Mohanbir Sawhney

Communities of creation: Managing distributed innovation in turbulent markets

A new model for managing distributed innovation, the community of creation is a governance mechanism for managing innovation that lies between the hierarchybased (closed) mechanism and the market-based (open) mechanism for innovation management. The community-centric model shifts the locus of innovation beyond the boundaries of the firm, to a community of individuals and firms that collaborate to create joint intellectual property. A community of creation requires an identified sponsor, a set of ground rules for participation, and a system for managing intellectual property rights. The community of creation model allows innovation to proceed in a complex environment by striking a balance between order and chaos. This article presents detailed case studies from the computer industry to highlight the differences among the different approaches to innovation management. It also discusses the opportunities and the unresolved issues of the community of creation model for practitioners as well as for academics.

Innovation and Virtual Environments: Towards Virtual Knowledge Brokers

We examine the implications of virtual customer environments for supporting the innovation process. By building on the literature of knowledge brokers, we introduce the concept of virtual knowledge brokers—actors who leverage the internet to support third parties’ innovation activities. These actors enable firms to extend their reach in engaging with customers and they also allow firms to have a richer dialogue with customers because of their perceived neutrality. Consequently, virtual knowledge brokers help firms to complement the knowledge they can acquire through traditional physical and virtual channels for customer interaction. We highlight the capabilities and contributions of virtual knowledge brokers, and we discuss the implications of these entities for theory and practice in the management of innovation.

Leveraged high-variety strategies: From portfolio thinking to platform thinking

SummaryBarbara Kahn correctly points out the importance of creating dynamic relationships with customers and adopting high-variety strategies to succeed in today’s fiercely competitive world. However, high variety is also often high cost and high complexity. In this commentary, I propose that platform thinking is a powerful way to manage these contradictions in becoming a high-variety provider. Platform thinking relies on a simple insight—understand the common strands that tie your firm’s offerings, markets, and processes together, and exploit these commonalities to create leveraged growth and variety. Platform thinking should permeate all aspects of the firm’s strategy and should guide all strategic decisions on diversification and growth. Marketers who master platform thinking may find the 21st century to be a somewhat more inviting prospect.

Managing and Measuring Relational Equity in the Network Economy

The Internet is emerging as a powerful connecting force, allowing firms to serve customers, collaborate with partners and suppliers, and empower employees more effectively than ever before. In the network economy, relationships with key stakeholders are becoming valuable assets of the firm, but few firms manage relationships effectively. The authors propose that firms need to take a more holistic approach to understanding where their relational equity resides and how it should be managed and measured. They also propose that relational equity is not limited to relationships with customers but also includes relationships with partners, suppliers, and employees. Effective management of relational equity requires firms to think in an integrative manner along several dimensions: strategy, process, technology, organization design, and metrics. The authors develop conceptual frameworks for each of these dimensions. Taken together, these frameworks offer a conceptual foundation for research and managerial practice on managing relational equity.

A Cross-Functional Approach to Evaluating Multiple Line Extensions for Assembled Products

Assembled product manufacturers often introduce line extensions that share components with existing products, or among themselves, resulting in cost interactions among products because of shared costs, and revenue interactions because of cannibalization. We present a cross-functional approach to evaluating multiple line extensions that simultaneously considers revenue implications of component sharing at the product level and cost implications at the component level. We develop a source-of-volume model and a measurement procedure to decompose the life-cycle sales volume from a line extension into sales from cannibalization, competitive draw, and demand expansion. We develop an activity-based costing procedure for estimating the life-cycle costs of line extensions that share components. We develop an optimization model that uses these revenue and cost estimates to identify a subset of line extensions that maximizes incremental profits. We implement our approach at a quartz wristwatch manufacturer. Results suggest that our approach would have improved profits for the firm by over 5%, while actually launching fewer line extensions. We also find that the drivers of cannibalization are counterintuitive. In simulation studies, our approach outperforms three managerial heuristics. We demonstrate that this approach is most valuable when cannibalization dominates competitive draw as a source of volume, and discuss its relative merits under low and high parts-sharing.

