This document discusses key characteristics of modern innovation. It notes that innovation is now distributed and diverse across geographic centers and models. Innovation ecosystems are dynamic, complex, and multidirectional. Corporate R&D has become global and strategic. There is an increasing importance placed on intangible capital like knowledge over tangible assets. This has led to a rise in value-intensive services and knowledge-based innovation. Globalization is an important force as infrastructure, talent, and markets become more interconnected worldwide.

1. Diversity and Paradox:
Managing Modern Innovation
Mel Horwitch
Dean & University Professor
CEU Business School
September 30, 2011

2. Importance of Innovation:
An Emerging Stark Choice−
Pervasive Innovation & Value Creation vs. a Zero-Sum World
One Type of Another Type of Heritage:
Heritage: Steam Power and the
From Malthus (19th Indus Revolution; the
Cent) to Limits to Railroad & Telegraph (19th
Growth (1960s) to Cent), the Green
―Peak Oil‖ (Today) Revolution in Agric, the
Natural Resource Internet, Wireless, etc.
Intensity Creating:
Reflecting: •An Innovation-Rich,
• A Zero-Sum/ Resource-Growing
Resource- • Knowledge- Intensive
Constrained World World, &
• Not an Attractive • A More Attractive
Future Future:
Needs A Planet
Comprising Intelligent
Communities
© Mel Horwitch, 2011

3. Key Characteristics of Modern Innovation:
Beyond R&D and Entrepreneurship
A Distributed & Diverse Future
Innovation Ecosystems Dynamic, Increasingly
Complex & Multidirectional
The ―New Geography‖ of
Modern Innovation Revitalized Corp. R&D &
Technology Strategy
Increasing Global Importance of
Global Innovation
―Intangible Capital
High Value & Diverse Services Innovation

4. Key Characteristics-1
An Increasingly Distributed & Diverse Future:
Primacy, Cyclicality, Dynamism
& Emergence (Re-Emergence) of New Key
Centers of Gravity
• 19th Century: Britain and Later Germany
• 20th Century: Germany, US, Russia and
Japan
•21st Century: New Geographic Centers
(Especially Cities as Loci of Innovation); New
Linked Innovation Models--Distributed &
Connected; Globalization of Innovative
Capabilities; Innovation of Innovation
© Mel Horwitch, 2011

5. Key Characteristics-2: MODERN INNOVATION NOW IS NOT EASY OR SIMPLE—
IT’S DYNAMIC, INCREASINGLY COMPLEX & MULTIDIRECTIONAL
From Mfg Services (80%)/Know-Intensive Innovation
The New Sophistication: Tension/Variety in Innovation
Management– Prof. Mgmt vs. Creative Destruction
1950s 1960s 1970s 1980s 1990s 2000 9/11 2002 2011
Internat. R&D Glob. Tech Strat Distrib. Glob. Innov
Silicon Valley et. al.High-Tech Entrepreneurialism
Technology a Distinct
Domain ―Reverse
& Industrial R&D Dot-Bomb/NASDAQ Innova-
Large-Scale Corporate
a Distinct Function tion‖
Crash/(9/11/2008 Meltdown
R&D and Innovation:
Technology Big Government Again:
Becomes Strategic Security/Global Terrorism;
(Physical Space) Global Warming &
Forgotten Legacy: Environment; Energy;
Big Government and the Cities; Disease/Health; etc
Cold War:
Some New
DOD, NASA, DARPA Digital-Based Innovation
Ingredients:
(Hardware, Software,
Glob.Rivalry/
Design, Content, etc.)—E-
Competitive-
Business (―Silicon Alley‖)
ness, BRICs
―Hybrid‖ Forms et al, Energy,
of Innovation Mega-Cities-
(Physical & Digital) Regions
Emerging ―Platforms‖ of Bus.
© Mel Horwitch, 2011 Innov./ (e.g. mobility,
broadband, soc. networks, etc)

