of the idea. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  10. 10. Slide 5.10 Copyright "Dan Brown copied from The Holy Blood and the Holy Grail and therefore the publication of the result by the defendant is in infringement of the copyright of my client in the United Kingdom." "The authors historical conjecture has spawned many other books that developed aspects of this conjecture in a variety of directions. But none has lifted the central theme of the book." Source: Lawyers for Baigent & Leigh, February 2006 Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  11. 11. Slide 5.11 Registered design  Intended for designs with aesthetic appeal  Toys, electrical appliances, packaging, etc.  New designs:  Not published in the UK  Materially different appeal to the eye.  Outward appearance of an article  Actual shape, configuration, pattern, etc.  Maximum of 25 years  Exclusive rights for initial five years, renewable for up to five five-year periods  Similar in operation to the patent system Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  12. 12. Slide 5.12 Registered design Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  13. 13. Slide 5.13 Registered trademark ®  Distinctive names, marks and symbols identifying a company‟s products  Must be:  Distinctive in itself  Non-deceptive  Not confusing.  International registration  Many brands are registered trademarks  Licensing Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  14. 14. Slide 5.14 Trademarks Orange colour clash set for court A row over the colour orange could hit the courts after mobile phone giant Orange launched action against a new mobile venture from Easyjets founder. Orange said it was starting proceedings against the Easymobile service for trademark infringement. Easymobile uses Easygroups orange branding. Founder Stelios Haji-Ioannou has pledged to contest the action. The move comes after the two sides failed to come to an agreement after six months of talks. Orange claims the new low-cost mobile service has infringed its rights regarding the use of the colour orange and could confuse customers – known as "passing off". Source: bbc.co.uk 20th February 2005 Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  15. 15. Slide 5.15 Patents  20-year monopoly to make, use or sell  Legal right to prevent others using the invention  Public disclosure of details of the invention  Novelty  Must not be part of „state of the art‟  Words, publications, anticipation  Inventive step  Not obvious to a person skilled in the art  Industrial application  Machine, product, process Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  16. 16. Slide 5.16 Limitations of patents  Annual fees required  National patent protection  Patent harmonisation  European Patent Convention (EPC)  Paris Convention – 114 countries  First-to-file (EU) vs first-to-invent (US)  Legal costs of defence  Limited effectiveness in some industries  Patent life vs „imitation lag‟  Inventing around patents Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  17. 17. Slide 5.17 Limitations of patents Creative wins MP3 player patent One of Apples main rivals, Creative Technology, has been awarded a patent in the US for the interface used on many digital music players. "The first portable media player based upon the user interface covered in our Zen Patent was our Nomad Jukebox MP3 player," said Creative CEO Sim Wong Hoo. "The Apple iPod was only announced in October 2001, 13 months after we had been shipping the Nomad Jukebox based upon the user interface covered by our Zen Patent." In its press release, Creative said Apple had filed for a patent for a user interface in a multimedia player in late 2002, but its application had been recently rejected. Source: bbc.co.uk 30th August 2005 Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  18. 18. Slide 5.18 Use of patents in innovation  Patent information is available to the public  Is a valuable source of technological knowledge  A good way of finding out how problems have been resolved in the past  A good way of linking current work to previous inventions and discoveries  Find out what competitors are doing  Can be a source of ideas and directions to go with R&D. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  19. 19. Slide 5.19 Do patents foster or hinder innovation?  In case of HIV research there are over 1000 patents files , each one building on the other.  Can deny follow-on innovators access to technologies  Can present barrier to entry into a field  The expense required to avoid patent infringement can de a deterrent  Some firms issue questionable patents Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  20. 20. Slide 5.20 Trademarks & Brands  Differentiates company‟s products  Associated with business image, goodwill, and reputation  Hoover for vacuum cleaners; Nestle for coffee  Trademarks (law) and brands (marketing) are closely linked  Both facilitate identity and origin  Brands help buyers identify specific products and help them in the buying process. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  21. 21. Slide 5.21 Brand extentions  Brands symbolise quality and image that can be transferred to other products  Unilever extended the Timotei shampoo name to skin-care products. Benefits of brand recognition.  