Episode 167      23 min 06 sec
Radically new: Team values, market intelligence and creating innovative products

Technology management analyst Professor Chris L. Tucci unpacks the interaction between market intelligence and team ideology in companies that create innovative products. Presented by Eric van Bemmel.

"It's a very tough thing to say how much market feedback should we be getting for a radical product. For a radical product, you know, you do want to have some, you may want to ignore some, but you should do that for a very good reason and be conscious of it." -- Professor Chris L. Tucci




           



Prof Christopher L. Tucci
Professor Christopher L. Tucci

Christopher L. Tucci is Professor of Management of Technology at the École Polytechnique Fédérale de Lausanne (EPFL), Switzerland, where he holds the Chair in Corporate Strategy & Innovation. He received the Ph.D. in Management from the Sloan School of Management at the Massachusetts Institute of Technology. His prior work experience was as an industrial computer scientist at Ford Aerospace, where he was involved in developing Internet protocols in the 1980s.

Dr. Tucci’s primary area of interest is in technological change and how waves of technological changes influence entrant / incumbent dynamics. He is also studying how the technological changes brought about by the popularization of the Internet affect firms in different industries. He is the co-author of the books Nurturing Science-Based Ventures and Internet Business Models and Strategies, and has published articles in, among others, Strategic Management Journal, Management Science, IEEE Transactions on Engineering Management, Research Policy, Communications of the ACM, Strategic Entrepreneurship Journal, and Journal of Product Innovation Management.  Professor Tucci is the Technology & Innovation Management Department Editor for the IEEE Transactions on Engineering Management and on the Editorial Board of Organization Science.  In 2004, he was elected to the five-year division leadership track of the Academy of Management’s Technology and Innovation Management (TIM) Division, serving as the Program Chair in 2005 and the Division Chair in 2007.  In 2010, he was elected to the leadership track of the Strategic Management Society's Strategy & Entrepreneurship Division.

Credits

Presenter: Eric van Bemmel
Producers: Kelvin Param, Eric van Bemmel
Audio Engineers: Gavin Nebauer
Voiceover: Nerissa Hannink
Series Creators: Eric van Bemmel and Kelvin Param

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VOICEOVER 
Welcome to Up Close, the research talk show from the University of Melbourne, Australia. 

ERIC VAN BEMMEL 
I’m Eric van Bemmel, thanks for joining us.  A few episodes ago on Up Close we looked at innovative firms, specifically the inventors in such organisations and how they fair when they're swallowed up by other companies.  We asked how can they, how do they stay creative.In this episode, we return once again to commercial product innovation, but this time we're asking in the area of radical new product development, how do factors such as external market intelligence and user feedback interact with the values of the actual developers working in their teams to bring highly innovative products to market.  When commitment, even ideology, is strong among innovators and their managers, are they able to listen to what the market has to say?Joining us in the studio is Professor Christopher Tucci, chair in corporate strategy and innovation at the École Polytechnique Fédérale de Lausanne, or EPFL in Switzerland.  Chris has researched, written and taught extensively on how companies manage technology to gain competitive advantage.  Chris is visiting the University of Melbourne to speak at a seminar organised by the Intellectual Property Research Institute of Australia and it gives us great pleasure to have him along on Up Close today.Thanks Chris.

CHRIS TUCCI
Thanks for having me.

ERIC VAN BEMMEL
Chris you've done research into variables in new product development that examines how data from the market, from consumers, real potential, is viewed and used by product innovations teams in the development process itself.  An important variable here is the very outlook, the attitude, the values of the teams themselves towards their creations and towards the needs that these creations are intended to address in the market.  We'll get into some of that research in a moment, but I want to just back up and talk about, well, a radical product.  What is a radical product?

CHRIS TUCCI
That's a great question.  You know there's a lot of different ways people think about radical products and radical innovation.  It's something that's very new, new to the world, that's very different and some people might say game-changing.  The opposite would be the incremental one which would be just building on something that's already there and making some minor change.

ERIC VAN BEMMEL
Listeners could probably relate to digital technologies, things for example, like the iPad from Apple Computer.  These would be considered radical products when they come out.

CHRIS TUCCI
Yeah, it's really taken off with this iPad in some sense.  Peter Golder wrote this great article in Marketing Science of trying to trace back the history of some of these big innovations and found out a lot of them were having their beginnings 100 years before they became commercial successes.  So the iPad, you know, is something that's taking a tablet PC, making it very easy to use, making it very seamless, integrate it with what customers really want, listening to music and being able to send messages and take photos and interact.  Putting together all the pieces to one thing took off really well commercially.

