development of concepts for r&d management r&d in an individual enterprise

Development of Concepts for

R&D Management R&D in

an Individual Enterprise

The Innovation Business Processin the 4th Generation

R&D Management

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The Innovation Business ProcessPhase I, Step 1 ARCHITECTURE, CAPABILITY, AND ORGANIZATION DEVELOPMENT

Phase II PLATFORM DEVELOPMENT Phase II, Step 2 Initial Prototype Development Phase II, Step 3 Validation of the Capabilities in the Real

World Phase II, Step 4 Full-scale External Testing in Actual

Customer Environments

Phase III PRODUCT FAMILY DEVELOPMENT Phase III, Step 5 Production and Testing of the Initial DesignPhase III, Step 6 Completed DesignPhase III, Step 7 Production Engineering

Phase IV, Step 8 MARKET DEVELOPMENT FOR THE PRODUCT FAMILIES

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The Innovation Business Process

Phase I, Step 1 Architecture, Capability, and Organization Development

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Essence is New Knowledge

• The innovation business process always starts with gathering new knowledge

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Breadth of Knowledge Concerning Competition

• Investigating the immediate competition is the basis

• Intelligence needs to be gathered from invisible competitors, too

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Building the Knowledge Infrastructure

• Knowledge gathering must constitute a fundamental activity that must be done systematically

• A new discipline called knowledge infrastructure engineering

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Types of Knowledge

• Getting a diverse mix of new knowledge• Knowledge that fits with the existing models;

and knowledge that does not fit with the existing models

• Knowledge that forces to rethink, to doubt, to rebuild concepts, to test…

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Accessibility of Knowledge

• All knowledge should be made accessible to everybody in the organization– Substance knowledge– Knowledge concerning the knowledge gathering

work – Knowledge on the new models developed in the

process

• One aim is to enhance useful connections between disparate pieces of knowledge

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Sources of New Challenging Knowledge

• Unexpected success• Unexpected failure• Unexpected outside event• Incongruous economic realities• Incongruity between reality and assumptions about it• Incongruity between perceived and actual customer values and

expectations• Incongruity within the rhythm or logic of a process• Process need• Industry and market structures• Demographics• Changes in perception• New knowledge• Drucker, P. (1985) 10

Criteria for Knowledge Evaluation

• Competitive architecture• Organizational capability• Potential that the knowledge has as the basis

for a new dominant design or a new platform

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Informal and Formal Evaluation of Knowledge

• Evaluation of new knowledge is done continuously

• Mostly evaluation is done informally– People of various backgrounds

• For the most promising ideas also formal evaluations are carried out – Based on a comprehensive business framework

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Factors in Formal Inquiry of a New Idea

• Customer application• Market size• Competitive architecture• Organizational capability and structure• Research and business development process• Product and service platforms • Stakeholder impacts

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Formal Inquiry of a New IdeaQuestions Concerning Customer

Application• What is the scenario that describes how customers would use

the innovation?• How would they feel about the innovation?• Would the innovation be perceived by the customers as

continuous or discontinuous?• How would the innovation be installed, and what

infrastructure would be required?• What functional changes would be required of customers?• What would the emotive factors be?• What degree of market development would be required to

make the innovation a success?

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Formal Inquiry of a New IdeaCategories of Customer Value

• Maybe 5 – 10 broad categories of value• Each category consisting of 10 – 50 or more

value attributes• In addition, latent needs

– number of latent needs can be even greater than number of perceived needs

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Value Matrix in the Auto Industry

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Perfor-mance

Price Safety Size Comfort Style

Durability

Luxury X X X X X X

Recreation X X X X X X X

Utility and work X X X X X

Family transportation

X X X X X X

Basic transportation

X X X X X

Eva

luti

onar

y de

velo

pmen

t pat

hSources of customer value

Formal Inquiry of a New IdeaQuestions Concerning Market Size

• How big is the market?• Does the market consist of new market

segments that must be hypothesized? OR• Does the market consist of existing segments

whose behavior is known and can be studied and referenced?

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Customers Have Experienced Same Kinds of Products or Services • Market research can be used

– to estimate the market size – to assess the investment needed for market

development and diffusion

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No Current Experience for Comparison 1

• (The product or service is new to the world)• Market research is not sufficient to estimate

the market potential• Discounted cash flow financing can not

planned fund the market development• Decision making can not rely on conventional

rules

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No Current Experience for Comparison 2

• Latent customer needs must be invoked and exposed

• Methods– Direct customer use of prototypes– Simulated prototypes in expeditionary marketing

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Formal Inquiry of a New IdeaQuestions Concerning

Competitive Architecture 1• Does the idea extend the current vector of the

market, or does it represent a new vector?• Is there a new s-curve or does the innovation

extend the existing one?• Is the innovation going to happen anyway or

does the innovation depend on the company’s unique capabilities and positioning in the market?

