innovation management 1

Innovation Management Dipl.-Wirtsch.-Ing. Dr. Christiane Rau IPM Bachelor: INO3VO | Master: INO1ILV

1. Setting the Stage

2. Innovation Strategy

3. Organizational Integration of IM

4. Innovation Process

5. Innovation Culture

6. Fuzzy Front End: Idea Evaluation

7. Innovation Performance Measurement

8. Service Innovation Management

Seite 2

Agenda

3

LVA Organisation

Grading Written exam (90 min.)

Slides and additional material

Chapter I: Introduction & Recap

© Kurt Gaubinger | Christiane Rau FH Wels IPM 5

Innovation

In all industries …

– Innovation are a key driver for success, growth, and

survival!

Research shows…

– there is a strong positiv link between innovation and market

share as well as ROI!

http://images.google.at/imgres?imgurl=http://www.icook.de/wissen/magazin/bilder/45739I87755K.jpg&imgrefurl=http://www.icook.de/wissen/magazin/details.php4?art%3D1607&h=140&w=210&sz=10&tbnid=9PaAZBobEVsJ:&tbnh=66&tbnw=99&start=13&prev=/images?q%3Dkartoffelchips%26hl%3Dde%26lr%3D

http://images.google.at/imgres?imgurl=http://www.technoscop.ch/d/1/images/micro2.jpg&imgrefurl=http://www.technoscop.ch/d/1/microchips.htm&h=203&w=300&sz=21&tbnid=jSo83wrOA6gJ:&tbnh=75&tbnw=110&start=5&prev=/images?q%3Dmicrochips%26hl%3Dde%26lr%3D


Terms and Definitions

Invention

– Focus on knowledge generated by R&D

– First technical realization of a solution

Innovation

– First commercial use of a novel solution

– A invention (product or process) is introduced in the market (focused definition) and achieves market success (wider definition)

DIESEL

http://wallpaper-s.org/17_~_BMW_530d_Sport,_Diesel_Engine.htm

http://de.wikipedia.org/wiki/Datei:First_Diesel.jpg


Innovation

What motivates companies to …

– engage in innovation projects?


Innovation

Technological progress

– High growth rates (technology / knowledge)

Changing customer needs

– Reconfiguration of markets, hybride consumers, …

Shorter Product lifecylces (PLC)

– In the last 50 years, PLC decreased down to 25%

– Development of product generations is persued in parallel

Global competition

– Chance for innovation vp. competitive pressure

Success of a novel idea / internal crisis

– Prospects of profit in return, potential cost reductions, …

© Kurt Gaubinger | Christiane Rau FH Wels IPM

Types of innovation

Products

Processes

Business

models


Concept of innovation

Criteria for describe innovation

– Novelty

• New – beyond state-of-the-art

• New-to-market vs. new-to-company

• Radical-revolutionary vs. incremental-evolutionary

– Aim

• Market launch

• Generate competitive advantage

• Economic success

– Procedural aspect

• Innovation as process (idea to market launch)

• Innovation as outcome of a process


Fundamental characteristics

Novelty

Novelty (degree of innovativeness) as a distinguishing feature

Source: Salomo/ Gemünden/ Billing (2007, p. 228)

Organisation Market

Technology

Environment

+

+

+ +

radical innovation

high level of novelty

within each dimension

Incremental innovation

Low level of novelty

within each dimension



Novelty

Subcategories to assess novelty

Source: Gaubinger (2008)

Technology Market Environment Organisation

New materials New customer

needs

New suppliers New strategy

New components New customer

groups

New forms of

finanzing

New form of

organization

New technologies New distribution

channels

New competitors New production

facilities

New manufacturing

technologies

New marketing mix New business

models

New competences

… … …



Novelty

Basic innovation

– Technological or organizational breakthrough

– Mostly leads to a number of subsequent innovations



Novelty

Product improvements and -adaptions

– Fundamental functions stay the same

– Distinct aspects are improved

– Available features are adapted to meet customer preferences



Aim of innovation

– Main aim: Develop and expand competitive advantage

Source: Vahs/Burmester, 2005, p. 61

Flexibility

Know-How

Competence

Output

Input Time

Efficiency Productivity

Intensity

Quality

Customer value

Cost

Price

Readiness for delivery

Availability


Aim of innovation

a) Quality and customer benefits

Quality

– „Degree to which a set of inherent characteristics fulfills

requirements”. (requirement defined as need or expectation)

(ISO 9000)

Aim of innovation

– radical as well as incremental improvements of products

(product innovation) and processes (process innovation) lead

to improved quality!


