See also design principles
Business Model Framework (RV3), 59 (figure), 70 (figure)
business model innovation
Blockbuster, 65–67
comparing business models of Blockbuster and Netflix, 70 (figure)
as competitive weapon, 65
experimentation and learning, 83
failure of, 73
Netflix, 67–70
as priority, 83
reason for, 46–47
throughout history, 57
transformative, 131
business model innovators
Airbnb, 47
Apple, 54
Boston Beer Company, 30
Flagship Pioneering, 124–125
IKEA, 29
Kodak, 32
Lyft, 30, 47
Netflix, 29
Polaroid, 32
ready-to-eat salad producers, 28–29
Ryanair, 29–30
Tommy John, 47
Uber, 30, 47, 131
Warby Parker, 47
business models
business strategy and business model relationship, 62–65
company-owned store, 64
comparison of Blockbuster and Netflix business models, 70 (figure)
dangers of imitation, 73–75
design principles, 75–83
evolution through iteration, 143
evolving, 40
franchising, 64
Internet-based, 64
transformative, 131
venture creation, 64
Bussicom, 93
carbon-fiber technology, 49
carburetor improvement, 94
Carroll, Lewis, 21
cash-out date, 208
Catch-22 (film), 1
Catmull, Ed, 138, 143, 197, 201
cell phone telephone service user percentage, 92
Chick-fil-A, 64
Christensen, Clay, 32, 44, 58, 160
Chrysler, 176, 200
Churchill, Winston, 174
cloud-based computing, 8, 84, 87, 146
Cockburn, Ian, 132
collaboration, 183–184
Columbia, 49
Compaq, 87
Comparing the Business Models of Blockbuster and Netflix using the RV3 Framework, 70 (figure)
compensation systems, 214
competition, dynamic quality of, 1
complementarities
advantages of, 77
as barrier to imitation, 50–52, 82
Netflix as example, 75–77
in Netflix DVD rental business model, 76 (figure)
Tesla’s production of batteries for electric cars, 52
use of by iPhone, 82
confirmation bias, 159
consensus, 192
consumer electronics, 41
contact lens company, innovation decisions by, 22–24
contest platforms, 127
cooking analogy, 141
Corning
invention of fiber-optic cable and glass manufacturing processes, 7
strategy and capital allocation framework, 37
corporate innovators, list of, 1
creative construction
at Apple, 7–8
complexity, 10
friction, mobility and, 10
iPhone as example, 7
at Johnson & Johnson, 9–11
paradox of, 9
trade-offs in, 218
See also innovation; leadership
creative destruction
defined, 2
reasons for, 2–3
victims of, 88–89
vulnerability of established businesses, 2, 35
waves of, 6
Creativity, Inc (Catmull), 143
Crick, Francis, 132, 137
crowdsourcing
Apple, 127
Google, 127
Microsoft, 127
as part of innovation process, 126–127
as possible strategy, 109
review sites, 79–80
Samsung, 127
Cuban missile crisis, 172
culture, defined, 181
cultures. See innovative cultures; start-up cultures
customers
changes in behavior and tastes, 44
customer need satiation, 44
endogenous preferences of, 93
hidden customer, 114–118
unmet needs of, 41–44
value creation for, 25, 29, 30
da Vinci, Leonardo, 137
DARPA
ability to alter portfolio of projects, 150
fixed timeframe, 149
program leaders control programs, 149, 150
temporary project teams, 149
transformative technologies seeded by, 149
debate, fostering
absence of personal attacks, 175
demanding criticism, 173–174
solicitation of input, 172–173
transparency, 174
DEC, 2, 88
decentralization, 132–135
decision making
event-driven approach, 166–167
hypothesis-driven approach, 167–170
leadership, characteristics of, 176
defend and extend strategy, 104
Defense Applied Research Projects Agency. See DARPA
Dell
business model innovation, 52–53
in personal computer business, 87
profitability of personal computers, 97
design principles
build upon hard-to-imitate resources, 80–83
create value for ecosystem, 77–78
exploit “free” resources, 78–80
search for complementarities, 75–77
diesel engines, locomotive, 104
digital imaging
as architectural innovation, 32–33
Kodak, 96–97
Polaroid, 155
profit potential of, 96
Sony, 136
discounted cash flow, 155–156, 161
disk drive industry, 44
Disney, 1
disruptive innovation, 32, 34, 54
diverse workforce, advantages of, 122–123
DNA, human, 129, 132
DNA, organizational, 3–4, 199
Dollar Shave Club, 43
drug hunters, 138
drug industry
drug discovery, 59
drug hunters, 138
genetically engineered drugs, 131
molecular-biology-based approaches, 48
new paradigms for, 46
pharmaceutical R&D programs, 153, 169
radical innovation in, 32
