Riassunto Testi Esame Innovation Management - UniCA, Appunti di Change Management

Scarica Riassunto Testi Esame Innovation Management - UniCA e più Appunti in PDF di Change Management solo su Docsity! INNOVATION MANAGEMENT INTRODUCTION Technological Innovation is now the most important driver of competitive success firms in a wide range of industries rely on products developed within the past 5-years for almost one-third of their sales and profits. Introducing new products to help firms product their margins, while investing in process innovation helps firms lower their costs. Flexible manufacturing technologies have made shorter production runs economical and have reduced the importance of production economies of scale. Flexible manufacturing technologies now enable firms to seamlessly transition from producing one product model to the next, adjusting production schedules with real-time information on demand. The aggregate impact of technological innovation can be observed by looking at GDP, gross domestic product. The gross domestic product of an economy is total annual output, measured by final purchase price. The average world GDP per capita has risen steadily since 1980. In a series of studies of economy growth economists showed that the historic grade of a comic growth in GDP could not be accounted for entirely by growth in labour and capital inputs. Solow argued that these unaccounted for residual growth represented technological change: technological innovation increased the amount of output achievable from a given quantity of Labour and capital. The majority of effort and money invested in technological innovation comes from industrial firms. Most innovative ideas do not become successful new products comma at only one out of several thousand ideas results in a successful new product. This means that it takes about 3000 row ideas to produce one significantly new and successful commercial product. The innovation process is often conceived of as a funnel, with many potential new product ideas going in the wide end, but very few making it through the development process. Improving a firm's innovation success rate requires a well-crafted strategy, so a firm's innovation projects should align with its resources and objectives, leveraging its core competencies and helping it achieve its strategic intent. A firm's new product development process should maximise the likelihood of projects being both technically and commercially successful. To achieve these things a firm needs: - An in-depth understanding of the dynamics of innovation - a well-crafted innovation strategy - well-designed processes for implementing the innovation strategy CHAPTER 2 - CREATIVITY Innovation can arise from many different sources: it can originate with individuals, from the research efforts of the universities, Government laboratories, incubators or private non-profit organizations. One primary engine of innovation is firms: they are well suited to innovation activities because they typically have greater resources than individuals and a management systems to marshal those resources towards a collective purpose. They can also face strong incentives to develop differentiating new products and services, which may give them an advantage of a non-profit or government funded entities. Networks of innovators that leverage knowledge and other resources from multiple sources are one of the most powerful agents of technological advance. CREATIVITY Innovation begins with a generation of new ideas and the ability to generate new ideas is termed creativity. Creativity is the ability to produce work that is useful and novel. The work produced must be surprising and different compared to the previous one. The degree to which a product is novel is a function both of how different it is from prior work and of the audience's prior experiences. An individual's creative ability is a function of their intellectual abilities, knowledge, personality, motivation and environment. The most important intellectual abilities for creative thinking include intelligence, memory and several other abilities such as looking at problems in unconventional ways. One important intellectual ability for creativity is a person's ability to let their mind engage in a visual mental activity termed primary process thinking. Primary process thinking can result in combining ideas that are not typically related, leading to what has been termed remote associations or divergent thinking. This means that creative people may make their minds more open to remote as associations and then mentally sort through these associations, selecting the best for further consideration. How knowledge can impact on creativity? If someone has to knowledge they are unlikely to understand it well enough to contribute meaningfully to the project, on the other side if someone knows a field too well, they can become trapped in the existing logic and paradigms and it can prevent them from coming up with solutions that require an alternative perspective. Outsiders of them phase resistance and scepticism, however they bring an advantage that insiders and Industry veterans often lack, because they aren't trapped by the paradigms and assumptions. Intrinsic motivation is very important for creativity. In fact, individuals are more likely to be creative if they work on things they are genuinely interested in and enjoy. A supportive environment is useful to own lease an individual's creative potential. The creativity of the organisation is a function of creativity of the individuals within the organisation and a variety of social processes and contextual factors that shape the way those individuals interact and behave. An organisation's creativity level is not a simple aggregate of the creativity of the individuals it employs. transfer activities are still quite small in comparison to Universities research budgets but their importance is growing. Now universities are taking a much more active role in helping to create startups based on their intellectual property and in proactively forging relationships with the commercial sector. Universities also contribute significantly to innovation through the publication of research results that are incorporated into the development efforts of other organizations and individuals. GOVERNMENT Governments of many countries actively invest in research through: - OWN LABORATORIES - SCIENCE PARKS Regional districts that aim at fostering R&D collaboration between government universities and private firms. They are very helpful for startups and are a focal point for their collaboration activities of established firms. - INCUBATORS Institutions designed to nurture the development of new businesses that might otherwise lack access to adequate funding or advice - GRANTS FOR PUBLIC OR PRIVATE ENTITIES NON PROFIT ORGANIZATIONS Private non-profit organisation contribute to innovation activity in a variety of complex ways. Non-profit organisations perform their own R&D activities, some fund the research and development activities of other organizations but do not do it themselves and some non-profit organisations do both in-house research and development and fund the development efforts of others. COLLABORATIVE NETWORKS There is a growing recognition of the importance of collaborative R&D networks for successful innovation. Such collaborations include joint Ventures, licensing and second-sourcing agreements, research associations. Collaborative research is especially important in high-technology sectors, where it is unlikely that a single individual or organisation will possess all of the resources and capabilities necessary to develop and implement a significant innovation. Sometimes geographic proximity appears to play a role in the formation and innovative activity of collaborative networks. Well-known regional clusters such as Silicon Valley semiconductor firms illustrate this point. Technology clusters are regional clusters of firms that have have a connection to a common technology and may engage in buyer, supplier and complementor relationships, as well as research collaboration. Clusters often encompass an array of industries that are linked through relationships between suppliers, buyers and producers of compliments. Knowledge that is complex (with that many underline components) or tacit (that cannot be readily codified) may require frequent and close interactions to be meaningfully exchanged. Firms may need to interact frequently to develop common ways of understanding and articulating the knowledge before they are able to transfer it. Therefor closeness and frequency of interactions can influence a firm's willingness to exchange knowledge. Firms that interact overtime develop greater knowledge of each other and their repeated interactions give them information as to the likelihood of their partner's behaving opportunistically. Firms that are proximate thus have an advantage in sharing information that can lead to greater innovation productivity. A cluster of firms with high innovation productivity can lead to more new firms starting up in the immediate vicinity and can attract other firms to the area. AGGLOMERATION ECONOMIES: The increase in employment and tax revenues in the region can lead to improvements in infrastructure (such as roads and utilities), schools and other markets that service the population. The benefits firms reap by locating enclosed geographical proximity to each other are known collectively as agglomeration economies. DOWNSIDES TO GEO CLUSTERING: - The proximity of many competitors serving a local market can lead to competition that reduces their pricing power in the relationships with both buyers and suppliers. - Close proximity of firms may increase the possibility that firms competitors gain access to the firm's proprietary knowledge - Clustering can potentially lead to traffic congestions, high housing costs and higher concentrations of pollution. The degree to which innovative activities are geographically clustered depends on: - Nature of the technology - Industry characteristics - Cultural context of the technology WHO ARE KNOWLEDGE BROKERS? They are individuals or firms that transfer information from one domain to another, in which it can be usefully applied. The knowledge broker puts existing information to use in new and profitable ways, for example Robert Fulton after observing the use of steam engines, realised this technology could be used to propel boats and subsequently developed the first successful steamboat. In a network of firms, a knowledge broker may be a firm that connects clusters of firms that would otherwise share no connection. Research suggests that most innovation is not due to the discovery of something fundamentally new but is the result of novel recombinations of already known concepts and materials. The knowledge brokers key expertise may lie in the ability to recognise and capture potential solutions that may be matched to problems in an unexpected way. WHAT ARE THECHNOLOGICAL SPILLOVERS? Technological spillovers occur when the benefits from the research activities of one firm spill over to other firms. Spillovers are thus a positive externality of the research and development efforts. Evidence suggests that technologies spillovers are a significant influence on innovative activity. CHAPTER 3 - TYPES OF INNOVATION The path a technology follows through time is termed its technology trajectory. Technology trajectories are most often used to represent the