ITO - Glossary

Strategic intent

A company's strategic intent is a long-term goal that is ambitious, builds upon and stretches the firm's existing core competencies, and draws from all levels of the organization. This forward-looking orientation is crucial; without it companies can easily become focused on markets they have served in the past.

Licensing

A contractual arrangement whereby one organization or individual (the licensee) obtains the rights to use the proprietary technology (or trademark, or copyright, etc.) of another organization or individual (the licensor).

Partly parallel development process

A development process in which some (or all) of the development activities at least partially overlap. That is, if activity A would precede activity B in a partly parallel development process, activity B might commence before activity A is completed.

Crowdsourcing

A distributed problem-solving model whereby a design problem or production task is presented to a group of people who voluntarily contribute their ideas and effort in exchange for compensation, intrinsic rewards, or a combination thereof.

Conjoint analysis

A family of techniques that enables assessment of the weight individuals put on different attributes of a choice, such as the relative value of features of a product or the relative importance of different outcomes of a development project. While individuals may find it very difficult to accurately assess the weight they put on individual attributes of a decision, conjoint analysis enables these weights to be derived statistically.

Data envelopment analysis (DEA)

A method of ranking projects based on multiple decision criteria by comparing them to a hypothetical efficiency frontier.

Joint venture

A partnership between two or more firms involving a significant equity stake by the partners and often resulting in the creation of a new business entity. A joint venture entails significant equity investment from each partner, and resources to be committed by each partner are usually specified in carefully constructed contractual arrangements, as is the division of any profits earned by the venture.

Patent

A property right protecting a process, machine, manufactured item (or design for manufactured item), or variety of plant. An intangible asset.

Copyright

A property right protecting works of authorship. An intangible asset.

Dynamic capabilities

A set of abilities that make a firm more agile and responsive to change - the firm's ability to integrate, build, and reconfigure internal and external resources/competences to address and shape rapidly changing business environments. In fast-changing markets, it can be extremely useful for a firm to develop a core competency in responding to change.

Exit barriers

Costs or other commitments that make it difficult for firms to abandon an industry (large fixed-asset investments, emotional commitment to the industry, etc.).

Lead users

Customers who face the same general needs of the marketplace but are likely to experience them months or years earlier than the rest of the market and stand to benefit disproportionately from solutions to those needs.

Switching costs

Factors that make it difficult or expensive to change suppliers or buyers, such as investments in specialized assets to work with a particular supplier or buyer.

Outsourcing

Firms that develop new technological innovations do not always possess the competencies, facilities, or scale to perform all the value-chain activities for the new innovation effectively or efficiently. Such firms might outsource activities to other firms.

Tacit knowledge

Knowledge that cannot be readily codified (documented in written form).

Complex knowledge

Knowledge that has many underlying components, or many interdependencies between those components, or both.

Alliance contracts

Legally binding contractual arrangements to ensure that partners are fully aware of their rights and obligations in the collaboration and have legal remedies available if a partner should violate the agreement.

Technology cluster

Regional clusters of firms that have a connection to a common technology, and may engage in buyer, supplier, and complementor relationships, as well as research collaboration. They can be analysed from the Regional Innovation System (RIS) perspective.

Science park

Regional districts, typically set up by government, to foster R&D collaboration between government, universities, and private firms.

Ambidextrous organization

The ability of an organization to behave almost as two different kinds of companies at once. Different divisions of the firm may have different structures and control systems, enabling them to have different cultures and patterns of operations.

Governance

The act or process of exerting authority and/or control. Three main governance mechanisms relevant in collaboration strategies: alliance contracts, equity ownership, relational governance

Monopoly rents

The additional returns (either higher revenues or lower costs) a firm can make from being a monopolist, such as the ability to set high prices, or the ability to lower costs through greater bargaining power over suppliers.

Real options

The application of stock option valuation methods to investments in nonfinancial assets.

Agglomeration economies

The benefits firms reap by locating in close geographical proximity to each other.