ERIC VAN BEMMEL
But importantly, these are gambles as well.

CHRIS TUCCI
Yeah.

ERIC VAN BEMMEL
I mean if we're talking about Apple Computer, which is many radical innovative products coming out, some of them don’t do very well, or haven't.  For those listeners who remember, the Newton which was actually a tablet computer that came out in the early '90s.

CHRIS TUCCI
Yeah, kind of a smartphone slash - yeah, like a PDA.

ERIC VAN BEMMEL
Exactly, PDA, which is a term you don't hear very much these days.

CHRIS TUCCI
Yeah, don't hear anymore.  But the Newton, in the marketplace, didn't do very well, it took a chance.  Apple hasn't necessarily come out with new radical products like clockwork.  Some of them have been flops and some of them haven't.  That's the way normally it is, I would say.

ERIC VAN BEMMEL
If we look at the normal practice for firms that are undertaking the development of new products, let's put “radical” aside for the moment, what are the sort of normal steps that takes place even before development itself begins?

CHRIS TUCCI
Okay, well the kind of standard approach is you've got your R&D facility or whatever…

ERIC VAN BEMMEL
Research and development.

CHRIS TUCCI
Yeah, research and development facility and you might have a bunch of projects going to a very concept level. And so the standard approach is usually to go through a bunch of stages and to bring them closer and closer to market over time and to have little controls, little checks every once in a while to weed them out so you can get rid of some that you don’t think are going to be very good, either from a technical point of view or eventually from a market point of view.  So the early ones are more the technical side, so you've got your projects going on, you've got people working on them, making proposals, developing prototypes, getting to this stage, trying to decide if we can actually pull this off technically.Then of course you have an idea at the beginning that it's going to be a success, that there's going to be a market for this and usually there's some preliminary market research going on and then you're winnowing them out and then you're saying we're going to move on with this next project.  And then, eventually, it gets closer and closer to market and then you get less and less concerned with the technical feasibility because that should have been proven at some point and you have a go/no go decision on whether or not you want to try and commercialise something.  Then you're going to get it into the marketplace or start doing testing to see whether there's a market for this thing and then eventually getting out to market.  So that's kind of the standard…

ERIC VAN BEMMEL
Well worn path?

CHRIS TUCCI
…well worn path for product development.  It's actually not a bad thing.  It's actually quite good.  Every company has to do this to some degree, right?

ERIC VAN BEMMEL
It's the rule book that you can rely on pretty much.

CHRIS TUCCI
Right.

ERIC VAN BEMMEL
But when we look at more radical new product development, what separates it from conventional development in terms of the challenges for the managers for these firms?

CHRIS TUCCI
Well there are a lot of different ways of organising these things and you may have a radical product come right out of that process too.  But what a lot of people would argue is that the internal mechanisms inside the firm tend to be too conservative.  So if you have too many controls during the time that you're bringing this thing through, that it might squelch and force you into a more incremental product than what you could have.There are a couple of different ways people have talked about handling these things.  One way is simply what they call more open innovation processes from the point of view of getting ideas from a larger pool, not being afraid to bring things in, even if they weren't developed by your own people at the very, very, very beginning.  So someone might get something partially done and have an idea and approach you and you might say, yeah I'll do that, I'll buy you, I'll take a licence out on that, et cetera.  So it's bringing in the ideas at different stages from lots of different people.And then the second idea is really more about incubating ideas or having a project that's offsite or greenfield or some kind of skunkworks or something where we're kind of keeping it protected from the rest of the defence mechanisms of the company in some sense, to be able to bring something more different to market.  So people talk about corporate ventures.  Corporate ventures is an example as you create a skunkworks operation, you give them a budget, you say here, you're a start up.  In some companies they actually say, we'll give you equity or we'll give you a kind of phantom equity, either one, in this product.  So you're going to run it like a start up company and you're going to bring something new to market.  There you could have a lot of chances for doing something that's quite different as well.

ERIC VAN BEMMEL
Now Chris you mentioned the term skunkworks a few times there.  What is skunkworks?

CHRIS TUCCI
It's setting up a separate organisation.  It could be something simple.  It could be putting people in a different building, usually it is. And it usually also involves not having them go through the same chain of command that we normally do for product development process.

