The InnoÕation Premium, by Ronald S. Jonash and Tom Sommerlatte. Perseus Books,Reading, MA, 1999

In this book, Jonash and Sommerlatte propose a ‘‘next generation’’ model ofinnovation that emerged from a global study of innovation conducted by Arthur D.Little. The authors surveyed 669 companies in 10 industries across four major economicregions: United States and Canada, Latin America, Europe and the Asia-Pacific. Thetarget audience of this report is largely CEOs and Chief Technology Officers. In part,this book was motivated by the authors’ finding that the majority of their seniormanagement sample was dissatisfied with the way their firms managed innovation.Disappointment remained despite the fact that most of these firms had departed from thetraditional R&D isolationist approach of the pre-1990s, and moved to an integration ofR&D management with the critical internal functional initiatives. But, the authorssuggest that effective internal coordination of R&D no longer differentiates the innova-tion pacesetters. The innovation leaders of today have moved to a ‘‘next generation’’model that extends R&D management across the boundaries of the organization toinclude customers, suppliers and strategic partners.

The book commences with an overview of Jonash and Somerlatte’s next generationhigh-performance innovation framework. The key elements of their innovation modelare an alignment and leveraging of the firm’s strategy, processes, resources, organizationand learning capabilities. In this chapter, they described each of their model componentsand cite a global array of international firms that have successfully implemented theirframework. The authors demonstrate how each company progressed along the fiveelements of their model to achieve an innovation premium, but also remark that thepathway to continuous, enterprise-wide and sustained innovation may differ from firm tofirm. In the second introductory chapter, the authors identify forces in the businessenvironment that they believe are driving the need for a new R&D paradigm. Forexample, they submit that intellectual property is increasingly difficult to protect andmanage, thus, firms must more effectively and efficiently capitalize on their ideas.Moreover, in today’s rapidly changing technology environment, the traditional R&Dapproach of moving incrementally from one product to the next may not be sufficient tomaintain competitive advantage. Indeed, generational or radical change may be more thenorm than the exception; therefore, new research paradigms may be necessary. Thesubsequent five chapters richly describe each dimension of their model using caseexamples of innovation leaders across the globe.

In Chapter 3, the authors describe how innovation leaders’ strategies focus ondeveloping platforms. Use of the term platform should not be confused with the productplatforms concept coined originally by the automotive industry to define a commonchassis for a family of cars. Platform levels represent hierarchies of expertise coalitionsorganized around both firm competencies and technologies that are critical to thesuccess of the firm. Companies can target a range of platforms spanning from routine totruly exploratory new technologies, products and services. The challenge for manage-ment is to achieve alignment between the firm’s vision, its platforms, and its project andprogram portfolios. Management must also develop a road map of emerging technolo-

gies and contingency plans that prepare the firm for changes in the competitive andtechnology landscapes. Furthermore, the authors encourage managers to utilize externalpartners to enhance their portfolio of capabilities and create more revolutionary plat-forms. For instance, Millennium Pharmaceuticals’ broad-based use of alliances has beena key driver of its market success, and has allowed this small niche player to develop anenviable set of research technologies and innovations.

The next generation innovation process discussed in Chapter 4 is depicted as a highvelocity venturi tube with an hourglass base. The front-end venturi-like processes aredesigned to capture and rapidly commercialize a broad array of product and technologyconcepts that address both known and unrealized user needs. These ideas originate froman extended collection of sources, including customers, suppliers, distributors, alliancepartners, industry groups, universities and think tanks. Inputs move rapidly through thetechnology development and commercialization phases when the innovation processintegrates customers and suppliers, leverages the knowledge of the firms’ partners andallies and builds on strategic platforms. A successful output process requires theexpansion of the target markets for the firm’s products, hence, the hourglass base. Theauthors found that firms typically limit their sites for new products to existing marketsand customers, and that opportunities abound if nontraditional markets and customersare actively sought. Nokia’s effective use of these next generation processes was theunderpinning of its move from a struggling conglomerate in the early 90s to the largestmobile-phone manufacturer in the world.

