Rebecca Henderson, Professor of Management, MIT Sloan
Rebecca Henderson focuses on strategy formulation, competition, research, and product development in high-technology industries. Her course slides are here. As telecommunication industry boundaries start to blurr with those of media entertainment , consumer electronics and on-line web 2.0, Rebecca Henderson’s rational approach help answer three questions : how to create, capture, and deliver value?
1. How will we create value?
A picture of S-CurveHow will the technology evolve, how will the market change? The S Curve is a tool for triggering discussion on industry life cycle and the evolution (especially disruptive transition) of markets. For telecoms, the difficulty is to choose the focus of analysis :
Industry : media/entertainment (content) or network access and transmission or both ?
Technology : fixed or mobile broadband and broadcasting?
Product : handset devices, internet services, network equipment and software ?
And which dimension of performance : market adoption, market sizes, social value ?
As we aim at creating value for customers, we should be desperate to listen to them but be very careful about which ones we select (innovators, early adopters, early majority, late majority, laggards). Too often the innovation is influenced by current customers (CTO councils) and not the leading edge customers that will survive after the discontinuity.
2. How will we deliver value?
One company innovation illustration:For sure in telecoms, there are too many options to choose from and strategy is required to drive real resource allocation? Rebecca jokes about why in the real world it is so hard to kill project #26. Low priority projects still meet ROI goals, please some customers, and have CEO support. Absence of innovation strategy leads to un-innovative project approval. There are a range of decision tools : Risk adjusted NPV, decision trees, simulations e.g. Monte Carlo, closed formulas e.g. Black-Scholes and differential equations. Accuracy of information is key for scenario analysis.
HP Labs moves to an open innovation process so that there are few boundaries for exporting or importing innovation at various stage of the process.How do we manage the core business and growth simultaneously? It is about combining entrepreneurial vs. operational excellence. In betweens are joint-ventures, project teams, separate teams [an organization challenges is to avoid A vs. B team conflicts] .
The best approach is not in the organization structure but rather in establishing incentives so employees share the innovation values "do you want to save lives?' ''Manage from the heart'', build on core values, practice thinking in new ways. It requires ability to manage divergent incentives and career paths plus a process to monitor metrics and resource allocation.
3. How will we Capture value?
How should we design the business model? Money is in the business model innovation. Now web 2.0, energyu and nano are hype. But 100% growth in mobile adoption or consumer riots for DuPont Nylon are no more there. It may sounds immoral but fast followers can capture more value.
Uniqueness : controlling the knowledge generated by an innovation.
Complementary assets : controlling the assets that maximize the profits from innovating, even if not unique. These are competencies=things you can do : manufacturing, sales, service . It also includes resources=things you can own : brand, channels, global.
A summary of wireless technology value chainWhere should we compete in the value chain? Should we buy our suppliers? Distributors? Should we outsource our manufacturing… distribution… sales… capability?
