Innovation and Invention →
- 20 Jul 2009
- Research & Ideas
Markets or Communities? The Best Ways to Manage Outside Innovation
No one organization can monopolize knowledge in any given field. That's why modern companies must develop a new expertise: the ability to attract novel solutions to difficult or unanticipated problems from outside sources around the world. A conversation with Harvard Business School professor Karim R. Lakhani on the keys to managing distributed innovation. Key concepts include: Many organizations find they cannot monopolize knowledge in any given field of endeavor. Firms need to consider three key factors in deciding to pursue either a community- or market-based external innovation model. Successful models developed by Apple, InnoCentive, SAP, and TopCoder create incentives for many entrants to generate a variety of products and services on a platform. The firm's role is to define the boundaries of the platform and then encourage entry and innovation by outsiders. Closed for comment; 0 Comments.
- 16 Jul 2009
- Working Paper Summaries
Principles that Matter: Sustaining Software Innovation from the Client to the Web
Despite the current strength and promise of the Internet software market, the future pace of growth and innovation is not assured. The principles of choice, opportunity, and interoperability were important in the growth of PC software and in the overall health of the information technology ecosystem, and these same principles will shape competition in Internet software, according to HBS professor Marco Iansiti. Given the unprecedented speed at which this industry is developing, consumers and the industry should watch carefully as different companies compete. Choice, opportunity, and interoperability should serve as an important lens, particularly when focused on companies with especially large footprints in the new markets. Key concepts include: Successful technology companies should not forget that innovation and growth in the technology sector is dependent on promoting a thriving ecosystem of complementary and interdependent products. The competitive principles of choice, opportunity, and interoperability are important in Internet software, because of the increased variety of possible software and hardware combinations and the increased interdependency in the applications and services they deliver. Closed for comment; 0 Comments.
- 02 Jul 2009
- Working Paper Summaries
Technology Innovation and Diffusion as Sources of Output and Asset Price Fluctuations
A central challenge to modern business cycle analysis is that standard macro models are unable to generate fluctuations in the stock market with the amplitude, persistence, and lead-lag pattern observed in the data. At the same time, standard macro models predict that good news about future, such as those received during 1994-1995 on the arrival of IT, lead to recessions rather than expansions. HBS professor Diego Comin and coauthors develop a model that overcomes these two problems by explicitly incorporating an endogenous speed of diffusion of technologies that is increasing in the resources spent in adoption. Revisions in beliefs about future profits generate fluctuations in the stock market with the amplitude and lead over output observed in the data. The firms' investment decisions in adoption leads to a shift in labor demand that increases hours worked and output. Key concepts include: In the model, news about future growth prospects produces movements in current output and hours that are positively correlated with the news. The mechanism described here is also potentially relevant to business fluctuations driven by factors other than news about future technological prospects. In particular, endogenous technology adoption amplifies the effects of these shocks vis-à-vis a model without this mechanism. The framework also broadly captures the cyclical pattern of stock price movements. It can account for the run-up of stock prices in the mid 1990s and also some of the decline preceding the most recent recession. Closed for comment; 0 Comments.
- 24 Jun 2009
- Working Paper Summaries
Don’t Just Survive—Thrive: Leading Innovation in Good Times and Bad
The financial crisis provides a sobering reminder of what happens when innovation fails to drive productive economic growth. For over a decade, money from around the world poured into the United States seeking innovation. Despite these massive investments, when adjusted for inflation, U.S. GDP grew slowly with much of the growth coming from government, professional, and business services, including real estate and outsourcing. What's more, inflation adjusted wages stalled for many, even as consumer spending increased. This paper argues that innovation is not a side business to a real business: rather, innovation is the foundation of a successful business. Key concepts include: Entrepreneurs can be found and a culture of entrepreneurship can be developed in companies of any size and age. Entrepreneurial leaders must relentlessly—but not recklessly—pursue opportunity. They must look beyond the resources currently controlled to harness the power, resources, and reach of their organizations and networks. Breakthrough innovations that change people's lives and the very structure and power dynamics of industries cannot be managed as "silos," tucked away in corporate, university, or government research labs, in incubators, or within venture capital funded entrepreneurial start-ups. Access to the marketplace is needed to help speed commercialization and adoption. Emerging opportunities must be nurtured and the transition to high growth must be managed. Once breakthrough innovations catch hold, growth must be funded and managed to exploit the full value of the opportunity. Incremental innovations must ensure that businesses that have passed through the high-growth stage can continue to deliver the resources, capabilities, and platforms needed to fuel the emerging opportunities of the future. Different organizational structures, cultures, governance and risk management systems, and leadership styles are needed to manage the business innovation lifecycle from an initial idea to a sustainable business that leverages entry position and capabilities to exploit the full potential for growth and evolution over time. Closed for comment; 0 Comments.
