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Integrating businessexcellence and innovationmanagement Developingvision blueprint and strategyfor innovation in creative andlearning organizationsAnne Martensen amp Jens J DahlgaardPublished online 30 Nov 2009

To cite this article Anne Martensen amp Jens J Dahlgaard (1999) Integrating businessexcellence and innovation management Developing vision blueprint and strategyfor innovation in creative and learning organizations Total Quality Management104-5 627-635

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TOTAL QUALITY MANAGEMENT VOL 10 NOS 4amp5 1999 S627plusmn S635

Integrating business excellence and

innovation management developing vision

blueprint and strategy for innovation in

creative and learning organizations

ANNE MARTENSEN amp JENS J DAHLGAARDResearch Group on Quality Productivity and Innovation Department of Information Science

The Aarhus School of Business Fuglesangs AlleAcirc 4 DK-8210 Aarhus V Denmark

Introduction

In recent research Martensen and Dahlgaard have discussed how the research on productdevelopment and innovation management can be integrated with the research on qualitymanagement and business excellence to work out what creates excellent leadership andexcellent strategy for innovation management in creative and learning organizations Byapplying the European Business Excellence Model to product development it is shown howthe model can be supplemented with reference to criterion parts and areas to addressespecially relevant for a self-assessment of `leadershiprsquo `strategyrsquo and of a holistic approachto how excellent `leadershiprsquo and excellent `strategyrsquo create excellent innovation managementThis article builds upon this knowledge Tushman and Nadler (1996) state that ` managementof innovation and change is the most vital of managementrsquos tasks Innovation is the outcomeof management that is strategic and leadership that is visionaryrsquo rsquo This is exactly the focus ofour article

We believe that innovation and continuous improvement are based on the companyrsquosability to be creative and to learn We argue that an extended planplusmn doplusmn studyplusmn act (PDSA)loop is necessary when formulating excellent strategies and plans for innovation management

The reg rst loop is used for achieving excellence in strategy and planning in innovationmanagement The second loop is to improve the whole setting in which innovation takesplace namely the company culture The second loop is a culture PDSA cycle aimed atcreative and learning organizations

We limit our reg eld of interest to the elements in the `planrsquo phase of the strategy loop Welook at three important elements for creating excellent blueprint strategies and plans ininnovation and discuss relevant areas to address We argue why there must exist a close linkbetween

middot vision and overall business strategy

middot overall business strategy and a new product blueprint and innovation strategy

We demonstrate how the theories developed can be applied in practice by giving examplesfrom a world-wide and innovative company Pioneer Electronic Corporation

0954-41279904S627-09 1999 Taylor amp Francis Ltd

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S628 A MARTENSEN amp J J DAHLGAARD

Introduction to Pioneer Electronic Corporation

Pioneer is in the middle of a transformation of a new corporate identityETH a rebirthETH where anew corporate philosophy (vision and mission) goals and objectives and positioning strategyis formulated This corporate plan is called `Pioneer Vision 2005rsquo

To fulreg l this vision Pioneer is preparing a new infrastructure and action has been takenfor a review of marketing strategy expansion of overseas production change of salesorganization and introduction of a company system

Pioneer states in `Pioneer Vision 2005rsquo that the corporate objective is to be ` an innovativecompany creating network and user friendly entertainmentrsquorsquo And as part of letting this visioncome true Pioneer is ` implementing structural reforms where one of these refers tocontinuous investment in RampD and strengthening and speeding up RampDrsquo rsquo (Pioneer material)

According to a press release of August 1998 the Pioneer group has invested over 30billion yen every year for RampD and has particularly been developing digital versatile disc(DVD) and display technologies cable television (CATV) and digital satellite broadcasting-related technologies

The harvest of all these investments in RampD has resulted in breakthrough productswithin the areas of optical disc technologyETH a blue laser and a DVD car navigation systemwhich is the reg rst of its kind in the world

As part of creating the new corporate identity Pioneer has also changed its companylogo so it now symbolizes the ` strengths of their commitment to technological brilliancersquo rsquo(Pioneer)

Pioneer attaches weight to following the changing world and tries to predict how thesechanges will athorn ect their business and what they have to do to capitalize on the opportunitiesof the future Pioneer states that ` it is essential that we take positive steps to both revitaliseand change the ways in which we think and operatersquo rsquo

Extended PDSA loop for ``Excellent strategy and planning for innovation

management in creative and learning organizationsrsquorsquo

Overview

In our research we have found that eight criterion parts are relevant when developing excellentinnovation strategies and plans in creative and learning organization The eight criterionparts can be combined in an extended PDSA loop (see Fig 1) The use of an extendedPDSA loop was inspired by Hildebrandt et al (1991) and Minzberg and Westley (1992) butthe approach is new in a business excellence context

The reg rst loop consists of four criterion parts all related to how to achieve excellence instrategy and planning for innovation management The second loop consists of four criterionparts all related to the companyrsquos culture The basis for the reg rst loop is a company culturewith an innovative climate where employees are encouraged to have a positive mind-set sothat they can be creative and bring up new ideas where the employees have the intention tolearn continuously and improve their own skills and abilities These aspects are covered bythe second loop

First loop The strategy loop

Leaders must formulate blueprint strategy and plans for innovation and they have to belinked to the companyrsquos vision and overall business strategy (plan) When this is done leaders

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BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S629

Trainingeducation

andCommunication

Communicationand policy

deployment

Strategy andplans for

innovations

Self-assessmentplusmn identify gaps(new product

audit etc)

Strategyloop

First loop

Goals andstrategies forbuilding up anew culture

Identify gapsbased on

feedback fromtraining etc

Implementactivities for

closing gaps andmotivation

Cultureloop

Second loop

plan

ning

H

osh in planningHoshin

H oshin

pla

nning

Hoshi n

pla nning

Figure 1 Extended PDSA loop for `Excellent strategy and planning for innovation management in creative and

learning organizationsrsquo

must communicate these strategies and plans to all involved employees (do) Goals and actionplans must be cascaded through the organization otherwise the employeesrsquo participation andthe necessary coordination by all levels and all functions of the organization will not takeplace (`catchballrsquo )

Annual objectives and action plans must be developed and implemented (do) Whencomprehensive information has been collected a self-assessment can be executed and herebygaps can be identireg ed The leaders must set up necessary actions to close the identireg edgaps (act)

The hoshin planning process starts with the establishment of organizational visions andcontinues throughout the reg rst loop with the development of 3plusmn 5-year strategic plans annualobjectives department plans implementation and regular reviews The hoshin planningprocess is the `backbonersquo of the reg rst loop Hoshin planning and its implications for the reg rstloop in relation to the leadersrsquo communication and responsibilities will be discussed in the`dorsquo phase The hoshin planning process is a continuous process so when the reg rst loop isrotated again the hoshin planning process is continued (but not from scratch)

Second loop The culture loop

If the company does not have the supporting culture needed to carry out the necessaryactivities from the reg rst loop the second loop must be activated

The second loop starts with the identireg cation of the necessary disciplines and principlesfor learning and creativity to be improved so that goals can be set up and strategies forbuilding up a new culture can be formulated (plan)

The next step will be to train and educate all involved employees in how to work withthe disciplines and principles for the new culture and how to assure that suyacute cient andrelevant information reaches the right persons at the right time (do)

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S630 A MARTENSEN amp J J DAHLGAARD

The leaders must study how things are improving for instance by using evaluation andfeedback from the training and education programmes from the `dorsquo phase (study) Identireg edgaps must be closed by starting up dithorn erent activities supported by committed leaders

Employees are motivated to participate in the culture change and actively follow theleader (act) We are now back in the `actrsquo phase of the reg rst loop and a combined ethorn ort isnecessary here Information facts activity plans learning etc must be exchanged heavilybetween the two `actrsquo phases and can in a sense be seen as a fuse of the two loops Theconsequences by turning the second loop must of course be incorporated in the reg rst looprsquosplan phase We need to spin the wheel of the reg rst loop again and start all over again with anew improvement loop

Close link to company vision and overall business strategy

Several studies show that it is important for companies to link innovation strategies to overallbusiness strategies and visions (see Martensen 1995) Management must therefore developa clear vision for the company

A vision can be perceived as an organizationrsquo s desirable future state which is alwaysbetter than what exists today A vision can on one hand vary in degree of reg rmness Thevision must on the other hand be clear and focused and easy to understand and it mustremacr ex some level of motivation to be followed At Pioneer a ` vision refers to a dream thatcan be achieved by utilising the proper meansrsquo rsquo (Pioneer)

A vision should include what leaders expect of innovations and the new product area ingeneral For instance how do leaders expect the growth goals to be achieved and what rolesare set up for the new products (new business new product lines product improvementsetc)

Pioneer has set up a clear vision and mission for its organization Pioneerrsquos vision isto become an ` innovative company which develops networking and customer orientedexcitementrsquo rsquo This overall vision is specireg ed in four more detailed visions

(1) Become worldrsquos number one in DVDETH this new digital optical disc technology willbe the core of the rebirth of Pioneer

(2) Establish the next generation display business as another core with the plasmadisplay panel organic EL and Pioneer unique HEED

(3) Expand business lines from stand-alone to network type(4) Expand traditional assembly to key device and key technology business by partnering

and collaborating with other manufacturers in the same industry

Pioneerrsquos mission is stated in the following way ` [Pioneer] ultimately wants to shareexcitement with [its] customers creating an atmosphere whereby [Pioneer] truly does `Movethe heart and touch the soulrsquo rsquo rsquo

In other words ` Pioneer aims to create a new culture in which the company moves thehearts of customersETH continue to fulreg l customersrsquo dreamsETH with its products and garnerstheir trustrsquorsquo Through competitive technology advantage and by knowing its customersrsquo needsand wants it is believed that Pioneer can achieve this goal of sharing thrilling experienceswith as many people as possible and thereby become the number one preferred consumerelectronics corporation in the world (Pioneer) Pioneerrsquos ultimate goal of its businessendeavours is therefore to create satisreg ed and loyal customers (Pioneer) But visions alonewill not doETH the company has to integrate vision and goals into daily work so that theorganization is heading the same way and in a consistent way

A long-term strategy where innovations are a major issue has to be formulated It is not

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BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S631

suyacute cient in the long term to develop and introduce new products as a reaction to the marketconditionsETH synergy between RampD marketing and production will hardly be achieved underthese circumstances

A new product blueprint and the link to an innovation strategy

A new product blueprint must be developed to secure a close relationship between a newproduct strategy and an overall business strategy The blueprint describes the new productperformance gap reg nancial objectives strategic roles new product types and screening criteriain an overall manner Then the new product strategy interprets the meaning of the blueprintin a much more detailed manner for instance by using information from a new productdiagnostic audit

A new product strategy must focus on which markets and concepts will reg t the strategicroles already set up It must answer questions such as How will the companyrsquos growthobjectives be satisreg ed by internally developed new products How can the blueprint betransformed into market realities Therefore strategies for new products must be based on anew product blueprint A well-developed new product blueprint ought to address the(Kuczmarski 1993 pp 21plusmn 22)

middot role that new products will play in the overall growth plan of the company

middot level of development expenditures and investment capital for the entire new productethorn ort

middot proreg le of the human resource requirements needed

middot reg nancial objective and revenue target for all new products launched during the plannedperiod

middot role of new products in relation to other growth modes

middot top management expectations for new products and its intended level of involvement

How does Pioneer address these areas First Pioneer has formulated several roles for newproducts which they are working towards

(1) Promotion of DVD products throughout the world the early creation of a marketfor home theatre systems and increasing market share with DVD car navigationsystems

(2) Expansion of the communication business(3) Strategic expansion of the integrated receiverdecoder and digital CATV business(4) Market introduction of plasma display panels (PTPs)(5) Increasing the sales of CD-R discs to a level in keeping with production capacities

Second the research and development expenditure for the entire new product ethorn ort has inthe Pioneer group been over 30 billion yen every year according to a press release ofAugust 1998

Third even though we do not have access to a detailed description of the humanresources required we know in a broader sense that Pioneer believes in people who do notblindly follow orders from superiors but encourage their employees to engage in constructivedialogue over any points of agreement

Fourth the sales target for all new DVD products launched until the year 2005 is set atUS$2 billion This corresponds to a market share of 20 In the PDP market Pioneerexpects the market will grow to US$57 billion in the year 2005 and their aim is to get 15of it which corresponds to US$850 million

We believe that the issues mentioned give a basis for which areas to address when

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S632 A MARTENSEN amp J J DAHLGAARD

assessing this area On the other hand we believe it is necessary to take the company cultureinto account when setting up the blueprint The company culture inmacr uences for instancethe kind of human resources already available in the company and the human resourcesinmacr uence to a great extent what strategic roles it is relevant to consider

Formulation of an innovation strategy

What determines a successful innovation strategy

Several studies show that success is not only a question of achieving competences or skillswithin a single strategy elementETH success is a multidimensional concept and there exists aninteraction between each success criteria (see Cooper amp Kleinschmidt 1988)

The circumstances are important when choosing a new product development strategy(see for example Booz et al 1982 Johne amp Snelson 1988 Twiss 1986) For instance onenew product strategy could be formulated to defend an existing market while anotherstrategy could be formulated to be the leader in a new market But a common denominatorcan be set up for what the success concept includes (Cooper 1993 Rothwell 1992)

Our opinion is that the success concept is a relatively homogeneous concept but theweighting of each strategy element varies depending on the circumstances and the idealproduct development strategy cannot be pinpointed

Content and elements of an innovation strategy

Product development strategies can start by answering three questions (Karlsson amp AEcirc hlstroEgrave m1997 p 481)

(1) What are the reg rmsrsquo capabilitiesETH where are we and what can we do(2) What is wanted by the reg rmsrsquo customersETH productmarket pull(3) What is technologically possible for the reg rmETH technology push

When answering the reg rst question the company has to look at the past and the presentsituation so that it knows where to head in the future A desired position must be formulatedon the basis of factETH it is much easier to plan the future if you know your position today andhow you got into that position

Pioneer has formulated an innovation strategy for the PDP area Pioneer wants toestablish itself as a dominant supplier of the next generation of PDPs and organic EL displaysThis goal is based on the facts that (a) Pioneer has a technological advantage compared totheir competitors (b) the market is ready for larger screens and (c) full commitment isachieved for it by Pioneerrsquos president It is stated in the strategy that Pioneer wants to be reg rstwith the best technology and quality and they will expand production and sales for bothconsumer and commercial use Screen sizes prices and timeframe for introduction etc havealso been pointed out

