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Innovation Strategy (AEM 437) Prof. Aija Leiponen Applied Economics and Management This course for juniors and seniors explores firm strategies related to innovation and technological change. We focus on how the success of technological innovations—new products, processes, and services—depends on the firm’s business model. Other key topics include intellectual property rights and the management of technological uncertainty through organizational arrangements such as corporate venturing, spinoffs, and alliances.
Technological change is a fundamental driver of economic development and performance, not only at the level of firms and industries but also economies. Innovation is the organizational process through which new technologies are created. In this course we begin by exploring technological dynamics in economies and industries. Next, we examine the processes of innovation in firms. In particular, we focus on how successful commercialization of new technologies—products, processes, and services—depends on organizational arrangements.
Without a good fit between a new technology and the business model in which it is embedded, the innovation is likely to fail in the markets. An overarching theme of the course is the management of technological uncertainty. We explore organizational arrangements intended to mitigate the effects of uncertainty: alliances, spinoffs, corporate venture programs, and the like. Effective management of intellectual property is a requisite for success with these arrangements.
An important element of the course is the final project, where students work in teams to study and analyze innovation activities in local high technology startup firms, in collaboration with the top managers or entrepreneurs in these organizations. In the first half of the semester, we build a conceptual framework for these case studies, and in the second half of the semester, we execute the projects. These projects take several weeks to complete and require very high professional standards and conduct.
The objective of the course is for students to understand how technological change shapes economies and industries and to develop an ability to design business models that can successfully take advantage of innovation opportunities. These are essential skills for students who are interested in careers in general management, consulting, R management, and/or public policy. The course topics are introduced through lectures and video material, student presentations, and visits by industry guest speakers. Readings Students will need the following materials:
Course packet, available from the campus store, and also on reserve in Mann Library. Melissa A. Schilling: Strategic Management of Technological Innovation, McGrawHill, 2006 (2. edition). Henry W. Chesbrough: Open Innovation: The New Imperative for Creating and Profiting from Technology; Boston MA: Harvard Business School Press, 2003. Newspaper and business magazine articles will supplement the readings. Links to many of these readings will be available on the course website on Blackboard (click through http://blackboard. cornell. edu/).
We will use the internet extensively for communicating during the semester. Enroll as a user on the course website as soon as possible to make sure you will have access to all the requisite postings and materials. Class time: Tuesdays, Thursdays 1:25-2:40 p. m. in 201 Warren Hall. Instructor: Prof. Aija Leiponen, e-mail aija. leiponen@cornell. edu. Office hours: TR 3-4pm in WN 251, or by appointment. Teaching assistant: Frank Pena, e-mail ffp3@cornell. edu. Office hours: By appointment in WN 47. Administrative assistant: Nancy Trencansky, njt1@cornell. edu, WN 102 Syllabus INTRODUCTION 1.
Introduction to innovation and technology (Jan 22) • E-clips: James Jorasch (Walker Digital), Elizabeth Ryan (Breeze Hill Orchards), Kevin McGovern (McGovern and Associates; SoBe Beverage Company), Bill Lloyd (Kodak) 2. Technological change and economic growth: Innovation, human capital and economic performance. Technology and development. (Jan 24) • Readings: Schilling Ch 1: Introduction • Video: Great Inventions 3. Institutions and incentives: Systems of Innovation (Jan 29) • Schilling Ch 2: Sources of innovation • Porter and Stern: Location Matters, Sloan Management Review, 2001 (on line) Farhoomand: National Innovation Systems of China and the Asian Newly Industrialized Economies: A Comparative Analysis. Asia Case Research Centre, University of Hong Kong, HKU392. Handed out in class. INNOVATION AND FIRM CREATION 