Carnegie Mellon Qatar © Robert T. Monroe Course Updated Class Schedule (Also Posted On Wiki Tuesday 3/22: Gate 3 - Making Go/No-Go Decisions Thursday 3/24: Product Development Process Case Study Tuesday 3/29: Final project workshop Thursday 3/31: Mechanics of a product launch: go-to-market Tuesday 4/5: Timing market entry and product portfolios Thursday 4/7: Building an innovative product organization Tuesday 4/12: Final projet workshop Thursday 4/14: Innovation for social good I Tuesday 4/19: Innovation for social good II Thursday 4/21: Final project presentations

Carnegie Mellon Qatar © Robert T. Monroe Course Building and Managing an Innovative Product Organization Robert Monroe Innovative Product Development April 7, 2011

Carnegie Mellon Qatar © Robert T. Monroe Course By The End Of Class Today, You Should: Better understand expectations and structure for the final project presentation and report Be able to explain the concept of a product innovation portfolio and be able to use a couple of powerful visualization techniques to evaluate your organizations innovation portfolio Be able to identify and explain some of the common traits of high-performing new product development organizations Be able to recommend concrete steps a company can take to organize itself to create effective product innovation teams

Carnegie Mellon Qatar © Robert T. Monroe Course Final Project

Carnegie Mellon Qatar © Robert T. Monroe Course Product Innovation Portfolios

Carnegie Mellon Qatar © Robert T. Monroe Course Remember: Innovation Resources Are Limited Organizational Resources NPD Resources Available for New Product Development

Carnegie Mellon Qatar © Robert T. Monroe Course Key Idea: Dont Consider Innovation Projects In Isolation Companies should deliberately manage their mix of innovation products to reflect the organizations: –Overall business strategy –Resource constraints –Core competencies –Desired risk profile (along several dimensions) A product innovation portfolio allows an organziation to: –Identify and track all of the innovation projects it is working on –Understand relative investments across areas and innovation types –Manage organizational risks –Allocate resources effectively

Carnegie Mellon Qatar © Robert T. Monroe Course Visualizing Innovation Portfolios: Aligned Spectra Process Product Incremental Radical Competence-Enhancing Competence-Destroying Component Architectural Evolutionary Disruptive Lower RiskHigher Risk

Carnegie Mellon Qatar © Robert T. Monroe Course Example: Apple iPod in 2001 Process Product Incremental Radical Competence-Enhancing Competence-Destroying Component Architectural Evolutionary Disruptive Lower RiskHigher Risk

Carnegie Mellon Qatar © Robert T. Monroe Course Example: Toyota Prius (Hybrid Petrol/Electric Car) Process Product Incremental Radical Competence-Enhancing Competence-Destroying Component Architectural Evolutionary Disruptive Lower RiskHigher Risk

Carnegie Mellon Qatar © Robert T. Monroe Course Example: Qatar Petroleum and LNG Process Product Incremental Radical Competence-Enhancing Competence-Destroying Component Architectural Evolutionary Disruptive Lower RiskHigher Risk

Carnegie Mellon Qatar © Robert T. Monroe Course Example: Oxo Goodgrips Peeler Process Product Incremental Radical Competence-Enhancing Competence-Destroying Component Architectural Evolutionary Disruptive Lower RiskHigher Risk

Carnegie Mellon Qatar © Robert T. Monroe Course Example: Microsoft Hotmail in 2002 (vs. Exchange Server) Process Product Incremental Radical Competence-Enhancing Competence-Destroying Component Architectural Evolutionary Disruptive Lower RiskHigher Risk

Carnegie Mellon Qatar © Robert T. Monroe Course Visualizing Innovation Portfolios: The 2x2 Matrix Dimension 1 High Low HighLow Dimension 2

Carnegie Mellon Qatar © Robert T. Monroe Course Innovation Portfolio Example Radical Incremental ArchitecturalComponent Size of circle indicates size of investment P1P1 P1P1 P2P2 P2P2 P3P3 P3P3 P4P4 P4P4

Carnegie Mellon Qatar © Robert T. Monroe Course Innovation Portfolio Example: Toyota Prius Radical Incremental ArchitecturalComponent Size of circle indicates size of investment Hybrid Platform P2P2 P2P2 P3P3 P3P3 Li + Batteries Regeneratin g Brakes Engine Control Software

Carnegie Mellon Qatar © Robert T. Monroe Course Innovation Portfolio Example: Toyota Prius (alt) Competence Destroying Competence Enhancing ArchitecturalComponent Size of circle indicates size of investment Hybrid Platform P2P2 P2P2 P3P3 P3P3 Li + Batteries Regeneratin g Brakes Engine Control Software

Carnegie Mellon Qatar © Robert T. Monroe Course Discussion: What should the 2x2 matrices for visualizing the product portfolios look like for companies following these strategies? –First-Movers? –Fast Followers? –Foot-Draggers? –Late Entrants? How about with the aligned spectra visualization model?

