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Managing radical innovation: an overview of emergent strategy issues

September 2003
Journal of Product Innovation Management 19(6):424 - 438

DOI:10.1111/1540-5885.1960424

Authors:

Christopher M. McDermott

Rensselaer Polytechnic Institute

Gina O'Connor

Rensselaer Polytechnic Institute

Despite differences in definitions, researchers understand that radical innovation within an organization is very different from incremental innovation [13,17,21] and that it is critical to the long-term success of firms. Unfortunately, research has also shown that it is often difficult to get support for radical projects in large firms [14], where internal cultures and pressures often push efforts toward more low risk, immediate reward, incremental projects. Interestingly, we know considerably less about the effective management of the product development process in the radical than in an incremental context. The purpose of this study is to explore the process of radical new product development from a strategic perspective, and to outline key observations and challenges that managers face as they move these projects to market. The findings presented here represent the results of a longitudinal (since 1995), multidisciplinary study of radical innovation projects. A multiple case study design was used to explore the similarities and differences in management practices applied to twelve radical innovation projects in ten large, established North American firms. The findings are grouped into three high-level strategic themes. The first theme, market scope, discusses the challenges associated with the pursuit of familiar versus unfamiliar markets for radical innovation. The second theme of competency management identifies and discusses strategic challenges that emerge as firms stretch themselves into new and unfamiliar territory. The final theme relates to the people issues that emerge as both individuals and the project teams themselves try to move radical projects forward in organizations that are not necessarily designed to support such uncertainty.

Uncertainty reduction in radical innovation.

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Summary of strategic themes

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Managing radical innovation: an overview of emergent strategy issues

Christopher M. McDermott*, Gina Colarelli O’Connor

The Lally School of Management and Technology, Rensselaer Polytechnic Institute, Troy, NY 12180-3599, USA

Received 29 July 1999; accepted 4 December 2001

Abstract

Despite differences in deﬁnitions, researchers understand that radical innovation within an organization is very different from

incremental innovation [13,17,21] and that it is critical to the long-term success of ﬁrms. Unfortunately, research has also shown that it is

often difﬁcult to get support for radical projects in large ﬁrms [14], where internal cultures and pressures often push efforts toward more

low risk, immediate reward, incremental projects. Interestingly, we know considerably less about the effective management of the product

development process in the radical than in an incremental context. The purpose of this study is to explore the process of radical new product

development from a strategic perspective, and to outline key observations and challenges that managers face as they move these projects

to market. The ﬁndings presented here represent the results of a longitudinal (since 1995), multidisciplinary study of radical innovation

projects. A multiple case study design was used to explore the similarities and differences in management practices applied to twelve radical

innovation projects in ten large, established North American ﬁrms. The ﬁndings are grouped into three high-level strategic themes. The ﬁrst

theme, market scope, discusses the challenges associated with the pursuit of familiar versus unfamiliar markets for radical innovation. The

second theme of competency management identiﬁes and discusses strategic challenges that emerge as ﬁrms stretch themselves into new and

unfamiliar territory. The ﬁnal theme relates to the people issues that emerge as both individuals and the project teams themselves try to move

radical projects forward in organizations that are not necessarily designed to support such uncertainty.

A breadth of subtopics emerge within and across this framework relating to such ideas as risk management, product cannibalization, team

composition, and the search for a divisional home. Taken together, our observations reinforce the emerging literature that shows that project

teams engaging in radical innovation encounter a much different set of challenges than those typically faced by NPD teams engaged in

1. Introduction

The development of new businesses and product lines

based on breakthrough innovations—which is critical for

renewal of a ﬁrm’s competitive position—requires manage-

ment practices that differ substantially from those required

for incremental innovation. While incremental innovations

are typically extensions to current product offerings or log-

ical and relatively minor extensions to existing processes

[13,17], radical product innovations involve the develop-

ment or application of signiﬁcantly new technologies or

ideas into markets that are either nonexistent or require

dramatic behavior changes to existing markets. These rad-

ical innovations, in turn, provide the foundation upon which

future generations of products are manufactured. Firms that

hold the largest share in one product generation often fail to

maintain leadership when there is a shift to a new technol-

ogy [1,6,11,39,41,49]. Effectively developing radical inno-

vations, therefore, is critical to the long-term survival of

many of today’s ﬁrms. The present research examines how

ﬁrms manage the new product development process for

potential game-changers. Using a multiple case study

method, we explore and document the development process

within twelve projects in nine manufacturing ﬁrms over the

course of four years.

2. Radical innovation and the ﬁrm

Innovation is deﬁned as a new technology or combina-

tion of technologies that offer worthwhile beneﬁts. This

deﬁnition does not delineate the degree of departure from

existing technology and practices [13,17,18]. Major inno-

vations require new skills, levels of market understanding,

leaps in new processing abilities, and systems throughout

the organization. The newly developed product or process is

* Corresponding author. Tel.: ⫹1-518-276-4861; fax: ⫹1-518-276-

8661.

E-mail address: mcderc@rpi.edu (C.M. McDermott).

The Journal of Product Innovation Management 19 (2002) 424–438

PII: S0737-6782(02)00174-1

so distinct from current and existing activities within the

ﬁrm that the process of bringing the product to market may

not closely parallel that of any existing products within the

ﬁrm. Examples of more radical innovations include the shift

from piston aircraft engines to turbojets, the change from

steam to diesel electric locomotives, or the move from core

to semiconductor memory [49].

2.1. Deﬁnitions

Researchers are far from a consensus regarding a formal

deﬁnition of radical innovation [13,15,17,21]. Recently,

there have been attempts to understand and develop a con-

sistent and reliable multidimensional measure of radical

innovation. One reliable and valid measure developed by

Green et al. [21] incorporates four dimensions: a) techno-

logical uncertainty, b) technical inexperience, c) business

inexperience, and d) technology cost. The operational def-

inition of radical projects used in this study was consistent

with this deﬁnition.

Most breakthrough innovations require long-term (typi-

cally ten years or longer [38]) development time and mil-

lions of investment dollars. The project’s longevity means

that there is turnover among development team members

and senior management that may typically be expected to

protect such a risky project. With new management come

changes in priorities. These, coupled with other exogenous

events, add to the unpredictability of the process, and result

in numerous stops and starts, deaths and revivals before

such projects are ultimately commercialized [44].

2.2. Importance of understanding radical innovation

Despite differences in deﬁnitions, researchers understand

that radical innovation within an organization is very dif-

ferent from incremental innovation [13,17,21] and that it is

critical to the long-term success of ﬁrms. Unfortunately,

research has also shown that it is often difﬁcult to get

support for radical projects in large ﬁrms [14], where inter-

nal cultures and pressures often push efforts toward more

low risk, immediate reward, incremental projects. Interest-

ingly, we know considerably less about the effective man-

agement of the product development process in the radical

than in an incremental context. Much has been written

regarding the integrated, cross-functional approach to new

product development [12,18,20]. Concurrent engineering,

Design-For-Manufacturability, and the Stage Gate Model

[12] all aim to bring the functional areas together early and

frequently in the new product development process. This

stream of research has helped improve our understanding of

the new product development (NPD) process but has im-

plicitly focused on the development of products that are of

an incremental, evolutionary nature.

It is unclear, however, what the landscape for radical

NPD looks like, much less if these popular management

practices are at all appropriate in developing radical prod-

ucts where uncertainty, risks, and potential rewards are

much higher. In fact, there is growing evidence [2,31,45]

that these common practices may be detrimental in some

environments. In the search for speed to market, researchers

and practitioners may have been too quick to generalize the

utility of these practices across very diverse environments.

Gaining a better understanding of the landscape of radical

NPD is a critical ﬁrst step in being able to judge the

appropriateness of these common practices in this turbulent

environment.

Since 1995, we have been engaged in a longitudinal

study of the managerial processes associated with radical

innovation. The speciﬁcs of the study are outlined below.

Previously published works based on this research program

study radical innovation from a variety of perspectives,

including, among others, the role of manufacturing in rad-

ical innovation [30], market learning [40], and the radical

innovation process compared to conventional stage gate

approaches [24].

The discussion in the present paper out-

lines ﬁndings from a high-level, strategic perspective.

3. The study

The research presented in this article was conducted in

cooperation with the Industrial Research Institute (IRI).