In relation to what is wanted by the customers it is believed in Pioneer that customerswant new forms of true entertainment that satisfy both the needs of pleasure and convenienceThis leads to a promise from Pioneer namely that the core benereg t from Pioneer is a brandthat will contribute to the discovery of fun ` The fun of Pioneer is dithorn erent and unique Itothorn ers something new The fun of Pioneer is new Itrsquos fresh Like nothing yoursquove seen beforeThe fun of Pioneer is advanced The excitement is sharper more vivid Itrsquo s ahead of thepackrsquo rsquo

We believe it is very important to establish constancy of purpose if the company is to

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BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S633

head for success in the future In this connection it is important that top management areheavily involved in direction-setting for the future In what direction will new products takethe company in the future

Innovation has to be managed in an integrated and holistic way to succeed In the longrun it will not do to have very strong capabilities in some areas and weak capabilities inothers As H R Carabelli of Michigan Bell Telephone Company said `A company couldhave the best product engineer the best manufacturing engineer the best man in the countryin marketing yet if these men do not work together as a system the company could beswallowed whole by the competition with people far less qualireg ed but with good manage-mentrsquorsquo A similar example is mentioned by Tidd et al (1997 p 39) These examplesillustrate exactly Demingrsquos (1993) thought about `appreciation for a systemrsquo under profoundknowledge

Cooper and his colleagues have carried out some of the most important and far-reachingstudies about what elements an innovation strategy ought to contain (see Cooper 19841987 Arleth amp Cooper 1996)

One of the latest empirical studies (Arleth and Cooper 1996 p 8) takes a more holisticview of innovation and reg nds that a clearly dereg ned new product strategy for a business unitmeans

middot there are goals or objectives for the businessrsquos total new product ethorn orts (eg whatsales proreg ts etc new products would contribute to the business)

middot the role of new products in achieving business goals is clearly communicated to all

middot there are clearly dereg ned areas of strategic focusETH strategic arenasETH to give direction tothe businessrsquos total new product ethorn ort

middot the businessrsquos overall new product strategy has a long-term trust and focus includingsome longer term projects (as opposed to just short-term incremental projects)

Cooper (1998) lists 10 critical success factorsETH which inmacr uence new product successETH andmost of them are an elaboration of the elements a new product strategy typically has todelineate Five out of 10 factors inmacr uencing mostly the plan phase `strategy and plans forinnovationrsquo are listed hereafter and we highlight these factors with examples from Pioneer

Example 1 A unique superior product

A dithorn erentiated product that delivers unique benereg ts and superior value to the customermeets customers needs better than competitive products is a better quality product thancompetitors (as the customer dereg nes quality) has unique benereg ts and features for thecustomer solves customersrsquo problems with competitive products reduces customersrsquo costs(better value-in-use) has highly visible benereg ts is innovative or novel

As mentioned before the concept behind Pioneerrsquos brand name is `funrsquo ETH a brand thatothorn ers stimulating enjoyable entertainmentETH the Pioneer funrsquo DNA (dithorn erent new andadvanced) Pioneer wants to give the word `entertainmentrsquo a new meaning that entails thediscovery of fun encompassing not just leisure but comfort and convenience as well

Example 2 A strong market orientationETH a market-driven and customer-focused new product

process

Need recognition understanding user needs market need satisfaction constant customercontact strong market knowledge market research quality of execution of marketingactivities more spending on up-front marketing activities

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S634 A MARTENSEN amp J J DAHLGAARD

Pioneer is fully aware of the importance to be market-oriented and focused on customersrsquoneeds and wants Pioneer also encourages employees to do benchmarkingETH competitive aswell as functionalETH so that they can improve their products and maybe even surpass themThis is what the president said in his New Year speech to his employees

You should meet with Pioneerrsquos customers and understand their level of satisfactionwith our products and service Truth and reality in our business only exist inknowing the actual situation `Situationrsquo here applies not only to the marketand Pioneerrsquos customers but to the locations where production research anddevelopment or other activities are conducted If changes occur you will see themin these places reg rst Also learn from the best corporations then catch up withand even surpass them using them as a benchmark of comparison for our work

Example 3 the right organizational structure design and climate

A true cross-functional team approach team empowerment a dereg ned and accountable teamleader a cross-functional process that integrates functional activities

As part of the `Pioneer Vision 2005rsquo Pioneer is also reforming the organization and thepersonal systemETH the last already highlighted Regarding the organization Pioneer has` established separate companies to handle each business domain with synchronized produc-tion and marketing activities the authority and responsibilities for the businesses have beenentrusted to the respective company presidentsrsquorsquo The intentions with this organizationalreform are to ` clarify the responsibilities for decision making and streamline managementprocessesrsquorsquo

Example 4 Sharp and early product dereg nition

Target market dereg nition product concept and benereg ts to be delivered positioning strategyfeatures attributes requirements and specireg cations

Example 5 More emphasis on consistency completeness and quality of execution

Preliminary technical and marketing assessments detailed market study pre-developmentbusiness analysis test market market launch quality of execution errors of omission andcommission treat product innovation as a processETH build quality assurance into the processuse check-points and metrics to ensure every sub-process is executed in a quality fashion

Tidd et al (1997) found that the technological aspects of product development oftenhave a low priority or are not even taken into consideration Their work integrates thisimportant aspect when giving recommendations on strategy formulation

Pioneerrsquos innovation strategies and business missions and objectives are all formulatedon the basis of where Pioneer has technological competitive advantages We have also seenthat Pioneer in some areas can be viewed as a learning organization (DVD-ROM CD-mixing system design technology)

Conclusion

The authors recommend following an extended PDSA loop when integrating businessexcellence and innovation management The reg rst loopETH the `strategy looprsquo ETH is for achievingexcellence in strategy and planning in innovation management The second loopETH the `culture

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BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S635

looprsquo ETH is to improve the whole setting in which innovation takes place Application of thisextended loop in a business excellence context for innovation management is a new suggestedtool to assess business excellence

This article further focuses on the `planrsquo phase in the `strategy looprsquo and highlightsrelevant areas to address under the criterion part `blueprint strategy and plansrsquo

Pioneer Electronic Corporation has been used as an example to demonstrate howtheoretical aspects can be perceived in practice

References

ARLETH J amp COOPER RG (1996) Improving a reg rmrsquos innovation performance Uncovering the drivers ofhigh innovation performance XIth ISPIM International Conference San Sebastian Spain 1plusmn 3 October

BOOZ ALLEN amp HAMILTON (1982) New Products Management for the 1980s (New York Booz Allen ampHamilton)

COOPER RG (1984) The performance impact of product innovation strategies European Journal of Marketing18 pp 5plusmn 54

COOPER RG (1987) New products what separates winners from losers Journal of Product Innovation

Management 4 pp 169plusmn 184COOPER RG (1993) Winning at New Products Accelerating the Process from Idea to Launch (Reading MA

Addison Wesley)COOPER RG (1998) Material presented at seminar on `Winning at New Productsrsquo Copenhagen 20 plusmn 21

January (Copenhagen Innovation Management)COOPER RG amp KLEINSCHMIDT (1988) Success factors in product innovation Industrial Marketing Manage-

ment 16 pp 215plusmn 223DEMING WE (1993) The New Economics for Industry Government Education (Cambridge MA Massachusetts

Institute of Technology)HILDEBRANDT S KRISTENSEN K KANJI G amp DAHLGAARD JJ (1991) Quality culture and TQM Total

Quality Management 2 pp 1 plusmn 10JOHNE FA amp SNELSON PA (1988) Success factors in product innovation a selective review of the literature

Journal of Product Innovation Management 5 pp 114plusmn 128KARLSSON C amp AEcirc HLSTROEgrave M P (1997) Perspective changing product development strategyETH a managerial

challenge Journal of Product Innovation Management 14 pp 473plusmn 484KUCZMARSKI TD (1993) Managing New ProductsETH The Power of Innovation 2nd Edn (Englewood Clithorn s NJ

Prentice Hall)MARTENSEN A (1995) Vejen til succesfulde produkter Working Paper Department of Marketing Copenhagen

Business SchoolMINZBERG H amp WESTLEY F (1992) Cycles of organizational change Strategic Management Journal 13

pp 39plusmn 59TIDD J BESSANT J amp PAVITT K (1997) Integrating Technological Market and Organisational Change (West

Sussex John Wiley)TUSHMAN M amp NADLER D (1996) Organizing for innovation In K STARKEY (Ed) How Organizations

Learn (London International Thomson Business Press)TWISS B (1986) Managing Technological Innovation 3rd Edn (London Longman)

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Introduction to Pioneer Electronic Corporation

Pioneer is in the middle of a transformation of a new corporate identityETH a rebirthETH where anew corporate philosophy (vision and mission) goals and objectives and positioning strategyis formulated This corporate plan is called `Pioneer Vision 2005rsquo

To fulreg l this vision Pioneer is preparing a new infrastructure and action has been takenfor a review of marketing strategy expansion of overseas production change of salesorganization and introduction of a company system

Pioneer states in `Pioneer Vision 2005rsquo that the corporate objective is to be ` an innovativecompany creating network and user friendly entertainmentrsquorsquo And as part of letting this visioncome true Pioneer is ` implementing structural reforms where one of these refers tocontinuous investment in RampD and strengthening and speeding up RampDrsquo rsquo (Pioneer material)

According to a press release of August 1998 the Pioneer group has invested over 30billion yen every year for RampD and has particularly been developing digital versatile disc(DVD) and display technologies cable television (CATV) and digital satellite broadcasting-related technologies

The harvest of all these investments in RampD has resulted in breakthrough productswithin the areas of optical disc technologyETH a blue laser and a DVD car navigation systemwhich is the reg rst of its kind in the world

As part of creating the new corporate identity Pioneer has also changed its companylogo so it now symbolizes the ` strengths of their commitment to technological brilliancersquo rsquo(Pioneer)

Pioneer attaches weight to following the changing world and tries to predict how thesechanges will athorn ect their business and what they have to do to capitalize on the opportunitiesof the future Pioneer states that ` it is essential that we take positive steps to both revitaliseand change the ways in which we think and operatersquo rsquo

Extended PDSA loop for ``Excellent strategy and planning for innovation

management in creative and learning organizationsrsquorsquo

Overview

In our research we have found that eight criterion parts are relevant when developing excellentinnovation strategies and plans in creative and learning organization The eight criterionparts can be combined in an extended PDSA loop (see Fig 1) The use of an extendedPDSA loop was inspired by Hildebrandt et al (1991) and Minzberg and Westley (1992) butthe approach is new in a business excellence context

The reg rst loop consists of four criterion parts all related to how to achieve excellence instrategy and planning for innovation management The second loop consists of four criterionparts all related to the companyrsquos culture The basis for the reg rst loop is a company culturewith an innovative climate where employees are encouraged to have a positive mind-set sothat they can be creative and bring up new ideas where the employees have the intention tolearn continuously and improve their own skills and abilities These aspects are covered bythe second loop

First loop The strategy loop

Leaders must formulate blueprint strategy and plans for innovation and they have to belinked to the companyrsquos vision and overall business strategy (plan) When this is done leaders

Dow

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ded

by [

Uni

vers

ity o

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2013

BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S629

Trainingeducation

andCommunication

Communicationand policy

deployment

Strategy andplans for

innovations

Self-assessmentplusmn identify gaps(new product

audit etc)

Strategyloop

First loop

Goals andstrategies forbuilding up anew culture

Identify gapsbased on

feedback fromtraining etc

Implementactivities for

closing gaps andmotivation

Cultureloop

Second loop

plan

ning

H

osh in planningHoshin

H oshin

pla

nning

Hoshi n

pla nning

Figure 1 Extended PDSA loop for `Excellent strategy and planning for innovation management in creative and

learning organizationsrsquo

must communicate these strategies and plans to all involved employees (do) Goals and actionplans must be cascaded through the organization otherwise the employeesrsquo participation andthe necessary coordination by all levels and all functions of the organization will not takeplace (`catchballrsquo )

Annual objectives and action plans must be developed and implemented (do) Whencomprehensive information has been collected a self-assessment can be executed and herebygaps can be identireg ed The leaders must set up necessary actions to close the identireg edgaps (act)

The hoshin planning process starts with the establishment of organizational visions andcontinues throughout the reg rst loop with the development of 3plusmn 5-year strategic plans annualobjectives department plans implementation and regular reviews The hoshin planningprocess is the `backbonersquo of the reg rst loop Hoshin planning and its implications for the reg rstloop in relation to the leadersrsquo communication and responsibilities will be discussed in the`dorsquo phase The hoshin planning process is a continuous process so when the reg rst loop isrotated again the hoshin planning process is continued (but not from scratch)

Second loop The culture loop

If the company does not have the supporting culture needed to carry out the necessaryactivities from the reg rst loop the second loop must be activated

The second loop starts with the identireg cation of the necessary disciplines and principlesfor learning and creativity to be improved so that goals can be set up and strategies forbuilding up a new culture can be formulated (plan)

The next step will be to train and educate all involved employees in how to work withthe disciplines and principles for the new culture and how to assure that suyacute cient andrelevant information reaches the right persons at the right time (do)

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The leaders must study how things are improving for instance by using evaluation andfeedback from the training and education programmes from the `dorsquo phase (study) Identireg edgaps must be closed by starting up dithorn erent activities supported by committed leaders

Employees are motivated to participate in the culture change and actively follow theleader (act) We are now back in the `actrsquo phase of the reg rst loop and a combined ethorn ort isnecessary here Information facts activity plans learning etc must be exchanged heavilybetween the two `actrsquo phases and can in a sense be seen as a fuse of the two loops Theconsequences by turning the second loop must of course be incorporated in the reg rst looprsquosplan phase We need to spin the wheel of the reg rst loop again and start all over again with anew improvement loop

Close link to company vision and overall business strategy

Several studies show that it is important for companies to link innovation strategies to overallbusiness strategies and visions (see Martensen 1995) Management must therefore developa clear vision for the company

A vision can be perceived as an organizationrsquo s desirable future state which is alwaysbetter than what exists today A vision can on one hand vary in degree of reg rmness Thevision must on the other hand be clear and focused and easy to understand and it mustremacr ex some level of motivation to be followed At Pioneer a ` vision refers to a dream thatcan be achieved by utilising the proper meansrsquo rsquo (Pioneer)

A vision should include what leaders expect of innovations and the new product area ingeneral For instance how do leaders expect the growth goals to be achieved and what rolesare set up for the new products (new business new product lines product improvementsetc)

Pioneer has set up a clear vision and mission for its organization Pioneerrsquos vision isto become an ` innovative company which develops networking and customer orientedexcitementrsquo rsquo This overall vision is specireg ed in four more detailed visions

