la technologie, unique clé d’une stratégie d’innovation · 5/2/18 2 coege of management of...

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Christopher L. TucciChair in Corporate Strategy & Innovation

EcolePolytechniqueFédéralede Lausanne (EPFL)

La technologie, unique clé d’une stratégied’innovation ?

26 April 2018

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WHAT IS INNOVATION?

! Innovation is the use of new knowledge to offer new products, processes or services

! It involves invention and commercialization (and hopefully appropriation)

R&D

Invention

Product development and marketing

Commercialization

Strategic pos itioning

Appropriation

Innovation

Co mp etitiv ead v an tag e

Afuah, Strategic Innovation, 2009

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! A “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”—Schumpeter , Capitalism, Soc ialism & Democracy , 1942

CREATIVE DESTRUCTION

Schumpeter clearly intended to emphasis not only the “destruction” aspect of creativity, but the “creative” aspect as well (Freeman, 1982).

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College of M anagem ent of Technology

Chris topher Tuc c iCopyr ight © EPFL, Lausanne, Swit zer landSMP 2018

Technology and innovation

§ Technology can be used in the innovation process itself

§ Or, more emphasized today, firms can adopt technology to modify their products, processes, and/or business models



Agenda

§ Crowdsourcing & BMI

§ Industry 4.0 / IoT & BMI

§ Business Models & Business Model Innovation



Industry 4.0 in context (adapted from Grassl 2015)

Internet of Things

CrowdsourcingIndustry 4.0

Consumer-facingSmart devices

Producer-facingIndustrial automation

Strategic

In tern etworkin g

e.g. , Su p p ly ch ain

man agemen t, factory

au tomation

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2.2 billion Facebook users spend733 million hours a day on the platform

(December, 2017)

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Brooklyn Bridge17 million person-hours

(December, 2017)

(P h otos: Wikip ed ia, 2 0 1 5 )

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Great Pyramid at Giza291 million person-hours

(December, 2017)


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Brooklyn Bridgehours

4040everyeveryeveryday

hours 2.52.5everyeveryeveryday

(December, 2017)


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Global 10 Web Sites by Traffic Volume 2017

1. Google.com2. YouTube.com (Google)

3. Facebook.com4. Baidu.com (Chinese search engine)

5. Wikipedia.org6. Yahoo.com

7. Tencent QQ (Chinese IM service)

8. Taobao (Chinese retail)

9. Reddit10. Amazon

~$598 billion

~$61.3 billion

$1.65 billion

~$404 billion

~$256 billion

~$406 billion

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What is crowdsourcing?

! “The act of taking a task traditionally performed by a designated agent (such as an employee or a contractor) and outsourcing it by making an open call to an undefined but large group of people”—Howe (2006: p. 1)

! Markets with no ex ante contracts! Getting a bunch of random people over the

Internet to solve a problem

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Distant vs. local search (Afuah & Tucci, 2012)

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P rob ab i l i ty o f

crowd sou rcin g

Ch aracteri sti cs o f th e p rob lem

• E ase o f d el in eation an d tran smission

• Mod u lari zab i l i ty

Ch aracteri sti cs o f th e crowd

• P ervasi ven ess o f p rob lem-so lvin g kn ow-h ow

• Motivation

Ch aracteri sti cs o f so lu tion s to b e evalu ated an d o f evalu ators

• E x p erien ce-good orien tation

• Nu mb er o f so lu tion evalu ators req u i red

Ch aracteri sti cs o f kn owled ge req u i red for th e so lu tion

• E ffecti ve d i stan ce

• Taci tn ess an d comp lex i ty o f kn owled ge to b e acq u i red

In formation tech n o logy (IT) ch aracteri sti cs

• P ervasi ven ess an d low cost

B);D

@);D

E);D

F);D

G

Conditions under which problems can be crowdsourced

(Afuah & Tucci, 2012)

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Innovation and crowdsourcing

1. Product and service innovation for a better customer experience

2. Using the power of crowdsourcing to improve products and services directly

3. Using crowdsourcing to seek input on innovation activities

4. Developing platforms that service crowds

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Product innovation pre-Web2.0

! What was the last innovation you can think of in a travel (bookings) web site?– Ability to store and retrieve records?– Faster search for fares?– Nicer interface?– Ability to book both flights and cars?

