About the Authors v

Preface to the Seventh Edition vi

How to Use This Book: Key Features viii

1 Innovation - What It Is and Why It Matters 1

1.1 The Importance of Innovation 2

1.2 Innovation Is Not Just High Technology 4

1.3 It's Not Just Products . . . 7

1.4 Innovation and Entrepreneurship 9

1.5 Strategic Advantage Through Innovation 10

1.6 Old Question, New Context 15

1.7 The Globalization of Innovation 16

1.8 So, What Is Innovation? 19

1.9 A Process View of Innovation 22

1.10 The Scope for Innovation 24

Four Dimensions of Innovation Space 24

Mapping Innovation Space 28

1.11 Key Aspects of Innovation 29

Incremental Innovation - Doing What We Do but Better 30

Component/Architecture Innovation and the Importance of Knowledge 31

Platform Innovation 33

The Innovation Life Cycle - Different Emphasis Over Time 34

Discontinuous Innovation - What Happens When the Game Changes? 37

1.12 Innovation Management 42

Summary 44

Further Reading 45

Other Resources 47

References 48

2 Digital Is Different? 50

2.1 What Is Digital Innovation? 51

2.2 Is It New? 54

2.3 Is It Revolutionary? 55

2.4 What Does It Mean for Innovation? 56

2.5 What Does It Mean for Innovation Management? 59

The New Digital Toolkit 60

New Ways of Thinking About Innovation Management 64

Summary 67

Further Reading 67

Other Resources 68

References 68

3 Innovation as a Core Business Process 70

3.1 The Innovation Journey 70

3.2 Different Circumstances Similar Management Challenges 72

3.3 Variations on a Theme 73

Services and Innovation 73

Service Innovation Emphasizes the Demand Side 77

The Extended Enterprise 79

Innovation in the Non-commercial Arena 79

Not-for-Profit Innovation 80

Social Entrepreneurship 82

3.4 Cross Sector Differences 84

Organizational Size 84

Project-based Organizations 85

Platform Innovation 85

Ecosystems 86

The Influence of Geography 86

Regulatory Context 87

Industry Life Cycle 87

3.5 Do Better/Do Different 88

3.6 A Contingency

Model of the Innovation Process 90

3.7 Evolving Models of the Process 90

3.8 Can We Manage Innovation? 93

3.9 Building and Developing Routines across the Core Process 95

Navigating the Negative Side of Routines 95

3.10 Learning to Manage Innovation 96

Identifying Simple Archetypes 97

Measuring Innovation Success 98

What Do We Know About Successful Innovation Management? 99

Success Routines in Innovation Management 101

Key Contextual Influences 107

3.11 Beyond the Steady State 108

Summary 108

Further Reading 109

Other Resources 109

References 110

4 Developing an Innovation Strategy 115

4.1 'Rationalist' or 'Incrementalist' Strategies for Innovation? 116

Rationalist Strategy 117

Incrementalist Strategy 120

Implications for Management 121

4.2 Innovation 'Leadership' versus 'Followership' 123

4.3 The Dynamic Capabilities of Firms 126

Institutions: Finance, Management and Corporate Governance 126

Learning and Imitating 128

4.4 Appropriating the Benefits from Innovation 130

4.5 Exploiting Technological Trajectories 136

4.6 Developing Firm-specific Competencies 139

Hamel and Prahalad on Competencies 139

Assessment of the Core Competencies Approach 141

Developing and Sustaining Competencies 144

4.7 Globalization of Innovation 149

4.8 Enabling Strategy Making 154

Routines to Help Strategic Analysis 154

Portfolio Management Approaches 155

Summary 157

Further Reading 158

Other Resources 158

References 159

5 Building the Innovative Organization 164

5.1 Shared Vision, Leadership and the Will to Innovate 166

5.2 Appropriate Organizational Structure 172

5.3 Key Individuals 176

5.4 High Involvement in Innovation 179

5.5 A Roadmap for the Journey 183

5.6 Effective Team Working 186

5.7 Creative Climate 192

5.8 Boundary-Spanning 204

Contents xiii

Summary 207

Further Reading 207

Other Resources 208

References 209

6 Sources of Innovation 214

6.1 Where Do Innovations Come From? 215

6.2 Knowledge Push 216

6.3 Need Pull 218

6.4 Making Processes Better 220

6.5 Crisis-driven Innovation 222

6.6 Whose Needs? The Challenge of Underserved Markets 223

6.7 Emerging Markets 227

6.8 Toward Mass Customization 229

6.9 Users as Innovators 232

