1. The Challenge of Effectively
Managing Innovation
MBA Defence 1999
M.S.Howard

2. The Organisation and its Environment
Micro environment: industry profit potential
– threat new entrants, bargaining power buyers/suppliers, threat substitute products, existing competition
Macro environment: Political, Economic, Societal, Technological
STRUCTURE
INDIVIDUALS AND ROLES
PROCESSES
STRATEGY TECHNOLOGY

3. Organisation Environment – Critical Fit
Macro environment Industry Organisation
Political
Legislation, Policies (e.g. grants) and
Lobbying.
New entrants
Deterrents e.g. distribution channels,
conomies of scale, capital needs, competitor
reaction, product differentiation.
Strategy
Purpose & direction of organisation. Effect of negotiation,
forced changes Offensive, defensive, imitative, trad.
Need for change ?, communicate.
Economic
Eastern Europe, China. Region & country
trends. Adapt 4P’s to economy.
Competition existing rivals
Profitability reduced. High when mature, slow
growth. Increase differentation - defend.
Technology
Benchmarking, adopt and adapt. Balance risk, profit
potential, changes. Push vs. pull.
Societal
Social responsibility. Environmental,
employee rights. Megatrends e.g. IT age.
Emotional fixes, youthful appearance.
Bargaining power buyers
Reduce profit - better quality & service
demanded at low prices. High buyer power
when low differentiation, seller reliant.
Culture
Norms, assumptions, values. Management style,
communicate priority. Room to try but fail – skunk
projects. Focus on customer results.
Technological
Development & diffusion paths. Related
change clusters (paradigms). Rate of
adoption S curve & life cycle.
Bargaining power suppliers
High when no substitute, industry supplied a
small customer, switching costs high, supplier
product critical.
Structure
Inflexible Bureaucratic traditional. For innovation – flat,
organic, cellular.Organisation evolution.
Substitute products
High threat when they have improving
price/performance.
Individuals and roles
Training, motivated, teams, champions, T shaped
knowledge profile, creativity.
Processes
Marketing, benchmarking, product development, project
management.
Ref: MBA thesis, M.S.Howard

4. SWOT analysis examples
Strengths Weaknesses Opportunities Threats
Distinctive competencies
Market leader
Economies of scale
Cost advantage
Quality of management
Financial resources
Product differentiation
Record of innovation
Obsolete facilities
Lack management
depth
Lack of key skills
Lack of competencies
Weak image in market
R&D lags competitors
Lack financial resources
Lack strategic direction
New markets
New market segments
Complementary
products
Diversify related
products
Vertical integration
Market growth
Competitor complacency
Demographic changes
Enter new competitors
Substitute products
Low market growth
Government policies
Vulnerability to
recession
Power of suppliers
Power of buyers

5. Technology adoption curve
Laggards – tradition bound
Late majority – skeptical
Early majority – deliberate
Early adopters – careful opinion leaders
Innovators – venturesome
Time from introduction
% acceptance by adopters
100
80
60
40
20
Ref: Kotler

6. Technology Life Cycle
Technical performance parameter
Time
Performance limit of mature technology
Performance limit of new technology
Old technology
New technology
Early development Rapid growth Approach of maturity
Ref: Twiss

7. Technology Life Cycle
Ref: Twiss
Technical performance parameter
Time
Performance limit of mature technology
Early development Rapid growth Approach of maturity
Competitive advantage New products Improved or new products Price (reduce costs)
Rate of new product introduction High (increasing performance) Medium Very low
Product life Very short Medium Long
Main technical focus New technology in products Products defined market segments Manufacturing, durability, reliability
Importance of new product cost Low Medium Very high (become a commodity)
Urgency of change Very high (assess delay costs) Medium Low
Main determinant success High quality R&D (technical focus) Marketing Production and finance
Management style Informal, entrepreneurial Formalising Highly formal

8. Deterrents to New Entrants
Economies of scale
Accept cost disadvantage or risk large-scale
incumbent competitor reaction.
Product differentiation
New entrants must incur expenditure to overcome
loyalties.
Brand development difficult, costly, risky.
Switching costs
The one off cost of a buyer switching from one
supplier to another (e.g. retraining).
Access to distribution channels
Often difficult for new entrants to obtain
distribution for new products.
Government policy
Influence of Monopolies Commission, government
policy standards.
Likely competitor reaction
A history of vigorous retaliation & well-resourced &
highly committed incumbents & slow industry
growth may deter.
Capital requirements
The commitment of substantial resources,
especially unrecoverable ones (e.g. R&D) is a large
deterrent
Cost advantages independent of scale
Incumbents may enjoy proprietary technology,
favourable relationships, and learning curve effects
Ref: Kotler

