lecture 3 organisational knowledge

Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008

Slide 5.1

Managing intellectual property

Chapters 5 and 6

http://www.ausinnovation.org/articles/ted-sixth-sense-technology.html









Slide 5.2

http://www.ausinnovation.org/articles/creating

-an-innovation-mindset.html

http://www.ausinnovation.org/articles/ted-sixth-

sense-technology.html

http://www.ausinnovation.org/articles/creating-an-innovation-mindset.html















Slide 5.3

Learning objectives

Understand the role of intellectual property in

appropriating gains from innovation

Understand different forms of protection available

for intellectual assets

Appreciate the limitations of the patent system


Slide 5.4

Profiting from innovation

For an innovation to be profitable:

The technology underlying the product must work

The product must create value for the

customer/consumer

The innovator must be able to appropriate (capture)

enough of the value to make a profit

Value can be lost to competitors, buyers, suppliers, etc.

(Winter, 2000)


Slide 5.5

Mechanisms of appropriability

Secrecy

Trade secrets

Legally protected intellectual assets are termed

intellectual property (IP)

Control of complementary assets

Other assets such as distribution, service capability,

customer/supplier relationships, complementary

products

Lead time

First-mover advantage(Winter, 2000)


Slide 5.6

Trade secrets

Often applied to ways of working, price costings

or business strategies

Also applied to products (e.g. Coca Cola)

Legal definition unclear

Maintain secrecy during product development

Risk of information leakage?

Inhibits internal knowledge transfer?

Limits inter-company collaboration?

Difficult to maintain once marketed

Reverse-engineering by competitors?

No protection against independent invention by others


Slide 5.7

“The secret to one of the world's most famous brands lies deep in a bank

vault somewhere in Georgia, US. Its exact location is reportedly known

only to between two and four Coca-Cola executives.

It is rumoured that measures are employed to protect the chosen

few – the executives never travel together, and must approve a

successor should one of them die.

Outlets which make the drink are simply supplied with syrups

and other ingredients from Coca-Cola – but not the original recipe.

People have revealed what they claim to be the official recipe

after analysing the drink, but Coca-Cola remains tight-lipped.”

No sign of the recipe on the can!

Source: Tom Geoghegan, „What we still don‟t know‟, bbc.co.uk/1/hi/business 2nd June 2005

Trade secrets


Slide 5.8

Types of intellectual property

Intellectual property Key features

Patent Offers a 20-year monopoly; for new products or

manufacturing processes, or improvements to

an existing product or process, which was not

previously known

Copyright Provides exclusive rights to creative individuals

for the protection of their literary or artistic

productions

Registered design Registration of the outward appearance of an

article; provides exclusive rights for up to 25

years

Registered trademark A distinctive name, mark or symbol identified

with a company‟s products


Slide 5.9

Copyright ©

Applies to:

Original literary, dramatic, musical and artistic works

(70 years a.d.)

Sound recordings, films, broadcasts and cable

programmes (50 years post publication)

Typographical arrangements or layout of a published

edition (50 years post publication)

Automatic protection

Cannot copyright ideas

Must be in tangible form (e.g. written)

Copyright applies to the presentation of the idea.


Slide 5.10

Copyright

"Dan Brown copied from The Holy Blood and the Holy Grail and

therefore the publication of the result by the defendant is in

infringement of the copyright of my client in the United Kingdom."

"The authors' historical conjecture has spawned many other books

that developed aspects of this conjecture in a variety of directions.

But none has lifted the central theme of the book."

Source: Lawyers for Baigent & Leigh, February 2006


Slide 5.11

Registered design

Intended for designs with aesthetic appeal

Toys, electrical appliances, packaging, etc.

New designs:

Not published in the UK

Materially different appeal to the eye.

Outward appearance of an article

Actual shape, configuration, pattern, etc.