This study presents the results of a longitudinal (since

1995), multidisciplinary study of the management of radical

innovation. Projects were selected for observation while

they were on-going and as a result, ﬁnal outcomes of the

projects were not yet known. We chose to collect data in

real time rather than retrospectively to control for history

effects that so often weaken case study research. While this

design parameter was chosen to limit biases that might

emerge from respondents tainting their comments in light of

the ultimate success or failure of completed projects, it also

ultimately limits the extent to which we can be prescriptive

in our analysis, at least within the context of an academic

audience. Our ﬁndings and analysis, therefore, to a large

extent describe the managerial challenges and activities we

observed in managing these projects.

Data were gathered at multiple times within each of the

ongoing projects to effectively track both progress and

learning that occurred as the project moved toward the

marketplace. Most projects have not yet been introduced to

the market and data collection will continue until they are

introduced and market and ﬁnancial performance can be

measured.

For the purpose of this study, we deﬁned discontinuous

innovation as the creation of a new line of business, both for

the ﬁrm and for the marketplace. To be selected as a study

participant, R&D management in ﬁrms identiﬁed projects

that were formed to the point of having a formal budget, an

identiﬁable team and the potential to impact the market in at

least one of the three following ways: offer an entirely new

set of performance features, offer a ﬁve to 10-fold improve-

425C.M. McDermott, G.C. O’Connor / The Journal of Product Innovation Management 19 (2002) 424–438

ment in known performance features, or offer a signiﬁcant

(30–50%) reduction in costs. As such, the projects chosen

for study tend to be new technologies (or previously untried

combinations of technologies) focused on either latent or

well-known needs, as opposed to new internal business

systems innovations.

All but two of the projects studied

emerged from the ﬁrm’s R&D lab, having moved from the

realm of pure scientiﬁc research to becoming a business

case. They were viewed internally as products being devel-

oped for the market, facing both technical and business/

market hurdles along the way. Thus we differentiate this

activity from corporate support of basic research (for which

there are few directed outcome requirements), which has

greatly diminished in American ﬁrms in the past 15 years.

3.1. Participating ﬁrms

Nearly all the ﬁrms that participated in this research were

members of the Industrial Research Institute (IRI), a con-

sortium of Fortune 1000 Research and Development man-

agers. IRI representatives volunteered projects on the basis

of hearing a proposal about the study at their annual meet-

ing. Volunteered projects were initially screened for appro-

priateness according to our operational deﬁnition described

above. Ultimately, the development teams selected were

from twelve ongoing projects within ten large, established

ﬁrms, including Air Products, Analog Devices, Dupont, GE,

GM, IBM, Northern Telecom, Polaroid, Texas Instruments

and United Technologies Corporation. Researchers signed

conﬁdentiality agreements prior to the interviews, so that

management practices tied to any speciﬁc project or ﬁrm are

not so identiﬁed. The projects and ﬁrms span a variety of

technologies, markets (consumer and industrial) and pro-

duction environments (materials processing, fabrication and

assembly, and both). This variety in the participating ﬁrms’

technical and market base was a deliberate research design

parameter chosen to increase the external validity of the

study’sﬁndings, and to assure that our ﬁndings are gener-

alizable and not speciﬁc to any one type of manufacturing

process, market, or industry [29,53]. Each project is more

speciﬁcally described in Appendix I.

Many of the projects we studied have been underway, in

some form or another, for ten years or more. GM’s hybrid

electric vehicle, for example, has origins that can be traced

back to the late 1960s. In an age where speed to market is

an increasingly powerful competitive priority, these projects

might appear to lumber slowly along like behemoths. This

is due largely to the magnitude of newness in the projects

themselves. In the hybrid vehicle, for example, GM clearly

recognized the appeal of the product, yet needed to work

patiently until both technologies and market infrastructures

became receptive. While other competitors strove toward

the same goals, they also faced the same stumbling blocks

along the way. It is important to acknowledge the fact that

the high levels of uncertainty surrounding these projects

drive them to be extremely long term. Even Nortel’s Ne-

tActive Channelware product, purely software based, has

not yet recouped any ﬁnancial rewards after more than six

years. Simply put, negotiating the uncertainties takes time

[7,9]. Funding stops and starts, senior management and

corporate contexts change, technical setbacks occur, and

market infrastructures must be built [33]. Not one of these

projects arose in response to a customer response or a direct

competitive threat. They persist on the basis of the nature of

the ‘big idea’and what it can offer to the marketplace [40].

This is one of the characteristics of these projects that makes

them so different from their incremental counterparts, and in

turn makes their effective management so difﬁcult.

3.2. Methodology

A multiple case study design was used to explore the

similarities and differences between management practices

across radical projects within the sample of large ﬁrms. The

study of radical innovation in large ﬁrms is rather early in its

development, and as such there exists little theoretical back-

ground upon which to draw. Case study research is espe-

cially appropriate for this type of exploratory research, with

a focus on 1) documenting a phenomenon within its orga-

nizational context, 2) exploring the boundaries of a phe-

nomenon, and 3) integrating information from multiple

sources [16,29,34]. McCutcheon and Meredith [29] argue

that case studies are a powerful tool for gathering informa-

tion and understanding the real conditions that are occurring

in organizations.

To learn about each case, we interviewed senior man-

agement (including Directors and Vice Presidents of R&D

and Corporate Development), project managers, and indi-

vidual team members. Using multiple interviewees in such

a way reduces the risk of undue inﬂuence that an individual

interview may have on the case study, and brings a richer

portrait of each case [16,19].

3.3. Data analysis

Academics from several functional areas within manage-

ment were involved in conducting this research, including

manufacturing, marketing, strategy, organizational behav-

ior, entrepreneurship, and technology policy. Observations

were compared among members of the research team at the

conclusion of each visit. Developing a convergence of opin-

ions from the various researchers involved can enhance

conﬁdence in the ﬁndings: as conﬂicting views can keep the

research from premature closure [16]. Multiple investiga-

tors made visits to case study sites in teams; this allowed the

case to be viewed from different perspectives. To uncover

and examine the key themes in the data, we used the ap-

proach outlined by Miles & Huberman [35], Yin [53] and

McCutcheon and Meredith [29]. We used a cross case or

multicase method for exploring and describing themes. This

approach allows us to understand the phenomena beyond

426 C.M. McDermott, G.C. O’Connor / The Journal of Product Innovation Management 19 (2002) 424–438

each individual ﬁrm’s context and increases the generaliz-

ability of our observations [16].

The interview data were transcribed and a representative

set of the interviews was used to establish common themes

emerging from the data. From the themes, seven general

categories emerged in which to classify the data. Each

interview was then reduced, analyzed, and coded separately

by one of the authors and a doctoral student. The results of

each independent analysis were then compared. This pattern

of coding and data reduction was repeated two more times.

This process followed the procedure suggested by Miles and

Huberman (35], pg. 57). These codes were then used to

retrieve and organize the groupings of data within each ﬁrm.

Following the same approach described by Miles and Hu-

berman [35], the second author independently developed a

set of themes from the data set that were then merged with

those developed by the ﬁrst. Observations and emerging

themes were cross-checked with other researchers involved

in the innovation study. It is important to note that, as the

study continues to evolve due to the ongoing nature of the

projects, themes will continue to emerge and evolve as well.

4. Findings

The ﬁndings from the study are framed by the three

overarching themes, summarized in Table 1. First, we de-

scribe issues that emerge as a result of the project’s choice

of market scope. Projects can be directed at markets that are

familiar territory to the ﬁrm, or may require the creation of

entirely new ones. Secondly, the ﬁrm’s approach to compe-

tency management drives a number of strategic issues. Rad-

ical innovations stretch ﬁrms beyond their current scope of

capabilities. Third, we identify that people issues at a num-

ber of levels emerge as critical strategic challenges in man-

aging Radical Innovation in the large established organiza-

tional context. Because careers advance, for the most part,

on managing efﬁciency and meeting clearly stated goals, the

development of people who understand and thrive in the

more chaotic world of radical innovation, fraught with un-

certainty and risk, is foreign to the large established orga-

nization. Thus each of these issues, and the choices ﬁrms

make within those domains, become key strategic concerns

in managing RI. Within each of these themes, a variety of

observations emerge, that, we hope, can enlighten the reader

regarding challenges and opportunities associated with cre-

ating a context wherein RI can be more effectively man-

aged.

