L6: Organizing NPD

Question 1

How do firms organization NPD?

Answer 1

• Within the firm - Intra-organizational mode

- With other firms - Inter-organizational mode

Question 2

Types of Intra-organizational mode

Answer 2

[1] Sequential model
[2] Rugby model
[3] Multiple convergent approach
[4] Black-box model

Question 3

Why do we need intra-organizational mode (functional cooperation)? (Olson et al., 2001)

Answer 3

The problem of distance between functions + Greater environmental uncertainty > The need for integration of functional specialization. Ex:

• RnD: technological issues of product’s design and performance.
• MKT and sales: customer preferences, levels of demand, or high competitor reactions.
• Operations: process technology or the firm’s ability to meet production schedules, cost parameters, or desired quality levels.

Question 4

[1] Sequential / Departmental approach as intra-organizational mode

Answer 4

Definition: Each stage or specialized function is responsible for certain tasks. The flow of developing products is sequential.
> Pros: More managerial control.

Question 5

Criticism of [1] Sequential / Departmental approach as intra-organizational mode

Answer 5

1) Slow, costly and inflexible: each stage must be completed before moving to the next stage.
2) Functions work to own goals and interests
3) Lack of accountability: if there’s a fault in the later stages, it’s difficult to find who is responsible.
4) Cumbersome system of sign-off approvals and audit trails: who’s responsible for the final result? The decision-making belongs to senior managers or CEO.

Question 6

[2] Rugby approach as intra-organizational mode

Answer 6

• Definition: several teams work together for a short of time. All teams are engaged in a concurrent development.
• Emphasis on training for personal and communication skill, especially for interaction and interfacing skills.
• Ex: a group of engineers start to design the product (phase 3) before the results of feasibility tests (phase 2).

Question 7

Pros and cons of [2] Rugby approach

Answer 7

Pros:
1) Rapid, flexible NPD and less costly.
2) Early identification of problems / misinterpretation and resolution of conflicts.
3) Stimulate function learning.
Cons: Some resistance by functions to be involved.

Question 8

[3] Multiple convergent approach as intra-organizational mode

Answer 8

• Definition: all key departments are involved in the convergent point. It includes external collaboration with customers and suppliers in the process.
• Ex: RnD, Suppliers, MKT, Customers, Manufacturing work together in the idea generation

Question 9

Pros and cons of [3] Multiple convergent approach (Hart et al., 2003)

Answer 9

1/ Pros:
- Allow iterative communication and evaluation within the functional groups.
- Can accommodate third parties easily.
2/ Cons:
- It converges for cross-functional decision, but then separate into functions to carry out the tasks. Horizontal communication happens only at evaluation point.
- Require more MGT effort to keep the process on track.

Question 10

[4] Conversion Process Model (Black box model) as intra-organizational mode

Answer 10

It views NPD as numerous inputs into a ‘black box’ where they are converted into the outputs.

Question 11

Patterns of functional dependence and cooperation across project stages (Olson et al., 2001)

Answer 11

• Each function plays a more crucial role in reducing uncertainty surrounding its particular expertise during some stages of project.
  + Early stage (Product conceptualization and evaluation): MKT and RnD
  + Later stage (Production and commercialization): MKT and operation, RnD and operation
• The cross-functional cooperation increases when moving to later stages.

Question 12

Benefits of cross-functional cooperation (Olson et al., 2001; Di Benedetto, 2011)

Answer 12

• Stronger new product performance.

- New solutions can be identified when critical questions are raised internally.

Question 13

Criticism of cross-functional cooperation (Olson et al., 2001; Di Benedetto, 2011; Blackburn, 2011)

Answer 13

• Conflicting measures of success.
• Personal conflict between individuals.
• Different expectations in terms of completion time.
• Team manager does not have direct authority over team members like Functional managers, so his power and access to resources may be limited.

Question 14

What managers should do to overcome functional cooperation limitation? (Di Benedetto, 2011)

Answer 14

• Identify and manage the frictions in the interface area.

