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Diskontinuierliche Innovation
Kompetenzen und Paradigmen im
Innovationsmanagement
Business Talk des integro-Projektes im Rahmen der Tagung X-Organisationen,
Berlin, 19. Nov. 2009




Frank T. Piller
RWTH Technology & Innovation Management Group, RWTH Aachen, Germany
MIT Smart Customization Group, Cambridge, MA, USA              tim.rwth-aachen.de
                                                   www.innovationsarbeit.de
2




Kontext des Vortrags: Das Projekt Integro
  INTEGRO: Integriertes Innovations-, Wissens- und HR-Management in Unternehmen
  und Innovationsnetzwerken der High-Tech-Branche am Beispiel Informationstechnik
  und Mechatronik
  Ziel: Empirische Analyse der Strukturen, Prozesse und Arbeitsbedingungen in Wertschöpfungs-
  und Innovationsnetzwerken von KMU der High-Tech-Branche, exemplarisch der IT-Branche und
  der Mechatronik.
  Im Rahmen des Projektes (Laufzeit: 04/08 bis 04/11) werden Funktionsmechanismen elaborierter
  Innovationskonzepte untersucht und Maßnahmen zur breiten Unterstützung der
  Innovationstätigkeit sowie zur Kompetenzentwicklung zentraler Beschäftigtengruppen
  erarbeitet. Ein besonderer Fokus liegt darauf, wie Innovations-, Wissens- und HR-Management
  sowie Kompetenzentwicklung optimal verzahnt bzw. integriert werden können, um die
  Innovationsfähigkeit von Unternehmen zu stärken und externes Wissen durch Kundenintegration
  und Open Innovation für die Unternehmen nutzbar zu machen.
  Das Vorhaben wird aus Mitteln des Bundesministeriums für Bildung und Forschung und aus
  dem Europäischem Sozialfonds der Europäischen Union gefördert und vom Projektträger
  Arbeitsgestaltung und Dienstleistungen im Deutschen Zentrum für Luft- und Raumfahrt e.V.
  betreut.
  Projektpartner: Sozialforschungsstelle Dortmund (sfs) an der Technischen Universität
  Dortmund (Koordinator); Management Zentrum Witten; networker westfalen e. V.
  Dortmund; Ruhr-Universität Bochum - Institut für Arbeitswissenschaft (IAW) und Lehrstuhl
  Informations- und Technikmanagement (IMTM); RWTH Aachen - Lehrstuhl für Technologie- und
  Innovationsmanagement (TIM).
  Mehr Informationen: www.innovationsarbeit.de
3

About us


           tim.rwth-aachen.de
4




 Our team
With about 18 full time
research positions plus
about 25 graduate student
assistants, tutors, and
research affiliates, RWTH-
TIM is one of the largest
groups of its kind in the
German-speaking academic
landscape.
5




RWTH-TIM Group: Facts and Figures

  Established in 1990 as one of the first dedicated chairs in technology & innovation
  management in Europe
  Part of RWTH's School of Business & Economics, with strong links to the RWTH
  Engineering Schools
  Ranked #1 in our school's faculty ranking w/r to research output (publications), and
  #2 w/r to external funding. Awarded "RWTH Price for Teaching Excellence 2009".
  Interdisciplinary team of about 18 full time positions for researchers plus about 25
  support positions and student researchers (strong growth since 2007)
  70% of budget funded by research contracts, grants, projects ("Drittmittel")
  Dedicated to research, but excellent in participant-centered learning on graduate
  student and executive education level.
  Strong industry partnerships, yet focus on scholarly research, not consulting.
  Network of affiliated companies & consultancies for direct project cooperation.
  November 2009: Moving to new building in RWTH Aachen Research Park next to
  Research Centers of, e.g., Microsoft, Sony Ericson and Ford (part of "RWTH Campus
  Project")
When googling "Innovation",
this picture shows up as the
            #1 hit.
"I' am happy to give you innovative thinking. What are the guidelines?"
What Is Innovation?



