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For decades, U.S. companies have been outsourcing manufacturing in the belief that it held no competitive advantage. That's been a disaster, maintain Harvard professors Pisano and Shih, because today's low-value manufacturing operations hold the seeds of tomorrow's innovative new products. What those companies have been ceding is the country's industrial commons - that is, the collective operational capabilities that underpin new product and process development in the U.S. industrial sector. As a result, America has lost not only the ability to develop and manufacture high- tech products like televisions, memory chips, and laptops but also the expertise to produce emerging hot products like the Kindle e-reader, high-end servers, solar panels, and the batteries that will power the next generation of automobiles. To rebuild the commons and restore its wealth-generating machine will require government and industry in the United States to make two drastic changes: (1) The government must change the way it supports basic and applied scientific research to promote the broad collaboration with business and academia needed to tackle society's big problems, and (2) Corporate management practices and governance structures must be overhauled so they no longer exaggerate the payoffs and discount the dangers of outsourcing production and cutting investments in R&D. Restoring the ability of enterprises to develop and manufacture high-tech products in America is the only way the country can hope to pay down its enormous deficits and raise its citizens' standard of living.

Nowadays, virtually no companies innovate alone. Firms team up with a variety of partners, in a wide number of ways, to create new technologies, products, and services. But what is the best way to leverage the power of outsiders? To help executives answer that question, Pisano, of Harvard Business School, and Verganti, of Politecnico di Milano, developed a simple framework focused on two questions: Given your strategy, how open or closed should your network of collaborators be? And who should decide which problems to tackle and which solutions to adopt? There are four basic modes of collaboration, say the authors. An elite circle is a closed network with a hierarchical governance: One company selects the participants, defines the problem, and chooses the solution. For instance, Alessi, an Italian home-products company, invited 200 outside experts in postmodern architecture to contribute ideas for new home-product designs. An innovation mall is hierarchical but open: Anyone can post a problem or propose solutions in it, but the company posting the problem chooses the solution. An example is InnoCentive.com, an eBay-like site where companies post scientific challenges. An innovation community is open and decentralized: Anyone can propose problems, offer solutions, and decide which ideas to use - as happens in the open-source software community Linux. A consortium is a private group of participants that operate as equals and jointly select problems, decide how to conduct work, and choose solutions. IBM has set up a number of consortia with other companies to develop next-generation semiconductor technologies. No one approach is superior; each involves strategic trade-offs. When choosing among modes, firms must weigh their advantages and challenges, and assess which will work best with their strategy, capabilities, structure, and assets.

Considers the development of Amazon Web Services (AWS), a division of Amazon.com, Inc., specializing in the provision of web-based storage and computing services to web developers. The case focuses on the issues facing Andy Jassy, the head of AWS, in 2008 as AWS faces increased competition from established technology giants, such as Google, Microsoft, and IBM. Students are asked to consider whether entry into web services by Amazon, which had established its brand in retail, represented a prudent move by the company. The case provides an opportunity to highlight the benefits of AWS' variable pricing for developers and to determine where overlaps exist between Amazon's core retailing business and AWS. Students are also provided with an opportunity to discuss operational diversification and its limits within the AWS context.

Considers the situation facing David Barger, President and CEO of JetBlue Airways, in May 2007 as he addresses the airline's need to slow its growth rate in the response to increasing fuel costs and the effects of major operational crisis for the airline in February 2007. In 2005, JetBlue-typically viewed as a low-cost carrier (LCC)-made a move that is often considered antithetical to the LCC model. Specifically, JetBlue moved from a single aircraft type (i.e., the Airbus 320, or A320) to a fleet with two types of aircraft by adding the smaller Embraer 190, or E190. Students are initially asked to consider the impact of this decision on JetBlue's operations strategy and business model. They are then asked to consider how the reductions in aircraft capacity growth should be spread across the two plane types. This discussion hinges not only on issues of aircraft efficiency but also on those of operational focus and the ultimate competitive priorities of the airline as a whole.

Columbus Tubing must choose to improve an old technology (steel) or to develop a new material (carbon fiber). The decision must take into account a complicated context: increased demand for the "old" steel products made in Italy, increasing power of carbon fiber manufacturing partners in Asia, growing wage rates in Asia, and high wage rates in Italy. Two plans have been presented to the CEO, Antonio Colombo. The first is to push development of all of the company's technologies, perhaps even seeking new markets for them. The second is to rationalize operations and to redirect R&D resources to marketing of stylish, lower-tech bicycles. The company's future hangs in the balance.

