Managing Innovation

[Managing Innovation]TD&PM

1.1IntroductionInnovation is driven by the ability to see connections, to spot opportunities and to take advantages of them. It is about opening up new markets and offer new ways of serving established and mature ones.

1.2Why innovation mattersOften success derives in large measure from innovation. There is a strong correlation between market performance and new products. New products can help capture and retain market shares, and increase profitability in those markets. New product development is an important capability because the environment is constantly changing. E.g. legislation and competitors may open new pathways or close down others.

Strategic advantages through innovation are complexity, novelty, legal protection, timing etc. L1, p7

1.3Old questions, new contextChanging context for innovation1. Acceleration of knowledge production2. Global distribution of knowledge production3. Market fragmentation4. Market virtualization5. Rise of active users6. Development of technological and social infrastructure

Joseph Schumpeter: Entrepreneurs will seek to use technological innovation to make profits, thereby destroying old structures and creating new ones. (creative destruction)

Edison: Innovation is the process of the need to complete the development and exploitation aspects of new knowledge, not just its invention.

1.5A process view of innovation

There are four key phases of a model of innovation: Search How can we find opportunities for innovation?Select What are we going to do - and why?Implementation How are we going to make it happen?CaptureHow are we going to get benefits from it?

Success of failure? Having a clear and focused direction and creating the organizational conditions to allow focused creativity. Scopes for innovation Sometimes it is about completely new possibilities. Equally important is the ability to spot where and how new markets can be created and grown. Innovation is also about offering new ways of serving established and mature markets.

4P approach Product innovation Process innovation Position innovation Paradigm innovation1.6Exploring different aspects of innovation

Types of innovation:(1) Degree of novelty Incremental or radical innovation?Incremental innovation - doing what we do but betterRadical do something differentLevel of novelty?

(2) Platform and families of innovationDevelopment of a basic platform which can be extended in the form of a product family. Powerful ways for companies to recoup their high initial investments in R&D by developing the technology across a number of market fields. Walkman originally developed by Sony as a portable radio and cassette system; the platform concept has come to underpin a wide range of offerings from major manufacturers, CD, DVD, MP3

(3) Discontinuous innovation what happens when the game changes?Sustainable: innovation build on the firms existing knowledge base Intels Pentium 4 built on the technology for Pentium III.

Discontinuous: Innovation that creates a new market by allowing customers to solve a problem in a radically new way. Closely related to radical innovation Requires a good deal of user-learning, often disrupt his or her routine, and may even require new behavior patterns. Sources: new market emerges, new technology emerges, new political rules emerge, running out of road, deregulation, unthinkable events, business model innovation etc. (p32-36) Photocopier machines, personal computer, internet.

(4) Level of innovation component or architectureComponent Innovation that change things at the level of componentsArchitecture Innovation that involve change in a whole system

(5) Timing the innovation life cycle

Innovation characteristicsFluid patternTransitional phase Specific phase

Competitive emphasis placed onFunctional product performanceProduct variationCost reduction

Innovation stimulated byInformation on user needs, technical inputsOpportunities created by expanding internal technical capabilityPressure to reduce cost, improve quality etc.

Predominant type of innovationFrequent major changes in productsMajor process innovations required by rising volumeIncremental product and process innovation

Product lineDiverse, often including custom designsIncludes at least one stable or dominant designMostly undifferentiated standard products

Production ProcessesFlexible and inefficient - aim is to experiment and make frequent changesBecoming more rigid and definedEfficient, often capital intensive and relatively rigid

2.1Variations on a theme

Common innovation and highlighted problems are: Lack of culture of innovation Lack of strategy for where to focus innovation efforts Innovation is seen to conflict with fee-paying work and is thus not always valued A formal innovation process does not exist Project management skills are very limited.

Service innovations are often much easier to imitate and the competitive advantages that they offer can quickly be competed away because there are fewer barriers. E.g. intellectual property protection.