- Try to reach an acceptable compromise or collaborative problem solving

Question 15

Organizational innovation (Blackburn, 2011)

Answer 15

• “the successful implementation of creative ideas within an organization” (Amabile, 1988, p. 126).
• Nature: uncertain, knowledge intensive, controversial and cross-functional.
• What top management do: Choose the innovation goal (where, when, who), Implement strategy and Manage people

Question 16

Types of Inter-organization mode

Answer 16

[1] Outsourcing innovation and innomediaries

[2] Collaboration / Acquisition with modes based TLC

Question 17

[1] Innovation outsourcing as an inter-organizational mode

Answer 17

Involve customers, suppliers, horizontal communities of practice and outside experts in solving the firm’s problems.

Question 18

Innomediaries in Innovation outsourcing

Answer 18

The third-party mediators who help companies fill ‘structural gaps’ in knowledge.
Ex: InnoCentive - an open innovation and outsourcing company puts the problem of firm to the crowd for solution (crowdsourcing).

Question 19

[2] Alliance or acquisition as an inter-organizational mode (Roberts and Liu, 2001)

Answer 19

• The need to choose between alliance and acquisition in the quest to develop profitable products.
• Executives who understand where their product fits within the TLC are more likely to make the right call.

Question 20

Technology Life cycle (TLC) and organizational forms over the life cycle (Roberts and Liu, 2001)

Answer 20

[a] Fluid phase
[b] Transitional phase
[c] Mature phase
[d] Discontinuities phase
=> Each stage is shaped by changes in the character and frequency of innovations in technology-based products and processes, and by market dynamics.

Question 21

[a] Fluid phase in TLC (Roberts and Liu, 2001)

Answer 21

Conditions: high level of product and market uncertainty.
=> High growth rate in market demand, Low entry barriers, Little brand loyalty, Low direct competition, Low bargaining power of suppliers.

Question 22

Choices in [a] Fluid phase in TLC (Roberts and Liu, 2001)

Answer 22

• Collaboration: licensing to protect technology, form MKT alliances with key players in supply chain to establish standards.
• Acquisition: acquire start-up to get access to more resources, gain critical CA technology, or make equity investment before acquisition.

Question 23

[b] Transitional phase in TLC (Roberts and Liu, 2001)

Answer 23

Conditions: The emergence of dominant design and improving dominant technology.
=> Industry demand grows rapidly. Customers require quality products and timely delivery. Barriers to entry become even lower if design is easily accessible.

Question 24

Choices in [b] Transitional phase in TLC (Roberts and Liu, 2001)

Answer 24

• Collaboration: To develop new technology extensions, features, applications through joint RnD. or Licensing (collect royalties or acquire the technology)
• Acquisition: Mature firms acquire businesses that possess dominant design. or Dominant design owners acquire for access to complementary technologies or new markets.

Question 25

[c] Mature phase (Roberts and Liu, 2001)

Answer 25

Condition: Slow growth of market demand. Price competition for profit in the commoditized market. High barriers to entry.
=> Focus shifts from product to process innovation.

Question 26

Choices in [c] Mature phase (Roberts and Liu, 2001)

Answer 26

• Collaboration: manufacturing and RnD JV or suppliers and competitors alliance to share costs and risk. MKT alliance to target latent markets and steal competitor’s customers.
• Acquisition: Horizontal mergers with complementary product lines. Divest non-core properties to alleviate pressure on earnings. => better than alliance.

Question 27

[d] Discontinuities phase (Roberts and Liu, 2001)

Answer 27

Condition: Volatile marketplace with obsolete technology and new technology in the fluid phase. Appearance of new demand.

Question 28

Choices in [d] Discontinuities phase (Roberts and Liu, 2001)

Answer 28

• Collaboration: MKT alliances and licensing agreements can accelerate the transition: ensure new product available to high-end customers and alleviate first mover concern about uncertain market demand.
• Acquisition: Divest companies as priorities shift with market convergence / Equity financing for attacker.

Question 29

Companies decision to ally or acquire depend on… (Roberts and Liu, 2001)

Answer 29

• Company-specific competencies and needs.
• Overall market development.
• Company’s position relative to its competitors.

