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Course Learning Outcomes-Covered
➢ Recognize the dynamics and the importance of managing technological innovation
strategically. (LO 1)
Reference Source:
Textbook:Schilling M.A (2020),Strategic Management of Technology Innovation (6th Edition). McGraw Hill Education. Electronic Version: ISBN-13: 978-1260087956 ISBN-10:
1260087956, Printed Version: ISBN-13: 978-1260087956 ISBN-10: 1260087956
Weight: 10 Marks
Students are required to refer to chapter 1 ‘Introduction’ of their textbook.
Clear understanding of the chapter along with continuous critical analyzation of each
topic and subtopic is highly recommended.
Based on the knowledge and information gathered by referring to the textbook and the
students own thorough research write a detailed report on “Analyzing the Impact of
Technological Innovation in KSA”
In a detailed report of 1500-2000 words, critically analyse the role of technological
innovation in the socio-economic development of the Kingdom of Saudi Arabia. Your report
should focus on how technological advancements have influenced various sectors such as
energy, education, healthcare, and urban development in KSA. Additionally, evaluate the
potential future impacts of technology on Saudi society, considering both opportunities and
challenges.
Guidelines:
Introduction (1 marks):
✓ Briefly introduce the concept of technological innovation.
✓ Highlight its importance in the global context and its relevance to KSA.
Historical Context (2 marks):
✓ Provide an overview of KSA’s technological landscape before the initiation of Vision
2030.
✓ Discuss the government’s initiatives to promote technological innovation as part of
Vision 2030.
Impact (3 marks):
✓ Economic Development: Discuss how technological innovations have contributed to
diversifying the economy beyond oil, focusing on sectors like renewable energy,
tourism, and digital infrastructure.
✓ Societal Impact: Analyse the effects of technological advancements on education,
healthcare, and urban living in KSA. Include examples of significant technological
projects or initiatives.
Challenges and Opportunities (2 marks):
✓ Identify and discuss the challenges KSA faces in implementing technological
innovations, such as resource allocation, skill gaps, and cultural resistance.
✓ Highlight the opportunities that technological advancements present for KSA’s future,
including job creation, international collaboration, and sustainable development.
Conclusion and Recommendations (1 mark):
✓ Summarize your findings and propose recommendations for KSA to maximize the
benefits of technological innovation while mitigating potential drawbacks.
References (1 Mark)
✓ Cite at least five reputable sources to support your arguments and claims.
✓ Use proper citation formatting.
Directions:
✓ All students are encouraged to use their own words.
✓ The assignment should be approximately 1500-2000 words in length.
✓ Use Saudi Electronic University academic writing standards and APA style
guidelines.
✓ Use proper referencing (APA style) to reference, other styles will not be accepted.
✓ Support your submission with course material concepts, principles, and theories from
the textbook and at least two scholarly, peer-reviewed journal articles unless the
assignment calls for more.
✓ It is strongly encouraged that you submit all assignments into the safe assignment
Originality Check prior to submitting it to your instructor for grading and review the
grading rubric to understand how you will be graded for this assignment.
Strategic
Management of
Technological
Innovation
Strategic
Management of
Technological
Innovation
Sixth Edition
Melissa A. Schilling
New York University
First Pages
STRATEGIC MANAGEMENT OF TECHNOLOGICAL INNOVATION
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2020 by McGraw-Hill
Education. All rights reserved. Printed in the United States of America. No part of this publication may be reproduced or
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ISBN 978-1-260-56579-9
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sch65793_fm_ise.indd iv
12/04/18 11:25 AM
About the Author
Melissa A. Schilling, Ph.D.
Melissa Schilling is the John Herzog family professor of management and organizations at New York University’s Stern School of Business. Professor Schilling teaches
courses in strategic management, corporate strategy and technology, and innovation management. Before joining NYU, she was an Assistant Professor at Boston
University (1997–2001), and has also served as a Visiting Professor at INSEAD
and the Bren School of Environmental Science & Management at the University of
California at Santa Barbara. She has also taught strategy and innovation courses at
Siemens Corporation, IBM, the Kauffman Foundation Entrepreneurship Fellows
program, Sogang University in Korea, and the Alta Scuola Polytecnica, a joint institution of Politecnico di Milano and Politecnico di Torino.
