BA 210: Innovation

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BA 210 Innovation
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Admin

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Todays hot product is tomorrows doorstop

• The first company to capitalize on an innovation
  reaps the greatest rewards and most improved
  operating margins. When competitors start to use
  the same technologies, your competitive advantage
  or differentiation gets commoditized. Then its
  time to move on to the next new thing.
• John Chambers, CEO, Cisco Systems
• The importance of innovation is at historic highs
  for all the usual reasons rapid technological
  change, changing customer preferences,
  deregulation, globalization, etc.
• Companies target increasingly large parts of
  their sales to be recently introduced products.
• Companies are increasingly responsive to
  customers.

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Todays Roadmap and Objective

• To understand key elements of organizational
  innovation
• What are the strategic benefits of innovation?
  Is Chambers advice always right?
• Stimulating internal innovation how do you
  generate creativity and innovation in your
  organization?
• Principles of new product development how do
  you convert ideas into innovative products?
• What role do customers play in innovation?
• Technique How does brainstorming work?

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Innovation terminology

• Innovation Change in technology, a departure
  from previous ways of doing things
• Product innovation change in actual output
• Process innovation change in methods of
  producing outputs (e.g., TQM)
• Innovation process how creative ideas are
  transformed into a useful product, service, or
  method of production
• Technology methods, processes, systems and
  skills used to transform resources into products
• Creativity - ability to combine ideas in a unique
  way or to make unusual associations between ideas
• Dominant Design - a widely-accepted standardde
  facto if not de jurefor a particular product or
  process.

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Classic Technology Life Cycle
Theoretical maximum
Late to mkt.
Development slows as limit approached
Technical performance
High product innovation Lots of experimentation
Dominant design emerges Process innovation
increases
Time
First to mkt.
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Technology strategyleadership followership

• Technology leadership (first to market)
• Advantages
• First-mover advantage higher profit margins,
  little initial competition
• Occupying best niches building entry barriers
• Opportunities to learn ahead of the competition
  (Japanese auto firms)
• Disadvantages
• Greater risks is there a market, will the
  technology work, etc.
• Costs of developing (learning about) technology,
  market
• Technology followership (late to market)
• Advantages
• Market is established risks are lower
• Can learn from leaders experience -gt better
  products or at lower cost.
• Disadvantages

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Examples of technology leadership trajectories

• IBM-compatible PCs (IBM, Compaq, Dell)
• Did Palm invent PDAs?
• No Apple did Newton
• Bulky
• Buggy
• Palm founded by
• Apple defectors

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Systems View Of Innovation
Innovation is driven by more than creative
people and clever ideas
Creative individuals, groups, organizations
Creative process Creative situation
Creative product(s)
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Organizational characteristics that support the
innovation process

• Internal innovation is encouraged by appropriate
• Structural variables
• organic design decentralized action, cross-unit
  communication
• plentiful resources to fund risky projects,
  absorb mistakes
• Cultural variables
• Encourage experimentation accept ambiguity
  the impractical
• Encourage
• Human Resource variables
• Keep employees current through training and
  development
• Encourage idea champions who drive the idea by
  energizing others with their vision, by taking
  risks, by being persistent (Ford Don Frey, Lee
  Iacocca, the Edsel and the Mustang).

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(No Transcript)
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Example Encouraging Experimentation and
Risk-Taking

• You, my friend, are a Master Scotch Tape
  Engineer. Your reputation as the King of Stick is
  riding on your latest project. But the adhesive
  you've come up with is flabby and weak, the
  "Before" picture among compounds. It couldn't
  hold two magnets together. You're flummoxed.
• Two choices Mention this intriguing development
  to your co-workers or keep it quiet to hide your
  "failure" rather than exposing it to ridicule.
• If you chose option one, congratulations. You
  have just invented the central ingredient in
  Post-it Notes. You chose the second? Oooh, too
  bad. Your cover-up was so successful, no one knew
  you'd made any progress at all. And you never did
  find that super-adhesive. Professionally, you've
  come undone.
• This dilemma stems from Dr. Spence Silver's story
  in the 3M company's Innovation Chronicles. Silver
  went looking for a strong bond and found a weak
  one. Fascinated rather than embarrassed, he
  shared his results with co-workers, among them
  churchgoer Arthur Fry. Fry enjoyed singing
  Amazing Grace as much as the next guy, but he was
  bedeviled by the church hymnal's bookmarks. They
  kept falling out and making him lose his place.
  If only there was some way to secure the bookmark
  that wasn't permanent. Hey! Hello, Dr. Silver?
  The rest is Post-it Note history.
• Failure, as this sticky little parable
  illustrates, is the gateway to innovation.

Story from myprime.com, special Feature
Celebrate Failure! By Ashley Ball
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Managing the innovation process New product
development

• How do you make sure you put your resources where
  they are going to count the most?
• Speed How do you make sure ideas are converted
  to products quickly?
• Fit How do you make sure customers will buy the
  new products?
• Quality and Cost How do you make sure you can
  make the new products at the right cost and
  quality?
• Who do you get involved in the process?

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Four Goals of New Product Development
1st to market premium prices Stay ahead of
competition
Poor Quality annoys customers Quality problems
often come from rushing to market
Avoid common failure Not meeting customer needs
Shortens development time (no redos), avoids
production problems, reduces costs, improves
quality
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Four Principles of New Product Development

Rapid conversion of the best ideas into
marketable, manufacturable products
Enable cross-functional teams
Use partly parallel development
Involve customers and suppliers
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Principle 1 Use a Development Funnel

• Forces managers to make choices among competing
  projects to avoid common mistake spreading
  limited resources too thin.