Question 30

Benefits of Inter-organization mode

Answer 30

Network experience and Improve position

Question 31

Limitations of Inter-organization mode

Answer 31

1) Imitation and Ownership of patents.
2) Disparity of the outcome => less quality product.
3) Time-consuming and costly.
4) Small firms have risk of being taken over by big companies.
5) Risk of losing the CA during the learning race.
6) Unintended sharing secrets of partner firms to the outsiders.
7) Conflict due to different approaches of different firms (ex: expectation - small firms want cash quickly while big firms take things slowly)

Question 32

The formation of tie strength in a strategic alliance and first NPD project (Badir and Connor, 2015)

Answer 32

Alliance’s first NPD project characteristic (+ Technical skills of alliance) => Required interorganizational learning (+ Market overlap) => Communication => Strength of ties

Question 33

NPD project characteristics’ impact on Interorganizational learning (in terms of degree of innovation) (Badir and Connor, 2015

Answer 33

• Radical: higher probability of failure. But it reaps advantage of first entrant (higher profit, survive longer and larger market share) and promotes mutual learning. => More learning
• Incremental: products are less ambiguous, so partners have sound knowledge of most features of products.

Question 34

NPD project characteristics’ impact on Interorganizational learning (in terms of mode of development) (Badir and Connor, 2015

Answer 34

• Modular: each task are managed independently and produced separately. It allows information hiding and appropriate when there is insufficient trust.
• Integrated: each component work specifically with other components in a tightly coupled system. => More learning for tacit knowledge

Question 35

Moderating role of partner’s technical skills and capabilities’ impact on Interorganizational learning (Badir and Connor, 2015)

Answer 35

• Complementary: More learning. As it’s a means to exploit new business opportunities. And by bringing distinctive knowledge to alliances, there is more incentive to invest in partnership than cost-saving investment.
• Similar: weaker competitive position. It is to limit inherent risks in product development, to establish industry standard to avoid full burden of development cost.

Question 36

Degree and Type of Interorganizational Learning (Badir and Connor, 2015)

Answer 36

• Degree: the amount of knowledge and info to share and receive. High knowledge-transfer mechanism can “out innovate” production networks.
• Type: explicit knowledge (systematic and easily codifiable) and tacit knowledge (hard to formalize or articulate, not easily visible, acquired through experience).

Question 37

Impact of Interorganizational Learning on Communication (Badir and Connor, 2015)

Answer 37

• When the knowledge needed to be exchanged is high and of a tacit nature, the project members engage in a high frequency of richer communication media.
• Otherwise, the communication using a lesser degree of media richness, from written documents available in paper or electronic formats.

Question 38

The moderating role of partners’ market overlap (Badir and Connor, 2015)

Answer 38

• Purpose for firms that share big market overlap: collusion on price or geographical territory allocation, share the risk and cost associated with NPD, weaken the outsiders.
• Yet, the bigger size of market overlap, the more difficult to pursue mutually beneficial objectives. It is the risk of opportunism from partner - loss of proprietary knowledge and risk of taken-over.

Question 39

Tie Strength (Badir and Connor, 2015)

Answer 39

• Strong ties increase the likelihood that social actors will share sensitive information with each other; share advice, help and knowledge flow willingly in both directions.
• Firms feel confident in the relationships, and share a mutual understanding and trust.
• Strong ties are more costly to maintain and require more time and effort.

Question 40

From tie strength to Exploration strategy in Innovation network (Dittrich and Duyster, 2007)

Answer 40

• Ideas arise from: 1) Search, experimentation, risk taking and innovation and 2) Interaction with partners in different lines of business.
• New partner company usually are outside the core technological field in different sector of the industry.
• Low frequency of partnership, and lower commitment.
• Non-equity alliances.

Question 41

From tie strength to Exploitation strategy in Innovation network (Dittrich and Duyster, 2007)

Answer 41

Purpose: to strengthen and broaden basic knowledge of established technologies and products by exploiting existing knowledge.

• High frequency of partnership.
• Partners in the same technological field, so the network are highly diversified and produce a wide range of related but different products.
• Equity alliances.

Question 42

2 systems in the organization that support innovation: (Blackburn, 2011)

Answer 42

• Culture for innovation

- Structuring for innovation

Question 43

Culture in the organization that support innovation (Blackburn, 2011)

Answer 43

[1] ‘‘support for innovation’’ (openness to change, supportive of new ideas from employees, and tolerant of diversity among employees).
[2] ‘‘resource support’’ (the provision of people, time, material, and money in service of innovation).

Question 44

Structure in the organization that support innovation (Blackburn, 2011)

Answer 44

[1] The need to confront tensions: internal or external, exploration or exploitation, strategy emergence or strategic determination, and freedom to innovation or responsibility to work towards goal.
[2] How to organize structure: cross-functional team, autonomous team (ex: skunkwork).