Appropriability

The degree to which a firm is able to capture the rents from its innovation. In general, the appropriability of an innovation is determined by how easily or quickly competitors can imitate the innovation. The ease with which competitors can imitate the innovation is, in turn, a function of both the nature of itself and the strength of the mechanisms used to protect the innovation.

Resource fit

The degree to which potential partners have resources that can be effectively integrated into a strategy that creates value. * Complementary - most collaborations are motivated by the need to access resources the firm does not possess; such collaborations are based on the combination of complementary resources. * Supplementary - The pooling of supplementary resources can enable partners to achieve market power or economies of scale.

Contract book

core team members and senior managers must negotiate a definition in detail the basic plan to achieve the goal laid out in the project charter. The contract book provides a tool for monitoring and evaluating the team's performance in meeting objectives by providing a set of performance benchmarks and deadlines to which the team's performance can be compared. The contract book is an important mechanism for establishing team commitment to the project and a sense of ownership over the project.

Project charter

encapsulates the project's mission and articulates exact and measurable goals for the project. It might include a vision statement for the project and a background statement for why this project is important for the organization. It ensures that members have a clear focus and commitment to the development project by defining team member roles and responsibilities, budget, timeline, success criteria, rewards, and explicit goals.

Exploration

explore and experiment with new opportunities or new environments. Can be very risky, but also very lucrative if you find a blue ocean situation.

Knowledge

facts, information, and skills acquired through experience or education. Can be complex or tacit.

Collective research organizations

may take a number of forms, including trade associations, university-based centers, or private research corporations. Many of these organizations are formed through government or industry association initiatives, with the purpose to promote collaborations among industry, government, and academic organizations. Other collective research organizations have been formed solely through the initiative of private companies.

Sustainable competitive advantage

resources must be rare, valuable, durable, and inimitable.

Applied research

targeted at increasing knowledge for a specific application or need.

Research

the "R" in R&D can be divided into two types: Basic research and applied research.

Absorptive capacity

the ability of an organization to recognize, assimilate, and utilize new knowledge. As firms accumulate knowledge, they also increase their future ability to assimilate information. The effects of absorptive capacity suggest that firms that develop new technologies ahead of others may have an advantage in staying ahead.

Creativity

the ability to produce novel and useful work from new and useful ideas.

Core competency

the capabilities that differentiate the firm strategically. A core competency arises from a firm's ability to combine and harmonize multiple primary abilities in which the firm excels into a few key building blocks of specialized expertise. This combination and harmonization of multiple abilities make core competencies difficult to imitate. A firm's core competencies also depend on building high-quality relationships across different functions and business units.

Tightly coupled systems

the connections between system components/subsystems (technical and institutional) are very strong and especially designed for system purposes. They are centrally built, planned, and managed, access for other operators is limited, technical standardization of components high, and they have a top-down perspective as distribution system of goods. The system builder/manager has one overarching goal: to avoid technical and institutional mismatch in the system - to align system components with the system. This type of system is highly sensitive to disturbance: if one component fails the whole system breaks down. E.g., railroad and electrical systems.

Modularity

the degree to which a system's components may be separated and recombined.

Strategic fit

the degree to which partners have compatible objectives and styles. The objectives of the partners need not be the same as long as the objectives can be achieved without harming the alliance or the partners. Not knowing a partner's true objectives or forging an alliance with a partner with incompatible objectives can result in conflict, wasted resources, and forfeited opportunities.

Creative destruction

the double character of the transformation process: on the one hand the positive fact that innovations are introduced, on the other the negative fact that the old is destroyed: technologies become obsolete and firms are closed down.

Computer Aided Manufacturing (CAM)

the implementation of machine-controlled processes in manufacturing. CAM is faster and more flexible than traditional manufacturing. Computers can automate the change between different product variations and allow for more variety and customization in the manufacturing process. Example: 3d-printing.