technology's rate of performance improvement or its rate of adoption in the marketplace. PRODUCT vs PROCESS INNOVATION Product innovations are embodied in the outputs of an organisation. For ex., snapchat's filters. Process Innovations are Innovations in the way an organisation conducts it's business, such as in the techniques of producing or marketing goods or services. Process Innovations are often oriented toward improving the effectiveness or efficiency of production by reducing the effective rate or increasing the quantity that may be produced in a given time. New product Innovations and process Innovations often occur in tandem. New processes may enable the production of new products and new products may enable the development of new processes. A product innovation for one firm may simultaneously be a process innovation for another. RADICAL vs INCREMENTAL INNOVATION RADICAL INNOVATION: an innovation that is very new and different from prior solutions. A technology could be new to the world, to an Industry, to a firm or to an adopting business unit. The most radical Innovations would be new to the world and exceptionally different from existing products and processes. The radicalness of an innovation is relative and me change over time or with respect to different observers. Innovation that was once considered radical may eventually be considered incremental as the knowledge based on the line the innovation becomes more common. For example, steam engine that today it's construction seems relatively simple. Again and Innovation that is radical 214 may seem incremental to another. For example, Kodak and Sony and digital cameras. INCREMENTAL INNOVATION: an innovation that makes a relatively minor change from existing practices. An incremental innovation may not be particularly new or exceptional it might have been previously known to the Firm or industry and involve only a minor change from existing Practices. For example, changing the screen of a cell phone to make it more crack resistant or offering a new service plan. COMPETENCE-ENHANCING vs COMPETENCE-DESTROYING INNOVATION Whether switching to a new technology will benefit a firm depends on a number of factors: - The advantages of third by the new technology - The new technology's fit with a firm's current abilities - The new technology's fit with a firm's position in complementary resources - The expected rate of diffusion of the new technology TECHNOLOGY CYCLES The s-curve model above suggests that technological change is cyclical: each new escova s-curve ushers in an initial period of turbulance, followed by rapid improvement, then diminishing returns and ultimately is displaced to buy a new technological discontinuity. Schumpeter call the disease process creative destruction and argued that it was the key driver of progress in a capitalist Society. Several studies have tried to identify the stages of the technology cycle: PHASE 1: technology passed through distinct phases. In the first phase (the fluid phase) there was considerable uncertainty about both the technology and its market. Products or services based on the technology might be crude, unreliable or expensive, but might suit the needs of some market niches. Firms experiment with different form factors or product features to assess the market response. Eventually producers and customers begin to arrive at some consensus about the desired product attributes and a dominant design emerges. A dominant design is a product design that is adopted by the majority of producers, creating a stable architecture on which the industry can focus it's efforts. PHASE 2: the second phase is the specific phase, because Innovations in products, materials and manufacturing processes are all specific to the dominant design. Each technology discontinuity inaugurated a period of turbulence and uncertainty (the era of ferment). During this era different stakeholders might have different concepts of what purposes that technology should serve or how a business model might be built around it. A dominant design always arise to command that majority of the market share unless the next discontinued arrived too soon and disrupted the cycle. The rise of a dominant design signals that transition from the era of ferment to the era of incremental change in this era firms focus on efficiency and market penetration. CHAPTER 4 - STANDARDS BATTLES DOMINANT DESIGNS Why do many markets coalesce around a single dominant design rather than support a variety of technological options? One primary reason is that many Industries exhibit increasing returns to adoption, meaning that the more technology is adopted the more valuable it becomes. Complex technologies often exhibit increasing returns to adoption in that the more they are used, the more they are improved. A technology that is adopted usually generates revenue that can be used to further develop and refine that technology. As the technology is used, greater knowledge and understanding of the technology accrue, which may then enable improvements both in technology itself and in its applications. As technology becomes more widely adopted, complementary assets are often developed that are specialised to operate with that technology. Two of the primary sources of increasing returns are: 1 - LEARNING EFFECTS The more technology is used to, the more it is developed and the more effective and efficient it becomes. As a technology is adopted, it generates sales revenues that can be reinvested in further developing and refining the technology. One example of learning effect is manifested in the impact of cumulative production on cost and productivity, aka learning curve. As individuals and producers repeat a process, they learn to make it more efficient, often producing new technological solutions that may enable them to reduce input costs or waste rates. For example, the cost of producing a unit of pizza or of an aeroplane as the number of units produced increases. The standard form of the learning curve is formulated as y=ax^(-b), where: - y = the number of direct labour hours required to produce the Xth unit; - a = the number of direct labour hours required to produce the first unit; - x = the cumulative number of units produced - b = the learning rate Learning curves have also been identified by using a variety of performance measures, including productivity, total costs per unit, accidents per unit and waste per unit. The learning rate it can be influenced by factors such as the nature of the task, firm strategy and the firm's prior experience. A firm's investment in prior learning can accelerate its rate of future learning by building the firm's absorptive capacity: it refers to the phenomenon whereby as firms accumulating knowledge, they also increase their future ability to assimilate information. A firm's prior related experience shapes its ability to recognise the value of new information and therefore to utilise that information effectively. Firms that develop new technologies ahead of others may have an advantage in staying ahead. Firms that forgo investment in technology development may find it difficult or expensive to develop technology in a subsequent period: that explains why firms that fall behind the technology frontier find it so difficult to catch up. The more firms that are using a given technology and refining it, the more absorptive capacity that is being generated related to that technology, making development of that technology more effective and efficient. As firms develop complementary technologies to improve the productivity or ease of utilisation of the core technology, the technology becomes more attractive to other firms. Learning effects suggest that early technology offerings often have an advantage because they have more time to develop and become enhanced than subsequent offerings. 2 - NETWORK EXTERNALITIES Many markets are characterized by network externalities or positive consumption externalities: in these markets, the benefit from using a good increases with the number of other users of the same good. For example, railroads are more valuable as the size of the Railroad network (and therefore the number of available destinations) increases. Also, the amount of utility a phone provides is directly related to the size of the network. Network externalities can also arise in markets that do not have physical networks. The number of users of a particular technology is often referred to as its installed base: a user may choose a computer platformer based on the number of other users of that platform, rather than on the technological benefits of a particular platform, because it increases the ease of exchanging files. The user's training in a particular platform becomes more valuable as the size of the installed base of the platform increases. Network externalities also arise one complementary goods are important. Complementary goods are additional goods and services that enable or enhance the value of another good. For example, the value of a video game console is directly related to the availability of complementary goods such as videogame, the referral devices and services such as online gaming. Many products are functional or desirable only when there is a set of complementary goods available for them. Products that have a large installed base are likely to attract more developers of complementary goods. Since the availability of complementary goods will influence users' choice among competing platforms, the availability of complementary goods influences the size of the installed base. Firms can also attempt to influence the selection of a dominant design by building coalitions around a preferred technology. Occasionally a dominant design is put in place through government regulation. GOVERNMENT REGULATION In some Industries, the consumer welfare benefits of having compatibility among technologies have prompted government regulation and thus a legally induced adherence to a dominant design. This has often been the case for the utilities, telecommunications and television Industries. In 1998 the European Union adopted a single wireless telephone standard, GSM ( general standard for Mobile Communications). By choosing a uniform standard, the European Union could avoid the proliferation of incompatible standards and facilitate exchange both within technology clearly dominates. It's the case of the video game console industry, where two or more platforms may successfully coexist. MODULARITY & PLATFORM COMPETITION In many Industries the value of a product system is strongly related to the number and quality of complements available for it. A smartphone operating system, for example, is only as good as the applications available. In markets like this, rather than having a single firm produce both the platform and all of the components, industry players will instead often use modularity to create a platform ecosystem where many different firms contribute to the product system. With modularity we refer to the degree to which a system components can be separated and recombined. The majority of products are modular at some level. For example, a computer is a bundle of components that includes a microprocessor, a monitor, a keyboard and more. Each of those components can also be thought of as a bandeau. Integrated vs Modular Systems They have different kinds of advantages. Integrated product system might have components that are customised to work together, which may enable a level of performance that