Management of Technology (OM476) Collaborative Strategies April 5, 2006 S. Fisher
Agenda Why collaboration? Various forms of collaboration to enhance innovation Current examples
Criteria for Determining Best Collaboration Strategy Speed Cost Control Potential for Leveraging existing competencies Developing new competencies Accessing other firms’ competencies See Figure 8.5 on page 155
Strategic Alliances Allows a firm to gain access to valuable resources of another firm Share risk Enhance flexibility Knowledge transfer Capability complementation vs. transfer
Joint Ventures Formal arrangement Equity investment from both sides E2-home Joint venture between Electrolux and Ericsson to develop smart appliances Electrolux wanted Ericsson’s expertise in electronics and mobile communications
8 th Continent Joint venture between General Mills and DuPont Produces soy milk Motivation for each company? Source: Tischler, L. (May 2002). Deep pockets, open mind. Fast Company. P. 32.
Research Consortia Trade associations, university-based centers, private research firms Center for Automotive Research ( Center for Research on Polymers ( American Gas Association ( Share expenses on research projects that will benefit multiple companies
Entering into Alliances for Funding Venture Capital Firms that invest in projects with rapid growth potential Often comes with equity stake in the new firm Angel investors Wealthy individuals Usually smaller funding than VCs Government grants and loans
Licensing Reaping benefits from ownership of the technology More transaction, less relationship- oriented Passive vs. aggressive multiple licensing Passive – Performance Indicator Aggressive - JVC
Outsourcing Innovation Hottest new cell phone designers HTC Flextronics Cellon Outsourcing of manufacturing has led to outsourcing of design Efforts to cut costs, design time Similar to what we saw in the RLK Media case Key question – what is core technology and what has become a commodity?
palmOne Collaboration Outsources mechanical and electrical design to HTC in Taiwan Still has in-house designers for look and feel, display, core chips, specification of performance requirements Outcomes Reduced development times by months Reduced defects by 50% Increased gross margins approximately 20% Source: Engardio and Einhorn (March 21, 2005). Outsourcing innovation. Business Week,
Risks of outsourcing innovation Fostering new competitors Losing in-house R&D capability Becoming “hollow” Negative reactions from customers and investors Source: Engardio and Einhorn (March 21, 2005). Outsourcing innovation. Business Week,
Procter and Gamble’s Connect and Develop Strategy Acquiring innovations from outside the firm 35% of new products 45% of projects in the NPD portfolio Goal is 50% Examples Printing process for Pringles ® Prints Mr. Clean Magic Eraser Source: Huston and Sakkab (March 2006). Connect and develop: Inside Procter and Gamble’s new model for innovation. Harvard Business Review,
Connecting Tools NineSigma Company identifies problem to solve Submits problem to network of innovators Anyone can submit a proposal back to the company InnoCentive Founded by Eli Lilly 75,000 contract scientists who can solve very specific problems YourEncore Network of retired scientists and engineers Short term contract assignments
Caveats to Connect and Develop Need cultural commitment, buy-in for the approach Consistent with need to speed up NPD Was initially inconsistent with P&G’s resistance to ideas not invented internally “Ready to go” ideas usually aren’t; they still need some further development Easy to underestimate the R&D resources needed for connect and develop Source: Huston and Sakkab (March 2006). Connect and develop: Inside Procter and Gamble’s new model for innovation. Harvard Business Review,
For next class Monday, April 10: Technology transfer Compilation of many of the concepts we have been discussing In-class exercise Wed., April 12: Our last formal case presentation