use of specialized complementary resources, 82
iPod, 136
Isaacson, Walter, 136
iteration
experimentation and, 125
at Pixar, 143
in problem solving, 117
role of in evolution of business models, 143–144
suppression of, 144
as theme in innovative organizations, 143
Jassy, Andy, 147–149, 194
Jobs, Steve
ability to see connections across fields, 137
biography by Walter Isaacson, 136
creation of Apple University, 197
intolerance for incompetence, 187
prediction about tablets, 91
Johnson & Johnson
creative construction of, 9–11
discouragement of risk-taking, 201–202
as innovator, 1
joint research symposium at Harvard University, 120–121
Joy, Bill, 126
Joy’s Law, 126
judgments, 158–160
Kaufman, Stephen, 160
Kelley, David, 201, 215
Kelly, Mervin, 145
Kettering, Charles, 90
Kevlar
initial use for, 114–115
as reinforcement for police vests, 115
search for more applications and markets for, 115–117
Key Complementarities in Netflix DVD Rental Business Model, 76 (figure)
Kodak
architectural innovation, 32–33
digital imaging, effect on profit potential, 96
dire situation of, 103
as innovator, 1
predictions of failure of, 2
Kwoleck, Stephanie, 114
Lakhani, Karim, 127
land line telephone service user percentage, 92
large established enterprises
acquisitions by, 3
advantages of, 11, 128
decentralization, 132–133
freight train characterization, 5
learning, 128, 143
organizational pathologies of, 2–3
R&D productivity compared to smaller companies, 5
replicating accountability culture of a start-up, 211–212
replicating risk-rewards incentives of a start-up, 212–215
replicating speed of a start-up, 210–211
scale, innovation and, 5
transformative innovation, view of, 3
See also transformative innovations of large firms
“last gasps” of old technologies, 94
latent demand, 113
leaders, characteristics of, 176
leadership, constructive
becoming different from competitors, 219–220
discipline about tough trade-offs, 220
obsession with organizational culture, 222
as organizational innovators, 221
problem solving outlook, 219
systems perspective on innovation, 220–221
as talent hawks, 221–222
view of innovation as competitive weapon, 219
leadership, role of in cultural change
arsenal of management tools required, 216
getting the right people, 205–207
incubating and protecting “Revolutionary” pockets, 203–205
modeling desired behavior, 201–203
taking ownership of cultural problem, 200–201
learning
from analogies, 123
in business model innovation, 83
debate and, 171–175
experimentation as vehicle for, 183
in innovative cultures, 177–178, 182–198, 221
keeping mind open, 175–176
orienting R&D proposals around, 167–170
selection as process of, 165–170
as survival enhancing behavior, 106
synthesis and, 151
in transformative innovation, 128, 143
use of analytics in, 170–172
use of criticism, 174
Lego Design byME, 72–73
Lenovo, purchase of IBM PC division by, 87
Levinson, Art, 205
Linux software, 101–102
lithium-ion batteries, 118
Lyft
business model innovation, 30, 47
financial losses of, 98
imitators of, 80
Macintosh, 155
mainframe computers, 86–87
Mapping Responses to Potential Disruptions, 101 (figure)
March, James, 15
Marchionne, Sergio, 176, 200, 206, 211
Marconi, Guglielmo, 137
matrix teams, 148
McCaw Cellular, 155
McDonald’s
business models, 64
imitators of, 80
as innovator, 1
source of new menu ideas, 126
microprocessors, 93–94, 117–118
Microsoft
balance sheet of, 210
creating value for ecosystem, 77–78
as innovator, 1, 4
mobile operating system of, 83
outsourcing of IBM’s operating system to, 87
profits from personal computers, 97
routine innovation, 38
use of crowdsourcing by, 127
mobility, friction and, 10
model, defined, 75
Model T Ford, 90
Monsanto Corporation, agricultural seed industry and, 7
Monte Carlo simulation, 170
Moore, Gordon, 94
Moore’s Law, 47, 48, 86, 94
Morgan Stanley, 3
Motorola, 7
music, as example of innovation through combination, 129
Musk, Elon, 89
mutation within cultures, 199–200
MySpace, 39, 82
Nadella, Satya, 197–198
net present value, 161
Netflix
advantages of scale, 72
business model innovation, 29, 30
convenience, 67, 69, 71
domination of VoD market, 72
eating own lunch, 102–103
elimination of stores, 67
evolution of business model, 84
film library, 67
focus on content creation, 72
imitators of, 80