more standardised components cannot achieve. The producer of a tightly integrated system also has more control over the end product, which can enable them to better monitor quality and reliability. For example, Apple computers. Modular products often offer more choices over function, design, scale and other features, enabling the customer to choose a product or system that more closely suits their needs and preferences. Because components are reused in different combination, this can achieve product variety while still allowing scale economies in manufacturing the individual components. This is known as economies of substitution. PLATFORM ECOSYSTEMS In a platform ecosystem some core part of a product mediates the relationship between a wide range of other component or complements and prospective end users. For example, Amazon Prime. The success of individual members depends upon the success of other members of the ecosystem, even those competing. In many platforms there are switching costs that make it difficult or costly to change ecosystems. A platform ecosystem is characterized by relationships that are neither as independent as arm's-length market contract nor as dependent as those within a hierarchical organization. It is a hybrid organisational form. Video game systems are and iconic example of platform ecosystems. Consoles need to launch with high-quality games. Most game console producers must produce games themselves to ensure that high quality games are available when the console launches. End users, on the other end, want more games than just those produced by the console producer, so console producers also licence third-party developers to produce games for their consoles. They may require the game developers to sign exclusivity agreements or to customise the games for the console. CHAPTER 5 - TIMING OF ENTRY Some Industries are characterized by increasing returns to adoption, meaning that the more a technology is adopted, the more valuable it becomes. In such Industries, timing can be crucial: at technology that is adopted earlier than others may reap self-reinforcing advantages such as greater funds to invest in improving the technology, greater availability of complementary goods and less customer uncertainty. The same factors that cause increasing returns to adoption may make very early technologies unattractive. Entrance are often divided into 3 categories: - First movers (or pioneers), which are the first to sell in a new product or service category; - Early followers (or early leaders), which are early to the market but not first; - Late entrants, which enter the market when or after the product begins to penetrate the mass market. FIRST MOVERS - ADVANTAGES Being a first mover may confer the advantages of brand loyalty and technological leadership, pre-emption of scarce assets and exploitation of buyer switching costs. The company that introduces a new technology may earn a long-lasting reputation as a leader in that technology domain. Such a reputation can help sustain the company's image, brand loyalty and market share even after their competitors have introduced comparable products. Being the technology leader can give access to monopoly rents ( additional return affirma can make from being a monopolist). Even if their technology characteristics are a imitable, the first mover has an opportunity to build brand loyalty before the entry of other competitors. Firms that enter the market early can preemptively capture scarce resources such as key locations, government permits, patents, access to distribution channels and relationship with suppliers. Once buyers have adopted a good, they often face costs to switch to another good. The initial cost of the good is itself a switching cost, as is the cost of complements purchased for the good. If a product is complex, buyers must spend time of becoming familiar with its operation: this time investment becomes a switching cost that deters the buyer from switching to a different product. If buyers face switching costs, the firm that captures customers early may be able to keep those customers even if technologies with a superior value proposition are introduced later. For example, this is the reason for the dominance of the QWERTY typewriter keyboard. In an industry with pressures encouraging adoption of a dominant design, the timing of a firm's investment in new technology development may be particularly critical to its likelihood of success. FIRST MOVERS - DISADVANTAGES There are also arguments for not entering a market too early. Indeed market pioneers have a high failure rate, roughly 47%. By contrast, early leaders averaged almost three times the market share of market pioneers. First movers earn greater revenues than other entrants, but they also face higher costs, closing them to earn significantly lower profits in the long run. A later entrant often can capitalise on the research and development investment of the first mover, avoid any mistakes made by the earlier entrant and exploit incumbent inertia ( the tendency for incumbents to be slow to respond to changes in the industry environment due to their large size, established routines or prior strategic commitment to existing suppliers and customers). Developing a new technology often entails significant research and development expenses and the first to develop and introduce a technology typically the brunt of these expense. By the time a firm has successfully developed a new technology, it may have borne not only the expense of that technology but also the expense of exploring technological paths that did not yield a commercially viable product. Sales of the new product development failure applied can be as high as 95%, being the first to develop and introduce an unproven new technology is expensive and risky. Later entrants often do not have to invest in exploratory research once a product has been introduced to the market, competitors can often ascertain how the product was created. When a firm introduces a new to the world technology, often no appropriate suppliers or distributors exist, so it may be facing the task of developing and producing its own supplies and distribution service, or assisting in the development of supplier and developing markets. When firms develop technologies, they often rely on other producers of Enabling Technologies (component technologies that are necessary for the performance or desirability of a given innovation). A first mover to the market may face considerable uncertainty about what product features customers will ultimately desire and how much they will be willing to pay for them. For a very new product technology, market research may be of little help. First movers may find that they are early product offering must be revised as the market begins to reveal customer preferences. For example, when Kodak introduced the 8-mm video camera in the late 1980s consumers rejected that product: they found it expensive, they didn't recognise its need and they were unsure of what value it could provide. Kodak decided to withdraw from the market but by the early 1990s consumers had become more comfortable with the concept of 8mm video camera technology and several competitors entered this market. In declining Industries, high exit barriers like fixed capital investment or emotional attachment to the industry can intensify rivalry by making firms reluctant to abandon the industry. 2. Threat of potential entrants This threat is influenced by the degree to which the industry is likely to attract new entrants and the height of entry barriers. To effectively compete against these companies requires that an entrant must be able to manufacture, advertise and distribute on a large-scale, suggesting significant startup costs for an entrant to achieve a competitive position. Some of these capabilities could be obtained through partnership with other firms, thereby lowering start up costs. 3. Bargaining power of suppliers The degree to which the firme relies on one or a few suppliers will influence its ability to negotiate good terms. If there are few suppliers or suppliers are highly differentiated, the firm have a little choice in its buying decision and have little leverage over the supplier to negotiate prices, delivery schedules or other terms. If suppliers are very abundant and are not highly differentiated, the firm may be able to force the suppliers to beat against one another for the sale. If the supplier's sales constitute a large portion of the firm's purchases, the firm will be heavily reliant upon the supplier and the supplier will have more bargaining power. And viceversa. If the Firm faces switching costs that make it difficult or expensive to change suppliers this will increase the suppliers bargaining power. If the firm can backward vertically integrated, so produce its own supplies, this will lessen supplier bargaining power. 4. Bargaining power of buyers Many of the same factors that influence the bargaining power of suppliers have an analogous role with the bargaining power of buyers. The degree to which the firm is reliant on a few customers will increase the customers bargaining power and vice-versa. If the firm's product is highly differentiated, buyers will experience less bargaining power and if the product is undifferentiated they will experience greater bargaining power. 5. Threat of substitutes Substitutes are products or services that are not considered competitors but fulfill a strategically equivalent role for the customer. For example, Starbucks may consider other coffeehouses as competitors but other social destinations as substitutes. The more potential substitutes there are, and the closer they are in function to the firm's product or service, the greater the threat of substitution. Recently Porter has acknowledged the role of complements: products or services that enhance the usefulness or desirability of another product. For example, software is an important complement for computers and gasoline for automobiles. The availability, quality and price of complements will influence the threats and opportunities posed by the industry. It is important to consider how important complements are whether they are differentially available for the products of various arrivals and who captures the value offered by the complements. For example, printers. Printers manufacturers make a considerable portion of their desktop printing profits from the ink cartridges that consumers have to replace when empty. The printer manufacturers design the printer cartridges to be specific to each printer model, avoiding standardised designs that would facilitate consumers purchasing printer cartridges from other vendors for their printers. The market for ink cartridges is so lucrative that a number of third-party vendors have emerged that either clone cartridges or offer to refill the consumers empty cartridges with ink. - Stakeholder Analysis Stakeholder models are often used for both strategic and normative purposes. Strategic stakeholder analysis emphasizes the stakeholder management issues that are likely to impact the firm's financial performance, while a normative stakeholder analysis emphasizes the stakeholder management issues the firm ought to attend to due to their ethical or moral implications. First step is to identify all the parties that will be affected by the behaviour of the firm. For each party, the firm identifies: - what that stakeholder's interests are - what resources they contribute