Type of innovationIncrementalRadical

Product service offering to end usersModified/improved version of an established service offering such as increased range of features in telecomm service.Radical departure such as online retailing

Process ways of creating and delivering the offeringLower cost delivery through back office process optimization. Waste reduction through lean or six sigma.Radical shift in process route, for example moving from face-to-face contact to online, supermarkets and self-service shopping.

Position target market and the story told to those segmentsOpening up new market segments such as opening specialist insurance products for students.Radical shifts in approach such as shifting healthcare provision to communities.

Paradigm underlying business modelRethinking underlying model. Example: migrating from insurance agents and brokers to direct and only systemsRadical shifts in mindset such as moving from product-based to service-based manufacturing.

The extended enterpriseThe underlying business model of outsourcing is based on being able to do something more efficiently than the client and thereby creating a business margin, but achieving this depends critically on the ability to reengineer and then continuously improve on core business processes.

Size of the organization is also an important influence on the particular way in which innovation is managed. Typically smaller organizations possess a range of advantages.

AdvantagesDisadvantages

Speed of decision makingInformal cultureFlexibility, agilityEntrepreneurial spirit and risk takingEnergy, enthusiasm, passion for innovationGood at networking internally and externallyLack of formal management control systemsLack of access to key resources, especially financeLack of key skills and experienceLack of long-term strategy and directionLack of structure and succession planningPoor risk management

Small-/medium-sized enterprises (SMEs) often fail to feature in surveys of R&D and other formal indicators of innovative activity

5.2 Knowledge pushExamples of knowledge-push innovations: nylon, microwave, photocopiers, antibiotics, medical scanners

Knowledge creation provides a push, creates an opportunity field which sets up possibilities for innovation.Not every idea finds successful application and innovation requires some form of demand if it is to take root. Involves a mixture of occasional breakthrough followed by extensive elaboration on the basic theme.

Moores law: shapes and guides innovation based on the idea that the size will shrink and the power will increase by a factor of two every two years. affects components drives rate of innovation in applications

5.3Need pullAnother key driver of innovation is need the complementary pull to the knowledge push.

In innovation management the emphasis moves to ensuring we develop a clear understanding of needs and finding ways to meet those needs. Henry Ford was able to turn the luxury plaything into something which became a car for Everyman.

Managing innovation is a dynamic capability something which needs to be updated and extended on an continuing basis to deal with the moving frontier problem.

Understanding buyer/adopter behavior has become a key theme in marketing studies since it provides us with frameworks and tools for identifying and understanding user needs. Advertising and branding play a key role in this process essentially using psychology to tune into or even stimulate and create basic human needs.

Need-pull innovation is particularly important at mature stages in industry. Competing depends on differentiating on the basis of needs and attributes.

Brandwagon effect: as more people adopt so the innovation becomes modified to take on board their needs.

Model of Kaizen: Kaizen means improvement. The Kaizen strategy calls for never-ending effort for improvement, involving everyone in the organization. Incremental. Basic philosophy behind the TQM movements in the 1980s

Innovation is not always about commercial markets or consumer needs. There is also a strong tradition of social needs providing the pull for new products, processes and services. Micro-finance

5.4Whose needs?Disruptive innovation: describes innovations that improve a product of service in ways that the market does not expect. Also when the rules of the game change dramatically in the marketplace. (Clayton Christensen) YouTube, DVDs, portable memory, wireless internet access, cellphones, mp3, low-cost airlines

The role of emerging marketsThere is a growing interest in what have been termed the bottom of the pyramid (BoP) markets. Prahalad argued that 80% of the worlds population lived on incomes below the poverty line. See table 5.2 on page 240

5.5Towards mass customizationMass customization is the ability to offer highly configured bundles of non-price factors configured to suit different market segments, but to do this without incurring cost penalties and the setting up of a trade-off of agility versus prices.