Example from automobile industry

From an interview with Dr. Dannenberg, Director of Oliver

Wyman

Aim of innovation

a) Quality and customer benefits

17

Source: Automobil-Produktion, Mai 2007,

Available from: http://miredaktion.sv-www.de/imperia/md/content/ap/heftausgaben/ap2007/ap05-2007/apr-008000-interview.pdf

Innovation needs to stay affordable.

The automobile industry is alarmingly often rode roughshod over its

clients wishes - and wastes therefore about 27 billions of euro a year.

Too low commitment is shown to cost-cutting innovation. This is the

result of the very recent study done by Oliver Wyman (formerly known as

Mercer Management Consulting).


Aim of Innovation

b) Input - costs

Costs

– … valued consumption of inputs

– Competitive markets increase cost pressure

– The evolution of costs during the innovation process needs to

be closely monitored

Source:

Vahs/Burmester,

2005, p. 67

CO

MM

ITM

EN

T/

TO

TA

L C

OS

TS

INF

LU

EN

CE

ON

CO

ST

S

INNOVATION PROCESS


Aim of Innovation

b) Time

Short lead time for innovation …

– enable early market entrance

– Give greater flexibility to choose when to enter the market

– Lead in knowledge compared to competitors

Innovation process X AG

Innovation process Y GmbH

Monopoly profit



Procedural aspect

Innovation…

– … is a new product that is successful brought to market or a

successfully implemented new process.

Up to now…

– … different activities have been necessary, which are more or

less similar for all innovations

To describe innovation processes…

– … a variety of different models have been developed


Translated from Gaubinger (2009, p. 23)

21

Fundamental Characteristics

Procedural Aspects

Marketing

management

Design

management

R&D & technology

management Innovation process

Idea

gather-

ing &

evalua-

tion

Product

concept

Develop

-ment

Test &

vali-

dation

Launch

Str

ate

gy


Innovation Management

Many new development projects fail…

… why?

FedEx lost $340 million

on its Zap mail

Flop rates of 90%!

Dupont lost $100 million

on the synthetic leather

„Corfam“ Ford lost $250 million

on its Edsel

In 2007 readers of the magazine „Motorrad“

chose the C1 for the „biggest motorcycle flop“.[

© Dr. Kurt Gaubinger & Dr. Christiane Rau IPM INO1VO

Translated from

Cooper (2002, p.24)

Innovation Management

• Main reasons for new product failure

23

13%

6%

8%

9%

10%

14%

16%

24%

Other reasons

Technical problems

Bad timing

Competition

Increase developmental costs

Insufficient marketing effort

Products do not meet

expectation

Insufficient market analysis


Innovation management

Organisation & employees

Innovation culture

Inn

ovati

on

str

ate

gy



Aims of innovation management

– Effectiveness

• Engage in the right innovation projects

• Choose innovation projects that are important to implement

corporate strategy

– Efficiency

• Execute innovation projects in the right way

• Execute a innovation project in a target orientated way (in

regards to quality, cost and time)

Managerial instruments…

– … supports managers to achieve these aims!



Initiating product innovations

technological

progress

internal crisis

competition

shortened product

life cylces

changing customer

requirements

Init

iati

ng

pro

du

ct

inn

ova

tio

ns

Marketing

management

Design

management

R&D & technology

management

Innovation process

Idea g

ath

ering &

evalu

ation

Pro

duct concept

Develo

pm

ent

Test &

valid

ation

Launch


Initiating product innovations

Pull innovation

– Innovation is initiated by distinct customer needs (market-pull)

– Potentially highly successful

Push innovation

– Innovation is initiated by technological advancement

(technology-push)

– Triggered by innovation within the R&D department of a company

– Potential for success does not always exist!

