Frontiers of Entrepreneurship Research
1997 Edition

SUMMARIES

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OPPORTUNITY RECOGNITION:  DEFINING THE  ATTRIBUTES OF DISCONTINUOUS INNOVATION AS A STARTING POINT FOR NEW BUSINESS FORMATION 

Names
Mark P. Rice
Donna J. Kelley

Rensselaer Polytechnic Institute
Troy, NY 12180

Telephone: 518-8398
Fax: 518-8661

Principal Topics

Many researchers suggest that a discontinuous innovation does not earn this designation until its impact is felt on the market or industry; consequently, much research explores the process after fact, that is, after an innovation has proven to be discontinuous in the market. Yet an innovation with the potential to alter a market or transform an industry will first create impacts on the innovating firm.

Both researchers and practitioners have recognized that projects involving discontinuous innovation may require different management practices compared to those required for incremental innovation.  The examination of attributes must occur in the project's earliest stages, however, to be of benefit to the innovating firm in its choice of management strategies and practices.

Discontinuous innovation has been described as a risky, uncertain, disruptive, and costly undertaking. While incremental innovation is characterized as predictable and well understood by the innovating organization, discontinuous innovation is said to conflict with the established structure, requiring new procedures, and demanding changes in the firm's resource base. Researchers have defined the multiple impacts of discontinuous innovation along varying dimensions, but provide little consensus to guide recognition of its attributes.

This research seeks to understand the methods firms use to define a project as potentially discontinuous, and the characteristics or dimensions upon which evaluation is based. The study will focus on opportunity recognition and evaluation the front end of the new business formation process.

Method

This research is part of a three year study of managerial practices associated with the discontinuous innovation process in large, multinational corporations. This study, now in its second year, is funded by the Sloan Foundation and involves a multidisciplinary team of faculty researchers from Rensselaer. The research sample comprises six large, multinational, U.S. based firms. Although these firms are quite diversified, their primary operations are represented within the following industry segments: semiconductors, computers, industrial chemicals, industrial gases, motor vehicles, and motors and generators. These firms have identified projects that do not fit existing practices, in which major impacts on the market and industry are anticipated. For the six firms, a total of eight discontinuous innovation projects are examined.

The researchers are using a case study methodology to analyze transcripts of in depth interviews conducted by themselves and the rest of the Rensselaer research team. The Rensselaer team has interviewed company personnel that have been directly or indirectly associated with these projects.  For each company, the group of interviewees represents several management levels and a cross section of disciplines. The Rensselaer research team is currently completing its second round of interviews. It is anticipated that sufficient data collection and analysis will be completed prior to the conference to permit us to present preliminary insights.

Major Findings

Applications arena
* Fundamental improvement to an existing application
* Unique direction from current applications
* New product application

Further the key questions asked by the project teams concerning technology are as follows.
1.  What development effort is needed beyond the breakthrough to demonstrate technical feasibility?
2.  What technical issues need to be resolved to incorporate this technology into a system or end product?
3.  What implications do these technology and application factors have on the technology and production systems of the firm in these early stages?

These attributes and these questions provide the basis for the firms' decision to pursue innovation and a foundation for determining how to best manage commercialization efforts.

Implications

The competitive advantage created by firms who have initiated and implemented major new changes in their industry verifies the importance of research concerning discontinuous innovation. Many authors have cited the need for firms to balance the short term benefits of incremental innovation with radical improvements based on discontinuous innovation. Research that seeks to understand the management practices associated with the discontinuous innovation process is therefore valued for its practical implications. This study will be of interest to researchers who are exploring opportunity recognition and evaluation in a variety of venturing environments.

 

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