Type of customizationCharacteristics

Distribution customizationCustomers may customize product/service packaging, delivery schedule and delivery location but the actual product/service is standardized. Sending a book to a friend from Amazon.com/Bol.com

Assembly customizationCustomers are offered a number of predefined options. Products/services are made to order using standardized components. Buying a computer from Dell

Fabrication customizationCustomers are offered a number of predefined designs. Products/services are manufactures to order. BMW allows you to design your own configuration i.e. color, size, extras

Design customizationCustomer input stretches to the start of the production process. Products do not exist until initiated by a customer order. Shoe design Adidas

5.6Users as innovatorsIdeas of users + their frustrations with existing solutions lead to experiment and prototyping and create early versions of what eventually become mainstream innovations.Lead users: importantly active and interested users who are often well ahead of the market.

One strategy around managing innovation is thus to identify and engage with such lead users to co-create innovative solutions. Perpetual beta: testing new software modules across a community to get feedback and development ideas.

5.7Extreme usersAn important variant that picks up on both the lead user and the fringe needs concepts lies in the idea of extreme environments as a source of innovation. Users in the toughest environments may have needs which by definition are at edge. Antilock braking system began life as a special add-on for premium high-performance cars

5.8Watching othersInnovation is essentially a competitive search for new or different solutions. Imitation is a viable and successful strategy for sourcing innovation.Benchmarking: enterprises make structured comparisons with others to try and identify new ways of carrying out particular processes or to explore new product of service concepts. Southwest Airlines became most successful when it copied the pit-stop techniques in the Formula 1 Grand Prix events. This reduced the turnaround times at airports.

5.9Recombinant innovationRecombinant innovation: transferring or combining old ideas in new contexts (Andrew Hargadon) Reebok pump running shoe

Rich innovation through: recruited teams with diverse industrial and professional backgrounds and thus bring very different perspectives to the problem in hand.

Very often original breakthrough ideas come about through a process of what Artur Koestler called bisociation the bringing together of apparently unrelated things which can somehow be connected and yield an interesting insight.

Key message: Look to diversity to provide raw materials which might be combined in interesting ways and realizing this makes the search for unlikely bedfellows a useful strategy.

5.10RegulationDeregulation may open up new innovation space. Privatization of telecommunications led to rapid growth in competition and high innovation rates.

Regulation can also trigger counter innovation: solutions designed to get round existing rules or at least bend them to advantage. Regulation both pushed in key directions and pulls innovation through in response to changed conditions.

5.11Futures and forecastingAnother source of stimuli for innovation comes through imagining and exploring alternative trajectories to the dominant version in everyday use. Concept models and prototypes are used in this context.

5.12Accidents Making adhesive resulted in Post-it notes

The secret is not so much recognizing that such stimuli are available but rather in creating the conditions under which they can be noticed and acted upon. 9/11 provides a huge stimulus to innovate in areas like security, fire safety and evacuation

5.13A framework for looking at innovation sourcesThe key challenge for innovation management is how to make sense of the potential input and to do so with often limited resources. Innovations tend to resolve into vectors combinations of the two core principles. These direct our attention in two complementary directions creating possibilities and identifying and working with needs.

User-led innovation may be triggered by used needs but it often involves creating new solutions to old problems essentially pushing the frontier of possibilities in new directions.

(1) All eggs in one basket: push/pull(2) Incremental or radical innovation. There is a pattern of what could be termed: punctuated equilibrium. This means that most of the time innovation is about exploiting and elaborating, creating variations on a theme within an established technical, market or regulatory trajectory.(3) Timing at different stages in the product of industry life cycle the emphasis may be more or less on push or pull.(4) Diffusion the adoption and elaboration of innovation over time. Understanding diffusion processes is important because it helps understand where and when different kinds of triggers are picked up.

5.14How to searchThe challenge in managing innovation is how to seek out and find the relevant triggers early and well enough to do something about them. Community Innovation Survey reinforces the view that successful innovation is about spreading the net as widely as possible, mobilizing multiple channels.

