Version 0.

82 (DRAFT SUBJECT TO CHANGE)

INDIAN INSTITUTE OF MANAGEMENT, BANGALORE POST GRADUATE PROGRAM IN SOFTWARE ENTERPRISE MANAGEMENT 2013-14 (NOTE: ALSO OPEN TO PGP)

Strategic Management of Technology and Innovation

Course Introduction Innovation is the lifeblood of winning organizations. As Indian technology firms move towards positions of global market leadership, it becomes increasingly important for them to create sustainable competitive advantage based on the creativity of their employees. They need to ensure that there is structure in house that encourages a continuous process of intellectual property rights generation. It is often said that Indian technology firms need to migrate up the value chain. While the software industry was maturing in the 1990s and early 2000s, a pure services model sufficed to ensure growth and profitability. However, looking into the future, it is likely that a changed business model will be necessary for Indian firms to maintain their leading edge status. This is because they are beginning to run into the limits of the outsourced services model as well as into entrenched blue-chip competition. Even lower-cost destinations also beckon to the outsourcing customer. In terms of diversifying their

SMTI for 2013, v 0.8

Rajeev S, 4/13/2013

portfolios, Indian software firms will need to consider new product development activity including intellectual property rights creation as part of their operational strategies. One of Indias core competencies is the development of intellectual property. Historically, India has been the source of many revolutionary ideas and concepts. It is also universally acknowledged that Indian technical and managerial brainpower is among the best in the world. However, innovation and IPR generation have not been recognized as important elements in company strategy in the recent past. This course considers a framework to create strategic change through technological innovation and internal entrepreneurship. It is necessary to forecast technology trends, anticipate customer needs, predict competitor moves and strategies as well as environmental conditions and respond in flexible ways via mid-course corrections. Business plan generation and implementation is a combined product management and engineering activity. There are very good examples in technology areas where Indian firms have managed to make the conceptual leap from follower to leader by investing in R&D. The most visible are the pharmaceutical industry and the automotive components industry. In the face of intense global competition, Indian firms in both these sectors have done remarkably well by leveraging Indian skills in engineering, reverse engineering, and re engineering. In particular, the pharmaceutical sector has remarkable for its rapid emergence as an IPR generation machine. Part of the learning experience is to consider the reinvention of the Indian software industry as a technology driven, rather than purely services driven, entity. A major part of this reinvention is the need to encourage and nurture the creative entrepreneurial energy of individual participants at lower and middle levels in the organization. There is synergy between greater professional success for individual and long term viability and effectiveness of the firm in the marketplace. The first part of the innovation process is the creation of a new idea. The emerging discipline of design thinking enables companies to nurture out-of-the-box thinking, along with a strong focus on value creation from the point of view of the end customer. In addition to creating a strategy, it is important to translate it into an implementation framework and methodology on the ground that enables the firm to create an architecture and a specific action plan. The fleshing out of an idea is the second part of the innovation process, and we will consider this in detail in the course. The actual process of protecting intellectual property is quite complicated. The course will touch upon how to decide whether an innovation is novel enough and not obvious enough to be patentable. This is a complex legal matter, so the course can only offer a birds-eye view of the legalities involved. Finally, one of the most neglected areas in new product development is the act of selling the idea to customers. The classic case is that of the product that excites the cognoscenti,

