Deck 12: Technology-Based Industries and the Management of Innovation

Question 1

In fast changing industries, firms have to maintain market share, efficiency, and simultaneously commit to new technologies and standards for their future. How can they achieve this?

Answer 1

They have to simultaneously run their operations very efficiently, which can be achieved through repetition, formalization, certainty, stability, and volume and, at the same time, be flexible, prepare for future, and change their activities, operations, and procedures to adapt to a new situation. This fundamental issue is a common problem for organizational change, and a challenge for the organizational structure and HR management fields. Most of the advice and techniques that the literature offers (flexible structure, diverse coordination devices, managerial roles, adapted culture, etc.) are closely related within the field.
In fact, all the variables of the organization must be directed towards addressing this critical dilemma; one of the first, and maybe most difficult challenges, is to convince top managers of the need to adapt their own behavior to deal with it.
There is definitively no magic recipe but a set of common-sense recommendations and tools whose wise combination leads to a correct and balanced management of the two dimensions of management: exploitation and exploration.
If an industry is accustomed to rapid change, it is very likely that managers have already moved towards these types of tools. However, improvement can still increase the "balance optimality"

Question 2

The Dyson dual cyclone bagless vacuum cleaner story describes:

A)An episodic fight against patent infringement, and the choice between internal commercialization vs. license
B)The fight of Dyson against Amway and Hoover
C)The tumultuous relationship between parent Maytag and its subsidiary Hoover
D)The courage and consistency exhibited by British inventor James Dyson

Answer 2

A

Question 3

How do technology-based industries reveal a fundamental dilemma that many firms are facing?

Answer 3

The fundamental dilemma clearly apparent in technology-based industries relies on the fact that innovation is unpredictable, and requires a nurturing organizational context to encourage and foster that innovation, whereas strategy is about resource-allocation decisions.
Strategy and management, on one hand, and innovation, on the other, necessitate different and generally antithetical attributes: respectively consensus, control, certainty, and status quo, vs. instinct, uncertainty, freedom, and iconoclasm.
Some devices and mechanisms exist to bridge these conflicting requirements, or at least, to make them as compatible as possible. Examples include cross-functional team-based approaches, parallel organizational structures, resource-based approaches, and efficiency-oriented managerial roles.
In technology-based industries, technology is the main driver of competition, and innovation the principal source of competitive advantage. Therefore, integrating technology is critical in strategic management, since speed of innovation, international competition, and turbulence of environments are on the rise.

Question 4

The Morse telegraph and compact discs are:

A)Inventions
B)Innovations
C)Both inventions and innovations
D)Improvement of existing technologies

Question 5

Matsushita's VHS format won against Sony's Betamax format because:

A)VHS was significantly superior to Betamax
B)VHS was slightly superior to Betamax
C)Matsushita was able to gain acceptability of its standard in the market
D)Sony opened its standard to all players too early

Question 6

How can a firm manage risks in technology-based industries?

Question 7

Traditional management of firms does not seem to be "innovation-friendly". Is a new form of management required?

Question 8

How can a firm create the conditions for innovation?

Question 9

Network externalities are critical phenomena because:

A)They create a positive feedback loop that leads to a winner-takes-all situation
B)They create a winner-takes-all situation which is unfair from a competition standpoint
C)Technological innovations tend to be resilient
D)Governments are more and more concerned about firms' corporate citizenship

Question 10

Why is an evolutionary strategy's backward compatibility usually an advantage over a revolutionary strategy?

A)Companies should never throw away a proven technology - it may be vital
B)Customers' and suppliers' stocks of hardware and knowledge about old products can still be useful
C)All revolutionary strategies eventually evolve into evolutionary strategies
D)Backward compatibility at this stage permits backward compatibility for ever

Question 11

What role do complementary resources play with regard to innovation?

Question 12

Reputation, brand name, intellectual property rights, and control over an installed base of customers are examples of:

A)Key resources to win a standard war
B)Key capabilities to succeed in a new market
C)A list of desirable resources
D)A list of capabilities that most large firms own

Question 13

A self-fulfilling prophecy is:

A)A tautological statement that is always true by definition
B)A statement that becomes true by coincidence
C)A prediction that a player makes for itself
D)A prediction that becomes true because the enunciation and communication of the statement leads to the predicted outcome

Question 14

To win a standard war, a firm has to:

A)First identify the future standard and then assemble allies to win
B)First recognize that the industry is coalescing around a single standard and then build a "bigger bandwagon"
C)Wait, and try to network and lobby the Federal authorities
D)Increase marketing and outreach

Question 15

Is innovation profitable?