9. Organisation Evolution
Pioneering phase Systemisation phase Integration phase
Crisis
I'm getting too big
We want guidelines
Unclear about priorities
Pioneer entrepreneur loses
touch
Too much fire fighting
Crisis
Lost touch with the customer
Too much paperwork
Low risk attitude
Too many meetings
Empire building
Departments set own agenda
Total internal focus
Loyalty and warmth
Few people
Little formality
Fast growth
Quick return on effort
Clear systems mean well
organised
Consistency & production
efficiency
Organisation charts
Specialist functions
Departments high self interest
Autonomy, systems
integration
Positive management of
change
More concern for the
customer
Decentralisation
Time
Size
Ref: Stewart

10. Organisation Structures
Ref: adaptation Twiss
Organisation
structure
Basic or traditional
structure
Matrix Independent project /
entrepreneurship
Venture team/
intrapreneurship
Characteristics
(medium to large
organisations)
Hierarchical,
Bureaucratic,
Division of work by
product &/or discipline,
Discipline or product
focus.
Organic,
More informal,
Division of work by
product &/or discipline
but project manager
oversees project &
secondes staff,
Project & task focus.
Self contained group of
full time members with
all necessary
disciplines
A project manager
oversees the complete
project & is given the
necessary resources
for implementation.
Small self -contained
team of full time
multidisciplined people.
Risk takers, broad
objectives, freedom,
minimum rules &
regulations.
Ideas development &
exploitation.
Project path
engineering)
Serially between
departments
S.E within project
teams
S.E within full time
independent teams
S.E within full time
independent teams
Appropria teness Incremental or minor
innovation with little
novelty
Complex projects that
require simultaneous
interdisciplinary
engineering.
Completely new
solution or product is
required
Completely new
solution or product
req., high uncertainty.
Advantages for
product innovation
No structural changes,
Project appears more
relevant to those in
mainstream activities
Task & project focus
ensures project loyalty,
Team structures are
adaptable & flexible
Full time team efforts,
On completion team
return to basic
str ucture or continue
As for the independent
project organisation
Disadvantages for
product innovation
(PM = project
manager)
Short term focus of
mainstream personnel
hinders innovation,
Innovation likely to
receive very low
priority,
High discipline poorly
suited to flexibility,
Department managers
tend to focus on dept.
needs rather than
those of the final
product.
P.M. relies on
functional heads for
planning inf.,
Human/financial/facility
resources bargaining
with functional heads
(difficult if low priori ty),
Complex planning &
co -ordination may
hinder creative flexible
environment,
Team members have
divided loyalties.
Team members may
be isolated from basic
structure & knowledge,
At the start of the
project there will be
disturbances to the
basic structur e as
personnel are
transferred,
On completion, there
may be no job security.
It is essential to have
all the necessary
factors in favour of
such teams (e.g. total
higher management
support sufficient
resources, high calibre
personnel) &
unfortunately, this is
rare.

11. .Organisation Strategies
Ref: Freeman, Soete
Strategy/feature Offensive Defensive Imitative Traditional
Technical/market
position
Leadership Follow just behind the
leader
Follow a long way
behind the leaders
Few comparable firms:
niche market position
Nature of product
innovation
Fundamental research
intensive
Patent emphasis
Empha sise product
differentiation
Advanced
development,
knowledge research,
More emphasis on
production & marketing,
less on patents
Develop well
established technology
A few minor secondary
patents
Rely on others
pioneering work
Emphasise low
production costs
Reliance on traditional
craft skills with virtually
no innovation
R&D strategy Generate scientific &
technical information
Develop ext.
technology
Build special scientific
community links
Strong R&D & fast
development process
Extensively use
technology f orecasting
In touch with latest
technology
Quickly develop new
improvements to
leaders technology
Make minor
improvements on the
industry leaders
original products &
learn from their
mistakes
Ensure technical
strength to do this
Not likely to have any
si gnificant strategy or
R&D facilities
Corporate strategy Long term planning
Accept high risks
Employ many
scientifically trained
people
Long term planning
Less risk accepted
Don’t seek to be first to
market but also not to
be left behind
Content to lag a l ong
way behind the leaders
with lower risk Short
term view
Exploit traditional
values with a lower risk
shorter term view
General comments Few firms can sustain
this in the long term
Often firms rest on their
laurels in long term
Most firms follow this
a pproach
Typically create
licensed technology
production in third
world
eg need captive market
A high degree of long
term risk because of
the reliance on a niche
mature market