Professor Schilling’s research focuses on technological innovation and knowledge creation. She has studied how technology shocks influence collaboration activity and innovation outcomes, how firms fight technology standards battles, and how
firms utilize collaboration, protection, and timing of entry strategies. She also studies how product designs and organizational structures migrate toward or away from
modularity. Her most recent work focuses on knowledge creation, including how
breadth of knowledge and search influences insight and learning, and how the structure of knowledge networks influences their overall capacity for knowledge creation.
Her research in innovation and strategy has appeared in the leading academic journals
such as Academy of Management Journal, Academy of Management Review, Management Science, Organization Science, Strategic Management Journal, and Journal
of Economics and Management Strategy and Research Policy. She also sits on the editorial review boards of Academy of Management Journal, Academy of Management
Discoveries, Organization Science, Strategy Science, and Strategic Organization.
She is the author of Quirky: The Remarkable Story of the Traits, Foibles, and Genius
of Breakthrough Innovators Who Changed the World, and she is coauthor of Strategic
Management: An Integrated Approach. Professor Schilling won an NSF CAREER
award in 2003, and Boston University’s Broderick Prize for research in 2000.
v
Preface
Innovation is a beautiful thing. It is a force with both aesthetic and pragmatic appeal:
It unleashes our creative spirit, opening our minds to hitherto undreamed of possibilities, while accelerating economic growth and providing advances in such crucial human
endeavors as medicine, agriculture, and education. For industrial organizations, the primary engines of innovation in the Western world, innovation provides both exceptional
opportunities and steep challenges. While innovation is a powerful means of competitive
differentiation, enabling firms to penetrate new markets and achieve higher margins, it is
also a competitive race that must be run with speed, skill, and precision. It is not enough
for a firm to be innovative—to be successful it must innovate better than its competitors.
As scholars and managers have raced to better understand innovation, a wide range
of work on the topic has emerged and flourished in disciplines such as strategic management, organization theory, economics, marketing, engineering, and sociology.
This work has generated many insights about how innovation affects the competitive
dynamics of markets, how firms can strategically manage innovation, and how firms
can implement their innovation strategies to maximize their likelihood of success. A
great benefit of the dispersion of this literature across such diverse domains of study
is that many innovation topics have been examined from different angles. However,
this diversity also can pose integration challenges to both instructors and students.
This book seeks to integrate this wide body of work into a single coherent strategic
framework, attempting to provide coverage that is rigorous, inclusive, and accessible.
Organization of the Book
The subject of innovation management is approached here as a strategic process. The
outline of the book is designed to mirror the strategic management process used in
most strategy textbooks, progressing from assessing the competitive dynamics of the
situation, to strategy formulation, and then to strategy implementation. The first part
of the book covers the foundations and implications of the dynamics of innovation,
helping managers and future managers better interpret their technological environments and identify meaningful trends. The second part of the book begins the process of crafting the firm’s strategic direction and formulating its innovation strategy,
including project selection, collaboration strategies, and strategies for protecting the
firm’s property rights. The third part of the book covers the process of implementing
innovation, including the implications of organization structure on innovation, the
management of new product development processes, the construction and management of new product development teams, and crafting the firm’s deployment strategy. While the book emphasizes practical applications and examples, it also provides
systematic coverage of the existing research and footnotes to guide further reading.
Complete Coverage for Both Business
and Engineering Students
vi
This book is designed to be a primary text for courses in the strategic management of
innovation and new product development. Such courses are frequently taught in both
Preface vii
business and engineering programs; thus, this book has been written with the needs
of business and engineering students in mind. For example, Chapter Six (Defining the
Organization’s Strategic Direction) provides basic strategic analysis tools with which
business students may already be familiar, but which may be unfamiliar to engineering students. Similarly, some of the material in Chapter Eleven (Managing the New
Product Development Process) on computer-aided design or quality function deployment may be review material for information system students or engineering students,
while being new to management students. Though the chapters are designed to have
an intuitive order to them, they are also designed to be self-standing so instructors can
pick and choose from them “buffet style” if they prefer.