use of synthesis, 131
Dugan, Regina, 149
DuPont
as innovator, 1
search for replacement for polyester in tires, 114–115
search for uses for Kevlar, 115–117
easyCar, 74–75
easyGroup, 74
easyJet, 73–74
“eat your own lunch before someone else does,” 85, 88–89, 95–97, 101–103, 106
eBay, transformative business model of, 131
ecosystem, creating value for
Amazon, 77
Apple, 77–78
Intel, 77–78
Microsoft, 77–78
Toyota, 78
Uber, 77
Eddie Merckx, 49
Edison, Thomas, 89, 137
Edmondson, Amy, 183
Einstein, Albert, 137
Eisenhower, Dwight, 173, 193
electric starter for automobiles, 90
electric vehicles
critical problems of, 117
history of, 89–90
market for, 51–52
use of lithium-ion batteries in, 118
entrepreneurial firms, as source of transformative innovation, 4
ESPN, 72
event-driven approach to decision making, 166–167
experiment
ation
Amazon as example, 8, 84
in business model innovation, 83–84
Hewlett Packard as example, 143
iteration and, 125, 143
project, 189
synthesis and, 141–144
testing and, 125–126
as vehicle for learning, 183
Exxon Valdez oil spill, 127
Facebook
as collector of information about customers, 79
exploitation of inherent positive network economies, 97
as innovator, 1
routine innovations of, 39
value creation for customers, 81
failure, tolerance of, 12–13, 143–144, 183, 185–188, 209
fast food chains
collaboration among owner operators, 192–193
individual-accountability, 192–193
similar strategy, different business models, 64
Fazioli Pianoforte S.p.A., 138
Fiat, 176, 200, 206, 211
financial analytical tools
“alleged crimes” against, 160
effect of uncertainty and ambiguity of innovation projects, 161–162
“flaws” of, 161
as “innovation killers,” 160
limits of, 162–163
purpose of, 161
reasons for reliance on, 164–165
as tool of inquiry, 170–171
financial services company, as example of unused potential, 133–135
Flagship Pioneering, 124–125, 168, 169, 189
flat organizations, 194
Fleming, Lee, 131, 142, 143
Ford, Henry, 89, 137
Ford Motor Company, 1
Fortune 500 rankings, 6, 7, 8
franchising, 64
Franklin, Rosalind, 132
Friendster, 82
fuel injection, electronic, 91
Fuji, 103
Fujino, Michimasa, 111–112, 122, 124, 192
futurists, 91
Gabriel, Kaigham, 149
Garvin, David, 165
GE (General Electric)
aircraft engines business unit, 60
domination of diesel locomotive industry, 105
as innovator, 1
number of employees, 199
GE Medical Systems, 39
Genentech, 4, 205
genetic components of DNA, as example of innovation through combination, 129
genetically engineered drugs, 131
Gillette razors, evolution of, 42–43
GM, 98
GMOs, economic significance of, 7
Goodyear, 40–41
Google (now Alphabet)
advertising based on customer information, 78–79
allocation of resources, 37
Android operating system, 92
attraction of talent to, 214
business model evolution, 144
crowdsourcing by, 127
decentralized innovation, 194
disruptive innovation, 32
as employee-friendly culture, 187
encouragement of risk taking and failure, 188
exploration of radical and architectural innovation opportunities, 41
as innovator, 1, 4
job applications for, 187
market demand growth potential, 40
performance management system, 187–188
revenues, 40
routine innovation, 40, 42
search engine, convenience of, 113
stock-based compensation plan, 214
strong increasing returns to scale, 97
transformative innovation, 8
in VoD market, 72, 103
GoPro, 96
Gordon, Robert, 223
grocery businesses
similar strategy, different business models, 63–64
Stop & Shop, 62–63
threats from transformative innovations, 85
Whole Foods, 62–64
GSK, 207
Haji-Ioannu, Stelios, 73–74
Harry’s, 43
Harvard Business Review
on design prowess of Sony, 136
on financial analytical tools, 160
Harvard University, joint research symposium at, 120–121
Hastings, Reed, 65, 73
Heller, Joseph, 1
Henderson, Rebecca, 132
Hewlett Packard, 87, 143
Hoff, Ted, 93
home court
advantage, 35
bias, 35
routine innovation, 34
trade-offs between home court and outside opportunities, 218, 220
venturing outside of, 111–113, 121–128, 158–160, 204–205
Honda
Honda Aircraft Company, 111
light jet program hypotheses, 168
transformative innovation, 8, 111–112
HondaJet program
Civic design analogy, 123–124
in Greensboro, North Carolina, 207
over-the-wing-engine design, 111, 124
success in light business jet market, 112
hotel chains, threats from transformative innovations, 85