Learning and Using Electronic Information Products and Services: A Field Study

Because of its implications for revenues, marketers of Electronic Information Products and Services (EIPS) are interested in increasing usage of their offering. In this research we investigate how structuring the initial-learning experience can impact subsequent usage. The initial learning experience can be structured by varying the amount of process-based or content-based knowledge that consumers acquire during the initial learning phase. A field experiment where actual usage of a complex, Web-based EIPS was monitored is described. Results show that both content-based and process-based learning are important, though emphasizing either to the virtual exclusion of the other during the initial learning experience may be deleterious for usage.

Customer-Oriented Innovation and Firm Performance

The service-dominant logic of marketing suggests that customer-oriented innovation should be an essential focus for any firm; however, there is limited literature on the relative impact of customer-oriented innovation on firm performance in comparison with other dimensions of innovation. We integrate the service-dominant logic of marketing with the resource-based view of strategy to examine the relative importance of customer-oriented innovation on firm performance. By analyzing data from 765 managers from 52 business units of 19 large U.S. corporations, we find that customer-oriented innovation and offering-oriented innovation are both significantly associated with firm performance, while operations-oriented innovation is not. We discuss the implications of our findings for the service-dominant logic of marketing, resource-based view of strategy and measurement of innovation.

The Real Value of B2B: From Commerce Towards Interaction and Knowledge Sharing

The paper analyzes the evolution of business-to-business e-commerce (B2B) and outlines the emerging framework for business networks where interactive relations between firms are empowered by ICT. The rise and decline of B2B have highlighted the weaknesses of its hypotheses, focused on the benefits for firms to gain in efficiency through electronic transactions (Transaction cost theory). The economic and financial problems in which B2B marketplaces occurred have stressed the dif- ficulties of their transaction-based business models, while the low value of e-commerce over the years can be explained in terms of firms’ indifference in using electronic networks as new commercial channels. Instead, such emphasis on emerging technology solutions, mainly based on the Web, to connect firms with its customers, suppliers and partners increases firm’s opportunities of interaction within its value chain. From a knowledge-based perspective, firms are discovering a completely different scenario and new drivers for their competitiveness, based on a renovated use of ICT to manage distributed business processes. Opposite to the e-commerce value proposition focused on spot efficiency of electric transactions, firms refer to ICT to enhance their established networks of business-to-business relationships.

Trilogy Corporation: Customer Value-Based Pricing

Steve Meyer, the chief marketing officer at Trilogy, was evaluating the best way to move forward with an innovative, customer value-based pricing approach for its enterprise software solutions. Trilogy had radically transformed its business from a product-centric organization to a customer-centric one, and value-based pricing was a pillar of this transformation. Meyer had to evaluate three pricing approaches: traditional license based, subscription based, and gain sharing. He had to assess which pricing approach Trilogy and Trilogys clients would prefer and the conditions under which gain-sharing pricing would work. Meyer also had to address several adoption barriers that prevented customers from embracing the gain-sharing pricing approach.

Ontela PicDeck (A): Customer Segmentation, Targeting, and Positioning

Ontela, a technology start-up company, has introduced an innovative service called PicDeck that improves the mobile imaging experience for wireless subscribers. Ontela sells PicDeck to wireless carriers, who in turn private-label the service to their subscribers. Ontela must decide which customer segments it should target for the service and how to create a positioning strategy and a marketing communication plan to promote it. It must also consider the value proposition of the PicDeck service for wireless carriers (its direct customers), who need to be convinced that the service will lead to higher monthly average revenue per user (ARPU) and/or increased subscriber loyalty. Part A of the case provides qualitative information on customer personae that represent different customer segments. Students are asked to develop a targeting and positioning strategy based on this qualitative information. Part B provides quantitative data on customer preferences that can be used to identify response-based customer segments, as well as demographic and media habits information that can be used to profile the segments. Students are asked to revise their recommendations based on the additional quantitative data. The case reinforces the principles of data-driven customer segmentation, discusses the appropriate criteria for selecting segments, and provides a deeper understanding of the benefits and drawbacks of different approaches to identifying and evaluating segments. The case illustrates how the results of data-driven segmentation may run counter to approaches that rely on “gut feel” or qualitative information alone.