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Describes the challenges Steve Grossman, a fourth-generation owner of a small commercial printing company, must face amid industry consolidation, technological changes, and his own run for public office.

Some companies are better at scouting out new market opportunities than others are. Those that lack the time or the talent for this work should consider outsourcing it to reconnaissance experts.

Diversity, cohesiveness, and autonomy may seem critical to the creative work that teams do. But new research shows that too much of those things can thwart innovation.

Not long ago, it seemed far-fetched to think that feature films could be made on computers. Pixar cofounder Ed Catmull discusses how his company turned improbability into reality with the blockbusters Toy Story, A Bug's Life, and Monsters, Inc.

Regions where social ties are tight are the worst places to put your innovation operations. Look instead for communities that promote tolerance, diversity, and creativity.

HomeStar's reputation for being "the first, the best, the only" name in appliances is under threat. For the second time in six months, upstart competitor Vanguard has pulled off a market coup: Its retro line of refrigerators, ranges, and dishwashers is a huge hit. Meanwhile, HomeStar's latest big idea--jumbo appliances--is bombing. CEO Hal Marden is chagrined: How did the company lose its edge? Kelly Dowd, HomeStar's head of marketing, blames Charlie Hamad, the company's chief engineer. Charlie is so focused on developing smart appliances--products that can cook, clean, and even shop--that he's lost touch with the changing marketplace, Kelly complains. Global competition is growing, and consumers' tastes are changing. Now, more than ever, churning out new products is critical to HomeStar's success. But Charlie, a 27-year veteran who has spearheaded almost every major technological advance in the industry, pooh-poohs the new, flashy products: "Form over function. Nothing new there but a fancy paint job and higher prices." Hal is torn. Charlie is a hero to him, but what if the market doesn't go for networked appliances? The company simply can't afford to put all its eggs in one basket. What's more, the biggest trade show of the year is just six months away, and HomeStar has nothing new to offer. Vanguard, meanwhile, is making product announcements every quarter. Is it time for Charlie to move on? How can HomeStar get its R&D efforts back on track? In R0208A and R0208Z, four commentators--Ideo's Tom Kelley, Whirlpool's Philip Pejovich, Thayer School of Engineering's Lewis Duncan, and Ealing Studios' John Kao--offer advice in this fictional case study.

Some organizations repeatedly come up with great ideas, even though each act of innovation is really a leap of imagination that can't be taught or predicted. But even if they can't exactly replicate those successes, can other organizations learn from them? HBR's editors asked 16 innovation experts--leaders but not necessarily inventors themselves--one question: "What's the one thing you've done that most inspired innovation in your organization?" Some of them--like Nolan Bushnell, who founded Atari; CEO Michael Dell; and venture capitalist Esther Dyson--emphasize the importance of letting people experiment and take risks. Hal Tovin, an executive vice president of a financial group, and John Talley, a pharmaceutical researcher, believe that hiring people with widely divergent skills and talents sets the stage for increased innovation. Larry Keeley, the president of an innovation strategy firm, encourages others to innovate in customer service, business models, and networking. Luciano Maiani, the director general of the European Organization for Nuclear Research (CERN), states the case for pure science by claiming that it drives innovation as much as markets do. These experts and others pull back the curtain on the mysteries of innovation.

In most companies, investments in innovation follow a boom-bust cycle. For a time, the cash flows. Then, as the economy sours or companies rethink their priorities, the taps go dry. But when research budgets are slashed, the strong projects are often abandoned along with the weak ones. When disruptive changes in the competitive landscape come, companies are caught flat-footed. Sustainable innovation requires a new approach: Instead of being largely isolated projects, innovation initiatives need to gain access to the insights and capabilities of other companies. But how can businesses traffic in such sensitive information without giving their competitors an advantage? The answer, the author contends, lies in a practice that's been common since the Middle Ages: the use of independent intermediaries to facilitate the exchange of sensitive information among companies without revealing the principals' identities or motives and without otherwise compromising their interests. A network of innovation intermediaries would be in a unique position to visualize new opportunities synthesized from insights and technologies provided by several companies--ideas that might never occur to businesses working on their own.