4. Creativity (Jan 31, Feb 5) • Video: Deep dive/IDEO Inc (Jan 31) • Creativity exercise in TEAMS (Jan 31) • Schilling Ch 12 (Jan 31) • E-clips: Howard Morgan (IdeaLab), Jaime Jorasch (Walker Digital) • Amabile: How to Kill Creativity? Harvard Business Review 1998 (course packet; writeup 1. For Feb 5) • Assignment 1 DL: The greatest technological challenge of our time (DL: Jan 31) . University startup process (Feb 7) • Audia & Rider: A Garage and an Idea: What More Does an Entrepreneur Need? California Management Review 2005 (online) • Scott Shane: Academic Entrepreneurship – University Spinoffs and Wealth Creation, Edward Elgar, Cheltenham, UK, 2004. Ch 10 (course packet). • Case 1: A123Systems, HBS case 9-606-114 (course packet; writeup). 6. Managing the NPD Process; Critical Success Factors (Feb 12) • Schilling Ch 11 • Case 2: Zipcar: Refining the Business Model. HBS case 9-803-096. TEAM 1 leads discussion. • Project guidelines; getting started PRODUCT/INDUSTRY LIFE CYCLE . Types of innovation and the industry life cycle (Feb 14) • Schilling Ch 3 8. University technology licensing and startup firms (Feb 19) • Guest speaker: Dr. Alan Paau, Vice Provost Vice Provost for Technology Transfer & Economic Development, Cornell University; Executive Director, Cornell Center for Technology Enterprise and Commercialization (CCTEC); President, Cornell Research Foundation, Inc. See www. cctec. cornell. edu 9. Innovation cycles and technological discontinuities (Feb 21) • Schilling Ch 4 • Case 3: Kodak (A), HBS case 9-703-503 (course packet; writeup). TEAM 2. 10.
Early stage financing options (Feb 26) • Guest speaker: Cliff Lardin, Cornell Entrepreneur in Residence and Partner, Cayuga Venture Fund (see http://cvf. biz) 11. First mover advantages: (when) do they exist? (Feb 28) • Schilling Ch 5: Timing of Entry • Case 4: BancZero New Product Development, HBS case 9-697-044 (coursepack; writeup). TEAM 3 OPEN INNOVATION BUSINESS MODELS 12. The Closed Innovation Paradigm: Innovation System in Flux (March 4) • Chesbrough Ch 2: The Closed Innovation Paradigm • Assignment 2: Technological life cycles (assess life cycles in the “greatest technological challenge of our time” industry).
TEAM 4. 13. In-class open-book exam I (Mar 6) 14. The Open Innovation model (Mar 11, 13) • Case 5: Chesbrough Ch 1: Xerox PARC (writeup). TEAM 5. • Chesbrough Ch 3: The Open Innovation Paradigm • Chesbrough Ch 4: The Business Model – Connecting Internal and External Innovation • Shafer, Smith & Linder: The Power of Business Models. Business Horizons 48 (2005): 199-207 (online). SPRING BREAK 15. The role of the business model in profiting from technological innovations (Mar 25) • Chesbrough Ch 4: The Business Model – Connecting Internal and External Innovation • Video: Ballard Industries.
Why was the business model so difficult to design? • Case 6: Herman Miller (A): Innovation by Design, HBS Case 9-602-023 (course packet; Assignment 3). TEAM 6 presents. 16. Guest speaker: Jonathan Greene, Acting CEO, Widetronix Inc. (Mar 27) • Case 7: Distributed Generation Technologies (online; writeup). • Introduction to final project firm, industry PRE-SEED WORKSHOP March 28, April 4: Two-day workshop with local inventors and entrepreneurs to get over the key early steps in setting up a high tech company. 17. Protecting open innovations? (Apr 1) • Schilling Ch 9: Protecting Innovation Chesbrough Ch 8: Business Models and Managing Intellectual Property • Case 8: D-Wave Systems HBS Case 9-604-073 (course packet; writeup. TEAM 7). 18. Guest lecture: Paul Carpenter, Director of Standards, Research In Motion, Inc. (Apr 3? ) Take home exam (April 8) 19. Video: Who Killed the Electric Car? (April 8) • Class discussion led by TEAM 8 on April 10 20. Strategic Direction and Choice of Innovation Projects (Apr 10) • Schilling Ch 6-7 • E-clips: Michael Crooke, CEO of Patagonia • Case 9: Patagonia, HBS Case 9-703-035 (course packet; writeup). TEAM 9 leads discussion. 21. Cooperative Strategies (Apr 15) Schilling Ch 8 • E-clips: Golightly (Ford Motor Co. ) • Assignment 4: Cooperative and IPR strategies. TEAM 10 makes a short presentation of current debates in IPR and leads a class discussion. 22. Guest speaker: John Spoonhower, Director of University Alliances, Kodak Inc. Alliance strategies/access to emerging technologies for a major technology company. (Apr 17) • TEAM 11 leads discussion TEAM PROJECTS 23. Review and wrap-up; project updates (Apr 22) • TEAM 12 collects and prepares answers for questions about the final project. • Assignment 5: Personal assessment of learning (by May 3) 24.