4.1. The choice of market scope

The issue of whether or not a market exists for an

innovation is an early, critical differentiator in the chal-

lenges that project teams face in managing this process. We

observed two kinds of radical innovation. The ﬁrst serves to

strengthen the ﬁrm’s position with familiar markets by

bringing breakthrough technologies to them and advancing

the state of the art with big leaps. The appropriate SBU

home is clear, and the infrastructure for contacting custom-

ers, understanding markets, and developing sales forecasts

is understood. Five of the twelve projects were directed at

existing markets in which the ﬁrm either already partici-

pated or had the infrastructure in place to enter. The second

type of project is an innovation for which the market is not

clearly identiﬁed or developed. While these are the riskier

and more uncertain efforts, they are the ones with the

potential to move the organization in new directions that

provide rich platforms for growth. Seven of the twelve cases

ﬁt into this set. See Table 2.

4.1.1. The challenge of familiar markets

Projects targeted at familiar markets face three sets of

challenges, all of which revolve around countering resis-

tance and breaking down barriers, both within and outside

the organization’s boundaries. These include 1) ensuring

delivery of a perceptible beneﬁt, 2) managing the threat of

cannibalization, and 3) overcoming market resistance to the

technology.

In two of the ﬁve projects that have been commercialized

so far, the beneﬁt that was delivered did not measure up to

the promised level, or was not immediately perceptible by

customers. In both cases the technology was incorporated

into an existing platform as the next incremental innovation

in the natural progression of a product family. Depending on

how the technology is presented by R&D in terms of ap-

plication market possibilities, this is the easiest course of

action for the business unit. Rather than considering poten-

tial application markets that may beneﬁt in discontinuous

ways from the technical discovery, we observed in these

Table 1

Summary of strategic themes

Theme Issues

Strategic choice regarding market scope Existing markets

●Delivering perceptible

beneﬁt

●Threat of cannibalization

●Overcoming market

resistance

New markers

●Finding a divisional home

●Identifying an appropriate

business model

Competency management Competency stretching as part

of radical innovation

Managing project risk

Project management tools and

interfaces

The people side of radical innovation Leadership roles

Team composition

Role of informal networks

427C.M. McDermott, G.C. O’Connor / The Journal of Product Innovation Management 19 (2002) 424–438

cases that ﬁrms opted not to invest the additional resources

to develop new potential markets, but rather allowed the

potential of the technology to be suboptimally marketed as

a next generation product in a familiar market.

Secondly, the project must manage the cannibalization of

the current line of business and the associated resistance to

the new technology by the operating unit designated to

receive the project from R&D and bring it to market.

Chandy and Tellis [10] show that a ﬁrm’s willingness to

cannibalize it’s current investments in products, assets and

organizational routines is, in fact, more important than a

ﬁrm’s size in determining its likelihood of successfully

commercializing radical innovations. We noted in one case

that the determination of which operating unit the project

team elected to work with rested on their judgment regard-

ing which one of several potential operating units would

more readily adopt the project. In another case, the R&D

team worked hard to convince the operating unit that there

‘really wasn’t that much new about this,’so as to diminish

concerns among operating unit people that they’d have to

adopt new procedures. Again, the risks associated with

these activities lie in not fully exploiting the market oppor-

tunities associated with the innovation because of the fear of

reprisal from the operating unit.

The ﬁnal challenge we identiﬁed in this market scope

category is the question of whether users will adopt the new

technology. Are the beneﬁts big enough to warrant the

change and risks associated with adoption of new usage

patterns and extreme price levels? We observed that the

familiarity of markets breeds, in some cases, an assumption

on the part of the project team that the market will clamor

for the technology even given new usage requirements that

are perceptibly less convenient than customers’current sit-

uations offer. In addition, there is a lack of understanding of

the level of investment required to develop a market under-

standing to sufﬁciently build demand. In these cases, the

promises of the big market potential that drove the project at

the outset can fail to materialize, and the ﬁrm risks the

withdrawal of the operating unit’s support.

4.1.2. The challenge of market creation

We identiﬁed two challenges unique to project teams that

chose market applications unfamiliar to the ﬁrm. In contrast

to the challenges of familiar markets, in which project teams

were required to counter resistance and barriers, the chal-

lenges of unfamiliar markets lie in requirements to proac-

tively invest in building and creating new domains both

within and outside the corporation. Speciﬁcally, these in-

clude 1) where to locate this business within the ﬁrm, given

that it has no obvious operating unit home, and 2) how to

build an effective business model that takes advantage of

the potential the innovation offers.

Unlike most incremental new product development ef-

forts, project teams on most of these radical innovation

projects found the need to actively search for a divisional

home for their products. Too often, they simply did not ﬁt

neatly within existing business structures. Some were

avoided because they were a threat to existing operations,

and others were viewed as an obligation for the potential

host to take on short-term debt. Yet the projects pushed on.

[Divisions] can’t look away from us because they do

recognize there is a competitive threat. They really wish

that we would go away along with all the other compet-

itors’R&D people, but we won’t and our competitors

won’t. So they have to face the fact that there may be a

paradigm change. When it comes time to try to transfer

this technology to [the division], that technology had

better be good and it better sell itself, because they don’t

understand it, they didn’t develop it, they don’t neces-

sarily trust us.

Table 2 illustrates the divisional home for each project.

(One project ended up with multiple product platforms,

each ﬁtting into a different part of the organization, and so

this is indicated as 1a, 1b and 1c). There were new divisions

Table 2

Divisional homes for projects

Natural home

in a current

operating unit

Force ﬁt into

a current

operating unit

New division New market

targeted Spin out Unclear/not

yet resolved

P1A ●●

P1B ●

P1C ●●

P2 ●

P3 ●

P4 ●

P5 ●●

P6 ●

P7 ●●

P8 ●

P9 ●

P10 ●●

P11 ●●

P12 ●●

428 C.M. McDermott, G.C. O’Connor / The Journal of Product Innovation Management 19 (2002) 424–438

created for two of the projects, and one was spun out of the

organization, but the vast majority were either clear ﬁts or

force-ﬁtted into an existing division.

We observed a gap in attention to this transition process.

There was no recognized mechanism in place to move the

development of the project forward to a level acceptable by

the operating unit. Operating units typically require a focus

on the development of the initial entry application, the

development of the list of initial potential customers, the

ﬂeshing out of the business plan, complete with forecasts for

which there is some comfort level, and some additional

engineering development effort. Yet R&D was often pri-

marily focused on technical feasibility. When transitions to

the business unit were made before this market development

effort is invested, we observed two consequences. One was

that the project was allowed to wither in the operating unit

because the level of effort required to further its develop-

ment was not rewarded by conventional operating unit

based performance metrics. The second was that the project

manager is forced to comply with conventional SBU pro-

cedures and submit a business plan with a forecast that he

had no conﬁdence in. In one case we observed, the forecast

numbers were not met, and the project manager (who had

been associated with the project almost from its origin and

was transferred with it to the business unit), was sidelined

and ultimately left the company. While it is beyond the

scope of this study to state conclusively what would help in

such situations, our observations certainly tend to support

the proposition that a formally recognized transition group

of some form might provide assistance in bridging this gap.

The second critical issue that arises in moving into new

markets is how the opportunity should be leveraged to make

money, or the form that the business model should take.

There are typically many choices and many unknowns. The

initial promise of a large market may have driven the

project, but how to develop it, capture it, and ensure that

returns are worth the effort are not trivial issues. Seven of

our twelve projects can be categorized as projects that were

directed at creating new markets.

Deriving the best business model takes time and exper-

imentation. One project is developing a product platform

that will offer entirely new features to the entertainment

industry. The project team’s business model has changed

four times. It has gone from the concept of selling its

technology to the public via the internet and gaining reve-

nue from internet merchants, to selling it to producers of

music and video games on a contract basis, to creating a

series of alliances that will allow the ﬁrm to collect a small

fee every time a consumer uses their technology, and ulti-

mately, returned to the ﬁrst model as the infrastructure has

developed to support it. Discovering how the market struc-

ture works, ﬁguring out how the ﬁrm will participate in it in

terms of what it will offer and how the ﬁrm will ally with

other partners to complete the offering is a critical part of

new market creation. Interestingly, many project teams did

not recognize the signiﬁcant investment of time and talent

required to do this successfully. As one project team mem-

ber told us

“We’ve invested $60 million in developing this technol-

ogy. I don’t want to have to invest another $60 million

to develop the market!”

Even when the project team did recognize these require-

ments, their expectations and those of the management of

the ultimate business unit that would commercialize the

technology frequently were misaligned regarding how much

time and investment was required to build new markets.