Carnegie Mellon Qatar © Robert T. Monroe Course Organizing For Innovation

Carnegie Mellon Qatar © Robert T. Monroe Course Remember: Organizational Resources Are Finite Profit NPD Supporting Current Products Sales and Marketing Adminis- trative Costs Advertising Training Production

Carnegie Mellon Qatar © Robert T. Monroe Course A Fundamental Tension Operational Excellence and Efficiency Creativity, Experimentation, Flexibility, New Offerings Why are these in opposition? … and how can we manage both?

Carnegie Mellon Qatar © Robert T. Monroe Course Designing Organizations For Innovation Small Large Decentralized Centralized Informal (flexible) Formal (standardized) Localized Centralized Organic Mechanistic Firm Size Locus of Control Work norms Globalization strategy Structural Evolution

Carnegie Mellon Qatar © Robert T. Monroe Course Achieving Innovation And Efficiency Some common approaches –Vary norms for different groups within the organization –Skunk works –Spin off subsidiaries –Vary incentives by project and organizational roles These are all trickier to do in practice than they sound –Why?

Carnegie Mellon Qatar © Robert T. Monroe Course Encouraging Innovation: Google One of the things that weve tried very hard to avoid at Google is the sort of divisional structure that prevents collaboration across units. Its difficult. So I understand why people want to build business units, and have their presidents. But by doing that you cut down the informal ties that, in an open culture, drive so much collaboration. If people in the organization understand the values of the company, they should be able to self organize to work on the most interesting problems –Eric Schmidt, Google CEO [Sch10] page 212 Google technical personnel are required to spend 20% of their time on innovative projects of their own choosing Embracing the perpetual beta

Carnegie Mellon Qatar © Robert T. Monroe Course Encouraging Innovation: Apple Q: How do you systematize innovation? A: The system is that there is no system. That doesn't mean we don't have process. Apple is a very disciplined company, and we have great processes. But that's not what it's about. Process makes you more efficient. But innovation comes from people meeting up in the hallways or calling each other at 10:30 at night with a new idea, or because they realized something that shoots holes in how we've been thinking about a problem. It's ad hoc meetings of six people called by someone who thinks he has figured out the coolest new thing ever and who wants to know what other people think of his idea. And it comes from saying no to 1,000 things to make sure we don't get on the wrong track or try to do too much. We're always thinking about new markets we could enter, but it's only by saying no that you can concentrate on the things that are really important. –Steve Jobs, Apple CEO [BW12_4] Intense focus on product excellence – nothing goes out until it is insanely great Very careful and strategic selection of a small number of products –Pours massive resources and energy into them Apple product teams are often discouraged from mingling to insure secrecy

Carnegie Mellon Qatar © Robert T. Monroe Course Encouraging Innovation: Google vs. Apple Which of these approaches is best? Why? Which organization would you rather work at? –Does that matter? Why or why not? What can other organizations learn from these two? –What are some lessons that other organizations should probably not take away from these case studies?

Carnegie Mellon Qatar © Robert T. Monroe Course Discussion Questions For what types of innovation activities are large firms likely to outperform small firms? –And the other way around? Can you think of (other) examples of firms that are both operationally excellent – efficiency and productivity, and also very innovative? –Are those firms the exception or the rule? –Why do you think that is? Are innovation activities necessarily better done at small, organic, informal, localized firms, or can firms at the other end of these spectrums be successful innovators also?

Carnegie Mellon Qatar © Robert T. Monroe Course Wrap Up

Carnegie Mellon Qatar © Robert T. Monroe Course For Tuesday 4/12 On Tuesday, each group will have 15 minutes to present their work to date on their final project –This will be graded as a pass/fail challenge problem #6 (50 pts) –You may use your time however your group decides to do so –You should provide enough information in your presentation, and time after the presentation, that you can get feedback from the class on your ideas and your plan –Key idea: you have a short amount of time, be very focused on the most important ideas, decisions, and supporting evidence that you want to get across in this time.

Carnegie Mellon Qatar © Robert T. Monroe Course References [CE09] Robert G. Cooper and Scott Edgett, Successful Product Innovation, Product Development Institute, 2009, ISBN: [Chr97] Christensen, Clayton M., The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail. Harvard Business Press, 1997, ISBN [Sch10]Melissa A. Schilling, Strategic Management of Technological Innovation, 3 rd Edition, McGraw Hill, 2010, ISBN: Chapter 13 [BW12_04] "The Seeds of Apple's Innovation", Bloomberg BusinessWeek, October 12,