Transcript Navigating the technology Landscape of Innovation Lee

Navigating the Technology
Landscape of Innovation
Lee Fleming & Olav Sorenson
MIT Sloan Management Review
Winter 2003
Design Strategies
• How should a company go about determining what their
essential strategy should be for product innovation?
• Two basic design strategies:
– Modular design: independent pieces are put together to make
a product
• A change in one component of the product has little influence on
the performance of other parts or on the performance of the
whole product
– Upgrade the heating element in an electric coffeemaker
– NonModular or coupled design: components are highly
interdependent
• A minor change in one part can cause an unexpectedly huge
difference in the functioning of the overall system
– A miniscule impurity in a semiconductor (10 parts in a billion)
can dramatically alter silicon’s resistance by a factor of 10,000
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The Technology Landscape
– Modular designs make R&D more predictable but they tend to result in
incremental product improvements instead of important advances
– Coupled design are riskier to work with but are more likely to lead to
breakthroughs
– The trade-off between predictability and innovation can be viewed as a
“technology landscape”
• Gently sloping hills correspond to incremental product improvements based
on modular components
• Soaring, craggy peaks represent breakthrough inventions that rely on
tightly coupled parts
– Developing new products requires a search across such technology
terrain
• Dell, with its efficient manufacturing and superb supply-chain management
, can compete by traversing the slopping hills
• Apple needs to scale the high peaks to maintain the competitive advantage
– A “map” of the terrain would help such companies minimize risk i.e., gain an
understanding of the underlying science of the technologies being used
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The Technology Landscape
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The Technology Landscape
• The concept of “technology terrain” and “maps” helps explain
why some companies have profited from R&D efforts while
others have stumbled
– A company having difficulty moving products through R&D into
manufacturing could be exploring an area of the technology
landscape that is too rugged
• Such a company might try to work in a less precarious terrain by
using more modular components, or
• Make a large investment in basic science to develop a map of the
landscape that will help its researchers avoid technological pitfalls
– Summits correspond to inventions that have successfully
merged different components and the valleys represent failed
combinations
– Inventors seek out the peaks while trying to avoid the chasms
in between
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The Technology Landscape
• Researchers who do not understand the components they are working
with nor how they interact, are searching the terrain in a “fog” and thus
prefer cautious forays i.e., small adjustments to proven concepts
– Mt Fuji landscape
• One peak, researchers simply travel uphill to discover the next invention
– Minor enhancements will likely work and be accepted by the market
– First mover advantage is short-lived as other competitors can easily
find the same peak
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The Technology Landscape
– The Alps landscape
• With its multitude of peaks and chasms (working with tightly coupled
systems), inventors searching in the fog will miss most of the great
inventions because they are situated beyond an abyss of technological
dead ends
• Proceeding slowly uphill will leave the inventor stranded on some local hill
far below the soaring heights of Mt Blanc
• Once stranded on a local peak, any direction is downhill. They can not see
where to proceed because of the fog and may even decide to quit further
research in the incorrect belief that they have reached the apex
• A map is needed to gain a strong technological advantage over rivals
• Working with this technology is risky and unpredictable but the payoffs
can be huge for those who make landmark discoveries that others have
difficulty replicating
• But, not every organization is suited to attempt Mt Blanc and may be
better off exploring less rugged terrain (modular systems)
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The Alps and Mt Blanc
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Summary of Strategies
for Product Innovation
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Modular Strategy
• Sun Microsystems
– Was able to develop working systems relatively easily by using modular
microprocessors
• Computational power lagged behind that of Apollo Computer which relied on
customized and more coupled designs
• Sun eventually eclipsed Apollo because the latter found it difficult to sustain the pace
of innovation
•
•
Dell
– Benefits not from revolutionary product development but through exemplary
SCM and strong execution of its business model
– This in a market where consumers are able to build their own PCs using
modular parts
Sony Walkman
– First built a library of standard, interchangeable components (Mt Fuji
landscape) which made it easier to find useful combinations
– They stayed ahead of the competition not because their product could not be
reproduced but by flooding the market with changes and improvements
through rapid innovation by modular recombination that the competition could
not keep pace with
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Tightly Coupled Strategy
• Need an effective way to deal with the complexity og rugged
technology landscapes
– Shotgun sampling: generate an enormous number of random trials and
then subject them to rigorous selection criteria. Requires two things:
• Methods to generate variation cheaply
• Accurate tests to assess the value of those variations
– Used by Thomas Edison in his Menlo Park laboratory
• Gathered together hundreds of gadgets, chemicals, compounds and
technologies under one roof staffed by a variety of technical professionals
• The layout of the lab further facilitated rapid shotgun sampling by
juxtaposing seemingly unrelated technologies in the same work area and
encouraging his staff to try strange combinations
– In developing the light bulb, Edison tried 1,000 combinations of
filament materials, vacuum pressures, voltages, bulb shapes, etc.