6.10 Using the Crowd 235

6.11 Extreme Users 237

6.12 Prototyping 238

6.13 Watching Others - and Learning from Them 239

6.14 Recombinant Innovation 240

6.15 Design-led Innovation 241

6.16 Regulation 243

6.17 Futures and Forecasting 243

6.18 Accidents 244

Summary 245

Further Reading 246

Other Resources 247

References 248

7 Search Strategies for Innovation 251

7.1 The Innovation Opportunity 252

Push or Pull Innovation? 252

Incremental or Radical Innovation? 253

Exploit or Explore? 254

7.2 When to Search 254

7.3 Who Is Involved in Search? 255

7.4 Where to Search - The Innovation Treasure Hunt 257

Ambidexterity in Search 258

Framing Innovation Search Space 258

7.5 A Map of Innovation Search Space 260

Zone 1 261

Zone 2 261

Zone 3 262

Zone 4 262

7.6 How to Search 263

7.7 Absorptive Capacity 266

7.8 Tools and Mechanisms to Enable Search 268

Managing Internal Knowledge Connections 268

Extending External Connections 270

Summary 272

Further Reading 272

Other Resources 273

References 274

8 Innovation Networks 277

8.1 The 'Spaghetti' Model of Innovation 279

8.2 Innovation Networks 281

Why Networks? 282

Emergent Properties in Networks 284

Learning Networks 284

Breakthrough Technology Collaborations 286

Regional Networks and Collective Efficiency 286

Mobilizing Networking 287

8.3 Networks at the Start-up 288

8.4 Networks on the Inside . . . 290

8.5 Networks on the Outside 291

8.6 Networks into the Unknown 296

8.7 Managing Innovation Networks 298

Configuring Innovation Networks 298

Facing the Challenges of Innovation Networks 299

Summary 300

Further Reading 301

Other Resources 301

References 302

9 Dealing with Uncertainty 304

9.1 Meeting the Challenge of Uncertainty 305

9.2 The Funnel of Uncertainty 306

9.3 Planning Under Uncertainty 307

9.4 Forecasting Innovation 311

Customer or Market Surveys 313

Internal Analysis, for Example, Brainstorming 314

External Assessment, for Example, Delphi 314

Scenario Development 315

9.5 Estimating the Demand for Innovations 316

9.6 Assessing Risk, Recognizing Uncertainty 318

Risk as Probability 319

Perceptions of Risk 321

9.7 Assessing Opportunities for Innovation 325

Financial Assessment of Projects 325

How to Evaluate Learning? 326

How Practicing Managers Cope 334

9.8 Decision Making at the Edge 336

Selection and Reframing 336

9.9 Mapping the Selection Space 339

Summary 345

Further Reading 345

Other Resources 345

References 346

10 Creating New Products and Services 349

10.1 Processes for New Product Development 350

Concept Generation 353

Project Selection 353

Product Development 354

Product Commercialization and Review 355

Lean and Agile Product Development 355

Lean Start-up 356

10.2 Factors Influencing Product Success or Failure 358

Commitment of Senior Management 362

Clear and Stable Vision 362

Improvisation 363

Information Exchange 363

Collaboration under Pressure 364

10.3 Influence of Technology and Markets on Commercialization 364

10.4 Differentiating Products 368

10.5 Building Architectural Products 371

Segmenting Consumer Markets 372

Segmenting Business Markets 373

10.6 Commercializing Technological Products 378

10.7 Implementing Complex Products 381

The Nature of Complex Products 382

Links Between Developers and Users 382

Adoption of Complex Products 384

10.8 Service Innovation 385

10.9 Diffusion of Innovations 391

Processes of Diffusion 391

Factors Influencing Adoption 393

Characteristics of an Innovation 394

Summary 399

Further Reading 399

Other Resources 400

References 401

11 Exploiting Open Innovation and Collaboration 405

11.1 Joint Ventures and Alliances 406

Why Collaborate? 406

11.2 Forms of Collaboration 410

11.3 Patterns of Collaboration 413

11.4 Influence of Technology and Organization 415

Competitive Significance 416

Complexity of the Technology 417

Codifiability of the Technology 418

Credibility Potential 418

Corporate Strategy 419

Firm Competencies 419

Company Culture 419

Management Comfort 420

Managing Alliances for Learning 420

11.5 Collaborating with Suppliers to Innovate 427

11.6 User-led Innovation 431

11.7 Extreme Users 434

Co-development...