In open innovation, organizations move to a more permeable view of knowledge in which they recognize the importance of external sources and also make their own knowledge more widely available. 5.15Balancing exploitation and explorationExploitation: the use and development of things already know.It builds strongly through knowledge leveraging activities on what is already well established but in the process leads to a high degree of path dependency. Supported by applied researchExploration: long jumps or re-orientations that enable a firm to adopt new attributes and attain new knowledge outside its domain. Supported by wide-ranging blue-sky activities

5.16Absorptive capacityAbsorptive capacity (AC): the measure of the ability to find and use new knowledge.

Technological learning: the processes whereby firms acquire and use new technological knowledge and underlying organizational and managerial processes which are involved.

Reasons why firms may find difficulties in growing through acquiring and using new knowledge:1. Unaware of the need to change (problem of SME growth)2. Recognize the need to change, but lack the capability to target their search or to assimilate and make effective use of new knowledge once identified.3. Clear what they need but lack capability in finding and acquiring it

AC involves multiple and different activities around search, acquisition, assimilation and implementation. Connectivity between these is important the ability to search and acquire may not lead to innovation. To complete the process further capabilities around assimilation and exploitation are also needed.

Developing AC involves 2 complementary kinds of learning:1. Adaptive learning about reinforcing and establishing relevant routines for dealing with a particular level of environmental complexity.2. Generative learning for taking on new levels of complexity.

5.17Tools and mechanisms to enable searchManaging internal knowledge connectionsHow can organizations tap into the rich knowledge within its existing structures and amongst its workforce? Use communities of practice, such as Innovation scouts, intranet

One rich source of internal innovation lies in the entrepreneurial ideas of employees. Encouraging intrapreneurship (internal entrepreneurship) is increasingly popular and used by Google and 3M.

Bootlegging: a culture in which there is tacit support for projects which go against the grain. BMW Series 3 Estate caused concern because of the conflict with the high-quality brand image.

Extending external connectionsOpen innovation is needed to make new connections.Page 263, table 5.5

Extending search strategies for innovation

Sending out scouts Exploring multiple futures Using the web

Working with active users Deep diving Probe and learn

Mobilize the mainstream Corporate venturing Idea generators

Use brokers and bridges Deliberate diversity Corporate entrepreneurship and intrapreneuring

5.18Two dimensions of innovation searchHigh rates of R&D investment push technological frontiers even further technology overshoot

Firms in a particular field can adopt the same way of framing when they assume certain rules of the game. These frames correspond to accepted architectures the way which players see the configuration within which they innovate.

Search behavior is essentially bounded exploration and raises some challenges: When there is a shift to a new mindset/cognitive frame established players may have problems because of the reorganization of their thinking which is required think outside the box. Bounding process they create a box we need to get out of. Architectural innovation is easier for new players There may be incremental innovation to make the new configuration work but this is not usually new to the world but rather problem solving.

5.19A map of innovation search space

With this model organizations learn to manage innovation within this space and construct routines. In mature sectors a characteristic is the dominance of a particular logic which gives rise to business models of high similarity. This model represents a dominant logic of trajectory for a sector they are not the only possible way of framing things. In high-complexity environments with multiple sources of variety it becomes possible to configure alternative models to reframe the game and arrive at an alternative architecture.

page 271-274

6.1 No man is an islandA network can be defined as a complex, interconnected group or system, and networking involves using that arrangement to accomplish particular tasks.Teamwork is about links between organizations, developing and making use of increasingly wide networks.

Internal project teams are formal and informal networks of knowledge, often organized as a team. Challenge: crossing department borders.

Fluency is the ability to produce ideas; and flexibility is the ability to come up with different types of idea.

Technological breakthrough all kinds of inputs from the marketing skill set getting access to finance spend the money wisely.

6.2The spaghetti model of innovation

Why greater levels of networking in innovation?1. Collective efficiency2. Collective learning3. Collective risk taking4. Intersection of different knowledge sets

Rothwells vision of the fifth-generation innovation is essentially the one in which we now need to operate, with rich and diverse network linkages accelerated and enabled by intensive set of information and communication technologies.

6.3Innovation networks

Networks have been claimed by some to be a new hybrid form of organization that has the potential to replace both firms (hierarchies) and markets. = virtual corporation

How can a network influence actions of its members?1. Through flow and sharing of information within the network.2. Through differences in the position of actors in the network.