Team project presentations (Apr 24-May 1) Grading The course consists of a number of complementary elements: 1. There are 5 assignments to practice the most important concepts and 5 short case write-ups (out of 8 possible cases). 2. Some of the assignments as well as the final project are carried out in teams of 4 students. Students can form the teams themselves or ask to be assigned into one by TA. Teams are formed by the third class session. 3. In midterm exams, emphasis will be on applying the frameworks and concepts discussed in class in strategic decisionmaking situations. Exams are open-book and in-class. 4.
Team project is an empirical case study of a real firm’s innovation activities. You will need to identify the firm and write up a description of its industry by early March, and deliver a max. 20 page final report about one innovation project carried out by this firm, interpreting the project through the conceptual tools learned in class. Final report deadline is 2 pm on May 14. 5. Professionalism is a grade component that consists of class attendance and participation; professional conduct during class discussion; and enthusiastic and high quality contributions to team work (assignments, presentations, and the final project).
Active participation is extremely important in this class to make the experience more rewarding for all. Participation is assessed based on the approximate number of times you contribute voluntarily and meaningfully to the class discussion. You are expected to read and think about the material before each class. Attendance is not formally taken, but attendance and performance tend to be very highly correlated. Classes help forming shared understandings of the material so you are encouraged to attend each and every class. Business professionals are on time, prepared, and interested, articularly in guest lectures; they don’t eat or sleep in meetings or class sessions; they treat others with respect, are able to manage their schedules, and most importantly, they are reliable, communicative, and courteous in the final project process particularly when dealing with industry professionals. There will be 2 team presentations during the semester. These include, first, leading the discussion of a case study, and second, final project presentation. Use these opportunities to practice your future business presentations in front of a friendly audience.
Team contributions are assessed based on peer reviews in the end of the semester. GRADE COMPONENTS 1. Assignments20% 2. Case and guest lecture writeups10% 3. 2 exams30% 4. Team project20% 5. Professionalism20% Total100% IMPORTANT NOTICES: Basic rules about missing a deadline or an exam If you miss an assignment or paper deadline, you can deliver it within three days (72 hours) from the deadline and receive half (50%) of the points. If you are ill or struck by some other serious emergency, you need to notify the instructor before the exam and provide a written doctor’s notice from Gannett health center or equivalent documentation.
Failing to observe these rules can lead to a score of zero (0). Academic Integrity is expected in this course Any work you submit is your own; collaboration is allowed only in Team assignments (see http://www. cornell. edu/UniversityFaculty/docs/main. html). Course packet 1. Farhoomand: National Innovation Systems of China and the Asian Newly Industrialized Economies: A Comparative Analysis. Asia Case Research Centre, University of Hong Kong, HKU392. (To be distributed separately) 2. T. Amabile: How to Kill Creativity?
Harvard Business Review, Sept-Oct, 1998, reprint 98501. 3. A123Systems, HBS Case 9-606-114 4. Scott Shane: Academic Entrepreneurship – University Spinoffs and Wealth Creation, Edward Elgar, Cheltenham, UK, 2004. Ch 10: The process of spinoff development. 5. Zipcar: Refining the Business Model. HBS case 9-803-096 6. Kodak (A), HBS Case 9-703-503 7. Herman Miller (A): Innovation by Design, HBS Case 9-602-023 8. Patagonia, HBS Case 9-703-035 9. BancZero New Product Development, HBS Case 9-697-044 10. D-Wave Systems: Building a Quantum Computer, HBS Case 9-604-073