12. A Need for Organisation Change ?
Organisation as it is
Cultural audit
Innovation audit
Technical audit
The changing business environment
Environmental analysis
The need for change
Culture
Strategy
Organisation
Systems
Management
Technology
Innovative organisation features Technical & corporate strategic impact
Specific technical change programmes
The
organisation's
future &
successful
implementation
Ref: Twiss & Goodridge

13. Innovative culture
Bias for action (encourage employees to quickly develop customer prototypes
Stick close to the customer (listen intently & regularly to customers)
Autonomy & entrepreneurship (blind eye to a few unauthorised product developments)
Respect for individuals & an open door policy
Hands on value driven management style, common attitudes culture & shared beliefs
Stay in a familiar business you know how to run
Simultaneous loose - tight control (pass down autonomy but insist on core values)
Ref: Peters & Austin

14. Marketing Process
Key value driven business process that involves three basic steps
1. Choosing a value
Researching potential markets : segmenting, targeting, positioning with STP
2. Providing value
With 4 P’s of product, place, price, people
3. Communicating value
Strategy and plan e.g. promotion
In general
Researching macroenvironment, industry trends and SWOT analysis
Systematically identify competitors, their likely strategies, objectives, strengths and weaknesses
(e.g. benchmarking), and how they might react to new products.
Designing marketing strategies and planning programs (suitability, feasibility, acceptability)
Organising, implementing and controlling the marketing effort (e.g. annual budgeting).
Ref: Kotler

15. Ref: adaptation Twiss & Goodridge
Key roles in Product Innovation
Key role Description of role Character traits
Design engineer Source of creativity. Strong willed.
Innovative & creative.
Technically well eduucated.
Enjoys advanced problems often initially working alone.
To some extent non-conformist.
Constantly questioning.
Free thinker.
Project manager
(managerial leadership for
mainly for new products
closely linked to existing
business)
Detailed control &co-
ordination of the project.
Well organised.
Effective planner.
Sensitive to peoples needs.
Can cope with new changes, adjust resources & instil urgency.
Good business knowledge.
Intrapreneur & project
champion
(entrepreneurial leadership
mainly for newto the world
products)
An individual who is or
could be an entrepreneur
in a large organisation.
Develop internal space,
freedom to create,
innovate ,drive through
new ideas & products
Aggressive creativity for selling a new idea.
Committed to achieve byany means.
Broad range of interests & hands on team leader.
More emotional than rational.
Looks beyond the constraints of the organisation.
Skills in R&D, business strategy, pioneering, marketing & production
management.
Highly developed project managementskills.
Adaptive & divergent decision making style.
Shaper/resource investigator/ideas person.
High-risk orientation.
Opts out of formal status structure.
Technology gatekeeper Brings technical or
marketing information into
the organisation
Good communicator.
Genuine interest in technical or marketing aspects of product.
Well read in technical journals etc.
Knowledgeable & experienced.
Gives inf. to many people & initiates many product directions.
Sponsor
(collegial leadership for
entering new businesse s &
product line additions)
Senior protector &
advocate of new ideas
Mature & senior.
A large amount of experience.
Supportive with a personal interest in new ideas & people.

16. Product Innovation Training & Project Problems
Interpersonal behaviour Creativity Analysis
Group working
Questioning & listening skills
Assertiveness
Mentoring
Creativity circles
Brainstorming
Scenario writing
Think tanks
Suggestion schemes
Problem solving & evaluation
Force-field analysis
Data presentation
Planning
Stakeholder & job analysis
Cost benefit & bench marking
Ref: MBA thesis, M.S.Howard and Gasson et al
Difficulty in estimating costs & benefits
Need to make fundamental project changes as the project develops & manage changes in working
practices
Vulnerability to changes in organisational politics
Difficulty in agreeing & quantifying the business case
Problems in describing what internal & external customers want or might want

17. Project Manager Responsibility
Ref: Walley and Slack
Quality Cost Time scale People management
Responsible for project
performance
Often requires
considerable technical
knowledge
Cost estimates
Cost control (one off
nature - unforeseen
problems, inaccurate
estimates)
Principal competitive
criteria is often delivery
speed
Use variety of planning
tools (Gantt charts,
critical path methods)
to improve delivery
speed
Assemble a team from
available specialists
Help them work together
using team building
Contain & resolve conflicts
Client liaison (inform of
progress, ask for resources)