- 17 Jun 2009
- Working Paper Summaries
Innovation Communication in Multicultural Networks: Deficits in Inter-cultural Capability and Affect-based Trust as Barriers to New Idea Sharing in Inter-Cultural Relationships
What makes sharing new ideas across cultural lines so difficult? Given that disclosing new ideas makes one person vulnerable to the other, innovation communication requires trust. The literature on workplace relationships distinguishes affect-based trust—feelings of socio-emotional bond with the other—and cognition-based trust—judgments of the other's reliability and competence. Recent organizational psychology research on capabilities needed to work across cultures has also identified affect-relevant strengths such as confidence and nonverbal communication. HBS professor Roy Y.J. Chua and Columbia Business School professor Michael W. Morris survey a sample of business executives with diverse professional networks, assessing their inter-cultural capability and measuring both kinds of trust as well as idea sharing in their working relationships. Key concepts include: A diverse professional network is not sufficient for cultural idea exchange and cross-pollination. In the study, individuals with low inter-cultural capabilities did not share new ideas across inter-cultural ties due to deficits of affect-based trust, but not cognition-based trust. Inter-cultural capability may be particularly predictive of affect-loaded interactions and relationships, such as mentoring an employee or inspiring an audience, rather than more intellectual tasks, such as evaluating performance. Individual differences play a role in harnessing the power of multiculturalism for creativity. Closed for comment; 0 Comments.
- 04 Jun 2009
- Working Paper Summaries
Can a Continuously-Liquidating Tontine (or Mutual Inheritance Fund) Succeed where Immediate Annuities Have Floundered?
The changeover from defined benefit to defined contributions retirement plans in the United States has created a vast group of individuals that faces (or will face) the difficult problem of using a lump sum of assets to provide consumption for a relatively long but uncertain number of years. Up to this point, however, consumers appear not to have embraced annuitization. HBS professor Julio J. Rotemberg suggests an alternative instrument that, like immediate annuities, provides longevity insurance and postpones income until old age. In the proposed Mutual Inheritance Fund (MIF), a pool is formed by having individuals of a particular age buy shares in a mutual fund. The income from the underlying assets in the mutual fund is reinvested in the fund so that the value of the shares in an individual's name (and possibly also the number of these shares) grows over time. The basic idea behind the MIF is that the shares of pool members who die are liquidated, and the proceeds are then distributed in cash to the remaining members in proportion to the number of mutual fund shares that are currently in their name. Key concepts include: The essence of the MIF is that people within a pool are bequeathing benefits to each other. The commonality of purpose among the members of the pool, inherent in the MIF, fits with the "mutual insurance" idea with which a great deal of insurance was started. The MIF might be more successful when the members of a pool have some reason to feel altruism toward each other (perhaps because they worked for the same organization). This altruism may be able to counteract an aspect of annuities that potential contributors customers dislike, namely, that they "get nothing" after they die. The MIF suggests an implicit concern for direct descendants. While annuities are sometimes seen as robbing children of their inheritance, the strong tilt of the MIF toward old age leads to a lottery-like component where heirs have a good chance to inherit some of the tontine's proceeds if a contributor policyholder survives until old age. Closed for comment; 0 Comments.
- 01 Jun 2009
- Lessons from the Classroom
The Challenges of Investing in Science-Based Innovation
Smart science-based businesses view today's economic turmoil as an opportunity to stoke up research and innovation for long-term competitive advantage, says professor Vicki L. Sato. How about your business? Key concepts include: Companies with highly differentiated products will be able to weather this storm, and come out the other side stronger. Innovation management challenges fall across several key areas, including strategy, organizational design, decision-making, and resource allocation. Different situations will require different business decisions—investing in R&D isn't always the right path to take. Closed for comment; 0 Comments.