(1) Become worldrsquos number one in DVDETH this new digital optical disc technology willbe the core of the rebirth of Pioneer

(2) Establish the next generation display business as another core with the plasmadisplay panel organic EL and Pioneer unique HEED

(3) Expand business lines from stand-alone to network type(4) Expand traditional assembly to key device and key technology business by partnering

and collaborating with other manufacturers in the same industry

Pioneerrsquos mission is stated in the following way ` [Pioneer] ultimately wants to shareexcitement with [its] customers creating an atmosphere whereby [Pioneer] truly does `Movethe heart and touch the soulrsquo rsquo rsquo

In other words ` Pioneer aims to create a new culture in which the company moves thehearts of customersETH continue to fulreg l customersrsquo dreamsETH with its products and garnerstheir trustrsquorsquo Through competitive technology advantage and by knowing its customersrsquo needsand wants it is believed that Pioneer can achieve this goal of sharing thrilling experienceswith as many people as possible and thereby become the number one preferred consumerelectronics corporation in the world (Pioneer) Pioneerrsquos ultimate goal of its businessendeavours is therefore to create satisreg ed and loyal customers (Pioneer) But visions alonewill not doETH the company has to integrate vision and goals into daily work so that theorganization is heading the same way and in a consistent way

A long-term strategy where innovations are a major issue has to be formulated It is not

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BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S631

suyacute cient in the long term to develop and introduce new products as a reaction to the marketconditionsETH synergy between RampD marketing and production will hardly be achieved underthese circumstances

A new product blueprint and the link to an innovation strategy

A new product blueprint must be developed to secure a close relationship between a newproduct strategy and an overall business strategy The blueprint describes the new productperformance gap reg nancial objectives strategic roles new product types and screening criteriain an overall manner Then the new product strategy interprets the meaning of the blueprintin a much more detailed manner for instance by using information from a new productdiagnostic audit

A new product strategy must focus on which markets and concepts will reg t the strategicroles already set up It must answer questions such as How will the companyrsquos growthobjectives be satisreg ed by internally developed new products How can the blueprint betransformed into market realities Therefore strategies for new products must be based on anew product blueprint A well-developed new product blueprint ought to address the(Kuczmarski 1993 pp 21plusmn 22)

middot role that new products will play in the overall growth plan of the company

middot level of development expenditures and investment capital for the entire new productethorn ort

middot proreg le of the human resource requirements needed

middot reg nancial objective and revenue target for all new products launched during the plannedperiod

middot role of new products in relation to other growth modes

middot top management expectations for new products and its intended level of involvement

How does Pioneer address these areas First Pioneer has formulated several roles for newproducts which they are working towards

(1) Promotion of DVD products throughout the world the early creation of a marketfor home theatre systems and increasing market share with DVD car navigationsystems

(2) Expansion of the communication business(3) Strategic expansion of the integrated receiverdecoder and digital CATV business(4) Market introduction of plasma display panels (PTPs)(5) Increasing the sales of CD-R discs to a level in keeping with production capacities

Second the research and development expenditure for the entire new product ethorn ort has inthe Pioneer group been over 30 billion yen every year according to a press release ofAugust 1998

Third even though we do not have access to a detailed description of the humanresources required we know in a broader sense that Pioneer believes in people who do notblindly follow orders from superiors but encourage their employees to engage in constructivedialogue over any points of agreement

Fourth the sales target for all new DVD products launched until the year 2005 is set atUS$2 billion This corresponds to a market share of 20 In the PDP market Pioneerexpects the market will grow to US$57 billion in the year 2005 and their aim is to get 15of it which corresponds to US$850 million

We believe that the issues mentioned give a basis for which areas to address when

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assessing this area On the other hand we believe it is necessary to take the company cultureinto account when setting up the blueprint The company culture inmacr uences for instancethe kind of human resources already available in the company and the human resourcesinmacr uence to a great extent what strategic roles it is relevant to consider

Formulation of an innovation strategy

What determines a successful innovation strategy

Several studies show that success is not only a question of achieving competences or skillswithin a single strategy elementETH success is a multidimensional concept and there exists aninteraction between each success criteria (see Cooper amp Kleinschmidt 1988)

The circumstances are important when choosing a new product development strategy(see for example Booz et al 1982 Johne amp Snelson 1988 Twiss 1986) For instance onenew product strategy could be formulated to defend an existing market while anotherstrategy could be formulated to be the leader in a new market But a common denominatorcan be set up for what the success concept includes (Cooper 1993 Rothwell 1992)

Our opinion is that the success concept is a relatively homogeneous concept but theweighting of each strategy element varies depending on the circumstances and the idealproduct development strategy cannot be pinpointed

Content and elements of an innovation strategy

Product development strategies can start by answering three questions (Karlsson amp AEcirc hlstroEgrave m1997 p 481)

(1) What are the reg rmsrsquo capabilitiesETH where are we and what can we do(2) What is wanted by the reg rmsrsquo customersETH productmarket pull(3) What is technologically possible for the reg rmETH technology push

When answering the reg rst question the company has to look at the past and the presentsituation so that it knows where to head in the future A desired position must be formulatedon the basis of factETH it is much easier to plan the future if you know your position today andhow you got into that position

Pioneer has formulated an innovation strategy for the PDP area Pioneer wants toestablish itself as a dominant supplier of the next generation of PDPs and organic EL displaysThis goal is based on the facts that (a) Pioneer has a technological advantage compared totheir competitors (b) the market is ready for larger screens and (c) full commitment isachieved for it by Pioneerrsquos president It is stated in the strategy that Pioneer wants to be reg rstwith the best technology and quality and they will expand production and sales for bothconsumer and commercial use Screen sizes prices and timeframe for introduction etc havealso been pointed out

In relation to what is wanted by the customers it is believed in Pioneer that customerswant new forms of true entertainment that satisfy both the needs of pleasure and convenienceThis leads to a promise from Pioneer namely that the core benereg t from Pioneer is a brandthat will contribute to the discovery of fun ` The fun of Pioneer is dithorn erent and unique Itothorn ers something new The fun of Pioneer is new Itrsquos fresh Like nothing yoursquove seen beforeThe fun of Pioneer is advanced The excitement is sharper more vivid Itrsquo s ahead of thepackrsquo rsquo

We believe it is very important to establish constancy of purpose if the company is to

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BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S633

head for success in the future In this connection it is important that top management areheavily involved in direction-setting for the future In what direction will new products takethe company in the future

Innovation has to be managed in an integrated and holistic way to succeed In the longrun it will not do to have very strong capabilities in some areas and weak capabilities inothers As H R Carabelli of Michigan Bell Telephone Company said `A company couldhave the best product engineer the best manufacturing engineer the best man in the countryin marketing yet if these men do not work together as a system the company could beswallowed whole by the competition with people far less qualireg ed but with good manage-mentrsquorsquo A similar example is mentioned by Tidd et al (1997 p 39) These examplesillustrate exactly Demingrsquos (1993) thought about `appreciation for a systemrsquo under profoundknowledge

Cooper and his colleagues have carried out some of the most important and far-reachingstudies about what elements an innovation strategy ought to contain (see Cooper 19841987 Arleth amp Cooper 1996)

One of the latest empirical studies (Arleth and Cooper 1996 p 8) takes a more holisticview of innovation and reg nds that a clearly dereg ned new product strategy for a business unitmeans

middot there are goals or objectives for the businessrsquos total new product ethorn orts (eg whatsales proreg ts etc new products would contribute to the business)

middot the role of new products in achieving business goals is clearly communicated to all

middot there are clearly dereg ned areas of strategic focusETH strategic arenasETH to give direction tothe businessrsquos total new product ethorn ort

middot the businessrsquos overall new product strategy has a long-term trust and focus includingsome longer term projects (as opposed to just short-term incremental projects)

Cooper (1998) lists 10 critical success factorsETH which inmacr uence new product successETH andmost of them are an elaboration of the elements a new product strategy typically has todelineate Five out of 10 factors inmacr uencing mostly the plan phase `strategy and plans forinnovationrsquo are listed hereafter and we highlight these factors with examples from Pioneer

Example 1 A unique superior product

A dithorn erentiated product that delivers unique benereg ts and superior value to the customermeets customers needs better than competitive products is a better quality product thancompetitors (as the customer dereg nes quality) has unique benereg ts and features for thecustomer solves customersrsquo problems with competitive products reduces customersrsquo costs(better value-in-use) has highly visible benereg ts is innovative or novel

As mentioned before the concept behind Pioneerrsquos brand name is `funrsquo ETH a brand thatothorn ers stimulating enjoyable entertainmentETH the Pioneer funrsquo DNA (dithorn erent new andadvanced) Pioneer wants to give the word `entertainmentrsquo a new meaning that entails thediscovery of fun encompassing not just leisure but comfort and convenience as well

Example 2 A strong market orientationETH a market-driven and customer-focused new product

process

Need recognition understanding user needs market need satisfaction constant customercontact strong market knowledge market research quality of execution of marketingactivities more spending on up-front marketing activities

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Pioneer is fully aware of the importance to be market-oriented and focused on customersrsquoneeds and wants Pioneer also encourages employees to do benchmarkingETH competitive aswell as functionalETH so that they can improve their products and maybe even surpass themThis is what the president said in his New Year speech to his employees

You should meet with Pioneerrsquos customers and understand their level of satisfactionwith our products and service Truth and reality in our business only exist inknowing the actual situation `Situationrsquo here applies not only to the marketand Pioneerrsquos customers but to the locations where production research anddevelopment or other activities are conducted If changes occur you will see themin these places reg rst Also learn from the best corporations then catch up withand even surpass them using them as a benchmark of comparison for our work

Example 3 the right organizational structure design and climate

A true cross-functional team approach team empowerment a dereg ned and accountable teamleader a cross-functional process that integrates functional activities

As part of the `Pioneer Vision 2005rsquo Pioneer is also reforming the organization and thepersonal systemETH the last already highlighted Regarding the organization Pioneer has` established separate companies to handle each business domain with synchronized produc-tion and marketing activities the authority and responsibilities for the businesses have beenentrusted to the respective company presidentsrsquorsquo The intentions with this organizationalreform are to ` clarify the responsibilities for decision making and streamline managementprocessesrsquorsquo

Example 4 Sharp and early product dereg nition

Target market dereg nition product concept and benereg ts to be delivered positioning strategyfeatures attributes requirements and specireg cations

Example 5 More emphasis on consistency completeness and quality of execution

Preliminary technical and marketing assessments detailed market study pre-developmentbusiness analysis test market market launch quality of execution errors of omission andcommission treat product innovation as a processETH build quality assurance into the processuse check-points and metrics to ensure every sub-process is executed in a quality fashion

Tidd et al (1997) found that the technological aspects of product development oftenhave a low priority or are not even taken into consideration Their work integrates thisimportant aspect when giving recommendations on strategy formulation

Pioneerrsquos innovation strategies and business missions and objectives are all formulatedon the basis of where Pioneer has technological competitive advantages We have also seenthat Pioneer in some areas can be viewed as a learning organization (DVD-ROM CD-mixing system design technology)

Conclusion

The authors recommend following an extended PDSA loop when integrating businessexcellence and innovation management The reg rst loopETH the `strategy looprsquo ETH is for achievingexcellence in strategy and planning in innovation management The second loopETH the `culture

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BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S635

looprsquo ETH is to improve the whole setting in which innovation takes place Application of thisextended loop in a business excellence context for innovation management is a new suggestedtool to assess business excellence

This article further focuses on the `planrsquo phase in the `strategy looprsquo and highlightsrelevant areas to address under the criterion part `blueprint strategy and plansrsquo

Pioneer Electronic Corporation has been used as an example to demonstrate howtheoretical aspects can be perceived in practice

References

ARLETH J amp COOPER RG (1996) Improving a reg rmrsquos innovation performance Uncovering the drivers ofhigh innovation performance XIth ISPIM International Conference San Sebastian Spain 1plusmn 3 October

BOOZ ALLEN amp HAMILTON (1982) New Products Management for the 1980s (New York Booz Allen ampHamilton)

COOPER RG (1984) The performance impact of product innovation strategies European Journal of Marketing18 pp 5plusmn 54

COOPER RG (1987) New products what separates winners from losers Journal of Product Innovation

Management 4 pp 169plusmn 184COOPER RG (1993) Winning at New Products Accelerating the Process from Idea to Launch (Reading MA

Addison Wesley)COOPER RG (1998) Material presented at seminar on `Winning at New Productsrsquo Copenhagen 20 plusmn 21

January (Copenhagen Innovation Management)COOPER RG amp KLEINSCHMIDT (1988) Success factors in product innovation Industrial Marketing Manage-

ment 16 pp 215plusmn 223DEMING WE (1993) The New Economics for Industry Government Education (Cambridge MA Massachusetts

Institute of Technology)HILDEBRANDT S KRISTENSEN K KANJI G amp DAHLGAARD JJ (1991) Quality culture and TQM Total

Quality Management 2 pp 1 plusmn 10JOHNE FA amp SNELSON PA (1988) Success factors in product innovation a selective review of the literature

Journal of Product Innovation Management 5 pp 114plusmn 128KARLSSON C amp AEcirc HLSTROEgrave M P (1997) Perspective changing product development strategyETH a managerial

challenge Journal of Product Innovation Management 14 pp 473plusmn 484KUCZMARSKI TD (1993) Managing New ProductsETH The Power of Innovation 2nd Edn (Englewood Clithorn s NJ

Prentice Hall)MARTENSEN A (1995) Vejen til succesfulde produkter Working Paper Department of Marketing Copenhagen

Business SchoolMINZBERG H amp WESTLEY F (1992) Cycles of organizational change Strategic Management Journal 13

pp 39plusmn 59TIDD J BESSANT J amp PAVITT K (1997) Integrating Technological Market and Organisational Change (West

Sussex John Wiley)TUSHMAN M amp NADLER D (1996) Organizing for innovation In K STARKEY (Ed) How Organizations

Learn (London International Thomson Business Press)TWISS B (1986) Managing Technological Innovation 3rd Edn (London Longman)

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BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S629

Trainingeducation

andCommunication

Communicationand policy

deployment

Strategy andplans for

innovations

Self-assessmentplusmn identify gaps(new product

audit etc)