Conclusion

– A dual focus on market as well as technological aspects is

needed to come up with successful new offerings!

© Dr. Kurt Gaubinger & Dr. Christiane Rau IPM INO1VO 28

Idea Management and Open Innovation

Defining search fields

Search fields…

– … link strategic innovation planning and gaining ideas

– … are defined on the basis of strategic goals!

– … are defined to increase efficiency of idea generation!

Innovation trigger Search fields Idea generation

Customer survey:

„More safety“

Preventing accidents

(functions for active

safety)

Preventing consequences

of accidents

(functions for passive

safety)

Ideas for solutions

Ideas for solutions


Idea Management and

Open Innovation

• Aim…

– … first generate a high quantity of ideas!

– „Quantity breeds quality“ (Osborn 1963, p. 124)

• Consistent use…

– … of internal and external sources of information as well as

creativity techniques

Marketing

management

Design

management

R&D & technology

management

Innovation process

Idea g

ath

ering &

evalu

ation

Pro

duct concept

De

ve

lop

me

nt

Test &

valid

ation

Launch


Open innovation

Processes

Source: Gassmann/Enkel (2009, p.7)


Open innovation

Methods

Idea contests

– To be applied in the fuzzy-front-end; competition supports participants’ creativity and improves the quality of submissions

Lead-user method

– Citeria for leaduserness

– Empathic design

– Observation of individuals when using the object in the intended (natural) enviornment of use

IT-supported methods for customer integration

– IT supported methods which support the articulation of customer needs by visual and/or virtual means (e.g. online communities, toolkits, or bulletin boards)

© Dr. Kurt Gaubinger & Dr. Christiane Rau IPM INO1VO

Idea Management

Collecting and storing ideas

32

External

sources

Idea

generation

Internal

sources

Idea pool I (newly submitted)

Screening

Idee pool III

Idea pool II (ready to evaluate)

Ro

ug

h e

va

lua

tio

n

De

taill

ed

evalu

ation

Fin

al

choic

e


Success factors in innovation

management

Inn

ovati

on

serf

olg

product

market

resources & potentials

internal processes

Source: Cooper, R., G.: Tops und Flops in der Produktentwicklung, 2002

Su

cce

ss

http://images.google.at/imgres?imgurl=http://www.zbt-duisburg.de/de/Aktuell/Veranstaltungen/Messen_und_Austellungen/_fotos_hmi2002/hmi-schwanhold.jpg&imgrefurl=http://www.zbt-duisburg.de/de/Aktuell/Veranstaltungen/Messen_und_Austellungen/start.php?nav%3D/de/Aktuell/Veranstaltungen/Messen_und_Austellungen&h=225&w=300&sz=26&tbnid=ZqPUmsfshkMJ:&tbnh=83&tbnw=111&start=15&prev=/images?q%3Dmesse%2Bindustrie%26hl%3Dde%26lr%3D%26sa%3DG

http://images.google.at/imgres?imgurl=http://www.advaltech.com/de/5-mediainfo/02-fotoarchiv/media/produktion.jpg&imgrefurl=http://www.advaltech.com/de/5-mediainfo/02-fotoarchiv/pages/contents.html&h=1481&w=2000&sz=1010&tbnid=tMx4xoWHEOsJ:&tbnh=111&tbnw=150&start=1&prev=/images?q%3Dproduktion%26hl%3Dde%26lr%3D


Success factor

Product

Product superiority (1) Satisfying customer needs and quality requirements

Competitive advantage:

– Functionality

– „Technical“ quality (reliability, durability, etc.)

– Design

– Compatibility

– Services („product-service- systems“)

Important: Customer needs to be able to recognize

and verify product superiority!

Success


Success factor

Market

– Customer insights need to be well-considered already

while developing first concepts

– Using customers insights not verify product concepts is

not sufficient!

– Early customer integration is important!

– Which customers should be integrated?

– Customer feedback is important

– Ongoing task!