         “(Basic) research is the transfer of money into
         knowledge. Innovation is the transfer of knowledge into
         money.”
                                     W. Sittenthaler, Wacker Chemie
             (German manufacturer of specialized chemical compounds)



         "Innovation: How to link creativity in new ideas with
         necessary rigor and discipline in execution."
                                                      H. Kerminen, Kemira
                (Finish manufacturer of fertilizers and industrial chemicals)



(c) Copyright tim.rwth-aachen.de                                                8
Exploring the decision space of innovation mgmt

                                   ‘Paradigm’ (= mental model)




  Process                                  Innovation                         Product
                                                   ‘do better’ ………
                                                     ‘do different’




                                            Position
                                                                      Source: Bessant (2008)
(c) Copyright tim.rwth-aachen.de                                                               9
How we think about
something ... shapes the way
      we manage it.
Draw an alien on your
   notepad. NOW!
Experts' Confidence
                                                                                                                     Bu




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                                                                                                                             (off scale)
12
Innovation follows a paradigm (basic model)


                                               Mildred
                                               McDaniel
                                               (1933)
                                               Olympic
                                               Games,
                                               Melbourne,
                                               1956

                                               World
                                               Record: 2,15




                                               Richard
                                               Fosbury
                                               (1947),
                                               Olympic
                                               Games,
        Ray Ewry (1873-1937)
                                               Mexico, 1968
        Olympic Games,
        London, 1908
                                               World
                                               Record: 2,24
        World record: 1,98

(c) Copyright tim.rwth-aachen.de                              13
(Radical) Innovation is
overcoming the problem
   of "local search".
The challenge


    Popper (1988):

    For radically new innovation to occur at all, the
    future must be unknowable, since otherwise
    innovation would, in principle, be already known
    and would occur in the present and not in the
    future.

    The inherent limits of organizations to forecast,
    especially discontinuous and radical new
    developments (Hogarth & Makridakis, 1981; Makridakis, 1990)

(c) Copyright tim.rwth-aachen.de                                  15
Exploitation




                                   Exploration
(c) Copyright tim.rwth-aachen.de                 16
Gary Cooper
(c) Copyright tim.rwth-aachen.de   17
How it really happens ...




(c) Copyright tim.rwth-aachen.de   18
19



    Exploitation




                                     Exploration
Source: von Stamm / Bessant (2008)
Disruptive
            Innovation




(c) Copyright tim.rwth-aachen.de   20
                                   20
Sustaining vs. disruptive technologies




(c) Copyright tim.rwth-aachen.de
Source: Bower/Christiansen: Disruptive technologies, HBR, 1995/1   21
                                                                   21
Why firms fail to
  master discontinuous innovation


       Resource dependency:
Listened too much to best customers.
     Internal inertia to change:
 Existing structures, mental models,
           and capabilities
Firms face many more sources of discontinuity
  than "just" new technologies (Bessant 2005)




(c) Copyright tim.rwth-aachen.de                  Source: Bessant (2008)
                                                                           23
                                                                           23
Challenging some of our
common paradigms (mental
  models) of innovation
Innovation is high-tech
Dr G Venkataswamy




(c) Copyright tim.rwth-aachen.de
                                   26
But innovation is not just western "high tech":
 The fortune at the Bottom of the Pyramid (BoP)
        Book and articles by C.K. Prahalad,
        University of Michigan
        Begins with potential position
        innovation – 4 billion people subsist
        on less than $2/day
        Products and services for this market?
        Significant paradigm innovation
        potential- challenges our assumptions
        about ‘the poor’
        Case examples of experiments from
        wide range of countries
        Early warning signals of fundamental
        shifts in innovation landscape?


(c) Copyright tim.rwth-aachen.de
                                                   27
BoP Example: Aravind eye clinics

           Began 1976, Dr G Venkataswamy , retired eye surgeon
           9 million in India, 45 million worldwide suffer blindness due to
           cataracts
           Cataract operation cost in USA - $2500-$3000
           Target cost in India - $50, but no compromise on quality
           Learning from other sectors – the McDonalds approach
           200,000 operations/year @ $50 - $300 including hospital stay
           and any complications treatment
           60% of patients treated free, so average cost is $25/operation
           Rich learning (200k ops) so world-class – NHS is looking at this
           as an option for the UK
           Extension to other operations – e.g. bypass surgery in India $4k
           vs $50k in USA
(c) Copyright tim.rwth-aachen.de
                                                                              28
Further examples of BoP innovation