Chapter 5 expands on how innovators effectively use their resources. The authorsnote that firms are adept at managing their tangible assets, but few consider theopportunity that intangible assets can offer. External suppliers, partners and evencompetitors can be valuable sources of innovation if they are integrated into theinnovation process as collaborators. For example, Chrysler actively seeks to createarrangements with supply chain suppliers and partners that result in mutual long-termgains for both parties. Suppliers are encouraged to innovate, and in some instances,Chrysler pays the development costs. But, the key motivator in the process is that now,supplier contracts are awarded based on product performance and innovation, notpersonal relationships. The authors observed that first tier suppliers must be moreattuned to the quality and performance of their vendors’ products, and in effect learn tomanage their own vendors. Thus, innovation leaders proactively leverage exogenousresources in support of the platforms and products they are pursuing.

The next chapter shows how development of communication networks supported byinternal leadership is another key element of the innovation premium. The authors showhow Alcoa’s globalization initiatives spurred its drive to develop an organizationalstructure that capitalized on its global network of innovators. Using Technology Review

Ž .Boards TRB , Alcoa was able to efficiently transfer process and product innovationsacross the business units, as well as engage multiple levels of management in strategicdecision-making. These TRBs also became the main stem that facilitated growth offormal and informal innovation networks and platform teams. These organizationalnetworks created a fast response and adaptable conduit for information sharing thatovercame typical cross-organizational global barriers, such as language, culture andinformation systems. Finally, senior management leadership in these innovation-minded

companies were likened to coaches who motivated, inspired and set-up the conditionsfor success of the team.

The final component of Jonash and Sommeratte’s innovation model is an environ-ment that supports sustained learning, and a capacity to utilize this new knowledge toconstantly renew itself. In Chapter 7, the authors suggest that organizational learning isthe backbone that supports the efficient functioning of the firm’s strategies, processes,resources and organizational structures. Unless this learning is distributed throughout theorganization and the external environment, opportunities will be missed for greater value

Ž .creation through innovation. These researchers cite how British Petroleum BP hasoutpaced its industry peers in shareholder returns, in part through the use of mechanismsthat facilitate information mining, sharing and the combining of new knowledge withexisting knowledge. One such program is BP’s peer-assist tool that encourages employ-ees to take accountability for their work group’s problems by seeking solutions locallyusing extensive computer based networks. Moreover, lessons are learned at BP throughself-reflection and dialogue about how things were done.

The authors conclude in Chapter 8 that superior innovation skills are a cleardifferentiating factor of firms that have been able to achieve sustained economic growth.The final chapter is devoted to demonstrating how these innovation capabilities translateinto greater value for the firm’s customers, employees, partners and shareholders. Ascharacteristic of the previous chapters, this last section uses numerous company exam-ples to illustrate how value is created for employees and external constituencies by theinnovation premium. The book also includes two appendices, the first of which is theresults of the Arthur D. Little global innovation survey, the foundation material for this‘‘next generation’’ innovation model. The second appendix shows the results of a surveyof financial analysts that addresses how this group measures and values innovation.

This book provides an easy-to-read, common sense set of prescriptions for seniormanagers in technology-driven industries. While not unique, the central message ishighly consistent with resource-based strategy and technology management research.The supporting survey results in the appendix allow those readers with a deeper interestin the model a subset of the data to explore. The major contribution of this work,however, is not found in the appendices, but is embedded in the rich descriptions of howindustry leaders have effectively managed their organizations to capture the benefits of acomplex and rapidly changing technology environment through innovation.

B.J. ZirgerDepartment of Management,

College of Business Administration,UniÕersity of Cincinnati,

Cincinnati, OH 45221-0165, USA

Ž .PII: S0923-4748 99 00023-5