6. Key Characteristics-3
Revitalized, Opened, Linked
& Transformed:
Modern Global Corporate
R&D & Innovation Strategy

7. Samsung’s Global R&D Network
Office in Tokyo
SDS
SDS China SDS America
Europe
Tokyo
Office in Japan
London Europe IT
Germany IT Center
Center
New Jersey e-
Data Center
Tijuana
e-Data Center
Gwacheon & Gumi
e-Data Center
India
R&D Center
China Office in Shanghai
R&D Center
Singapore Asia
IT Center Beijing China IT
Center
● Overseas Branches (USA, UK, China)
● Overseas Offices (Japan, Germany, China)
● Overseas R&D Centers (San Jose, NJ, Japan, China, Russia, Israel, India)
● Data Centers (Gwacheon, Gumi, London, Singapore, Beijing, Tokyo, Tijuana, New Jersey)
● Global Networks (250 nodes in 64 countries)

8. The Trading Floor of the NYSE
Wall Street/NYSE

11. Key Characteristics-4
Increasing Global Importance of
“Intangible Capital”
• Natural Capital: 5 % of Worldwide Value
• Produced Capital: 18 % of Worldwide Capital
• Intangible capital: 77 % of Worldwide Capital
Source: World Bank, Where is the Wealth of nations? Measuring Capital for the 21 st Century; Reason, Aug-Sept, 2007

12. Key Characteristics-5
Resulting in Increasing Variety of Services
Rise of Value-/Knowledge-Intensive Services
Within services a major transition is occurring: from “traditional” services
(emphasizing low cost, economies of scale, etc.) to value- and knowledge-
intensive services (emphasizing knowledge, customization, integration,
analytics, etc.)
Then (Traditional Services) Now (Value- and Knowledge-
Intensive Services)
Standardization Customization
Transactions Relationships
Focus on Goods Focus on Service
Cost Reduct. Via Mfg Effec Revenue Expansion Through
Service
Mass Marketing Marketing to Indiv. Customers
Limited Ability Vastly Improved Ability
To Commun, Store, Process Info To Commun, Store, Process Info
(Source: Rust & Miu, 2006)

13. Key Characteristics-6
Rise of ―Global Innovation:‖
Building Blocks & Forces at Work
• Globalization of IT and Transportation Infrastructure
• Rise of High-Tech Regions Around the Globe (More on this Later)
• Rise of Modern Sophisticated Supply Chains
• Emerging Globalization of Entrepreneurship (So-Called ―Born
Global‖)
• At Least ―Semi-Globalization‖ of Production and Especially
Markets
• Talent Everywhere…and Globalization of Professionalization
– Increasingly Higher Value ―Outsourcing‖
– Globalization of the ―Business School Industry‖
– Globalization of R&D
– Migration of Professional Services, e.g. Consulting, to Emerging Economies*
* ―Heeding Their Own Advice, Consulting Firms Head East,‖ WSJ, 10/11/10
http://online.wsj.com/article/SB10001424052748704394704575496071382791624.html?mod=ITP_marketplace_0
© Mel Horwitch,2010

14. Key Characteristics-7
The ―New Geography‖ for Innovation & Changing
High-Tech Clusters:
•Starting Point: Advanced Economies (Route 128, Silicon Valley, Cambridge, UK
etc.)
•Later: in small/medium size knowledge-intensive advanced economies:
e.g. Finland, Israel, Singapore, Taiwan, Korea, etc.
•Rise of BRICs and ―Mini-BRICS‖ & Further Shifting of Centers of Gravity for
Innovation
Russia
China India
Brazil
South Africa Vietnam
Ghana
Mexico Costa Rica Colombia Turkey
Some Other Key Dimensions:
Hungary?
• Pervasive Entrepreneurship & Startups
• Ingredients: Universities, Magnet for Talent, ―Culture‖ of Innovation, Industrial
Base, Core Industries, ―Amenities,‖ ―Complements‖ (Support Services, VCs, etc.)
• Sometimes Governmental Support
• Resilience and Adaptation of Such Clusters © Mel Horwitch, 2011