Amp Up, a wildly popular electronic-music game, is the brainchild of KMS's cherished programmers, who now spend their time trying to keep customers dazzled with upgrades. But a couple of start-ups have ripped off the idea using their own code - which is open source. Now they're demanding that KMS float with the rising tide and join the open-source community. How could the company make money without its IP? And why should it try? Four experts comment on this fictional case study in R0804A and R0804Z. Jonathan Schwartz, the CEO of Sun Microsystems, says that if KMS is confident it knows what its customers will want next - and if it's content with a small corner of the market - it should stay proprietary. But it will pay a reputational price. Eric Levin, the executive vice president of Techno Source, suggests that KMS take a middle path: license its software to third-party companies and add features to promote community building. This approach could fund itself through royalties or fees and would allow KMS to approve or veto third-party products. Gary P. Pisano, of Harvard Business School, points out that an open-source strategy could increase Amp Up's rate of improvement, enhance users' satisfaction with the game, and reduce KMS's development costs. But if the company stops competing on the basis of its code, it had better be sure of the strength of its downstream capabilities. Michael J. Bevilacqua, of the law firm WilmerHale, warns that KMS risks greater liability for intellectual-property infringement if it joins the open-source community, where code carries no guarantee that it doesn't infringe on someone's IP rights and providers offer no indemnification.

Amp Up, a wildly popular electronic-music game, is the brainchild of KMS's cherished programmers, who now spend their time trying to keep customers dazzled with upgrades. But a couple of start-ups have ripped off the idea using their own code - which is open source. Now they're demanding that KMS float with the rising tide and join the open-source community. How could the company make money without its IP? And why should it try? Four experts comment on this fictional case study in R0804A and R0804Z. Jonathan Schwartz, the CEO of Sun Microsystems, says that if KMS is confident it knows what its customers will want next - and if it's content with a small corner of the market - it should stay proprietary. But it will pay a reputational price. Eric Levin, the executive vice president of Techno Source, suggests that KMS take a middle path: license its software to third-party companies and add features to promote community building. This approach could fund itself through royalties or fees and would allow KMS to approve or veto third-party products. Gary P. Pisano, of Harvard Business School, points out that an open-source strategy could increase Amp Up's rate of improvement, enhance users' satisfaction with the game, and reduce KMS's development costs. But if the company stops competing on the basis of its code, it had better be sure of the strength of its downstream capabilities. Michael J. Bevilacqua, of the law firm WilmerHale, warns that KMS risks greater liability for intellectual-property infringement if it joins the open-source community, where code carries no guarantee that it doesn't infringe on someone's IP rights and providers offer no indemnification.

IBM's "Radical Collaboration" model has been an innovative approach to meeting the challenges of the huge R&D and capital investments that are needed to stay competitive in the global semiconductor industry. This model has required a rethinking of what is proprietary, and what is shared, and where do the boundaries of cooperation end and competition begin. IBM and its partners have managed to stay competitive at, for example, the 45 nm node, at a far lower cost than firms that "go it alone," and there is a large benefit from a larger funnel of ideas and diverse points of view. It also reshapes what firms can use to build competitive advantage, or it necessitates a rethinking at least.

Capturing value from innovation requires innovators to figure out how to blunt inroads into the profit stream by imitators, customers, suppliers, and other providers of complementary products and services. In making strategic decisions around technology commercialization, managers often assume that the intellectual property environment and the architecture of the industry are beyond their control. This need not be so. Shows how managers can shape both the appropriability regime and the architecture of the industry in ways that can benefit the innovator by blunting the actions of others who may endeavor to tap into the stream of profits generated by innovation. Even small firms can play important roles. Tools include putting information into the public domain, helping to shape standards, and promoting modularity.

Describes an operational crisis for JetBlue Airways during an ice storm in the eastern United States in February 2007 and chronicles the airline's immediate response. Provides detail concerning the history of the airline from its founding in 1999 through the February 2007 crisis, which forced the airline to cancel more than 1,000 flights over the course of six days. In addition, discusses the initial response to the crisis by CEO David Neeleman and his management team. Students are provided with the opportunity to evaluate this response in terms of its impact on customer relations, growth prospects, and ongoing operations for JetBlue.

Describes the reorganization of the drug discovery organization at Wyeth Pharmaceuticals and focuses on the decisions to: (1) centralize decision-making within drug discovery and (2) institute numerical metrics--jointly affecting all R&D scientists--for the progression of compounds through the Wyeth pipeline. Highlights issues concerning the degree to which scientific activity can be evaluated via numerical metrics, the extent to which R&D can be structured as a process, and the degree to which decision-making should be centralized in commercial R&D activities.