4.2. Competency stretching and risk management

The second overarching strategic decision is how com-

petency development is managed. The idea of competencies

has been discussed extensively in the literature [26,42], and

there is much debate about its deﬁnitions and key elements.

Prahalad and Hamel [42] deﬁne core competence as the

“collective learning in the organization, especially how to

coordinate diverse production skills and integrate multiple

streams of technologies.”(pg. 82) Two deﬁning attributes of

competencies are that they are not easily imitated and that

they provide ﬁrms access to new markets. This idea of core

competence is frequently used to explain the process by

which ﬁrms extend product lines in an incremental way.

However, this notion of core competence was also an ob-

servable phenomenon within our study. Consistent with the

Prahalad and Hamel deﬁnition above, we observed the

projects building extensively off their respective ﬁrms’

unique scientiﬁc, manufacturing, and market knowledge to

effectively move their radical products toward the market-

place.

In their popular work on the subject, Tushman and

Anderson [47] suggest that competencies can either be en-

hancing, where they further a ﬁrm’s leadership position

through extension of strengths, or destroying, where they

replace existing strengths and incumbent ﬁrms. While the

projects we studied clearly provided support for these con-

cepts, an additional phenomenon emerged as well, which

we label competency stretching. This stretching took the

form of moving to a new direction for the ﬁrm (either

technologically or through markets). It was not strictly com-

petency enhancing, because it required the creation of truly

new abilities and knowledge within the ﬁrm. This is one of

the key elements of radical innovation projects, and is one

that distinguishes them from more incremental efforts. They

are more than just enhancing or destroying. The very nature

of many of the projects stretches the ﬁrm into new direc-

tions and ventures. Every project team we observed engaged

in learning and stretching the ﬁrm into new competency

domains.

Our observations imply that competency destruction, en-

hancing, and stretching are separate, yet critical activities

for long-term growth and renewal of large established or-

ganizations. As we will discuss, we observed a number of

429C.M. McDermott, G.C. O’Connor / The Journal of Product Innovation Management 19 (2002) 424–438

activities that were used to reduce the risk associated with

stretching. Further research is needed to explore this rela-

tionship between competency destroying, competency en-

hancing and competency stretching more deeply. For exam-

ple, the increasingly popular notion of “spinning out”

breakthrough innovations poses signiﬁcant questions when

put in the light of competency stretching, as it might imply

that this practice undermines long-term internal competency

growth and development.

4.2.1. Managing risk associated with competency

stretching

Fig. 1 depicts project characteristics classiﬁed along di-

mensions of technical and market uncertainty. This ﬁgure

derives from a long history of researchers and consultants

attempting to classify new product initiatives. Moriarty and

Kosnik present a taxonomy of marketing [36] and NPD [37]

situations based on technological and market uncertainty.

The authors note that the quadrant of high uncertainty on

both dimensions requires “high-tech”marketing principles,

skills and tactics, which differ from the marketing strategies

applied to the other three quadrants. Finally, Veryzer [50]

classiﬁes innovations along the dimensions of newness of

product capability and newness of technological capability.

He labels those innovation efforts that operate in the ad-

vanced technology and enhanced capability (as perceived

by the market) as technologically and commercially discon-

tinuous. Projects operating in this realm encounter high

degrees of uncertainty, in that perceived value from the

market may focus on features of the technology not antic-

ipated by the developers [50].

This conceptual framework is useful not only to aca-

demic researchers, but also to those in industry as well.

When presented with the generic form of this matrix, mem-

bers of the Industrial Research Institute found it familiar,

and labeled the upper right quadrant “suicide square,”

indicating their understanding of the risk in working in

contexts characterized by high levels of uncertainty on mul-

tiple fronts.

We observed three approaches to reduce these risks.

These include 1) leveraging from known capabilities, 2)

outsourcing, and 3) choosing not to face all the issues of

uncertainty concurrently.

4.2.1.1. Leveraging from known capabilities

Each ﬁrm’s unique, historical knowledge of the enabling

technologies served to lower their risk. All projects in the

study built upon some form of strong technical competence

(as opposed to innovating in a completely new area). By

building off of existing strengths, ﬁrms effectively shifted

their project’s location on the grid in Fig. 1 away from the

upper right quadrant (high technological and market uncer-

tainty). Unique manufacturing knowledge and history in

working with a material, for example, acted to make devel-

oping the project less uncertain for the innovating ﬁrm than

it would be for a competitor. In one case, the ﬁrm had

acquired a number of scientists with unique capabilities in

ceramics research. When the ﬁrm went through a divesti-

ture, these scientists were retained rather than retired, and

were told to focus on a very speciﬁc problem for which the

ﬁrm had no solution. Within a very short period, the project

we studied was initiated, due to those unique capabilities

that allowed for a wholly novel approach to the problem.

R&D managers apply the label ‘hinging’to the concept of

leveraging the known in one area to strengthen one’s pros-

pects as they move into unknown territory.

Outsourcing was a second approach we observed for

managing risk. It is less and less common for ﬁrms of today

to perform all of their critical development activities in

house, yet this notion of outsourcing poses distinct chal-

lenges for more radical projects [10]. In every project we

studied, alliances of some form or another were created to

ﬁll competency gaps deemed absolutely critical to the suc-

cess of the project, yet not available in house. These gaps

could be either technical or market based. Through the use

of alliances, ﬁrms were able to progress their breakthrough

projects without having all the skills internally, and were

able to reduce their own risk and move out of suicide

square, at least temporarily. In most cases, these were very

tightly managed partnerships, to the extent that the team

chose to use them to develop competencies and learn over

time. In one project, for example, the team leader believed

that the majority of value in the business his invention

would enable would not be in manufacturing the novel

computer chip, but rather in designing the newly enabled

applications onto the chip. His team, therefore, strived to

ﬁndaﬁrst customer/partner who would design the applica-

tion, and who would fully disclose the know-how for cre-

ating that design to the project team. Other potential part-

ners appeared to offer applications with bigger market

promise earlier, but they were not chosen because the

project team chose to strategically partner to maximize

learning and competency development. In other cases, how-

Fig. 1. Uncertainty reduction in radical innovation.

430 C.M. McDermott, G.C. O’Connor / The Journal of Product Innovation Management 19 (2002) 424–438

ever, the teams managed the partners with a more hands off

relationship, and depended on the partner to take on the risk

and concomitant learning that resulted. This occurred in

three of the projects we observed. In one project, the team

recognized that the application possibilities for the technol-

ogy they were developing were far removed from any mar-

kets the ﬁrm had previous experience with and, in fact, the

project team recognized that they likely could not envision

most of the more interesting ones. Rather than choosing to

probe and learn [27,40] on their own, they hired an outside

agency with marketing expertise to identify the most likely

applications areas and the key potential customers in those

arenas.

The third mechanism project teams used to manage risk

was simply to ignore it and choose not to learn for a period

of time, that is, to shelter the project team from some of the

risks and issues by not attending to them. For example, one

project team expected their technological innovation to re-

sult in a substantial cost reduction to the customer. The team

worked for more than seven years on the assumption that

the cost reduction would be realized, without ever testing it.

By simply ignoring one set of uncertainties (or assuming

them away), teams could focus their energies on addressing

another. While, at many levels, this may seem like danger-

ous behavior, it was nonetheless a common mechanism we

observed. Actively managing so much uncertainty was un-

palatable, so they would choose to ignore an entire set so

they could at least make progress on something.

The observation that radical innovation projects do not

operate constantly in the high market, high technology un-

certainty quadrant of Fig. 1 may seem surprising since we

have used that conceptual framework to deﬁne radical in-

novation. But the dynamic nature of the project’s evolution,

and the management techniques applied to this chaotic en-

vironment are what we document here. What is reﬂected in

the cases we observed is a way to temporarily suspend parts

of the uncertainty so that attention can be focused on one or

two problems at a time; not all of them simultaneously.