18. Project Management
Ref: Slack
Understanding the project environment
Internal & external influencing factors (macro, micro & organisation environment)
Project definition
Set objectives (end state trying to achieve with purpose, end result, success criteria).
Set scope (project responsibilities, time period, processes & people affected, resources)
Set strategy (how to meet objectives in time based phases & milestones to review progress)
Assess impact & clarify understanding
Project planning
How to execute: cost, duration, resources, responsibility
Maintain an adaptive plan to changing circumstances.
Identify activities (WBS), estimate times (e.g. expected, pessimistic) & resources, identify
relationships & dependencies (e.g. parallel, independent, float), identify schedule
constraints (e.g. resources), undertake potential problem analysis & fix the schedule
Technical execution
Management of change (individuals react differently, gain champion, communicate
progress, sell project benefits, arrange training to assist changes)
Project control
Monitoring performance (cost, quality, time)
Assessing performance (of above e.g. cumulative
budget against project % completion) during and
post execution (e.g. what went right, wrong, future)
Intervening with corrective actions & changes
(variance trends & use wide consultation of impact)
Changes
Corrective action

19. Product Innovation
Ref: Wong, Fitzgerald, Quinn, Cooper, Maidique and Zirger
Encouragement/Success Discouragement/Failure
Top executives create a clear vision, direction, support.
Marketing proficiency (e.g. early & imaginative identification of potential
markets & good product/organisation fit).
Customer & market orientation.
Unique features give superior benefits that customer’s value.
Product provides high contribution margin.
Strong in house R&D & can finance R&D over long periods.
Conduct basic research, close links with scientific world.
Technology orientation (encourage learning/experimenting).
Patent protection & positive rewards for innovating.
Fast development process (first to market with idea).
Entrepreneurship with & readiness to take risks.
Good co-ordination & synergy of R&D/production/marketing.
Small, flat organisation, small multidisciplinary project teams.
Skunkworks emulate small entrepreneurial organisations.
Constructive & managed internal competition.
A reliance on individuals & acceptance of the unorthodox.
Effective management of change.
Too late to market.
Customers needs not met with poor customer value.
Market misunderstood (e.g. chose poor 4P combination).
A competitive market where many new product introductions
Competitor retaliation through price etc.
Technical problems.
Resource deficiencies in development process (e.g. skills).
Poorly undertaken activities in development process.
Top management isolation from customers & employees.
Short term results at the expense of long term requirements.
Poor traditional accounting practices (e.g. too cost focused).
Management preference for excessive rationalism.
Inflexible bureaucracy (e.g. everything by the book).
Intolerance of fanatics (punishing out of line behaviour).
Inappropriate incentives that discourage entrepreneurial activity, punish
risk takers, & those who experiment.
Total reliance on systems.
Ignoring the need to manage change.

20. Project Management of Product Innovation
Technology
capture and
transfer Creativity
Ideas
generation.
Culture, organisation, strategy Environment suitable for product innovation
Formal management processes
Evaluation Specification
Design Control
Planning
Champion or project manager
Effective R & D and cross functional teams
Implementation;
Product
Process
System
Needs Involvement Purchase or use
The user : internal or customer
Ref: Twiss and Goodridge

21. Bibliography
Roy R & Wield D, Product Design & Technological Innovation, Open University press, 1989
Dosi et al, Technical Change & Economic Theory, Pinter publishers, 1988
Twiss B & Goodridge M, Managing Technology For Competitive Advantage, Pitman, 1989
Peters T & Austin N, A Passion For Excellence, Fontana, 1990
Sculley J, Odyssey : Pepsi To Apple, Fontana, 1989
Twiss B, Managing Technological Innovation, Pitman, 1990
Rothwell R & Zegveld W, Innovation & The Small & Medium Sized Firm, Frances Pinter Publishers, 1983
Bergen S A, Productivity & The R&D/Production Interface, Gower, 1986
Bowman C & Asch D, Strategic Management, Macmillan Distribution Ltd., 1991
Child J, Organization, A Guide To Problems & Practice, Paul Chapman Publishing Ltd., 1988
Handy C, Understanding Organizations, Penguin Business, 1993
Buchanan D & Huczynski A A, Organisational Behaviour, An Introductory Text, Prentice Hall International, 1985
Sapienza A M, Managing scientists, Leadership Strategies in Research & Development, Wiley-Liss, 1994
Wilson D C & Rosenfeld R H, Managing organisations, Mc Graw Hill, 1990
Kotler P, Marketing Management Analysis Planning Implementation & Control, Prentice Hall International, 1994
Slack N, Chambers S, Harland C, Harrison A, Johnston R, Operation Management, Pitman Publishing, 1995
Hart S, New Product Development, The Dryden Press, 1996
Ref: MBA thesis, M.S.Howard