- 11 May 2009
- Research & Ideas
The IT Leader’s Hero Quest
Think you could be CIO? Jim Barton is a savvy manager but an IT newbie when he's promoted into the hot seat as chief information officer in The Adventures of an IT Leader, a novel by HBS professors Robert D. Austin and Richard L. Nolan and coauthor Shannon O'Donnell. Can Barton navigate his strange new world quickly enough? Q&A with the authors, and book excerpt. Key concepts include: The role of CIO is one of the most volatile, high-turnover jobs in business. Why? The driving cause is more than rapid change in IT. Rather, IT is at the crossroads of major organizational change. Barton soon realizes that IT-specific knowledge is not a key to success. Instead, he must take care to collaborate equally with the senior management team and his own staff. Like Barton, today's senior executives are continuously confronted with situations with multiple uncertainties, needing collaboration and input from experts who may know more than they do about the specifics. Closed for comment; 0 Comments.
- 08 May 2009
- Working Paper Summaries
Capitalizing On Innovation: The Case of Japan
How can Japan create a better business environment for innovation? Japan presents a unique case of industrial structures that have produced remarkable developments in certain sectors but seem increasingly inadequate to do the same in modern technology industries, which rely on ecosystems of firms producing complementary products. Robert Dujarric and HBS professor Andrei Hagiu present three case studies of software, animation, and mobile telephony to illustrate potential sources of inefficiencies. Like all advanced economies, Japan faces two interconnected challenges. The first challenge is rising competition from lower-cost countries with the capacity to manufacture midrange and in some cases advanced industrial products. At the same time, Japan confronts changes in the relative weights of manufacturing and services, including soft goods, which go against the country's long-standing competitive advantage and emphasis on manufacturing. If Japan is to continue to prosper in a world where its ability to rely principally on manufacturing will diminish, its policymakers will need to capitalize on its untapped innovative power. Key concepts include: The Japanese hierarchical industry organizations can simply "lock out" certain types of innovation indefinitely by perpetuating established business practices. This is the case with software, an industry in which Japan is strikingly weak. Even when vertical hierarchies produce highly innovative sectors in the domestic market—as is the case with animation and wireless mobile communications—the exclusively domestic orientation of the "hierarchical industry leaders" can entail large missed opportunities for other members of the ecosystem, who are unable to fully exploit their potential in global markets. Private-sector initiative is critical in developing the venture-capital sector, which is a key and necessary ingredient for stimulating innovation in modern industries. Closed for comment; 0 Comments.
- 01 May 2009
- What Do You Think?
Do Innovation and Entrepreneurship Have to Be Incompatible with Organization Size?
Like a good case study, this month's question divided respondents nearly down the middle, says professor Jim Heskett. Can managers lead both a large, established organization and encourage intrapreneurial effort inside it? Readers weighed in. (Online forum now closed. Next forum begins June 5.) Closed for comment; 0 Comments.
- 27 Apr 2009
- Research & Ideas
Building Businesses in Turbulent Times
An economic crisis is a charter for business leaders to rewrite and rethink how they do business, says Harvard Business School professor Lynda M. Applegate. The key: Don't think retrenchment; think growth. Key concepts include: Companies that survive the financial crisis by identifying and exploiting innovation will serve as economic growth engines in the future—and will be the industry leaders of tomorrow. This is a time of unprecedented opportunity to rethink offerings, markets, business processes, and organizational structure—and to improve them to achieve growth. Success will depend on leaders who are able to stabilize the company as they identify and exploit opportunities, find new market niches, create innovative new offerings, and restructure and reposition. Closed for comment; 0 Comments.
- 13 Apr 2009
- Research & Ideas
Kind of Blue: Pushing Boundaries with Miles Davis
Since it hit the airwaves half a century ago, Kind of Blue by Miles Davis has influenced the hearts and minds of jazz fans everywhere. Its songs became instant classics, and it has also converted many a nonfan to appreciate the music's subtlety and complexity. In a new business case, HBS professor Robert D. Austin and Carl Størmer highlight the takeaways for thoughtful managers and executives from this story of creation and innovation. Closed for comment; 0 Comments.
- 08 Apr 2009
- Research & Ideas
Clayton Christensen on Disrupting Health Care
In The Innovator's Prescription, Clayton Christensen and his coauthors target disruptive innovations that will make health care both more affordable and more effective. From the HBS Alumni Bulletin. Closed for comment; 0 Comments.
- 06 Apr 2009
- Research & Ideas
Cheers to the American Consumer
The willingness by American consumers to adopt new products, processes, and services more rapidly than those in other countries may be the most important enabler of entrepreneurship and innovation in America, says marketing professor John Quelch. Key concepts include: America's "venturesome consumer" may be the most important enabler of entrepreneurship and innovation in the United States. Six characteristics separate consumers and entrepreneurs in America from those in other countries. Closed for comment; 0 Comments.