4.2.2. Project management tools and interfaces

The tools and techniques associated with good project

management in incremental NPD could not be applied in the

same manner in radical innovation projects. Traditional

approaches are based on planning and controlling resources,

based on clearly deﬁned objectives, a set schedule and a

known budget. Such techniques as PERT/CPM are staples

of classic project management, yet seemed largely unwork-

able in environments wrought with such uncertainty and

large-scale changes. Uncertainties that crop up are treated as

exceptions to the well-deﬁned development path, and are

handled via appropriated “slack time”that’s built in to the

budget [43]. Various approaches have been proposed for

managing innovation projects under conditions of high un-

certainty [8,32,46]. Each of these writings deﬁnes a disci-

plined approach to innovation development, allowing for

mistakes, discovery of false assumptions, and unexpected

outcomes through actions described as ‘recycle’or ‘redi-

rect.’Similarly, Leonard-Barton’s [25] concept of ‘failing

forward’and Lynn, Morone and Paulson’s [27] concept of

‘probing and learning’are tools that require ﬂexible, trial

and error approaches to managing projects with high levels

of uncertainty.

Consistent with these writings, managers in the projects

we observed were oriented toward a different set of issues

than allocating resources and controlling them towards pre-

dictable outcomes. In fact, many of them were concerned

about protecting their team from scrutiny if and when they

experienced failure. One team leader, for example, main-

tained two sets of Gantt charts. One he used to manage

senior management’s expectations, and the other he used to

really track progress on the team. He did not put anyone’s

names next to the tasks listed, because he didn’t want

anyone to get targeted as failures if deadlines were missed.

He knew his team was engaged in very highly uncertain

technical development, and the only thing that was certain is

that they couldn’t predict with accuracy the pace at which

progress would be made.

We also observed that, due to the critical contribution of

alliance partners in radical innovation, project managers

devoted signiﬁcant time and effort to ﬁnding partners for the

purpose of accessing competency based resources, and ne-

gotiating appropriate relationships. Beyond ﬁnding the part-

ners, managing the relationships for competency develop-

ment was a continuing challenge. In one case, the

partnership and codevelopment work went extremely well,

but in others, the project team found themselves oftentimes

having to develop the intellectual property themselves and

handing it off to the partner, or oversee the relationship very

tightly such that there was no reduction in workload. In two

cases where development was outsourced completely,

project teams expressed regret because they not only had

not gained the expertise they desired, but, in both cases,

were unhappy with the result offered by the partner. In one

of those cases, the project shut down completely due to the

failure of the partner to deliver the necessary technology.

Intellectual property concerns that previously caused ﬁrms

to steer clear of alliances for breakthrough projects are now

a critical challenge for RI project managers and their parent

companies. Thus the well-intentioned desire to reduce un-

certainty through outsourcing needs to be closely moni-

tored, as it can result in a drain on managerial time and

resources, as well as a potential loss of control and missed

opportunity for competency stretching.

In addition to the project management challenges posed

by external partners for accessing new competencies, we

observed project leaders working to manage interfaces be-

tween the radical project and the mainstream organization

for the same purpose. We noted a tension across the projects

between the need to incubate them and the need to interact

with the mainstream. Other writers have also noted that

boundary-spanning activities vary widely across types of

teams [4,5]. Isolation may protect the project from the

431C.M. McDermott, G.C. O’Connor / The Journal of Product Innovation Management 19 (2002) 424–438

counterproductive forces within the mainstream, but it also

cuts the project off its most important sources of learning,

competencies and resources. Further, projects that remained

in protection mode too long had trouble gaining legitimacy

when seeking a home. A key aspect of an RI project man-

ager’s job, we observed, was to manage this balance appro-

priately. Sometimes the environment was hostile, and other

times apathetic. Both had to be overcome in order for the

project manager to be able to leverage the ﬁrm’s assets

optimally.

4.3. The people side of radical innovation

Three issues emerge from the data with respect to the

role of individuals in radical innovation. These include

leadership roles, the composition of the team, and informal

networks.

4.3.1. Leadership roles

There were two primary, critical groups of leadership

roles we observed in these projects. In our discussion below,

we discuss not only what function these Sponsors and

Champions played in the development process, but also

situations where the uncertain environment posed unique

challenges or inefﬁciencies to these activities.

The sponsor’s (a senior management level project sup-

porter) position within each ﬁrm varied from the director

level all the way up to CEO. Across cases, team members

could point to an individual who provided encouragement

from above, and ﬁnancial backing for the projects when

traditional measures would point to termination. This was a

particularly critical factor in projects with long payback

periods. Rather than base decisions on promises of speciﬁc

economic payback hurdles, sponsors commonly cited con-

tinued investment based on a gut feel that the project could

have signiﬁcant impact on the long- term success of the

ﬁrm. Many of the projects would “fall between the cracks”

of the existing businesses of their corporations. The sponsor

of each of these projects worked to keep them alive (even

unofﬁcially), and encouraged business units to adopt them.

In ﬁve of our cases, senior management sponsors created

new business units or spin-off companies to house the

innovation. In our sample, we observed that it was critical

that each project have someone willing (and in a position) to

identify and promote these high-risk, high-potential projects

within the ﬁrm.

While it is important to recognize the critical role of such

sponsors to these projects’survival, it is also interesting to

consider the effectiveness of this practice. Over time we

began to term this the ‘patronage model,’in reference to the

artists of the Renaissance period who sought out wealthy

patrons to support their ideas and efforts as they worked on

their life’s masterpieces. While patrons were critical to the

artist’s success, there was no system for connecting artists to

patrons. The search for a patron was not a well-deﬁned

process, and there were no clear standards for convincing

such a person to fund the artist.

This sponsorship model is similar in the radical innova-

tion projects that we observed. First there is the issue of

identifying the appropriate patron. Then there is the more

difﬁcult challenge of getting access to him. Finally, there is

the challenge of convincing the sponsor of the importance

of the project. Our observations suggest that this is not

managed in a very systematic way, or with any prescribed

set of tools.

Champions provided the operational level enthusiasm

and persistence to keep these projects alive “in the trench-

es.”In lieu of conventional ﬁnancial projections that prom-

ise returns above accepted hurdle rates, we found across

most projects that the patron had faith in the projects be-

cause of personal characteristics of its champion, a lengthy

historical relationship between the two, and the champion’s

track record. Again, this raises obvious questions as to the

effectiveness of this practice, both from a standard operating

procedure perspective, and also because projects that are

kept alive by a senior management patron are extremely

vulnerable once the patron retires or moves on. Money, time

and individuals’careers devoted to the project are wasted.

Six of the twelve projects we studied were affected by

senior management turnover. In two of those cases, the

turnover resulted in increased attention and resources to the

project, but in four of them, the result was in the opposite

direction. Aside from ﬁnding and convincing a patron, the

role of the champion was critical in other aspects as well.

When funding went away, they worked on the projects on

their own time, and lobbied extensively to get the project

back on the map. When funding returned, they became

project leaders, and were instrumental in creating and hold-

ing together a development team. Their enthusiasm for the

projects was palpable. One champion boasted: “People go

their whole career, 30 or 40 years, and never have a chance

to work on things like this.”

While the research on the importance of champions in

innovation is inconclusive [22,28], their criticality to the

projects we observed is undeniable. We expect that, where

support systems, process and infrastructure are lacking for

managing radical innovation systematically within a com-

pany, its success and drive is dependent on strong, persistent

individuals, and thus the importance of individual champi-

ons for radical innovation is heightened.

4.3.2. Team composition

While much has been written about the importance of

teams in traditional NPD projects, we were curious what

practices we would observe in the more uncertain environ-

ment of radical innovation. Our ﬁndings in this area point to

some interesting characteristics of the people on the projects

and their backgrounds.

Our observations revealed that the people who sought to

join radical innovation development teams were character-

ized by breadth of experience, in addition to depth. For

432 C.M. McDermott, G.C. O’Connor / The Journal of Product Innovation Management 19 (2002) 424–438

example, former plant managers, or others who had spent

signiﬁcant time working on operational issues at the plant

before moving on to other roles were selected for the team

ahead of individuals who might have the greatest or most

current knowledge of the operating system. It was clear that

a combination of product development skills and functional

sophistication (with an emphasis on the former) was what

was sought after for this liaison position.

The role of marketing differed depending on whether the

project was bound for an existing market with which the

ﬁrm had experience, or for an as yet undeveloped market.

For familiar markets, efforts were made to involve market-

ing people from the business unit in an informal way very

early on, to validate the value of the innovation, and to

provide links to customers that would provide input. Still,

there was only one example of an individual from a business

unit joining the team while the work was in being done

within R&D. Scientists were the ﬁrst ones to approach

potential users in most cases. This observation is in align-

ment with Workman [52], who observed a limited role for

Marketing in NPD activities in high-tech ﬁrms.