Sources of power: technology, expertise, trust, economic strength and legitimacy.

Different network perspectives in innovation research

Social network focusRegional and business groups; communities of scientists and engineersDiffusion and commercialization of innovations

Actor network focusPortfolios of strategic alliancesNetworks mobilized for a specific innovation

Focus on general innovativenessFocus on discrete innovations

High transaction costs in purchasing technology: network approach/market modelWhere uncertainty exist: network approach/full integration or acquisition

A process of information exchange between supplier groups is path-dependent in the sense that past relationships between actors increase the likelihood of future relationships, which can lead to inertia and constrain innovation.

Unconnected, closedConnected, open

System attributes(1) Incompatible technologies(2) Customer components and interfaces(1) Compatible across vendors and products(2) Standard components

Firm strategiesControl standards by protecting proprietary knowledgeShape standards by sharing knowledge with rivals and complementary markets

Source of advantageEconomies of scale, customer lock-inEconomies of scope, multiple segments

E.g. Microsoft in operating systems

Organizational networks have two characteristics that affect the innovation process: 1. Activity cycle create constraints within a network. The repetition of transactions is the basis of efficiency, but systemic interdependencies create constraints to change.2. Instability.

Zaibatsu is a family based organization.

Keiretsu are the more loosely connected organizations.(1) Vertical types organizes suppliers and distribution outlets hierarchically beneath a large, industry-specific manufacturer. E.g. Toyota(2) Horizontal shows relationships between entities and industries, normally centered around a bank and trading company.

Benefits of keiretsu include access to low-cost, long-term capital, and access to the expertise of firms in related industries. This is important for high-technology firms. Keiretsu is associated with below-average profitability and growth. Mitsubishi: machinery by Nikon, cars by Mitsubishi motors, food by Kirin brewery Mitsui , Sumitomo, DKB (commercial banks), Sanwa

Emergent network emerges and develops as a result of environmental interdependence and through common interest. Engineered network requires some triggering entity to form and develop.

Innovation networks can also have emergent properties - the potential for the whole to be greater than the sum of its parts. Without such networks its hard to bring ides successfully to the market.

Another way in which networking can help innovation is in providing support for shared learning. A lot of process innovation is about configuring and adapting what has been developed elsewhere and applying it to your process.

Long-lasting innovation networks can create capability to ride out major waves of change in the technological and economic environment. Silicon Valley

Types of innovation networks:[Managing Innovation]TD&PM

Entrepreneur-basedInternal project teamsCommunities of practiceSpatial clustersSectoral networksSectoral forumEmerging standardsSupply-chain learningNew product/process development consortiumNew technology development consortium

6.5Networks on the insideOrganizations have many people spread across their organizations with all sorts of knowledge. The trouble is that many of these knowledge elements remain unconnected.

6.6Networks on the outside

Principles of open innovation by Chesbrough:1. Not all the smart people work for you2. External ideas can help create value, but it takes internal R&D to claim a part of that value.3. It is better to build a better business model than to get to the market first.4. Make the best use of internal and external ideas and you will win.5. Profit from others use of your intellectual property and buy others IP whenever it advances your own business model.6. Expand R&Ds role to include not only knowledge generation, but knowledge brokering as well.Case of Procter & Camble: Inward-focused approach innovation Connect and develop an innovation process based on the principles of open innovation.

6.7Learning networksA learning network is a network formally set up for the primary purpose of increasing knowledge. Formally established and defined Have primary learning target Have a structure for operation, with boundaries defining participation Processes which can be mapped on to the learning cycle. Measurement of learning outcomes: feedback and decision to continue Co-laboratories, sectoral research organizations, horizontal/vertical collaboration

Enable learning through: experiment (e.g. R&D), transfer of ideas from outside, working with different players, reflecting and reviewing previous projects and even from failures.