! These are all relatively incremental innovations

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CASE: TripIt

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Social networking built in to product / service

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Waze (hybrid passive + active crowdsourcing)

! An iPhone and Android app that constantly tracks your movements via GPS

! All users’ movements are aggregated and reported as real-time traffic flow [IoT / passive crowdsourcing]

! Plus you can add your own information , road reports, gas station prices, and speed traps (!) [active crowdsourcing]

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Case: Netflix Prize (background)

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Case: Netflix Ratings Database

! The permanent contest was meant to last at least 5 years

! Within 15 months, 30’397 contestants had registered, grouped in 24’836 teams from 167 different countries

! 21 345 submissions were received from 2’925 different teams

! The leading team (two AT&T researchers) achieved an improvement of 8.57% after one year, winning them $50K

! Within three years the same team, combined with another leading team, had won the Netflix Prize!

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CASE: Facebook Translation Project

§ Launched on December 27, 2007



3 weeks later (Jan. 18, 2008)CASE: Facebook Translation Project

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Case: Google Image Labeler

! What is this picture?

! When you and your randomly assigned partner pick the same words, you get “points”

! What for?– HINT: users vs consumers

vs customers

! Guess how much time

the winners spent?

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Examples of getting input from the crowd

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CASE (platform): Amazon Mechanical Turk

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Who are these people ?



Data: Amazon Mechanical Turk

– Demographics• Age: 14 to 71 (median 30)

• Gender: 54% females, 46% males• Employment: 71% employed, 29% students, retired, unemployed

• Education: 99.9% high-school or higher, 64% college educated, 5% PhD • Industry:25 out of 28 proposed industries• Income: $0 to over $150,000 (US median $30-40k)

• Geography: 26 countries (76% US, 8% India, 3% Canada)• Hours week: 6.7 (median 4)

• Team size: 1 (median)



Data: AMT breakdown emerging markets

Variable Emerging IndustrialzedAge 17-65 (26) 14-71 (31)

Gender F 19%; M 81 % F 65%; M 35%

Employment 72% employed 71% employed

Education HS 100%; Univ 82% HS 99%; Univ 62%

Industry 17 / 28 24 / 28

Income $0-80K ($7.5K) $0-150K ($35K)

Geography India 55%; Phil 7% (19 countries)

USA 87%; Canada 4% (16 countries)

Hours / week 11.5 (7) 5.9 (3)

Team size 4 (1) 1 (1)

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Data: Facebook Translations

– Demographics• Age: 14 to 50 (median 24)

• Gender: 33% females, 67% males• Employment: 56% employed, 44% students, retired, unemployed

• Education: 99% high-school or higher, 60% college educated, 4% PhD• Industry:26 out of 28 proposed industries• Income: $0 to over $150,000 (median $5-10k)

• Geography: 26 countries (9% US)• Hours week: 8 (median 3)

• Team size: 1 (median)

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What motivates them ?

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How satisfied would you be if you were contracted to work on the same

tasks…

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Being ab le to do th is at home on my own schedule is very important to me. I can work in the middle of the n ight if I want to. I have had some days where I started at 6 am and worked until midnight, with no breaks except the meal and bathroom kind.

To be able to do th is as a paid profession would be great. But home based work would be my preferred method. Being part of an online collaborative enterprise allows flex ibility not normally associated with regular activities.

I'd love a job like th is.



Values

Career

Enhancing

Understanding

Social

Performance

Fun

MoneyProtective

Challenge

VolunteerismNon-Volunteerism

Free Time

Unsatisfying Job

- +++

+++

+



Crowd “tuning” to different crowd organizations (Pereira, Viscusi & Tucci, 2017)

Type When useful + techniques to complementCrowd-driven(e.g ., Innocentiveclient)

• Useful for exploitation of well-understood problems or improvements to known products, services, or issues

• Useful for innovative solutions to highly defined tasks• Invest in analytics and data scientists

Crowd-based(e.g ., Wikipedia)

• Firms that have an open-ended problem—not very well defined—and that would like to explore the creative potential of the crowd without losing control over it

• The crowd itself helps not only with potential solutions, but also helps to define the problem/direction itself

“Crowded”(e.g ., One Billion Minds)

• Useful for exploration of little-understood problems• Searching for new consumer trends, emerging disruptive changes, and

highly creative new products and/or services• To complement the exploration orientation, invest in crowd

infrastructure such as peer voting and gamification

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CONCLUSIONS

§ Take advantage of Web2.0 and IoT by building services that exploit the valuable information provided by users

§ If you are making money directly from a crowdsourcinginitiative, consider paying contributors, either a small amount directly or via a large prize, to induce effort.

