Capturing the Value of Synchronized Innovation

Coordinating new product development efforts with other companies in your industry can provide substantial benefits — but can be challenging.

For more than 30 years, Intel Corporation and Microsoft Corporation, two technology powerhouses, have closely synchronized many product development and launch activities in one of the most widely recognized corporate alliances. The early success of their collaboration set market expectations for a flow of coordinated semiconductor and software products. In some rapidly growing industries such as mobile telecommunications, such synchronization is more extensive, permeating the product development moves of dozens of young companies at once.1

Intercompany synchrony in product development and innovation is hardly new, and some research has shown that synchrony can generate performance benefits for companies. However, prior research largely centered on the relationships between two companies rather than examining how synchrony emerges in broader industry networks or how individual or pairs of companies could capture the value of synchrony in different industry networks. (See “About the Research.”)

For example, it is relatively common for companies to coordinate their product development efforts in hopes of generating increased sales and customer satisfaction. Yet while some businesses work hard to synchronize their product development processes with other organizations, others are significantly less formal about how they tie in with outside entities that are involved with related products or synchronize unwittingly with companies in their network.

Synchronization can take a number of forms, and the implementation costs vary widely. Moreover, keeping part of one company’s operations synchronized with those of another organization can present substantial challenges involving control. Such challenges are magnified when capturing the benefits of synchrony depends on many other players in the industry network. Understanding what it takes to coordinate critical activities across industry networks can therefore be extremely helpful, particularly in technology-intensive industries, where innovation is distributed and companies are strategically interdependent.

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References

1. Synchrony often emerges in collaborative ecosystems that develop integrated technology platforms such as personal computers. For example, it is often observed in the managerial literature that computing companies leveraging similar platform technologies tend to release their products simultaneously. See T. Bresnahan and S. Greenstein, “Technological Competition and the Structure of the Computer Industry,” Journal of Industrial Economics 47, no. 1 (March 1999): 1-40; A. Gawer and R. Henderson, “Platform Owner Entry and Innovation in Complementary Markets: Evidence From Intel,” Journal of Economics & Management Strategy 16, no. 1 (Spring 2007): 1-34; M. Iansiti, “Technology Integration: Managing Technological Evolution in a Complex Environment,” Research Policy 24, no. 4 (July 1995): 521-542; A. Gawer and M. Cusumano, “Platform Leadership: How Intel, Microsoft, and Cisco Drive Industry Innovation” (Boston: Harvard Business School Press, 2002); and D.B. Yoffie and M. Kwak, “With Friends Like These: The Art of Managing Complementors,” Harvard Business Review 84, no. 9 (September 2006): 89-98.

2. Research about platform ecosystems and R&D racing finds that complementary products that are available simultaneously enhance value creation for consumers and for the surplus captured by producers. For example, the success of one video game platform over its competitors is often credited to multiple games that are simultaneously released with each new generation of gaming console. See, for example, R. Adner and R. Kapoor, “Value Creation in Innovation Ecosystems: How the Structure of Technological Interdependence Affects Firm Performance in New Technology Generations,” Strategic Management Journal 31, no. 3 (March 2010): 306-333; K. Boudreau, “Let a Thousand Flowers Bloom? An Early Look at Large Numbers of Software App Developers and Patterns of Innovation,” Organization Science 23, no. 5 (September-October 2012): 1409-1427; P. Milgrom, Y. Quian and J. Roberts, “Complementarities, Momentum, and the Evolution of Modern Manufacturing,” American Economic Review 81, no. 2 (May 1991): 84-88; and D. Takahashi, “The Xbox 360 Uncloaked: The Real Story Behind Microsoft’s Next-Generation Video Game Console“ (n.p.: Lulu Press, 2006).

3. R. Katila and E. Chen, “Effects of Search Timing on Product Innovation: The Value of Not Being In Sync,”Administrative Science Quarterly 53, no. 4 (December 2008): 593-625.

4. In fact, the flashing of fireflies is the inspiration for the original mathematical model upon which my own simulation modeling is based. See R.E. Mirollo and S.H. Strogatz, “Synchronization of Pulse-Coupled Biological Oscillators,” SIAM Journal on Applied Mathematics 50, no.6 (December 1990): 1645-1662.

5. This and other qualitative research quoted here was originally part of my dissertation at Stanford University. See J.P. Davis, “Collaborative Innovation, Organizational Symbiosis, and the Embeddedness of Strategy” (Ph.D. diss., Stanford University, 2007).

6. Ibid.

7. These results are drawn from simulation modeling results. See J.P. Davis, “The Emergence and Coordination of Synchrony in Networked Industry Ecosystems,” Advances in Strategic Management, forthcoming.

8. Ibid.

i. In this paper, Kathleen Eisenhardt and I explore the strategic processes that shape innovation in technology collaborations. We describe a rotating leadership process in which pairs of partners alternate control of different phases of collaborative development that is associated with innovative outcomes. See J.P. Davis and K.M. Eisenhardt, “Rotating Leadership and Collaborative Innovation: Recombination Processes in Symbiotic Relationships,” Administrative Science Quarterly 56, no. 2 (June 2011): 159-201.

ii. Mirollo and Strogatz, “Synchronization of Pulse-Coupled Biological Oscillators.”

iii. Davis, “The Emergence and Coordination of Synchrony in Networked Industry Ecosystems.”

1 Comment On: Capturing the Value of Synchronized Innovation

  • drsergekuznetsov | June 19, 2013

    I find the notion of ‘synchronization’ very fruitful, as it combines synergy of separate efforts and the coincidence of time.

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