to the organization - what claims they are likely to make on the organisation - which will be the most important from the firm's perspective INTERNAL ANALYSIS The analysis of the internal environment of the firm most often begins with identifying the firm's strengths and weaknesses. Sometimes this task is organised by examining each of the activities of the value chain. In Michael Porter's model of a value chain activities are divided into: - Primary activities They include inbound logistics, operations, outbound logistics, marketing and sales, service - Support activities They include procurement, human resource management, technology development, infrastructure. This generic model can be adapted to better fit a particular firm's needs. Each activity can then be considered from the point of view of how it contributes to the overall value produced by the firm and what the firm's strengths and weaknesses are in that activity. Once the key strengths and weaknesses are identified, the firm can assess which strengths have the potential to be a source of sustainable competitive advantage. This helps the firm gain valuable perspective on which of its activities and resources should be further leveraged in its articulation of its strategic intent for the future. To be a potential source of sustainable competitive advantage, resources must be rare, valuable, durable and inimitable. IDENTIFYING CORE COMPETENCIES A company's core competencies are typically considered to be those that differentiate it strategically. A core competency is more than just a core technology: competencies often combine different kinds of abilities, such as abilities in managing the market interface, building and managing an effective infrastructure and technological abilities. These combination and harmonization of multiple abilities make core competencies difficult to imitate. For example, Sony's core competency is miniaturisation. If managers or resources are wed too closely to their business units, there will be underinvestment in the development and leverage of core competencies. According to some researchers, few firms are likely to be leaders in more than five or six core competencies. Sometimes the very things that a firm excels at can enslave it, making the firm rigid and overly committed to inappropriate skills and resources. Incentive assistance may evolve that favor activities that reinforce of the firm's core competencies. They can also inhibit the development of new core competencies. IDENTIFYING DYNAMIC CAPABILITIES In fast-changing markets it can be extremely useful for a firm to develop a core competency in responding to change. It is also possible for a firm to develop core competencies that are not specific to any set of technology or product but rather to a set of abilities that enable it to quickly reconfigure its organisational structure and routines in response to new opportunities. Such competences are termed dynamic capabilities: they enable firms to quickly adapt to emerging markets or major technological discontinuities. STRATEGIC INTENT A firm's purpose is to create value: it means leveraging corporate resources to create more performance for customers, more well-being for employees and more returns for shareholders. This is accomplished through developing new businesses and markets and leveraging corporate resources, guided by the firm's strategic intent. A company's strategic intent is a long-term goal that is ambitious and built upon the firm's existing core competencies. Strategic intent looks 10 to 20 years ahead and establishes clear milestones for employees to target. Without this forward-looking orientation companies can easily become focused on market they have served in the past. DISADVANTAGES OF QUANTITATIVE METHODS Quantitative methods for analysing potential innovation projects can provide concrete financial estimates that facilitate strategic planning and trade-off decisions. They can explicitly consider the timing of investment and cash flows and the time value of money and risk. They can make the returns of the product seem unambiguous and managers may find them very reassuring. This minimization of ambiguity may be deceptive: discounted cash flow estimates are only as accurate as the original estimate of the profits from that technology and in many situations it is extremely difficult to anticipate the return of the technology. That's my thoughts discriminate heavily against project that are long-term or risky and the methods may fail to capture the strategic importance of the Investment decision. QUALITATIVE METHODS FOR CHOOSING PROJECTS Most new product development projects require the evaluation of a significant amount of qualitative information. Many factors in the choice of development projects are extremely difficult to quantify or quantification could lead to misleading results. SCREENING QUESTIONS The team May create a list of screening questions that are used to structure the discussion of potential costs and benefits of the project. These questions might be organised into categories such as the role of the customer, the role of the firm's capabilities and the project's timing and cost. After creating a list of questions, managers can use the questions to structure surveys about a project or they can create a scoring mechanism, that can then be weighted according to importance and use in subsequent analysis. Screening questions enable a firm to consider a wider range of issues that may be important in the firm's development decisions. THE AGGREGATE PROJECT PLANNING FRAMEWORK Many companies find it valuable to map of their R&D portfolio according to levels of risk, resource commitment and timing of cash flows. Managers can use this map to compare their desired balance of products with their actual balance of products. It can also help them to identify capacity constraints and better allocate resources. Companies may use a project map to aid this process. A platform product is designed to serve a core group of consumers, whereas derivative projects represent modifications of the basic platform designed to appeal to different niches within that core group. Companies that use the project map categorise all their existing projects and projects under consideration by the resources they require and by how they contribute to the company's product line. Managers can also use the map to identify their desired mix of products and allocate resources accordingly. Mapping the company's R&D portfolio encourages the firm to consider both short-term cash flow needs and long-term strategic momentum in its budgeting and planning. COMBINING QUANTITATIVE & QUALITATIVE METHODS Both methods offer a number of benefits to managers in choosing development projects and many firms use a combination of methods to arrive at an investment decision. CONJOINT ANALYSIS It is a family of techniques used to estimate the specific value individuals place on some attribute of a choice, such as the relative value of features of a product or the relative importance of different outcomes of a development project. Conjoint analysis enables a subjective assessment of a complex decision to be decomposed into quantitative course of the relative importance of different criteria. The most common use of conjoint analysis is to assess the relative importance to customers of different product attributes. DATA ENVELOPMENT ANALYSIS It is a method of assessing a potential project using multiple criteria that may have different kinds of measurement units. For a particular set of potential projects, a firm might have cash flow estimates, a ranking of the products fit with existing competences, a ranking of the products potential for building desired future competencies, a score for its technical feasibility and a score for its customer desirability. Each of these measures captures something that is qualitatively different and the numbers assigned to them are based on different units of measure. Data envelopment analysis uses linear programming to combine these different measures from the projects to create a hypothetical efficiency frontier that represents the best performance on each measure. It then measures the distance of each project from this frontier to give it an efficiency value. These values can then be used to rank-order the projects or identify projects that clearly dominate others. The biggest advantage of DEA is that it enables comparisons of projects using multiple kinds of measures. However the results of DEA are only as good as the data utilised. Managers bear the responsibility of determining which measures are most important to include and of ensuring that the measures are accurate. CHAPTER 8 - COLLABORATION STRATEGIES Firms frequently face difficult decisions about the scope of activities to perform in-house. A significant portion of innovation arises not from any single individual organization but from the collaborative efforts of multiple individuals or organizations. Collaboration can often enable firms to achieve more at a faster rate and with less cost or risk than they can achieve alone. However collaboration too have some advantages. REASONS FOR BEING ALONE The firm may perceive no need to collaborate with other organizations. It may possess all the necessary capabilities and resources for a particular development project in-house. Alternatively, the firm may prefer to obtain complementary skills or resources from a partner, but there may be no available partner that is appropriate or willing to collaborate. A firm's solo development of a technological innovation might give it more opportunities to build and renew you its capabilities. AVAILABILITY OF CAPABILITIES Whether a firm chooses to partner on a project is largely determined by the degree to which it possesses all of the necessary capabilities in-house and the degree to which one or more potential partners have necessary capabilities. If the firm has all of the necessary capabilities for a project, it may have little need to collaborate with others and may opt to go it alone. PROTECTING PROPRIETARY TECHNOLOGIES Firms sometimes avoid collaboration for fear of giving up proprietary technologies. Working closely with a partner might expose the company's existing proprietary technologies to the prying eyes of a would-be competitor. The firm may wish to have exclusive control over any proprietary technologies created during the development project. CONTROLLING TECHNOLOGY DEVELOPMENT AND USE Sometimes firms choose not to collaborate because they desire to have complete control over their development processes and the use of any resulting new technologies. This desire might be for pragmatic reasons or cultural reasons. BUILDING AND RENEWING CAPABILITIES Firms may also choose to engage in solo development even when partnering could save time or money because they believe that development efforts are key to building and renewing their capabilities. Solo development of a technological innovation challenges the firm to develop new skills, resources and market knowledge. The potential for creating and enhancing the organization's capabilities may be more valuable than the innovation itself. ADVANTAGES OF COLLABORATING Collaborating on development projects can offer a firm a number of advantages, including faster speed to market, greater flexibility, learning capabilities from other firms and building accommodation around a standard. Licensing a technology from another firm is typically much less expensive