Licensing of trademarks is growing rapidly eg AFL, many firms license their trademark to clothing manufacturers Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  22. 22. Slide 5.22 Chapter 6 Managing organisational knowledge Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  23. 23. Slide 5.23 Managing organisational knowledge 1. Introduction: The importance of technology 2. Technology as an asset 3. Resource-based view of the firm 4. Tacit knowledge 5. Competencies 6. Core competencies 7. Turning technology into profits 8. Technology life cycles & S-curves 9. The degree of innovativeness Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  24. 24. Slide 5.24 The importance of technology • The battle of Trafalgar 1805 • Nelson defeated the French and Spanish fleets in the battle of Trafalgar • Nelson‟s ship, HMS Victory, stands in a drydock in Portsmouth • Nelson‟s fleet, while composed of fewer vessels achieved victory • Technology advantage Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  25. 25. Slide 5.25 Technology as an asset Product technology advantages • Pfizer‟s Sildenfil – aka Viagra: The fastest selling human drug • Gore Associates‟ Gore-Tex: the versatile polymer polytetrafluoroethylene (PTFE) • Dyson‟s vacuum cleaner: Revolutionised a very stable mature industry Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  26. 26. Slide 5.26 Technology as an asset (Continued) Process technologies • Enterprise Resource Planning (ERP) business software • Virtually all large firms have installed it • SAP, Oracle, Baan and PeopleSoft • SAP has over 20,000 products installed worldwide and Oracle has installed databases in nearly every one of the world‟s top 500 companies • Moreover, it has changed the way they work (Gartner, 2002). Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  27. 27. Slide 5.27 The resource-based view of the firm (RBV) The resource based view of the firm (RBV) is an influential theoretical framework for understanding how competitive advantage within firms is achieved and how that might be sustained over time. Penrose (1959) Wernerfelt (1984) Prahalad and Hamel (1990) Barney (1991) Nelson (1991) Teece, Pisano and Schuen (1997) Winter (2003) Ray, Barney & Muhanna (2004). Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  28. 28. Slide 5.28 The resource-based view of the firm (RBV) (Continued) RBV focuses on the internal activities of the firm and so complements the traditional emphasis on structure and positioning. It assumes: • that firms can be conceptualised as bundles of resources; • that these resources are variously and differently distributed; • resource differences persist over time. Certain resources that are: Valuable Rare Inimitable Non-substitutable VRIN attributes Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  29. 29. Slide 5.29 Prahalad and Hamel  In 1990 Prahalad and Hamel changed the direction of strategic thinking when they published their now classic article  “The Core Competency of the Corporation” Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  30. 30. Slide 5.30 Prahalad and Hamel Recommended that the organisation  Outsource all but its key functions to keep costs down  Figure out its real core competencies  Forget about SBUs and concentrate on competencies that are shared across the total corporation  Focus on core products developed from that competency. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  31. 31. Slide 5.31 Core Competency: Examples  Sonys core competency was miniaturisation and this leads to core mobile products such as Walkman and Discman.  Hondas core competency is engine expertise leading to core products (engines) in fields as diverse as cars to motorcycles to outboard motors on boats to water scooters to generators.  3Ms core competency is practical innovation leading to products such as Post-It or Scotch tape Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  32. 32. Slide 5.32 The Resource Based View (RBV) Since Prahalad and Hamel‟s article was published, many researchers and theorists have developed the concept by:  elaborating on its meaning and significance  developing techniques for identifying and measuring core competencies in corporations Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  33. 33. Slide 5.33 Perspectives on Competitive Strategy 1980s View 1990s View External Unit of Industry Market Segment Analysis Customer-Firm Win-lose battle among Win-win and creation of Relationship rivals and between superior customer value firms and customers Key Strategy Industry-Firm Fit Organisational learning Challenge to develop key resources and competencies Management’s Industry Concentration Delivering Superior Value Main Task and Market Power to the Customer Main Profit Industry concentration Delivering Superior Influencers and market-power Customer Value Ideal Outcome Monopoly Position Superior Financial Performance Achieved by Barriers to Entry Distinctive Competencies causally ambiguous resources Source: O’Keeffe, Mavondo and New Product Development, 4c. 2000 Education Limited 2008 Paul Trott, Innovation Management and Schroder, Edition, © Pearson th