Maximum of 25 years

Exclusive rights for initial five years, renewable forup to five five-year periods

Similar in operation to the patent system


Slide 5.12

Registered design


Slide 5.13

Registered trademark ®

Distinctive names, marks and symbols identifying

a company‟s products

Must be:

Distinctive in itself

Non-deceptive

Not confusing.

International registration

Many brands are registered trademarks

Licensing


Slide 5.14

Trademarks

Orange colour clash set for court

A row over the colour orange could hit the courts after mobile phone giant

Orange launched action against a new mobile venture from Easyjet's founder.

Orange said it was starting proceedings against the Easymobile service for

trademark infringement.

Easymobile uses Easygroup's orange branding. Founder Stelios Haji-Ioannou

has pledged to contest the action.

The move comes after the two sides failed to come to an agreement after six

months of talks.

Orange claims the new low-cost mobile service has infringed its rights

regarding the use of the colour orange and could confuse

customers – known as "passing off".

Source: bbc.co.uk 20th February 2005


Slide 5.15

Patents

20-year monopoly to make, use or sell

Legal right to prevent others using the invention

Public disclosure of details of the invention

Novelty

Must not be part of „state of the art‟

Words, publications, anticipation

Inventive step

Not obvious to a person skilled in the art

Industrial application

Machine, product, process


Slide 5.16

Limitations of patents

Annual fees required

National patent protection

Patent harmonisation

European Patent Convention (EPC)

Paris Convention – 114 countries

First-to-file (EU) vs first-to-invent (US)

Legal costs of defence

Limited effectiveness in some industries

Patent life vs „imitation lag‟

Inventing around patents


Slide 5.17

Creative wins MP3 player patent

One of Apple's main rivals, Creative Technology, hasbeen awarded a patent in the US for the interface

used on many digital music players.

"The first portable media player based upon the user interface covered in our Zen Patent was our Nomad Jukebox MP3 player," said Creative CEO Sim Wong

Hoo.

"The Apple iPod was only announced in October 2001, 13 months after we had been shipping the Nomad Jukebox based upon the user interface covered by our

Zen Patent."

In its press release, Creative said Apple had filed for a patent for a user interface in a multimedia player in late 2002, but its application had been recently rejected.

Limitations of patents

Source: bbc.co.uk 30th August 2005


Slide 5.18

Use of patents in innovation

Patent information is available to the public

Is a valuable source of technological knowledge

A good way of finding out how problems have

been resolved in the past

A good way of linking current work to previous

inventions and discoveries

Find out what competitors are doing

Can be a source of ideas and directions to go

with R&D.


Slide 5.19

Do patents foster or hinder innovation?

In case of HIV research there are over 1000

patents files , each one building on the other.

Can deny follow-on innovators access to

technologies

Can present barrier to entry into a field

The expense required to avoid patent

infringement can de a deterrent

Some firms issue questionable patents


Slide 5.20

Trademarks & Brands

Differentiates company‟s products

Associated with business image, goodwill, and

reputation

Hoover for vacuum cleaners; Nestle for coffee

Trademarks (law) and brands (marketing) are

closely linked

Both facilitate identity and origin

Brands help buyers identify specific products and

help them in the buying process.


Slide 5.21

Brand extentions

Brands symbolise quality and image that can be

transferred to other products

Unilever extended the Timotei shampoo name to

skin-care products. Benefits of brand recognition.

Licensing of trademarks is growing rapidly eg

AFL, many firms license their trademark to

clothing manufacturers


Slide 5.22

Chapter 6

Managing organisational knowledge


Slide 5.23

1. Introduction: The importance of technology

2. Technology as an asset

3. Resource-based view of the firm

4. Tacit knowledge

5. Competencies

6. Core competencies

7. Turning technology into profits

8. Technology life cycles & S-curves

9. The degree of innovativeness

Managing organisational knowledge


Slide 5.24

• The battle of Trafalgar 1805

• Nelson defeated the French and Spanish fleets in

the battle of Trafalgar

• Nelson‟s ship, HMS Victory, stands in a drydock in

Portsmouth

• Nelson‟s fleet, while composed of fewer vessels

achieved victory

• Technology advantage

The importance of technology


Slide 5.25

Product technology advantages

• Pfizer‟s Sildenfil – aka Viagra:

The fastest selling human drug

• Gore Associates‟ Gore-Tex:

the versatile polymer polytetrafluoroethylene (PTFE)

• Dyson‟s vacuum cleaner:

Revolutionised a very stable mature industry

Technology as an asset


Slide 5.26

Process technologies

• Enterprise Resource Planning (ERP) business software

• Virtually all large firms have installed it

• SAP, Oracle, Baan and PeopleSoft

• SAP has over 20,000 products installed worldwide

and Oracle has installed databases in nearly every

one of the world‟s top 500 companies

• Moreover, it has changed the way they work

(Gartner, 2002).

Technology as an asset (Continued)


Slide 5.27

The resource based view of the firm (RBV) is an

influential theoretical framework for understanding how

competitive advantage within firms is achieved and how

that might be sustained over time.

Penrose (1959)

Wernerfelt (1984)

Prahalad and Hamel (1990)

Barney (1991)

Nelson (1991)

Teece, Pisano and Schuen (1997)

Winter (2003)

Ray, Barney & Muhanna (2004).

The resource-based view of the firm (RBV)


Slide 5.28

RBV focuses on the internal activities of the firm

and so complements the traditional emphasis on structure

and positioning.

It assumes:

• that firms can be conceptualised as bundles of resources;

• that these resources are variously and differently distributed;

• resource differences persist over time.

Certain resources that are:

Valuable

Rare

Inimitable

Non-substitutable

VRIN attributes

The resource-based view of the

firm (RBV) (Continued)


Slide 5.29

Prahalad and Hamel

In 1990 Prahalad and Hamel changed the

direction of strategic thinking when they

published their now classic article

“The Core Competency of the Corporation”


Slide 5.30

Prahalad and Hamel

Recommended that the organisation

Outsource all but its key functions to keep costs

down

Figure out its real core competencies

Forget about SBUs and concentrate on

competencies that are shared across the total

corporation

Focus on core products developed from that

competency.


Slide 5.31

Core Competency: Examples

Sony's core competency was miniaturisation and this leads to core mobile products such as Walkman and Discman.

Honda's core competency is engine expertise leading to core products (engines) in fields as diverse as cars to motorcycles to outboard motors on boats to water scooters to generators.

3M's core competency is practical innovation leading to products such as Post-It or Scotch tape


Slide 5.32

The Resource Based View (RBV)

Since Prahalad and Hamel‟s article was published, many

researchers and theorists have developed the concept by:

elaborating on its meaning and significance

developing techniques for identifying and

measuring core competencies in corporations


Slide 5.33

Perspectives on Competitive

Strategy1980s View 1990s View

External Unit of

Analysis

Industry Market Segment

Customer-Firm

Relationship

Win-lose battle among

rivals and between

firms and customers

Win-win and creation of

superior customer value

Key Strategy

Challenge

Industry-Firm Fit Organisational learning

to develop key resources

and competencies

Management’s

Main Task

Industry Concentration

and Market Power

Delivering Superior Value

to the Customer

Main Profit

Influencers

Industry concentration

and market-power

Delivering Superior

Customer Value

Ideal Outcome Monopoly Position Superior Financial

Performance

Achieved by Barriers to Entry Distinctive Competencies

causally ambiguous

resources

Source: O’Keeffe, Mavondo and Schroder, c. 2000


Slide 5.34

RBV and Core Competencies

A key feature of the RBV is the search for core competencies or distinctive competencies within a corporation

Competition is as much a race for competency mastery as it is a race for market dominance and market share

Core competencies represent a fundamental departure from the positioning school in that they are:

Internal

Controllable


Slide 5.35

RBV Framework


Slide 5.36

The Resource Based View (RBV)

Market Based Resources include:

Culture (e.g. market orientation, research orientation, culture of innovation)

Assets (e.g.brands, Mktg IS, databases, etc)

Capabilities (e.g. research, relationships, know-how etc)

The key is to transform these resources into core competencies which form the foundation of superior competitive position.