Projects directed at new, undeveloped markets added

team members from outside the ﬁrm that had marketing

experience in related markets, relied on scientists to initiate

potential contacts in the earliest stages, or relied on the

commercial development individuals within R&D to help

drive the business related activities of the projects. Thus, the

type of marketing expertise required, much like that of

manufacturing expertise described earlier, is more broad-

based in nature. This result supports Burgelman’s [9] ob-

servation that this activity is less like New Product Devel-

opment and more like New Business Development.

4.3.3. The role of informal networks

Individuals who operated most successfully in these po-

sitions had been with their ﬁrm for many (at least 15) years

and had typically rotated through a number of positions in

several business units before joining a business develop-

ment group within R&D. The deep informal networks that

they could access for information at any time, and experi-

ential knowledge of most of their ﬁrms’businesses was

invaluable. Said one manager “Because of the way in which

managers have grown up around here, you have all these

internal networks and webs, and you work them, and that’s

what makes the place work. It really does.”

Team members on every project relied on the existence

of large, informal networks of individuals, both inside and

outside the company, which could be tapped into as needed

to help the development process. These networks provided

early validation of business opportunities, in some cases, or

helped projects survive when shoestring budgets were in

place [30]. Manufacturing networks allowed these projects

to make pilot runs at very low costs, which was especially

critical when budgetary belts were tightened. As the follow-

ing quote shows, these networks also had strong ties to the

ﬁrm’s unique production expertise and knowledge—its

manufacturing competencies.

“I’ve developed a lot of links to discover whose equip-

ment can I use. Well, a new [piece of equipment] is

going to cost me 50- to $60,000. I’m not going to get

money to do that on [this project], not until an SBU

maybe takes it over and has ownership for it....We’re

not there right now.”

Others writer have noted the importance of these net-

works within the R&D setting, and the importance of pro-

fessional networks of scientists [3]. We observed that ‘com-

munities of practice’[51] transcended laboratory

boundaries. Technical experts found one another across

organizational divisions, though this happened in an ad hoc

manner. Most of these projects required the integration of

multiple developing technologies from numerous divisions

or research groups within the ﬁrm.

5. Discussion and conclusion

The ﬁndings of this study provide insight into key stra-

tegic issues faced by large ﬁrms as they develop radical

products. The study describes a breadth of themes that we

observed in our sample of projects relating to choice of

market scope, competency creation and managemet, and

people issues. While the design of our study prohibits pre-

scription per se, our observations and analysis highlight

emerging practice, and point to several propositions that

appear worthy of further exploration. It is our hope that the

themes that emerged from this study will help lay the

foundation upon which later research on this important topic

can be built. Speciﬁcally, this study provided unique insight

in several key areas.

We observed that even though it may be that the driving

technology is radical, the manner in which the project is

managed, and the challenges that the team may expect to

encounter, vary dramatically by whether the market exists

or requires development. In the case of familiar markets,

issues of threat of cannibalization or familiarity with the

current business model may cause projects to be managed

suboptimally because of inertia provided by mainstream

operating units. In the case of completely new markets, the

project may proceed more slowly than planned due to lack

of attention to market development activities that neither the

R&D based team nor the operating unit team are tradition-

ally expected to perform.

The projects in this study extensively utilized existing

competencies in the creation of radical products. Firms

consistently built off existing internal knowledge of markets

and technologies to launch into radical new product and

process areas. In addition, they sought ways to stretch their

competencies as the development of the invention into a

commercial innovation pulled them technically or market-

wise somewhat aﬁeld from completely familiar turf. Build-

ing on internal competencies together with the creation of

433C.M. McDermott, G.C. O’Connor / The Journal of Product Innovation Management 19 (2002) 424–438

alliances are methods ﬁrms use to reduce the overall risk

associated with engaging in radical innovation. While con-

ceptual frameworks used to deﬁne radical innovation indi-

cate that it is set in the context of high technical and high

market uncertainty [36,37], our observations of the dynamic

nature of the process reveal that project teams work hard to

reduce uncertainty on some dimensions so that they work on

other aspects of the project. Whether or not this is appro-

priate, or what the decision criteria ought to be for choosing

where to close off learning for a time, are clearly issues for

future investigation.

The study also illustrates some mechanisms that helped

projects, but that may not be explicitly recognized as NPD

tools. For example, informal networks within the ﬁrm

played a large role in the development of these radical

projects. These networks were seen as a critical means to

gain both market and technical insight, ultimately moving

the project forward. The ﬁndings of the study as they relate

to the integrated approach to NPD were also quite interest-

ing. Interviews with team members across the sample gave

credence to the proposition that the commonly held belief in

the beneﬁts of getting functional experts in manufacturing

and marketing involved early and often in the NPD process

might be less appealing in these radical products.

We noted that traditional project management priorities

of evaluation, monitoring and control, take on a more minor

role in comparison to the concerns about managing market,

resource and organizational uncertainties along with the

natural technical uncertainties associated with break-

throughs. This observation points to the need for rethinking

appropriate management skill sets for radical innovation

projects. It may be that negotiation, handling ambiguity,

setting a course of action amid skepticism, and managing

boundaries between the project team and outsiders (includ-

ing senior management, the ultimate divisional home, alli-

ance partners and funding sources) in order to set expecta-

tions and utilize available resources are among those critical

skill sets.

This study also documented the unique difﬁculties these

projects faced as they prepared to leave their respective

ﬁrms’corporate R&D labs to become part of a division. The

timetables, metrics, and people involved in these projects

were often incongruent with those of existing divisions,

resulting in a host of challenges for the project team. As a

result of our observations, we identiﬁed a gap that might be

ﬁlled by some form of interim incubating mechanism in

organizations that would serve to bridge the transition from

R&D and the business unit. As stated above, however, it is

beyond the scope of this study to test this proposition, but it

is our hope that this question does receive more research

attention in the future.

Taking our observations as a whole, it appears the new

insights we bring to light regarding the management of

radical innovation point to key ideas. First, we’ve identiﬁed

apparent gaps between current practice and what our study

participants view as effective practice. In the big picture, it

appears that large established ﬁrms too often assume the

practices that have worked well for their incremental

projects will be useful in more radical environments as well.

Instead, our preliminary observations point to the idea that

ﬁrms might need to create different sets of rules for the two

types of innovation. Many incremental practices seem dys-

functional in this arena.

Similarly, these observations highlight the importance of

the need to develop and test new practices that managers

bringing radical projects along can use with conﬁdence.

Time and again, the individuals we studied decried their

own lack of conﬁdence in the practices they were using to

move their projects forward in their ﬁrms. Unlike their

incremental counterparts, these projects are rare in their

ﬁrms, and the organization as a whole does not have the

internal experience and expertise to move with conﬁdence.

In short, they appear to be pushing toward the need for

developing a competency in managing radical innovation.

The challenge goes beyond this. It appears important that

ﬁrms’management recognize the need to build this compe-

tency while simultaneously excelling at incremental inno-

vation, with its focus on current customers, speed to market,

and intense competition. In our estimation, as well as that of

many other writers [23,38,48], it is not an impossible task.

Organizations have not been sensitive to the need for dif-

ferent systems, and instead have relied on maverick indi-

viduals, working with senior management patrons against

the organizational context, to push these through, and then

‘retroactively rationalizing’[9] them into the ﬁrm’s strat-

egy.

While this study highlights a number of important issues

and observations regarding the conduct of radical innova-

tion, it treats the issues at a high level. More research is

needed in this area. Although our data are notable for its

richness and longitudinal nature, it has its limitations. Be-

cause we observed ongoing projects, it was not possible to

gather data regarding perceptions of product success. Such

data would permit examination more akin to hypothesis

testing, as opposed to exploratory analysis. The ﬁrms in the

sample obviously do not represent all mature ﬁrms in their

respective industries, and the projects clearly do not repre-

sent the population of discontinuous innovations. In addi-

tion, the process by which we selected these projects may

introduce some bias to the ﬁndings. Since the projects were

volunteered by their ﬁrms, for example, it is likely that they

were of higher proﬁle and more strategically critical to their

respective ﬁrms than those that we might have studied

through a random sampling process. This in turn, for exam-

ple, may increase the likelihood of a sponsor in the organi-

zation. These limits may force constraints on the interpre-

tation of the ﬁndings, and suggest topics for future

research.

Our observations about the importance of internal net-

works, generalists and business development experts on

radical NPD teams also raise key questions. In what ways

do these needs change in radical versus incremental NPD?