  34. 34. Slide 5.34 RBV and Core Competencies  A key feature of the RBV is the search for core competencies or distinctive competencies within a corporation  Competition is as much a race for competency mastery as it is a race for market dominance and market share  Core competencies represent a fundamental departure from the positioning school in that they are:  Internal  Controllable Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  35. 35. Slide 5.35 RBV Framework Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  36. 36. Slide 5.36 The Resource Based View (RBV) Market Based Resources include: Culture (e.g. market orientation, research orientation, culture of innovation)  Assets (e.g.brands, Mktg IS, databases, etc) Capabilities (e.g. research, relationships, know-how etc) The key is to transform these resources into core competencies which form the foundation of superior competitive position. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  37. 37. Slide 5.37 The Core Competency Concept; Some Definitions Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  38. 38. Slide 5.38 Core Competencies Vs Strengths  Understanding core competencies makes intuitive sense However, the real significance of the concept can be difficult to grasp  The following series of slides present different perspectives on the concept and its relevance for contemporary business practice Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  39. 39. Slide 5.39 Core Competencies: Some Definitions Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  40. 40. Slide 5.40 Core Competencies: Some Definitions What the theorists say “Few companies are likely to build world leadership in more than five or six fundamental core competencies.” “Core competence does not diminish with use. Unlike physical assets, which do deteriorate over time, competencies are enhanced as they are applied and shared. But, competencies still need to be nurtured and protected.” p. 84 C.K. Prahalad and Gary Hamel, 1990 Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  41. 41. Slide 5.41 Core Competencies: Some Definitions What the practitioners say Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  42. 42. Slide 5.42 Core Competencies: Some Definitions What the practitioners say “ Firms can embody core competencies or capabilities in many different ways, ranging from logistics, to distribution, to trade partner relationships to branding. Given that resources are usually limited, firms have at the most five or six core competencies.” “Whatever they are, a set of core competencies needs to create a uniquely bundled system.” Nancy Tennant Snyder, Corporate VP of Core Competencies and Leadership Development, Whirlpool Corporation, quoted in Snyder and Tennant, 2003, p. 7 Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  43. 43. Slide 5.43 Core Competencies: Some Definitions What the practitioners say “Core competencies is an issue that seems to make a lot of conceptual sense. But true core competencies are hard to define precisely … Core competencies are exaggerated by some managers and underestimated by others. Some think everything they do is a core competency. Other companies really dont understand what particular competencies make them successful in a marketplace. The reason is that competencies are sometimes so ingrained theyre unapparent.” Dan Simpson, Director of Strategy and Planning, The Clorox Company Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  44. 44. Slide 5.44 The Identification Problem  A key task for management is to identify which skills and assets should be nurtured as core competencies  Prahalad and Hamel (1990) point out that sustaining core competencies is critical to creating sustainable value  Yet many companies have reported real difficulties identifying which competencies are core Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  45. 45. Slide 5.45 Core Competencies Vs Strengths Identifying core competencies is not just a matter of taking an inventory of skills and assets A company can have many strengths but few will qualify as core competencies. So how can companies identify their core competencies? Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  46. 46. Slide 5.46 Core Competencies At least three tests can be applied [to internal strengths] to identify core competencies: 1. Provides access to a wide variety of markets 2. Significant contribution to perceived customer benefits 3. Difficult for competitors to imitate (Prahalad & Hamel, 1990, pp 83-83) Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  47. 47. Slide 5.47 Access to Broad Markets  A core competency must exist in more than one or two businesses  For example, if innovation is a core competency, then it must permeate all products and businesses for it to be considered a core competency If a competency exists in only one department or one product, then it is not a core competency (3M case study) Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  48. 48. Slide 5.48 Access to Broad Markets (Example) Black & Decker‟s core competency in producing 200- 600 watt motors enabled it to enter a variety of markets Home Workshop Market Drills, saws, sanders, polishers and rotary tools Domestic Cleaning & Maintenance Market Dust busters  Kitchen Appliance Market Blenders, toasters, can openers etc Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  49. 49. Slide 5.49 Significant Contribution to Customer Benefits A core competency must make a significant contribution to perceived customer benefits If customers do not see the value from your competencies, then it cannot be considered core Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  50. 