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Competitive Architecture 2• Are there other, competing ideas or technologies

that might better fulfill the underlying customer needs that this innovation tries to access?

• Why would we target our efforts in one channel versus another?

• Do the predilections reflect underlying value to our customers or simply internal biases that have come about based on organizational structure or serendipity of history?

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Formal Inquiry of a New IdeaQuestions Concerning Organizational

Capabilities and Structure• ?• ?• ?

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• Do the needed capabilities presently exist? OR• Must there be an investment in the development of new capabilities?• Are the new capabilities attainable?• Would the innovation be worth the required investments?• Will the innovation be a sustained source of value for the organization

over the long term?• Can this product or service be marketed, sold, and delivered using the

existing organizational structures? OR• Are managerial innovations required in the form of new departments,

new divisions, new business units, or fully autonomous spin-off companies?

• Can all the costs be earned back?

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Formal Inquiry of a New IdeaQuestions Concerning Research

and Business Development Process• ?• ?• ?

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• What new research and business development activities must be undertaken to realize the idea?

• How long is this likely to take, and how much is it likely to cost?• What are the incremental steps that can be taken in the research

process that can be funded as options?• What external research will be required to fully develop the idea?• How well can the success of that research be assured?• How great is the downside risk of failure if the research shows that

the idea cannot be accomplished?

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Product and Service Platforms• ?• ?• ?

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• Can the new product or service be developed on existing platforms, OR must new ones be developed?

• In either case, what would the range of development costs be?• How will the changes impact on existing platform configurations?• Will the changes complement the existing platforms, or render

them obsolete?

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Formal Inquiry of a New IdeaQuestions Concerning Stakeholder Impacts

• ?• ?• ?

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• How would the idea impact the various stakeholders, including vendors, employees, investors, and the communities in which the company operates?

• Would implementations of the idea put the company into competition with key suppliers?

• Would the idea put the company into competition with investors or business partners?

• If competition would occur, how would the competitors respond?• Would the possible competition lead to significant changes in the

workforce requirements?• Could the people in the company learn the required new skills, or

would it be necessary to displace them?

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• How would the possible changes in the workforce impact on labor relations and existing labor agreements?

• How would the changes be perceived in the community in which the company operates?

• Would people welcome the changes as worthwhile activity, or condemn the changes as wasteful, destructive, or immoral?

• Would the company need to deal with significant environmental concerns or problems?

• Over the long term, what impact would all the changes have on public relations?

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Application and Development Scenarios

• Stories of what the world would be like if the possibilities inherent in the idea would be realized

• Based on the answers to the questions in the formal enquiry of a new idea

• In addition, all other available information is taken into consideration

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Use of Scenarios

• Scenarios can be presented to R&D partners, lead customers, and early adopters

• Obtaining outsider views • Getting partners to participate in the develop-

ment project• What if the outsiders are not willing to

participate in the development project?

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Other Systematic Analysis Tools

• Technology road maps• Technology portfolios• Analysis of functional components of each

technology• Competitive analyses• Life-cycle analyses

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Synthesis of the Formal Enquiry

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Synthesis of the Formal Enquiry

• Reasonable assessment of the value that the innovation could offer to customers and other stakeholders

• Decision to go further or to terminate the project

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Focused Concept Development

• Next step after the possibilities are identified• Assessing and developing the potential of the

possibilities anticipated

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Creative Tension

• Contrast between what already exists and the vision of a possible new future

• Creative tension makes the compulsion to transform a seed into its full potential which will change the world - or part of it

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The vision

The current

condition

Creative Tension and Knowledge

• Creative tension puts forward a need for finding new knowledge

• Knowledge about the difference between – what is and – what should be

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Initiation of Innovation Projects 1

• The company’s strategic intent and new discoveries intersect and suggest new possibilities

• The possibilities can be new dominant designs or they can be technology, product, or service platforms

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Initiation of Innovation Projects 2

• Existing customer needs and tacit customer needs are taken into consideration

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New discoveries

New dominant designs or new

platforms

Strategic intent

Formal Enquiry and Managerial Intent

All on-going innovation projects have been evaluated focusing on competitive architectureCompany’s view of the competitive architecture is both explicit and widely understood in the organizationEvolution of the company becomes a matter of managerial intent, not the happen-stance of events

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Reality Check of Assumptions

Explicit competitive architecture includes the expression of its underlying assumptionsAnyone can raise questions concerning discrepancies between assumptions and realityFit of strategic intent and marketplace reality are constantly checked

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Terminating a Project

• If at any stage, evaluation gives the reason to terminate the project, wasting resources should be stopped at once

• Note! Most projects end up being terminated• There must be a large number of alternative

projects in the pipeline

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Wrap-up Activity of Terminated Projects

• Complete documentation of the project and its results

• Can be useful in evaluating future projects• Changes in the marketplace can return the

project to relevance

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Terminated Projects and Learning

• Asking and answering the questions in the formal enquiry is a tremendous source of learning

