NOTES

PREFACE

1. J. Lerner, The Architecture of Innovation: The Economics of Creative Organizations (Boston: Harvard Business Review Press, 2012).

2. L. Bossidy and R. Charan, Execution: The Discipline of Getting Things Done (New York: Crown Business, 2002).

3. G. P. Pisano and D. J. Teece, “How to Capture Value from Innovation: Shaping Intellectual Property and Industry Architecture,” California Management Review 50 (1): 278–296; R. Adner, The Wide Lens: A New Strategy for Innovation (New York: Penguin Group, 2012).

4. M. Gladwell, “The Televisionary,” The New Yorker, May 27, 2002.

5. For additional arguments on the challenges to breakthrough innovation among established companies, see G. C. O’Connor, A. Corbett, and R. Pierantozzi, “Create Three Distinct Career Paths for Innovators,” Harvard Business Review 12 (2009): 78–79.

6. T. Kelley and J. Littman, The Ten Faces of Innovation: IDEO’s Strategies for Defeating the Devil’s Advocate and Driving Creativity Throughout Your Organization (New York: Currency Doubleday, 2005).

CHAPTER 1: WHAT IS THE INNOVATION PARADOX?

1. R. Jana, “Inspiration from Emerging Economies,” Businessweek, March 23, 2009.

2. J. Nocera, “How Not to Stay on Top,” The New York Times, August 19, 2013.

3. For more on the concept of disruptive innovation and disruptive technology, see C. M. Christensen, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail (Boston: Harvard Business School Press, 1997).

4. J. Goldenberg, R. Horowitz, A. Levav, and D. Mazursky, “Finding Your Innovation Sweetspot,” Harvard Business Review 3 (March 2010): 120–129.

5. For companies’ potential reaction to these disruptions, see C. C. Markides and D. Oyon, “What to Do Against Disruptive Business Models (When and How to Play Two Games at Once),” MIT Sloan Management Review 4 (Summer 2010): 25–32.

6. This approach to thinking about innovation was originally formulated by Robert Shelton. See T. Davila, M. J. Epstein, and R. Shelton, Making Innovation Work: How to Manage It, Measure It, and Profit from It (Upper Saddle River, NJ: Prentice Hall, 2013).

7. Different companies and authors label this matrix using different terms. The y axis has been referred to as assets or technology and the x axis as markets or competitive impact. The distinction between incremental and breakthrough innovation and the differences in between have been referred to as core (similar to incremental), adjacent (incremental with a breakthrough component to it), and transformational (similar to breakthrough). Incremental has also been labeled sustaining innovation, and breakthrough has been labeled as radical, game changer, or emerging business areas. See B. Nagji and G. Tuff, “Managing Your Innovation Portfolio,” Harvard Business Review 5 (May 2012): 68–74; M. W. Johnson and A. G. Lafley, Seizing the White Space: Business Model Innovation for Growth and Renewal (Boston: Harvard Business Press, 2010). For an in-depth analysis of business model innovation through adding novel activities, linking activities in novel ways, or changing who performs different activities, see R. Amit and C. Zott, “Creating Value through Business Model Innovation,” MIT Sloan Management Review 3 (2012): 41–49.

8. D. K. Rigby, K. Gruver, and J. Allen, “Innovation in Turbulent Times,” Harvard Business Review 6 (June 2009): 79–86. These authors further develop the idea of combining creativity and business at the leadership level.

9. Ibid.

10. C. Markides and P. A. Geroski, Fast Second: How Smart Companies Bypass Radical Innovation to Enter and Dominate New Markets (San Francisco: JosseyBass, 2004).

11. M. Tripsas, “Everybody in the Pool of Green Innovation,” The New York Times, November 1, 2009.

12. J. Menn, R. Waters, and D. Gelles, “Jobs Biography Reveals Apple Recipe for Success,” Financial Times, October 25, 2013.

13. R. Stross, “The Auteur vs. the Committee,” The New York Times, July 23, 2011.

14. J. H. Dyer, H. B. Gregersen, and C. M. Christensen, “The Innovator’s DNA: Five ‘Discovery Skills’ Separate True Innovators from the Rest of Us,” Harvard Business Review 12 (2009): 61–67.