Key element shared learning: active participation of others in the process of challenge and support

6.8Networks into the unknown

Primary objectiveType of barrierDescription

Finding prospective partnersGeographicalGeographical and cultural distance makes complex opportunities more difficult to access, and as a result they typically get discounted.

TechnologicalDiscontinuous opportunities often emerge at the intersection of two technological domains.

InstitutionalArise because of different objectives or origins of two groups, such as those dividing public from private sector.

Forming relationships with prospective partnersIdeologicalNot sharing values and norms which can blind from seeing threats or opportunities which might arise at the interfaces between the 2 world views.

DemographicDifferent values and needs of different demographic groups.

EthnicArise from deep-rooted cultural differences between countries or regions in the world.

Reluctant to engage with you3. Building relationships with unusual partners4. Moving into uncharted territory

Keen to engage with you1. Creating new networks in proximate areas2. Seeking out new networks in distant areas

Easy to findHard to find

Zone 1 LEGOs decision to develop its next-generation Mindstorms product involved using network of lead users of the first-generation product.Zone 2 Scouts and agents play a key roleZone 4 BBC Backstage

6.9Managing innovation networksConfiguring innovation networks

Important success factors: Highly diverse Third-party gatekeepers Financial leverage Proactively managed

Learning to manage innovation networks How to manage something we dont own or control. How to see system-level effects not narrow self-interests. How to build trust and shared risk taking without typing the process up in contractual red tape. How to avoid free riders and information spillovers.

9.1Processes for new product development

Four main types of team structure1. Functional structure Traditionally hierarchy structure where communication is handles by function managers to standard procedures.2. Lightweight product manager structure traditional hierarchy where a project manager provides an overarching coordinating structure to the inter-functional work.3. Heavyweight product manager structure matrix structure led by a manager with authority.4. Project execution teams full-time project team where staff works under project leader direction

Filter ideas to preliminary investigationFilter projects to business opportunitiesFilter projects to product/process developmentFilter product to limited launchFilter products to international marketing

Concept generationIdentifying the opportunities for new products and servicesIncremental adaptations or product line extensions market pull

Product assessment and selectionScreening and choosing projects which satisfy certain criteria.

Two levels of filtering:1. Aggregate product plan1.1 Ensure resources are applied to the appropriate types and mix of projects1.2 Develop a capacity plan to balance resource and demand1.3 Analyze the effect of the proposed projects on capabilities to ensure it meets future demands.

2. Specific product concepts Development funnel: identify, screen and converge development projects as they move from idea to commercialization. Stage-gate system: provides a formal framework for filtering projects on explicit criteria.

Product developmentTranslating the selected concepts into a physical product.

Product commercializationTesting, launching and marketing the new product.

Best criteria for success:[Managing Innovation]TD&PM

Product advantageMarket knowledgeClear product definitionRisk assessmentProject organizationProject resourcesProficiency of executionTop management support

Five key practices that contribute to the successful development of blockbuster products: 1. Commitment of senior managementFunctioned as sponsors and toke an active and intimate role. 2. Clear and stable visionProject pillars are the key requirements. Mission, objectives and leadership clarity.3. Improvisation4. Information exchangeBlockbusters development teams are generally cross-functional where communication is difficult.5. Collaboration under pressure

9.2Influence on technology and markets on commercialization

Strategic marketing: whether or not to enter a new marketTactical marketing: concerned mainly with the problem of differentiating existing products and services, and extensions to such products.

High novelty: segmentation, prototyping, market experimentation and industry experts.Low novelty: partnering customers, trend extrapolation and segmentation

Many of the standard marketing tools and techniques are of limited utility for the development and commercialization of novel or complex products. Weaknesses: Identifying and evaluating novel product characteristics. Identifying and evaluating new markets or businesses Promoting the purchase and use of novel products and services.

HighTechnological New solutions to existing problemsComplex Technology & markets co-evolve

Novelty of technologyDifferentiated Compete on quality and features

Architectural Novel combinations of existing technologies

LowNovelty of Markets High

9.3Differentiating products

High relative quality is associated with a high return on sales. Good value is associated with increased market share. Product differentiation is associated with profitability.