Slide 5.37

The Core Competency

Concept; Some Definitions


Slide 5.38

Core Competencies Vs Strengths

Understanding core competencies makes

intuitive sense

However, the real significance of the concept

can be difficult to grasp

The following series of slides present

different perspectives on the concept and its

relevance for contemporary business practice


Slide 5.39

Core Competencies: Some Definitions


Slide 5.40


What the theorists say

“Few companies are likely to build world leadership in more than five or six fundamental core competencies.”

“Core competence does not diminish with use. Unlike physical assets, which do deteriorate over time, competencies are enhanced as they are applied and shared. But, competencies still need to be nurtured and protected.” p. 84

C.K. Prahalad and Gary Hamel, 1990


Slide 5.41


What the practitioners say


Slide 5.42



“ Firms can embody core competencies or capabilities in many different ways, ranging from logistics, to distribution, to trade partner relationships to branding. Given that resources are usually limited, firms have at the most five or six core competencies.”

“Whatever they are, a set of core competencies needs to create a uniquely bundled system.”

Nancy Tennant Snyder, Corporate VP of Core Competencies and Leadership Development, Whirlpool Corporation, quoted in Snyder and Tennant, 2003, p. 7


Slide 5.43



“Core competencies is an issue that seems to make a lot of conceptual sense. But true core competencies are hard to define precisely … Core competencies are exaggerated by some managers and underestimated by others. Some think everything they do is a core competency. Other companies really don't understand what particular competencies make them successful in a marketplace. The reason is that competencies are sometimes so ingrained they're unapparent.”

Dan Simpson, Director of Strategy and Planning, The Clorox Company


Slide 5.44

The Identification Problem

A key task for management is to identify which skills

and assets should be nurtured as core competencies

Prahalad and Hamel (1990) point out that sustaining

core competencies is critical to creating sustainable

value

Yet many companies have reported real difficulties

identifying which competencies are core


Slide 5.45

Core Competencies Vs Strengths

Identifying core competencies is not just a

matter of taking an inventory of skills and assets

A company can have many strengths but few

will qualify as core competencies.

So how can companies identify their core

competencies?


Slide 5.46

Core Competencies

At least three tests can be applied [to internal strengths] to identify core competencies:

1. Provides access to a wide variety of markets

2. Significant contribution to perceived customer benefits

3. Difficult for competitors to imitate

(Prahalad & Hamel, 1990, pp 83-83)


Slide 5.47

Access to Broad Markets

A core competency must exist in more than one or

two businesses

For example, if innovation is a core competency, then

it must permeate all products and businesses for it to

be considered a core competency

If a competency exists in only one department or one

product, then it is not a core competency

(3M case study)


Slide 5.48

Access to Broad Markets

(Example)

Black & Decker‟s core competency in producing 200- 600 watt motors enabled it to enter a variety of markets

Home Workshop Market

Drills, saws, sanders, polishers and rotary tools

Domestic Cleaning & Maintenance Market

Dust busters

Kitchen Appliance Market

Blenders, toasters, can openers etc


Slide 5.49

Significant Contribution to Customer Benefits

A core competency must make a significant

contribution to perceived customer benefits

If customers do not see the value from your

competencies, then it cannot be considered core


Slide 5.50

Significant Contribution to Customer Benefits

(Example)

For example, The Coca Cola company invested

millions in developing an improved water

purification system with significant cost savings

Customers could not taste the difference. While

the purification system may have been something

CC did very well, it was not a core competency


Slide 5.51

Difficult for Competitors to Imitate

Core competencies should be:

“Competitively unique”

Something that competitors wish they had, but would find difficult to acquire in the short term

Able to confer significant differentiation

A competence which is central to business activities, but which is not exceptional, should not be considered a core competency.