434 C.M. McDermott, G.C. O’Connor / The Journal of Product Innovation Management 19 (2002) 424–438

These observations regarding networks and generalists also

raise questions about the extent to which ﬁrms need to do

more work to actively develop the type of personnel who

can become a part of radical NPD teams. For example,

further research might explore whether activities such as job

rotation effectively encourage both informal networks and

act to create the type of generalists seen in these teams. In

addition, there is much to be learned about the difﬁcult

process we observed relating to moving radical projects

from R&D to the divisions. To what extent are these ﬁnd-

ings transferable to smaller ﬁrms pursuing radical NPD?

How might incubating structures be created to effectively

facilitate this transfer? These and similar questions are

clearly worthy of more investigation.

It is our hope that these ﬁndings stimulate more research

on the dynamic environment and challenges surrounding the

development of radical products. Effectively managing rad-

ical innovation is absolutely critical to the long- term suc-

cess of the ﬁrm, and, as echoed by the project members of

the teams we studied, there is much to be learned.

Notes

1. For a complete listing of papers published from

this research program, see the annotated bibliog-

raphyat http://radicalinnovation.mgmt.rpi.edu/pubs_

academ.asp

2. Our thanks to an anonymous reviewer for pointing

out the need for this clariﬁcation.

3. These were R&D managers attending a meeting of

the Industrial Research Institute in the Spring of

1995, at which we presented our original proposal for

this research program.

4. These were R&D managers attending a meeting of

the Industrial Research Institute in the Spring of

2000.

5. Again, we’d like to credit an anonymous reviewer for

this helpful comment.

Appendix-case descriptions

YAir Products and Chemicals Corporation developed

an ionic transport membrane (ITM) using ceramic

materials for separating oxygen from air. AP was

working on systems to meet the needs of three dif-

ferent application domains. The business model

projects new to the world features in two of those

application areas, and a greater than 30% cost savings

in the third.

YAnalog Devices has developed a microelectro-me-

chanical (MEMS) accelerometer, which is a small

microchip that can measure changes in speed. While

the application possibilities are nearly endless (e.g.,

virtual reality games, medical applications to detect

changes in the rate of heart pulse), ADI initially used

this technology to help move itself into the automo-

tive market space. Even there, potential applications

are numerous, but the initial market disruption was to

replace current airbag sensors with accelerometers.

The cost to the automotive market for the airbag

system fell from approximately $500 to $100 per unit.

YDupont’s Biomax®is a polyester material that can be

recycled or decomposed. It holds up under normal

commercial conditions for a time period established

through product speciﬁcations. The material decom-

poses at the right time and under the right conditions.

It is environmentally safe at every stage of its decom-

position. Chemically, Biomax®represents a new

family of highly versatile polymers based on tradi-

tional polyethylene terephthalate (PET) technology.

Its biodegradable qualities are made possible by the

water soluble (hydrolyzable) linkages in its molecular

chain. These linkages dissolve as they make contact

with water, causing the entire molecular chain to

break apart. The remnants are consumed by microbes,

which convert them into carbon dioxide and water.

The material itself can be made into ﬁbers, ﬁlms or

resins. This makes it suitable for countless agricul-

tural, industrial and consumer product applications:

mulch containers, mulching ﬁlm, seed mats, plant

pots, disposable eating utensils, blister packs, yard

waste bags, parts of disposable diapers, blown bottles.

In the United States alone, where the average house-

hold creates over three tons of disposable waste each

year, the number of potential applications for Bi-

omax®is immense; its development represents a po-

tentially huge business for DuPont and an important

solution to the mounting problem of solid waste in

developed countries.

YDupont was also home to a second project of our

study. This was the development on an electron emit-

ting material with properties that made it attractive in

electronic display applications.

YGE is well known for its advances in medical diag-

nostic technology, particularly with respect to imag-

ing systems. One of the most controversial recent

innovations in that industry is the advance of Digital

X-ray technology. Digital X-ray not only allows for

dramatic improvement in the speciﬁcity of the image,

but also can be sent as a stream of data to a diagnostic

bank. That alone allows for remote diagnosing, and

has wide ranging implications for stafﬁng of highly

paid radiologists at local hospitals and clinics. GE has

found a way to combine Digital X-ray technology

with Fluoroscopy, a technology that allows the ﬁlm-

ing and digitization of movement within the body.

The combined beneﬁt provides a leap in beneﬁts in

the medical imaging ﬁeld that GE believes will be the

next “game-changer.”

435C.M. McDermott, G.C. O’Connor / The Journal of Product Innovation Management 19 (2002) 424–438

YGM’s focus on alternative power systems for auto-

mobiles is widely known. One of the innovation paths

down which they, and their counterparts, have been

traveling for some time is that of the hybrid electric

vehicle. The concept is that power comes from both

electrical and conventional engines, each of which is

drawn upon at the speeds at which it performs most

efﬁciently. Those technologies, combined with sev-

eral others such as regenerative braking, could serve

to offer a vehicle capable of exceptional gas mileage

(50–80 miles/gallon) and exceedingly low emissions

of pollutants.

YIBM has commercialized a new microchip based on

an alloy of Silicon and Germanium (SiGe), which

promises to become the basis for high-performance

new transistors with switching speeds up to four times

faster than those of traditional semiconductors. SiGe

chips also offer several other important additional

beneﬁts. First, they can operate using only a fraction

of the normal power requirements for competing tech-

nologies, such as Gallium Arsenide (GaAs) based

chips. Secondly, SiGe can be manufactured with the

same costly fabrication equipment used to make con-

ventional silicon chips, potentially avoiding billions

in new capital investments. The most promising ap-

plication arenas are in telecommunications, which is

based on analog technology, an arena in which IBM

had not previously participated.

YIBM was the second ﬁrm that entered two projects for

study. The second project was the development and

integration of display, memory and battery technolo-

gies to enable the creation of an ‘electronic book,’

though the development of utmost interest was the

advance in the display technology.

YNetActive is a spin-off venture of Nortel Networks,

though it began as an internal organizational innova-

tion. The innovation is a software capability that al-

lows NetActive to encode game publishers’software

in such a way that a user could obtain the application

for a fraction of the normal purchase price. The cus-

tomer must then initialize its use over the internet, and

choose from a variety of usage options that allow

single use, usage for a speciﬁed period of time, or

purchase, all with differing fee structures. The cus-

tomer’s credit card is then charged for the given usage

selection. Game software and utility software such as

tax ﬁling programs are the current most promising

applications.

YPolaroid applied highly innovative manufacturing

technologies from its traditional product arena to the

creation of low-cost, high-capacity computer memory

storage devices.

YTexas Instrument’s Digital Light Processor is based

on the MEMS device described above. The TI pro-

jector creates a screen image by bouncing light off of

1.3 million microscopic mirrors squeezed onto a 1

square inch chip, each with the ability to angle itself

independently in order to best reﬂect light. Potential

applications exist in the hard copy markets, home

movie projection systems, and large screen movie

theaters, to name but a few. The ﬁrst that TI is com-

mercializing are large screen movie projection sys-

tems. Movie theater owners can now receive movies

from Hollywood producers on Digital Video Disks or

even by satellite rather than on heavy reels. Theaters

will no longer be limited by a ﬁnite number of ﬁlm

prints, so they have increased ﬂexibility in show times

and the number of screens showing a particular

movie.

YUnited Technologies’Otis Elevator division has de-

voted considerable energy to solving the problem of

the “mile high building.”In the commercial construc-

tion industry, limits on building height are not based

on any technical constraints other than the problem of

the elevator systems. Current systems are limited by

the weight of the cable that pulls the elevator. Once

the cable gets too long (more than 130 stories), it

becomes too heavy to lift. Designing parallel elevator

shafts and moving people from one shaft to the other

is the current solution to very tall buildings, but at

some point, that solution becomes uneconomic be-

cause the amount of the building’s real estate needed

to house the shafts is too high in proportion to the

amount available for rent. Otis has developed a sys-

tem of people movement that solves the problem. It

allows for elevator cars to become separated from the

shaft, and to move onto other shafts. A combination

of horizontal and vertical movement allows for a

conservation of shaft space, and opens up the oppor-

tunity for thinking about conveyance systems in a

completely different light.