• Enhancing learning: afterwards calibrating the findings in each case with the sub-sequent out-comes

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Phase II, Steps 2, 3, and 4 Platform Development

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Concept Development and Platform Development

• When something new is found to be the correct means to achieve strategic objectives, – then concept development ends and– then platform development begins

• The new can be a new question, problem, idea, discovery, vision, etc

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Objectives of Phase II

• Defining exactly what tacit knowledge is needed for continuous and discontinuous innovation and discovering this knowledge

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Essence of Phase II

• Identifying questions and answering these questions

• Using real experimentation to discover tacit knowledge of stakeholders

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Inputs to Phase II

• First hand observations• Video recording• Unconscious behavior by users• Unnoticed interactions between people

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Sequence of the Three Steps of Phase II

• Each step can have many iterations• Each step is completed before the beginning

of the next step

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The Three Steps of Phase II

• Step 2: Developing and testing initial prototypes by researchers and customers in research laboratories

• Step 3: Validating the capabilities in the real world

• Step 4: Full-scale external testing in actual customer environments with all the necessary infrastructure elements in place

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Phase II, Step 2Initial Prototype Development

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Working methods of Phase II Step 2

• Utilizing laboratory tests and prototypes• Multiple iterations• Approaching the customers whose tacit

knowledge will be the key to the ultimate success

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Objectives of Phase II Step 2

• Checking the feasibility• Allowing stakeholders to experiment real use• Finding key performance attributes• Estimating the potential value of the innovation• Assessing the necessary infrastructure• Estimating costs of full implementation

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Decision Making in Phase II Step 2

• In each successive step, deciding that the project is worth continuing or terminating the project

• Taking both test results and the development of the environment into consideration

• Same results may be interpreted in opposite ways

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Phase II, Step 3Validation of the Capabilities

in the Real World

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• Transferring testing and prototyping from the laboratory environment to the real world environment

• Knowledge development in three over-lapping communities– vendors– manufacturers– customers

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• Proving that the product or service is worthwhile and effective wherever it is to be used

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Phase II, Step 4 Full-scale External Testing in

Actual Customer Environments

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• Comprehensive platforms, not just modular components or individual capabilities, are tested

• Customers who have not participated in the development work are involved

• Members of the innovation team are joined with members of the operations personnel

• Customer support, technical support, and customer communications are also tested

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• Securing that every project which is alive after Phase II Step 4 is of significant value to customers and other stakeholders

• Providing input to the product family and to the product development of Phase III and to the market development of Phase IV

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”Wall of Invention”

• After the end of Phase II – No fundamental research is conducted and no

significant concept development is done– Only the managed process of commercialization– Execution of ideas which have been proven

through many iterations

• If, however, new ideas emerge, they are explored in Phase I and Phase II, not in Phase III or Phase IV

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Phase III, Steps 5, 6, and 7 Product Family Development

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Working methods of Phase III

• Rapidly developing more refined prototypes of product families and products

• Testing and prototyping iterations can be shorter and simpler than in Phase II, because platforms have already been fully validated

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Objectives of Phase III

• Developing specific design attributes, not anymore developing the platforms

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The Three Steps of Phase III

• Step 5: Production and testing of the initial design

• Step 6: Completed design• Step 7: Production engineering, including

tooling and preparation for distribution

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Sequence of Phase III and Phase IV

• Since the concepts were tested in Phase II, Phase III and Phase IV can be conducted concurrently

• Concurrency supports a faster learning process and a faster path to the market

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Phase III, Step 5Production and Testing

of the Initial Design

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Phase III, Step 6Completed Design

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Phase III, Step 7Production Engineering, Including

Tooling and Preparation for Distribution

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Phase IV, Step 8Market Development for

the Product Families

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Three Sets of Activities in Phase IV

• Development of a revised competitive architecture framework

• Establishment of full-scale operations• Initiation of the knowledge channel with

respect to this particular product family

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Development of a Revised Competitive Architecture Framework• New product families derived from the new

platforms are implemented• In case of new dominant designs, competitive

architecture is significantly impacted

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Establishment of Full-scale Operations

• Full-scale operations in design, production, distribution, sales, and support are established

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Initiation of the Knowledge Channel

• Two-way communication with customers is established

• Emphasis is on sharing knowledge with the customers: This enables the customers to understand the philosophy behind the product

• Feedback from the customers helps to further develop the architecture, capabilities, platforms, product families, and the company itself

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Thank you!

AcknowledgementsMain source: Miller, W. L. & Morris, L. (1999) 4th Generation R&D: ManagingKnowledge, Technology, and Innovation, New York, New York, USA, JohnWiley & Sons Inc, 347 pages.

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development of concepts for r&d management r&d in an individual enterprise

Documents

types of knowledge

work knowledge

breadth of knowledge

accessibility of knowledge

existing models knowledge

disparate pieces of

process process

new models