50. Slide 5.50 Significant Contribution to Customer Benefits (Example)  For example, The Coca Cola company invested millions in developing an improved water purification system with significant cost savings Customers could not taste the difference. While the purification system may have been something CC did very well, it was not a core competency Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  51. 51. Slide 5.51 Difficult for Competitors to Imitate Core competencies should be:  “Competitively unique” Something that competitors wish they had, but would find difficult to acquire in the short term  Able to confer significant differentiation A competence which is central to business activities, but which is not exceptional, should not be considered a core competency. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  52. 52. Slide 5.52 Difficult to Imitate (Example) Dell Computers has several core competencies which provide significant differentiation in the PC market:  Online customisation of computer built  Minimisation of capital in the production process  Manufacturing and distribution quality Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  53. 53. Slide 5.53 A Framework for Identifying Core Competencies Task Complexity High Low High I II can be outsourced Genuine Core Supply Chain Competencies Management Low III easy to imitate IV easy to outsource Accountancy Facilities Legal Services Security Support Personnel Catering Task Value Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  54. 54. Slide 5.54 Distinctions “It is essential to make the distinction between core competencies, core products and end products because global competition is played out by different rules and for different stakes at each level.” Prahalad and Hamel, 1990, p. 85 Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  55. 55. Slide 5.55 Core Competencies  Core competencies are skills or assets Examples  Coca Cola – brand equity (asset)  3M - Innovation (skill)  Sony – Miniaturisation (capability) Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  56. 56. Slide 5.56 Core Products Core products are the physical embodiment of one or more core competencies  Core products are the components or sub- assemblies that contribute value to end products Examples IBM‟s microprocessor and operating systems  3M‟s adhesives, abrasives and polymers Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  57. 57. Slide 5.57 End Products End products are the finished articles which are sold to end users or to distributors Examples Honda‟s motors Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  58. 58. Slide 5.58 The Tree Analogy The corporation, like a large tree, grows from its roots. Core products are nourished by competencies and engender business units, whose fruits are end products. (Prahalad & Hamel, 1990: 81) Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  59. 59. Slide 5.59 The Tree Analogy End Products Core Products Competency 1 Competency 3 Competency 2 Based on Prahalad & Hamel, 1990, p. 81 Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  60. 60. Slide 5.60 Conclusions  The core competency concept provides an alternative perspective on the issue of “corporate strengths”  Some theorists have seen this as contributing to the “fall of strategic planning” and the “demise of SWOT analysis.” (See for example Mintzberg)  However, more enlightened theorists view the core competency concept as a more robust method of evaluating corporate strengths Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  61. 61. Slide 5.61 Conclusions The Resource Based View:  takes account of both customer and competitors in external analysis  less likely to conduct analysis at industry level and more likely to consider market served  includes a mediating element between generic strategy and positional advantage (Positioning Theme)  Is compatible with positioning school (because industry effects account for 10% of profitability while corporate effects account for 50%) Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  62. 62. Slide 5.62 Firm‟s capabilities Intellectual Firm‟s capabilities: assets Design Purchasing Physical Manufacturing assets Finance Cultural Distribution assets Customer relationships Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  63. 63. Slide 5.63 Tacit knowledge We often know more than we can tell . . . Have you ever tried explaining to someone in words how to tie a shoelace? Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  64. 64. Slide 5.64 Core competencies End products Business End End units Business products products units Core products Core competencies Source: Reprinted by permission of Harvard Business Review. Adapted from „The Core Competence of the Corporation‟, by G. Hamel and C.K. Prahalad, (1990). Copyright © 1990 by the Harvard Business School Corporation; all rights reserved Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  65. 65. Slide 5.65 Turning technology into profits Low Negligible Long-term profits profits Imitability No Short-term High profits profits Non-core Core Extent of coreness Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  66. 