for a licensee than developing a new technology in-house. Through licensing, a firm can obtain a technology that is already technically or commercially proven. Though it is often presumed that a technology available for licence is an unlikely source of advantage, because it is typically available to many potential licensees. Overtime licensees may gain valuable knowledge from working with the licensed technology that can enable them to later develop their own proprietary technologies. In the long run, the licensor's control over the technology may erode. By licensing out the technology to potential competitors, the licensor gives up the ability to earn monopoly rents on that technology. However, doing so may prevent potential competitors from developing their own proprietary technologies. OUTSOURCING Firms that develop new technological Innovations do not always possess the competencies, facilities or scale to perform all the value chain activities for the new innovation effectively or efficiently. Such firms might outsource activities to other firms. Contract manufacturing: it's a common form of outsourcing. It allows firms to meet the scale of market demand without committing to long-term capital Investments or an increase in the Labour Force, giving the firm greater flexibility. It also enables firms to specialise in those activities central to their competitive advantage while other firms provide necessary support and specialised resources the firm does not possess. Contract manufacturing further enables a firm to tap the greater economies of scale and faster response time of a dedicated manufacturer, thereby reducing costs and increasing organisation of responsiveness to the environment. By not investing in development of in-house capabilities, a firm might not develop many of the skills and resources related to its products that enable the development of future product platforms. The Firma risks becoming hollow. Outsourcing can also impose significant transaction costs for a firm. Contract manufacturing for example requires a well-specified contract: product design, cost and quantity requirements must be clearly communicated and generally specified upfront. The contracting firm may also have to go to great lengths to protect itself from having any proprietary technology expropriated by the contract manufacturer. COLLECTIVE RESEARCH ORGANIZATIONS In some Industries, multiple organisations have established corporate research and development organizations such as the Semiconductor Research Corporation or the American Iron and Steel Institute. Collective research organisations may take a number of forms, like trade associations, university-based centres or private research corporations. Many of these organisations are formed through government or industry Association initiatives, whereas others have been formed solely through the initiative of private companies. CHOOSING A MODE OF COLLABORATION Solo internal development might make sense for a firm that has strong competencies related to the new technology, has access to capital and is not under great time pressure. Sound strategic alliances may enable a firm to relatively quickly and cheaply gain access to another firm's technology but give the firm a low level of control over that technology. Most alliances offer opportunities for leveraging existing competences or developing new competencies. For example, a joint venture is more structured and enables partners to share the cost of the development effort but they must also share control. Licensing in technology offers a fast way to access and new technology that is typically lower in cost than developing it internally. The firm typically has limited discretion over what it can do with the technology. Licensing can also be a good way for a firm to obtain enabling technologies that are necessary for it's products or services but that are not Central to the firm's competitive advantage. Licensing our technology offers a fast way for a firm to extend the reach of its technology that is nearly free and offers the potential for royalties. It also leverages difference existing competences by enabling technology to be deployed in a wider range of products or markets than the Firm participates in itself. However, it offers little opportunity for developing new competencies. CHOOSING AND MONITORING PARTNERS Gaining access to another firm's skills or resources through collaboration is not without risks. These risks can be minimised if the company meets the number of collaborations in which it engages, chooses its partners very carefully and establishes appropriate monitoring and governance mechanisms to limit opportunism. PARTNER SELECTION The success of collaborations will depend in large part on the partners chosen. A number of factors can influence how well suited partners are to each other. These factors can be divided into two dimensions: 1. Resource Fit Refers to the degree to which potential partners have resources that can be effectively integrated into a strategy that creates value. Start resources may be either complementary or supplementary. 2. Strategic Fit Refers to the degree to which partners have compatible objectives and styles. The objectives of the partners need not be the same as long as the objectives can be achieved without harming the alliance all the partners. Not knowing apartments true objectives or forging an alliance with the partner with incompatible objectives can result in conflict and wasted resources. PARTNER MONITORING Successful collaboration agreements typically have clear and flexible monitoring and governance mechanisms. The more resources put a 3 by the collaboration the more governance structure partner firms are likely to impose on the relationship. There are three main types of governance mechanisms organizations used to manage their collaborative relationships: 1. Alliance Contracts They are legally binding contract with arrangements to ensure that partners are fully aware of the rights and obligations in the collaboration and have legal remedies available if a partner should violate the agreement. Search contract also often include mechanisms for monitoring each partners adherence to the agreement ( regular review or reporting requirements). Many agreements also include provisions for terminating the relationship if their need for the alliance and or partners and counter disputes they cannot resolve. 2. Equity Ownership Each partner contributes capital and own a share of the equity in the alliance. Equity ownership helps to align the incentives of the partners and provides a sense of ownership and commitment to the project that can facilitate supervision and monitoring of the alliance. 3. Relational Governance Relational governance is the self-enforcing governance based on the goodwill, trust and reputation of the partners that is built over time through shared experiences of repeatedly working together. Research suggests that relational governance can help to reduce contracting and monitoring costs of managing an alliance and facilitate more extensive cooperation, sharing and learning by alliance partners. CHAPTER 9 - PROTECTING INNOVATION Economics and strategy have emphasized the importance of vigorously protecting an innovation in order to be the primary beneficiary of the innovation's rewards. APPROPRIABILITY It is defined as the degree to which a firm can capture that rents from its innovation. The appropriability of an innovation is determined by how easily or quickly competitors can imitate the innovation. Some technological innovations are inherently difficult for competitors to copy. The knowledge underlying that technology may be rare and difficult to replicate. A firm's prior Firms may also seek patents just to limit the options of competitors or to earn revenues through aggressive patent lawsuits; these actions are sometimes referred to as patent trolling. Patent troll's primary purpose in owning patients is to extort money from other firms. A patent troll might buy a patent from a bankrupt firm to sue another company that it claims is infringing on the purchased patent. In Industries with complex technologies such as computers and telecommunications, a dense web of overlapping patents, known as patent thickets, can make it very difficult for firms to compete without falling prey to patent suits by other firms in that technology domain. This can seriously stifle innovation and has resulted in the rather peculiar strategy of firms buying bundles of patents to create war chests that they hope will deter the patent attacks of others. TRADEMARKS A trademark is a word, phrase, symbol, design or other indicator that is used to distinguish the source of goods from one party from the goods of others. The Intel logo on many computer is one example of a trademark. A service marker is basically the same as a trademark, but distinguishes the provider of a service rather than a product. Often the term trademark is used to refer to both trademarks and service marks. Trademarks and service marks can be embodied in an indicator that can be perceived through one of the five senses. Most marks are embodied in visual indicators (words, pictures and slogans). Marks are also registered that use other senses such as sound or smells. Trademark rights that may be used to prevent others from using a mark that is similar enough to be confusing, but they may not be used to prevent others from producing or selling the same goods or services under a clearly different mark. In most countries the rights to a trademark or service mark are established in the legitimate use of the mark and do not require registration. Anyway, registration provides several advantages, for example claim of ownership over the mark. COPYRIGHTS Copyright is a form of protection granted to works of authorship. The authors of original literary, musical, or other intellectual words that can obtain copyright protection. The right of copyright protection are established by legitimate use of the work. These protection is available whether or not the work is published and prevents others from producing or distributing that work. The owner of the copyright has the exclusive right to: - Reproduce the work in copies or phonorecords - Prepare derivative works based upon the work - Distribute copies of the work to the public by sale or other transfer of ownership (rental, lease or landing) - Perform the work publicly - Display the copyrighted work publicly - Perform publicly by means of digital audio transmission There are however limitations to these rights: in the United States, in most circumstances, it is not a violation of copyright for others to use copyrighted material for purposes such as criticism, comments, news reporting, teaching, scholarship or research. As with patents and trademarks, no international copyright law automatically protects and authors work throughout the world. Copyright protection varies from country to country. Most countries do offer copyright protection to both domestic and foreign works and there are international copyright treaties for simply find the process of securing such protection. TRADE SECRETS Rather than disclose detailed information about a proprietary product or process in exchange for the grant of a patent, inventors or firms often will choose to protect their intellectual property by holding it as a trade secret. A trade secret is information that belongs to a business that is generally unknown to others. For