New for the Sixth Edition
This sixth edition of the text has been comprehensively revised to ensure that the
frameworks and tools are rigorous and comprehensive, the examples are fresh and
exciting, and the figures and cases represent the most current information available.
Some changes of particular note include:
Six New Short Cases
The Rise of “Clean Meat”. The new opening case for Chapter Two is about the
development of “clean meat”—meat grown from animal cells without the animal
itself. Traditional meat production methods are extremely resource intensive and
produce large amounts of greenhouse gases. Further, the growing demand for meat
indicated an impending “meat crisis” whereby not enough meat could be produced
to meet demand. “Clean meat” promised to enable meat production using a tiny
fraction of the energy, water, and land used for traditional meat production. Its
production would create negligible greenhouse gases, and the meat itself would
have no antibiotics or steroids, alleviating some of the health concerns of traditional meat consumption. Furthermore, it would dramatically reduce animal suffering. If successful, it would be one of the largest breakthroughs ever achieved in
food production.
Innovating in India: The Chotukool Project. Chapter Three opens with a case about
the Chotukool, a small, inexpensive, and portable refrigerator developed in India. In
rural India, as many as 90 percent of families could not afford household appliances,
did not have reliable access to electricity, and had no means of refrigeration. Godrej
and Boyce believed that finding a way to provide refrigeration to this segment of the
population offered the promise of both a huge market and making a meaningful difference in people’s quality of life.
UberAIR. Chapter Five now opens with a case about UberAIR, Uber’s new service
to provide air transport on demand. Uber had already become synonymous with
on-demand car transport in most of the Western world; it now believed it could
develop the same service for air transport using electric vertical take-off and landing
aircraft (eVTOLs). There were a lot of pieces to this puzzle, however. In addition to
the technology of the aircraft, the service would require an extensive network of landing pads, specially trained pilots (at least until autonomous eVTOLs became practical), and dramatically new air traffic control regulations and infrastructure. Was the
time ripe for on-demand air transport, or was UberAIR ahead of its time?
viii Preface
Tesla Inc. in 2018. Chapter Six opens with a new case on Tesla, no longer just an
electric vehicle company. This case reviews the rise of Tesla, and then explores the
new businesses Tesla has entered, including solar panel leasing and installation (Solar
City), solar roof production, and energy storage systems (e.g., Powerwall). Why did
the company move into these businesses, and would synergies betweeen them help to
make the company more successful?
Where Should We Focus Our Innovation Efforts? An Exercise. Chapter Seven now
opens with an exercise that shows how firms can tease apart the dimensions of value
driving technological progress in an industry, map the marginal returns to further
investment on each dimension, and prioritize their innovation efforts. Using numerous
examples, the exercise helps managers realize where the breakthrough opportunities
of the future are likely to be, and where the firm may be currently overspending.
Scrums, Sprints, and Burnouts: Agile Development at Cisco Systems. Chapter Eleven
opens with a case about Cisco’s adoption of the agile development method now commonly used in software development. The case explains what agile development is,
how it differs from other development methods (such as stage-gated methods), and
when (and why) a firm would choose agile development versus gated development for
a particular innovation.
Cases, Data, and Examples from around the World
Careful attention has been paid to ensure that the text is global in its scope. The
opening cases and examples feature companies from China, India, Israel, Japan, The
Netherlands, Kenya, the United States, and more. Wherever possible, statistics used in
the text are based on worldwide data.
More Comprehensive Coverage and Focus on Current Innovation Trends
In response to reviewer suggestions, the new edition now provides an extensive
discussion of modularity and platform competition, crowdsourcing and customer
co-creation, agile development strategies, and more. The suggested readings for each
chapter have also been updated to identify some of the more recent publications that
have gained widespread attention in the topic area of each chapter. Despite these additions, great effort has also been put into ensuring the book remains concise—a feature
that has proven popular with both instructors and students.