Strategyloop

First loop

Goals andstrategies forbuilding up anew culture

Identify gapsbased on

feedback fromtraining etc

Implementactivities for

closing gaps andmotivation

Cultureloop

Second loop

plan

ning

H

osh in planningHoshin

H oshin

pla

nning

Hoshi n

pla nning

Figure 1 Extended PDSA loop for `Excellent strategy and planning for innovation management in creative and

learning organizationsrsquo

must communicate these strategies and plans to all involved employees (do) Goals and actionplans must be cascaded through the organization otherwise the employeesrsquo participation andthe necessary coordination by all levels and all functions of the organization will not takeplace (`catchballrsquo )

Annual objectives and action plans must be developed and implemented (do) Whencomprehensive information has been collected a self-assessment can be executed and herebygaps can be identireg ed The leaders must set up necessary actions to close the identireg edgaps (act)

The hoshin planning process starts with the establishment of organizational visions andcontinues throughout the reg rst loop with the development of 3plusmn 5-year strategic plans annualobjectives department plans implementation and regular reviews The hoshin planningprocess is the `backbonersquo of the reg rst loop Hoshin planning and its implications for the reg rstloop in relation to the leadersrsquo communication and responsibilities will be discussed in the`dorsquo phase The hoshin planning process is a continuous process so when the reg rst loop isrotated again the hoshin planning process is continued (but not from scratch)

Second loop The culture loop

If the company does not have the supporting culture needed to carry out the necessaryactivities from the reg rst loop the second loop must be activated

The second loop starts with the identireg cation of the necessary disciplines and principlesfor learning and creativity to be improved so that goals can be set up and strategies forbuilding up a new culture can be formulated (plan)

The next step will be to train and educate all involved employees in how to work withthe disciplines and principles for the new culture and how to assure that suyacute cient andrelevant information reaches the right persons at the right time (do)

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The leaders must study how things are improving for instance by using evaluation andfeedback from the training and education programmes from the `dorsquo phase (study) Identireg edgaps must be closed by starting up dithorn erent activities supported by committed leaders

Employees are motivated to participate in the culture change and actively follow theleader (act) We are now back in the `actrsquo phase of the reg rst loop and a combined ethorn ort isnecessary here Information facts activity plans learning etc must be exchanged heavilybetween the two `actrsquo phases and can in a sense be seen as a fuse of the two loops Theconsequences by turning the second loop must of course be incorporated in the reg rst looprsquosplan phase We need to spin the wheel of the reg rst loop again and start all over again with anew improvement loop

Close link to company vision and overall business strategy

Several studies show that it is important for companies to link innovation strategies to overallbusiness strategies and visions (see Martensen 1995) Management must therefore developa clear vision for the company

A vision can be perceived as an organizationrsquo s desirable future state which is alwaysbetter than what exists today A vision can on one hand vary in degree of reg rmness Thevision must on the other hand be clear and focused and easy to understand and it mustremacr ex some level of motivation to be followed At Pioneer a ` vision refers to a dream thatcan be achieved by utilising the proper meansrsquo rsquo (Pioneer)

A vision should include what leaders expect of innovations and the new product area ingeneral For instance how do leaders expect the growth goals to be achieved and what rolesare set up for the new products (new business new product lines product improvementsetc)

Pioneer has set up a clear vision and mission for its organization Pioneerrsquos vision isto become an ` innovative company which develops networking and customer orientedexcitementrsquo rsquo This overall vision is specireg ed in four more detailed visions

(1) Become worldrsquos number one in DVDETH this new digital optical disc technology willbe the core of the rebirth of Pioneer

(2) Establish the next generation display business as another core with the plasmadisplay panel organic EL and Pioneer unique HEED

(3) Expand business lines from stand-alone to network type(4) Expand traditional assembly to key device and key technology business by partnering

and collaborating with other manufacturers in the same industry

Pioneerrsquos mission is stated in the following way ` [Pioneer] ultimately wants to shareexcitement with [its] customers creating an atmosphere whereby [Pioneer] truly does `Movethe heart and touch the soulrsquo rsquo rsquo

In other words ` Pioneer aims to create a new culture in which the company moves thehearts of customersETH continue to fulreg l customersrsquo dreamsETH with its products and garnerstheir trustrsquorsquo Through competitive technology advantage and by knowing its customersrsquo needsand wants it is believed that Pioneer can achieve this goal of sharing thrilling experienceswith as many people as possible and thereby become the number one preferred consumerelectronics corporation in the world (Pioneer) Pioneerrsquos ultimate goal of its businessendeavours is therefore to create satisreg ed and loyal customers (Pioneer) But visions alonewill not doETH the company has to integrate vision and goals into daily work so that theorganization is heading the same way and in a consistent way

A long-term strategy where innovations are a major issue has to be formulated It is not

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BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S631

suyacute cient in the long term to develop and introduce new products as a reaction to the marketconditionsETH synergy between RampD marketing and production will hardly be achieved underthese circumstances

A new product blueprint and the link to an innovation strategy

A new product blueprint must be developed to secure a close relationship between a newproduct strategy and an overall business strategy The blueprint describes the new productperformance gap reg nancial objectives strategic roles new product types and screening criteriain an overall manner Then the new product strategy interprets the meaning of the blueprintin a much more detailed manner for instance by using information from a new productdiagnostic audit

A new product strategy must focus on which markets and concepts will reg t the strategicroles already set up It must answer questions such as How will the companyrsquos growthobjectives be satisreg ed by internally developed new products How can the blueprint betransformed into market realities Therefore strategies for new products must be based on anew product blueprint A well-developed new product blueprint ought to address the(Kuczmarski 1993 pp 21plusmn 22)

middot role that new products will play in the overall growth plan of the company

middot level of development expenditures and investment capital for the entire new productethorn ort

middot proreg le of the human resource requirements needed

middot reg nancial objective and revenue target for all new products launched during the plannedperiod

middot role of new products in relation to other growth modes

middot top management expectations for new products and its intended level of involvement

How does Pioneer address these areas First Pioneer has formulated several roles for newproducts which they are working towards

(1) Promotion of DVD products throughout the world the early creation of a marketfor home theatre systems and increasing market share with DVD car navigationsystems

(2) Expansion of the communication business(3) Strategic expansion of the integrated receiverdecoder and digital CATV business(4) Market introduction of plasma display panels (PTPs)(5) Increasing the sales of CD-R discs to a level in keeping with production capacities

Second the research and development expenditure for the entire new product ethorn ort has inthe Pioneer group been over 30 billion yen every year according to a press release ofAugust 1998

Third even though we do not have access to a detailed description of the humanresources required we know in a broader sense that Pioneer believes in people who do notblindly follow orders from superiors but encourage their employees to engage in constructivedialogue over any points of agreement

Fourth the sales target for all new DVD products launched until the year 2005 is set atUS$2 billion This corresponds to a market share of 20 In the PDP market Pioneerexpects the market will grow to US$57 billion in the year 2005 and their aim is to get 15of it which corresponds to US$850 million

We believe that the issues mentioned give a basis for which areas to address when

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assessing this area On the other hand we believe it is necessary to take the company cultureinto account when setting up the blueprint The company culture inmacr uences for instancethe kind of human resources already available in the company and the human resourcesinmacr uence to a great extent what strategic roles it is relevant to consider

Formulation of an innovation strategy

What determines a successful innovation strategy

Several studies show that success is not only a question of achieving competences or skillswithin a single strategy elementETH success is a multidimensional concept and there exists aninteraction between each success criteria (see Cooper amp Kleinschmidt 1988)

The circumstances are important when choosing a new product development strategy(see for example Booz et al 1982 Johne amp Snelson 1988 Twiss 1986) For instance onenew product strategy could be formulated to defend an existing market while anotherstrategy could be formulated to be the leader in a new market But a common denominatorcan be set up for what the success concept includes (Cooper 1993 Rothwell 1992)

Our opinion is that the success concept is a relatively homogeneous concept but theweighting of each strategy element varies depending on the circumstances and the idealproduct development strategy cannot be pinpointed

Content and elements of an innovation strategy

Product development strategies can start by answering three questions (Karlsson amp AEcirc hlstroEgrave m1997 p 481)

(1) What are the reg rmsrsquo capabilitiesETH where are we and what can we do(2) What is wanted by the reg rmsrsquo customersETH productmarket pull(3) What is technologically possible for the reg rmETH technology push

When answering the reg rst question the company has to look at the past and the presentsituation so that it knows where to head in the future A desired position must be formulatedon the basis of factETH it is much easier to plan the future if you know your position today andhow you got into that position

Pioneer has formulated an innovation strategy for the PDP area Pioneer wants toestablish itself as a dominant supplier of the next generation of PDPs and organic EL displaysThis goal is based on the facts that (a) Pioneer has a technological advantage compared totheir competitors (b) the market is ready for larger screens and (c) full commitment isachieved for it by Pioneerrsquos president It is stated in the strategy that Pioneer wants to be reg rstwith the best technology and quality and they will expand production and sales for bothconsumer and commercial use Screen sizes prices and timeframe for introduction etc havealso been pointed out

In relation to what is wanted by the customers it is believed in Pioneer that customerswant new forms of true entertainment that satisfy both the needs of pleasure and convenienceThis leads to a promise from Pioneer namely that the core benereg t from Pioneer is a brandthat will contribute to the discovery of fun ` The fun of Pioneer is dithorn erent and unique Itothorn ers something new The fun of Pioneer is new Itrsquos fresh Like nothing yoursquove seen beforeThe fun of Pioneer is advanced The excitement is sharper more vivid Itrsquo s ahead of thepackrsquo rsquo

We believe it is very important to establish constancy of purpose if the company is to

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BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S633

head for success in the future In this connection it is important that top management areheavily involved in direction-setting for the future In what direction will new products takethe company in the future

Innovation has to be managed in an integrated and holistic way to succeed In the longrun it will not do to have very strong capabilities in some areas and weak capabilities inothers As H R Carabelli of Michigan Bell Telephone Company said `A company couldhave the best product engineer the best manufacturing engineer the best man in the countryin marketing yet if these men do not work together as a system the company could beswallowed whole by the competition with people far less qualireg ed but with good manage-mentrsquorsquo A similar example is mentioned by Tidd et al (1997 p 39) These examplesillustrate exactly Demingrsquos (1993) thought about `appreciation for a systemrsquo under profoundknowledge

Cooper and his colleagues have carried out some of the most important and far-reachingstudies about what elements an innovation strategy ought to contain (see Cooper 19841987 Arleth amp Cooper 1996)

One of the latest empirical studies (Arleth and Cooper 1996 p 8) takes a more holisticview of innovation and reg nds that a clearly dereg ned new product strategy for a business unitmeans

middot there are goals or objectives for the businessrsquos total new product ethorn orts (eg whatsales proreg ts etc new products would contribute to the business)

middot the role of new products in achieving business goals is clearly communicated to all

middot there are clearly dereg ned areas of strategic focusETH strategic arenasETH to give direction tothe businessrsquos total new product ethorn ort

middot the businessrsquos overall new product strategy has a long-term trust and focus includingsome longer term projects (as opposed to just short-term incremental projects)

Cooper (1998) lists 10 critical success factorsETH which inmacr uence new product successETH andmost of them are an elaboration of the elements a new product strategy typically has todelineate Five out of 10 factors inmacr uencing mostly the plan phase `strategy and plans forinnovationrsquo are listed hereafter and we highlight these factors with examples from Pioneer

Example 1 A unique superior product

A dithorn erentiated product that delivers unique benereg ts and superior value to the customermeets customers needs better than competitive products is a better quality product thancompetitors (as the customer dereg nes quality) has unique benereg ts and features for thecustomer solves customersrsquo problems with competitive products reduces customersrsquo costs(better value-in-use) has highly visible benereg ts is innovative or novel

As mentioned before the concept behind Pioneerrsquos brand name is `funrsquo ETH a brand thatothorn ers stimulating enjoyable entertainmentETH the Pioneer funrsquo DNA (dithorn erent new andadvanced) Pioneer wants to give the word `entertainmentrsquo a new meaning that entails thediscovery of fun encompassing not just leisure but comfort and convenience as well

Example 2 A strong market orientationETH a market-driven and customer-focused new product

process

Need recognition understanding user needs market need satisfaction constant customercontact strong market knowledge market research quality of execution of marketingactivities more spending on up-front marketing activities

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Pioneer is fully aware of the importance to be market-oriented and focused on customersrsquoneeds and wants Pioneer also encourages employees to do benchmarkingETH competitive aswell as functionalETH so that they can improve their products and maybe even surpass themThis is what the president said in his New Year speech to his employees

You should meet with Pioneerrsquos customers and understand their level of satisfactionwith our products and service Truth and reality in our business only exist inknowing the actual situation `Situationrsquo here applies not only to the marketand Pioneerrsquos customers but to the locations where production research anddevelopment or other activities are conducted If changes occur you will see themin these places reg rst Also learn from the best corporations then catch up withand even surpass them using them as a benchmark of comparison for our work

Example 3 the right organizational structure design and climate

A true cross-functional team approach team empowerment a dereg ned and accountable teamleader a cross-functional process that integrates functional activities

As part of the `Pioneer Vision 2005rsquo Pioneer is also reforming the organization and thepersonal systemETH the last already highlighted Regarding the organization Pioneer has` established separate companies to handle each business domain with synchronized produc-tion and marketing activities the authority and responsibilities for the businesses have beenentrusted to the respective company presidentsrsquorsquo The intentions with this organizationalreform are to ` clarify the responsibilities for decision making and streamline managementprocessesrsquorsquo

Example 4 Sharp and early product dereg nition

Target market dereg nition product concept and benereg ts to be delivered positioning strategyfeatures attributes requirements and specireg cations

Example 5 More emphasis on consistency completeness and quality of execution

Preliminary technical and marketing assessments detailed market study pre-developmentbusiness analysis test market market launch quality of execution errors of omission andcommission treat product innovation as a processETH build quality assurance into the processuse check-points and metrics to ensure every sub-process is executed in a quality fashion

Tidd et al (1997) found that the technological aspects of product development oftenhave a low priority or are not even taken into consideration Their work integrates thisimportant aspect when giving recommendations on strategy formulation

Pioneerrsquos innovation strategies and business missions and objectives are all formulatedon the basis of where Pioneer has technological competitive advantages We have also seenthat Pioneer in some areas can be viewed as a learning organization (DVD-ROM CD-mixing system design technology)

Conclusion

The authors recommend following an extended PDSA loop when integrating businessexcellence and innovation management The reg rst loopETH the `strategy looprsquo ETH is for achievingexcellence in strategy and planning in innovation management The second loopETH the `culture

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BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S635

looprsquo ETH is to improve the whole setting in which innovation takes place Application of thisextended loop in a business excellence context for innovation management is a new suggestedtool to assess business excellence