example, the formula for a beverage. Information is typically considered to be a trade secret only if it: - Offers a distinctive advantage to the company in the form of economic rents - Remains a valuable only as long as the information remains private Information is qualified as a trade secret under the Uniform Trade Secret Act if: - The information must not be generally known or readily ascertainable through legitimate means - The information must have economic importance that is contingent upon its secrecy - The trade secret holder must exercise of reasonable measures to protect the secrecy of the information The act states that no individual or group can copy, use or benefit from a trade secret without the owners authorisation if they need any of the following conditions: - They are bound by a duty of confidentiality - They have signed a non-disclosure agreement - They acquire this secret through improper means such as theft or bribery - They acquire the information from someone who did not have the right to disclose it - They learn about the secret by mistake but have reason to know that the information was a protected trade secret THE EFFECTIVENESS OF PROTECTION MECHANISMS The methods used to protect innovation and their effectiveness very significantly both within and across industries. In some Industries (Pharmaceuticals) legal protection mechanisms such as patents are very effective, but in other Industries (Electronics) patents and copyright provide relatively little protection because other firms can often invent around the patent without infringing on it. If patents provide little protection, the firm may rely more heavily on trade secrets. To protect a trade secret, a firm must be able to expose its product to the public without revealing the underlying technology, but in many cases revealing the product reveals all. A firm that controls the standard can reap monopoly rents and can exert significant architectural control over both its own industry and related industries. This enviable position can be so lucrative that firms may be willing to lose money in the short-term to improve their technologies chance of rising to the position of dominant design. Firms may liberally diffused their technologies, for example open source software, to accelerate the technology's proliferation and jump-start the self-reinforcing feedback effect that can lead to the technology's dominance. To resolve certain trade-offs, firms often adopt a strategy of personal protection for their innovations, falling somewhere on the continuum between wholly proprietary systems and wholly open systems. WHOLLY PROPRIETARY SYSTEMS These systems are based on technology that is company owned and protected through patents, copyrights, secrecy or other mechanisms. Such technologies may be legally produced or augmented only by their developers. These systems are often not compatible with the products offered by other manufacturers. For ex., major video game console producers WHOLLY OPEN SYSTEMS The technology used in a product or process is not protected by secrecy or patents. It may be based on available standards or it may be new technology that is openly diffused to other producers. These technologies may be freely accessed, augmented and distributed by anyone. Many technologies are neither one or the other, they are partially open utilising varying degrees of control mechanisms to protected their technologies. ADVANTAGES OF PROTECTION Because proprietary systems offer greater rent appropriability, their developers often have more money and incentive to invest in technological development, promotion and distribution. If a single firm is the primary beneficiary of its technology's success, it has much greater incentive to invest in further developing the technology. The profits from the technology may be directly reinvested in further improvements in the technology. The sponsor of a proprietary technology might also adopt a penetration pricing strategy to rapidly build its installed base. It may spend aggressively on advertising to increase awareness of the technology. Protecting that technology also gives the developing firm architectural control over their technology: this type of control refers to the firm's ability to determine the structure and Small firms that are often considered more flexible and entrepreneurial than large firms. It is simpler to monitor employees and reward them for their effort or success at innovation. Small firms may also be more motivated to choose products more carefully, leading to higher rates of new product success. STRUCTURAL DIMENSIONS OF THE FIRM Firms vary on a number of structural dimensions that can influence the amount, type, and effectiveness of their innovation. Let's see some key structural dimensions: CENTRALIZATION It is the degree to which decision-making authority is kept at top levels of the firm. Decentralisation is the degree to which decision-making authority is pushed down to lower levels of the firm. Centralisation can refer both to the geographical location of activities and to where power and authority of activities are located. For example, activities might occur in locations far from the corporate headquarters. The use of a centralised vs decentralized development process there is by type of firm and Industry. Decentralized firms may struggle to get the cooperation from all divisions necessary to undergo a significant change, but they may be better able to respond to some types of technological or environmental change because not all decisions need to be passed up the hierarchy to top management: employees at lower levels are empowered to make decisions and changes independently and they may be able to act more quickly. FORMALIZATION The formalization of the firm is the degree to which the firm utilizes rules, procedures and written documentation to structure the behaviour of individuals or groups within the organisation. Formalization can substitute for some degree of managerial oversight and help large companies run smoothly with fewer managers. STANDARDIZATION It is the degree to which activities in a firm are performed in a uniform manner. Standardization can ensure that activities within the firm run smoothly and yield predictable outcomes, but it can also stifle innovation. Standardization may be used to ensure quality levels are met and that customers and suppliers are responded to consistently and equitably but, by minimising variation, standardisation can limit the creativity and experimentation that leads to innovative ideas. MECHANISTIC VS ORGANIC STRUCTURES The combination of formalization and standardization results in what is often termed a mechanistic structure: the careful adherence to policies and procedures combined with the standardization of most activities results in a well oiled machine that operates with great consistency and reliability. It is also possible to have a highly decentralized mechanistic structure by using formulation as a substitute for direct oversight. Mechanistic structures are often deemed unsuitable for fostering innovation. Mechanistic structures achieve efficiency by showing rigid adherence to standards and minimising variation. Organic structures are more free-flowing and characterized by low levels of formalization and standardization. They are often considered better for innovation and dynamic environments. THE AMBIDEXTROUS ORGANIZATION Most firms must simultaneously manage the existing product lines with efficiency, consistency and incremental innovation, while still encouraging the development of new product lines and responding to technological change through more radical innovation. Dissolution might be to create an ambidextrous organisation, which is a firme with a complex organisational form, composed of multiple internally inconsistent architectures that can collectively achieve both short-term efficiency and long-term innovation. It utilises mechanistic structures in some portions of the firm and organic structures in others. By doing that firms can achieve some of the advantages of large size and efficiency and speed of implementation afforded by mechanics structures while simultaneously harnessing the creativity and entrepreneurial spirit of small firms and organic structures. Firms can also achieve some of the advantages of mechanistic and organic structures by alternating through different structures over time. MODULARITY AND LOOSELY COUPLED ORGANIZATIONS Another method firmus used to strike a balance between efficiency and flexibility is to standardise the manufacturing platforms or components that can then be mixed and matched in a modular production system. These enables them to achieve standardization advantages ( efficiency and reliability) at the component level, while achieving variety and flexibility at the end product level. MODULAR PRODUCTS Modularity refers to the degree to which a system's components may be separated and recombined. Making products modular can exponentially increase the number of possible configurations achievable from a given set of inputs. For example, IKEA's shelving systems. Modularity is achieved in product design through the specific occasion of standard interfaces. by designing all of its shelving components to work with its standardised connectors IKEA ensures that components can be freely mixed and matched. Individual components can be changed without requiring any design changes in the other components. Modularity provides a relatively cost-effective way for firms to meet heterogeneous customer demands and modular products become more valuable when customers have heterogeneous demands and there are diverse options for meeting them. When products are made more modular, it enables the entire production system to be made more modular. LOOSELY COUPLED ORGANIZATIONAL STRUCTURE Organisation can also be made modular through the adoption of structures that enable loose coupling. In a loosely coupled structure, development and production activities are not tightly integrated but rather achieve coordination through their adherence to shared objectives and common standards. Advances in information technology have also enabled loosely coupled organisational structures to become more common. IT can enable a firm to access and process more information at a lower cost, vastly increasing different options for development configurations. Less need for integration frees firms to pursue more flexible R&D and production configurations. Firms that can become more specialised by focusing on a few key aspects of technological innovation that relate closely to the firm's core competencies. By focusing on those activities in which the Firm has a competitive advantage, the Firm can improve its chances of developing a product that has a price to value ratio that attracts customers while reducing the overhead and administrative complexity of maintaining a wide scope of activities. There are however disadvantages of loose coupling: many activities reap significant synergies by being integrated, in particular activities that require the frequent exchange of complex or tacit knowledge are likely to need closer integration than a loosely coupled development configuration can offer. MANAGING INNOVATION ACROSS BORDERS The organisation of innovation activities becomes particularly interesting for multinational firms. Many firms consider decentralising R&D to take advantage of local information and tailor innovation activities to the local market. The customisation of products and processes to the local markets makes them particularly difficult to transfer to divisions serving different markets. Divisions may be reluctant to share them and may also be reluctant to adopt other divisions' Innovations because of the belief that Innovations that are not developed locally will not suit their local market needs. CENTRE-FOR-GLOBAL STRATEGY loyalty, but a firm that brings a new product to market late may find that customers are already committed to other products. Moreover, a firm that is able to bring its product to market early has more time to develop complementary goods, that enhance the value and attractiveness of the product. Many development costs are directly related to time. We define development cycle time as the time elapsed from project initiation to product launch. A company that is slow to market with a particular generation of technology is unlikely to be able to fully amortize the fixed costs of development before that generation becomes obsolete. A company with a short development cycle can quickly revise or upgrade its offering as design flaws are revealed or technology advances. Rapid product introductions may cause adverse customer reactions: they may regret past purchases and be wary of new processes for fear they should rapidly become obsolete. The speed of a new product development may also come at the expense of quality or result in sloppy market introductions. 