Cooperation with customers (2) Integrating customers in the innovation process

Further

information.

INO3VO-T2

Success


Success factors

Market

Market attractiveness (3) Structure of needs, market growth and –size

Competitive situation (4) Competition, substitutions

• Already in the early phases of product development it is

necessary to assess the attractiveness of potential

markets!

• A systematic analysis of competito Systematische

Konkurrenzanalyse muss am Beginn der Entwicklung

stehen und auch processbegleitende durchgeführt

werden!

Success


Technological synergien (6) Synergies in R&D, Engineering, Production

Medical -

Materialprüfung

Marketing synergies (5) Using existing marketing knowledge

Example „Schnittbildtechnik“

Success

Success factors

Resources & potentials

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http://images.google.at/imgres?imgurl=http://www.anderegg-web.ch/fotos/natur-holz.jpg&imgrefurl=http://www.anderegg-web.ch/fotos/natur.htm&h=384&w=512&sz=45&tbnid=13imyLF4LtntEM:&tbnh=96&tbnw=128&hl=de&start=2&prev=/images?q%3Dholz%26svnum%3D10%26hl%3Dde%26lr%3D


Systematic Foresight (7) Generate new product ideas before competitors do!

– Time lead over competitors by early recognition

of chances and risks = competitive advantage!

• „Scanning“ the environment

• „Monitoring“ specific areas

Success

Presence Future t

Future

Technologies

Chances + Risks

Chances + Risks

New

Technologies Technology development

Success factors



Innovation culture (8) Organization as a system of continuous innovation

Financial resources (9) Equity as risk capital

Success

Success

Success factors



Quality of implementation (10) Systematic implementation (innovation process)

G G G G G G

Quality of marketing activity (11)

Success

Success

– Market studies & Competitive analyses

– Definition of target market & positioning

– Marketing plan (operative)

– Concept & product test

– Market launch

Success factors

Internal processes


Conjoint-Analysis as a tool to support

product development

Conjoint analysis is used to measure consumer

preference of multi-feature product or service

alternatives

It provides a distinct customer value for each

feature!

CA provides important directions for pricing

schemes and an estimation of market potential

Analysis is based on an evaluation of different

products (with varying combination of features) by

potential customers/ users!

Internal processes

Quality of marketing activity – An example


Internal processes

Quality of marketing activities

Concept test – scope

Source: Wiesmair, 2012


Exact product & project definition (12) Substantial specification to be done before the development phase

Success factors

Internal processes

Thoroughly defined products are three-times more

often successful then weaker defined ones

– Definition and description of the target market

– Customer requirements

– Central product features (performance data)

– Important external and internal restrictions

– Estimated manufacturing and project costs,

– Required timeframe and project milestones

Ideengewinnung und

-auswahl

Feinanalysen

Konzeptdefinition

Konzeptprüfung und

-freigabe

Produktentwicklung

Pro

du

ktk

on

ze

ptio

n

Success


– Cross-function teams!

– Innovation controlling

44

Internal coordination (13) R&D, Design and Marketing; cooperation partners

Top-Management support (14) Accelerating the innovation process

„Top-Management‘s main task is to set

the stage for innovation (resources)…no

to decide on each and every internal

issue of a project or its direction.“

(Cooper)

Success

Success

Success factors

Internal processes

Henard & Szymanski (2001)

Meta study of 60 studies by Henard & Szymanski (2001)

Besides Cooper‘s studies also a number

of meta studies on success factors exist

45

Product

characteristics

Strategic

factors

Process

characteristics

Product advantage

(0.44)

Product

innovativeness (0.30)

Company resources

(0.30)

Technological

Synergy (0.42)

Market orientation

(0.27)

Marketing synergy

(0.26)

(): betacoefficient

(multiple regressionanalysis)

Content:

Focus often on marketing perspective. Cooperation with partners is less

considered.

If technological processes are considered, it is focused on R&D

management. The innovation process is less considered.

Focus on large scale enterprise.

It is not controlled for the degree of innovativeness as a moderating

variable.

Method:

Mostly focusing on American institution.