This article further focuses on the `planrsquo phase in the `strategy looprsquo and highlightsrelevant areas to address under the criterion part `blueprint strategy and plansrsquo

Pioneer Electronic Corporation has been used as an example to demonstrate howtheoretical aspects can be perceived in practice

References

ARLETH J amp COOPER RG (1996) Improving a reg rmrsquos innovation performance Uncovering the drivers ofhigh innovation performance XIth ISPIM International Conference San Sebastian Spain 1plusmn 3 October

BOOZ ALLEN amp HAMILTON (1982) New Products Management for the 1980s (New York Booz Allen ampHamilton)

COOPER RG (1984) The performance impact of product innovation strategies European Journal of Marketing18 pp 5plusmn 54

COOPER RG (1987) New products what separates winners from losers Journal of Product Innovation

Management 4 pp 169plusmn 184COOPER RG (1993) Winning at New Products Accelerating the Process from Idea to Launch (Reading MA

Addison Wesley)COOPER RG (1998) Material presented at seminar on `Winning at New Productsrsquo Copenhagen 20 plusmn 21

January (Copenhagen Innovation Management)COOPER RG amp KLEINSCHMIDT (1988) Success factors in product innovation Industrial Marketing Manage-

ment 16 pp 215plusmn 223DEMING WE (1993) The New Economics for Industry Government Education (Cambridge MA Massachusetts

Institute of Technology)HILDEBRANDT S KRISTENSEN K KANJI G amp DAHLGAARD JJ (1991) Quality culture and TQM Total

Quality Management 2 pp 1 plusmn 10JOHNE FA amp SNELSON PA (1988) Success factors in product innovation a selective review of the literature

Journal of Product Innovation Management 5 pp 114plusmn 128KARLSSON C amp AEcirc HLSTROEgrave M P (1997) Perspective changing product development strategyETH a managerial

challenge Journal of Product Innovation Management 14 pp 473plusmn 484KUCZMARSKI TD (1993) Managing New ProductsETH The Power of Innovation 2nd Edn (Englewood Clithorn s NJ

Prentice Hall)MARTENSEN A (1995) Vejen til succesfulde produkter Working Paper Department of Marketing Copenhagen

Business SchoolMINZBERG H amp WESTLEY F (1992) Cycles of organizational change Strategic Management Journal 13

pp 39plusmn 59TIDD J BESSANT J amp PAVITT K (1997) Integrating Technological Market and Organisational Change (West

Sussex John Wiley)TUSHMAN M amp NADLER D (1996) Organizing for innovation In K STARKEY (Ed) How Organizations

Learn (London International Thomson Business Press)TWISS B (1986) Managing Technological Innovation 3rd Edn (London Longman)

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The leaders must study how things are improving for instance by using evaluation andfeedback from the training and education programmes from the `dorsquo phase (study) Identireg edgaps must be closed by starting up dithorn erent activities supported by committed leaders

Employees are motivated to participate in the culture change and actively follow theleader (act) We are now back in the `actrsquo phase of the reg rst loop and a combined ethorn ort isnecessary here Information facts activity plans learning etc must be exchanged heavilybetween the two `actrsquo phases and can in a sense be seen as a fuse of the two loops Theconsequences by turning the second loop must of course be incorporated in the reg rst looprsquosplan phase We need to spin the wheel of the reg rst loop again and start all over again with anew improvement loop

Close link to company vision and overall business strategy

Several studies show that it is important for companies to link innovation strategies to overallbusiness strategies and visions (see Martensen 1995) Management must therefore developa clear vision for the company

A vision can be perceived as an organizationrsquo s desirable future state which is alwaysbetter than what exists today A vision can on one hand vary in degree of reg rmness Thevision must on the other hand be clear and focused and easy to understand and it mustremacr ex some level of motivation to be followed At Pioneer a ` vision refers to a dream thatcan be achieved by utilising the proper meansrsquo rsquo (Pioneer)

A vision should include what leaders expect of innovations and the new product area ingeneral For instance how do leaders expect the growth goals to be achieved and what rolesare set up for the new products (new business new product lines product improvementsetc)

Pioneer has set up a clear vision and mission for its organization Pioneerrsquos vision isto become an ` innovative company which develops networking and customer orientedexcitementrsquo rsquo This overall vision is specireg ed in four more detailed visions

(1) Become worldrsquos number one in DVDETH this new digital optical disc technology willbe the core of the rebirth of Pioneer

(2) Establish the next generation display business as another core with the plasmadisplay panel organic EL and Pioneer unique HEED

(3) Expand business lines from stand-alone to network type(4) Expand traditional assembly to key device and key technology business by partnering

and collaborating with other manufacturers in the same industry

Pioneerrsquos mission is stated in the following way ` [Pioneer] ultimately wants to shareexcitement with [its] customers creating an atmosphere whereby [Pioneer] truly does `Movethe heart and touch the soulrsquo rsquo rsquo

In other words ` Pioneer aims to create a new culture in which the company moves thehearts of customersETH continue to fulreg l customersrsquo dreamsETH with its products and garnerstheir trustrsquorsquo Through competitive technology advantage and by knowing its customersrsquo needsand wants it is believed that Pioneer can achieve this goal of sharing thrilling experienceswith as many people as possible and thereby become the number one preferred consumerelectronics corporation in the world (Pioneer) Pioneerrsquos ultimate goal of its businessendeavours is therefore to create satisreg ed and loyal customers (Pioneer) But visions alonewill not doETH the company has to integrate vision and goals into daily work so that theorganization is heading the same way and in a consistent way

A long-term strategy where innovations are a major issue has to be formulated It is not

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BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S631

suyacute cient in the long term to develop and introduce new products as a reaction to the marketconditionsETH synergy between RampD marketing and production will hardly be achieved underthese circumstances

A new product blueprint and the link to an innovation strategy

A new product blueprint must be developed to secure a close relationship between a newproduct strategy and an overall business strategy The blueprint describes the new productperformance gap reg nancial objectives strategic roles new product types and screening criteriain an overall manner Then the new product strategy interprets the meaning of the blueprintin a much more detailed manner for instance by using information from a new productdiagnostic audit

A new product strategy must focus on which markets and concepts will reg t the strategicroles already set up It must answer questions such as How will the companyrsquos growthobjectives be satisreg ed by internally developed new products How can the blueprint betransformed into market realities Therefore strategies for new products must be based on anew product blueprint A well-developed new product blueprint ought to address the(Kuczmarski 1993 pp 21plusmn 22)

middot role that new products will play in the overall growth plan of the company

middot level of development expenditures and investment capital for the entire new productethorn ort

middot proreg le of the human resource requirements needed

middot reg nancial objective and revenue target for all new products launched during the plannedperiod

middot role of new products in relation to other growth modes

middot top management expectations for new products and its intended level of involvement

How does Pioneer address these areas First Pioneer has formulated several roles for newproducts which they are working towards

(1) Promotion of DVD products throughout the world the early creation of a marketfor home theatre systems and increasing market share with DVD car navigationsystems

(2) Expansion of the communication business(3) Strategic expansion of the integrated receiverdecoder and digital CATV business(4) Market introduction of plasma display panels (PTPs)(5) Increasing the sales of CD-R discs to a level in keeping with production capacities

Second the research and development expenditure for the entire new product ethorn ort has inthe Pioneer group been over 30 billion yen every year according to a press release ofAugust 1998

Third even though we do not have access to a detailed description of the humanresources required we know in a broader sense that Pioneer believes in people who do notblindly follow orders from superiors but encourage their employees to engage in constructivedialogue over any points of agreement

Fourth the sales target for all new DVD products launched until the year 2005 is set atUS$2 billion This corresponds to a market share of 20 In the PDP market Pioneerexpects the market will grow to US$57 billion in the year 2005 and their aim is to get 15of it which corresponds to US$850 million

We believe that the issues mentioned give a basis for which areas to address when

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S632 A MARTENSEN amp J J DAHLGAARD

assessing this area On the other hand we believe it is necessary to take the company cultureinto account when setting up the blueprint The company culture inmacr uences for instancethe kind of human resources already available in the company and the human resourcesinmacr uence to a great extent what strategic roles it is relevant to consider

Formulation of an innovation strategy

What determines a successful innovation strategy

Several studies show that success is not only a question of achieving competences or skillswithin a single strategy elementETH success is a multidimensional concept and there exists aninteraction between each success criteria (see Cooper amp Kleinschmidt 1988)

The circumstances are important when choosing a new product development strategy(see for example Booz et al 1982 Johne amp Snelson 1988 Twiss 1986) For instance onenew product strategy could be formulated to defend an existing market while anotherstrategy could be formulated to be the leader in a new market But a common denominatorcan be set up for what the success concept includes (Cooper 1993 Rothwell 1992)

Our opinion is that the success concept is a relatively homogeneous concept but theweighting of each strategy element varies depending on the circumstances and the idealproduct development strategy cannot be pinpointed

Content and elements of an innovation strategy

Product development strategies can start by answering three questions (Karlsson amp AEcirc hlstroEgrave m1997 p 481)

(1) What are the reg rmsrsquo capabilitiesETH where are we and what can we do(2) What is wanted by the reg rmsrsquo customersETH productmarket pull(3) What is technologically possible for the reg rmETH technology push

When answering the reg rst question the company has to look at the past and the presentsituation so that it knows where to head in the future A desired position must be formulatedon the basis of factETH it is much easier to plan the future if you know your position today andhow you got into that position

Pioneer has formulated an innovation strategy for the PDP area Pioneer wants toestablish itself as a dominant supplier of the next generation of PDPs and organic EL displaysThis goal is based on the facts that (a) Pioneer has a technological advantage compared totheir competitors (b) the market is ready for larger screens and (c) full commitment isachieved for it by Pioneerrsquos president It is stated in the strategy that Pioneer wants to be reg rstwith the best technology and quality and they will expand production and sales for bothconsumer and commercial use Screen sizes prices and timeframe for introduction etc havealso been pointed out

In relation to what is wanted by the customers it is believed in Pioneer that customerswant new forms of true entertainment that satisfy both the needs of pleasure and convenienceThis leads to a promise from Pioneer namely that the core benereg t from Pioneer is a brandthat will contribute to the discovery of fun ` The fun of Pioneer is dithorn erent and unique Itothorn ers something new The fun of Pioneer is new Itrsquos fresh Like nothing yoursquove seen beforeThe fun of Pioneer is advanced The excitement is sharper more vivid Itrsquo s ahead of thepackrsquo rsquo

We believe it is very important to establish constancy of purpose if the company is to

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BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S633

head for success in the future In this connection it is important that top management areheavily involved in direction-setting for the future In what direction will new products takethe company in the future

Innovation has to be managed in an integrated and holistic way to succeed In the longrun it will not do to have very strong capabilities in some areas and weak capabilities inothers As H R Carabelli of Michigan Bell Telephone Company said `A company couldhave the best product engineer the best manufacturing engineer the best man in the countryin marketing yet if these men do not work together as a system the company could beswallowed whole by the competition with people far less qualireg ed but with good manage-mentrsquorsquo A similar example is mentioned by Tidd et al (1997 p 39) These examplesillustrate exactly Demingrsquos (1993) thought about `appreciation for a systemrsquo under profoundknowledge

Cooper and his colleagues have carried out some of the most important and far-reachingstudies about what elements an innovation strategy ought to contain (see Cooper 19841987 Arleth amp Cooper 1996)

One of the latest empirical studies (Arleth and Cooper 1996 p 8) takes a more holisticview of innovation and reg nds that a clearly dereg ned new product strategy for a business unitmeans

middot there are goals or objectives for the businessrsquos total new product ethorn orts (eg whatsales proreg ts etc new products would contribute to the business)

middot the role of new products in achieving business goals is clearly communicated to all

middot there are clearly dereg ned areas of strategic focusETH strategic arenasETH to give direction tothe businessrsquos total new product ethorn ort

middot the businessrsquos overall new product strategy has a long-term trust and focus includingsome longer term projects (as opposed to just short-term incremental projects)

Cooper (1998) lists 10 critical success factorsETH which inmacr uence new product successETH andmost of them are an elaboration of the elements a new product strategy typically has todelineate Five out of 10 factors inmacr uencing mostly the plan phase `strategy and plans forinnovationrsquo are listed hereafter and we highlight these factors with examples from Pioneer

Example 1 A unique superior product

A dithorn erentiated product that delivers unique benereg ts and superior value to the customermeets customers needs better than competitive products is a better quality product thancompetitors (as the customer dereg nes quality) has unique benereg ts and features for thecustomer solves customersrsquo problems with competitive products reduces customersrsquo costs(better value-in-use) has highly visible benereg ts is innovative or novel

As mentioned before the concept behind Pioneerrsquos brand name is `funrsquo ETH a brand thatothorn ers stimulating enjoyable entertainmentETH the Pioneer funrsquo DNA (dithorn erent new andadvanced) Pioneer wants to give the word `entertainmentrsquo a new meaning that entails thediscovery of fun encompassing not just leisure but comfort and convenience as well

Example 2 A strong market orientationETH a market-driven and customer-focused new product

process

Need recognition understanding user needs market need satisfaction constant customercontact strong market knowledge market research quality of execution of marketingactivities more spending on up-front marketing activities

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S634 A MARTENSEN amp J J DAHLGAARD

Pioneer is fully aware of the importance to be market-oriented and focused on customersrsquoneeds and wants Pioneer also encourages employees to do benchmarkingETH competitive aswell as functionalETH so that they can improve their products and maybe even surpass themThis is what the president said in his New Year speech to his employees

You should meet with Pioneerrsquos customers and understand their level of satisfactionwith our products and service Truth and reality in our business only exist inknowing the actual situation `Situationrsquo here applies not only to the marketand Pioneerrsquos customers but to the locations where production research anddevelopment or other activities are conducted If changes occur you will see themin these places reg rst Also learn from the best corporations then catch up withand even surpass them using them as a benchmark of comparison for our work

Example 3 the right organizational structure design and climate

A true cross-functional team approach team empowerment a dereg ned and accountable teamleader a cross-functional process that integrates functional activities

As part of the `Pioneer Vision 2005rsquo Pioneer is also reforming the organization and thepersonal systemETH the last already highlighted Regarding the organization Pioneer has` established separate companies to handle each business domain with synchronized produc-tion and marketing activities the authority and responsibilities for the businesses have beenentrusted to the respective company presidentsrsquorsquo The intentions with this organizationalreform are to ` clarify the responsibilities for decision making and streamline managementprocessesrsquorsquo

Example 4 Sharp and early product dereg nition

Target market dereg nition product concept and benereg ts to be delivered positioning strategyfeatures attributes requirements and specireg cations