15. Davila, Epstein, and Shelton, Making Innovation Work.

16. W. Kuemmerle, “Foreign Direct Investment in Industrial Research in the Pharmaceutical and Electronics Industries—Results from a Survey of Multinational Firms,” Research Policy 28, nos. 2–3 (1999): 179–193; C. A. O’Reilly, J. B. Harreld, and M. L. Tushman, “Organizational Ambidexterity: IBM and Emerging Business Opportunities,” California Management Review 51 (2009): 4.

17. We do not discuss how to push top-down incremental innovation. That issue is addressed in such excellent management books as R. Simons, Performance Measurement and Control Systems for Implementing Strategy (Upper Saddle River, NJ: Prentice Hall, 1999).

18. On the idea of risky moves from top management, see R. Charan and M. Sisk, “Strategic Bets,” Strategy + Business 63 (2011).

CHAPTER 2: THE BENEFITS AND LIMITS OF THE BUSINESS UNIT

1. A. D. Chandler Jr., Strategy and Structure: Chapters in the History of the American Industrial Enterprise (Cambridge, MA: MIT Press, 1962).

2. J. Birkinshaw and M. Mol, “Management Innovation: A Problemistic Search Perspective on Why Firms Introduce New Management Practices,” Journal of Business Research 62 (12): 1269–1280.

3. J. M. Utterback, Mastering the Dynamics of Innovation (Boston: Harvard Business School Press, 1994).

4. Walmart has changed its slogan to “Save money. Live better.”

5. F. E. Allen, “The Terrible Management Technique That Cost Microsoft Its Creativity,” Forbes, July 3, 2012.

6. R. Simons, Performance Measurement and Control Systems for Implementing Strategy (Upper Saddle River, NJ: Prentice Hall, 1999).

7. J. Schumpeter, “Think Different,” The Economist, August 6, 2011.

8. A. G. Lafley, “What Only the CEO Can Do,” Harvard Business Review 5 (May 2009): 54–62.

9. B. Stone and S. Ray, “Don’t Dream It’s Over,” Bloomberg Businessweek, January 28, 2013.

10. See T. Davila, M. J. Epstein, and R. Shelton, Making Innovation Work: How to Manage It, Measure It, and Profit from It (Upper Saddle River, NJ: Prentice Hall, 2013).

CHAPTER 3: THE SUCCESS OF STARTUPS

1. M. Zwilling, “8 Innovation Secrets from Steve Jobs,” Business Insider, September 29, 2010.

2. C. Winter, “How Three Germans Are Cloning the Web,” Bloomberg Business Week, February 29, 2012.

3. U. Lichtenthaler, M. Hoegl, and M. Muethel, “Is Your Company Ready for Open Innovation?” MIT Sloan Management Review 1 (Fall 2011): 45–48.

4. J. Reingold and D. Burke, “Can P&G’s CEO Hang On?” Fortune, February 25, 2013, 66–75.

5. L. Kramer, “How French Innovators Are Putting the ‘Social’ Back in Social Networking,” Harvard Business Review 10 (October 2010): 121–124.

6. T. Brown, “Change by Design,” Businessweek, October 5, 2009.

7. E. Ries, The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses (New York: Crown Business, 2011). Also see S. Blank and B. Dorf, The Four Steps to the Epiphany (Pescadero, CA: K&S Ranch Press, 2012).

8. John Erceg, founder of Budgetplaces.com, personal communication.

9. A. Rajaraman and A. Davila, “Scripped.com: Creating the Business Model,” IESE Case E-146-E, 2012.

10. L. Pujol, S. Alvarez de Mon, and A. Davila, “Weizmann Institute: Creating the Future of Science,” IESE Case E-156-E, 2012.

CHAPTER 4: THE STARTUP CORPORATION

1. S. Lohr, “Who Says Innovation Belongs to the Small?,” The New York Times, May 24, 2009.

2. N. Radjou and J. Prabhu, “Mobilizing for Growth in Emerging Markets,” MIT Sloan Management Review 52, no. 3 (Spring 2012): 81–88. This reference includes other examples of large corporations, such as GE and Xerox, that are using their muscle to devise breakthrough innovations.