Survey data with low response rates.

Informant bias: Subjective perspective of single persons within

companies. Not controlled for their position or function

Hauschildt (2004)

Difficulties of research on success factors

Research on success factors need to be

considered with caution

Seite 46

•Insufficient ability to innovate. Strategic focus

Staff potential

Design of the organization

Innovation process

•Insufficient willingness to innovate. Lack of motivation of employees involved in innovation activities

Innovation management can find a remedy!

Conclusion

Companies fail in two main areas

Seite 47

Chapter II: Innovation Strategy

At the end of this chapter you should have enhanced your ability to:

- Detail the meaning of vision, mission, and strategy

- Examine innovation strategy in relation to corporate and business

strategy

- Debate a companies innovation strategy

- Understand strategy development processes

- Apply instruments of strategy development

Aims for this chapter

Martin

Hervorheben

50

How to develop an innovation strategy?

Adapted from: Vahs/Burmester, 2005, p. 104

Corporate

strategy

Corporate mission

Ausgangs-

situation

Ziel

51

How to develop an innovation strategy?

Vision = overarching lead concept Henry Ford‘s vision: „Make cars available to everyone“

Business principles & corporate mission Are deduced from the corporate vision

Provide insights on values, norms and ideals

Business principles are explicitly stated within the corporate mission statement!

The corporate mission supports employees to pursue the same objective

Strategy Strategies aligns operations („effectivness“)

See

MAK1VO

„Strategieplanung“

Objective

Starting

point

Levels of strategic business management

Strategic Management is done at the

coporate and the business level

52

52 52

Strategic Management

Business strategy

Corporate strategy

Advantage Strategic decision Success

Portfolio/ Diversification, Changes in Portfolio, etc.

Strategic market positioning, allocation of resources

„Parenting Advantage“

Competitive advantages (in an industry)

Corporate success

Success of a single business

Source: Siemens AG (2013 - http://www.siemens.com/about/en/management_structure.htm)

Structure of Siemens 2013 (excerpt)

Often companies are active in more than

one business

Seite 53

Energy Health Care Infrastructure & Cities

Audiology Solutions

Clnical Products

Customer solutions

Diagnostics

Energy Service

Power Generation

Power Transmission

Wind Power

Building Technologies

Low & Medium Voltage

Mobility & Logistics

Rail Systems

Imaging & Therapy

systems Smart Grid

CEO CEO CEO

Managing Board

Supervisory Board

Martin

Hervorheben

BCG portfolio

The BCG matrix is one of the most

renowned portfolio concepts

54

54

Question marks

Stars

Poor dogs Cash cows

Market growth

Relative market share

Costs per piece

Cumulated output

Turn over

Time

Life cycle

Experience curve

Source: The Boston Consulting Group

GE Portfolio (1984)

About 45% of GE‘s revenue was generated

in markets with limited growth and weak

market position

55

- 5

0

5

10

15

20

25

30

0.33 1 3

Major appliances

Small household appliances

Lighting (USA)

Lighting (ROW)

Mobile communications (1)

Semiconductors

Engineered plastics

Commercial aircraft engines

Military aircraft engines

Station TV

Natural resources Aerospace

Nominal

annual market

growth

(1974- 1984)

6.0% average market growth

(all GE units)

= $1.0 Mrd.

GE 1984 revenue

Revenue for each square ($Mrd.)

2%

31%

23%

GE relative market

share (1984)

* *

44%

Martin

Hervorheben

Source:

The Boston Consulting Group

Portfolio von General Electric 1994

10 years later, GE is market leader in

most businesses

56

- 5

0

5

10

15

20

25

30

1 3

Major appliances

Motors/components

Engineered plastics

Silicones

Network TV (NBC)

Station TV

GECS

Medical systems

Lighting USA

Industrial gas turbines

= $1.0Mrd.

GE 1994 revenue

Revenue for each square

($Mrd.)