Example 5 More emphasis on consistency completeness and quality of execution

Preliminary technical and marketing assessments detailed market study pre-developmentbusiness analysis test market market launch quality of execution errors of omission andcommission treat product innovation as a processETH build quality assurance into the processuse check-points and metrics to ensure every sub-process is executed in a quality fashion

Tidd et al (1997) found that the technological aspects of product development oftenhave a low priority or are not even taken into consideration Their work integrates thisimportant aspect when giving recommendations on strategy formulation

Pioneerrsquos innovation strategies and business missions and objectives are all formulatedon the basis of where Pioneer has technological competitive advantages We have also seenthat Pioneer in some areas can be viewed as a learning organization (DVD-ROM CD-mixing system design technology)

Conclusion

The authors recommend following an extended PDSA loop when integrating businessexcellence and innovation management The reg rst loopETH the `strategy looprsquo ETH is for achievingexcellence in strategy and planning in innovation management The second loopETH the `culture

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BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S635

looprsquo ETH is to improve the whole setting in which innovation takes place Application of thisextended loop in a business excellence context for innovation management is a new suggestedtool to assess business excellence

This article further focuses on the `planrsquo phase in the `strategy looprsquo and highlightsrelevant areas to address under the criterion part `blueprint strategy and plansrsquo

Pioneer Electronic Corporation has been used as an example to demonstrate howtheoretical aspects can be perceived in practice

References

ARLETH J amp COOPER RG (1996) Improving a reg rmrsquos innovation performance Uncovering the drivers ofhigh innovation performance XIth ISPIM International Conference San Sebastian Spain 1plusmn 3 October

BOOZ ALLEN amp HAMILTON (1982) New Products Management for the 1980s (New York Booz Allen ampHamilton)

COOPER RG (1984) The performance impact of product innovation strategies European Journal of Marketing18 pp 5plusmn 54

COOPER RG (1987) New products what separates winners from losers Journal of Product Innovation

Management 4 pp 169plusmn 184COOPER RG (1993) Winning at New Products Accelerating the Process from Idea to Launch (Reading MA

Addison Wesley)COOPER RG (1998) Material presented at seminar on `Winning at New Productsrsquo Copenhagen 20 plusmn 21

January (Copenhagen Innovation Management)COOPER RG amp KLEINSCHMIDT (1988) Success factors in product innovation Industrial Marketing Manage-

ment 16 pp 215plusmn 223DEMING WE (1993) The New Economics for Industry Government Education (Cambridge MA Massachusetts

Institute of Technology)HILDEBRANDT S KRISTENSEN K KANJI G amp DAHLGAARD JJ (1991) Quality culture and TQM Total

Quality Management 2 pp 1 plusmn 10JOHNE FA amp SNELSON PA (1988) Success factors in product innovation a selective review of the literature

Journal of Product Innovation Management 5 pp 114plusmn 128KARLSSON C amp AEcirc HLSTROEgrave M P (1997) Perspective changing product development strategyETH a managerial

challenge Journal of Product Innovation Management 14 pp 473plusmn 484KUCZMARSKI TD (1993) Managing New ProductsETH The Power of Innovation 2nd Edn (Englewood Clithorn s NJ

Prentice Hall)MARTENSEN A (1995) Vejen til succesfulde produkter Working Paper Department of Marketing Copenhagen

Business SchoolMINZBERG H amp WESTLEY F (1992) Cycles of organizational change Strategic Management Journal 13

pp 39plusmn 59TIDD J BESSANT J amp PAVITT K (1997) Integrating Technological Market and Organisational Change (West

Sussex John Wiley)TUSHMAN M amp NADLER D (1996) Organizing for innovation In K STARKEY (Ed) How Organizations

Learn (London International Thomson Business Press)TWISS B (1986) Managing Technological Innovation 3rd Edn (London Longman)

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BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S631

suyacute cient in the long term to develop and introduce new products as a reaction to the marketconditionsETH synergy between RampD marketing and production will hardly be achieved underthese circumstances

A new product blueprint and the link to an innovation strategy

A new product blueprint must be developed to secure a close relationship between a newproduct strategy and an overall business strategy The blueprint describes the new productperformance gap reg nancial objectives strategic roles new product types and screening criteriain an overall manner Then the new product strategy interprets the meaning of the blueprintin a much more detailed manner for instance by using information from a new productdiagnostic audit

A new product strategy must focus on which markets and concepts will reg t the strategicroles already set up It must answer questions such as How will the companyrsquos growthobjectives be satisreg ed by internally developed new products How can the blueprint betransformed into market realities Therefore strategies for new products must be based on anew product blueprint A well-developed new product blueprint ought to address the(Kuczmarski 1993 pp 21plusmn 22)

middot role that new products will play in the overall growth plan of the company

middot level of development expenditures and investment capital for the entire new productethorn ort

middot proreg le of the human resource requirements needed

middot reg nancial objective and revenue target for all new products launched during the plannedperiod

middot role of new products in relation to other growth modes

middot top management expectations for new products and its intended level of involvement

How does Pioneer address these areas First Pioneer has formulated several roles for newproducts which they are working towards

(1) Promotion of DVD products throughout the world the early creation of a marketfor home theatre systems and increasing market share with DVD car navigationsystems

(2) Expansion of the communication business(3) Strategic expansion of the integrated receiverdecoder and digital CATV business(4) Market introduction of plasma display panels (PTPs)(5) Increasing the sales of CD-R discs to a level in keeping with production capacities

Second the research and development expenditure for the entire new product ethorn ort has inthe Pioneer group been over 30 billion yen every year according to a press release ofAugust 1998

Third even though we do not have access to a detailed description of the humanresources required we know in a broader sense that Pioneer believes in people who do notblindly follow orders from superiors but encourage their employees to engage in constructivedialogue over any points of agreement

Fourth the sales target for all new DVD products launched until the year 2005 is set atUS$2 billion This corresponds to a market share of 20 In the PDP market Pioneerexpects the market will grow to US$57 billion in the year 2005 and their aim is to get 15of it which corresponds to US$850 million

We believe that the issues mentioned give a basis for which areas to address when

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S632 A MARTENSEN amp J J DAHLGAARD

assessing this area On the other hand we believe it is necessary to take the company cultureinto account when setting up the blueprint The company culture inmacr uences for instancethe kind of human resources already available in the company and the human resourcesinmacr uence to a great extent what strategic roles it is relevant to consider

Formulation of an innovation strategy

What determines a successful innovation strategy

Several studies show that success is not only a question of achieving competences or skillswithin a single strategy elementETH success is a multidimensional concept and there exists aninteraction between each success criteria (see Cooper amp Kleinschmidt 1988)

The circumstances are important when choosing a new product development strategy(see for example Booz et al 1982 Johne amp Snelson 1988 Twiss 1986) For instance onenew product strategy could be formulated to defend an existing market while anotherstrategy could be formulated to be the leader in a new market But a common denominatorcan be set up for what the success concept includes (Cooper 1993 Rothwell 1992)

Our opinion is that the success concept is a relatively homogeneous concept but theweighting of each strategy element varies depending on the circumstances and the idealproduct development strategy cannot be pinpointed

Content and elements of an innovation strategy

Product development strategies can start by answering three questions (Karlsson amp AEcirc hlstroEgrave m1997 p 481)

(1) What are the reg rmsrsquo capabilitiesETH where are we and what can we do(2) What is wanted by the reg rmsrsquo customersETH productmarket pull(3) What is technologically possible for the reg rmETH technology push

When answering the reg rst question the company has to look at the past and the presentsituation so that it knows where to head in the future A desired position must be formulatedon the basis of factETH it is much easier to plan the future if you know your position today andhow you got into that position

Pioneer has formulated an innovation strategy for the PDP area Pioneer wants toestablish itself as a dominant supplier of the next generation of PDPs and organic EL displaysThis goal is based on the facts that (a) Pioneer has a technological advantage compared totheir competitors (b) the market is ready for larger screens and (c) full commitment isachieved for it by Pioneerrsquos president It is stated in the strategy that Pioneer wants to be reg rstwith the best technology and quality and they will expand production and sales for bothconsumer and commercial use Screen sizes prices and timeframe for introduction etc havealso been pointed out

In relation to what is wanted by the customers it is believed in Pioneer that customerswant new forms of true entertainment that satisfy both the needs of pleasure and convenienceThis leads to a promise from Pioneer namely that the core benereg t from Pioneer is a brandthat will contribute to the discovery of fun ` The fun of Pioneer is dithorn erent and unique Itothorn ers something new The fun of Pioneer is new Itrsquos fresh Like nothing yoursquove seen beforeThe fun of Pioneer is advanced The excitement is sharper more vivid Itrsquo s ahead of thepackrsquo rsquo

We believe it is very important to establish constancy of purpose if the company is to

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2013

BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S633

head for success in the future In this connection it is important that top management areheavily involved in direction-setting for the future In what direction will new products takethe company in the future

Innovation has to be managed in an integrated and holistic way to succeed In the longrun it will not do to have very strong capabilities in some areas and weak capabilities inothers As H R Carabelli of Michigan Bell Telephone Company said `A company couldhave the best product engineer the best manufacturing engineer the best man in the countryin marketing yet if these men do not work together as a system the company could beswallowed whole by the competition with people far less qualireg ed but with good manage-mentrsquorsquo A similar example is mentioned by Tidd et al (1997 p 39) These examplesillustrate exactly Demingrsquos (1993) thought about `appreciation for a systemrsquo under profoundknowledge

Cooper and his colleagues have carried out some of the most important and far-reachingstudies about what elements an innovation strategy ought to contain (see Cooper 19841987 Arleth amp Cooper 1996)

One of the latest empirical studies (Arleth and Cooper 1996 p 8) takes a more holisticview of innovation and reg nds that a clearly dereg ned new product strategy for a business unitmeans

middot there are goals or objectives for the businessrsquos total new product ethorn orts (eg whatsales proreg ts etc new products would contribute to the business)

middot the role of new products in achieving business goals is clearly communicated to all

middot there are clearly dereg ned areas of strategic focusETH strategic arenasETH to give direction tothe businessrsquos total new product ethorn ort

middot the businessrsquos overall new product strategy has a long-term trust and focus includingsome longer term projects (as opposed to just short-term incremental projects)

Cooper (1998) lists 10 critical success factorsETH which inmacr uence new product successETH andmost of them are an elaboration of the elements a new product strategy typically has todelineate Five out of 10 factors inmacr uencing mostly the plan phase `strategy and plans forinnovationrsquo are listed hereafter and we highlight these factors with examples from Pioneer

Example 1 A unique superior product

A dithorn erentiated product that delivers unique benereg ts and superior value to the customermeets customers needs better than competitive products is a better quality product thancompetitors (as the customer dereg nes quality) has unique benereg ts and features for thecustomer solves customersrsquo problems with competitive products reduces customersrsquo costs(better value-in-use) has highly visible benereg ts is innovative or novel

As mentioned before the concept behind Pioneerrsquos brand name is `funrsquo ETH a brand thatothorn ers stimulating enjoyable entertainmentETH the Pioneer funrsquo DNA (dithorn erent new andadvanced) Pioneer wants to give the word `entertainmentrsquo a new meaning that entails thediscovery of fun encompassing not just leisure but comfort and convenience as well

Example 2 A strong market orientationETH a market-driven and customer-focused new product

process

Need recognition understanding user needs market need satisfaction constant customercontact strong market knowledge market research quality of execution of marketingactivities more spending on up-front marketing activities

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ber

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Pioneer is fully aware of the importance to be market-oriented and focused on customersrsquoneeds and wants Pioneer also encourages employees to do benchmarkingETH competitive aswell as functionalETH so that they can improve their products and maybe even surpass themThis is what the president said in his New Year speech to his employees

You should meet with Pioneerrsquos customers and understand their level of satisfactionwith our products and service Truth and reality in our business only exist inknowing the actual situation `Situationrsquo here applies not only to the marketand Pioneerrsquos customers but to the locations where production research anddevelopment or other activities are conducted If changes occur you will see themin these places reg rst Also learn from the best corporations then catch up withand even surpass them using them as a benchmark of comparison for our work

Example 3 the right organizational structure design and climate

A true cross-functional team approach team empowerment a dereg ned and accountable teamleader a cross-functional process that integrates functional activities

As part of the `Pioneer Vision 2005rsquo Pioneer is also reforming the organization and thepersonal systemETH the last already highlighted Regarding the organization Pioneer has` established separate companies to handle each business domain with synchronized produc-tion and marketing activities the authority and responsibilities for the businesses have beenentrusted to the respective company presidentsrsquorsquo The intentions with this organizationalreform are to ` clarify the responsibilities for decision making and streamline managementprocessesrsquorsquo

Example 4 Sharp and early product dereg nition

Target market dereg nition product concept and benereg ts to be delivered positioning strategyfeatures attributes requirements and specireg cations

Example 5 More emphasis on consistency completeness and quality of execution

Preliminary technical and marketing assessments detailed market study pre-developmentbusiness analysis test market market launch quality of execution errors of omission andcommission treat product innovation as a processETH build quality assurance into the processuse check-points and metrics to ensure every sub-process is executed in a quality fashion

Tidd et al (1997) found that the technological aspects of product development oftenhave a low priority or are not even taken into consideration Their work integrates thisimportant aspect when giving recommendations on strategy formulation

Pioneerrsquos innovation strategies and business missions and objectives are all formulatedon the basis of where Pioneer has technological competitive advantages We have also seenthat Pioneer in some areas can be viewed as a learning organization (DVD-ROM CD-mixing system design technology)

Conclusion

The authors recommend following an extended PDSA loop when integrating businessexcellence and innovation management The reg rst loopETH the `strategy looprsquo ETH is for achievingexcellence in strategy and planning in innovation management The second loopETH the `culture

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BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S635

looprsquo ETH is to improve the whole setting in which innovation takes place Application of thisextended loop in a business excellence context for innovation management is a new suggestedtool to assess business excellence

This article further focuses on the `planrsquo phase in the `strategy looprsquo and highlightsrelevant areas to address under the criterion part `blueprint strategy and plansrsquo

Pioneer Electronic Corporation has been used as an example to demonstrate howtheoretical aspects can be perceived in practice

References

ARLETH J amp COOPER RG (1996) Improving a reg rmrsquos innovation performance Uncovering the drivers ofhigh innovation performance XIth ISPIM International Conference San Sebastian Spain 1plusmn 3 October

BOOZ ALLEN amp HAMILTON (1982) New Products Management for the 1980s (New York Booz Allen ampHamilton)