15. Key Characteristics-8
Rise of Worldwide ―Innovation Ecosystems‖
What are ―Innovation Ecosystems?
A network of actors (e.g., firms or individuals) whose differing interests
are bound together in a collective whole for purposes of promoting
business development through innovation.
Key Features:
• Exist in the physical, digital and “blended” worlds of modern knowledge and
value creation.
• Can be Configured as ―centralized: and ―decentralized‖ networks
• Can be dynamic, organic and non-linear network, i.e. multi-nodal and
multidirectional, with a changing set of strong and weak ties.
• Function, often to access high-value talent and ideas from practically
• Populated with an increasingly diverse array of talent and sources of new
value creation, including users and other outsiders.
• Inter-linkages can be malleable, adaptive.
• Flows of ideas and knowledge within the linkages are multidirectional on a
global scale.
• Core & Periphery: Links are increasingly diverse and comprise globally
dispersed sources, developers and users of innovation (possibly “reverse
innovation”)

16. Illustration-1:
Reverse Innovation at GE:
One Way to Conceptualize Cycles of Global
Innovation: Example Portable MRIs
• Phase One: Globalizing Market Presence (1950s-60s)
• Phase Two: Globalizing the Resource Base (1970s-
80s)
• Phase Three: Glocalization (1990-2005)
– Winning market share by adapting global offerings
to meet local needs)
• Phase Four: Reverse Innovation (2005-?)
– Develop products ―in country, for country‖
• Phase Five: Bringing Innovation Home (2005-?)
– ―In country, for the world’
Source: Vijay Govindarajan, “The Case for „Reverse Innovation,” BusinessWeek, 10/26/09

17. Illustration-2: Smart Grid Innovation Ecosystems for GE, IBM, & Cisco, Circa 1/10
From: Ari Ginsberg, Mel Horwitch, Subhendu Mahapatra, & Chhavi Singh, Ecosystem Strategies
for Complex Technological Innovation: The Case of Smart Grid Development, Paper Presented at
PICMET 2010 Conference, Phuket, Thailand July 22, 2010

18. Mapping this Illustration: Comparing Smart
Grid Innovation Ecosystems for GE, IBM &
Cisco, Circa Jan. 2010
GE IBM Cisco
From: Ari Ginsberg, Mel Horwitch, Subhendu Mahapatra, & Chhavi Singh, Ecosystem Strategies
for Complex Technological Innovation: The Case of Smart Grid Development, Paper Presented at
PICMET 2010 Conference, Phuket, Thailand July 22, 2010

19. Illustration-3:
Radically Expanding & Scope
of Global Innovation Ecosystems
for Innovation Strategy:
Leveraging Social Networking

20. New Arenas: Innovation-Based Opportunities-
ENERGY
The Myriad Cleantech-Innovation Connections
• Supply—”Below
Ground”
−Redefining Cleantech &
•—Geologists-The Catching the Next Wave
“Peak Oil”
Perspective RISING ENVIRONMENTAL
• National Security Gov’t Policy: CONCERNS
• New Sources of Jobs, •Global Warming
Energy Stimulus, Etc. •Other Concerns
• Management
“GREEN”: BASIS OF NEW INDUSTRIAL
Global Competition: REVOLUTION? MAYBE-BUT NOT JUST
The EU; China, India, “RENEWABLE ENERGY”
Japan
Thought Leadership
SECTOR-LEVEL-TOPICS: FINANCIAL MELTDOWN
(From the Gloomy ‘06
•Automobiles (A “Substitute” for Financial
Stern Report to Stern’s
•Alternative Energy Services?)
Emphasis Now on the
•Cities
“Next Industrial
Revolution”

21. Cleantech-Innovation Opportunities: Linking Smart
Grids & Microgrids-An Emerging Opportunity Globally
The Global Embracing of Smart Grids
• Smart Grids permits an electricity network to uses a wide array of
information technology to monitor and manage the flows of electricity
& energy usage. They can be configured on a massive scale, regional
and continental.
• Smart grids are globally a huge opportunity, with smart grids being
proposed throughout the world, including the US, Australia, Northern
Europe, the UK, India, China, Taiwan, etc. (According to IBM, China is
the Biggest Market for Smart Grids
• (Over Next 10 Years: In US $36 Billion vs. in China $208 Billion on
Renewable Energy; Current Announced Smart Grids allocation: US:
$4.5 Billion vs. China $7.3 Billion; IBM is Establishing Energy &
Utilities Solutions Lab in China)
• Source: “IBM’s Chinese Smart Grid Ambitions,‖ earth2tech, 3/4/10