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Acknowledgments
This book arose out of my research and teaching on technological innovation and
new product development over the last decade; however, it has been anything but a
lone endeavor. I owe much of the original inspiration of the book to Charles Hill, who
helped to ignite my initial interest in innovation, guided me in my research agenda,
and ultimately encouraged me to write this book. I am also very grateful to colleagues
and friends such as Rajshree Agarwal, Juan Alcacer, Rick Alden, William Baumol,
Bruno Braga, Gino Cattanni, Tom Davis, Sinziana Dorobantu, Gary Dushnitsky,
Douglas Fulop, Raghu Garud, Deepak Hegde, Hla Lifshitz, Tammy Madsen, Rodolfo
Martinez, Goncalo Pacheco D’Almeida, Joost Rietveld, Paul Shapiro, Jaspal Singh,
Deepak Somaya, Bill Starbuck, Christopher Tucci, and Andy Zynga for their suggestions, insights, and encouragement. I am grateful to director Mike Ablassmeir and
marketing manager Lisa Granger. I am also thankful to my editors, Laura Hurst Spell
and Diana Murphy, who have been so supportive and made this book possible, and to
the many reviewers whose suggestions have dramatically improved the book:
Joan Adams
Baruch Business School
(City University of New York)
Shahzad Ansari
Erasmus University
Deborah Dougherty
Rutgers University
Cathy A. Enz
Cornell University
Rajaram B. Baliga
Wake Forest University
Robert Finklestein
University of Maryland–University
College
Sandy Becker
Rutgers Business School
Sandra Finklestein
Clarkson University School of Business
David Berkowitz
University of Alabama in Huntsville
Jeffrey L. Furman
Boston University
John Bers
Vanderbilt University
Cheryl Gaimon
Georgia Institute of Technology
Paul Bierly
James Madison University
Elie Geisler
Illinois Institute of Technology
Paul Cheney
University of Central Florida
Sanjay Goel
University of Minnesota in Duluth
Pete Dailey
Marshall University
Andrew Hargadon
University of California, Davis
Robert DeFillippi
Suffolk University
Steven Harper
James Madison University
xi
xii Acknowledgments
Donald E. Hatfield
Virginia Polytechnic Institute and State
University
Glenn Hoetker
University of Illinois
Sanjay Jain
University of Wisconsin–Madison
Theodore Khoury
Oregon State University
Rajiv Kohli
College of William and Mary
Aija Leiponen
Cornell University
Vince Lutheran
University of North
Carolina—Wilmington
Steve Markham
North Carolina State University
Steven C. Michael
University of Illinois
Michael Mino
Clemson University
Robert Nash
Vanderbilt University
Anthony Paoni
Northwestern University
Johannes M. Pennings
University of Pennsylvania
Raja Roy
Tulane University
Mukesh Srivastava
University of Mary Washington
Linda F. Tegarden
Virginia Tech
Oya Tukel
Cleveland State University
Anthony Warren
The Pennsylvania State University
I am also very grateful to the many students of the Technological Innovation and
New Product Development courses I have taught at New York University, INSEAD,
Boston University, and University of California at Santa Barbara. Not only did these
students read, challenge, and help improve many earlier drafts of the work, but they
also contributed numerous examples that have made the text far richer than it would
have otherwise been. I thank them wholeheartedly for their patience and generosity.