Increasing returns to adoption

the more a technology is adopted, the more valuable it becomes. Some of the primary sources of increasing returns are learning effects, network externalities, and government regulation.

Technology trajectory

the path a technology takes through its life-time. It's used to represent the technology's rate of performance improvement or its rate of adoption in the marketplace.

Technology path

the path a technology takes through its life-time. This path may refer to its rate of performance improvement, its rate of diffusion, ot other change of interest.

Resource and capability gap

the resources and capabilities required to close the gap between the strategic intent and the current position.

First movers

The first entrants to sell in a new product or service category. Advantages: Brand loyalty. Technological superiority. Preemption of scarce resources. Exploitation of buyer switching costs. If industry is characterized by increasing returns: self-enforcing learning and network externalities advantages. Disadvantages: Research and development costs. Undeveloped supply and distribution channels. Immature enabling technologies and complement goods. Uncertainty of customer requirements.

Learning effects

The more a technology is adopted, the better it should become. * The more a technology is used, the more it is developed and the more effective and efficient it becomes. * The technology generates sales revenues that can be reinvested in further developing and refining the technology. * As firms accumulate experience with the technology, they find ways to use the technology more productively, including developing an organizational context that improves the implementation of the technology.

Installed base

The number of users of a particular good. A user may choose a computer platform based on the number of other users of that platform, rather than on the technological benefits of a particular platform, because it increases the ease of exchanging files.

Innovation

The practical implementation of an idea into a new device or process. Innovation requires combining a creative idea with resources and expertise that make it possible to embody the creative idea in a useful form.

Technology diffusion

The spread of a technology through a population. Follows an s-curve (number of adopters plotted against time).

Incumbent inertia

The tendency for settled companies to be slow to respond to changes in the industry environment due to their large size, established routines, or prior strategic commitments to existing suppliers and customers.

Discounted payback period

The time required to break even on a project using discounted cash flows

Contract manufacturing

When a firm hires another firm (often a specialized manufacturer) to manufacture its products.

Cannibalization

When a firm's sales of one product (or at one location) diminish its sales of another of its products (or at another of its locations).

Center-for-global strategy (organizing for innovation, structure dimension)

When all innovation activities are conducted at a central hub and innovations are then diffused throughout the company. Allows managers to tightly coordinate activities, achieve economies of scale, standardize, but also means that the firm is not responsive to diverse demands in different markets.

Social loafing

When an individual in a team does not exert the expected amount of effort and relies instead on the work of other team members. A risk in larger teams.

Locally leveraged strategy (organizing for innovation, structure dimension)

When each division conducts its own R&D activities, but the firm attempts to leverage resulting innovations throughout the company. Then you can take advantage of the diverse ideas and resources created in local markets, while leveraging these innovations across the company. Requires Integration mechanisms - e.g. holding regular cross-regional meetings, or establishing an international brand custodian to encourage the divisions to share their best developments with each other.

Sequential development process

companies proceeded from one development stage to another in a sequential fashion. Includes a number of gates at which managers decide whether to proceed to the next stage, send the project back to a previous stage for revision, or kill it. R&D is responsible for product design, and manufacturing takes the lead in process design. Problems in communication can arise, and there is no early warning system, resulting in costly iterations and long cycle times.

Loosely coupled systems

connections between system components are not very strong and there is no centrally responsible entity. Not as sensitive to change. Historically, they have moved towards a more tightly coupled system as time goes on. E.g., sea transport.

Development

Activities that apply knowledge to produce useful devices, materials, or processes.

Complementary goods

Additional goods and services that enable or enhance the value of another good. Many products are only functional or desirable when there is a set of complementary goods available for them. The bigger the installed base, the higher the attractiveness of producing complementary goods.

Trademark

An indicator used to distinguish the source of a good. An intangible asset.

Competence-destroying/enhancing innovation

An innovation that builds on (renders obsolete) existing knowledge and skills. Whether an innovation is competence enhancing or competence destroying depends on whose perspective is being taken. An innovation can be competence enhancing to one firm, while competence destroying for another.

