Creative Construction
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9 John Gertner, The Idea Factory: Bell Labs and the Great Age of American Innovation (New York: Penguin, 2012).
10 On the concept of learning from analogies more broadly, see Gentner and Holyoak, “Reasoning and Learning by Analogy,” 32; Posner, “Legal Reason,” 761; Gavetti, Levinthal, and Rivkin, “Strategy Making in Novel and Complex Worlds”; Gavetti, Giovanni, and Rivkin, “How Strategists Really Think.”
11 “1973 Honda Civic,” archived road test, Road and Track Magazine, March 1973, https://www.caranddriver.com/reviews/1973-honda-civic-test-review.
12 Hong Luo, Gary Pisano, and Yu Huafang, “Institutionalized Entrepreneurship: Flagship Pioneering,” Harvard Business School, case no. 9-718-484, March 23, 2018.
13 Noubar Afeyan, interview by Gary Pisano, 2017.
14 Gertner, Idea Factory.
15 David M. Upton and Joshua D. Margolis, “McDonald’s Corporation,” Harvard Business School, case no. 693-028, October 1992, revised September 1996.
16 Eric von Hippel, Free Innovation (Cambridge, MA: MIT Press, 2016).
17 Andrew King and Karim R. Lakhani, “Using Open Innovation to Identify the Best Ideas,” MIT Sloan Management Review, 55, no. 1 (Fall 2013): 41–48. See also Kevin Boudreau and Karim Lakhani, “How to Manage Outside Innovation,” MIT Sloan Management Review 50, no. 4 (Summer 2009): 69–76.
18 “InnoCentive Solver Develops Solution to Help Clean Up Remaining Oil from the 1989 Exxon Valdez Disaster,” November 7, 2007, https://www.innocentive.com/innocentive-solver-develops-solution-to-help-clean-up-remaining-oil-from-the-1989-exxon-valdez-disaster/.
Chapter 6: Synthesis
1 Joseph Schumpeter (translated by Ursula Backhaus), “The Theory of Economic Development,” in Joseph Alois Schumpeter: Entrepreneurship, Style and Vision, ed. Jurgen Backhause, 61–116 (New York: Kluwer Academic, 2003).
2 Lee Fleming and Olaf Sorenson, “Technology as a Complex Adaptive System: Evidence from Patent Data,” Research Policy 30 (2001): 1019–1039. They measured “technology components” by the number of technology subclasses assigned to each patent.
3 Rebecca Henderson and Ian Cockburn, “Scale, Scope and Spillovers: The Determinants of Research Productivity in the Drug Industry,” Rand Journal of Economics 27, no. 1 (Spring 1996): 32–59.
4 Brian Uzzi, Satyam Mukherjee, Michael Stringer, and Ben Jones, “Atypical Combinations and Scientific Impact,” Science 342, no. 6157 (2013): 468–472.
5 Walter Isaacson, Steve Jobs (New York: Simon & Schuster, 2011), 492. The quote is from Jimmy Iovine, CEO of Interscope-Geffen-A&M.
6 Fazioli company website, www.fazioli.com/en/.
7 Ed Catmull and Amy Wallace, Creativity, Inc.: Overcoming the Unseen Forces That Stand in the Way of True Inspiration (New York: Random House, 2014), 90.
8 Lee Fleming, “Finding the Organizational Sources of Technological Breakthroughs: The Story of Hewlett-Packard’s Thermal Ink-Jet,” Industrial and Corporate Change 11, no 5 (2002): 1059–1084.
9 Bezos, letter to the shareholders.
10 See, for example, Melvin Conway, “How Do Committees Invent?” 1968, www.melconway.com/Home/Committees_Paper.html; Henderson and Clark, “Architectural Innovation”; Stefano Brusoni, Andrea Prencipe, and Keith Pavitt, “Knowledge Specialization, Organizational Coupling, and the Boundaries of the Firm: Why Do Firms Know More Than They Make?” Administrative Science Quarterly 46, no. 4 (2001): 597–621; and Alan MacCormack, John Rusnak, and Carliss Baldwin, “The Impact of Component Modularity on Design Evolution: Evidence from the Software Industry,” 2007.
11 Gertner, Idea Factory.
12 As John Gertner describes it in his detailed history of Bell Labs, The Idea Factory:
By intention, everyone would be in one another’s way. Members of the technical staff would have both laboratories and small offices—but these might be in different corridors, therefore making it necessary to walk between the two, and all but assuring a chance encounter or two with a colleague during the commute. By the same token, the long corridor for the wing that would house many of the physics researchers was intentionally made to be seven hundred feet in length.… Traveling its length without encountering a number of acquaintances, problems, diversions, and ideas would be almost impossible. Then again, that was the point.