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Funnel example Stages and Gates

• Stage 1 Wide mouth encourage volume
• Gate 1 Easy screen (often by middle managers)
• Consistency with strategy
• Technically feasibility
• Stage 2 Detailed development plan
• Gate 2 Senior management review
• Market potential
• Resources required
• Fit with other projects
• Stage 3 Development
• Cross-functional team assigned, 6 month 5 year
  effort

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Principle 2 Establish Cross-Functional Teams

• Cross functional teams are a crucial part of
  effective product development.
• Core members of the team are the people primarily
  responsible for the development effort.
• Management must ensure there is coordination and
  communications between team members.
• Teams are often located physically together.
• Successful teams will develop a clear sense of
  their objectives and share a common mission.

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Principle 3 Partly Parallel Development
Traditional Approach - Long Development Time -
Threats to cost and quality if Communication
is poor
Faster Design for Manufacturability Enabled by
X-Functional Teams
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Principle 4 Involve Both Customers and Suppliers

• Frequently new products fail because design does
  not meet the needs of customers.
• Design process must include customer ideas and
  needs.
• Solicit customer input from many sources.
• Include them during concurrent engineering
• Same benefits faster, better quality.
• Seek out their ideas and input early in the
  process.

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Example Thermos Develop a new barbecue grill in
18 months

• How did Thermos design the new grill?
• Formed a cross-functional team with core members
  (6) assigned to nothing else for 18 months!
• Engineers to Marketing Thanks for telling us its
  electric! Save 6 months
• Spend a month on the road visiting customers.
  Surprises
• Messy charcoal and polluting lighter fluid are
  out, women grill, rusty grills on expensive decks
  are a no-no, apartments flames also a no-no.
• Concept emerges dramatically different grill
• Looks like furniture, no lighter fluid needed,
  electric not fire.
• During development leadership rotated
• Do you want those legs straight or tapered
• Result Highly manufacturable, spot-on product
  that is most best-selling grill in the U.S.
  (Char-Broil Patio Bistro Grill)

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The breakthrough innovation problem 3M as example

• 3M is an examplar of innovationa-stimulating
  characteristics
• Resources 15 of researchers on own projects
  no approvals needed
• Culture of experimentation, collaboration,
  communication and learning.
• Post-it notes is a vivid example.
• Fortune Article Even so, signs it isnt working
• 30 of sales from new products like pink
  Post-It notes
• Profits stagnating, new CEO considering culture
  change
• Bottom Line Senior execs want breakthrough
  innovations
• Very tough to manage processes like Dr. Silvers
  innovation

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BackgroundCustomer Focus and Innovation

• How do you normally learn from customers?
• Stay close to, and be responsive to, your largest
  customers
• Understand your major market segments needs
• What type of innovations are likely
• Major innovations, if you havent been in touch
• Thermos grill example
• Line extensions and incremental improvements if
  you have.
• The creativity is in coming up with ideas to meet
  the current needs of the center, mainstream market

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Lead Users Taking customer focus to the next
level

• Where do major, non-incremental innovations come
  from
• Surprisingly large number from the most advanced
  users lead users, rather than from the
  development labs of leading manufacturers
• 100 first of type scientific instruments
• 70 chemical processes and process equipment
• 82 New functional capabilities, surface
  chemistry instruments
• See article copy for a better copy of the graphic

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Product innovation by leveraging lead users

• Lead Users
• Not early adopters usually though of as the
  first to adopt new innovations because lead
  users are proactive.
• Lead users go beyond what is commercially
  available
• They are thinking of, investing in, and
  prototyping innovations.
• Lead users often are in related markets with
  extreme needs
• Lead users can point to breakthrough innovation
  ideas because lead users may already be where the
  market will/can go.
• Compare to standard approaches to staying close
  to customers, that aim where the money is, not
  where it is going to be.

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Examples

• Race cars. Why do auto companies sponsor race
  cars?
• Not because it is a big market eh?
• Partly for reputation, but do you buy a Civic
  because Honda wins Formula 1 races?
• Recall from class on strategy that one of Hondas
  core competencys is engines
• Where did antilock brakes for your car come from?
• Some auto company scientist?
• No from military aerospace, a much smaller
  market with very expensive vehicles youd
  rather not have sliding uncontrollably down rainy
  runways.

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Implementation

• Foundation Define mission, get stakeholders on
  board.
• Determine trends by talking to experts
• Network to find users at the leading edge
• In the target market
• Across knowledge / industry boundaries
• Systematically brainstorm
• Lead user workshops
• Gain stakeholder approval of the best ideas
• And send them into the new product development
  funnel.

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Brainstorming Theory

• Divide creativity into three phases (Osborn)
• Fact-finding
• Solution-finding
• Brainstorming an unrestrained flow of ideas in a
  group with all critical judgements suspended.
• Separate imagination from judgement -gt more,
  bigger ideas
• Quantity leads to quality -gt more ideas means
  larger likelihood of hitting the best leads.

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Brainstorming - Process

• Brainstorming rules
• Criticism is ruled out withhold critical
  judgement
• Freewheeling is encouraged the wilder the idea,
  the better
• Quantity is key shotgun rather than rifle
  approach
• Build and combine ideas
• Mechanics
• 5-12 people in session
• 20 minutes to an hour per session
• Leader who enforces rules and encourages rapid
  fire idea generation say next! rather than
  comment on the idea.

Adopted from Hellriegel, Jackson, Slocum,
Management, 9th ed., 2002.
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Next Up Change Management

• Ch 13 - Managing Change and Innovation
• Read the sections on Organizational Change, p.
  336-347
• Testing 123 Do 1-6 only
• Read in Article Packet
• Leading Change Why Transformation Efforts
  Fail, by John Kotter (Harvard Bus. Review, Mar
  1995).
• Mastering Management Change module
• Complete the introduction, concepts, exercises
  and resolution sections of the Change module.