8%

11% 29%

52%

nominal

annual market

growth

(1984- 1994)

GE relative market share (1994)

6.0% average market growth

(all GE units)

Martin

Hervorheben

Portfolio Deutsche Telekom 2003

(excerpt)

57

Selected businesses

1. T-Com: Access

2. T-Com: Basis Telefonie

3. T-Com: Handsets

4. T-Systems: VCN

5. T.Systems: IP-VCN

6. T-Mobile: Telephony GSM

7. T-Mobile: mCommerce

8. T-Online: Internet Access PC

9. T-Online: Horizontal portals

Market

growth

Relative maret share

1.0

5

3

8

4

6

2

1

7

9

high

low

Please go in teams of three and analyze the portfolio!

Martin

Hervorheben

58

Similarity of businesses (market, processes)

heterogen

homogen

Logic behind the strategy

Identify opportunities and share risks

Share resources and capabilities

Benefit from economies of scale and learning curve effects

1 2 3 4 5 15 ... // ...

Conglo-merate Diversi-fication Relational

diversification

Focused diversi-fication

SBF

Number of businesses

• horizontal • vertical

Types of diversification strategies

The degree of diversification is a central

decision of corporate strategy

Opportunities for growth

Diversification strategies can rely on

three basic alternatives

59

Internal development

External development Joint Development

Build up new business units (new products & markets) within a company

Company jointly build business units and

capitalize together on these businesses

Business units are externally sold or bought

= Internal growth = Cooperation = Akquisition

Levels of strategic business management

Strategic Management is done at the

coporate and the business level

60

60 60

Strategic Management

Business strategy

Corporate strategy

Advantage Strategic decision Success

Portfolio/ Diversification, Changes in Portfolio, etc.

Strategic market positioning, allocation of resources

„Parenting Advantage“

Competitive advantages (in an industry)

Corporate success

Success of a single business

Strategic triangle

Competitive advantages result from better

price/performance rations from customer’s

perspective

Seite 61

customer

company competition

price/

performance

costs costs

price/

performance

Please choose a company and

describe:

1) Its competitive strategy

2) What distinguishes the company

(from a customer‘s perspective

(!))

3) How does the company deliver

the advantage?

4) Is the advantage sustainable?

What are potential threats?

Exercise: Competitive advantage

Seite 62

1.) Google

2.) Audi

3.) Facebook

4.) Sonnentor

5.) Treems

An innovation strategy

… is deduced from corporate and business strategy!

… is a bundle of decisions-, actions- and behaviors, which actively

aligns a company and its product mix to meet prospective market and

competitive conditions.

It focuses on search, selection and realization of innovation and

fundamental change.

(translation from Vahs/Burmester, 2005, p. 102)

Innovation strategy definition

What is an innovation strategy?

Seite 63

Source: Vahs/Burmester (2005, p. 110)

Scope

Innovation strategy can be a functional

or a meta strategy

Seite 64

Functional

strategies

Mark

etin

g

Pro

ductio

n

Fin

ance

HR

F&

E

Functional

strategies

Ma

rke

ting

Pro

ductio

n

Fin

ance

HR

F&

E

Meta strategy Innovation strategy as a

functional strategy

Innovation strategy as a

meta strategy

Our focus!

Systematization

Innovation strategy

65

Stimulus

Technology-push

Ecosystem

Market-Pull

Market launch

pioner

Late follower

Early follower

scope

Strategy of functions

Meta strategy

Please see:

MAK1VO „Timing-

Strategie“

Please see: INO2VO

„Initiierung von

Innovationen“

Martin

Hervorheben

66

Siemens: innovation strategy addressed at

corporate level – aim set for all businesses

http://www.siemenp.com/sustainability/pool/en/core_topics/innovation/innovation_at_siemens2012_q3_01_08_2012_e.pdf

Martin

Hervorheben

67

Siemens: corporate level innovation

strategy - businesses may change in the

future

http://www.siemenp.com/sustainability/pool/en/core_topics/innovation/innovation_at_siemens2012_q3_01_08_2012_e.pdf

Martin

Hervorheben

As cited in A.T. Kearney (2008)

A.T. Kearney study

Successful innovators focus more on

the upfront activities

68

Martin

Hervorheben

innovation management 1

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