How much of innovation is inspiration, and how much is hard work? The answer lies somewhere in the middle, says management thinker Peter Drucker. In this HBR classic from 1985, he argues that innovation is real work that can and should be managed like any other corporate function. Success is more likely to result from the systematic pursuit of opportunities than from a flash of genius. Indeed, most innovative business ideas arise through the methodical analysis of seven areas of opportunity. Within a company or industry, opportunities can be found in unexpected occurrences, incongruities of various kinds, process needs, or changes in an industry or market. Outside a company, opportunities arise from demographic changes, changes in perception, or new knowledge. There is some overlap among the sources, and the potential for innovation may well lie in more than one area at a time. Innovations based on new knowledge tend to have the greatest effect on the marketplace, but it often takes decades before the ideas are translated into actual products, processes, or services. The other sources of innovation are easier and simpler to handle, yet they still require managers to look beyond established practices, Drucker explains. The author emphasizes that innovators need to look for simple, focused solutions to real problems.

Consistent innovation is the key to market leadership. Outstanding companies know that and build their success on it. And other organizations can do the same, the author explains in this HBR article from 1988, by making a systematic effort to concentrate on five key activities. Start at the top. Innovation begins with a CEO or general manager who believes change is the way to survive. Spread that mind-set through the organization by setting challenging, measurable goals; getting everyone focused on beating a specific competitor; and supporting individuals who take risks. Allow innovation to rise. New ideas need champions, sponsors, a mix of creative types (for ideas) and operators (to keep things practical), and separate systems to get ideas to top management early and quickly. Know the competitive dynamics of your business cold. A realistic strategic vision will channel innovative efforts to ideas that will pay off in the marketplace. Determine where innovation lives. Look hard at your customers to find new segments, at your competitors to see what's already working, and at your own business to determine where you can leverage existing strengths. Once an idea is well developed, go for broke. Set priorities. Think through every step of the launch.

Champions of virtual corporations urge managers to subcontract anything and everything. And because several high-profile corporate giants have been outperformed by more nimble, "networked" competitors, the idea of the virtual organization is tantalizing. Many executives have come to believe that a company that invests in as little as possible will be more responsive to a changing marketplace and more likely to attain global competitive advantage. But is that really the best way to organize for innovation? In this HBR article from 1996, Henry Chesbrough and David Teece argue that the virtual corporation has been oversold. Innovation is not monolithic. For some innovations, joint ventures, alliances, and outsourcing can play a useful role. But for others, they are inappropriate--and strategically dangerous. The authors present a framework to help managers determine when to innovate by going virtual, when to form alliances, and when to rely on internal development. They provide a range of cases to illustrate how to match organizational strategy to the type of innovation being pursued. Long-term success requires considerable and sustained investment within a company.

Creativity is often touted as a miraculous road to organizational growth and affluence. But creative new ideas can hinder rather than help a company if they are put forward irresponsibly. Too often, the creative types who generate a proliferation of ideas confuse creativity with practical innovation. Without understanding the operating executive's day-to-day problems or the complexity of business organizations, they usually pepper their managers with intriguing but short memoranda that lack details about what's at stake or how the new ideas should be implemented. They pass off onto others the responsibility for getting down to brass tacks. In this classic HBR article from 1963, the author, a professor emeritus at Harvard Business School and a former HBR editor, offers suggestions for the person with a great new idea. First, work with the situation as it is--recognize that the executive is already bombarded with problems. Second, act responsibly by including in your proposal at least a minimal indication of the costs, risks, manpower, and time your idea may involve. Extolling corporate creativity at the expense of conformity may, in fact, reduce the creative animation of business. Conformity and rigidity are necessary for corporations to function.