Architectural innovation

An innovation that changes the overall design of a system or the way its components interact with each other.

Radical innovation

An innovation that is very new and different from prior solutions.

Component innovation

An innovation to one or more components that does not significantly affect the overall configuration of the system.

Mechanistic organization

An organization structure characterized by a high degree of formalization and standardization, causing operations to be almost automatic or mechanical.

Organic organization

An organization structure characterized by a low degree of formalization and standardization. Employees may not have well-defined job responsibilities and operations may be characterized by a high degree of variation.

Capability complementation

Combining ("pooling") the capabilities and other resources of partner firms, but not necessarily transferring those resources between the partners.

Enabling technology

Component technologies that are necessary for the performance or desirability of a given innovation. First Movers often lack enabling technologies in their surroundings.

Entry barriers

Conditions that make it difficult or expensive for new firms to enter an industry, such as: Start-up costs, Government regulation, Access to suppliers and distributors, Threat of retaliation by existing competitors, etc.

Early followers

Entrants that are early to market, but not first.

Late entrants

Entrants that do not enter the market until the time the product begins to penetrate the mass market or later.

Capability transfer

Exchange of capabilities across firms in such a manner that partners can internalize the capabilities and use them independently of the particular development project.

Vertical integration

Getting into the business of one's suppliers (backward vertical integration) or one's buyers (forward vertical integration). For example, a firm that begins producing its own supplies has practiced backward vertical integration, and a firm that buys its distributor has practiced forward vertical integration. If the firm can backward integrate it will lessen supplier bargaining power, and if the supplier can threaten to forward vertically integrated into the firm's business, this will increase the supplier's bargaining power.

Incubator

Institutions designed to nurture the development of new businesses that might otherwise lack access to adequate funding or advice.

Research and Development approaches

Science-push: assumes that innovation proceeded linearly from scientific discovery, to invention, to engineering, then manufacturing activities, and finally marketing. According to this approach, the primary sources of innovation were discoveries in basic science that were translated into commercial applications by the parent firm. This linear process was soon shown to have little applicability to real-world products. Demand-pull: argued that innovation was driven by the perceived demand of potential users. Research staff would develop new products in efforts to respond to customer problems or suggestions. This view, however, was also criticized as being too simplistic.

Relational governance

Self-enforcing norms based on goodwill, trust, and reputation of the partners. These typically emerge over time through repeated experiences of working together.

Viral marketing

Sending information directly to targeted individuals in effort to stimulate word-of-mouth advertising. Individuals are typically chosen on the basis of their position or role in particular social networks.

Core rigidness

Sometimes the very things that a firm excels at can enslave it, making the firm rigid and overly committed to inappropriate skills and resources. Incentive systems may evolve that favor activities that reinforce the firm's core competencies. While these systems and norms can prove beneficial in reinforcing and leveraging the firm's existing core competencies, they can also inhibit the development of new core competencies. Knowledge accumulation tends to be very path dependent

Local-for-local strategy (organizing for innovation, structure dimension)

When each division or subsidiary of the firm conducts its own R&D activities, tailored for the needs of the local market. Advantages includes access to diverse information and resources and customizes innovation for the needs and tastes of the local market. Disadvantages include redundancy in activities and lack of scale in R&D activities of each division, and risk that valuable innovation will not be diffused across the firm. Choose a local-for-local strategy when divisions are very autonomous and when markets are highly differentiated.

Equity ownership

When each partner contributes capital and owns a specified right to a percentage of the proceeds from the alliance. Equity ownership helps to align the incentives of the partners, and provides a sense of ownership and commitment to the project that can facilitate supervision and monitoring of the alliance.

Path dependency

When end results depend greatly on the events that took place leading up to the outcome. It is often impossible to reproduce the results that occur in such a situation. Increasing returns to adoption imply that technology trajectories are path dependent.

Backward compatible

When products of a technological generation can work with products of a previous generation. For example, a computer is backward compatible if it can run the same software as a previous generation of the computer.