13 Gertner, Idea Factory, 79.
14 Gertner, Idea Factory, 81–91.
15 The notion that organizational designs involve trade-off and that therefore the choice of design is contingent on strategic objectives goes back to Paul R. Lawrence and Jay W. Lorsch, “Differentiation and Integration in Complex Organizations,” Administrative Science Quarterly (1967): 1–47.
16 The section that follows is based on the case study on Amazon Web Services that I coauthored with Robert Huckman and Liz Kind (“Amazon Web Services”). All quotes and company specific information originate from that case.
17 Amazon, “2016 Annual Report.”
18 Huckman, Pisano, and Kind, “Amazon Web Services.”
19 Information drawn from Regina Dugan and Kaigham Gabriel, “Special Forces Innovation: How DARPA Attacks Problems,” Harvard Business Review, October 2013, reprint R1310C.
20 Dugan and Gabriel, “Special Forces Innovation,” 8.
Chapter 7: When to Hold ’Em and When to Fold ’Em
1 Information regarding Vertex events are sourced from Harvard Business School case, “Vertex Pharmaceuticals (A),” no. 9-604-101 written by Gary Pisano, Lee Fleming, and Eli Strick.
2 Todd R. Weiss, “Timeline: PARC Milestones,” Computerworld, September 20, 2010, accessed November 6, 2017, computerworld.com; Douglas K. Smith and Robert C. Alexander, Fumbling the Future: How Xerox Invented Then Ignored the First Personal Computer (Lincoln, NE: iUniverse, 1999).
3 “Cutting the Cord,” Economist, October 7, 1999, http://www.economist.com/node/246152.
4 Harry McCracken, “Shocker: In 1980, Motorola Had No Idea Where the Phone Market Would Be in 2000,” Time, April 15, 2014, http://time.com/63718/shocker-in-1980-motorola-had-no-idea-where-the-phone-market-would-be-in-2000/.
5 Andrew Kupfer and Kathleen Smyth, “AT&T’S $12 Billion Cellular Dream,” Fortune, December 12, 1994, http://archive.fortune.com/magazines/fortune/fortune_archive/1994/12/12/80051/index.htm.
6 Mary Tripsas and Giovanni Gavetti, “Capabilities, Cognition, and Inertia: Evidence from Digital Imaging,” Strategic Management Journal 21, nos. 10–11 (2000): 1147–1161.
7 The term “unknown unknowns” came into popular discourse in the early 2000s when Secretary of Defense Donald Rumsfeld used it to describe the challenges of assessing whether Iraq possessed weapons of mass destruction (February 12, 2002). He later wrote a book with the term in the title: Donald Rumsfeld, Known and Unknown: A Memoir (New York: Penguin Group, 2011), xiv.
However, the basic concept of unknown unknowns goes back to economist Franklin Knight in the early 1920s. In his book Risk, Uncertainty and Profit, published in 1921 (Mineola, NY: Dover), Wright distinguished between “primary uncertainty” and “secondary uncertainty.”
8 The literature on this topic has exploded over the past few decades. I refer interested readers to: Daniel Kahneman, Paul Slovic, and Amos Tversky, eds., Judgment Under Uncertainty: Heuristics and Biases (Cambridge: Cambridge University Press, 1982); Max Bazerman and Don Moore, Judgment in Managerial Decision Making (New York: Wiley, 2008); Daniel Ariely, Predictably Irrational: The Hidden Forces That Shape Our Decisions (New York: HarperCollins, 2008); Francesca Gino, Sidetracked: Why Our Decisions Get Derailed, and How We Can Stick to the Plan (Boston: Harvard Business Review Press, 2013).
9 Clay Christensen, Stephen Kaufman, and Willy Shih, “Innovation Killers: How Financial Tools Destroy Your Capacity to Do New Things,” Harvard Business Review, January 2008.
10 David Garvin and Michael Roberto, “What You Don’t Know About Making Decisions,” Harvard Business Review, September 2001, reprint R0108G.
11 Here again on this point, see Garvin and Roberto, “What You
Don’t Know About Making Decisions.”