SMTI for 2013, v 0.8

Rajeev S, 4/13/2013

but fails to reach the mass market; the innovating company may face extinction, but an industry giant that follows may make a huge business out of it. The course considers the business of selling innovation, which is at least as hard as coming up with the innovation in the first place. This is the third and final part of the innovation process. Most, but not all, of the instances considered will be from the information technology industry, partly because it has seen rapid cycles of innovation and the concomitant creative destruction, and partly because of the immediate relevance to many Indian firms. Since the Case Study Method is best suited for critical analysis and problemsolving, that is the method adopted in this course. General Flow of the Course There are four parts to the course. Module 1: Technology strategy and innovative systems; design thinking In this part of the course we will focus on how senior managers integrate knowledge about the key issues relating to the firm's technology with business and corporate strategy. What are the various factors that impact a companys technology strategy? We first focus on distinctive technological competencies and capabilities and how they drive technology strategy. We then examine the contextual forces that affect the evolution of a companys technology strategy. These include the developmental trajectory of relevant technologies, the firms industry context, the firms internal organizational context, and the firm's strategic actions. We also consider how design thinking can be used as a competitive weapon to arrive at potentially game-changing disruptions. Module 2: An architecture for new product development This part of the course deals with technology sourcing and corporate innovation. Here we will examine the role of R&D in a companys strategic evolution, how to link corporate R&D to corporate strategy, and how to make sure that the output of corporate R&D is transferred to other parts of the firm. This part of the course also examines the role of corporate entrepreneurs and how to manage project champions/venture managers, and what some of the organizational design and associated incentive issues are related to corporate entrepreneurship. What are the key issues associated with new product development? We also consider some of the key innovation challenges faced by established firms. What are the conflicts inherent in having to manage these various challenges simultaneously? Module 3: Intellectual property as key to creating unfair advantage This part of the course provides an overview of the mechanisms for creating barriers to entry via the development of intellectual property rights. There are a number of ways in which intellectual property can be generated and safeguarded. The most common mechanism is that of patents. India has acceded to the WTOs patent conventions, and a

SMTI for 2013, v 0.8

Rajeev S, 4/13/2013

growing number of US and worldwide patents are being generated in India. What makes an idea patentable? What are the procedures to follow in case you have a patentable idea? Is patenting less valuable to poorer nations? Are there alternative perspectives to patenting and thereby extracting value from ideas? Module 4: Value enhancement through consultative selling This part of the course looks at the process of strategic selling. Although this is one of the areas least focused on in most business school curricula, it is an important part of the process of creating perceived value for the customer. Much of the value of technologically advanced products and services are derived from their inherent characteristics, yet it is possible to add value via the process of selling. REQUIRED TEXTS Burgelman, R. A., Christensen, C. M. and Wheelwright, S. C., Strategic Management of Technology and Innovation, FIFTH Edition, McGraw-Hill/Irwin, 2009. (Called "BCW" in this course description.) NOTE: the Fourth Edition is also available, but this course outline refers directly to the Fifth Edition. REFERENCE BOOKS (OPTIONAL READING) Davila, T., Epstein, M. J., and Shelton, R., Making Innovation Work: How to Manage It, Measure It, and Profit from It., Wharton School Publishing/Pearson Education, 2005. There are two copies in the Library. Grove, Andrew S., Only the Paranoid Survive, Harper Collins Business, 1997 Moore, Geoffrey A., Crossing the Chasm, Harper Collins Business, 1991 Moore, Geoffrey A., Inside the Tornado, Harper Collins Business, 1995 Bronson, Po, The Nudist on the Late Shift, Random House, 1999 Collins, Jim, Built to Last, Harper Collins, 1994 Collins, Jim, Good to Great, Random House, 2001 Ghoshal, Sumantra, Managing Radical Change What Indian Companies must do to become world-class, Viking, 2000 Porter, Michael E., Competitive Advantage, The Free Press, 2004 Pressman, David, Patent It Yourself, Tenth Edition, Nolo Press, 2004

SMTI for 2013, v 0.8

Rajeev S, 4/13/2013

Rackham, Neil, Rethinking the Sales Force, Tata McGraw-Hill, 2001 Target Audiences This course is designed with the following audiences in mind: People who are interested in becoming general managers in firms where technology is an important part of business and corporate strategy; People who want to understand the logic of innovation in large, complex firms because they anticipate that they will have to deal with such firms as competitors or potential acquirers of the small firms in which they intend to work; People who expect to become involved in internal corporate ventures; People who expect to become involved in high-tech venture capital.