Low relative costsInnovation relative quality relative value + brand image market share

Quality function deployment (QFD) Used to identify opportunities for product improvement or differentiation, rather than to solve problems. It is a useful technique for translating customer requirements into development needs, and encourages communication between engineering, production and marketing.Does not work where relations between technical and marketing groups are a problem.

Types of users:1. Must besMust exist before a potential customer will consider a product2. One dimensionalQuantifiable features which allow direct comparison between competing products.3. DelightersMost subtle means of differentiation, attractive features.

9.4Building architectural productsArchitectural products consist of novel combinations of existing technologies that serve new markets or applications.

Segmenting consumer marketsUtilitarian theories: consumers are rational and make purchasing decisions by comparing product utility with their requirements. Rational approach states that there is not influence on buying behavior.Utilitarian: Problem recognition information search evaluation of alternatives purchase

Behavioral approaches have greater explanatory power. The balance between rational and behavioral influences will depend on the level of customer involvement.

Segmenting by: socioeconomic class, life-cycle groupings, lifestyle, psychographic. Yuppy, Dinky, Yappy, Sitcoms, Skiers

Segmenting business marketsBusiness customers tend to be better informed than consumers and make more rational purchasing decisions. They are segmented on the basis of common buying factors or purchasing processes.

People involved in the process: actual customer/buyer, ultimate users, gatekeeper, influences.Benefit segmentation is only practical where such preferences can be related to more easily observable and measurable customer characteristics.

3-stages segmentation process for identifying new business markets.1. Functional segmentation: mapping functions against potential applications.2. Behavioral segmentation to identify potential customers with similar buying behavior. Price of service3. Combine the functional and behavioral segmentation in a single matrix to help identify potential customers with relevant applications and buying behavior.

Phases of analysis:1. Cross-functional teams are used to generate new product concepts.2. These concepts are refined and evaluated, using techniques such as QFD.3. Parallel prototype development and market research activities are conducted.

Incremental product innovation within an existing platform can either introduce benefits to existing customers, such as lower price or improved performance, or additionally attract new users and enter new market niches.

9.5Commercializing technological productsTechnologists are concerned with developing devices. Potential customers but products, which marketing must create from the devices.

AppraiseSelectDevelopField TrialOperate

Identify technologies and evaluateOn the basis of the data from Appraise select the best technologyR&D program to develop a route to the technology and demonstrate its applicability and effectivenessIdentify field trial targets, engage business units, execute field demonstrationCommercialize the technology and implement within BP

9.6Implementing complex products A special case in marketing: neither technology nor markets are well defined and understood.

The nature of complex products Products consist of a large number of interacting components and subsystems.

Customers evaluate purchasers at the system level, rather than at the component. Robot manufacturers offer manufacturing solutions rather than stand-alone robot manipulators.

Links between developers and users Technical knowledge of customers is greater, but there is a burden on developers to educate potential users. This requires close links between developers and users.Expeditionary marketing is the process that acknowledge that failure might take place, bit it is a risk worth taking. Apple didnt identify a specific audience that needed the benefits of a touch screen computer, they launched a product and caused enough of a buzz around it through marketing and PR.

Three distinct processes need to be managed, each demanding different linkages: development, adoption and interfacing. The interface process can be thought of as consisting of two flows: information flows and resource flows which are negotiates by developers and adopters.

Two dimensions help determine the most appropriate relationship between developers and users: the range of different applications for innovation; and the number of potential users of each application:

Few applications, few usersFace-to-face negotiation

Few applications, many usersClassic marketing case which demands careful segmentation, but little interaction with users.

Many applications, few usersMultiple stakeholders, skills to avoid optimization of technology for one group at the expense of others.

Many applications and different usersDevelopers must work with multiple architects of users and aim for the most generic market possible.

Role of lead usersLead users can help to co-develop innovations, and are therefore often early adopters of such innovations. They recognize requirements early, expect high level of benefits, develop their own innovations and applications and perceived to be pioneering and innovative.