Hulu, 72, 103
human genome mapping, 132
hypothesis-driven approach to decision making, 167–170
IBM
dominance of mainframe computer business, 86–87
eating own lunch, 86, 101–102
entry into personal computer market, 86
as innovator, 1
number of employees, 199
outsourcing of operating system and microprocessor, 87
personal computer unit in Florida, 207
revolution of computer architecture by, 6–7
sale of PC division to Lenovo, 87
switch to Linux by, 102
System Z mainframe, 87
IDEO, 215–216
IKEA, 29
imitation, barriers to
building complementary technologies, 51–52
business model innovation, 52–53
continual evolution, 82
hard-to-replicate resources, 81
inherent complexity, 52
patents, 50–52, 80–81
rapid routine innovation, 53–54
specialized ecosystem, 82
information, paradox of, 79
ink-jet printer creation, 143
InnoCentive, 127
innovation
after acquisition of new firm, 16
alignment with business strategy, 25
balancing types of, 39, 54–56
combination of existing ideas and components, 129–130
competitive advantage of, 15–16
in complex organizations, 10
disruptive threat prediction, 88–95
diversity of talent base, 122
fear of seeming stupid, 120
as human activity, 179
Innovation Landscape Map, 31 (figure)
involvement of learning in, 177–178
judging merits of, 38
leadership tasks, 17
outside home court, 34–35, 118–120
paradox of, 1, 15
profit potential, 95–98
purpose of, 25
rapid disruption, 92
slow disruption, 91
society-transforming, 223
solutions in search of problems, 114–118
as solutions to social problems, 113
transformative, 6–8
types of, 28–30
value creation and, 25–30, 35
See also architectural innovation; innovation initiatives; innovation strategy; innovative cultures; routine innovation; synthesis; transformative innovation
innovation initiatives
choices of management practices, 14–15
cultural changes, 15
obstacles, 14
pattern of, 12–13
percent of failures, 13
time horizon, 14
&nb
sp; trade-offs, 14
The Innovation Landscape Map, 31 (figure)
innovation strategy
alignment of organizational parts around common priorities, 19, 25–27
clarification of trade-offs, 19, 21–24, 27
creation of value for customers, 25, 29, 30
focus of resources and energy on building capabilities, 27–28
framework for different options, 30–34, 31 (figure)
mapping innovation opportunities, 28–30
Moore’s Law, 47
organization’s capabilities in alignment with, 109
understanding of objectives, 21
value capture for company, 25, 30
See also resources
innovation systems, 27, 110
innovative cultures
acquisition of innovative company, 205
Apple, as example, 136
beliefs about, 182–185
building, 198, 204
challenges created by growth, 198–200
as complexity of, 195
Google, as example, 32, 37, 187–188, 194
guiding principles of, 200–207
implementation difficulties, 186–187
importance of team of supporters, 206
imprinting effect of original founders, 199
in large organizations, 207–215
mutation of, 199–200
paradox of, 187–194
as places to work, 191, 195
preservation of, 197–201
requirement of balance between different values, 195
safe spaces in, 204
See also leadership, role of
innovative cultures, characteristics of
candid feedback, 189–191
collaboration, 183, 184
discipline, 188–189
individual accountability, 191–194
intolerance of incompetence, 187–188
psychological safety, 183–184
shared values, 181, 195, 198, 201, 206
strong leadership, 194
structural flatness, 184–185
tolerance of failure, 183
willingness to experiment, 183
innovative organizations, as products of human creativity, 224
innovators, list of, 1
Intel
buying back rights to microprocessor, 93–94
creating value for ecosystem, 77–78
exploration of alternative paradigms, 47–48
as innovator, 1, 4
invention of microprocessor, 93, 117–118
outsourcing of IBM’s microprocessor to, 87
profits from personal computers, 97
routine innovation, 32, 38, 42, 53
intellectual arbitrage, 137
internal combustion engine, 45–46, 90, 117
internal rate of return, 156, 161
Internet-based banking, 91
Internet-only vendors, 43–44
Internet purchases, as example of innovation by synthesis, 130
Internet service providers, domination of VoD market by, 72
iPad, 38, 91
iPhone
appearance, 113
as example of creative construction, 7
keeping ahead of imitators, 53
as synthesis of known technologies, 130
Creative Construction Page 30