22. Further Cleantech-Innovation Opportunities: Linking
Smart Grids & Microgrids
Introducing Microgrids
• Microgrids are also intelligent & they utilize advanced IT. They represent small-
scale power supply networks. The can provide power for small areas, such as
rural, a campus, neighborhood or factory. Energy sources include a portfolio
of decentralized energy technologies, often connected at a single point to the
larger utility grid.*
• The benefits of microgrids include: more Community control to manage its
energy generation & distribution and connect to the utility grid as a single
entity (allows a community to be less dependent on a national grid); greater
flexibility & more options in planning energy source strategies; more
experimentation due to lower size & capital requirements; decrease of energy
losses due to lower transmission distances; utilizes space more effectively;
promotes energy awareness; adapts more easily to local conditions.*
Note: An Opportunity for Leapfrog: Linking Smart Grids &
Microgrids
*Adapted from Jaise Kuriatkose, Distributed Generation, Smart grid & Micro grid, Centre for Alternative Technology, circa June, 2010,
www.cat.org.uk (accessed on Sept. 3, 2010)

23. Further Opportunities: Barrowing from Another Innov.
Infection Point: From Pure Energy Perspectives to
Incorporating Intelligence Cleantech: An ―Energy
Internet‖ Convergence
Data
Smart Appliances, Power
Monitoring, Smart Grid
Communication Energy Media
Internet
Standards and Website,
Companies BlogsTwitter,
technology
Facebook
Energy
Utility Companies
Power
Transmission
Source: MBA-ITM Team Presentation on 4/18/09 in NYC

24. An Energy Internet Viewpoint:
“The goal in the next six or seven
decades should be to produce
„squanderably abundant,‟ cheap
and clean energy.”
-Bob Metcalfe, 2008
-Speaking about the energy internet
in Scientific American
Source: MBA-ITM Team Presentation on 4/18/09 in NYC

25. Startup Manifestations of
“Energy Internet” Startups
Leveraging Mobile Smart Phone Innovation in
Cleantech: e.g. iPhone Apps for Remote Home
Power Monitoring
Source: MBA-ITM Team Presentation on 4/18/09 in NYC

26. Increasing Varieties of Modern
Innovation Beyond Technology:
Business Model Innovation
19th Century 20th Century 21st century
Manufacturing Innov.
High Technology Innov.
Services Innov.
Business Model Innov.
Innovation of Innovation

27. A Contribution from the Field of Management:
Providing a Language for Better Understanding and
Implementing Business Model Innovation
•Subscription – [Economist, WSJ (so far)].
•Leveraging Power of Networks – [CNN’s iReport].
•Disintermediation & Analytics– [Amazon].
•Collectives & Communities – [Commune Buildings in Brooklyn;
Public Wifi, Green Maps].
•Optimizing Efficiencies in Services – [McDonalds, Wal-Mart].
• Becoming Services for Previously Physical-Based Products
– [IBM, Xerox]
•Competing on Cost [EasyJet, Southwest, Chinatown Bus
Companies-Fung Wah].
•Compelling Content – [WSJ, ]
•Open source – [Linux, Apache].
•Traffic, Leverage Analytics, Smart Advertising – [Google].
•Ecosystem Innovation – [Smart Grids]
Source: Based Partially on Neely, 2007