12 Rita Gunther McGrath and Ian MacMillan propose a similar approach to resource allocation they call “discovery-driven planning,” which also focuses heavily on identifying and testing critical assumptions. Rita Gunther McGrath and Ian C. MacMillan, Discovery-Driven Planning (Philadelphia: Wharton School, Snider Entrepreneurial Center, 1995). There are two differences between their approach and the approach I describe. In discovery-driven planning, financial analysis is reduced to identifying critical assumptions. In the approach I describe, financial analysis remains an integral part of the selection process and is used to drive the development and testing of critical program assumptions and hypotheses. Second, the focus of discovery-driven planning is to force identification of buried assumptions. In the approach I described, the hypotheses themselves represent the main rationale for undertaking the project. Their development and articulation are essential to the proposal.
13 Graham Allison, The Essence of Decision: Explaining the Cuban Missile Crisis (New York: Little Brown, 1971); Stephen Bates, Richard Neustadt, Joshua Rosenbloom, and Ernest May, “Kennedy and the Bay of Pigs,” Harvard Kennedy School, case no. KHS009-PDF-ENG, January 1, 1980.
14 Geoffrey Perret, Eisenhower (New York: Random House, 2000).
15 Gary Pisano, Phillip Andrews, and Alessandro Di Fiore, “Fiat-Chrysler Alliance: Launching the Cinquecento in North America,” Harvard Business School, case no. 9-611-037, 2011.
Chapter 8: The Paradox of Innovative Cultures
1 Amy C. Edmondson, “Psychological Safety and Learning Behavior in Work Teams,” Administrative Science Quarterly 44, no. 2 (1999): 350–383.
2 Amy Edmondson, Richard Bohmer, and Gary Pisano, “Disrupted Routines: Team Learning and New Technology Implementation in Hospitals,” Administrative Science Quarterly 46, no. 6 (2001): 685–716.
3 On this point, see Mark Cannon and Amy Edmondson, “Failing to Learn and Learning to Fail (Intelligently),” Long Range Planning 38 (2005): 299–319.
4 Tom Lamont, “How Get a Job at Google: Meet the Man Who Hires and Fires,” Guardian, April 6, 2015, https://www.theguardian.com/technology/2015/apr/04/how-to-get-job-at-google-meet-man-hires-fires.
5 Catmull and Wallace, Creativity, Inc.
6 Catmull and Wallace, Creativity, Inc.
7 Francesca Gino, Gary Pisano, and Brad Staats, “Pal’s Sudden Service: Scaling an Organizational Model to Drive Growth,” Harvard Business School, case no. 916-052.
8 “Fact Sheet: Normandy Landings,” White House, Office of the Press Secretary, June 6, 2014, https://obamawhitehouse.archives.gov/the-press-office/2014/06/06/fact-sheet-normandy-landings.
Chapter 9: Leaders as Cultural Architects
1 Catmull and Wallace, Creativity, Inc., 5.
2 Satya Nadella, Hit Refresh: The Quest to Rediscover Microsoft’s Soul and Imagine a Better Future for Everyone (New York: HarperCollins, 2017), 100, emphasis mine.
3 On imprinting, see A. L. Stinchcombe, “Social Structure and Organizations,” in Handbook of Organizations, ed. J. G. March, 142–193 (Chicago: Rand McNally, 1965); M. T. Hannan and J. Freeman, Organizational Ecology (Cambridge, MA: Harvard University Press, 1989); A. Swaminathan, “Environmental Conditions at Founding and Organizational Mortality: A Trial-by-Fire Model,” Academy of Management Journal 39 (1996): 1350–1377.
4 Pisano, Andrews, and di Fiore, “Fiat-Chrysler Alliance.”
5 C. Copley, “Analysis: After Roche Merger, Biotech Tail Wags Big Pharma Dog,” Thomson Reuters (Zurich, 2012); Erika Check Hayden, “Roche Vows to Keep Genentech Culture” (2009): 270; Marne Arthaud-Day, Frank T. Rothaermel, and Wei Zhang, “Genentech (in 2011): After the Acquisition by Roche,” McGraw-Hill Education, case study no. MH0014, 2012.
6 Robert Huckman and Eli Strick, “GlaxoSmithKline: Reorganizing Drug Discovery (A),” Harvard Business School, case no. 9-605-074.
7 Microsoft Corporation, “Earnings Release FY18 Q2,” https://www.microsoft.com/en-us/Investor/earnings/FY-2018-Q2/balance-sheets.