             EID Parry, ITC – e-choupals – internet in the village
             Casas Bahia – 10m customers for electronics, appliances, furniture –
             45% of spending is at BoP
             Jaipur Foot – as Aravind – US cost of foot $8000, target cost of JF is
             $30 and free to many. Extreme use innovation. 25million amputees
             worldwide.
             Voxiva medical alerts and communication – spread of SARS, etc.
             Robust comms. platform independent of specific hardware. Applicable
             to crime, safety, etc.
             Annapurna iodised salt – using extreme conditions as a laboratory to
             push the innovation frontier (micro-encapsulation technology)



(c) Copyright tim.rwth-aachen.de
                                                                                      29
Learning from the BoP "real life lab"

         Create a new price/performance    Aravind eye care, Monsoon Hungama
                    envelope               mobile phone, Grameen and other
                                           micro-finance
            Innovation requires hybrid     Micro-encapsulation of iodine in salt
        (traditional and new technology)   (Hindustan Lever), Amul Dairies
                     solutions             collection/distribution system

      Innovations must be adaptable and How to devolve/reach – mobilise local
                   scalable             entrepreneurs. Cemex, Casias Bahia

                Innovations must tackle    Energy, water use, waste, etc. E+Co
                  sustainability issues    distributed energy

       Innovations must come from deep Jaipur Foot, TVS PoS system
        understanding of local needs and
                    context
             Process innovations are as    Aravind, Amul
               significant as product
(c) Copyright tim.rwth-aachen.de
                                                                                   30
Learning from the BoP "real life lab" (II)

                 Innovations must deal    Voxiva medical diagnostics, Cemex
                    with skill issue
       User education is critical and     How to work in ‘media-dark’
     requires innovation in approaches    environments? HLL ‘clean hands’
                                          campaign
       Innovations must suit hostile  Jaipur Foot, ITC e-choupal, HLL
    environments – extreme innovation Annapurna salt
        Innovations require robust user   Languages, input devices for illiterates,
                  interfaces              etc. Elektra Mexico fingerprint
                                          recognition in stores
      Innovations must reach dispersed    Extending reach in marketing and
                  markets                 delivery. Avon model – networks of
                                          local agents, direct to consumer
                Innovations must be       Aravind, Voxiva, ITC models diffusing
            platform/architecture-based   to ‘developed’ world

(c) Copyright tim.rwth-aachen.de
                                                                                      31
Consider other "low tech" innovations
  breaking with the "high tech" paradigm


                                     The flip video camera

                                         The netbook

                                   The Apple-Nike "+" system

                                            Twitter

                                            Skype

(c) Copyright tim.rwth-aachen.de
                                                               32
Innovation is the domain of
   firms (manufacturers).
Users have the advantage of problem-solving in
their own use environments as they “do” a
desired activity – they are learning by doing.


  Lead users innovate here


# of users
perceiving
                    First manufacturer product appears here
      need
                                              “Voice of the customer”
                                                methods start here




                                                    Time
                                                    Time
                                                            Source:
                                               Eric von Hippel 2005
                                                                        34
But whatever you do,
  inspire your most
important participant


Your Executive Board
If you find a
"chief innovation officer",
          run away.
Innovation cannot be
delegated or assigned to an
 "innovation function". It is
  the job of everyone in an
organization – including the
       executive board.
38




       piller@tim.rwth-aachen.de

tim.rwth-aachen.de | open-innovation.com

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Diskontinuierliche Innovation