3. CONTROLLING DEVELOPMENT COST Sometimes a firm engages in an intense effort to develop a product that exceeds customer expectations and brings it to market early, only to find that its development costs have ballooned so much that it is impossible to recoup the development expenses even if the product is enthusiastically received by the market. Development efforts must be not only effective, but also efficient. We are going to see some ways to monitor and control development costs. SEQUENTIAL VS PARTLY PARALLEL DEVELOPMENT PROCESSES To shorten the development process and avoid time-consuming and costly iterations between stages of the development cycle, many firms have adopted a partly parallel development process. This is a development process in which some or all of the development activities at least partially overlap: if activity A would proceed activity B in such a development process, then this last one might commence before activity A is completed. For example, Product Design is initiated before concept development is complete and Process Design is begun long before product design is finalized, enabling much closer coordination between the different stages and minimising the chance that R&D will design products that are difficult or costly to manufacture. This should eliminate the need for time-consuming iterations between design stages and shorten overall cycle time. One type of parallel development process is concurrent engineering, which involves not only conducting the typical product development stages simultaneously but also takes into account downstream stages of a product lifecycle such as maintenance and disposal. Concurrent engineering is a design method in which stages of product development and planning for later stages of the product life cycle occur simultaneously. PROJECT CHAMPIONS Firms should assign a senior member of the company to champion a new product development project. Senior executives have the power and authority to support in fight for a project: they can facilitate the allocation of human and capital resources to the development efforts, ensuring that cycle time is not extended by resource constraints and help ensure that the project can sustain the necessary momentum to surmount the hurdles that inevitably will arise. Senior product champion can stimulate communication and cooperation between the different functional groups involved in the development process. RISKS A manager's role as champion may cloud judgement about the true value of the project. Optimism is often taken to extreme levels. Managers may fall victim to escalating commitment and being able to admit that a project should be killed even when it is clear to many others in the organisation that the product has gone sour or the factors driving the project's original value are no longer relevant. INVOLVING CUSTOMERS AND SUPPLIERS Many products fail to produce an economic return because they do not fulfill customer requirements for performance and price or because they take too long to bring to market. Both of these problems can be reduced by involving customers and suppliers in the development process. CUSTOMERS The end customer is often the one able to identify the maximum performance capabilities and minimum service requirements of a new product. Customers may be involved in the new product development process as an information source or as actual co-developers of a new product. Many firms use beta versions of products, which are early working prototypes of a product release to users for testing and feedback. Beta versions also enable a firm to signal the market about its product features before the product reaches the commercial production stage. Agile Development processes take this approach even further: the product is divided into many smaller features or functionality and these are rapidly developed into minimum viable products and presented to the customer feedback, enabling rapid incremental adaptation. According to some studies, firms should focus on the input of Lead Users in their development processes rather than a large sample of customers. Lead users are those who face the same needs of the general marketplace, but face them months or years earlier than the bulk of the market and expect to benefit significantly from a solution to those needs. When customers help co-create an innovation, the resulting innovations tend to better fit their needs or expectations. SUPPLIERS Much of the same logic behind involving customers in the new product development process also applies to involving suppliers. Suppliers may be actual members of the product team or consulted as an alliance partner. Today can contribute ideas for product improvement or increase development efficiency. Suppliers may be able to suggest an alternative input, and managers can help to ensure that inputs arrive on time and that necessary changes can be made quickly to minimise development time. CROWDSOURCING Firms can also open up an innovation task by directing an innovation challenge to third parties such as the general public or specific targeted groups of innovators from different networks. Sometimes firms work with third parties directly and other times they use a professional outsourcing service provider with their own network of innovators. Crowdsourcing challenges typically go through a four-step process: - TRANSLATION A need statement is required: a short 2 page document, very clean and concise to trigger interest. - CONNECTING The innovation challenge must be broadcast to the network of potential solution providers that have been selected as most suitable to respond - EVALUATION Submitted proposals get an in-depth review and the most interesting solution proposals at selected and collated in the form of a report - ACQUISITION The firm engages with the solution provider and negotiate an agreement to transfer knowledge TOOLS FOR IMPROVING THE NEW PRODUCT DEVELOPMENT PROCESS Some of the most prominent tools used to improve the development process include: STAGE-GATE PROCESSES (R. Cooper) Escalating commitment can lead managers to support projects long after they're expected value has turned negative and the cost of pushing bad projects forward can be very high. To help avoid this, many managers and researchers suggest implementing tough go/kill decision points in the product development process. The stage-gate process is the most widely known development model that incorporates such go/kill points. This process provides a blueprint for moving products through different stages of development: at each stage, a cross-functional team of people undertake activities designed to drive down the risk of a development project. At each stage of the process, the NEW PRODUCT DEVELOPMENT PROCESS METRICS Many firms use a number of methods to gauge the effectiveness and efficiency of the development process. These measures capture different dimensions of the firm's ability to successfully shepherd products through the development process. To use such methods, it is important to first define a finite period in which the measure is to be applied in order to get an accurate view of the company's current performance. This also makes it easier for the manager to calculate a response. OVERALL INNOVATION PERFORMANCE Firms also use a variety of methods to assess their overall performance at innovation. These messages give an overall view of the bang for the buck the organisation is achieving with each new product development processes. CHAPTER 12 - MANAGING NEW PRODUCT DEVELOPMENT TEAMS New product development of town requires activities that are the responsibility of different departments within the organisation. To facilitate coordination and cooperation across division boundaries, many organisations create cross-functional new product development teams to lead and manage the development process for the project. In constructing new product development teams, the organisation must consider how the teams has size and composition will affect its mix of skills, its access to resources and its effectiveness in providing communication and coordination across the divisions. TEAM SIZE New product development teams may range from a few members to hundreds of members. There is considerable research suggesting that individuals may be better off working alone during early ideation phases, teams are often extremely valuable for refining and executing on those ideas. Groups can often outperform individuals on many problem-solving tasks. Anyway bigger is not always better large teams can create more administrative costs and communication problems, leading to costly delays. The larger the team, the harder it can be to foster a shared sense of identity among team members. The potential for social loafing also increases (it happens when, as the size of the team increases, individuals perceive that they will not receive a full credit for their contribution to the group effort and so their effort and commitment decrease). TEAM COMPOSITION A lack of communication among the marketing, R&D and manufacturing functions of a company can be extremely detrimental to new product development. One of the ways that serves address this problem is by building cross-functional product development teams: they include members drawn from more than one functional area, such as engineering, manufacturing or marketing. Teams that are composed of people from diverse backgrounds have several advantages over teams that are drawn from only one or a few functional areas a greater variety of specialist provides a broader knowledge base and increases the cross-fertilisation of ideas. Diversity of team members however can also raise coordination and communication costs. Individuals tend to interact more frequently and more intensely with other individuals whom they perceive as being similar to them on one or more dimensions. This phenomenon is known as homophily: individuals prefer to communicate with others they perceive as similar to them, because it is easier and more comfortable to communicate with those who