running each against an obvious and rigorous test – how long does the
bulb stay lit?
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Tightly Coupled Strategy
– Computer simulation reduces the cost of running numerous
trial-and-error tests
• BMW builds computer models of its cars and then “crashes” then in
virtual simulations
• Sometimes engineers can not manually predict the complex
behavior of a system that involves the interactions of thousands or
millions of parts and simulations are the only way to test the system
– In the 1980s, the RISC (reduced instruction set computing)
microprocessors could only be tested via simulation due to the
numerous configuration possibilities that were being
investigated.
• As a result of this work, the annual rate of improvement in
microprocessors increased from 35% to 55%
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Tightly Coupled Strategy
– To increase the odds of success when using
shotgun sampling, an organization should:
• Work with many diverse technologies
• Physically juxtapose researchers from seemingly
unrelated fields
• Promote a relatively unstructured workplace
• Be on the lookout for unexpected breakthroughs even if
they appear far from the original target
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Tightly Coupled Strategy
– The pharmaceutical industry faces a daunting challenge
in testing new drugs
• The possible interactions between other drugs and the
unique makeup of each person makes it difficult to know
if they have truly hit the intended target
• The do extensive testing but have limited understanding
of the diseases they are attempting to deal with which
limits the effectivesness of the tests
– This is why failures of drugs occur much later in
clinical trials after much time and expense
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Mapped Searching
• Instead of performing shotgun sampling, a company
can obtain a fundamental understanding of the
different coupled components and their interactions
– This will allow researchers to narrow their field of
exploration and arrive at useful inventions more
quickly
– This requires an expensive and long-term
investment in basic or applied science but the
potential payoffs are huge
• Even an inexact map of the rugged, technological
landscape can pay off handsomely
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Mapped Searching
• The invention of the inkjet printer presented a great
challenge as it involved so much coupling among the
different components
– Technicians and researchers at H-P labs finally
succeeded in putting together the winning
combination of intricate components that led to
the company’s blockbuster product
• This achievement was made possible only through a
basic understanding of the complex physics of
superheated liquids, simulations and numerical
techniques – they mapped the technology landscape
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Mapped Searching
• Research on patent citations demonstrates that
those inventions that were accomplished through
mapped searching generated have twice the import
(on the average) of those developed through
modular recombination
– The commercial value of patents that are highly cited
increases exponentially
• A patent with 14 citations has 100 times the value of a
patent with 8 citations
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Mapped Searching
• A technology map is useful for companies that have
hit a dead-end but don’t realize it yet
– Research and analysis can show that the technology is
impractical and should be abandoned
• A technology map is useful for companies who think
they are at a dead-end but really aren’t
– Prozac was discovered by a researcher at Eli Lily who
continued studying a group of compounds that had
not yet shown promise because of a theory he had
developed on the mechanism by which brain cells
release and absorb serotonin, a powerful neural
transmitter
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Mapped Searching
• Scientists seek recognition through publication of their
research; this runs counter to the protection required for new
technology
– In the 1980s, IBM developed copper-interconnect
technology which enabled transistors on a chip to be
connected at very low electrical resistance
• This was a major coup and the stock price rose over 10%
• IBM allowed its researchers to publish only general ideas about the
technology and did not apply for patents
• During the downturn of the early 1990s, IBM suffered drastic
cutbacks and several reserachers left the company
– The rest of the industry now learned about the technology but
IBM had already shipped more than a million chips before the
competitors could respond
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