  • 1. Diskontinuierliche Innovation Kompetenzen und Paradigmen im Innovationsmanagement Business Talk des integro-Projektes im Rahmen der Tagung X-Organisationen, Berlin, 19. Nov. 2009 Frank T. Piller RWTH Technology & Innovation Management Group, RWTH Aachen, Germany MIT Smart Customization Group, Cambridge, MA, USA tim.rwth-aachen.de www.innovationsarbeit.de
  • 2. 2 Kontext des Vortrags: Das Projekt Integro INTEGRO: Integriertes Innovations-, Wissens- und HR-Management in Unternehmen und Innovationsnetzwerken der High-Tech-Branche am Beispiel Informationstechnik und Mechatronik Ziel: Empirische Analyse der Strukturen, Prozesse und Arbeitsbedingungen in Wertschöpfungs- und Innovationsnetzwerken von KMU der High-Tech-Branche, exemplarisch der IT-Branche und der Mechatronik. Im Rahmen des Projektes (Laufzeit: 04/08 bis 04/11) werden Funktionsmechanismen elaborierter Innovationskonzepte untersucht und Maßnahmen zur breiten Unterstützung der Innovationstätigkeit sowie zur Kompetenzentwicklung zentraler Beschäftigtengruppen erarbeitet. Ein besonderer Fokus liegt darauf, wie Innovations-, Wissens- und HR-Management sowie Kompetenzentwicklung optimal verzahnt bzw. integriert werden können, um die Innovationsfähigkeit von Unternehmen zu stärken und externes Wissen durch Kundenintegration und Open Innovation für die Unternehmen nutzbar zu machen. Das Vorhaben wird aus Mitteln des Bundesministeriums für Bildung und Forschung und aus dem Europäischem Sozialfonds der Europäischen Union gefördert und vom Projektträger Arbeitsgestaltung und Dienstleistungen im Deutschen Zentrum für Luft- und Raumfahrt e.V. betreut. Projektpartner: Sozialforschungsstelle Dortmund (sfs) an der Technischen Universität Dortmund (Koordinator); Management Zentrum Witten; networker westfalen e. V. Dortmund; Ruhr-Universität Bochum - Institut für Arbeitswissenschaft (IAW) und Lehrstuhl Informations- und Technikmanagement (IMTM); RWTH Aachen - Lehrstuhl für Technologie- und Innovationsmanagement (TIM). Mehr Informationen: www.innovationsarbeit.de
  • 3. 3 About us tim.rwth-aachen.de
  • 4. 4 Our team With about 18 full time research positions plus about 25 graduate student assistants, tutors, and research affiliates, RWTH- TIM is one of the largest groups of its kind in the German-speaking academic landscape.
  • 5. 5 RWTH-TIM Group: Facts and Figures Established in 1990 as one of the first dedicated chairs in technology & innovation management in Europe Part of RWTH's School of Business & Economics, with strong links to the RWTH Engineering Schools Ranked #1 in our school's faculty ranking w/r to research output (publications), and #2 w/r to external funding. Awarded "RWTH Price for Teaching Excellence 2009". Interdisciplinary team of about 18 full time positions for researchers plus about 25 support positions and student researchers (strong growth since 2007) 70% of budget funded by research contracts, grants, projects ("Drittmittel") Dedicated to research, but excellent in participant-centered learning on graduate student and executive education level. Strong industry partnerships, yet focus on scholarly research, not consulting. Network of affiliated companies & consultancies for direct project cooperation. November 2009: Moving to new building in RWTH Aachen Research Park next to Research Centers of, e.g., Microsoft, Sony Ericson and Ford (part of "RWTH Campus Project")
  • 6. When googling "Innovation", this picture shows up as the #1 hit.
  • 7. "I' am happy to give you innovative thinking. What are the guidelines?"
  • 8. What Is Innovation? “(Basic) research is the transfer of money into knowledge. Innovation is the transfer of knowledge into money.” W. Sittenthaler, Wacker Chemie (German manufacturer of specialized chemical compounds) "Innovation: How to link creativity in new ideas with necessary rigor and discipline in execution." H. Kerminen, Kemira (Finish manufacturer of fertilizers and industrial chemicals) (c) Copyright tim.rwth-aachen.de 8
