4th Generation - Short (2)

8/10/2019 4th Generation - Short (2)

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4th Generation R&DManaging Knowledge, Technology, and Innovation

William L. Miller and Langdon Morris; John Wiley & Sons, Inc., New York NY; 1999;

www.allbusiness.com

Asserting that business organizations have largely failed in their attempts to bring about innovation-

especially radical innovation-William Miller and Langdon Morris set out "to understand the problemof innovation and to identify how it can be corrected." As R&D professionals (Miller at Intel andMorris at KMLab), their method is to combine conceptual descriptions with illustrative examples

that include the XeroxDocuTech, Apollo 13, Nike Town, Ford Tri-Motor, Motorola's New

Enterprises Group, Hewlett-Packard's Test and Measurement Organization, and Intel.

To frame the problem, they quote the 1997 Harvard Business Review article by John Seely Brown,chief scientist at Xerox: "The great challenge in innovation is linking emerging technologies with

emerging markets. If it were just a matter of linking emerging technologies with existing markets (or

vice versa), the coupling would be relatively easy. But when both are emerging, it is a delicate,

coevolutionary process: as technologies emerge, they affect the markets, and as markets emerge,they influence the technologies."

Resolving the problem, write Miller and Morris, requires "a complete rethinking of innovation

practice." It is this model they call 4th generation R&D, the practice of which will enable both

continuous and discontinuous innovation.

Following their introduction to 4th generation R&D, they devote a chapter to each of the following:

* The broad structure of the market and its evolution (the "competitive architecture").

* The development of products and services within this market ("organizational capability").* The knowledge channel and market development.

* Managing knowledge and financial assets.

* Issues related to the design of the organization ("organizational architecture").

* How this design supports the ongoing development of organizational capability.* A complete description of the new innovation business process.

From this structure emerges:* How to master the linkage between strategy, innovation and R&D.

* Why conventional market research is not sufficient - and what is.* How to use the Internet as a critical component of the innovation process.

* The vital difference between tacit and explicit knowledge, and how to combine them foreffective knowledge management.

* How the new organizational models used in leading organizations like Ford, Hewlett-

Packard and Intel are critical to success.

* The difference between continuous and discontinuous innovation, and how to make anorganization effective at both.

In concluding, Miller and Morris observe that "Achieving success at innovation requires that one

grapple with complexity, ambiguity, contradictions, unclear signals, and paradox, for neither

innovation nor technology is black and white." By presenting a framework for using R&D to driveinnovation throughout an entire organization, the authors have provided a means of harnessing

creativity and disciplined business process in a coherent approach to the central organizational

challenge of a new century.--------------------------------------------------------------------------------------------------------------------


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Another generation for R&DChemistry and Industry,August 7, 2000byPeter Bamfield

Fourth generation R&D: managing knowledge, technology, and innovation W- Miller & L. Morris

How many generations of R&D can we expect? Well apparently at least four!

The high points of the first-generation R&D departments occurred in the mid - 20th century. Largelyleft alone, they came up with new inventions, which the burgeoning (comming up, naciente)

development and engineering skills of large organizations turned into products and delivered to

expectant and receptive consumers. Innovation step changes were large, as with the arrival of

manmade fibres in the 1940s and 1950s. 1G: 40s to mid 60s. 2G: 70s to 80s

Naturally, this happy state of affairs did not last. By the mid-1960s, every major chemical companyhad set up its own R&D department -- often centralised within its organization -- and by this time,

many of the newer businesses had matured. Just having a large R&D department was no longer a

competitive advantage; it needed to be more focused. Marketing provided specific business targets

for research, in the form of project portfolios, and became integral to the process. By using project

management techniques to monitor progress, put measures in place (to evaluate cost-effectiveness)and modify its course, R&D was already in its second generation of development. Into the 1980s,

businesses were heavily customer focused and R&D had to deliver to market needs as rapidly aspossible, in order to underpin business development. At higher management levels, however,

business support was often missing, inhibiting the innovation contribution to a company's wellbeing.

In 1991, the third-generation R&D, from AD Little, came up with a methodology for addressing thisissue. At the core of its thinking was the requirement for each business to have an integrated

strategic plan for its development, in which the role of R&D was clearly defined. The innovation

process was to be managed by a team from the breadth of the organization, using portfoliomanagement and technology road maps for each business. The third-generation R&D fitted in neatly

with prevalent business strategies; aligning R&D more closely with strategic business units became

a driving force, encouraging the demise (downfall, death) of the central research function.

This methodology did not escape criticism; whilst seen as an excellent driving force for research

geared towards the existing market needs, it was seriously lacking when it came to step change ordiscontinuous innovations.