Melissa A. Schilling
Brief Contents
Preface vi
1
Introduction 1
PART ONE
Industry Dynamics of Technological Innovation 13
2
Sources of Innovation 15
3
Types and Patterns of Innovation 43
4
Standards Battles, Modularity, and Platform Competition 67
5
Timing of Entry 95
PART TWO
Formulating Technological Innovation Strategy 113
6
Defining the Organization’s Strategic Direction 115
7
Choosing Innovation Projects 141
8
Collaboration Strategies 167
9
Protecting Innovation 197
PART THREE
Implementing Technological Innovation Strategy 223
10
Organizing for Innovation 225
11
Managing the New Product Development Process 249
12
Managing New Product Development Teams 277
13
Crafting a Deployment Strategy 297
INDEX 327
xiii
Contents
Chapter 1
Introduction 1
The Importance of Technological
Innovation 1
The Impact of Technological Innovation
on Society 2
Innovation by Industry: The Importance of
Strategy 4
The Innovation Funnel 4
The Strategic Management of Technological
Innovation 6
Summary of Chapter 9
Discussion Questions 10
Suggested Further Reading 10
Endnotes 10
PART ONE
INDUSTRY DYNAMICS
OF TECHNOLOGICAL
INNOVATION 13
Chapter 2
Sources of Innovation 15
The Rise of “Clean Meat” 15
Overview 19
Creativity 20
Individual Creativity 20
Organizational Creativity 22
Translating Creativity Into Innovation 24
The Inventor 24
Innovation by Users 26
Research and Development by Firms 27
Firm Linkages with Customers, Suppliers,
Competitors, and Complementors 28
xiv
Universities and Government-Funded
Research 30
Private Nonprofit Organizations 32
Innovation in Collaborative Networks 32
Technology Clusters 33
Technological Spillovers 36
Summary of Chapter 37
Discussion Questions 38
Suggested Further Reading 38
Endnotes 39
Chapter 3
Types and Patterns of Innovation 43
Innovating in India: The Chotukool Project 43
Overview 46
Types of Innovation 46
Product Innovation versus Process
Innovation 46
Radical Innovation versus Incremental
Innovation 47
Competence-Enhancing Innovation versus
Competence-Destroying Innovation 48
Architectural Innovation versus Component
Innovation 49
Using the Dimensions 50
Technology S-Curves 50
S-Curves in Technological Improvement 50
S-Curves in Technology Diffusion 53
S-Curves as a Prescriptive Tool 54
Limitations of S-Curve Model as a Prescriptive
Tool 55
Technology Cycles 56
Summary of Chapter 62
Discussion Questions 63
Suggested Further Reading 63
Endnotes 64
Contents xv
Chapter 4
Standards Battles, Modularity,
and Platform Competition 67
A Battle for Dominance in Mobile
Payments 67
Overview 71
Why Dominant Designs Are Selected 71
Learning Effects 72
Network Externalities 73
Government Regulation 76
The Result: Winner-Take-All Markets 76
Multiple Dimensions of Value 77
A Technology’s Stand-Alone Value 78
Network Externality Value 78
Competing for Design Dominance
in Markets with Network Externalities 83
Modularity and Platform Competition 87
Modularity 87
Platform Ecosystems 89
Summary of Chapter 91
Discussion Questions 92
Suggested Further Reading 92
Endnotes 93
Chapter 5
Timing of Entry 95
UberAIR 95
Overview 98
First-Mover Advantages 98
Brand Loyalty and Technological
Leadership 98
Preemption of Scarce Assets 99
Exploiting Buyer Switching Costs 99
Reaping Increasing Returns Advantages 100
First-Mover Disadvantages 100
Research and Development Expenses 101
Undeveloped Supply and Distribution
Channels 101
Immature Enabling Technologies and
Complements 101
Uncertainty of Customer Requirements 102
Factors Influencing Optimal Timing of
Entry 104
Strategies to Improve Timing Options 108
Summary of Chapter 108
Discussion Questions 109
Suggested Further Reading 109
Endnotes 110
PART TWO
FORMULATING TECHNOLOGICAL
INNOVATION STRATEGY 113
Chapter 6
Defining the Organization’s Strategic
Direction 115
Tesla, Inc. in 2018 115
Overview 123
Assessing the Firm’s Current
Position 123
External Analysis 123
Internal Analysis 127
Identifying Core Competencies and Dynamic
Capabilities 131
Core Competencies 131
The Risk of Core Rigidities 132
Dynamic Capabilities 133
Strategic Intent 133
Summary of Chapter 137
Discussion Questions 138
Suggested Further Reading 139
Endnotes 139
Chapter 7