  • 9. Exploring the decision space of innovation mgmt ‘Paradigm’ (= mental model) Process Innovation Product ‘do better’ ……… ‘do different’ Position Source: Bessant (2008) (c) Copyright tim.rwth-aachen.de 9
  • 10. How we think about something ... shapes the way we manage it.
  • 11. Draw an alien on your notepad. NOW!
  • 12. Experts' Confidence Bu 50 55 60 65 70 75 80 si En ne te ss rta D W ig 2005 -T in o- m O ita i re Bu en nl lC le si in on ss ne t-o n- e ve Sm ss U D Fi rg ar (B til it em nan en t P 2B y a ce ce ho ) Co We nd ne m b s O E- n G re e G Fu pu 2. t in 0 G li n r e n l C Sm ov e i d g B e Energy & Environment ar ern Pub Co us ll C E-T 2010 t S m l i m in a a Bi Br en en shi put ess rs il in so t n g i ng g o o rs Sp me adb O P a c tric an e s d pt D rec ic es is To al ur Graph by Evan M. H. Faber C ig ion is 2010: The World Goes Online ne m M om Aqu d MFar H od pu a m Pe yb t c a i © TechCast, LLC. All Rights Reserved ul rv ri d ar ers ul tu teria ng H re l s In as Ca o In T tel ive rs 2015 Ar Pe me ti f rs s G tel li elem li ge Ne lo g n t ic Information Technology ia on M bal ent edic t Ca wo r lI al as W In in r ks nt iz R Vi s ar te e s el ed e Q M l ig Trcyc Vi Glo rt ua Cus mi n rfac Th ic en ea lin rt u ba l t g e ua ou ro nt gh -M ce tm g al l A Re om um Bi t ac en E cc al i i za o P du e ty C hi t ca ss ti o n om co m ow ne pu pu er s Ar t io n E-Commerce tin tin ti f g g N ic 2020 Al O an ial O D G te r o is e rn ga n te c rga tri D ne at ic hn ns bu es tic iv F o te e 2020: High-Tech Arrives d C ali n al ly En a rm l og an a M Po ce tio o er in y w r C n dif Sm gy g er ie G ur e d art ro O Ro w G rg n an bot O en is s rg et m Longitudinal Summary of Forecasts Sm ic s 2025 an al s Au Th M lA to er oo irc m ap Manufacturing & Robotics n C ra at ed y Ba hi ld ft H Most Likely Year to Enter Mainstream se Tr ig ai hw ts ay s H yp er N M so 2030 uc ni le en c ar on Pl F us M an es io ar n s Li fe 2030: Global Crisis of Maturity Ex M te Medicine and Biogenetics ag ns le i v on Tr ai ns 2035 Size Market Sta r Transportation Co Tr nta ave l ct 2040 (off scale) 12
  • 13. Innovation follows a paradigm (basic model) Mildred McDaniel (1933) Olympic Games, Melbourne, 1956 World Record: 2,15 Richard Fosbury (1947), Olympic Games, Ray Ewry (1873-1937) Mexico, 1968 Olympic Games, London, 1908 World Record: 2,24 World record: 1,98 (c) Copyright tim.rwth-aachen.de 13
  • 14. (Radical) Innovation is overcoming the problem of "local search".
  • 15. The challenge Popper (1988): For radically new innovation to occur at all, the future must be unknowable, since otherwise innovation would, in principle, be already known and would occur in the present and not in the future. The inherent limits of organizations to forecast, especially discontinuous and radical new developments (Hogarth & Makridakis, 1981; Makridakis, 1990) (c) Copyright tim.rwth-aachen.de 15
  • 16. Exploitation Exploration (c) Copyright tim.rwth-aachen.de 16
  • 17. Gary Cooper (c) Copyright tim.rwth-aachen.de 17
  • 18. How it really happens ... (c) Copyright tim.rwth-aachen.de 18
  • 19. 19 Exploitation Exploration Source: von Stamm / Bessant (2008)
  • 20. Disruptive Innovation (c) Copyright tim.rwth-aachen.de 20 20
  • 21. Sustaining vs. disruptive technologies (c) Copyright tim.rwth-aachen.de Source: Bower/Christiansen: Disruptive technologies, HBR, 1995/1 21 21
  • 22. Why firms fail to master discontinuous innovation Resource dependency: Listened too much to best customers. Internal inertia to change: Existing structures, mental models, and capabilities
  • 23. Firms face many more sources of discontinuity than "just" new technologies (Bessant 2005) (c) Copyright tim.rwth-aachen.de Source: Bessant (2008) 23 23
  • 24. Challenging some of our common paradigms (mental models) of innovation
  • 26. Dr G Venkataswamy (c) Copyright tim.rwth-aachen.de 26
  • 27. But innovation is not just western "high tech": The fortune at the Bottom of the Pyramid (BoP) Book and articles by C.K. Prahalad, University of Michigan Begins with potential position innovation – 4 billion people subsist on less than $2/day Products and services for this market? Significant paradigm innovation potential- challenges our assumptions about ‘the poor’ Case examples of experiments from wide range of countries Early warning signals of fundamental shifts in innovation landscape? (c) Copyright tim.rwth-aachen.de 27