William Miller and Langdon Morris now address these shortcomings by what they call 'fourth-

generation R&D'. 'Knowledge management' has been the hot topic in recent years and is at the heart

of fourth-generation R&D thinking. Here the unmet, or latent, needs of customers are to beidentified from their tacit rather than explicit knowledge, normally generated by traditional market

research. They see sharing knowledge, including testing technologies, with customers and other

stakeholders as essential, at each stage of any discontinuous innovation. (Focus in discontinuous

innovation)

The final chapter describes a new business process for protecting discontinuous innovation duringits formative period, bringing it to fruition and ensuring its development. This is an excellent and

thought-provoking book that deserves to be as widely read as it's third-generation precursor, upon

which its thinking is built, and certainly well before the fifth-generation appears!

Peter Bamfield is an independent consultant and author of 'Research and development managementin the chemical industry' (VCH, 1996).COPYRIGHT 2000 Society of Chemical Industry
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Excerpts (extract) from4th Generation R&DManaging Knowledge, Technology, and Innovation

Innovation labs - http://www.innovationlabs.com/4Gpub2c.html

Continuous and Discontinuous InnovationThe difference between continuous innovations that comply with thestandards of existing markets and discontinuous innovations that supplantthem is critical.

Continuous innovation is incremental, and takes place within existinginfrastructures. It builds on existing knowledge in existing markets withoutchallenging underlying strategies or assumptions. We can visualize thedomain of continuous innovation as a circle containing the establishedknowledge of suppliers and customers in a particular market or field.

Figure 1.2 - Continuous innovation

Continuous innovation occurs within the boundaries of this known world. It works when the futurecompetitive requirements of customers can be met within existing industry structures, an existingcompetitive architecture. As indicated by the inward-pointing arrows, continuous innovation ischaracterized by convergent thinking, by progressive refinements, increasing focus, and thereforeincreasing specialization.

Strategies for continuous innovation include portfolio planning, five forces analysis, andglobalization through regional subsidiaries that stay close to customer needs. The awareness ofcore competencies also turns the focus inward, while the emerging resource-based view of the firmproposes integrating internal and external views by better gauging the value of resources.

But continuous innovation is clearly not sufficient unto itself. As Joe Marone, Dean of Rensselaer

Polytechnic Institute has commented, "We know that there is overwhelming emphasis on the virtueof continual incremental improvement, yet every time we look at any successful company that hasemerged over the last 30 years in a technology intensive field, and in fact throughout any period ofindustrial history, you will always find a pattern of big leaps into major new product lines, which arethen followed by the efforts to stay ahead. And yet while we know an awful lot about practices ofcontinual improvement, we seem to know very little about how to manage the discontinuousinnovations. It may well be that the practices that we have learned for continuous improvement arenot only inappropriate for discontinuous innovation, but may actually be detrimental."

Discontinuous innovation brings forth conditions that emanate fromfundamentally different new knowledge in one or more dimensions of aproduct or service compared to what has come before, offering significantly

different performance attributes. The difficulty that is so commonlyexperienced in achieving successful discontinuous innovation is preciselythat it requires new knowledge, knowledge that is not available when youare looking only on the inside.

The domain of discontinuous innovation is therefore everything outside ofthe circle.

Fig 1.3 - Discontinuous innovation


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Discontinuous innovation falls outside of existing markets or market segments, and whensuccessful extends and redefines the market, exposing new possibilities. As indicated by theoutward-pointing arrows, discontinuous innovation is characterized by lateral or divergent thinking,by looking outside of defined boundaries, and by discovery of new knowledge related to bothmarket need and technological capability. Discontinuous innovation leads to aggregated domains ofknowledge that support new capabilities.

Success at both continuous and discontinuous innovation are driven by "forced questioning" aboutthe limits of existing capabilities, and by asking the right questions and probing at the edges ofexisting knowledge to understand what new possibilities may exist that have not yet beenrecognized or considered. It would be trite (commonplace) to say that the kinds of questions youask determine the kinds of answers you receive, were it not for the fact that deep, fundamentalquestions are simply not being asked in so many organizations. Prevalent cultural barriers widelypreclude precisely the kinds of inquiry that are needed. Until and unless such questions are asked,deep and fundamental answers about the evolution of companies, markets, and industries will notbe uncovered in time to do anything about it, nor will leadership be achieved.

Discontinuous innovation is more than the shift from horses to automobiles for personaltransportation, an inconceivable thought for those focused on four-legged capabilities. It includes

the shift from urban to suburban communities that offer new lifestyles created by real estatedevelopment that is based, in turn, on new highways that also bring new patterns of traffic and newforms of congestion,

Discontinuous innovation does not just bring change in the simple sense, but change in a deep andsystemic way that is fundamental and far-reaching. It affects not only products and services, butalso the infrastructures that are integral to their use, and the extensive chains of distribution thatmay involve dozens or hundreds of affiliated and competing companies and industries.

Hence, it is the shift from family to factory farms, impossible without the tractor, the truck, therailroad, the ship, and global markets; the shift from typewriters to personal computers, completelyunpredictable before the microprocessor; or the shift from live performance to radio and television

broadcasting for entertainment, news, and advertising, inconceivable before moderncommunications.