Slide 5.52

Difficult to Imitate (Example)

Dell Computers has several core competencies which provide significant differentiation in the PC market:

Online customisation of computer built

Minimisation of capital in the production process

Manufacturing and distribution quality


Slide 5.53

A Framework for Identifying

Core Competencies

I

Genuine Core

Competencies

II can be outsourced

Supply Chain

Management

III easy to imitate

Accountancy

Legal Services

Support Personnel

IV easy to outsource

Facilities

Security

Catering

High Low

Task Value

High

Low

Task Complexity


Slide 5.54

Distinctions

“It is essential to make the distinction between

core competencies, core products and end

products because global competition is played out

by different rules and for different stakes at each

level.”

Prahalad and Hamel, 1990, p. 85


Slide 5.55

Core Competencies

Core competencies are skills or

assets

Examples

Coca Cola – brand equity (asset)

3M - Innovation (skill)

Sony – Miniaturisation (capability)


Slide 5.56

Core Products

Core products are the physical embodiment of

one or more core competencies

Core products are the components or sub-

assemblies that contribute value to end products

Examples

IBM‟s microprocessor and operating systems

3M‟s adhesives, abrasives and polymers


Slide 5.57

End Products

End products are the finished articles

which are sold to end users or to

distributors

Examples

Honda‟s motors


Slide 5.58

The Tree Analogy

The corporation, like a large tree, grows from its

roots. Core products are nourished by

competencies and engender business units, whose

fruits are end products.

(Prahalad & Hamel, 1990: 81)


Slide 5.59

The Tree Analogy

Competency 1

Competency 2

Competency 3

End Products

Core Products

Based on Prahalad & Hamel, 1990, p. 81


Slide 5.60

Conclusions

The core competency concept provides an

alternative perspective on the issue of

“corporate strengths”

Some theorists have seen this as contributing to

the “fall of strategic planning” and the “demise of

SWOT analysis.” (See for example Mintzberg)

However, more enlightened theorists view the

core competency concept as a more robust

method of evaluating corporate strengths


Slide 5.61

Conclusions

The Resource Based View:

takes account of both customer and competitors in external analysis

less likely to conduct analysis at industry level and more likely to consider market served

includes a mediating element between generic strategy and positional advantage (Positioning Theme)

Is compatible with positioning school (because industry effects account for 10% of profitability while corporate effects account for 50%)


Slide 5.62

Intellectual

assets

Physical

assets

Cultural

assets

Firm‟s capabilities:

Design

Purchasing

Manufacturing

Finance

Distribution

Customer relationships

Firm‟s capabilities


Slide 5.63

We often know more than we can tell . . .

Have you ever tried explaining to someone in words how

to tie a shoelace?

Tacit knowledge


Slide 5.64

Core competencies

Core

products

Business

unitsEnd

productsEnd

products

End

products

Business

units

Core competencies

Source: Reprinted by permission of Harvard Business Review. Adapted from „The Core Competence of the Corporation‟, by G. Hamel and C.K. Prahalad, (1990).

Copyright © 1990 by the Harvard Business School Corporation; all rights reserved


Slide 5.65

Negligible

profitsLong-term

profits

No

profits

Short-term

profits

Imitability

Extent of coreness

Non-core Core

Low

High

Turning technology into profits


Slide 5.66

Rate of

Technological

progress

Amount of effort

Single-processor

computer

Multi-processor

computerSpeed of light

Communication bottlenecks

Technology life cycles and

S-curves: Supercomputer

Technology development effort required?


Slide 5.67

individual

knowledge

shared knowledge

embedded in relationships

Knowledge embedded in relationships


Slide 5.68

Informal and formal discussions

amongst colleagues with

prior knowledge, mutual respect

and credibility, and an awareness of

the needs of the business

Generates new associations

and linkages for the business

that have not been made before

1

Accumulation and retention

of additional knowledge

by the organisation

2

34 The spiral is

continuous

The rejection of ideas and associations

by the organisation does not cause a loss

of knowledge. The knowledge is retained

within the business for other and later uses

as a form of organisational memory.