Question 16

Network externalities are fueled by three sources:

A)Minimizing switching costs, the existence of a natural network in an industry, and the availability of complementary products or services
B)The existence of a natural network, the extent to which the government allows firms in an industry to externalize their costs, and the level of innovation in this industry
C)The availability of complementary products or services, the importance of barriers to entry, and the level of innovation in an industry
D)The level of innovation in an industry, the nature of the fundamental knowledge involved in this industry, and the availability of complementary products or services

Question 17

The examples of xerography, jet engines, mathematics of fuzzy logic, and MP3 format illustrate that:

A)Invention always precedes innovation
B)Financial resources are critical to introduce successful innovations
C)The innovation cycle has speeded up over time
D)Innovation never stops over time

Question 18

How and why should a firm try to win a war over standards?

Question 19

Microsoft's war against Netscape in the browser industry, and GE's lead over EMI in the CT scanner industry show that:

A)Size matters
B)First movers always win the battle
C)No real outcome can be predicted
D)Existing resources and capabilities are critical in a competition between high technology products

Question 20

Monsanto's Nutrasweet artificial sweetener, Pzifer's Viagra, and Pilkington's float glass process are examples of:

A)Weak regimes of appropriability
B)Strong regimes of appropriability
C)Technological inventions that were not successful
D)Technological innovations sharing inventions in the field of chemistry

Question 21

The value created by an innovation is:

A)Shared equally among the players
B)Left to customers
C)Captured by the player possessing the largest market share of the industry
D)None of the above

Question 22

Standards wars tend to take place:

A)Earlier and earlier in a product life cycle
B)In the middle of a product life cycle
C)Before a product launch
D)After a product launch

Question 23

To determine the strength of an innovator's appropriation, four elements should be considered:

A)Property rights, tacitness and complexity of technology, corporate culture, and HR management
B)Property rights, lead-time complementary resources, and tacitness and complexity of technology,
C)Property rights, tacitness and complexity of technology, lead-time, and luck
D)Property rights, lead.time, complementary resources, and relative bargaining power

Question 24

Chester Carlson invented xerography, but was unable for many years to bring it successfully to market. Why?

A)He lacked courage
B)He lacked managerial skills
C)He became sick
D)He lacked complementary resources

Question 25

Some examples of property rights include:

A)Copyrights, patents, and trade secrets
B)Patents, goodwill, and trademarks
C)Know-how, skills, and trade secrets
D)Trademarks, copyrights, and tangible assets

Question 26

Lead-time refers to:

A)The period of time during which a firm is the leader of an industry
B)The period of time during which a firm has discovered the largest number of innovations
C)The time it takes followers to catch up
D)None of the above

Question 27

"Creative abrasion" is a concept used to describe:

A)Teams where different personalities and profiles interact to foster innovation and creativity
B)Teams created specifically to provoke helpful organizational conflict
C)Teams where conflict is artificially provoked in order to create idea generation
D)A method for increasing effectiveness and efficiency in strategic decision-making processes

Question 28

Innovation is an act of:

A)Luck
B)Creativity
C)Selfishness
D)None of the above

Question 29

The distinction between codifiable and tacit knowledge is important in relation to property rights protection because:

A)Both types of knowledge are present in innovations
B)Patents must be written clearly and in an accurate way, so that they only contain codifiable knowledge
C)If an innovation is not described and embedded in a written form, it cannot be effectively protected
D)In the absence of legal protection, the extent to which an innovation can be imitated depends on the ease with which the technology can be comprehended and communicated

Question 30

Codifiable knowledge means that:

A)It can be written down
B)It can be replicated at no cost
C)It complies with local laws and regulations
D)It cannot be demonstrated

Question 31

The cycle of innovation has recently:

A)Speeded up
B)Slowed down
C)Become more aggressive
D)Become more uncertain

Question 32

To stimulate creativity, a critical factor is allowing:

A)Everyone to do what they want for an hour a day
E-
F-Employees to absorb the principles of lateral thinking
G-Employees to play with new things at work h-Managers to hire unorthodox thinkers, whom you put in a separate 'skunk works'

Question 33

One key strategic challenge for fuel cell developers in the automobile industry is:

A)There is not enough political backing at the Federal level
B)They lack financial resources
C)They need the cooperation of many other specialized players
D)The technology is not yet fuel-efficient

Question 34

If a strong system of appropriability exists, the innovator:

A)Cannot capture a significant portion of the created value
B)Cannot acquire the property rights of its innovation
C)Can capture a significant portion of the created value
D)Should try to sell its innovation to a large firm

Question 35

The degree of specialization of complementary resources affects:

A)The degree of concentration of the industries that will emerge
B)The speed of acceptance of the innovation
C)The division of value between the respective suppliers of the innovation and of its complementary resources
D)Answers b and c

Question 36

A product innovation diffuses:

A)On the supplier side (integration into suppliers' value chain)
B)On the supply side (imitation by competitors)
C)On the demand side (adoption by customers)
D)Answers b and c

Question 37

An innovation's complexity impacts:

A)The ease with which it can be copied
B)The resources needed to formalize it and to establish a patent to protect it
C)The rate of diffusion of the innovation, and its acceptance by customers
D)The probability for a firm to innovate

Question 38

Why is innovation no guarantee of success and fortune?

A)Success depends on the value created
B)Implementation of innovation may be a failure due to internal organizational factors
C)Success depends on the value created and the portion of that value that the innovator is able to appropriate
D)Nothing is guaranteed in the corporate world and in life in general

Question 39

Cross functional product development teams, product champions, and incubators are organizational devices used:

A)By top managers to control the technological development of their firms
B)To reconcile the conflicting requirements of operations and innovation
C)To build new organizational structures, inspired by innovation in high-tech industries
D)To reconcile coordination and specialization needs

Question 40

The effectiveness of the different instruments used to protect property rights depends on:

A)The country in which a firm wants to protect is property rights
B)The role of specialized state agencies in that protection
C)The state of the economy
D)The type of innovation that is being protected

Question 41

Network externalities are:

A)The set of effects related to the network organizational structure, where many firms are connected through loose but efficient linkages
B)The idea that the value of a product for a customer depends on the number of other users of the same product
C)The costs incurred outside a firm when these costs are a direct consequence of that firm's activity
D)The set of events, facts, and trends taking place in a firm's environment and that may impact its strategy

Question 42

A classic example of network externalities, is:

A)The retailing industry
B)The automobile industry
C)The telephone
D)The housing industry

Question 43

Computer, telephone, search engines and wedding organizations, are examples of industries where the following strong phenomenon is at work:

A)High differentiation of products and services
B)Network externalities
C)Incremental innovations
D)Radical innovations

Question 44

When reliable forecasting is not available, managing risk can be implemented through:

A)Alertness
B)Responsiveness
C)Avoiding large scale commitment
D)All of the above

Question 45

Risk in emerging industries is created by the following factors:

A)Market and technological uncertainties
B)Market and cost uncertainties
C)Rivalry and political uncertainties
D)Having different customer tastes in emerging countries from your home market

Question 46

The choice of a strategy to exploit innovation depends on two factors:

A)Luck and past experience in the industry
B)Characteristics of the innovation and a firm's financial resources
C)Characteristics of the innovation and a firm's resources and capabilities
D)All of the above

Question 47

De facto standards suffer from the following weakness:

A)They are characterized by uncertainty
B)They may take a long time to evolve because adoption is voluntary
C)They usually cost more to develop
D)Rivals may not accept them and fight against their adoption by the industry

Question 48

Standards are important in an industry because:

A)They allow interoperability and industry growth, and are linked with network externalities
B)They are established by the dominant player in the industry
C)They are imposed by the government and have the force of law behind them
D)High-tech industries are the only industries that cannot effectively function without standards

Question 49

Which way of exploiting an innovation leaves the largest degree of control for the innovator?

A)Licensing
B)Joint venture
C)Internal commercialization
D)Strategic alliances

Question 50

Advancing technology is an external force that:

A)Drives competitors to innovate, to attain or maintain competitive advantage
B)Drives R&D expenditures
C)Determines, on its own, a firm's success
D)None of the above

Question 51

For a firm what is a "strategic window"?