Discontinuous innovation is dramatic, and it is also inevitable when the requirements of customerscan no longer be met within the existing framework of capability. This often happens because newcombinations or aggregations of knowledge, tools, technology, and processes change theunderlying character of customer need by changing the boundaries of what is possible.In fact, newknowledge continually creates new realities.

But discontinuous innovation also brings with it a price in the form of entirely new rules ofcompetition. It invalidates entire companies and even entire industries even as it creates new ones.

There was once, for example, a global infrastructure to distribute kerosene for lighting, and anotherto distribute ice for cooling. Both were highly developed, extremely sophisticated for their times, andhighly profitable for extended periods. But both are now mostly forgotten, displaced by the evolutionof technology in the shift from one dominant business model to another.

More recent examples are the rapid evolution of the computer and communications industries thatdrastically impacted industry leaders IBM and AT&T. Both companies shed hundreds of thousandsof employees in the early 1990s as discontinuity reached their worlds, and both continue toreshape themselves still. In addition to its impact in computers and telecommunications,


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discontinuous innovation is reshaping the airline industry, the auto industry, banking, retail, creditcards, securities, entertainment, and even the staid world of electrical generation and distribution.No business can protect itself fully from the impact of discontinuous change.

In the marketplace, discontinuous innovations are successful only if a new value proposition offersa significant improvement on at least one of the three performance axes: features, benefits, andcost. In the words of Rensselaer Polytechnic Institute Dean Joe Marone, "The performance gain

must be five to ten-fold or have a 50% reduction in costs, or both."

The switch from the typewriter to the PC, for example, required not only the purchase of expensiveequipment, but also training in its use. Once a PC user attained experience with particularapplication programs, the investment of additional time that was required to switch to differentprograms became a significant burden, so users stayed with obsolete software rather than incur thecost of switching to new programs, or even newer versions of the same program.

Similarly, an audiophile who switches from long-playing records to compact discs must repurchasean entire music library, title by title.

Hence, the new economics of "increasing returns" described by Stanford Professor Brian Arthur

suggests that when an innovation does become dominant, so much knowledge is attached to it thatit gets "locked-in." The cost to switch is too high, showing that the structure of the market, itsarchitecture, is inseparable from the knowledge-enabled capability of end users.

While discontinuous innovations force major shifts in both architecture and capability, continuousinnovations are absorbed relatively effortlessly. They are easier to achieve, as they draw upon theexisting market framework, infrastructure, and tacit knowledge of customers, suppliers, and otherstakeholders. As they are more narrowly and incrementally focused, they do not require conceptualleaps, massive amounts of new knowledge, nor the huge risks that accompany dealing with theunknown. Hence, they are also more comfortable innovation targets. As Chip Holt, Corporate VicePresident of the Wilson Center for Research and Technology of Xerox has observed, "People havea tendency to focus in on the things they're most comfortable with and work them to death."

In a stable world there would be no call for discontinuous innovation, and continuous innovationwould suffice for every need. But the reality of today is exponential change that takes many forms.One element is the influx of new technologies that drive a positive feedback cycle from which thereis no escaping. If you want to remain viable in a competitive market, you must engage in the samecycle of technology development that your competitors are pursuing.

Figure 1.4 - Positive feedback in technology-driven markets


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To remain viable in a competitive market, companiesinevitably pursue proprietary technical advances. Thisleads to further specialization, which drives increasingchange. There is no graceful way to exit the loop.

The threat of unexpected competition, the risks ofindustry evolution, and compression of the sales cyclemakes mastery of discontinuous innovation not adesirable adjunct but a vital necessity.

Fig. 1.5 - Compression of the sales cycle

It is no longer enough merely to keep up through incremental innovation in existing markets andmarket segments (although few companies seem to be doing even that). Today success is definedby leadership, and leadership is achieved not only by evolving today's products and services, butmore powerfully by evolving and even redefining the very industries in which competition takesplace. This requires not just managing discontinuities in the marketplace, but creating newdiscontinuities. These are frequently seen as revolutions or ruptures, and achieving them is the trueand enduring purpose of innovation; describing howto achieve them is the purpose of this book.

While continuous innovation is focused on existing needs, discontinuous innovation is driven byquestions about the future needsof customers, needs that are rarely articulated. In fact, they maynot be able to be articulated at all, and so the only effective way to understand future needs is forcustomers to participate in the innovation process. Only when researchers work jointly withcustomers can this hidden knowledge be exposed, and only after tacit needs are exposed andunderstood is it effective to consider the role that technology should play in fulfilling them.

Therefore, the discontinuous innovation process is a mutually dependent learning process in whichcustomers must experience what is possible in order to determine what may be of value for thefuture. The process is driven not by technology itself, but by how technology is used. Hence, therole of R&D changes significantly from the 3rd generation to the 4th.

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4th Generation - Short (2)