ERIC VAN BEMMEL
They have special privileges these people?

CHRIS TUCCI
Special privileges, yeah.  I mean you might not want to have that go through the same control system that we normally have.  So you might want to pitch it up at a higher level.  In some cases, Proctor & Gamble's famous for setting up a whole new venture group that was separate, reporting to the CEO, trying to come up with a way of cross-fertilising some of the ideas from their different departments, et cetera.  So it's kind of a separate operation, it's in a different location that people would be more free to try and develop something that would be different, new, radical, that's the idea of a skunkworks operation.

ERIC VAN BEMMEL
In this area of radical product development, there's a lot of market uncertainty.  You and others have written about the need for exploratory market learning.  Can you explain what that is?

CHRIS TUCCI
Yeah, well there's this kind of debate, how much do you want to listen to the market.  There's a literature out there which says, well you need to be aware of what's going on in the market.  The idea is some companies may not be looking at the market at all.  They may just be ignoring it.

ERIC VAN BEMMEL
It's hard to believe.

CHRIS TUCCI
Yeah, but it happens.  There are other companies that are very forward thinking, scanning, trying to see what people want.  Now to bring it back to the radical ideas, if you listen to the market too much, it actually might be preventing you from getting something radical.  If you're constantly seeking customer feedback, you may give the customers exactly what they want right now, but you can't imagine what they want 10 years from now or five years from now because you're too focused on getting their feedback.

ERIC VAN BEMMEL
It's akin to poll driven politics…

CHRIS TUCCI
Yes, exactly.

ERIC VAN BEMMEL
…which seem to lack vision.

CHRIS TUCCI
Right, exactly.  Changing what you're working on, what you say you're interested in doing right now because the people say they want right now.  So you tend to change course or maybe you can do something quick, but probably not going to give you some game-changing new product.  So usually when people think of market orientation or market learning and things like that, it's a way of thinking about do you scan the environment, do you try and understand what people want, do you bring information into your company, do you disseminate it, do you try and use it and try and learn from the market.Some of the things that I've been working on is how much do you want to ignore some of this stuff, do you need to?  That's why sometimes I say well go into the skunkworks operation, go into a different building, go into a different state, do something completely different and not necessarily seek a lot of market feedback.  So it's like trade off.  You don't want to have a company that's not very market oriented in some sense because eventually that would tend to fall apart.  On the other hand, for a particular product or a particular new product, maybe you don't want to overly solicit, to use your example, the poll driven politics.

ERIC VAN BEMMEL
On Up Close this episode we're speaking with technology management expert Professor Chris Tucci about factors that impact on teams developing radical new products.  I'm Eric van Bemmel and we're coming to you from the University of Melbourne, Australia.Now Chris the research literature into product innovation talks about the need to acquire and disseminate market information, exploratory market information to have the effect of speeding product development, to better the chances of success of products.  This is sort of coming out of the management literature.  But you and your research collaborator, Luca Berchicci, have argued that how and to what extent firms communicate and use that information in development process is not actually well understood.

CHRIS TUCCI
Yeah, it's funny.  It's clear that you do need to get some market information and getting market information can be good.  But what we're looking at in a few cases was, well what if you don't actually use the information that you get?  You've got your own views, passion is driving, you really want to come up with something different.  So you might want to actually not listen.  If someone says, I want this, you say, well that's fine, but that’s because you're too bound to the present and I've got something I'm thinking about for the future.

ERIC VAN BEMMEL
This is where team values, the term you use, comes in.

CHRIS TUCCI
Yeah, exactly.

ERIC VAN BEMMEL
What do you mean by team values?

CHRIS TUCCI
Team values, we're thinking about what's the vision of the project.  In that shared vision of the project, what are some of the key components of it?  We actually said it was almost ideology.  In the beginning we called it ideology, but we kind of scaled it back a little.  Ideology has a kind of a negative ring to it in some sense.  But it's not necessarily a bad thing, it's just that that's what you define as your vision and it could be very strong.  So it could be this has to be very innovative or this has to be very environmentally friendly, this has to make people feel powerful, whatever, when they're using it, to name some kind of values that people have.  So it's kind of the characteristics of a vision of the new product that you've got when you're working in this team to develop something new.