A)A point in time where its strategic plan needs to be reviewed and redesigned
B)A point in time where it is the strongest firm in the industry
C)A period in time when its capabilities are aligned with the opportunities of the market
D)None of the above

Question 52

Public vs. private standards are respectively:

A)Standards set by public firms vs. standards established by privately-owned companies
B)Standards established by governments vs. standards set by companies
C)Standards available for all organizations and industry players vs. standards owned by firms or individuals
D)Free standards vs. standards users have to pay for

Question 53

The example of Microsoft and its 1988 operating systems shows that:

A)The industry was facing uncertainty with regard to standards
B)Microsoft was still the dominant player
C)Alliances emerged to support different standards
D)The industry was evolving accordingly to its lifecycle model

Question 54

Licensing, joint ventures, and alliances, are examples of:

A)Alternative strategies to exploit innovation
B)Alternative strategies to create inventions
C)Alternative strategies to sell inventions to another firm in the industry
D)Strategies involving third parties

Question 55

Patents are the best protection for innovation.

A)A century of evidence shows this is true
B)No one can confirm or disprove this statement
C)The evidence is mixed
D)Evidence shows this is not true

Question 56

Cooperation with lead users and flexibility are two illustrations of:

A)Business level strategies
B)Corporate level strategies associated with innovation and technological management
C)Tactics to limit the exposure to financial risk in the context of a depressed economy
D)Strategies to limit the technological risk associated with emerging industries

Question 57

The choice of being a leader or a follower should depend on:

A)The extent of protection of the innovation, the nature of the knowledge involved, and the potential to establish a standard
B)The development cost of the innovation, the importance of complementary resources, and the shape of the economy
C)The extent of protection of the innovation, the potential to establish a standard, and the importance of complementary resources
D)The potential to establish a standard, the relative powers of the other players in the industry, and the development cost of the innovation

Question 58

Research suggests that most inventions are the result of:

A)Large firms' R&D departments
B)Small firms
C)Small specialized research firms
D)"Capital angels" who have invested in successful start-ups

Question 59

A process of active waiting describes:

A)A well-known formula for running successful restaurants
B)A good fast second-entrant strategy
C)A situation where a firm waits and acts simultaneously
D)A contradiction in conflicting requirements that a firm cannot handle

Question 60

The difference between invention and innovation is

A)Invention requires an inventor, innovation requires no individual person
B)You must innovate before you invent
C)Invention is the development of new knowledge, innovation is the commercialization of it
D)An inventor is guaranteed a payment, an innovator is not

Question 61

The best option to exploit innovation depends on several factors, including a firm's available resources and capabilities

Question 62

Surveys show patent protection appears to be the best protection of innovation, because it is enforced by law

Question 63

Emerging technologies are not more risky than existing technologies, because the path of history will bring them to the forefront

Question 64

Being the leader in innovation is always the optimal strategy, much better than the follower strategy

Question 65

Invention is the commercialization of new products and services

Question 66

Network externalities can be defined as the phenomenon where the value of a product to an individual depends on the number of other people connected to the network

Question 67

The first automobile, introduced by Benz in 1885, embodied many inventions

Question 68

To ensure that creativity is productive, the most important factor appears to be a strong linkage between creative processes and market needs

Question 69

Firms innovate because they are looking for:

A)Market share
B)Leadership of the industry
C)A competitive advantage
D)Lower costs

Question 70

Creating the conditions conducive to innovation is the most important challenge that firms face in technology-based industries

Question 71

Strategic management of innovation and technological change

A)Cannot be managed
B)Can contribute to a firm's competitive advantage
C)Exists only in technology-intensive industries
D)Tries to influence or direct technological change before it occurs

Question 72

Technology and innovation can be used to build competitive advantages

Question 73

A standard is a format, an interface, or a closed system that does not allow interoperability

Question 74

Competitive advantage and technology are linked by:

A)Innovation
B)Corporate culture
C)Invention
D)Organizational culture

Question 75

There are two main strategies available to exploit innovation

Question 76

If one compares the two concepts of invention and innovation, one would conclude that:

A)They are exactly the same
B)They have nothing in common
C)They describe two close but different phenomena
D)Distinguishing the two concepts is a waste of time

Question 77

The time it will take followers to catch up is called "Catch-up lead time"

Question 78

'Freedom to design' means two firms legally having access to use each other's patents through a cross licensing agreement

Question 79

All resources and capabilities needed to support the development of innovations and bring them to market are the "complementary resources"

Question 80

For a firm, a strategic window is a period of time when its capabilities need to be aligned with the available opportunities in the market