impact of video storage technology on, 93
as innovator, 4
lower cost structure of, 69
move from DVD rental to VoD, 102
strategy-business model coherence, 62–65, 71
value distribution, 68
video on demand (VoD), 71
viewer recommendation system, 67
Netscape, 4
New England Patriots, 214
newspapers, print, 91, 97
Newton, Isaac, 137
Nobel Prize winners, 145
Nokia
creative destruction of, 7, 82, 88
predictions of failure of, 2
sale to Microsoft, 82
Symbian operating system of, 92
Normandy invasion (Operation Overlord), 173–174
oil field analogy, 39–40, 47
online shopping, 8
organizational DNA, 3–4, 199
organizational systems, 128, 182, 195, 217–218
organizationally autonomous units, 207–208
“overshooting the market,” 44
Page, Larry
ambiguity of original options, 157–158, 194
as cofounder of Google, 144
leadership, 194
preservation of innovative culture, 197, 201
Palo Alto Research Center, 154
Pal’s, 64
paradigm shifts
autonomous vehicles, 33–34, 41, 46, 48
digital photography, 32–33
high-end bicycle frame industry, 48–50
pharmaceutical industry, 46
patents, 50–51, 80–81
<
br /> Pearson, Gerald, 145
Penn Station, 64
personal computers
as competitive business, 87
as example of innovation by synthesis, 130
impact on IBM, 86–88
low profits for sellers of, 97
as market for microprocessors, 118
unpredictable popularity of, 94
pharmaceutical innovation, 32, 46
phase-gate models, 142
Pinarello, 49–50
Pixar
candid feedback for directors, 192
central role of iteration at, 143
diverse workforce of, 138
preservation of innovative culture, 197
replacement of incompetent directors, 188
routine innovation by, 32
success of, 197
Polaroid
architectural innovation, 31 (figure), 32–33
digital photography and, 155
as example of poor project-selection decisions, 155
predictions of failure of, 2, 88
predicting threats
endogenous customer preferences, 93
system interdependencies, 92
timing of reaction to disruptive innovations, 94–95
product reviews, 79
profit impact, 100–101, 101 (figure)
profit potential, 96–97
project selection. See selection decisions
project teams
Amazon Web Services as example, 146–148
DARPA as example, 149–150
focus on specific innovation opportunities, 146
in innovative cultures, 183, 190–194
quasi-autonomous, 148, 204–205, 208
propeller aircraft engines, 91
quantum computing, 48
radical innovation, 32, 55
RCA, 1, 2
R&D
career paths in, 140
evaluating projects, 163
expenditures, 2, 9
homogeneity in organizations, 122
orienting proposals around learning, 167–170
pharmaceutical, 5, 32, 132, 144, 153, 169
R&D productivity of large versus smaller companies, 5
at Vertex, 173
real option valuation, 163, 170
recency effects, 160
resource allocation principles
core market growth capability, 39–41
creation of barriers to imitation, 50–51
customer needs, 41–44
examples of, 37–38
optimal, 38
technological paradigm improvement potential, 44–50
resources
allocation of, 53, 155, 160, 170 (See also resource allocation principles)
Alphabet’s allocation policy, 37
Corning’s allocation policy, 37
defined, 58
“free,” 78–80
hard-to-replicate, 81
making choices, 59–60, 59 (figure)
review sites, 79–80
reviews of products, 79
Reynolds Cycling, 49
ride-sharing business, 98
RIM, 2, 7, 88
The Rise and Fall of American Growth (Gordon), 223
road system expansion in US, 90
Roche, 205
routine innovation
addressing customers’ unmet needs, 42
anchoring with well-defined problems, 117
denigration of, 38
rapid, 53–54
as winning strategy, 54
routine innovation examples
Amazon, 32
Apple, 32, 38, 53, 157
Boeing, 32
EMI, 39
Facebook, 39
GE Medical Systems, 39
Goodyear, 40–41
Google, 40, 42
Intel, 32, 38, 42, 53
Microsoft, 38
MySpace, 39
Pixar, 32
RV3 business model framework, 59–60, 68
Ryanair, 29–30, 73
safe spaces, 204
salad, ready-to-eat, 28–29
Samsung, use of crowdsourcing by, 127
Sato, Vicki, 176, 192
Scapin, 49
Schumpeter, Joseph, 2, 131
Schwan, Severin, 205
searches, broadening
challenging sacred assumptions, 124–126
creation of forcing mechanisms, 121
diverse workforce, 122–123
experimentation and testing, 125–126
moving people away from home courts, 121–122
opening up innovative processes, 126–127
scale, advantages of, 128
use of analogies, 123–124
searches for problems and solutions
expanding search arc, 118–127
hidden customer, 114–118
outside home court, 112–113