  • 28. BoP Example: Aravind eye clinics Began 1976, Dr G Venkataswamy , retired eye surgeon 9 million in India, 45 million worldwide suffer blindness due to cataracts Cataract operation cost in USA - $2500-$3000 Target cost in India - $50, but no compromise on quality Learning from other sectors – the McDonalds approach 200,000 operations/year @ $50 - $300 including hospital stay and any complications treatment 60% of patients treated free, so average cost is $25/operation Rich learning (200k ops) so world-class – NHS is looking at this as an option for the UK Extension to other operations – e.g. bypass surgery in India $4k vs $50k in USA (c) Copyright tim.rwth-aachen.de 28
  • 29. Further examples of BoP innovation EID Parry, ITC – e-choupals – internet in the village Casas Bahia – 10m customers for electronics, appliances, furniture – 45% of spending is at BoP Jaipur Foot – as Aravind – US cost of foot $8000, target cost of JF is $30 and free to many. Extreme use innovation. 25million amputees worldwide. Voxiva medical alerts and communication – spread of SARS, etc. Robust comms. platform independent of specific hardware. Applicable to crime, safety, etc. Annapurna iodised salt – using extreme conditions as a laboratory to push the innovation frontier (micro-encapsulation technology) (c) Copyright tim.rwth-aachen.de 29
  • 30. Learning from the BoP "real life lab" Create a new price/performance Aravind eye care, Monsoon Hungama envelope mobile phone, Grameen and other micro-finance Innovation requires hybrid Micro-encapsulation of iodine in salt (traditional and new technology) (Hindustan Lever), Amul Dairies solutions collection/distribution system Innovations must be adaptable and How to devolve/reach – mobilise local scalable entrepreneurs. Cemex, Casias Bahia Innovations must tackle Energy, water use, waste, etc. E+Co sustainability issues distributed energy Innovations must come from deep Jaipur Foot, TVS PoS system understanding of local needs and context Process innovations are as Aravind, Amul significant as product (c) Copyright tim.rwth-aachen.de 30
  • 31. Learning from the BoP "real life lab" (II) Innovations must deal Voxiva medical diagnostics, Cemex with skill issue User education is critical and How to work in ‘media-dark’ requires innovation in approaches environments? HLL ‘clean hands’ campaign Innovations must suit hostile Jaipur Foot, ITC e-choupal, HLL environments – extreme innovation Annapurna salt Innovations require robust user Languages, input devices for illiterates, interfaces etc. Elektra Mexico fingerprint recognition in stores Innovations must reach dispersed Extending reach in marketing and markets delivery. Avon model – networks of local agents, direct to consumer Innovations must be Aravind, Voxiva, ITC models diffusing platform/architecture-based to ‘developed’ world (c) Copyright tim.rwth-aachen.de 31
  • 32. Consider other "low tech" innovations breaking with the "high tech" paradigm The flip video camera The netbook The Apple-Nike "+" system Twitter Skype (c) Copyright tim.rwth-aachen.de 32
  • 33. Innovation is the domain of firms (manufacturers).
  • 34. Users have the advantage of problem-solving in their own use environments as they “do” a desired activity – they are learning by doing. Lead users innovate here # of users perceiving First manufacturer product appears here need “Voice of the customer” methods start here Time Time Source: Eric von Hippel 2005 34
  • 35. But whatever you do, inspire your most important participant Your Executive Board
  • 36. If you find a "chief innovation officer", run away.
  • 37. Innovation cannot be delegated or assigned to an "innovation function". It is the job of everyone in an organization – including the executive board.
  • 38. 38 piller@tim.rwth-aachen.de tim.rwth-aachen.de | open-innovation.com