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Innovation Management: Collaboration


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Innovation Management: Collaboration

  1. 1. Innovation Management 28 March 2013 Rotterdam Business School
  2. 2. Weekly overview Week Instruction method Content/subjects Assignment 1 Lecture Introduction + Business model Innovation Choose a company and specialization topic Prepare pitch if signed up 2 Pitch arena Lecture IPR Read Sustainable innovation article Solve the riddle 3 Pitch arena Lecture Collaboration Use relationship metaphor Build ‘golden formula’ of collaboration 4 Pitch arena Lecture Sustainability TBD 5 Pitch arena Lecture Social media TBD 6 Final pitches Company case study Advise on IM
  3. 3. It is the long history of humankind (and animal kind, too) those who learned to collaborate and improvise most effectively have prevailed. - Charles Darwin
  4. 4. ColllllaboRRRRaaaattttiiiioooonnnn ssssTraaaatttteeeeggggiiiiES
  5. 5. Learning Outcomes of Lecture • be able to define and differentiate collaboration • identify some advantages (and disadvantages) of collaborating • discuss the most common forms of collaborative arrangements used in technological innovation • outline approaches to choosing and monitoring partners • discuss a) key success factors and b) common reasons for failure
  6. 6. The XenoMouse
  7. 7. • Abgenix spent 7 years and $40 million to produce a genetically-engineered mouse that could produce antibodies with human protein sequences. • One antibody, ABX-EGF showed great promise for treating human illnesses like cancer, arthritis and organ transplant rejection. • Abgenix had to decide upon the further process of testing, developing, regulatory and commercializing. The XenoMouse
  8. 8. • Abgenix had to decide whether to: – License ABX-EGF to a pharmaceutical or biotechnological company which would do all further testing, development of antibodies for specific diseases, and commercialization (bear little risk and receive license royalties). – Use a 50/50 joint venture with a biotechnology company to complete the testing and commercialization (bear moderate risk and split both costs and profits). Including upfront payments to compensate for earlier investments. – Pursue the ABX-EGF project as a solo venture (bear all risks and keep all profits) The XenoMouse
  9. 9. • In 2001 as they were burning through their cash rapidly and the stock market had soured, they had to decide, taking into account: –Their short term cash needs –Their potential for long term growth –The ability to commercialize rapidly as competitors were developing the same type of drugs The XenoMouse
  10. 10. Discussion Questions: 1. What are the pros and cons of Abgenix collaborating with a partner on ABX-EGF? 2. If Abgenix chooses collaboration, would it be better off licensing ABX-EGF to the pharmaceutical company, or forming a joint venture? 3. How does Abgenix’s decision about collaborating for ABX-EGF impact its prospects for its other drug development projects? The XenoMouse
  11. 11. “The biggest winners in the 21st century will be those businesses that assemble a global ecosystem of partners, emphasising flexible access to products, talents, and expertise, not ownership.” Prahalad and Krishnan (2008)
  12. 12. Overview • Firms must often choose between performing innovation activities alone or in collaboration. • Collaboration has the potential to enable firms to achieve more, at a faster rate, and at less cost and risk (XenoMouse). • However, collaboration also entails sharing control and rewards, is time-consuming and may risk partner wrong- doing. • The advantages of going solo are compared with those of collaborating, and then different forms of collaboration are compared.
  13. 13. Philips & Douwe Egberts
  14. 14. Nespresso
  15. 15. Advantages of Collaborating • Obtaining skills or resources more quickly • Reducing asset commitment and increasing flexibility • Learning from partner • Sharing costs and risks • Building cooperation around a common standard
  16. 16. Levels of ‘Collaboration’ limited communication More defined roles Clear roles Some shared decision making Shared decision making Frequent communication One system Trust Concensus Adapted from Frey, Lohmeier et al, 2006. In Bauwen, 2011.
  17. 17. 0 500 1000 1500 2000 2500 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 NewTechnologyorResearchAlliances Year Trends in Strategic Technology Alliances
  18. 18. Key Questions to Guide Decision • Whether a firm chooses to engage in solo development or collaboration will be influenced by: – Availability of capabilities (does firm have needed capabilities in house? Does a potential partner exist?) – Protecting proprietary technologies (how important is it to keep exclusive control of the technology?) – Controlling technology development and use (how important is it to direct development processes and applications?) – Building and renewing capabilities (is the project key to these capabilities?)
