Vish Krishnan

Effort, Revenue, and Cost Sharing Mechanisms for Collaborative New Product Development

The growing sophistication of component technologies and the rising costs and uncertainties of developing and launching new products require firms to collaborate in the development of new products. However, the management of new product development that occurs jointly between firms presents a new set of challenges in sharing the costs and benefits of innovation. Although collaboration enables each firm to focus on what it does best, it also introduces new issues associated with the alignment of decisions and incentives that have to be managed alongside conventional performance and timing uncertainties of new product development. In this paper, we conceptualize and formulate the joint development of products involving two firms with differing development capabilities and examine the implications of arrangements that go beyond sharing of revenues to include sharing of development cost and work. We term these approaches that involve sharing of the development cost and sharing of the development work investment sharing and innovation sharing, respectively. These cost and effort sharing mechanisms have subtle interactions with the degree to which revenues are shared between firms and the type of development project under consideration. Our analysis shows that investment and innovation sharing are particularly relevant for products with no preexisting revenues, and their benefits also depend on the degree to which revenues are shared between the firms. Whereas investment sharing is more attractive for new-to-the-world product projects with significant timing uncertainty, innovation sharing plays an important role in environments where projects experience product quality uncertainty, firms are similar in their capabilities, and the costs of integration of work across firms can be controlled. Our key contribution involves the modeling of joint work and decision making between collaborating firms and unearthing the complementary role of revenue, cost, and innovative effort sharing mechanisms for new product development. We translate our analytical findings into a managerial framework and illustrate the results with examples from the life-sciences and electronics industries.

Design Architecture and Introduction Timing for Rapidly Improving Industrial Products

Technological advances present firms in many industries with opportunities to substantially improve their products capabilities in short periods of time. Customers who invest in these products may, however, react adversely to rapid improvements that make their previous versions obsolete by deferring their purchase. In industrial markets, there is an emerging trend of sequentially improving products designed to be upgraded in a modular fashion. We study the impact of product architecture and introduction timing on the launch of rapidly improving products. We find that by localizing performance improvements in a sequence of upgradable modules of the product, a firm can better manage the introduction of rapidly improving products. Specifically, we show that modular upgradability can reduce the need for slowing the pace of innovation or forgoing upgrade pricing. The additional flexibility in pricing and timing makes the modular, upgradable approach preferable to an integrated architecture, even in some situations where there may be distinct performance or cost-related disadvantages to pursuing the modular architecture. We differentiate between proprietary and nonproprietary approaches to modular upgradability and consider the implications for profits. Our central contribution in this paper is the innovative integration of product architecture with pricing and timing decisions for managing the introduction of rapidly improving products.

Managing Delegated Search Over Design Spaces

Organizations increasingly seek solutions to their open-ended design problems by employing a contest approach in which search over a solution space is delegated to outside agents. We study this new class of problems, which are costly to specify, pose credibility issues for the focal firm, and require finely tuned awards for meeting the firms needs. Through an analytical model, we examine the relationship between problem specification, award structure, and breadth of solution space searched by outside agents toward characterizing how a firm should effectively manage such open-ended design contests. Our results independently establish and offer a causal explanation for an interesting phenomenon observed in design contests---clustering of searchers in specific regions of the solution space. The analysis also yields a cautionary finding---although the breadth of search increases with number of searchers, the relationship is strongly sublinear (logarithmic). Finally, from the practical perspective of managing the delegated search process, our results offer rules of thumb on how many and what size awards should be offered, as well as the extent to which firms should undertake problem specification, contingent on the nature (open-endedness and uncertainty) of the design problem solution being delegated to outside agents. This paper was accepted by Kamalini Ramdas, entrepreneurship and innovation.

Integrated Product Architecture and Pricing for Managing Sequential Innovation

Science and technology advances drive firms to continually enhance their products performance and launch sequentially improving offerings. Firms face challenges in marketing such improving products to well-informed, forward-looking consumers who anticipate product improvements and seek to delay their purchase timing. Product design, specifically a modular upgradable architecture in which improving and stable subsystems of a product are separated and selectively upgraded, can be a valuable approach for marketers to alleviate consumer concerns about product obsolescence. However, such an architecture-based approach can present new challenges as well, and dealing with them requires carefully coordinated cross-functional decision making by the firm. In this paper, we identify and formalize the notion of design inconsistency, which refers to the monopolist firms inability to commit to future product design architectures. We find that firms experience design inconsistency even when they are able to commit to future prices, and design inconsistency lowers firm profits as well as consumer surplus. We then derive a joint product architecture and pricing approach to solve this problem; this enables an innovating firm to optimally and in a time-consistent manner launch modular upgradable products. The modeling and analysis in the paper lends insight into types of markets and products for which modular upgradability is most appropriate and offers guidelines on making pricing and product design decisions jointly for managing sequential innovation. This paper was accepted by Preyas Desai, marketing.

Project Performance and the Enabling Role of Information Technology: An Exploratory Study on the Role of Alignment

As firms focus on new product, process, and service innovations, improving the performance and productivity of projects that help deliver these innovations assumes greater importance. Information technology (IT) has been an enabler of manufacturing productivity improvement, but its effect on improving the productivity of innovation-intensive operational activities has been mixed. In this paper, we explore the pathways through which IT impacts project-level performance measured in terms of speed, quality, and cost. Specifically, in this exploratory study we seek to present a theory of how the fit between enabling IT and the core characteristics of the project impacts project performance. We test our research hypotheses empirically, using a relatively large, cross-sectional sample of project data. The central contribution is the development and testing of a research model to improve our understanding of the relationship between enabling IT-project alignment, project competencies, and project performance. In doing so, our study clarifies the role of information technologies in project management, providing insights into how to integrate IT into innovation-intensive operational activities for improving project execution competence and productivity.