ERIC VAN BEMMEL
And you and Luca Berchicci were wondering whether these values, this ideology in some way mediated the way that market information was received and used by innovation teams.

CHRIS TUCCI
Yeah, that's what we did.  I mean we were looking specifically at the development of this Mitka product, this new mobility vehicle where Luca was actually a participant observer in this process so he…

ERIC VAN BEMMEL
So what was the Mitka?  This is a product that was begin developed a few years ago in the Netherlands, an innovative radical product that was used by you and your collaborator to study as a way that innovative teams actually take on information.

CHRIS TUCCI
That's right.  So we were able to track all the product development decisions from this Mitka consortium as they tried to develop something that they said was going to change the game essentially for commuters.  It was a mobility vehicle; eventually it became a three-wheeled mobility vehicle, but the idea was to take people - not bicyclists, because bicyclists are already riding to work on their bicycles - the idea was we're going to get some car drivers to stop driving their car, so it's electric assisted…

ERIC VAN BEMMEL
Environmentally friendly.

CHRIS TUCCI
…environmentally friendly vehicle and this is part of the driving force of this thing.  Very, very clear at the beginning, we want this to be - so we talk about the team values - it's going to be a unique thing, it's going to be very environmentally friendly, we really want to get these people off the roads in their cars and make it to so that they can get to the office on a reasonable commute without polluting so much.

ERIC VAN BEMMEL
So the mean value wasn't we want to make a whole lot of money?

CHRIS TUCCI
Well, yeah, that's never a - usually a very good fundamental premise for radical innovation, in my opinion.  In some cases the money will come, but that certainly wasn't the idea here.  They were very driven by environmental friendliness and about this idea that it was going to be something very different.  So that’s the kind of issue of team values and what we were doing then was exploring their solicitation and then use of market learning techniques, so market feedback.

ERIC VAN BEMMEL
What did you find?

CHRIS TUCCI
Well in this particular case, they were very attuned to market feedback, so they wanted feedback and they solicited it in a variety of different ways.  They were involved with [the] Nike operation in the Netherlands and they were able to ask people what they were doing and how they were getting to work and they were able to bounce designs off.

ERIC VAN BEMMEL
This was the market research?

CHRIS TUCCI
Yeah, tell us what you think, what do you want and how are you going to use these things and how do you get to work.  As the product evolved, they were out there looking for market feedback and they were taking it in.  So what we were finding though is that in certain cases they were actually listening to the feedback.  But in other cases, they were ignoring the feedback.  Is this about a specification for the product or is this about the whole concept of the product itself.  So we tried to code the suggestions relative to the team values.So like a big suggestion that came in early on was, you know, it's going to have three wheels and so you'll sit in it and you'll ride it and if you need help, it will have some kind of boost for your own human energy.  So a lot of people said, well actually we don't want a three wheel, we want a two wheel.  It was pretty strong actually and of course that's okay for the environmental friendly part, but for the innovation part, it's like well that's just another electric assisted bicycle then.  So those kinds of suggestions were ignored.  What happened in the end was that they were not able to bring it to production.  There were too many problems with it and one of the partners that was there was able to commercialise and they actually went with a commercial two-wheeled vehicle which sort of threw out getting the car drivers off the road, that's…

ERIC VAN BEMMEL
Not particularly radical, either.

CHRIS TUCCI
It wasn't very radical.  I wouldn’t say it was worse for the environment, but it wasn't of big benefit to the environment either.  But it was a commercial success and they tended to take a lot of the feedback that was received during that period and they were able to listen to it in some sense and give people what they wanted, which ended up not being a very radical product, but it was a successful product.  So it's kind of an interesting story about listening to the market, ignoring it maybe in certain places. And what we ended up talking about here was that in the beginning stages, maybe you don't want to listen to the market.  If you're coming up with something very radical, maybe, but as you get closer and closer, you definitely want to get some kind of market input and you kind of have to decide if you're ignoring something it's for a good reason.

ERIC VAN BEMMEL
This is Up Close coming to you from the University of Melbourne Australia.  I'm Eric van Bemmel.  In this episode we're asking technology management researcher and educator Professor Chris Tucci how the very values of innovators in technology companies may impact on how they listen to and respond to the market.So Chris you also, I believe, found that the type of information that people are getting from the market and how they interact with that in terms of their values is different as well?