Internal knowledge accumulation process


Slide 5.69

• Leader/offensive

• Fast follower/defensive

• Cost minimisation/imitative

• Market segmentation specialist/traditional

The degree of innovativeness


Slide 5.70

Product Pioneer(s) Imitator/later entrant(s)

35mm Cameras Leica (1925)

Contrax (1932)

Exacta (1936)

Canon (1934)

Nikon (1946)

Nikon SLR (1959)

CAT Scanners

(Computer Axial

Tomography)

EMI (1972) Pfizer (1974)

Technicare (1975)

GE (1976)

Johnson and Johnson (1978)

Ballpoint pens Reynolds (1945)

Eversharp (1946)

Parker “Jotter” (1954)

Bic (1960)

MRI (Magnetic

Resonance Imaging)

Fonar (1978) Johnson & Johnson‟s Technicare (1981)

General Electric (1982)

Personal Computers MITS Altair 8800 (1975)

Apple II (1977)

Radio Shack (1977)

IBM-PC (1981)

Compaq (1982)

Dell (1984)

Gateway (1985)

VCRs Ampex (1956)

CBS-EVR (1970)

Sony U-matic (1971)

Catrivision (1972)

Sony Betamax (1975)

JVC-VHS (1976)

RCA Selectra Vision (1977) made by

Matsushita

Word-processing

software

Wordstar (1979) WordPerfect (1982)

Microsoft Word (1983)

Throughout the twentieth century „late entrants‟ have been surpassing

pioneers


Slide 5.71

Habits of Innovative Companies

1. Deep understanding of the customer and

market needs:

Engage with customers;

Understand industry trends and competitive

environment;

Big picture perspectives

2. A “Culture” of innovation:

Vision; leadership; Executive support;

Openness to new ideas; supportive/encouraging

of innovation; commercial imperative to innovate;

Flexibility.


Slide 5.72

Habits 2

3. An Open Innovation model: Open collaboration

model and having global partnerships

4. An appropriate funding model for innovation

activities:

Willingness to invest in R&D activities;

Balanced investment in future versus current needs.

5. Ability to execute:

Commitment of resources dedicated to innovation;

Continuous development/improvement processes;

Benchmarking;

Clear goals/deadlines/strategy;

Best practice evolves over time (dynamic); Flexible and

quick to move.


Slide 5.73

6. Human intellect/creativity:

Development of skills;

Knowledge base;

Talented Educated individuals;

Willingness to learn/change.

7. Management of Intellectual Property:

Ability to manage/protect IP that is generated

through the innovation process in a practical

manner.


Slide 5.74

Some definitions of innovation

"Innovation . . . is generally understood as the

successful introduction of a new thing or method

. . . Innovation is the embodiment, combination,

or synthesis of knowledge in original, relevant,

valued new products, processes, or services.

Luecke and Katz (2003)

Innovation typically involves creativity, but is not

identical to it:

innovation involves acting on the creative ideas

to make some specific and tangible difference in

the domain in which the innovation occurs.

http://en.wikipedia.org/wiki/Creativity


Slide 5.75

Definitions 2

"All innovation begins with creative ideas. It is the

successful implementation of creative ideas

within an organization.

Creativity by individuals and teams is a starting

point for innovation; the first is necessary but not

sufficient condition for the second".

For innovation to occur, something more than the

generation of a creative idea or insight is

required: the insight must be put into action to

make a genuine difference, resulting for example

in new or altered business processes within the

organization, or changes in the products and

services provided.

activity.


Slide 5.76

Definitions 3

Creative insights leading to significant

organizational improvements in terms of

improved or new business products, services, or

internal processes.

Creativity is typically seen as the basis for

innovation, and innovation as the successful

implementation of creative ideas within an

organization.

lecture 3 organisational knowledge

Documents

innovation management

new product development

pearson education limited

patent system paul trott

protected intellectual

intellectual propertychapters

cocacola executives

profit value