have similar dialects, mental models and belief systems. STRUCTURE OF NEW PRODUCT DEVELOPMENT TEAMS One well-known typology classifies teams into 4 types FUNCTIONAL TEAMS Members remain in their functional departments and report to their regular functional manager: they may meet periodically to discuss the project. Such teams are usually temporary and typically do not have a project manager. LIGHTWEIGHT TEAMS Members still reside in their functional department and functions of supervisors retain authority over evaluation and rewards. They are typically temporary but they have a project manager. Managers are normally junior or middle management employees. This structure is appropriate for the derivative projects where high levels of coordination and communication are not required. HEAVYWEIGHT TEAMS Members are removed from their functional departments so that they may be co-located with the project manager. Project managers are typically senior managers and have significant authority to command resources and evaluate and reward team members. They are often temporary and appropriate for platform projects. AUTONOMOUS TEAMS Members are removed from their functional departments and dedicated full-time to The Development Team. They are co-located with the project manager, who is a very senior person in the organisation. The project manager is given full control of a resources contributed from different functional departments. Such teams do not conform to the operating procedures of the rest of the organisation but they are held fully accountable for the success of the project. They act like independent divisions of the firm and excel at rapid and efficient new product development. They are appropriate for breakthrough products and some major platform projects. They can also be the birthplace of new business units. MANAGEMENT OF NEW PRODUCT DEVELOPMENT TEAMS TEAM LEADERSHIP The team leader is responsible for: - directing the team's activities - maintaining the team's alignment with project goals - serving as a communicator between the team and senior management In heavyweight and autonomous teams, the team leader may also be the person who is primarily responsible for the evaluation koma compensation and promotion of individual team members. Effective team leaders are often much more directly related to the team's success than senior management or project champions. Different types of teams have different leadership needs. While lightweight teams might have a junior or middle management leader who provides basic coordination between the functional groups, project managers in heavyweight and autonomous teams must: - Have high status within the organisation - Act as a concept champion for the team within the organisation - Be good at conflict resolution - Have multilingual skills - Be able to exert influence upon the engineering, manufacturing and marketing functions TEAM ADMINISTRATION Many organisations now have every wait and autonomous teams develop a project charter and contract book. The project charter encapsulats the project's mission and articulates exact and measurable goals for the project. It might include a vision statement for the project and a background statement for why this project is important for the organisation. Once the team charter is established, core team members and senior managers must negotiate a contract book, which defines in detail the basic plan to achieve the goal laid out in the project charter. Typically, the contract book will estimate the resources required, the development time schedule and the results that will be achieved. It provides a tool for monitoring and evaluating the team's performance in meeting objectives by providing a set of performance benchmarks and deadlines to which the team's performance can be compared. The contract book is an important mechanism for establishing team commitment to the project and a sense of ownership over the project. Signing the contract book can give the members a sense of ownership over the project and empowerment to make decisions about it. MANAGING VIRTUAL TEAMS total of 7 countries provides a useful map of the take-up and experience with high involvement innovation in manufacturing. Growing recognition of the potential has moved the management question away from whether or not to try out employee involvement to one of "how to make it happen?". ROADMAP Research on implementing high involvement innovation suggest that there are a number of stages in this journey, progressing in terms of the development of systems and capability to involve people and also in terms of the bottom-line benefits. LEVEL 1: there is little if any high involvement innovation activity going on and when it does happen it is essentially random in nature and occasional in frequency there is no formal attempt to mobilise or build on this activity. LEVEL 2: it represents an organization's first serious attempt to mobilise high involvement innovation. It involves setting up a formal process for finding and solving problems in a structured and systematic way. Ideas will be managed through some form of system for processing and progressing as many as possible and handling those that cannot be implemented LEVEL 3: it involves that coupling the high involvement innovation habit to the strategic goals of the organisation such that all the various local level improvement activities of teams and individuals can be aligned. This is the point at which high-involvement innovation makes a significant impact on the bottom line. LEVEL 4: introduces a new element of empowerment of individuals and groups to experiment and innovate on their own initiative LEVEL 5: it is a notional end point for the journey: a condition where everyone is fully involved in experimenting and improving things, sharing knowledge and creating an active learning organisation. TEAM WORKING Teams to have more to offer than individuals in terms of both fluency of idea generation and flexibility of solutions developed. Stop using these potential on innovation tasks is the prime driver for the trend toward high levels of team working. GROUP vs TEAM Group refers to an assemblage of people who made just be near to each other. Groups can be a number of people who are regarded as some sort of unity or are classed together on account of any sort of similarity. Team means a combination of individuals who come together or who have been brought together for a common purpose or goal in the organisation. A team is a group that must collaborate in their professional work in some enterprise or on some assignment and share accountability or responsibility for obtaining results. Teens are increasingly being seen as a mechanism for bridging boundaries within the organisation and in dealing with interorganizational issues. Cross-functional teams can bring together the different knowledge sets needed for tasks such as product development or process improvement, but they also represent a forum where often deep-rooted differences in perspectives can be resolved. Successful organisation where those which invested in multiple methods for integrating across groups and the cross-functional team was one of the most valuable resources. We should remember that teams are not always the answer. There are dangers in putting nominal teams together where unresolved conflict, personality clashes, lack of effective group processes and other factors can diminish their effectiveness. Key elements in effective high performance team working include: - Clearly defined tasks and objectives - Effective team leadership - Good balance of team roles and match to individual behavioral style - Effective conflict resolution mechanisms within the group - Continuing liaison with external organisation Research has shown that the most effective teams are those with the diversity in background, ability and behavioural style. Highly talented but similar people in certain teams consistently performed less than mixed groups. Characteristics that promote effective teamwork: - A clear, common and elevating goal - Results driven structure: individuals within high performing teams feel productive when their efforts take place with a minimum of grief. Open communication, clear coordination of tasks, clear roles and accountabilities, monitoring performance and providing feedback. - Competent team members - Unified commitment - Collaborative climate, that supports cooperation and collaboration - Standards of excellence - External support and recognition - Team spirit - Embracing appropriate change - Participation in decision making Threats to teamwork: - Group vs team One of the mistakes that is often made when managing teams is to call the group a team but to actually treat it as nothing more than a loose collection of individuals. It is important to be very clear about the underlying goal and reward structure: people are often asked to perform task as a team but then have all evaluation of performance based on an individual level. - Ends vs means Managing the source of authority for groups is a delicate balance - Structured freedom It turns out that most groups would find a little structure quite enabling, if it was the right kind. Teams generally need a well-defined task. They need clear limits and sufficient freedom to take initiative and make good use of their diversity. It's all about striking the right kind of balance between structure, authority and freedom. - Support structures and systems High performing teams need a reward system that recognises and reinforces excellent team performance. They also need access to good quality and adequate information. - Assumed competence Members will undoubtedly require explicit coaching on skills needed to work well in a team. CREATIVE CLIMATE Many great inventions came about as the result of lucky accidental discoveries. Two important features of creativity are relevant: the first is to recognise that creativity is an attribute that everyone possesses but their preferred style of expressing it varies widely. Innovation involves bringing something new into widespread use, not just inventing it. While the initial flash may require a significant creatively leap, much of the rest of the process will involve hundreds of small problem-finding and problem-solving exercises, each of which needs creative input. Culture is a complex concept, but it basically is "the way we do things around here" in any organisation. Management cannot directly change culture but it can intervene at the level of artefacts, by changing structures or processes, and by providing models and reinforcing preferred styles of behaviour. Such "culture change" action are now widely tried in the context of change programme towards total quality management and other models of organisation which require more participative culture. CLIMATE VS CULTURE Climate is defined as the recurring patterns of behaviour, attitudes and feelings that characterize life in the organisation. Culture refers to the deeper and more enduring values, norms and beliefs within the organisation. Culture is within the domain of anthropology and climate Falls within the domain of social psychology. Building a creative climate involves systematic development of organisational structure, communication policies and procedures, reward and recognition systems, training policy, accounting and measurement systems and deployment of strategy. Innovative organisations look for ways to reward creative behaviour and to encourage its emergence.