CHRIS TUCCI
Yeah, what we were doing is we're trying to categorise the feedback in terms of was it concept oriented, was it product feature oriented feedback and what we found was that product features were very well received.  If it's a windshield, a windscreen that was a different size or better able to do something, that was something we can quickly do.  In this particular case, they were embracing these things.  Concept things, you know…

ERIC VAN BEMMEL
Broader picture stuff?

CHRIS TUCCI
…broader picture stuff…

ERIC VAN BEMMEL
Like make it two wheels rather than three?

CHRIS TUCCI
Yeah.

ERIC VAN BEMMEL
It's harder to swallow, isn't it?

CHRIS TUCCI
It's harder to swallow, yeah and if it's clashing - I don't know what the answer to this is in terms of the internal decision making of a team, but I think to be aware of it is probably one of the biggest things that you could do.  If you find something clashing with your values and the market's telling you to do one thing and you basically say, well that's really not what we had in mind for the vision of this whole thing, rather than simply delete it or just move on, it might be worth considering why is it that they want it and why is it that it's not comfortable for you in this product development process.  I think that's the part that's hard.Sometimes you want to ignore them, but you should ignore them in a conscious way and say, no, no, we're not doing that because that's really in conflict with what we really want to do here.  I'd rather not have a product than have another incremental product based on the same old thing that we've been doing for 20 years or whatever.

ERIC VAN BEMMEL
To what extent, if an innovation team decides not to listen to certain information, not to take it on board, how much of it is like a rejection because they feel conceptually this is not where they want to go or how much of it is actually what you call a confirmation bias that is basically not even hearing these things because you have a biased ear?

CHRIS TUCCI
That's right.  That's the point about making a conscious decision.  In many cases it's just ignored.  I'm just not going to listen…

ERIC VAN BEMMEL
I didn't even hear it.

CHRIS TUCCI
Right, I didn't hear it, it's gone, you know?  What did you say?  So what you would want to do in a situation like that was you've got something that's conflicting with your vision and then instead of saying, what did you say, you're really saying, okay why is the market telling me this, they don't want this and maybe I should ignore them anyway.  That's fine.  But to simply ignore them without realising that you're ignoring them, that's the danger part, because they're sending you some signal for some reason, usually.
ERIC VAN BEMMEL
So just finally Chris, what are the implications for managers of innovative firms here in terms of what your study has shown and what the literature says?

CHRIS TUCCI
There are lots of different implications.  Part of this is you want to have a portfolio, for sure.  You're going to have a lot of projects that are going at the same time, you're going to have some things that are building on your current projects and you're going to have other ones and those things might have different organisation structures, you may have a different place for them, a different physical location, different organisational location for those things.  Those are going to be giving you the mix that you need to keep going with your company.In terms of the product development process itself, you've got the standard way of doing controls and checks and you've got stage-gate and bringing a product to market and you've got these corporate ventures or these kinds of skunkworks or some kinds of teams that are producing something that may be very, very different.  Inside those teams, you want to be conscious of what you're doing and you want to be bouncing that very tricky trade off.  I'm not saying it's an easy job.  It's a very tough thing to say how much market feedback should we be getting for a radical product.  I understand for an incremental product you want to have lots of market feedback constantly, you want to listen to it very carefully and you want to follow up on it.For a radical product, you know, you do want to have some, you may want to ignore some, but you should do that for a very good reason and be conscious of it.  So I think that's the management implications of this line of research.

ERIC VAN BEMMEL
Chris, we'll leave it there.  I want to thank you very much for being our guest today on Up Close.

CHRIS TUCCI
It's been a real pleasure. Thanks a lot.

ERIC VAN BEMMEL
That was Professor Christopher Tucci, chair in Corporate Strategy and Innovation at the École Polytechnique Fédérale de Lausanne or EPFL in Switzerland.  We've been speaking about new product development and how values may impact on how innovation teams listen to and use market information and what that might mean for the success of the products themselves.On that topic of commercial product innovation, listeners may also be interested to hear episode 154 of this program where we look at what factors impact on creativity when innovative firms are swallowed up by other companies.  Relevant links, a full transcript and all our episodes can be found at our website at upclose.unimelb.edu.au.  Up Close is a production of the University of Melbourne Australia.  This episode was recorded on 21 October 2011 and produced by Kelvin Param and me, Eric van Bemmel. Audio engineering by Gavin Nebauer.  Up Close is created by me and Kelvin Param.  Thanks for joining us.  Until next time, good bye.


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