  19. 19. Types of Collaborative Arrangements I – Strategic Alliances: formal or informal agreements between two or more organizations (or other entities) to cooperate in some way. – Joint Ventures: a particular type of strategic alliance that entails significant equity investment and often establishes a new separate legal entity. – Licensing: a contractual arrangement that gives an organization the rights to use another’s intellectual property, typically in exchange for royalties.
  20. 20. Brand licensing
  21. 21. Brand licensing II • Brand licensing is the process of creating and managing contracts between the owner of a brand and a company or individual who wants to use the brand in association with a product, for an agreed period of time, within an agreed territory. Licensing is used by brand owners to extend a trademark or character onto products of a completely different nature.[4]
  22. 22. Types of Collaborative Arrangements II –Outsourcing: when an organization procures services or products from another rather than producing them in-house. –Collective Research Organizations: organizations formed to facilitate collaboration among a group of firms.
  23. 23. Outsourcing
  24. 24. Outsourcing II • 47% market share of the domestic footwear industry • manufacturing throughout the Asian region for over twenty-five years, using only subcontractors • Output produced in factories in China, Indonesia, and Vietnam, but they also have factories in Italy, the Philippines, Taiwan, and South Korea. • Nike does employ teams of four expatriates per each of the big three countries (China, Indonesia, Vietnam), that focus on both quality of product and quality of working conditions, visiting the factories weekly. • They also developed their code of conduct in 1992 and have implemented it across the globe,
  25. 25. Outsourcing III
  26. 26. Bowing to pressure from critics who have tried to turn its famous shoe brand into a synonym for exploitation, Nike Inc. promised today to root out underage workers and require overseas manufacturers of its wares to meet strict United States health and safety standards. Philip H. Knight, Nike's chairman and chief executive, also agreed to a demand that the company has long resisted, pledging to allow outsiders from labor and human rights groups to join the independent auditors who inspect the factories in Asia, interviewing workers and assessing working conditions. By JOHN H. CUSHMAN Jr Published: May 13, 1998 Nike Pledges to End Child Labor And Apply U.S. Rules Abroad
  27. 27. ''We believe that these are practices which the conscientious, good companies will follow in the 21st century,'' he said in a speech here at the National Press Club. ''These moves do more than just set industry standards. They reflect who we are as a company.'' Nike said it would raise the minimum age for hiring new workers at shoe factories to 18 and the minimum for new workers at other plants to 16, in countries where it is common for 14-year-olds to hold such jobs. It will not require the dismissal of underage workers already in place. By JOHN H. CUSHMAN Jr Published: May 13, 1998 Nike Pledges to End Child Labor And Apply U.S. Rules Abroad
  28. 28. Choosing and Monitoring Partners • Partner Selection –Resource fit –Strategic fit –Impact on Opportunities and Threats –Impact on Internal Strengths and Weaknesses –Impact on Strategic Direction
  29. 29. “Organizations do not collaborate, people do!” Maura Walsh (2013)
  30. 30. Honeymoon approach Think of the last time you fell in love… – How was the attaction established? – What where key factors for the relationship to work out?
  31. 31. In search of the ‘golden formula’
  32. 32. Trade offs: advantages • Get instant market access, or at least speed your entry into a new market. • Increase sales. • Gain new skills and technology. • Develop new products at a profit. • Share fixed costs and resources. • Enlarge your distribution channels. • Broaden your business and political contact base. • Gain greater knowledge of international customs and culture.
  33. 33. Trade offs: disadvantages • Weaker management involvement or less equity stake. • Fear of market insulation due to local partner's presence. • Less efficient communication. • Poor resource allocation. • Difficult to keep objectives on target over time. • Loss of control over such important issues as product quality, operating costs, employees, etc.
  34. 34. Choosing and Monitoring Partners • Partner Monitoring and Governance –Successful collaborations require clear yet flexible monitoring and governance mechanisms –May utilize legally binding contractual arrangements - Helps ensure partners are aware of rights and obligations. - Provides legal remedies for violations.
  35. 35. Choosing and Monitoring Partners • Partner Monitoring and Governance –Contracts often include: 1. What each partner is obligated to contribute. 2. How much control each partner has in arrangement. 3. When and how proceeds of collaboration will be distributed. 4. Review and reporting requirements. 5. Provisions for terminating relationship.
  36. 36. Key Failure Factors • Lack of understanding of each other’s/joint goals • Lack of understanding of each other’s roles and responsibilities • Insufficient governance mechanisms • Ineffective/incompatible structures • Poor communication • Conflicting chemistry • Divergent expectations and interests • Breakdown in trust