§ If you are indirectly making money from the distributed innovation effort, you may induce effort via a leaderboard and perhaps a feeling of belonging to a community

§ Also use crowdsourcing to seek input on innovation activities§ Develop products and services that enable social interactions§ Pick the crowd that fits your needs best because not all crowds

are the same!



Agenda

§ Crowdsourcing & BMI

§ Industry 4.0 / IoT & BMI

§ Business Models & Business Model Innovation



Industry 4.0 in context (adapted from Grassl 2015)

Internet of Things

CrowdsourcingIndustry 4.0

Consumer-facingSmart devices

Producer-facingIndustrial automation

Strategic

In tern etworkin g

e.g. , Su p p ly ch ain

man agemen t, factory

au tomation

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Progression across sectors (Brews & Tucci, 2003)

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Progression across sectorsProgression across sectors (Brews & , 2003)

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Comparing banking and auto manufacturing

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Progression to Industry 4.0

Stage 1: Build Bandwidth

Development of the network infrastructure to connect all stakeholders.

Stage 2: Automate and web-enable the office, factory, supply, employee, and customer relationship chain.

Standardization and web-enabling of existing operational processes and activities.

Stage 3: Innovate through networking

Innovation through the exploitation of networking and existing core capabilities.

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Analyze them and use them for decision-making!

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Case: Styr

! Integrated tracker, scale, and phone app

! Sport supplement suggestions

! Possible move into personal nutrition

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Accountable care?

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Agenda

! Crowdsourcing & BMI

! Industry 4.0 / IoT & BMI

! Business Models & Business Model Innovation

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So u rce:

Massa, Tu cci, Afu ah 2 0 1 6

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Novel ways of “DoingBusiness”

So u rce:

Zo tt, Amit, Massa 2 0 1 1

5/2/18

19



Business models

§ “A conceptual tool that expresses the business logic of a specific firm”– Osterwalder, Pigneur, & Tucci

§ A story that answers Peter Drucker’s age-old questions: (1) who is the customer, (2) what does the customer value, (3) how do we make money in this business, (4) and what is the economic logic that explains how we can deliver value to customers at an appropriate cost?– Magretta

§ “The method by which a firm organizes its resources to offer its customers value from which it can make money.”– Afuah & Tucci

§ A depiction of the rationale of how an organization creates, delivers, and captures value (economic, social, or other forms of value) in relationship with a network of exchange partners– Zott, Amit, & Massa



A theoretically rich and conceptually dense notion

So, what is a BUSINESS MODEL?

www.Wo rdle.net



Understanding BMs: back in 1958

Chester Carlson

So urce: Henry Chersbro ug hAlex Osterwa lder

5/2/18

20



Understanding BMs: back in 1958

Xero x 9 1 4 photo copy ma chine

So urce: Henry Chersbro ug hAlex Osterwa lder



Understanding BMs: today

So urce: internet

Shai Agassi



Understanding BMs: today

So urce: BetterPla ce.co m

Better Pla ce BM Ba ttery Swa p Sta tionCha rg e Sta tio n

5/2/18

21



Comparing the examples

What do they have in common?



Lessons

Technology (product) per se has no value (you need a business model to connect it to a market)

How can value be extracted from technology?

1

So urce:

Alex Osterwa lder



Lessons

Both Xerox and Better Place created and implemented radically new business models.

Design – creation, implementation, validation

2

So urce:

Alex Osterwa lder

5/2/18

22



Lessons

Business Model Innovation involves undertaking risk

Effectuation – (fast) prototyping – experimentation - trial & error learning

3

So urce:

Alex Osterwa lder



Business Model Innovation

BUSINESS MODEL INNOVATION

BUSINESS MODEL DESIGN BUSINESS MODEL RECONFIGURATION



Business model design

§ the very first instance of a new BM

§ is usually associated with entrepreneurial activity

5/2/18

23



Business Model Innovation (Massa & Tucci 2013)



Any firm’s first BM

Ex: Travelocity






Any firm’s first BM

Ex: Metro

The first BM of a kind in an industry

Ex: Travelocity






Any firm’s second (or later) BM

Ex: GMAC

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Business Model Innovation



Any firm’s second (or later) BM

Ex: GMAC

Ex: iTunes

The first BM of a kind in an industry

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New revenue model

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Role of innovation management

! Anticipate new markets, new technologies, new business models

! Possible solutions– Map business models– Use new ideas as sources of limited experiments– Confer authority to experiment– Run experiments before scaling up

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73Lorenzo Massa

>When is BMI needed?