Attaining the Course Objectives and Evaluation To pursue the course objectives effectively, the following are required: a. Preparation and discussion of cases in class; b. Readings and lectures c. Mid-term exam and final exam a. Preparation and discussion of cases You are required to form study groups of three or four people. Please hand in the list of the study group members at the beginning of session #4. The assignments for a class should be prepared in advance of that class. The prescribed textbook will not be covered through a lecture in class, and participants are expected to have read the specified reading material before the session. The case assignments require the identification of key issues, problems, and opportunities; the articulation and evaluation of alternative approaches to deal with the identified problems; the selection of a preferred strategy; and the formulation of a concrete action plan to implement the strategy. Preparation questions for each case have been provided or will be handed out in class. However, these are merely meant as guidelines and are not exhaustive; fresh insights and perspectives are welcome. In a typical class, one or more participants (from different study groups) will be asked to start the class by answering a specific question. Anyone who has thoroughly prepared the case with written conclusions should be able to handle such a lead-off assignment. After a few minutes of initial analysis, we will open the discussion to the rest of the class. As a group, we will then build a complete analysis of the situation and

SMTI for 2013, v 0.8

Rajeev S, 4/13/2013

address the problems and issues presented in the case. We will also spend time discussing the implementation of those recommendations. Most general managers spend very little time reading, and even less time writing reports. The vast majority of their interactions with others are verbal. For this reason, the development of verbal skills is given a high priority in this class. The classroom should be considered a laboratory in which you can test your ability to convince your peers of the correctness of your approach to complex problems and of your ability to achieve the desired results through the use of that approach. Some of the things that have an impact on effective class participation are the following: - - Is the participant a good listener? - - Is the participant willing to interact with other class members? - - Are the points that are made relevant to the discussion? Are they linked to the comments of others? - - Do the comments add to our understanding of the situation? - - Does the participant distinguish among different kinds of data (i.e., facts, opinions, beliefs, concepts, etc.)? - - Is there a willingness to test new ideas, or are all comments "safe"? For example, repetition of case facts without analysis and conclusions. b. Readings and Lectures Case discussion and project activities will take place against a background of conceptual material that is acquired through selected readings and brief lectures. The readings are listed in the course outline. Some of the readings are taken from leading academic publications in strategic management, economics and organization theory and are somewhat technical. They refer to bodies of preceding research and discuss at some length the research methodologies employed. Do not be discouraged by these technicalities. Ask yourself what the key insights and findings of each reading are. Write these down. Try to relate them to the case for the day. But, more importantly, try to relate them to the key ideas of other readings in the course. Note on the cases. The course has a mixture of mostly new and a few "classic" cases. The latter ones offer the opportunity to discuss fundamental and timeless issues and challenges faced by technology-based companies. Please study them in that spirit and do not dismiss them out of hand simply because they seem "old." Ask yourself - as we will in class - What can I learn from this situation that is generalizable to companies that I am interested in today?

c. Exams

SMTI for 2013, v 0.8

Rajeev S, 4/13/2013

The one-hour mid-term exam will cover roughly the first 10 class sessions. Questions will be drawn from both the cases and the readings, as well as any additional material handed out in class, and class discussions. The exams seek the assess the participants learning and mastery over the course materials. The final exam (2 hours) will be based on a case not discussed in class.

Grading Policies Your course grade will be based on class participation and the field project: Cases and Class Participation Mid-term Exam Final Exam Behavioral Expectations The following reflect general expectations as to class behavior: 1. In case you need to miss one class, please provide advance notice by means of email or, if you could not provide advance notice, an email note afterwards to explain the absence. If you do miss a class, it will be your responsibility to find out from your classmates what materials were covered, what additional assignments were made, and what handouts you may have missed. I will be prepared for every class and expect that you will be too. You should let me know before the start of class if some emergency has made it impossible for you to be adequately prepared for that class. Please use a name card. I will pass around a seating chart during the second class session and expect that you will use the same seat from then on. For purposes of general case preparation, you should not use others' notes or papers from other courses where these materials might have been taught. Such use is considered a violation of the IIM-B Honor Code. If you personally have actually had one of these cases previously, you are certainly free to use your own prior notes on that material, but you are encouraged to rethink the case within the context of this course, since it may be somewhat different from how you saw it previously. 25% 25% 50%

2.

3.

4.

5. Group work is encouraged for case preparation. Every member of the group will get the same grade for classroom presentation of cases.

SMTI for 2013, v 0.8

Rajeev S, 4/13/2013

CLASS ASSIGNMENTS All materials, except those to be handed out in class, are included in the Burgelman, Christensen and Wheelwright (BCW) textbook, except as indicated. Some new materials will be handed out in class.