Many of the greatest discoveries happen by accident, not design. Innovations often emerge not at the center of a company's field of focus, but at its periphery, hidden in the mass of work done in the pursuit of some other goal. Everyone knows that innovation is risky, and it's rare that you arrive at your expected destination. But maybe the destination isn't so important. Maybe what you should be paying attention to are the little detours along the way: It's down those back roads and byways that the real payoff usually is found. The discovery of penicillin and the creation of e-mail are just two examples of such stumblings into brilliance.

HomeStar's reputation for being "the first, the best, the only" name in appliances is under threat. For the second time in six months, upstart competitor Vanguard has pulled off a market coup: Its retro line of refrigerators, ranges, and dishwashers is a huge hit. Meanwhile, HomeStar's latest big idea--jumbo appliances--is bombing. CEO Hal Marden is chagrined: How did the company lose its edge? Kelly Dowd, HomeStar's head of marketing, blames Charlie Hamad, the company's chief engineer. Charlie is so focused on developing smart appliances--products that can cook, clean, and even shop--that he's lost touch with the changing marketplace, Kelly complains. Global competition is growing, and consumers' tastes are changing. Now, more than ever, churning out new products is critical to HomeStar's success. But Charlie, a 27-year veteran who has spearheaded almost every major technological advance in the industry, pooh-poohs the new, flashy products: "Form over function. Nothing new there but a fancy paint job and higher prices." Hal is torn. Charlie is a hero to him, but what if the market doesn't go for networked appliances? The company simply can't afford to put all its eggs in one basket. What's more, the biggest trade show of the year is just six months away, and HomeStar has nothing new to offer. Vanguard, meanwhile, is making product announcements every quarter. Is it time for Charlie to move on? How can HomeStar get its R&D efforts back on track? In R0208A and R0208Z, four commentators--Ideo's Tom Kelley, Whirlpool's Philip Pejovich, Thayer School of Engineering's Lewis Duncan, and Ealing Studios' John Kao -- offer advice in this fictional case study.

HomeStar's reputation for being "the first, the best, the only" name in appliances is under threat. For the second time in six months, upstart competitor Vanguard has pulled off a market coup: Its retro line of refrigerators, ranges, and dishwashers is a huge hit. Meanwhile, HomeStar's latest big idea--jumbo appliances--is bombing. CEO Hal Marden is chagrined: How did the company lose its edge? Kelly Dowd, HomeStar's head of marketing, blames Charlie Hamad, the company's chief engineer. Charlie is so focused on developing smart appliances--products that can cook, clean, and even shop--that he's lost touch with the changing marketplace, Kelly complains. Global competition is growing, and consumers' tastes are changing. Now, more than ever, churning out new products is critical to HomeStar's success. But Charlie, a 27-year veteran who has spearheaded almost every major technological advance in the industry, pooh-poohs the new, flashy products: "Form over function. Nothing new there but a fancy paint job and higher prices." Hal is torn. Charlie is a hero to him, but what if the market doesn't go for networked appliances? The company simply can't afford to put all its eggs in one basket. What's more, the biggest trade show of the year is just six months away, and HomeStar has nothing new to offer. Vanguard, meanwhile, is making product announcements every quarter. Is it time for Charlie to move on? How can HomeStar get its R&D efforts back on track? In R0208A and R0208Z, four commentators--Ideo's Tom Kelley, Whirlpool's Philip Pejovich, Thayer School of Engineering's Lewis Duncan, and Ealing Studios' John Kao--offer advice on this fictional case study.

ING Direct USA is a direct bank operating in the United States. Launched in September 2000, it offers a small menu of simple banking products available to customers online, via telephone, mail or fax. In September 2001, the global head of ING Direct asked the president of ING Direct USA, if he would consider adding e-brokerage to the portfolio of ING Direct USA's direct banking products. The president of ING Direct USA is approaching the decision to add e-brokerage to the ING Direct USA portfolio with care. He first has to decide if it makes sense to add this new service. If he decides to add it, he has to consider if he will build the capability in-house or purchase an existing player.