Characteristics

Introduction

Small SalesHigh CostLow Quality

Growth

Emergence of a Dominant DesignSales start increasingMarket penetration

Maturity

CommoditizationMarket Saturation

(decline)

Competition

Loduc ofinnovation

Compete on functionality/performance

Product

Compete on quality/services

Process

Compete on convenienceCompete on prices

Business Model

Rate ofInnovation

Time

ProductInnovation

ProcessInnovation

Business ModelInnovation

Industry Sales

Time

Introduction Growth Maturity Market development stages

ProductInnovation

ProcessInnovation


Characteristics

Introduction

Small SalesHigh CostLow Quality

Growth

Emergence of a Dominant DesignSales start increasingMarket penetration

Maturity

CommoditizationMarket Saturation

(decline)

Competition

Loduc ofinnovation

Compete on functionality/performance

Product

Compete on quality/services

Process

Compete on convenienceCompete on prices

Business Model

Rate ofInnovation

Time

ProductInnovation

ProcessInnovation


Industry Sales

Time

Introduction Growth Maturity Market development stages

ProductInnovation

ProcessInnovation


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Examples of Industry 4.0 BMI (Baur & Wee 2015; Brews & Tuc c i 2003, 2007)

! Servitization: Cemex (service guarantee); Rolls-Royce , Caterpiller (“subscription” with anticipatory maintenance)

! Intellectual property servitization: Consulting services built around current products (SAP, Red Hat) or IP licensing (Qualcomm)

! Integrate products with active (human) or passive (sensors) crowdsourcing (or “monetizing data”): Western Digital hard drive quality; SCiO spectrometer

! Creating platforms around products for complementors: SLM Solutions 3D printer manufacturer; Nvidia graphics processors

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During the past decade of the major innovations within existing corporations “only a precious few have been business model

related” (Johnson, Christensen & Kagermann, 2008)

Why?

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Challenges of BMR

! Reconfiguration and design are two distinct activities that imply important differences

! Reconfiguration assumes the existence of a BM: it involves facing challenges that are idiosyncratic to existing organizations – organizational inertia– management processes

– modes of organizational learning– modes of change– path dependent constraints in general

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Why is Business Model Innovation so difficult?

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1Lack of understanding concerning

what a Business Model ultimately is

Problems in collective sense making

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5/2/18

27



Barriers to Business Model thinking

2Cognitive Barriers

Dominant Logic, Industry Recipes, Heuristics

PARC XEROX




3Computational Complexity

The number of logically possible combinations of business model components may be very large




4Dynamic Complexity

Interdependencies and non-linear dynamics between components, activities, choices

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Possible areas to focus on (Giesen, Berman and Blitz 2007; Massa &

Tuc c i 2012)

! Industry model innovation– moving into new industries– redefining existing industries, or– creating entirely new ones

! Revenue model innovation– re-configuration of the product-service value mix– new pricing models

! Enterprise model innovation– changing the role a firm plays in the value chain– changes in the extended enterprise and networks with employees,

suppliers, customers, and others, including capability / asset configurations

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Managing two+ business models (Markides & Cheriton 2004)

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Managing two+ business models (Markides & Oyon 2010)

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La technologie, unique clé d’une stratégie d’innovation ?

! If this were a debate, it would be difficult to argue that technology is the unique key to innovation strategy– Leadership– Organization culture– Understanding your market

! However, I hope the above examples show that technology is playing an increasingly important role in companies’ innovation strategies, even in sectors that were not used to technological innovation– Example: Fintech

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Brooklyn Bridgehours

4040everyeveryeveryday

hours 2.52.5everyeveryeveryday

(December, 2017)


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Thank you!

Christopher L Tucci

[email protected]://csi.epfl.ch

Twitter @cltucci

la technologie, unique clé d’une stratégie d’innovation · 5/2/18 2 coege of management of...

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