Acknowledgments

This research was funded by the Sloan Foundation, with

access to ﬁrms provided by the Industrial Research Institute

(IRI). The authors would like to thank the other faculty on

the research team: Ron Gutmann, Richard Leifer, Joe Mo-

rone, Lois Peters, Mark Rice, and Bob Veryzer as well as

research assistant Theresa Coates for their assistance in data

analysis and comments on earlier drafts of this article.

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Biographical Sketches

Christopher McDermott is an Associate Professor in the Lally School of

Management, and Technology at Rensselaer. His ﬁelds of interest include

New Product Development, Radical Innovation, and Operations/Technol-

ogy Management. He earned a BS in Engineering from Duke University,

and a PhD in Business from The University of North Carolina. Prior to

returning to academia, Dr. McDermott held positions at Westinghouse

Electric Company and at Fairchild, where he was an on-site contractor at

NASA’s Goddard Space Flight Center. He is the current coordinator of the

437C.M. McDermott, G.C. O’Connor / The Journal of Product Innovation Management 19 (2002) 424–438

Lally School’sﬂagship MBA course in New Product Development and has

taught other courses at the Undergraduate, Masters, PhD, and Executive

levels. His research has been published in such journals as IEEE Trans-

actions on Engineering Management, Journal of Operations Management,

Journal of High Technology Management Research, Business Horizons, and The

International Journal of Production and Operations Management. Dr. McDermott

is co-author of the book Radical Innovation: How Mature Companies can Out-

smart Upstarts. He can be contacted at mcderc@rpi.edu.

Gina Colarelli O’Connor is assistant professor in the Lally School of

Management, and Technology at Rensselaer Polytechnic Institute. Her

ﬁelds of interest include New Product Development, Radical Innovation,

and Strategic Marketing Management in High Technology Arenas. Before

joining RPI in February 1988; Dr. O’Connor earned her Ph.D. in Marketing

and Corporate Strategy at New York University. Prior to that time, she

spent several years with McDonnell Douglas Corporation in Contract

Administration, and at Monsanto Chemical Corporation’s Department of

Social Responsibility. The majority of her research efforts focus on how

ﬁrms link advanced technology development to market opportunities She

has articles published in The Journal of Product Innovation Management,

California Management Review, Academy of Management Executive, The

Journal of Strategic Marketing, The European Journal of Marketing, Psy-

chology and Marketing, Business Horizons, The Journal of Advertising

Research and The Journal of Advertising, and is one of the authors of the

book Radical Innovation, How Mature Firms Can Outsmart Upstarts,

published by HBS Press in December, 2000. She can be contacted at

oconng@rpi.edu.

438 C.M. McDermott, G.C. O’Connor / The Journal of Product Innovation Management 19 (2002) 424–438

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Sep 1993

Recently, there have been numerous calls for more empirical field‐based research to be conducted in operations management (OM). Knowledge of how operations systems work can be enhanced significantly through contact with the “real‐world” conditions that OM models seek to describe. Case study research is a primary means of exploring field conditions but is an unfamiliar methodology for many in OM. Moreover, the case study method is viewed with scepticism by those who consider it to be a weak form of research, one that lacks rigor and objectivity. Here, we offer an introduction to the case study method for OM researchers who may have little background in field based research. We provide an outline of the procedure and cite some excellent sources that cover case study design, data analysis and the philosophical rationale for the methodology. We also identify some recent examples of OM case studies that illustrate our points. We then contrast the various uses for case study research and their different design and theory requirements. An appendix provides a listing of case studies that have appeared in some OM journals in recent years, classifying the studies by their research purpose. However, regardless of their purposes, case study research need to be conducted in a manner that assures maximum measurement reliability and theory validity. We describe some of the steps that must be taken to ensure that a study is as rigorous as possible. We also argue that, properly conducted, a case study is a truly scientific research approach. We conclude by pointing out some areas of OM research where case studies might be particularly valuable.

Organizing for Radical Product Innovation: The Overlooked Role of Willingness to Cannibalize

Article

Nov 1998

Why are some firms more successful at introducing radical product innovations than others? Following Schumpeter (1942), many researchers have suggested that firm size is the key organizational predictor of radical product innovation. The authors provide an alternate view and argue that one key variable that differentiates firms with strong radical product innovation records from others is the firms’ willingness to cannibalize their own investments. The authors identify three organizational factors that drive a firm's willingness to cannibalize. Results from a survey of three high-tech industries tend to support the alternate view that willingness to cannibalize is a more powerful driver of radical product innovation than firm size is. These results suggest a need to reconsider conventional wisdom on firm size, cannibalization, and organizational synergy.

Sustained Product Innovation in Large, Mature Organizations: Overcoming Innovation-to-Organization Problems

Article

Oct 1996
ACAD MANAGE J

Building theories from case study research

Article

Jan 2002

- This paper describes the process of inducting theory using case studies from specifying the research questions to reaching closure. Some features of the process, such as problem definition and construct validation, are similar to hypothesis-testing research. Others, such as within-case analysis and replication logic, are unique to the inductive, case-oriented process. Overall, the process described here is highly iterative and tightly linked to data. This research approach is especially appropriate in new topic areas. The resultant theory is often novel, testable, and empirically valid. Finally, framebreaking insights, the tests of good theory (e.g., parsimony, logical coherence), and convincing grounding in the evidence are the key criteria for evaluating this type of research.

High-tech Marketing: Concepts, Continuity, and Change

Article

Jan 1989

Discontinuous Innovation and the New Product Development Process

Article

Jul 1998

Robert W. Veryzer

Although many new-products professionals may harbor hopes of developing "the next big thing" in their respective industries, most product development efforts focus on incremental innovations. Accordingly, most research on the new-product development (NPD) process focuses on the development of evolutionary products. For new-products professionals seeking insights into the means for achieving breakthrough innovations, a fundamental question remains unanswered: Does the NPD process for discontinuous products differ from the process for incremental, or continuous, products? To provide a better understanding of managerial practices associated with discontinuous innovation, Robert Veryzer presents findings from an in-depth study of eight discontinuous product development projects. The study explores the key factors that affect the discontinuous NPD process, as well as the methods that the firms in this study use for assessing the radically new products they have in development. From the findings in this study, he develops a descriptive model of the discontinuous product development process, and he offers insights into the requirements for effective management of discontinuous innovation projects. Although half the firms in the study use a formal process for evaluating radically innovative products, the participants in the study generally do not employ a formal, highly structured process for managing discontinuous NPD efforts. However; these firms do follow a consistent, logical process in the development of radical innovations, and their process differs significantly from incremental NPD processes. The processes used by the firms in this study are more exploratory and less customer driven than the typical, incremental NPD process. The impetus for all the projects in this study comes from the convergence of developing technologies, various contextual or environmental factors (for example, government regulations), and a product champion or visionary. Starting from these drivers, the discontinuous NPD process focuses on formulating a product application for the emerging technologies. In all cases, these firms developed prototypes at nit earlier stage than the typical, incremental NPD process. To aid in the formulation of a new product application from emerging technologies, prototype construction in these discontinuous NPD projects precedes opportunity analysis, assessment of market attractiveness, market research, and financial analysis. (C) 1998 Elsevier Science Inc.

A longitudinal examination of how champions influence others to support their projects

Article

Nov 1998

Stephen K. Markham

The image of the project champion fighting corporate inertia, rallying support, and leading a project to success makes for a great story, but that story may not reveal the true nature of the champion's role. All those off-tom tales about champions fail to provide hard evidence of the techniques that champions use, the activities they, perform, and the effects that champions have on project success, Stephen K, Markham addresses this knowledge gap in a study that examines how champions influence other people and what effects champions have on projects and the people those projects involve. The study uses responses from 53 champions of innovation projects in four large firms as well as team members from those projects. Rather than look at the champions' work oil project tasks, the study focuses on the influence champions have oil other people to support their projects, The results of the study only partially support the idea that champions affect projects by influencing people. In the four firms studied, champions use cooperative rather than confrontative tactics to influence other people. However, the champions' choice of influence tactics does not affect the level of compliance or the willingness to participate in the project that those people demonstrate. On the other hand, the champions appear to have a strong influence on their target's behavior if the champions enjoy positive personal relationships with those people, In general, the tactics used by the champions do not seem to play an important role in the projects studied. Front the perspective of the team members, the results of this study do not support the notion that champions make a positive contribution to project performance. However, the champions in this study consistently hold a more positive view of the project than those of the team members. (C) 1998 Elsevier Science Inc.

Managing radical innovation: an overview of emergent strategy issues

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