3. For example, see C. F. Munce, “Venture Capital: Getting Past the ‘Winning Company’ Approach,” Business Week Online, July 23, 2009, 5.

4. H. W. Chesborough, Open Innovation: The New Imperative for Creating and Profiting from Technology (Boston: Harvard Business School Press, 2005).

5. A. G. Lafley and R. Charan, The Game-Changer: How You Can Drive Revenue and Profit Growth with Innovation (New York: Crown Business, 2008).

6. For a detailed article on the innovation process, see S. L. Beckman and M. Barry, “Innovation as a Learning Process: Embedding Design Thinking,” California Management Review 50, no. 1 (Fall 2007): 25–56.

7. J. H. Dyer, H. B. Gregersen, and C. M. Christensen, “The Innovator’s DNA: Five ‘Discovery Skills’ Separate True Innovators from the Rest of Us,” Harvard Business Review 12 (2009): 61–67.

8. R. I. Sutton, Weird Ideas That Work: How to Build a Creative Company (New York: Free Press, 2002).

9. “How Seemingly Irrelevant Ideas Lead to Breakthrough Innovation,” [email protected], January 30, 2013.

10. A. Shapiro, “Stop Blabbing About Innovation and Start Actually Doing It,” www.FastCompany.com, accessed April 16, 2012.

11. W. J. Holstein, “Hotbeds of Innovation,” Strategy and Business, January 24, 2011.

12. E. J. Malecki, “Connecting Local Entrepreneurial Ecosystems to Global Innovation Networks: Open Innovation, Double Networks, and Knowledge Integration,” International Journal of Entrepreneurship and Innovation Management 14 (2011): 36–59.

13. J. V. Sinfield, E. Calder, B. McConnell, and S. Colson, “How to Identify New Business Models,” MIT Sloan Management Review 53, no. 2 (Winter 2012): 85–90.

14. G. S. Day and P. J. Shoemaker, “Innovating in Uncertain Markets: 10 Lessons for Green Technologies,” MIT Sloan Management Review 52, no. 4 (Summer 2011): 37–45.

15. N. Leiber, “Making the C in VC Stand for Corporate,” Bloomberg Businessweek, July 4–10, 2011.

16. B. Stone, P. Burrows, and D. MacMillan, “I’ll Take It from Here,” Bloomberg Businessweek. January 31–February 6, 2011; D. Lyons, “Android Invasion,” Newsweek, October 11, 2010, 32–37; B. Kowitt, “One Hundred Million Android Fans Can’t Be Wrong,” Fortune, July 4, 2011, 93–97.

17. P. F. Nunes and T. Breene, “Strategy at the Edge,” Accenture Outlook (June 2011).

18. N. Radjou, J. Prabhu, and S. Ahuja, “What the West Can Learn from Jugaad,” Strategy and Business 70 (November 19, 2012): 11–14.

19. J. R. Immelt, V. Govindarajan, and C. Trimble, “How GE Is Disrupting Itself,” Harvard Business Review (October 2009): 3–11.

20. V. Sehgal, K. Dehoff, and G. Panneer, “The Importance of Frugal Engineering,” Strategy and Business 59 (Summer 2010): 20–25.

21. B. Jaruzelski, J. Loehr, and R. Holman, “The Global Innovation 1000: Why Culture Is Key,” Strategy and Business 65 (Winter 2011): 30–45.

CHAPTER 5: IMPLEMENTING THE STARTUP CORPORATION

1. R. Verganti, Design-Driven Innovation: Changing the Rules of Competition by Radically Innovating What Things Mean (Boston: Harvard Business Press, 2009).

2. T. Brown, Change by Design: How Design Thinking Can Transform Organizations and Inspire Innovation (New York: HarperCollins Publishers, 2009).

3. E. Von Hippel, Democratizing Innovation (Cambridge, MA: MIT Press, 2006).

4. W. C. Kim and R. Mauborgne, Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant (Boston: Harvard Business School Press, 2005).

5. For an analysis of how big data and other IT developments are changing the way businesses are run and innovation is managed, see E. Brynjolfsson, Wired for Innovation: How Information Technology Is Reshaping the Economy (Cambridge, MA: MIT Press, 2010).