28. The Commerce Bank in NYC
• ―No Stupid Fees‖
• Burger King to Banking
(Retailers, not Bankers)
• Lollipops
• ―Saturation is Good‖?
• Dog Biscuits?
• Sundays & Holidays Are for Banking (7 Day Lobby/Drive
Through Hours)
• ―Penny Arcade‖ Coin Counting Machines
("We are writing to commend the outstanding service we received from your team,
enabling us successfully to close on our new house in Westport, CT under an extremely
tight timetable.‖ Evan, Connecticut (http://www.TDBank.com/inside_tdbank/fanMail/index.cfm))
10/2/07: Canada's TD Bank Financial Group Acquires Commerce Bank for $8.5B
7/23/08: Commerce Bank & TD Banknorth change the brand name for combined
operations to “TD Bank, America's Most Convenient Bank,” in place of “TD

29. Continually Evolving State of the Art: Ongoing
Stream of Concepts Expanding Modern Innovation
• Leveraging Shock and Intensive Rivalry:
―A crisis is a terrible thing to waste‖
• Increasing Ambiguity & Greater Difficulty in
Defining Innovation
• Not R&D; Not Simply Technology or Invention; & Hard to measure
• New Centers of Gravity for Innovation
(A New Innovation Arms Race: Purposeful Clustering)
• New Corp Structures (Modularize, Localize)
• Open Innovation vs. ―Beacons‖ vs. Users?
• Concurrent Innovation
• Forces: Globalization/IT
• Globalization of Entrepreneurship
• Clusters vs. Firms (Resilience)
• ―Real breakthroughs require and the ability to absorb failure
and large organizations are incapable of such risk.‖ (P. 4)
• ―Mass Innovation‖
• Instilling an ―Innovation Culture‖
• Difficult to Control: ―Information Wants to Be Free‖ (p.14)
• ―Innovation Labs;‖ Purposefully Designed ―Incubators;‖
Sources: Economist Special Section, 10/13/07; HBS Press Releases in 2011; NYC-ACRE Incubator at NYU-Poly

30. Some Key Implications for Modern Innovation
Management
Past leadership is no guarantee for the future, especially since valuable
knowledge is scattered, sophisticated, & sticky; new sources of
differentiation exist, latent needs are everywhere;
Thus, modern innovation offers continuously opportunities to create
unique advantage;
• Don’t Fight Last War−Focus on Present & Future
• Go Beyond Simple IT & Even Broadband & Aim to be Strong in Newer Sets
of Technologies and Associated Capabilities
• Leverage Partners of Diverse Kinds, e.g. Firms, NGOs, etc.
• Technology is Necessary But By No Means Sufficient−Education & Human
Networking are a key Components for Modern Innovation Clusters
(The Role of Modern Business Schools as High Value Neutral Zones)
• Aim to be a Participant in Best Practices--Not Settling to be a Second
Mover—Leap-Frog Opportunities Exist Throughout the Globe
• Learn from Best in Class—Don’t Be Limited By Geography
(Again, the Role of Modern Business Schools as High Value Neutral Zones)
• Meaning of Innovation “Periphery” & “Core” Changing in Fundamentally

31. Observation Based on Perspectives of
Strategy & Management
The Paradoxical Impact of Innovation’s Primacy in the
21st Century: The Resuscitation of the General
Management Tradition (Previously Prominent in the 1950s
Through the Late 1960s) due to the Imperatives of
Modern Innovation:
– The Importance of Multifaceted Leadership
– Adaptive and Strategic Direction Without Rigidity
– View the Firm as a Whole
– Universal Managerial Characteristics
– Optimism & Fun
– The Universal & Adaptive Professional Manager
– Human Talent: A Key Resource
– Importance of Hard-to-Define ―Implicit‖ Strategy
– A Sense of Purpose (From ―Organization‖ to ―Institution‖)

32. FURTHER PARADOX:
• THE REDISCOVERY OF “ARTFUL
MANAGEMENT” FOR SUCCESSFUL
MODERN INNOVATION;
• THE RISING PLACE OF BUSINESS
SCHOOLS IN CREATING ROBUST,
RELEVANT AND WINNING CLUSTERS OF
INNOVATION; and
• AS AN ANSWER TO THE CHALLENGES
OF THE OPEN SOCIETY AND THE NEED
FOR HOPE IN THE 21ST CENTURY.