COOPER RG (1984) The performance impact of product innovation strategies European Journal of Marketing18 pp 5plusmn 54

COOPER RG (1987) New products what separates winners from losers Journal of Product Innovation

Management 4 pp 169plusmn 184COOPER RG (1993) Winning at New Products Accelerating the Process from Idea to Launch (Reading MA

Addison Wesley)COOPER RG (1998) Material presented at seminar on `Winning at New Productsrsquo Copenhagen 20 plusmn 21

January (Copenhagen Innovation Management)COOPER RG amp KLEINSCHMIDT (1988) Success factors in product innovation Industrial Marketing Manage-

ment 16 pp 215plusmn 223DEMING WE (1993) The New Economics for Industry Government Education (Cambridge MA Massachusetts

Institute of Technology)HILDEBRANDT S KRISTENSEN K KANJI G amp DAHLGAARD JJ (1991) Quality culture and TQM Total

Quality Management 2 pp 1 plusmn 10JOHNE FA amp SNELSON PA (1988) Success factors in product innovation a selective review of the literature

Journal of Product Innovation Management 5 pp 114plusmn 128KARLSSON C amp AEcirc HLSTROEgrave M P (1997) Perspective changing product development strategyETH a managerial

challenge Journal of Product Innovation Management 14 pp 473plusmn 484KUCZMARSKI TD (1993) Managing New ProductsETH The Power of Innovation 2nd Edn (Englewood Clithorn s NJ

Prentice Hall)MARTENSEN A (1995) Vejen til succesfulde produkter Working Paper Department of Marketing Copenhagen

Business SchoolMINZBERG H amp WESTLEY F (1992) Cycles of organizational change Strategic Management Journal 13

pp 39plusmn 59TIDD J BESSANT J amp PAVITT K (1997) Integrating Technological Market and Organisational Change (West

Sussex John Wiley)TUSHMAN M amp NADLER D (1996) Organizing for innovation In K STARKEY (Ed) How Organizations

Learn (London International Thomson Business Press)TWISS B (1986) Managing Technological Innovation 3rd Edn (London Longman)

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S632 A MARTENSEN amp J J DAHLGAARD

assessing this area On the other hand we believe it is necessary to take the company cultureinto account when setting up the blueprint The company culture inmacr uences for instancethe kind of human resources already available in the company and the human resourcesinmacr uence to a great extent what strategic roles it is relevant to consider

Formulation of an innovation strategy

What determines a successful innovation strategy

Several studies show that success is not only a question of achieving competences or skillswithin a single strategy elementETH success is a multidimensional concept and there exists aninteraction between each success criteria (see Cooper amp Kleinschmidt 1988)

The circumstances are important when choosing a new product development strategy(see for example Booz et al 1982 Johne amp Snelson 1988 Twiss 1986) For instance onenew product strategy could be formulated to defend an existing market while anotherstrategy could be formulated to be the leader in a new market But a common denominatorcan be set up for what the success concept includes (Cooper 1993 Rothwell 1992)

Our opinion is that the success concept is a relatively homogeneous concept but theweighting of each strategy element varies depending on the circumstances and the idealproduct development strategy cannot be pinpointed

Content and elements of an innovation strategy

Product development strategies can start by answering three questions (Karlsson amp AEcirc hlstroEgrave m1997 p 481)

(1) What are the reg rmsrsquo capabilitiesETH where are we and what can we do(2) What is wanted by the reg rmsrsquo customersETH productmarket pull(3) What is technologically possible for the reg rmETH technology push

When answering the reg rst question the company has to look at the past and the presentsituation so that it knows where to head in the future A desired position must be formulatedon the basis of factETH it is much easier to plan the future if you know your position today andhow you got into that position

Pioneer has formulated an innovation strategy for the PDP area Pioneer wants toestablish itself as a dominant supplier of the next generation of PDPs and organic EL displaysThis goal is based on the facts that (a) Pioneer has a technological advantage compared totheir competitors (b) the market is ready for larger screens and (c) full commitment isachieved for it by Pioneerrsquos president It is stated in the strategy that Pioneer wants to be reg rstwith the best technology and quality and they will expand production and sales for bothconsumer and commercial use Screen sizes prices and timeframe for introduction etc havealso been pointed out

In relation to what is wanted by the customers it is believed in Pioneer that customerswant new forms of true entertainment that satisfy both the needs of pleasure and convenienceThis leads to a promise from Pioneer namely that the core benereg t from Pioneer is a brandthat will contribute to the discovery of fun ` The fun of Pioneer is dithorn erent and unique Itothorn ers something new The fun of Pioneer is new Itrsquos fresh Like nothing yoursquove seen beforeThe fun of Pioneer is advanced The excitement is sharper more vivid Itrsquo s ahead of thepackrsquo rsquo

We believe it is very important to establish constancy of purpose if the company is to

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BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S633

head for success in the future In this connection it is important that top management areheavily involved in direction-setting for the future In what direction will new products takethe company in the future

Innovation has to be managed in an integrated and holistic way to succeed In the longrun it will not do to have very strong capabilities in some areas and weak capabilities inothers As H R Carabelli of Michigan Bell Telephone Company said `A company couldhave the best product engineer the best manufacturing engineer the best man in the countryin marketing yet if these men do not work together as a system the company could beswallowed whole by the competition with people far less qualireg ed but with good manage-mentrsquorsquo A similar example is mentioned by Tidd et al (1997 p 39) These examplesillustrate exactly Demingrsquos (1993) thought about `appreciation for a systemrsquo under profoundknowledge

Cooper and his colleagues have carried out some of the most important and far-reachingstudies about what elements an innovation strategy ought to contain (see Cooper 19841987 Arleth amp Cooper 1996)

One of the latest empirical studies (Arleth and Cooper 1996 p 8) takes a more holisticview of innovation and reg nds that a clearly dereg ned new product strategy for a business unitmeans

middot there are goals or objectives for the businessrsquos total new product ethorn orts (eg whatsales proreg ts etc new products would contribute to the business)

middot the role of new products in achieving business goals is clearly communicated to all

middot there are clearly dereg ned areas of strategic focusETH strategic arenasETH to give direction tothe businessrsquos total new product ethorn ort

middot the businessrsquos overall new product strategy has a long-term trust and focus includingsome longer term projects (as opposed to just short-term incremental projects)

Cooper (1998) lists 10 critical success factorsETH which inmacr uence new product successETH andmost of them are an elaboration of the elements a new product strategy typically has todelineate Five out of 10 factors inmacr uencing mostly the plan phase `strategy and plans forinnovationrsquo are listed hereafter and we highlight these factors with examples from Pioneer

Example 1 A unique superior product

A dithorn erentiated product that delivers unique benereg ts and superior value to the customermeets customers needs better than competitive products is a better quality product thancompetitors (as the customer dereg nes quality) has unique benereg ts and features for thecustomer solves customersrsquo problems with competitive products reduces customersrsquo costs(better value-in-use) has highly visible benereg ts is innovative or novel

As mentioned before the concept behind Pioneerrsquos brand name is `funrsquo ETH a brand thatothorn ers stimulating enjoyable entertainmentETH the Pioneer funrsquo DNA (dithorn erent new andadvanced) Pioneer wants to give the word `entertainmentrsquo a new meaning that entails thediscovery of fun encompassing not just leisure but comfort and convenience as well

Example 2 A strong market orientationETH a market-driven and customer-focused new product

process

Need recognition understanding user needs market need satisfaction constant customercontact strong market knowledge market research quality of execution of marketingactivities more spending on up-front marketing activities

Dow

nloa

ded

by [

Uni

vers

ity o

f L

eeds

] at

12

39 1

9 Se

ptem

ber

2013

S634 A MARTENSEN amp J J DAHLGAARD

Pioneer is fully aware of the importance to be market-oriented and focused on customersrsquoneeds and wants Pioneer also encourages employees to do benchmarkingETH competitive aswell as functionalETH so that they can improve their products and maybe even surpass themThis is what the president said in his New Year speech to his employees

You should meet with Pioneerrsquos customers and understand their level of satisfactionwith our products and service Truth and reality in our business only exist inknowing the actual situation `Situationrsquo here applies not only to the marketand Pioneerrsquos customers but to the locations where production research anddevelopment or other activities are conducted If changes occur you will see themin these places reg rst Also learn from the best corporations then catch up withand even surpass them using them as a benchmark of comparison for our work

Example 3 the right organizational structure design and climate

A true cross-functional team approach team empowerment a dereg ned and accountable teamleader a cross-functional process that integrates functional activities

As part of the `Pioneer Vision 2005rsquo Pioneer is also reforming the organization and thepersonal systemETH the last already highlighted Regarding the organization Pioneer has` established separate companies to handle each business domain with synchronized produc-tion and marketing activities the authority and responsibilities for the businesses have beenentrusted to the respective company presidentsrsquorsquo The intentions with this organizationalreform are to ` clarify the responsibilities for decision making and streamline managementprocessesrsquorsquo

Example 4 Sharp and early product dereg nition

Target market dereg nition product concept and benereg ts to be delivered positioning strategyfeatures attributes requirements and specireg cations

Example 5 More emphasis on consistency completeness and quality of execution

Preliminary technical and marketing assessments detailed market study pre-developmentbusiness analysis test market market launch quality of execution errors of omission andcommission treat product innovation as a processETH build quality assurance into the processuse check-points and metrics to ensure every sub-process is executed in a quality fashion

Tidd et al (1997) found that the technological aspects of product development oftenhave a low priority or are not even taken into consideration Their work integrates thisimportant aspect when giving recommendations on strategy formulation

Pioneerrsquos innovation strategies and business missions and objectives are all formulatedon the basis of where Pioneer has technological competitive advantages We have also seenthat Pioneer in some areas can be viewed as a learning organization (DVD-ROM CD-mixing system design technology)

Conclusion

The authors recommend following an extended PDSA loop when integrating businessexcellence and innovation management The reg rst loopETH the `strategy looprsquo ETH is for achievingexcellence in strategy and planning in innovation management The second loopETH the `culture

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39 1

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2013

BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S635

looprsquo ETH is to improve the whole setting in which innovation takes place Application of thisextended loop in a business excellence context for innovation management is a new suggestedtool to assess business excellence

This article further focuses on the `planrsquo phase in the `strategy looprsquo and highlightsrelevant areas to address under the criterion part `blueprint strategy and plansrsquo

Pioneer Electronic Corporation has been used as an example to demonstrate howtheoretical aspects can be perceived in practice

References

ARLETH J amp COOPER RG (1996) Improving a reg rmrsquos innovation performance Uncovering the drivers ofhigh innovation performance XIth ISPIM International Conference San Sebastian Spain 1plusmn 3 October

BOOZ ALLEN amp HAMILTON (1982) New Products Management for the 1980s (New York Booz Allen ampHamilton)

COOPER RG (1984) The performance impact of product innovation strategies European Journal of Marketing18 pp 5plusmn 54

COOPER RG (1987) New products what separates winners from losers Journal of Product Innovation

Management 4 pp 169plusmn 184COOPER RG (1993) Winning at New Products Accelerating the Process from Idea to Launch (Reading MA

Addison Wesley)COOPER RG (1998) Material presented at seminar on `Winning at New Productsrsquo Copenhagen 20 plusmn 21

January (Copenhagen Innovation Management)COOPER RG amp KLEINSCHMIDT (1988) Success factors in product innovation Industrial Marketing Manage-

ment 16 pp 215plusmn 223DEMING WE (1993) The New Economics for Industry Government Education (Cambridge MA Massachusetts

Institute of Technology)HILDEBRANDT S KRISTENSEN K KANJI G amp DAHLGAARD JJ (1991) Quality culture and TQM Total

Quality Management 2 pp 1 plusmn 10JOHNE FA amp SNELSON PA (1988) Success factors in product innovation a selective review of the literature

Journal of Product Innovation Management 5 pp 114plusmn 128KARLSSON C amp AEcirc HLSTROEgrave M P (1997) Perspective changing product development strategyETH a managerial

challenge Journal of Product Innovation Management 14 pp 473plusmn 484KUCZMARSKI TD (1993) Managing New ProductsETH The Power of Innovation 2nd Edn (Englewood Clithorn s NJ

Prentice Hall)MARTENSEN A (1995) Vejen til succesfulde produkter Working Paper Department of Marketing Copenhagen

Business SchoolMINZBERG H amp WESTLEY F (1992) Cycles of organizational change Strategic Management Journal 13

pp 39plusmn 59TIDD J BESSANT J amp PAVITT K (1997) Integrating Technological Market and Organisational Change (West

Sussex John Wiley)TUSHMAN M amp NADLER D (1996) Organizing for innovation In K STARKEY (Ed) How Organizations

Learn (London International Thomson Business Press)TWISS B (1986) Managing Technological Innovation 3rd Edn (London Longman)

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BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S633

head for success in the future In this connection it is important that top management areheavily involved in direction-setting for the future In what direction will new products takethe company in the future

Innovation has to be managed in an integrated and holistic way to succeed In the longrun it will not do to have very strong capabilities in some areas and weak capabilities inothers As H R Carabelli of Michigan Bell Telephone Company said `A company couldhave the best product engineer the best manufacturing engineer the best man in the countryin marketing yet if these men do not work together as a system the company could beswallowed whole by the competition with people far less qualireg ed but with good manage-mentrsquorsquo A similar example is mentioned by Tidd et al (1997 p 39) These examplesillustrate exactly Demingrsquos (1993) thought about `appreciation for a systemrsquo under profoundknowledge

Cooper and his colleagues have carried out some of the most important and far-reachingstudies about what elements an innovation strategy ought to contain (see Cooper 19841987 Arleth amp Cooper 1996)

One of the latest empirical studies (Arleth and Cooper 1996 p 8) takes a more holisticview of innovation and reg nds that a clearly dereg ned new product strategy for a business unitmeans

middot there are goals or objectives for the businessrsquos total new product ethorn orts (eg whatsales proreg ts etc new products would contribute to the business)

middot the role of new products in achieving business goals is clearly communicated to all

middot there are clearly dereg ned areas of strategic focusETH strategic arenasETH to give direction tothe businessrsquos total new product ethorn ort

middot the businessrsquos overall new product strategy has a long-term trust and focus includingsome longer term projects (as opposed to just short-term incremental projects)

Cooper (1998) lists 10 critical success factorsETH which inmacr uence new product successETH andmost of them are an elaboration of the elements a new product strategy typically has todelineate Five out of 10 factors inmacr uencing mostly the plan phase `strategy and plans forinnovationrsquo are listed hereafter and we highlight these factors with examples from Pioneer

