Cheryl T. Druehl

The optimal pace of product updates

Some firms (such as Intel and Medtronics) use a time–pacing strategy for new product development, introducing new generations at regular intervals. If the firm adopts a fast pace (introducing frequently) then it prematurely cannibalizes its old generation and incurs high development costs, while if it waits too long, it fails to capitalize on customer willingness–to– pay for more advanced technology. We develop a model to gain insight into which factors drive the pace. We consider the degree to which a new generation stimulates market growth, the rate at which it diffuses (its coefficients of innovation and imitation), the rate of decline in its margin over time, and the cost of new product development. The optimization problem is non–concave; however we are able to solve it numerically for a wide range of parameters because there is a finite number of possible solutions for each case. Somewhat intuitively, we find that a faster pace is associated with a higher market growth rate and faster margin decay. Not so intuitively, we find that relatively minor differences in the new product development cost function can significantly impact the optimal pace. Regarding the Bass coefficients of innovation and imitation, we find that a higher sum of these coefficients leads to a faster pace but with diminishing effects, and that for relatively higher sums the coefficients are effectively

Managing Product Rollovers

We study the product rollover strategy decision, where a firm decides whether to phase out an old generation of a product to be replaced by a new with either a dual or single roll. Our model considers a final build of the old product and preannouncement of the new, and incorporates dynamic pricing and inventory decisions. We find that the optimal price path closely follows changes in reservation price curves for the two products over time. We also identify the drivers of the rollover strategy decision, finding that lower market risk (faster diffusion, higher market responsiveness to preannouncements) and higher performance improvement for the new generation are associated with the single roll strategy.

Overcoming barriers to adoption of environmentally-friendly innovations through design and strategy

Purpose – The purpose of this paper is to explore how a company which developed an environmentally friendly innovation attempted to address diffusion issues. Specifically, the purpose is to describe the ways in which an electric vehicle (EV) infrastructure company, in partnership with a major car manufacturer, tried to address barriers to diffusion of an environmentally friendly innovation during the development stage to improve the likelihood of success and lessons learned from its failure. Design/methodology/approach – The authors explore a single instrumental case of an Israeli company that developed infrastructure for EVs in partnership with a major automaker. The authors collected data using a series of semi-structured interviews at the companies’ headquarters, through direct observation in the company, and through the examination of archival and secondary data sources. Findings – The authors find that the company tried to incorporate design features in both the product and organization to address ke...

Introduction to innovation within and across borders: : A review and future directions

Innovation is an integral part of every firms ongoing operations. While new product and service creation is an essential task to ensure a firms immediate success in the marketplace, process and supply chain innovations can also create a unique source of competitive advantage for the future. Encouraging innovative thinking, developing new innovations, and managing the processes by which those innovations are developed are critical aspects of todays firm. Consequently, research which aids in the creation and maintenance of innovative firms is an important topic of inquiry for research communities on innovation management, including the operations management and information systems communities. We review the literature in this important area and offer suggestions for future research on the following topics: innovation within a firm and across the supply chain, technology management, and new product and service development.

Do Participation Strategy and Experience Impact the Likelihood of Winning in Unblind Innovation Contests

Innovation contests are increasingly adopting a format where submissions are viewable by all contestants and the information structure changes during the contest. In such an “unblind�? format, contestants must weigh the costs of revealing their submissions against the benefits of improving their submissions through emerging information. We take a closer look at how contestants solve problems in innovation contests with public submission of solutions—i.e., unblind contests, by examining the implications of their submission behavior for contest outcomes. We analyze the submission behavior in terms of three dimensions: the position of first submission by the contestant, the number of submissions the contestant makes, and the length of active participation by the contestant. The econometric analysis of a large dataset of unblind innovation contests and participating contestants indicates that, despite the potential for free riding and intellectual property loss from disclosure of submissions, contestants who have a lower position of first submission are more likely to succeed in the contest. Further, we find some evidence of a curvilinear relationship between a contestant’s number of submissions and her likelihood of success, indicating a potential “quality-quantity�? tradeoff in unblind innovation contests. Finally, our findings indicate that increasing the length of participation in a contest has a positive effect on a contestant’s likelihood of success. Departing from prior studies on innovation contests, where a contestant’s success is assumed to be a function of her prior experience and problem-solving skills, our study provides new empirical evidence that, in innovation contests with public submissions, the submission behavior of a contestant also plays an explanatory role in a contestant’s success.

Strategic Product/Service Innovations of an Online Firm

We study the incentives that drive an online firm to make various types of innovations in a competitive environment. We develop and use a simplified price competition model between two retailers, one online and one offline. A given fraction of consumers, called the Internet penetration, comparison shop online, independent of their customer type, thereby creating two markets for the offline retailer, a captive market and a competitive market. The online product has the steeper of the two linear utility functions, which means that the customers who buy online in our model are high end. We focus on the competitive region in which both retailers are (strictly) profitable in the competitive market and consider innovations that increase high-end appeal, low-end appeal, and/or reduce unit cost. We find that the online firm has a strong incentive to invest in innovations that either reduce unit cost and/or, equivalently, increase the appeal to all consumers equally. Investments of this type are strategic complements: implementing one increases the value of another, so the value of two innovations of this type is more than the sum of the values of each individually. We identify a relative strength measure of the online firm such that, as its high-end appeal increases and/or its unit cost decreases, we say that the online firm is stronger. This strength measure facilitates drawing an explicit dividing line between strong and weak online firms. If Internet penetration increases, the online firms profits increase if and only if it is strong. If penetration increases over time, it is possible for a strong firm to turn weak and see its profits decrease and possibly disappear completely. A strong online firm has more opportunity to profit from low-end innovations than does a weak one, while the opposite is true for high-end innovations. Interestingly, some innovations may actually decrease the online firms profits. We discuss the implications of our results for existing and future online innovations.

Technological Innovations: Impacts on Supply Chains

Supply chains have benefitted tremendously from digital and transportation technologies over the years. Advanced IT systems have enhanced inventory and demand visibility and facilitated communications with global partners and customers, while transportation technologies have improved the speed and efficiency necessary to transport goods globally. However, dramatic changes in both of these areas are on the horizon. The emergence of new technologies such as 3D printing, virtual reality, autonomous vehicles, drones, and the Internet of Things (IoT) will force the next big wave of changes in global supply chains. While some of these technologies have been adopted by individual firms, many questions remain concerning how these technologies will drive new supply chain policies, business models, and regulations in the future. To illustrate, while technologies such as autonomous vehicles and IoT facilitate supply chain efficiency and transparency, they also increase the risk of compromising data security. In this chapter, we offer a brief overview of each of these emerging technologies and summarize the impact on the supply chain. We intend for this chapter to spur interest and research into not only these technologies and their impact on supply chains, but also into envisioning the supply chains of the future.