Session 1: TBD Course Introduction Class Expectations Instructor Expectations Readings: "Technology, Innovation, and Strategy: A General Management Perspective" (BCW, pp. 1-12) Profiting from Technological Innovation: Implications for Integration, Collaboration, Licensing, and Public Policy" (BCW, p. 32-48)

Session 2: TBD Case: Readings: Advent Corporation (BCW, pp. 49-61) "The Core Competence of the Corporation" (BCW, pp. 66-67)

Preparation Questions: 1. What are the key elements in Advent's strategy? How successful has Advent been? Why? 2. What are Advent's distinct technological competencies? Please construct a matrix showing the technological competencies embodied in the different segments of the audio business. How is this different for the video business? 3. What are the key issues and problems facing Advent? Please prepare a detailed action plan. 4. Characterize Kloss's style as a general manager. Does he need to change? How?

Session 3: TBD Case: Elio Engineering, Inc. (A) (BCW, pp. 13-31)

Reading: (unrelated to the case) Global Innovation 1000: How Top Innovators Keep Winning, strategy + business, 2010, please read it at the following URL:

SMTI for 2013, v 0.8

Rajeev S, 4/13/2013

http://www.booz.com/media/file/sb61_10408-R.pdf Preparation Questions: 1. What is the structure of the automotive seat industry in 1998? How attractive is this industry? 2. What are the potential sources of competitive advantage that Elio Engineering has? How sustainable are they? Why/Why not? 3. What are Elio Engineering's strategic options in entering the automotive market? Please evaluate these options and reach a conclusion on the most attractive one. 4. How well is Elio Engineering's technology strategy aligned with the requirements for a successful entry into the automotive seat market? What, if anything, should they change?

Session 4: TBD Case: Electronic Arts in 1995 (BCW, pp. 164-279) Electronic Arts in 2002 (BCW, pp. 180-199) Defining the Minimum Winning Game in High-Technology Ventures (BCW, pp. 140-153)

Reading:

Preparation Questions: 1. In 1995, what are the key characteristics of the video game industry? In which ways is it similar/different from the movie industry? 2. Until 1995, how successful has EA been? Why? What is the basis of their competitive advantage? 3. Until 1995, what has been EA's technology strategy? How is it linked to their business strategy? 4. In 1995, how should EA top management think about the platform development decisions it faces? 5. By 2002, how has the Internet affected the video game industry? How does it affect EAs corporate strategy? What should EAs corporate strategy be for the next 5 years? Why? How execute the strategy? Note: List of group members, your course expectations and background mail (100 words) also due. These can be sent out by email to [email protected] Session 5: TBD Case: Pixim (A) Reading: "Management Criteria for Effective Innovation" (BCW, pp. 97-105)

SMTI for 2013, v 0.8

Rajeev S, 4/13/2013

Please also revisit earlier reading Defining the Minimum Winning Game in HighTechnology Ventures (BCW, pp. 140-153) Preparation Questions: 1) Examine the strategic situation at Pixim in 2001 before Siegel joined: - Where are they in the stages of development of new ventures? - What has been the main driver of their strategic actions so far? - How well is their strategy diamond defined? (What is the company saying? What is the company doing? What will it take for them to win (given their product-market position)? What has the company got (distinctive competence)?) - How well are they doing? 2) Why did Weinschenk reach out to Siegel? Why did Siegel agree to join Pixim? 3) What are the key things that Siegel needs to find out quickly? Is Pixims technology disruptive? Why or why not? 4) How did Siegel go about providing a structured analytical process for deciding which market(s) to focus on first? As a result of the more disciplined analytical process, what should Siegel conclude about Pixims first minimum winning game (MWG)? Why? What are the implications of this? Session 6: TBD Guest Lecture: Design thinking Topic: How can you use the techniques of design thinking profitably in your company?