6. For additional insights on stealth innovation, see P. Miller and T. WedellWedellsborg, “The Case for Stealth Innovation,” Harvard Business Review 91, no. 3 (March 2013): 90–97; and P. Miller and T. Wedell-Wedellsborg, Innovation as Usual: How to Help Your People Bring Great Ideas to Life (Boston: Harvard Business School Press, 2013).

7. P. Miller and T. Wedell-Wedellsborg, “Jordan Cohen at pfizerWorks: Building the Office of the Future,” IESE Case DPO-187-E, 2010.

8. See S. Vossoughi, “Is the Social Sector Thinking Small Enough?,” Harvard Business Review 89, no. 12 (December 2011): 40–41.

9. S. M. Datar and S. Chaturvedi, “BMVSS: Changing Lives, One Jaipur Limb at a Time,” Harvard Business School Case 114007, 2013.

10. J. Lerner, The Architecture of Innovation: The Economics of Creative Organizations (Boston: Harvard Business Review Press, 2012).

11. L. Kolodny, “P&G Taps into Startups,” The Wall Street Journal, February 2, 2013.

12. C. Markides and P. Geroski, Fast Second: How Smart Companies Bypass Radical Innovation to Enter and Dominate New Markets (San Francisco: Jossey-Bass, 2000).

13. H. W. Chesborough and A. R. Garman, “How Open Innovation Can Help You Cope in Lean Times,” Harvard Business Review 87, no. 12 (2009): 68–76.

14. M. L. Tushman, W. K. Smith, and A. Binns, “The Ambidextrous CEO,” Harvard Business Review 89, no. 6 (June 2011): 74–80.

15. F. Bidault and A. Castello, “Why Too Much Trust Is Death to Innovation,” MIT Sloan Management Review 51, no. 4 (Summer 2010): 33–38.

16. A. Vance and C. C. Miller, “Google TV Faces Delays amid Poor Reviews,” The New York Times, December 19, 2010.

17. “Companies & Industries,” Bloomberg Businessweek, March 12–March 18, 2012.

18. K. Capell, “Novartis Radically Remaking Its Drug Business,” Businessweek, June 22, 2009.

19. R. G. McGrath and I. C. Macmillan, Discovery-Driven Growth: A Breakthrough Process to Reduce Risk and Seize Opportunity (Boston: Harvard Business Review Press, 2009).

20. M. E. Porter, Competitive Advantage: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980); and A. Osterwalder and Y. Pigneur, Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers (Hoboken, NJ: John Wiley and Sons, 2010).

21. Brooks Barnes, “Disney Waves a High-Tech Wand over Its Stores,” The New York Times, October 13, 2009.

22. Chesborough and Garman, “How Open Innovation Can Help You Cope in Lean Times.”

CHAPTER 6: OVERCOMING THE INNOVATION PARADOX

1. C. K. Prahalad developed the concept of the bottom of the pyramid to refer to segments of the population with limited purchasing power but so large that in aggregate they form an attractive market. C. K. Prahalad and S. L. Hart, The Fortune at the Bottom of the Pyramid (Upper Saddle River, NJ: Prentice Hall, 2006).

2. For a description of play-to-win and play-not-to-lose, see T. Davila, M. J. Epstein, and R. Shelton, Making Innovation Work: How to Manage It, Measure It, and Profit from It (Upper Saddle River, NJ: Prentice Hall, 2013).

CHAPTER 7: INNOVATIVE CULTURES

1. For example, see J. P. Kotter and J. L. Heskett, Corporate Culture and Performance (New York: Free Press, 1992); and G. J. Tellis, Unrelenting Innovation: How to Create a Culture for Market Dominance (San Francisco: John Wiley and Sons, 2013).

2. R. Goffee and G. Jones, The Character of a Corporation: How Your Company’s Culture Can Make or Break Your Business (London: Harper Collins Business, 1998), 15.

3. Aristotle, The Nicomachean Ethics of Aristotle, book 2, section 1, ed. W. D. Ross (Oxford: Oxford University Press, 1954).