problem-solving perspective, 113–114
selection decisions
advocacy approach, 167, 171
ambiguity, 156–158, 162
AT&T, as example of poor project-selection decisions, 155
building a learning innovation system, 176–178
errors in, 155–158
event-driven approach, 166–167
financial analytical tools, 160–165
fostering vigorous debate, 171–175
hypothesis-driven approach, 167–170
judgments, 158–160
keeping an open mind, 175–176
managers as innovators, 177
over- or underestimation of project risk, 160
Polaroid, as example of poor project-selection decisions, 155
as process of learning, 165–170
trade-off between type 1 and type 2 errors, 158
uncertainty, 105–106, 127, 156, 162–163, 183
using analytics as tool for inquiry, 170–171
Xerox, as example of poor project-selection decisions, 154–155
semiconductors, 47, 113
Serotta, 49
Shieber, Stuart, 120–121
Shih, Willy, 96, 160
Shimano, 49
Shockley, William, 145
Smith Corona, 100, 103–104
Snow, Dan, 94
Sony, 136
Sorenson, Olaf, 131
Southwest Airlines, 24–25
start-up cultures
characterization of, 5
comfort with extreme risk-reward outcomes, 209
individual accountability, 209
no tolerance for incompetence, 209
obsession with speed, 208
statin drugs, 113
Stoffels, Paul, 201, 202
Stop & Shop, 62–63
Stradivari, Antonio, 139
strategy, defined, 24, 37
subscription services, 43
Sun Microsystems, 2, 126
synthesis
across disease areas, 132
application of knowledge across fields, 132
building capability for, 151
cooking analogy, 141
creating permeable boundaries, 144–150
decentralization as problem, 134
deep cultural divides as challenge, 134–135
defined, 130, 131
DNA discovery, 132
exploration and experimentation, 141–144
fluidity, 142–143, 146, 148–149, 184
as a function of management, 151
having all the pieces, 133–136
innovation and, 130–133
Internet purchases as example of, 130
iPhone as synthesis of known technologies, 130
rapid experimentation, iteration, and learning, 143, 151
recruiting synthesizers, 137–141
transformative innovation and, 151
unpredictability of, 141
variety of ingredients, 131
synthesizers
Catmull, Ed, 138, 143
characteristics of, 140
cultivation of within organizations, 140
drug hunters, 138
Fazioli, Paolo, 138–139
Israeli systems biologist, 139
list of, 137
people from “non-conforming” backgrounds, 140
at Pixar, 138
System Z mainframe, 87
talent
attracting, 78, 214–215, 221
Bell Labs, attracting talent, 123, 215
diversity of, 122, 123
Google, attracting talent, 214
harnessing talents to mission of company, 198
hiring right talent, 146, 221–222
investment in, 50
large enterprises’ advantages in recruiting, 11, 128
meshing talents together, 146
taxis, traditional
company ownership of vehicles, 60
concern about underutilized cars, 61
dividends or profit sharing for owners, 62
employment of dispatchers, 60
licenses, 61, 62
revenue streams, 62
seen as safer alternative to private rides, 61
value creation, 61
technological innovation, 32, 45–46, 55
technological paradigm, defined, 44
technological paradigm shifts, 32–33, 41, 46, 48–50
technologies, obsolete, 217
Teradyne, 190
Tesla, Inc., 52
Tesla, Nikola, 137
3Com, 155
Tibotec, 202
Tommy John, 44, 47
Torvalds, Linus, 102
Toy Story (film), 197
Toyota, 78
trade-offs
clarification of, 19, 21–24, 27
in creative constructive enterprises, 218
in innovation practices, 14, 109
navigating tough choices, 24, 27, 35, 37, 220
in organizational design, 146
between type 1 and type 2 errors, 158, 170
using working hypotheses, 170
transformative innovations
barriers to achieving, 133–136
of business models, 131
decision making, 166–167
encouraging new ideas, 128
entrepreneurial firms as source of, 4
large firms and, 6
mature slow-growing industries and, 41
prediction, 88–89
threats from, 85
transformative innovations of large firms
Amazon, 8, 131
Bell Labs, 7
Corning, 7
DARPA, 149
Google, 8
IBM, 6–7
Monsanto, 7
transistors, 131
TripAdvisor reviews, 79
type 1 and 2 errors in selection, 158
Uber
automated dispatch system, 61
business model innovation, 30, 47, 131
convenience, 61
extra benefits for customers, 61
financial losses of, 98
imitators of, 80
as innovator, 4
investment in brand, 61
low cost, 61
network of independent drivers, 61
ownership of cars, 61
potential capital appreciation, 62
Creative Construction Page 31