8 Pisano, Andrews, and di Fiore, “Fiat-Chrysler Alliance.”
9 “Alphabet,” Yahoo Finance, March 9, 2018, https://finance.yahoo.com/quote/GOOG/.
Chapter 10: Becoming a Creative Constructive Leader
1 James Niccolai, “Gateway to Close All Retail Shops,” PCWorld, April 1, 2004, https://www.pcworld.com/article/115507/article.html.
2 Robert J. Gordon, The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War, The Princeton Economic History of the Western World (Princeton, NJ: Princeton University Press, 2017).
Index
accountability, 191–194, 207, 209, 211–212
acquisition of innovative companies, 3, 16
Adobe, 155
advocacy approach to decision making, 167, 171
Afeyan, Noubar, 124–125, 143, 168
Airbnb, 47
ALCO, 105
Alice’s Adventures in Wonderland (Carroll), 21
Alphabet. See Google
Amazon
Amazon Web Services, 84, 146, 194
book-selling success, 92
business model experimentation, 84
continued innovation, 8
creation of value for ecosystem, 77
creative construction, 8
experimentation, 8, 84, 189
as flat organization, 194
increasing returns to scale, 81
initial third-party seller markets, 144
innovations to benefit shopper’s experience, 26
as innovator, 1, 4
letter from Bezos to shareholders, 11
number of employees, 199
opening web infrastructure to third-party developers, 147
ranking of employees, 187
retail business profitability, 97
reviews of products, 79
success at transformative innovation, 8
as transformative business model, 131
“two-pizza rule,” 194
use of quasi-autonomous teams, 148
in VoD market, 72, 103
ambiguity, 156–158, 162
AMD, 53
analogic reasoning, 73, 75, 123–124
analytics. See financial analytical tools
anchoring of initial impressions, 159
Annie Hall (film), 103
Apple
Apple II, 130
Apple TV, 103
Apple University, 197
business model innovation, 54
creation of value for ecosystem, 77–78
creative construction, 7–8
as innovator, 1, 4
iPod, 136
Macintosh, 155
proprietary operating system, 97
routine innovation by, 32, 38, 53, 157
use of crowdsourcing by, 127
value proposition themes of innovations, 26
in VoD market, 72, 103
See also iPhone
architectural innovation
Alphabet’s exploration of opportunities for, 41
comparison to routine innovation, 38–39
digital photography, 32–33
explanation of, 32–34
Google as example of, 33
Innovation Landscape Map, 31 (figure)
Netflix VoD, 71
when to use, 55–56
Arrow, Ken, 79
Arrow’s paradox, 79
AT&T, 2, 155
attribution bias, 159
Audi, 98
Audi on Demand, 34
automobile industry
autonomous vehicles, 33–34, 41
potential for paradigm shifts in, 46
threats from transformative innovations, 41
Baldwin Locomotive, 104–105
Bardeen, John, 137, 145
Barnes and Noble, 92
Bay of Pigs invasion, 172
Becton Dickinson (BD), 25–26
Bell Labs
attraction of talent to, 123, 215
diversity of talent at, 123
no constraints on imagination, 125
structured to drive cross-discipline integration, 145
suspension of belief, 125
transformative inventions of, 7
Bezos, Jeff, 11, 144, 194, 197, 201
BlackSocks, 43
Blockbuster
critical resources of, 65
data on customers’ preferences, 65–66
failure to anticipate success of DVD rental market, 68
late fees, 69–70
value capture, 66
value creation, 66, 68
value distribution, 66–67, 70
Boeing, 32, 99, 112
Boger, Joshua, 153–154, 173, 175–176, 192, 194
Bohmer, Richard, 183
Boston Beer Company, 30
Brady, Tom, 213–214
Brattain, Walter, 145
Brin, Sergey
ambiguity of original options, 157–158, 194
as cofounder of Google, 144
leadership, 194
preservation of innovative culture, 197, 201
broadband speeds, 103
bullet hole example, 118–119
business, navigating threats to
assessment of profits if disruption is adopted, 100
changes in customer behavior and tastes, 99
defend and extend strategy, 104
estimating time horizon, 99
facing uncertainty, 104–105
improvement potential in existing technologies, 99
Mapping Responses to Potential Disruptions, 101 (figure)
pivoting around capabilities, 103–104
survival-enhancing behaviors, 106
technological and economic analyses, 99
business model design
Business Model Framework (RV3), 59 (figure)
exploitation of interdependencies among components, 60
resource choice decisions, 59 (figure)
using RV3 framework, 59–60