4. For more details on Tesco, see J. F. Manzoni and J. L. Barsoux, “Tesco: Delivering the Goods (A) and (B),” IMD Case 3-1955, 3-1956, 2008.

5. Deloitte LLP, “Global Powers of Retailing 2013: Retail Beyond,” http://www.deloitte.com/assets/Dcom-Australia/Local%20Assets/Documents/Industries/Consumer%20business/Deloitte_Global_Powers_of_Retail_2013.pdf.

6. Personal communication with Steve Jobs, D5 Conference: All Things Digital, May 30, 2007.

7. “Zappos Insights,” http://www.zapposinsights.com/about/faqs.

8. T. Kelley, The Art of Innovation: Lessons in Creativity from IDEO, America’s Leading Design Firm (New York: Random House, 2001).

9. E. Gardiner and C. J. Jackson, “Workplace Mavericks: How Personality and Risk-Taking Propensity Predicts Maverickism,” British Journal of Psychology 103, no. 4 (2011): 497–519.

10. B. Stone, “Inside the Moonshot Factory: Google X’s Silicon Valley Nerd Heaven—America’s Last Great Corporate Research Lab,” Bloomberg Business Week, May 22, 2013.

11. A. Vance, “Netflix, Reed Hastings Survive Missteps to Join Silicon Valley’s Elite,” Businessweek, May 9, 2009.

12. B. Jopson, “Ackman Attacks JC Penney Chief He Picked,” Financial Times, April 5, 2013.

13. N. Cope, “The Monday Interview: Sir Terry Leahy,” The Independent, March 25, 2002.

14. A. Lashinsky, “Amazon’s Jeff Bezos: The Ultimate Disrupter,” Fortune, November 16, 2012.

15. M. Reeves and M. Deimler, “Adaptability: The New Competitive Advantage,” Harvard Business Review 89, no. 7 (July–August 2011): 135–141.

16. Lashinsky, “Amazon’s Jeff Bezos.”

17. J. F. Manzoni and J. L. Barsoux, The Set Up to Fail Syndrome: How Good Managers Cause Great People to Fail (Boston: Harvard Business School Press, 2002).

18. J. Clayton, B. Gambill, and D. Harned, “The Curse of Too Much Capital: Building New Businesses in Large Corporations,” McKinsey Quarterly 3 (1999): 48–59.

CHAPTER 8: LEADING FOR BREAKTHROUGH INNOVATION

1. Along with the discussion of culture in chapter 7, this examination of leadership draws heavily on the ideas of Jean-François Manzoni, and we thank him for his insights and helpfulness.

2. “Performance Driver: Helmut Panke, Chief Executive, Bavarian Motor Works, Germany,” Businessweek, June 7, 2004, 40.

3. CNN International.com, “In Focus, Lou Gerstner,” http://edition.cnn.com/2004/BUSINESS/07/02/gerstner.interview/.

4. Forbes, “Steve Jobs: Get Rid of the Crappy Stuff,” http://www.forbes.com/sites/carminegallo/2011/05/16/steve-jobs-get-rid-of-the-crappy-stuff/.

5. T. Davila, M. J. Epstein, and R. Shelton, Making Innovation Work: How to Manage It, Measure It, and Profit from It (Upper Saddle River, NJ: Prentice Hall, 2013).

6. C. Fishman, “Face Time with Michael Dell,” Fast Company, February 28, 2001.

7. A. Lashinsky, “Amazon’s Jeff Bezos: The Ultimate Disrupter,” Fortune, November 16, 2010.

8. Ibid.

9. A. Grove, Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company (New York: Random House, 1996).

10. A. Higginson, “Interview: Andrew Higginson, Finance and Strategy Director, Tesco,” Financial Management, March 1, 2005, 6.

11. J. Riera, “Scaling Great Heights,” Retail Week, April 8, 2005, 5.

12. J. Schwartz, “Dell Computer Is in the Catbird Seat, for Now,” The New York Times, September 11, 2001.

13. P. Hemp, “Managing for the Next Big Thing: An Interview with Michael Ruettgers,” Harvard Business Review 79, no. 1 (January 2001): 130–139.