- 09 Mar 2009
- Research & Ideas
How to Revive Health-Care Innovation
Simple solutions to complex problems lead to breakthroughs in industries from retailing to personal computers to printing. So let's try health care, too. According to HBS professor Clayton M. Christensen and coauthors of The Innovator's Prescription, such disruption to an industry might look like a threat, but it "always proves to be an extraordinary growth opportunity." Book excerpt. Key concepts include: Most disruptions have three enablers: a simplifying technology, a business model innovation, and a disruptive value network. Business model innovations are almost always forged by new entrants to an industry. Disruption of an industry rarely happens piecemeal. It is more common that entirely new value networks arise, displacing the old. Always, the technological enablers of disruption are successfully deployed against an industry's simplest problems first. Health care is no different. Closed for comment; 0 Comments.
- 21 Jan 2009
- Working Paper Summaries
The Supply Side of Innovation: H-1B Visa Reforms and US Ethnic Invention
The H-1B visa program governs most admissions of temporary immigrants into the U.S. for employment in patenting-related fields. This program has become a point of significant controversy in the public debate over immigration, with proponents and detractors at odds over how important H-1B admission levels are for U.S. technology advancement and whether native U.S. workers are being displaced by immigrants. In this study, Kerr and Lincoln quantify the impact of changes in H-1B admission levels on the pace and character of U.S. invention over the 1995-2006 period. Key concepts include: Immigrants represented 24 percent and 47 percent of the U.S.'s scientists and engineers (S&Es) with bachelors and doctorate educations in the 2000 Census, respectively. Immigrants have accounted for most of the net increase in U.S. S&Es since 1995. Because it governs the admissions of many S&E immigrants, the H-1B program plays an important role in U.S. innovation. Moreover, the policy shifts in this program have been relatively large compared to other policies concerning immigration or innovation. Fluctuations in H-1B admissions levels significantly influence the rate of Indian and Chinese patenting in cities and firms dependent upon the program relative to their peers. Most specifications find little impact on the invention rates of native U.S. workers, although a small crowding-in effect may exist. Most increases in U.S. innovation with higher H-1B admissions come through direct contributions of the immigrants themselves. Closed for comment; 0 Comments.
- 07 Jan 2009
- What Do You Think?
Is the World Really Flat?
A provocative new book, The Venturesome Economy, argues that the world isn't flat at all, says HBS professor Jim Heskett. But in supporting innovation, does flatness even matter? Readers around the world weighed in with a constellation of viewpoints. (Online forum now closed; next forum begins February 5.) Closed for comment; 0 Comments.
- 26 Nov 2008
- Working Paper Summaries
The Sciences of Design: Observations on an Emerging Field
This paper examines the sciences of design as an emerging field of study that cuts across disciplinary boundaries. The paper summarizes and synthesizes the positions, reflections, opportunities, and challenges expressed at the first doctoral consortium to explore the topic, held in 2008. It thus provides a useful agenda for clarifying and articulating important strands of this nascent field. Key concepts include: Design sciences is a movement that affects not only the information systems discipline but also several allied disciplines, which must also contribute to its definition and participation. When a common language exists across disciplines, it enables an ongoing, productive pursuit of scientific knowledge. But common languages only come about through intense, repeated conversations between individuals with disparate views and open minds. Closed for comment; 0 Comments.
- 14 Nov 2008
- Working Paper Summaries
Parallel Search, Incentives and Problem Type: Revisiting the Competition and Innovation Link
The innovation process is fraught with uncertainty. Managers often do not know ahead of time the ideal mix of individuals and skills needed to solve innovation-related problems. One way around this uncertainty is to have multiple paths, approaches, or designs explored at once. The "parallel search" principle can be used inside the firm just as it may be used more generally by pursuing "open innovation". However, having too many searchers attempting to solve the same problem can undercut the benefits if it leads to less effort and investment. The authors study the outcomes of 645 software development contests, conducted by a software outsourcing vendor, involving over 9,000 coders, to understand the relationship between parallel search and increasing competition and innovation. Key concepts include: The key factor favoring parallel search, i.e. increasing the number of independent solvers, is the complexity of the problem at hand. The benefits of increased searchers were curtailed when the problems were simple, indicating that the negative consequences of competition matter most for simpler problems. Closed for comment; 0 Comments.
Quantifying the Economic Impact of the Internet
Businesses around the advertising-supported Internet have incredible multiplier effects throughout the economy and society. Professor John Quelch starts to put some numbers on the impact. Open for comment; 0 Comments.