Session 7: TBD Readings: "Intraorganizational Ecology of Strategy Making and Organizational Adaptation" (BCW, pp. 511-528) "Strategic Intent" (BCW, pp. 550-561) Gunfire at Sea: A Case Study of Innovation (BCW pp. 431-441) None

Case:

Session 8: TBD Case: Readings: Eli Lilly and Company: Drug Development Strategy (BCW, pp. 415-430) Note on New Drug Development in the United States (BCW, pp. 410414)

SMTI for 2013, v 0.8

10

Rajeev S, 4/13/2013

Preparation Questions: 1. What are the environmental factors facing the pharmaceutical industry especially in the US? What is Eli Lillys strategic response to these? 2. Compare the various competitors balance sheet summaries in Exhibit 4 (page 418). Compare R&D expenses and net earnings as a % of sales. How do you account for the discrepancies in return on equity? 3. Diagram the new product development process in place at Eli Lilly as applied to the migraine project. What are the advantages and disadvantages you can see in this process? Compare this to the process in a smaller firm, example Advent (and Kloss) in an earlier case. 4. What are the human factors issues creating resistance to the new techniques of combinatorial chemistry and high throughput screening? Compare this to the issues in the reading Gunfire at Sea 5. What are the possible financial implications of gaining first mover advantage? See Exhibit 9. On the other hand, what is the downside of bringing an immature product to market? 6. What would you recommend to the PTAC if you were Bianca Sharma? Why?

Session 9: TBD Case: Reading: SAP America (BCW, pp. 348-361) Crossing the Chasm and Beyond (BCW, pp. 362-367)

Preparation Questions: 1. What are the external and internal forces that explain why SAP America has grown so rapidly? What are the challenges associated with this explosive growth? 2. What are the key features of SAP's approach to partnering, sales, and consulting? What are the advantages and potential disadvantages of this approach? 3. What is your evaluation of the new organization? What problems was it designed to solve? 4. As Eileen Basho, what is your action plan for dealing with the strategic and organizational challenges that you face? Be specific! Session 10: TBD Case: Readings: Hewlett-Packard: The Flight of the Kittyhawk (BCW, pp. 529-540) "Architectural Innovation: The Reconfiguration of Existing Product Technologies and the Failure of Established Firms" (BCW, pp. 441-454)

Preparation Questions: 1. Who were the key players in the emergence of the Kittyhawk project? What did each of them contribute?

SMTI for 2013, v 0.8

11

Rajeev S, 4/13/2013

2. What are the strengths and weaknesses of the way Hewlett-Packard structured and supported the Kittyhawk development team? 3. Why did Hewlett-Packard pursue the Kittyhawk project this way? What should they do differently if they could do it over?

Session 11: TBD Mid-term Examination (1 hour) Discussion: The Fortune at the Bottom of the Pyramid Innovation for the poor, or an exaggeration? C K Prahalad Fortune at the Bottom of the Pyramid http://www.cs.berkeley.edu/~brewer/ict4b/Fortune-BoP.pdf CK Prahalad The Innovation Sandbox http://www.strategy-business.com/press/freearticle/06306 Fortune at the Bottom of the Pyramid: A Mirage http://papers.ssrn.com/sol3/papers.cfm?abstract_id=914518 Fortune at the Bottom of the Pyramid: An Alternate Perspective http://www.iimahd.ernet.in/publications/data/2007-07-13Jaiswal.pdf

Session 12: TBD Case: Reading: Hewlett Packards Merced Division (BCW, pp. 233-244) "Customer Power, Strategic Investment, and the Failure of Leading Firms" (BCW, pp. 245-264)

Preparation Questions: 1. In summer 1998, what is the position of the Enterprise Server Group (ESG) in its industry? How has it evolved? Why? 2. Why did HP get involved in developing the IA-64 architecture? 3. Who will benefit the most from the introduction of the Merced chip in the markets served by ESG? Who will benefit the least? Why? 4. In summer 1998, what should Jim Davis recommend? Session 13: TBD Guest Lecture: Jugaad and industrial strength innovation

SMTI for 2013, v 0.8

12

Rajeev S, 4/13/2013

Topic: What steps can you follow to create lasting, scaleable, replicable, and high-quality innovation?