In 1976, Genentech, the first biotechnology company, was founded by a young venture capitalist and a university professor to exploit recombinant DNA technology. Thirty years and more than $300 billion in investments later, only a handful of biotech firms have matched Genentech's success or even shown a profit. No avalanche of new drugs has hit the market, and the long-awaited breakthrough in R&D productivity has yet to materialize. This disappointing performance raises a question: Can organizations motivated by the need to make profits and please shareholders successfully conduct basic scientific research as a core activity? The question has largely been ignored, despite intense debate over whether business's invasion of basic science--long the domain of universities and nonprofit research institutions--is limiting access to discoveries, thereby slowing advances in science. Biotech has not lived up to its promise, says the author, because its anatomy, which has worked well in other high-tech sectors, can't handle the fundamental challenges facing drug R&D: profound, persistent uncertainty and high risks rooted in the limited knowledge of human biology; the need for the diverse disciplines involved in drug discovery to work together in an integrated fashion; and barriers to learning, including tacit knowledge and murky intellectual property rights, which can slow the pace of scientific advance. A more suitable anatomy would include increased vertical integration; a smaller number of closer, longer collaborations; an emphasis by universities on sharing rather than patenting scientific discoveries; more cross-disciplinary academic research; and more federal and private funding for translational research, which bridges basic and applied science. With such modifications, science can be a business.

An abstract is not available for this product.

An abstract is not available for this product.

Teradyne, a leading manufacturer of semiconductor test equipment, embarked on a multiyear effort to improve its product development capabilities and to implement more formalized project management approaches. Examines the development of a new-generation tester that involved significant hardware and software design. For this, the company decided to implement new approaches to project management and project teams. Invites discussion of the effectiveness of these approaches and the general lessons for the management of product development.

Examines the product development strategy and processes of the Ducati motorcycle racing team during the 2003-2004 Grand Prix seasons. Invites discussion of appropriate design and development strategies to facilitate learning across product generations. Specifically, examines the trade-offs inherent in an "integral" vs. "modular" approach to product design and the impact on learning. Also enables students to explore the behavioral aspects of development strategy and, in particular, the impact of initial success on perceptions of competence and risk taking.

Vertex Pharmaceuticals, Inc., a drug discovery company that recently decided to pursue a vertically integrated business model, chose to build up its clinical development and commercial capabilities and infrastructure. For the first time in its history, Vertex will select two drug candidates from its internal research portfolio of four projects to develop on its own, without the help of strategic partners. CEO Joshua Boger and President Vicki Sato are grappling with which two projects to select. Focuses on how to select projects and how to manage the process of portfolio selection.

Describes Flextronics' evolution from providing outsourced manufacturing services for original equipment manufacturers (OEMs) in the electronics industry to developing entire unbranded products for purchase by OEMs. In 2001, Flextronics began a development program that yielded several unbranded cell phones that--even by the admission of several OEMs--delivered performance comparable to that of branded products at a significantly lower cost. Nonetheless, as of early 2003, no major OEM had yet agreed to purchase any of these phones from Flextronics. As chairman and CEO of Flextronics, Michael Marks must decide how aggressively to pursue full product development.

Istituto Clinico Humanitas is a newly built private hospital, south of Milan, Italy, that has attained unusual profitability while treating public system patients. The hospital was built and is managed by Techosp, a subsidiary of Techint, a global engineering and consulting firm. Techosp created a design and management system that emphasizes optimizing patient throughput and utilization of all of the hospital's facilities. Physicians are all fully employed and have a significant financial incentive to maximize efficiency. The executive team is now considering whether to affiliate with the University of Milan medical school and, in effect, become Italy's first private academic medical center. The general manager must consider the effect of this affiliation on the hospital's performance.

Biogen is a successful biotech company facing a critical juncture. CEO John Mullen ponders how technological changes introduced into the research function will shape larger corporate decisions. This world in which biotechnology companies operated had changed dramatically over the past few years. Parts of biology were rapidly evolving from being an individualistic, wet lab, bench-science driven field toward one where scientists manipulated huge amounts of data and divided up research steps into a factorylike production process. At the same time, the cost of developing a drug and bringing it to market had ballooned, from an estimated $231 million in 1991 to $802 million in 2000. Biogen was conservative in adopting new genomics tools. This case describes how the company decided to bring in house the latest genomics in silico tools and applied them to the discovery and research phase for drug development. The company also then restructured its research strategy. As the new tools and early-phase research began to bear fruit, Mullen realized that they implied significant changes down the road for other parts of Biogen.