A student at a large Boston-area university would soon be completing a dual degree in Management Information Systems and Business Administration. She is the oldest child and only member of a Japanese family that spoke English and was learning to represent the family business, Kashiwa Tubing, with its international accounts. It was planned that she would eventually assume leadership of the company. During her studies she became a believer in the potential and reach of the Internet. She immediately set up a Web site for the company. Within six months, the Web site generated its first major sale, a $2.5 million order from Saudi Arabia. Recently, she had begun to negotiate a multi-million dollar deal with a Taiwanese firm. The company's Japanese headquarters recently forwarded an inquiry from Nigeria. The inquiry was from a member of the Federal Ministry of Works and Housing, proposed a business transaction that would, if successful, represent the largest single Internet order in the history of Kashiwa Tubing. Believing in personally meeting with customers and building long lasting ties, her father suggests that she should meet with this customer, even if that meant traveling to Nigeria.

This case can be used in management of international business courses to illustrate the analysis of market attractiveness, the importance of fit between firm capabilities and market requirements, and the effects of multimarket competition. It describes the international expansion challenges facing EAC Nutrition, the infant formula division of a Danish conglomerate, in early 2002. Growth in EAC's core markets of Thailand and Malaysia has stagnated and EAC is contemplating three expansion options: entry into India, geographic expansion within China, and product line expansion in existing markets.

This is an MIT Sloan Management Review article. The product development process is often seen as an undependable black box that rarely produces results that exceed business expectations. Traditional financial models have limited success exposing the numerous product development risks that underlie the assumptions in a typical business case. Applying the same rules to development as they do to research, managers often accept unpredictable performance as normal. Most companies' evaluation and approval processes are driven by accounting-based metrics such as discounted cash flow or net present value (NPV) that make understanding the underlying risks of development difficult for decision makers. When risk is discussed in the business case, technology uncertainty is often confused with product development risk, and the narrative discussion of risk is designed more to persuade than inform. In this environment, decision makers are often hard-pressed to evaluate the potential commercial success of the new product development investment. With an approach called "net present value, risk-adjusted," author Craig R. Davis, CFO of product development consulting firm Product Genesis, offers an operational framework that gives decision makers quantitative tools to evaluate relative project risks. He shows how to integrate these tools into existing stage-gate methodologies to create a risk-adjusted NPV that considers the impacts of product portfolio, user needs, and technical and marketing risks. The framework also provides insights into the value of additional research in advance of full commitment to development. The framework provides a vocabulary appropriate for complex technology products in medical, commercial, and industrial products but is easily adapted to the unique terms, methods, and measures for each risk assessment area.

In 1995 Haiti's banking sector undergoes reformtwo important aspects of which are a lowering of the reserve requirement on banks and a lifting of the interest rate ceiling on loans. These reforms give banks the opportunity to expand their lending activities, but who to lend to? Some banks turn to the informal sector, which dominates the Haitian economy, and to microfinance as a way to serve entrepreneurs working in this sector. Pierre-Marie Boisson, Chief Economist of Sogebank, the largest bank in Haiti, begins selling the idea of microfinance to his board of directors in the late 1990s. By 2000 the new microfinance affiliate of Sogebank, Sogesol, opened its doors for business. A year later it has 2,200 active clients and has extended over 4,500 loans. As expected Sogesol is incurring losses, but it had built a sound operational base with the help of Accion International, which is a part-owner and technical assistance provider. Its challenge for the coming year is to further improve its productivity to maximize the number of clients each of its loan officers serves and to expand beyond metropolitan Port-au-Prince to Haiti's provincial towns. Beyond these internal challenges, Sogesol faces two external threats. Competition from other microfinance providers not only threatens its market share, but, more ominously, threatens to create overindebtedness of entrepreneurs in the informal sector. The solution to this problem is a credit bureau system that allows lenders to share information about their borrowers. But a central bank effort in the mid-1990s to institute such a system failed, and it is unclear who will lead a renewed effort. The other external threat Sogesol faces is the uncertain regulatory environment in which it is operating. Haiti has no microfinance regulations, and Sogesol is operating under the umbrella of Sogebank's bank regulations. HKS Case Number 1657.0