Session 14: TBD Case: 3M Optical Systems Division: Managing Corporate Entrepreneurship (BCW, pp. 902-914) The New Product Development Map, BCW pp. 1089-1098

Reading:

Preparation Questions: 1. Put yourself in the position of Andy Wong. In January 1992, what are your options for securing continued funding for the venture? Make a decision regarding those options and prepare an action plan. 2. Put yourself in the position of Paul Guehler. What will you do if Wong decides to ask for further funding for the Multiprotection Filter? Why? 3. How does Wong's effort fit within the 3M culture in 1992? 4. In the end, what are the key factors of 3Ms corporate entrepreneurial capability? What are the transferable features? Which features are difficult to transfer?

Session 15: TBD Case: Reading: Cisco Systems, Inc.: Acquisition Integration for Manufacturing (A) (BCW, pp. 745-761) Enactment of Technology StrategyDeveloping a Firms Innovative Capabilities (BCW, pp. 657-670)

Preparation Questions: 1.What are the most important elements (criteria, processes, specific actions, etc.) of Ciscos approach to selecting and integrating acquisitions? Why? 2. How can Cisco improve its acquisition selection and integration process? What should they add or modify? Why? 3. What are the specific challenges of the Summa Four acquisition? How well does the Cisco process address these challenges? Why?

Session 16: TBD Case: PlaceWare: Issues in Structuring a Xerox Technology Spinout (BCW, pp. 762-772) The Lab That Ran Away From Xerox (BCW, pp. 671-674)

Reading:

SMTI for 2013, v 0.8

13

Rajeev S, 4/13/2013

Preparation Questions: 1. Why has Xerox chosen to commercialize PlaceWare outside of Xerox? Do you agree with their rationale? Why or why not? 2. Which option should Bruce recommend for structuring the spinout of PlaceWare? 3. Why should the PlaceWare development team support your recommended choice of structure? How important is it that they support you? 4. What valuation would you give to PlaceWare in June of 1996? What percentage of that value should Xerox expect for its intellectual property? Why?

Session 17: TBD Case: Reading: Product Development at Dell Computer Corporation (BCW, pp. 957-970) Organizing and Leading Heavyweight Development Teams (BCW, pp. 1012-1023)

Preparation Questions: 1. How does Dell Computer differentiate itself from its competition in the desktop market? What is its business strategy and its core competence? How is it able to appropriate value from its innovations? 2. What are the advantages or disadvantages of Dells new product development process as compared to others you have seen such as Cisco or 3M? What improvements would you recommend? 3. What are the possible choices before Mark Holliday at the time of the case? What would you recommend and why? What are the risks (including financial) associated with your choice?

Session 18: TBD Lecture: Reading: The Patenting Process Finding the Balance: Intellectual Property in the Digital Age (BCW, pp. 398-410)

Session 19: TBD Lecture: Reading: class) Generating Value through the Selling Process The Three Emerging Selling Models and The New Consultative Selling (Rackham, Rethinking the Sales Force) (To be handed out in

SMTI for 2013, v 0.8

14

Rajeev S, 4/13/2013

Session 20: TBD Case: MySQL Open Source Database in 2004 (BCW, pp. 284-304) MySQL Open Source Database in 2006 (BCW, pp. 304-309) "How Can We Beat Our Most Powerful Competitors?" (BCW, pp. 310330)

Readings:

Preparation Questions: 1. How successful is MySQL? Why? 2. Identify different segments of the DBMS market. What differences exist between these segments, eg., in customer needs and expectations? 3. Analyze the DBMS industry in which MySQL operates. How attractive is it? Consider the different market segments you have identified in your analysis. 4. What are the competitive advantages of MySQL and how sustainable are they? Quantify these advantages to the extent possible in the identified market segments. 5. At the time of the 2004 case, what is the stated strategy of MySQL? What strategy is implied by the companys actions? How consistent are the strategic actions with the stated strategy? 6. What are MySQLs strategic options beyond 2004? What option should MySQL choose? 7. How is MySQLs open source model different from Linux OSS model, and what are the implications of this? 8. In 2006, how has the market changed? Does this favor MySQL or its competitors?

Course Evaluation Course Summary Final Exam: TBD

SMTI for 2013, v 0.8

15

Rajeev S, 4/13/2013