Choosing Innovation Projects 141
Where Should We Focus Our Innovation
Efforts? An Exercise 141
Overview 146
The Development Budget 146
Quantitative Methods For Choosing
Projects 149
Discounted Cash Flow Methods 149
Real Options 152
Disadvantages of Quantitative
Methods 154
xvi Contents
Qualitative Methods for Choosing
Projects 154
Screening Questions 155
The Aggregate Project Planning Framework 157
Q-Sort 159
Combining Quantitative and Qualitative
Information 159
Conjoint Analysis 159
Data Envelopment Analysis 161
Summary of Chapter 163
Discussion Questions 163
Suggested Further Reading 164
Endnotes 164
Chapter 8
Collaboration Strategies 167
Ending HIV? Sangamo Therapeutics and Gene
Editing 167
Overview 175
Reasons for Going Solo 175
1. Availability of Capabilities 176
2. Protecting Proprietary Technologies 176
3. Controlling Technology Development
and Use 176
4. Building and Renewing Capabilities 177
Advantages of Collaborating 177
1. Acquiring Capabilities and Resources
Quickly 177
2. Increasing Flexibility 178
3. Learning from Partners 178
4. Resource and Risk Pooling 178
5. Building a Coalition around a Shared
Standard 178
Types of Collaborative Arrangements 178
Strategic Alliances 179
Joint Ventures 181
Licensing 182
Outsourcing 183
Collective Research Organizations 184
Choosing a Mode of Collaboration 184
Choosing and Monitoring Partners 187
Partner Selection 187
Partner Monitoring and Governance 191
Summary of Chapter 192
Discussion Questions 193
Suggested Further Reading 193
Endnotes 194
Chapter 9
Protecting Innovation 197
The Digital Music Distribution
Revolution 197
Overview 201
Appropriability 202
Patents, Trademarks, and Copyrights 202
Patents 203
Trademarks and Service Marks 207
Copyright 208
Trade Secrets 210
The Effectiveness and Use of Protection
Mechanisms 211
Wholly Proprietary Systems versus Wholly Open
Systems 212
Advantages of Protection 213
Advantages of Diffusion 215
Summary of Chapter 218
Discussion Questions 219
Suggested Further Reading 219
Endnotes 220
PART THREE
IMPLEMENTING TECHNOLOGICAL
INNOVATION STRATEGY 223
Chapter 10
Organizing for Innovation 225
Organizing for Innovation at Google 225
Overview 227
Size and Structural Dimensions of the
Firm 228
Size: Is Bigger Better? 228
Structural Dimensions of the Firm 230
Centralization 230
Formalization and Standardization 231
Mechanistic versus Organic Structures 232
Size versus Structure 234
The Ambidextrous Organization: The Best of Both
Worlds? 234
Contents xvii
Modularity and “Loosely Coupled”
Organizations 236
Modular Products 236
Loosely Coupled Organizational
Structures 237
Managing Innovation Across Borders 240
Summary of Chapter 243
Discussion Questions 244
Suggested Further Reading 244
Endnotes 245
Chapter 11
Managing the New Product Development
Process 249
Scrums, Sprints, and Burnouts: Agile
Development at Cisco Systems 249
Overview 252
Objectives of the New Product Development
Process 252
Maximizing Fit with Customer
Requirements 252
Minimizing Development Cycle Time 253
Controlling Development Costs 254
Sequential versus Partly Parallel
Development Processes 254
Project Champions 257
Risks of Championing 257
Involving Customers and Suppliers in the
Development Process 259
Involving Customers 259
Involving Suppliers 260
Crowdsourcing 260
Tools for Improving the New Product
Development Process 262
Stage-Gate Processes 262
Quality Function Deployment (QFD)—The House
of Quality 265
Design for Manufacturing 267
Failure Modes and Effects Analysis 267
Computer-Aided Design/Computer-Aided
Engineering/Computer-Aided Manufacturing 268
Tools for Measuring New Product Development
Performance 269
New Product Development Process Metrics 271
Overall Innovation Performance 271
Summary of Chapter 271
Discussion Questions 272
Suggested Further Reading 272
Endnotes 273
Chapter 12
Managing New Product Development
Teams 277
Innovation Teams at the Walt Disney
Company 277
Overview 279
Constructing New Product Development
Teams 280
Team Size 280
Team Composition 280
The Structure of New Product Development
Teams 285
Functional Teams 285
Lightweight Teams 286
Heavyweight Teams 286
Autonomous Teams 286
The Management of New