Penetration pricing

When the price of a good is set very low (or free) to maximize the good's market share.

Learning curve

a function of cumulative output: Performance increases, or cost decreases, with the number of units of production, usually at a decreasing rate. This is because of the aforementioned learning effects.

Technological spillover

a positive externality from R&D resulting from the spread of knowledge across organizational or regional boundaries. Spillovers are thus a positive externality of research and development efforts. Whether R&D benefits will spill over is partially a function of the strength of protection mechanisms such as patents, copyrights, and trade secrets

Research and Development

a source of firm innovation.

Discontinuous technology

a technology that fulfills a similar market need by building on an entirely new knowledge base. They render technologies obsolete before these get the opportunity to reach their limits in the S-curve. E.g. chemical photography to digital photography.

Strategic alliance

an agreement between two or more parties to pursue a set of agreed upon objectives needed while remaining independent organizations. Can take many forms.

Product innovation

are embodied in the outputs of an organization, i.e. its goods or services.

Team structure

four classic ways: Functional - Members remain in their functional departments and report to their functional manager, only to periodically discuss the project. These teams are temporary, short-term, and doesn't have a manager. It's straightforward to implement, but provides little opportunity for cross-functional coordination and commitment to the project is low. Lightweight - like functional teams, except that there is a dedicated project manager to facilitate coordination. However, these managers have low influence. Heavyweight - Members are removed from their functional departments so that they may be collocated with the project manager and be completely committed to working full-time on the project. Project managers are typically senior managers who outrank functional managers, and have significant authority to command resources, and evaluate and reward team members. Still temporary. Autonomous - like heavyweight, but often permanent or very long-term and they do not conform to the operating procedures of the rest of the organization: they act like independent divisions of the firm that are held fully accountable for the success of the projec

Process innovation

in the way an organization conducts its business, such as in the techniques of producing or marketing goods or services. Process innovations are often oriented toward improving the effectiveness or efficiency of production.

Return to adoption

increasing for most industries, meaning that the more a technology is adopted, the more valuable it becomes. Two of the primary sources of increasing returns are learning effects and network externalities.

Globally linked strategy (organizing for innovation, structure dimension)

innovation activities are decentralized, but also centrally coordinated for the global needs of the corporation. The R&D groups specialize in a particular development activity. This approach also attempts to enable the learning accrued through innovation activities to be diffused throughout the firm. This strategy can be quite powerful in its ability to tap and integrate global resources, but it is also expensive in both time and money as it requires intensive coordination.

Basic research

is effort directed at increasing understanding of a topic or field without a specific immediate commercial application in mind. This research advances scientific knowledge, which may turn out to have long-run commercial value.

Development pairs

long-term partnership and development effort between the government and companies with the purpose to exploit and and develop new technologies. These partnerships are often a driving force and catalysator for the growth of development blocks.

Computer Aided Design (CAD)

the use of computers to build and test product designs. High-powered graphics-based workstations makes it possible to a construct a three-dimensional "working" image of a product or subassembly. This enables product prototypes to be developed and tested in virtual reality, meaning prototype attributes can easily be adjusted s by manipulating the three-dimensional model, allowing them to compare the characteristics of different product designs. Eliminating the need to build physical prototypes can reduce cycle time and lower costs

Exploitation

utilising current knowledge, skills, frameworks, structures, and mindsets to make it as efficient as possible. Is less risky than exploration, but it's easy to get stuck in a suboptimal status quo.

Project champion

when a senior member of the company to champion a new product development project. Senior executives have the power and authority to support and fight for a project, they can facilitate the allocation of human and capital resources to the development effort, help ensure that the project can sustain the necessary momentum, and stimulate communication and cooperation between the different functional groups involved in the development process. However, since personal reputation is on the line, it can be hard to abandon a project gone sour.

Network externality

when the value of a good to a user increases with the number of other users of the same or similar good. E.g. railroad and telecommunications.