Managing Cost Salience and Procrastination in Projects: Compensation and Team Composition

The rising trend of projects with high-skilled and autonomous contributors increasingly exposes managers to the risk of idiosyncratic individual behaviors. In this paper, we examine the e ects of an important behavioral factor, an individuals cost salience. Cost salience leads individuals to perceive the cost of immediate e ort to be larger than the cost of future e ort. This leads to procrastination in early stages and back-loaded e ort over the course of the project. We model the problem confronting the manager of a project whose quality is adversely impacted by such distortion of individual e ort over time. Complementary to prior works focused on the planning and scheduling tasks of project management in the absence of human behavior, we nd that managers should reward contributions made in earlier stages of a project. Our analysis also yields interesting insights on the project team performance: teams with diverse levels of cost salience will perform better than homogeneous teams. We also address another important facet of team composition, namely the choice between stable and uid teams, and nd that the practice of creating uid teams might have previously unrecognized bene ts when behavioral aspects of projects are considered. We conclude with insights and organizational implications for project managers.

Designing Product Lines with Higher Aggregate Environmental Quality

Firms that consider designing environmentally sustainable products face technical and market constraints that are not always easy to negotiate. Our goal in this paper is to identify approaches and policies that promote sustainable innovation, under which the design decisions of a firm both maximize its profit and improve the environmental quality of its product line. We model and analyze the problem, and identify three approaches that contribute to sustainable innovation by a firm faced with a heterogeneous market of customers. Our results show that firms are able to achieve the dual goals of profits and environmental quality when (a) the firms investments in inter-temporal R&D are considered, (b) the environmental policies are more nuanced, and (c) products are designed to cater to the psycho-social needs of their customers.

Managing Technology Uncertainty Under Multi-Firm New Product Development

The growing sophistication of component technologies and the rising costs of product development require firms to collaborate in the development of new products by pooling their resources and entering into resource or cost-sharing arrangements. However, the management of new product development that occurs jointly between a technology supplier and its industrial customer presents a new set of challenges. While such vertical collaboration enables each firm to focus on what it does best and achieve certain economies of specialization, it also introduces new issues associated with the alignment of decisions and incentives that have to be managed alongside conventional performance and timing uncertainties of new product development. In this paper, we conceptualize and formulate the co-development of products involving two firms and examine the implications of two collaboration mechanisms found in industrial practice. We term these approaches which involve sharing of the development cost and sharing of the development work, investment sharing and innovation sharing, and find that they have subtle effects on the degree of product innovation and profits of individual firms, depending on the nature and extent of technological uncertainty, product development cost structure, and complementary relationships with other products. We consider both exogenous and endogenous technology uncertainty, and study the impact of investment and innovation sharing on a firms technology consideration set, product qualities, and profits. Conditions under which firms should consider one mechanism over the other and over single firm product development are proposed. Our analysis shows that, while investment sharing plays an important role in environments with higher levels of technology uncertainty, innovation sharing can result in greater quality improvements and profits if firms are able to manage the distributed product development process more efficiently. We translate our analytical findings into a managerial framework and illustrate it with examples from the industry.

Inclusive Innovation: Product Innovation in Technology Supply Chains

Managers introducing new products with advanced component technologies frequently face the dual task of managing both revenues and profits. This task is made challenging, in part, due to the tendency of new technologies to traverse a sequentially downward path of gradually lowering costs and prices, which limits their initial availability and affordability, crimping market coverage and revenues. In this paper, we focus on this product management challenge, show how it is amplified in a supply chain, and propose a new degree of freedom in a supply chain, namely innovation investment anchoring, that offers product managers and their firms the ability to expand market coverage and improve both revenues and profits. After motivating with a detailed industry field-study, we formally characterize the problem and show that deliberate choice of the innovation investment anchor leads to greater investments in innovation, revenues and profits. We compare and contrast product quality improvement and cost reduction investments in a product management setting. These findings have subtle, but important, implications for firms launching innovative products and aspiring to expand product sales and profits. Specifically, innovating firms in a supply chain should broaden the quest for an investment anchor, offer them incentives to invest, and finely tune the level of innovation investment with product qualities, prices, and quantities for increasing revenues and profits.

Business Models for Technology-Intensive Supply Chains

Upstream technology and intellectual property plays an increasingly important role in emerging supply chains by endowing products with digital, data-networking, energy-storage and other sought-after capabilities. In such technology-intensive supply chains, intellectual property invented by an upstream firm must be embedded in a manufactured subsystem which is then integrated into a full system sold to end consumers. Upstream technology providers face key business model decisions about how to monetize their innovation and intellectual property that we study in this paper. They typically employ a royalty-driven business model, but the royalty-based approach has gotten complicated in industrial multi-lateral supply chains necessitating formal research attention. We consider these business model decisions in the context of the industry structure of the subsystem and full system markets which may face varying degrees of competition. We characterize the appropriateness of different business model decisions for markets with varying levels of customer diversity and competitive intensity at intermediate layers. Our key results show that a subsystem-based royalty approach is the optimal business model decision when dealing with monopolistic intermediaries. However, it becomes increasingly optimal for the technology provider to adopt a full-system based royalty business model when the intermediate supply chains face competition and the end-market customer diversity increases. Our formulation and results have significant direct relevance to the prevailing heated global discussion on royalty base among technology providers, national policymakers, and industry groups. We also provide actionable managerial insights on product and business model innovation in technology-intensive supply chains.