14. Lou Gerstner, quoted in Business Life (May 2000): 16.

15. C. Gallo, The Innovation Secrets of Steve Jobs: Insanely Different Principles for Breakthrough Success (New York: McGraw-Hill, 2011), 221.

16. A. Park and P. Burrows, “What You Don’t Know about Dell,” Businessweek, November 2, 2003.

17. A. L. Tucker and S. J. Singer, “Key Drivers of Successful Implementation of an Employee Suggestion–Driven Improvement Program,” Harvard Business School Working Paper no. 12-112, 2012.

18. Conversation with Bill Gates, D5 Conference, 2007, http://allthingsd.com/20070531/d5-gates-jobs-transcript/.

19. B. Stone, “Inside the Moonshot Factory: Google X’s Silicon Valley Nerd Heaven—America’s Last Great Corporate Research Lab,” Bloomberg Business Week, May 22, 2013.

20. George S. Patton, quoted in Gallo, The Innovation Secrets of Steve Jobs, 219.

21. S. Wozniak and G. Smith, iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It (New York: W. W. Norton & Company, 2006), 289.

CHAPTER 9: HARD FOUNDATIONS

1. This discussion dates back to the concept of hygiene factors: see F. Herzberg, Work and the Nature of Man (Oxford: World Publishing, 1966); see also M. C. Jensen, Theory of the Firm: Governance, Residual Claims, and Organizational Forms (Cambridge, MA: Harvard University Press, 2000); and A. Kohn, “Why Incentive Plans Cannot Work,” Harvard Business Review 71, no. 5 (September–October 1993): 54–63. For a discussion of economic incentives, see J. Lerner, The Architecture of Innovation: The Economics of Creative Organizations (Boston: Harvard Business Review Press, 2012).

2. J. Hempel, “IBM’s Super Second Act,” Fortune, March 21, 2011, 115–124.

3. S. Lohr, “Apple and I.B.M. Aren’t All That Different,” The New York Times, November 6, 2010.

4. C. K. Prahalad and R. A. Mashelkar, “Innovation’s Holy Grail,” Harvard Business Review 88, no. 7 (July–August 2010): 132–141.

5. A. Wooldridge, “Where Innovation Runs Deep,” Korn/Ferry Briefings (Spring 2011).

6. V. Sehgal, K. Dehoff, and G. Panneer, “The Importance of Frugal Engineering,” Strategy and Business 59 (Summer 2010): 20–25.

7. K. Capell, “Novartis Radically Remaking Its Drug Business,” Businessweek, June 22, 2009.

8. B. Jaruzelski and K. Dehoff, “How the Top Innovators Keep Winning,” Strategy and Business 61 (Winter 2010): 48.

9. R. Walker, “Jeff Bezos, Amazon.com,” April 1, 2004, http://www.inc.com/magazine/20040401/25bezos.html.

10. G. Kawasaki, “Ten Commandments from an Entrepreneurial ‘Evangelist,’” Knowledge@Wharton, June 10, 2009.

11. R. Simons, Levers of Control: How Managers Use Innovative Control Systems to Drive Strategic Renewal (Boston: Harvard Business School Press, 1995).

12. “Akio Morita: Gadget Guru,” October 9, 2008, http://www.entrepreneur.com/article/197676#.

13. S. Johnson, “On the Inside, Looking Out,” CFO 27, no. 2 (March 2011): 21–24.

14. S. Cook, “The Contribution Revolution: Letting Volunteers Build Your Business,” Harvard Business Review 86, no. 10 (October 2008): 60–69.

15. A. Lashinsky, “The Secrets Apple Keeps,” Fortune, February 6, 2012, 85–94.

16. G. Emmons, J. Hanna, and R. Thompson, “Five Ways to Make Your Company More Innovative,” Harvard Business School Working Knowledge, May 23, 2012.

17. V. Govindarajan and C. Timble, “The CEO’s Role in Business Model Reinvention,” Harvard Business Review (January–February 2011): 109–114.

18. T. Davila, M. J. Epstein, and R. Shelton, Making Innovation Work: How to Manage It, Measure It, and Profit from It (Upper Saddle River, NJ: Prentice Hall, 2013).