Example 1 A unique superior product

A dithorn erentiated product that delivers unique benereg ts and superior value to the customermeets customers needs better than competitive products is a better quality product thancompetitors (as the customer dereg nes quality) has unique benereg ts and features for thecustomer solves customersrsquo problems with competitive products reduces customersrsquo costs(better value-in-use) has highly visible benereg ts is innovative or novel

As mentioned before the concept behind Pioneerrsquos brand name is `funrsquo ETH a brand thatothorn ers stimulating enjoyable entertainmentETH the Pioneer funrsquo DNA (dithorn erent new andadvanced) Pioneer wants to give the word `entertainmentrsquo a new meaning that entails thediscovery of fun encompassing not just leisure but comfort and convenience as well

Example 2 A strong market orientationETH a market-driven and customer-focused new product

process

Need recognition understanding user needs market need satisfaction constant customercontact strong market knowledge market research quality of execution of marketingactivities more spending on up-front marketing activities

Dow

nloa

ded

by [

Uni

vers

ity o

f L

eeds

] at

12

39 1

9 Se

ptem

ber

2013

S634 A MARTENSEN amp J J DAHLGAARD

Pioneer is fully aware of the importance to be market-oriented and focused on customersrsquoneeds and wants Pioneer also encourages employees to do benchmarkingETH competitive aswell as functionalETH so that they can improve their products and maybe even surpass themThis is what the president said in his New Year speech to his employees

You should meet with Pioneerrsquos customers and understand their level of satisfactionwith our products and service Truth and reality in our business only exist inknowing the actual situation `Situationrsquo here applies not only to the marketand Pioneerrsquos customers but to the locations where production research anddevelopment or other activities are conducted If changes occur you will see themin these places reg rst Also learn from the best corporations then catch up withand even surpass them using them as a benchmark of comparison for our work

Example 3 the right organizational structure design and climate

A true cross-functional team approach team empowerment a dereg ned and accountable teamleader a cross-functional process that integrates functional activities

As part of the `Pioneer Vision 2005rsquo Pioneer is also reforming the organization and thepersonal systemETH the last already highlighted Regarding the organization Pioneer has` established separate companies to handle each business domain with synchronized produc-tion and marketing activities the authority and responsibilities for the businesses have beenentrusted to the respective company presidentsrsquorsquo The intentions with this organizationalreform are to ` clarify the responsibilities for decision making and streamline managementprocessesrsquorsquo

Example 4 Sharp and early product dereg nition

Target market dereg nition product concept and benereg ts to be delivered positioning strategyfeatures attributes requirements and specireg cations

Example 5 More emphasis on consistency completeness and quality of execution

Preliminary technical and marketing assessments detailed market study pre-developmentbusiness analysis test market market launch quality of execution errors of omission andcommission treat product innovation as a processETH build quality assurance into the processuse check-points and metrics to ensure every sub-process is executed in a quality fashion

Tidd et al (1997) found that the technological aspects of product development oftenhave a low priority or are not even taken into consideration Their work integrates thisimportant aspect when giving recommendations on strategy formulation

Pioneerrsquos innovation strategies and business missions and objectives are all formulatedon the basis of where Pioneer has technological competitive advantages We have also seenthat Pioneer in some areas can be viewed as a learning organization (DVD-ROM CD-mixing system design technology)

Conclusion

The authors recommend following an extended PDSA loop when integrating businessexcellence and innovation management The reg rst loopETH the `strategy looprsquo ETH is for achievingexcellence in strategy and planning in innovation management The second loopETH the `culture

Dow

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] at

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BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S635

looprsquo ETH is to improve the whole setting in which innovation takes place Application of thisextended loop in a business excellence context for innovation management is a new suggestedtool to assess business excellence

This article further focuses on the `planrsquo phase in the `strategy looprsquo and highlightsrelevant areas to address under the criterion part `blueprint strategy and plansrsquo

Pioneer Electronic Corporation has been used as an example to demonstrate howtheoretical aspects can be perceived in practice

References

ARLETH J amp COOPER RG (1996) Improving a reg rmrsquos innovation performance Uncovering the drivers ofhigh innovation performance XIth ISPIM International Conference San Sebastian Spain 1plusmn 3 October

BOOZ ALLEN amp HAMILTON (1982) New Products Management for the 1980s (New York Booz Allen ampHamilton)

COOPER RG (1984) The performance impact of product innovation strategies European Journal of Marketing18 pp 5plusmn 54

COOPER RG (1987) New products what separates winners from losers Journal of Product Innovation

Management 4 pp 169plusmn 184COOPER RG (1993) Winning at New Products Accelerating the Process from Idea to Launch (Reading MA

Addison Wesley)COOPER RG (1998) Material presented at seminar on `Winning at New Productsrsquo Copenhagen 20 plusmn 21

January (Copenhagen Innovation Management)COOPER RG amp KLEINSCHMIDT (1988) Success factors in product innovation Industrial Marketing Manage-

ment 16 pp 215plusmn 223DEMING WE (1993) The New Economics for Industry Government Education (Cambridge MA Massachusetts

Institute of Technology)HILDEBRANDT S KRISTENSEN K KANJI G amp DAHLGAARD JJ (1991) Quality culture and TQM Total

Quality Management 2 pp 1 plusmn 10JOHNE FA amp SNELSON PA (1988) Success factors in product innovation a selective review of the literature

Journal of Product Innovation Management 5 pp 114plusmn 128KARLSSON C amp AEcirc HLSTROEgrave M P (1997) Perspective changing product development strategyETH a managerial

challenge Journal of Product Innovation Management 14 pp 473plusmn 484KUCZMARSKI TD (1993) Managing New ProductsETH The Power of Innovation 2nd Edn (Englewood Clithorn s NJ

Prentice Hall)MARTENSEN A (1995) Vejen til succesfulde produkter Working Paper Department of Marketing Copenhagen

Business SchoolMINZBERG H amp WESTLEY F (1992) Cycles of organizational change Strategic Management Journal 13

pp 39plusmn 59TIDD J BESSANT J amp PAVITT K (1997) Integrating Technological Market and Organisational Change (West

Sussex John Wiley)TUSHMAN M amp NADLER D (1996) Organizing for innovation In K STARKEY (Ed) How Organizations

Learn (London International Thomson Business Press)TWISS B (1986) Managing Technological Innovation 3rd Edn (London Longman)

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Uni

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] at

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2013

S634 A MARTENSEN amp J J DAHLGAARD

Pioneer is fully aware of the importance to be market-oriented and focused on customersrsquoneeds and wants Pioneer also encourages employees to do benchmarkingETH competitive aswell as functionalETH so that they can improve their products and maybe even surpass themThis is what the president said in his New Year speech to his employees

You should meet with Pioneerrsquos customers and understand their level of satisfactionwith our products and service Truth and reality in our business only exist inknowing the actual situation `Situationrsquo here applies not only to the marketand Pioneerrsquos customers but to the locations where production research anddevelopment or other activities are conducted If changes occur you will see themin these places reg rst Also learn from the best corporations then catch up withand even surpass them using them as a benchmark of comparison for our work

Example 3 the right organizational structure design and climate

A true cross-functional team approach team empowerment a dereg ned and accountable teamleader a cross-functional process that integrates functional activities

As part of the `Pioneer Vision 2005rsquo Pioneer is also reforming the organization and thepersonal systemETH the last already highlighted Regarding the organization Pioneer has` established separate companies to handle each business domain with synchronized produc-tion and marketing activities the authority and responsibilities for the businesses have beenentrusted to the respective company presidentsrsquorsquo The intentions with this organizationalreform are to ` clarify the responsibilities for decision making and streamline managementprocessesrsquorsquo

Example 4 Sharp and early product dereg nition

Target market dereg nition product concept and benereg ts to be delivered positioning strategyfeatures attributes requirements and specireg cations

Example 5 More emphasis on consistency completeness and quality of execution

Preliminary technical and marketing assessments detailed market study pre-developmentbusiness analysis test market market launch quality of execution errors of omission andcommission treat product innovation as a processETH build quality assurance into the processuse check-points and metrics to ensure every sub-process is executed in a quality fashion

Tidd et al (1997) found that the technological aspects of product development oftenhave a low priority or are not even taken into consideration Their work integrates thisimportant aspect when giving recommendations on strategy formulation

Pioneerrsquos innovation strategies and business missions and objectives are all formulatedon the basis of where Pioneer has technological competitive advantages We have also seenthat Pioneer in some areas can be viewed as a learning organization (DVD-ROM CD-mixing system design technology)

Conclusion

The authors recommend following an extended PDSA loop when integrating businessexcellence and innovation management The reg rst loopETH the `strategy looprsquo ETH is for achievingexcellence in strategy and planning in innovation management The second loopETH the `culture

Dow

nloa

ded

by [

Uni

vers

ity o

f L

eeds

] at

12

39 1

9 Se

ptem

ber

2013

BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S635

looprsquo ETH is to improve the whole setting in which innovation takes place Application of thisextended loop in a business excellence context for innovation management is a new suggestedtool to assess business excellence

This article further focuses on the `planrsquo phase in the `strategy looprsquo and highlightsrelevant areas to address under the criterion part `blueprint strategy and plansrsquo

Pioneer Electronic Corporation has been used as an example to demonstrate howtheoretical aspects can be perceived in practice

References

ARLETH J amp COOPER RG (1996) Improving a reg rmrsquos innovation performance Uncovering the drivers ofhigh innovation performance XIth ISPIM International Conference San Sebastian Spain 1plusmn 3 October

BOOZ ALLEN amp HAMILTON (1982) New Products Management for the 1980s (New York Booz Allen ampHamilton)

COOPER RG (1984) The performance impact of product innovation strategies European Journal of Marketing18 pp 5plusmn 54

COOPER RG (1987) New products what separates winners from losers Journal of Product Innovation

Management 4 pp 169plusmn 184COOPER RG (1993) Winning at New Products Accelerating the Process from Idea to Launch (Reading MA

Addison Wesley)COOPER RG (1998) Material presented at seminar on `Winning at New Productsrsquo Copenhagen 20 plusmn 21

January (Copenhagen Innovation Management)COOPER RG amp KLEINSCHMIDT (1988) Success factors in product innovation Industrial Marketing Manage-

ment 16 pp 215plusmn 223DEMING WE (1993) The New Economics for Industry Government Education (Cambridge MA Massachusetts

Institute of Technology)HILDEBRANDT S KRISTENSEN K KANJI G amp DAHLGAARD JJ (1991) Quality culture and TQM Total

Quality Management 2 pp 1 plusmn 10JOHNE FA amp SNELSON PA (1988) Success factors in product innovation a selective review of the literature

Journal of Product Innovation Management 5 pp 114plusmn 128KARLSSON C amp AEcirc HLSTROEgrave M P (1997) Perspective changing product development strategyETH a managerial

challenge Journal of Product Innovation Management 14 pp 473plusmn 484KUCZMARSKI TD (1993) Managing New ProductsETH The Power of Innovation 2nd Edn (Englewood Clithorn s NJ

Prentice Hall)MARTENSEN A (1995) Vejen til succesfulde produkter Working Paper Department of Marketing Copenhagen

Business SchoolMINZBERG H amp WESTLEY F (1992) Cycles of organizational change Strategic Management Journal 13

pp 39plusmn 59TIDD J BESSANT J amp PAVITT K (1997) Integrating Technological Market and Organisational Change (West

Sussex John Wiley)TUSHMAN M amp NADLER D (1996) Organizing for innovation In K STARKEY (Ed) How Organizations

Learn (London International Thomson Business Press)TWISS B (1986) Managing Technological Innovation 3rd Edn (London Longman)

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BUSINESS EXCELLENCE AND INNOVATION MANAGEMENT S635

looprsquo ETH is to improve the whole setting in which innovation takes place Application of thisextended loop in a business excellence context for innovation management is a new suggestedtool to assess business excellence

This article further focuses on the `planrsquo phase in the `strategy looprsquo and highlightsrelevant areas to address under the criterion part `blueprint strategy and plansrsquo

Pioneer Electronic Corporation has been used as an example to demonstrate howtheoretical aspects can be perceived in practice

References

ARLETH J amp COOPER RG (1996) Improving a reg rmrsquos innovation performance Uncovering the drivers ofhigh innovation performance XIth ISPIM International Conference San Sebastian Spain 1plusmn 3 October

BOOZ ALLEN amp HAMILTON (1982) New Products Management for the 1980s (New York Booz Allen ampHamilton)

COOPER RG (1984) The performance impact of product innovation strategies European Journal of Marketing18 pp 5plusmn 54

COOPER RG (1987) New products what separates winners from losers Journal of Product Innovation

Management 4 pp 169plusmn 184COOPER RG (1993) Winning at New Products Accelerating the Process from Idea to Launch (Reading MA

Addison Wesley)COOPER RG (1998) Material presented at seminar on `Winning at New Productsrsquo Copenhagen 20 plusmn 21

January (Copenhagen Innovation Management)COOPER RG amp KLEINSCHMIDT (1988) Success factors in product innovation Industrial Marketing Manage-

ment 16 pp 215plusmn 223DEMING WE (1993) The New Economics for Industry Government Education (Cambridge MA Massachusetts

Institute of Technology)HILDEBRANDT S KRISTENSEN K KANJI G amp DAHLGAARD JJ (1991) Quality culture and TQM Total

Quality Management 2 pp 1 plusmn 10JOHNE FA amp SNELSON PA (1988) Success factors in product innovation a selective review of the literature

Journal of Product Innovation Management 5 pp 114plusmn 128KARLSSON C amp AEcirc HLSTROEgrave M P (1997) Perspective changing product development strategyETH a managerial

challenge Journal of Product Innovation Management 14 pp 473plusmn 484KUCZMARSKI TD (1993) Managing New ProductsETH The Power of Innovation 2nd Edn (Englewood Clithorn s NJ

Prentice Hall)MARTENSEN A (1995) Vejen til succesfulde produkter Working Paper Department of Marketing Copenhagen

Business SchoolMINZBERG H amp WESTLEY F (1992) Cycles of organizational change Strategic Management Journal 13

pp 39plusmn 59TIDD J BESSANT J amp PAVITT K (1997) Integrating Technological Market and Organisational Change (West

Sussex John Wiley)TUSHMAN M amp NADLER D (1996) Organizing for innovation In K STARKEY (Ed) How Organizations

Learn (London International Thomson Business Press)TWISS B (1986) Managing Technological Innovation 3rd Edn (London Longman)

Dow

nloa

ded

by [

Uni

vers

ity o

f L

eeds

] at

12

39 1

9 Se

ptem

ber

2013