66. Slide 5.66 Technology development effort required? Technology life cycles and S-curves: Supercomputer Communication bottlenecks Multi-processor Rate of Speed of light computer Technological progress Single-processor computer Amount of effort Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  67. 67. Slide 5.67 Knowledge embedded in relationships shared knowledge embedded in relationships knowledge individual Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  68. 68. Slide 5.68 Internal knowledge accumulation process Informal and formal discussions amongst colleagues with prior knowledge, mutual respect and credibility, and an awareness of the needs of the business 4 The spiral is 3 1 continuous Accumulation and retention of additional knowledge 2 Generates new associations by the organisation and linkages for the business that have not been made before The rejection of ideas and associations by the organisation does not cause a loss of knowledge. The knowledge is retained within the business for other and later uses as a form of organisational memory. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  69. 69. Slide 5.69 The degree of innovativeness • Leader/offensive • Fast follower/defensive • Cost minimisation/imitative • Market segmentation specialist/traditional Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  70. 70. Slide 5.70 Product Pioneer(s) Imitator/later entrant(s) 35mm Cameras Leica (1925) Canon (1934) Contrax (1932) Nikon (1946) Exacta (1936) Nikon SLR (1959) CAT Scanners EMI (1972) Pfizer (1974) (Computer Axial Technicare (1975) Tomography) GE (1976) Johnson and Johnson (1978) Ballpoint pens Reynolds (1945) Parker “Jotter” (1954) Eversharp (1946) Bic (1960) MRI (Magnetic Fonar (1978) Johnson & Johnson‟s Technicare (1981) Resonance Imaging) General Electric (1982) Personal Computers MITS Altair 8800 (1975) IBM-PC (1981) Apple II (1977) Compaq (1982) Radio Shack (1977) Dell (1984) Gateway (1985) VCRs Ampex (1956) JVC-VHS (1976) CBS-EVR (1970) RCA Selectra Vision (1977) made by Sony U-matic (1971) Matsushita Catrivision (1972) Sony Betamax (1975) Word-processing Wordstar (1979) WordPerfect (1982) software Microsoft Word (1983) Throughout the twentieth century „late entrants‟ have been surpassing pioneers Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  71. 71. Slide 5.71 Habits of Innovative Companies 1. Deep understanding of the customer and market needs:  Engage with customers;  Understand industry trends and competitive environment;  Big picture perspectives 2. A “Culture” of innovation:  Vision; leadership; Executive support;  Openness to new ideas; supportive/encouraging of innovation; commercial imperative to innovate;  Flexibility. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  72. 72. Slide 5.72 Habits 2 3. An Open Innovation model: Open collaboration model and having global partnerships 4. An appropriate funding model for innovation activities:  Willingness to invest in R&D activities;  Balanced investment in future versus current needs. 5. Ability to execute:  Commitment of resources dedicated to innovation;  Continuous development/improvement processes;  Benchmarking;  Clear goals/deadlines/strategy;  Best practice evolves over time (dynamic); Flexible and quick to move. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  73. 73. Slide 5.73 6. Human intellect/creativity:  Development of skills;  Knowledge base;  Talented Educated individuals;  Willingness to learn/change. 7. Management of Intellectual Property: Ability to manage/protect IP that is generated through the innovation process in a practical manner. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  74. 74. Slide 5.74 Some definitions of innovation  "Innovation . . . is generally understood as the successful introduction of a new thing or method . . . Innovation is the embodiment, combination, or synthesis of knowledge in original, relevant, valued new products, processes, or services. Luecke and Katz (2003)  Innovation typically involves creativity, but is not identical to it:  innovation involves acting on the creative ideas to make some specific and tangible difference in the domain in which the innovation occurs. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  75. 75. Slide 5.75 Definitions 2  "All innovation begins with creative ideas. It is the successful implementation of creative ideas within an organization.  Creativity by individuals and teams is a starting point for innovation; the first is necessary but not sufficient condition for the second".  For innovation to occur, something more than the generation of a creative idea or insight is required: the insight must be put into action to make a genuine difference, resulting for example in new or altered business processes within the organization, or changes in the products and services provided.  activity. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
  76. 76. Slide 5.76 Definitions 3  Creative insights leading to significant organizational improvements in terms of improved or new business products, services, or internal processes.  Creativity is typically seen as the basis for innovation, and innovation as the successful implementation of creative ideas within an organization. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008
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