Early adopters can provide insights to forecasting the diffusion of innovations.

Research note Beyond lead users: the co-development of innovations Shift towards a more open, democratized form of innovation driven by networks of individual users. Free revealing: users will often freely share their innovations with others.

Adoption of complex products Adoption involves long-term commitment cost of failure to performs is high Buying process is lengthy, adoption may lag years behind availability.

1. Performance risk: the extent to which the purchase meets expectations.2. Psychological risk: associated with how other people in the organization react to the decision.

If theres a agreement concerning the buying criteria, a process of persuasion and bargaining is likely to be necessary before any decision can be made. Three factors that affect the purchase decision:1. Political and legal environment2. Organizational structure and tasks3. Personal roles and responsibilities

9.7Service innovationProductivity paradox: disappointing returns to IT investments in services have resulted in a widespread debate about its causes and potential solutions.

The service sector includes a very wide range and a great diversity of different activities and businesses, ranging from individual consultants and shopkeepers, to huge multinational finance firms.

Differences services and goods: Good tend to be tangible, services are mostly intangible. Perceptions of performance and quality are more important in services. Perceptive are affected by: Tangible aspects appearance of facilities, equipment and staff Responsiveness prompt service and willingness to help Competence the ability to perform the service dependably Assurance knowledge and courtesy of staff, ability to convey trust and confidence. Empathy Simultaneity Storage Customer contact Location

Types of service organization for innovation

(1) Client project orientatedReduces time to market and improves service delivery by focusing on customer requirements and project managements.

Structured processes, such as QFD, are used to identify/influence customer requirements. Demands achievement of innovation solutions and significant time compression at the same time. Knowledge management initiatives to encourage sharing of know-how

Cross functional communications meetings and skills networks, project database, expert intranet. Consultancies and technology-based firms

(2) Mechanistic customizationReduces costs by setting standards and through the involvement of suppliers and customers.

Standardization is key factor in controlling relationships. A project is complete when all physical work is completed, all costs relation to the work have been incurred, and all benefits have been delivered.

(3) Hybrid knowledge sharingProvides a combination of innovation and efficiency by promoting team work and knowledge sharing.

People are cross-trained, co-rewarded and organized in groups, which reinforces team identity. Group systems are self-contained value knowledgeAble to become experts in developing and delivering products as quasi-professionals provides advantage of codified knowledge with far less hierarchical control. Strong in organization, tools and system integration, lacks formal processes. Distributed database, templates for process mapping

(4) Integrated innovativeRaises innovation and quality by means of cross-functional groups supported by groupware and other tools and technology, but this increased coordination raises the time and cost of service development. Co-located, cross-functional teams in a flattened hierarchy.

Several common elements: Organizational mode of bringing people together. Control mechanism, either impersonal (documentation) or interpersonal (co-located teams). Shared knowledge and/or technical information base. External linkages, e.g. customer, partners, suppliers.

Service delivery is improved by customer focus and project management, and by knowledge sharing and collaboration in teams. Time to market is reduced by knowledge sharing and collaboration, and customer focus and project organization, but cross-functional teams can prolong the process.

Summary:Where both technologies and markets are relatively mature, the key issue is how to differentiate a product or service for competing offerings. Tools like quality function deployment (QFD) are useful. Where existing technologies are applied to new markets, what we call architectural innovation, the key issue is resegmentation of markets to identify potential new applications. Where new technologies are applied to existing markets, the key issue is to assess the advantage the technology may have over existing solutions in specific applications, and then identify target users based on behavioral characteristics. Finally, where both technologies and markets are complex, the key issue is the relationship between developers and potential users.

SlidesInventor innovation Often radically new invention Individual discovers new product or process, often commercializing it Predominant till the early 20th century E.g. Siemens, Daimler, Bosch

Laboratory innovation Pioneered by the German chemical industry since the 1870s Predominant till the 1980s Pooling of experts at a single location the laboratory Typically improvement of competence

Network innovation Several firms with different competencies involved Predominant since the 1990s Process often called open innovation