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The Challenge of Effectively Managing Innovation : MBA Defence


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  • 1. The Challenge of Effectively Managing Innovation MBA Defence 1999 M.S.Howard
  • 2. The Organisation and its Environment STRUCTURE STRATEGY INDIVIDUALS AND ROLES TECHNOLOGY PROCESSESMicro environment: industry profit potential– threat new entrants, bargaining power buyers/suppliers, threat substitute products, existing competitionMacro environment: Political, Economic, Societal, Technological
  • 3. Organisation Environment – Critical Fit Macro environment Industry Organisation Political New entrants Strategy Legislation, Policies (e.g. grants) and Deterrents e.g. distribution channels, Purpose & direction of organisation. Effect of negotiation, Lobbying. conomies of scale, capital needs, competitor forced changes Offensive, defensive, imitative, trad. reaction, product differentiation. Need for change ?, communicate. Economic Competition existing rivals Technology Eastern Europe, China. Region & country Profitability reduced. High when mature, slow Benchmarking, adopt and adapt. Balance risk, profit trends. Adapt 4P’s to economy. growth. Increase differentation - defend. potential, changes. Push vs. pull. Societal Bargaining power buyers Culture Social responsibility. Environmental, Reduce profit - better quality & service Norms, assumptions, values. Management style, employee rights. Megatrends e.g. IT age. demanded at low prices. High buyer power communicate priority. Room to try but fail – skunk Emotional fixes, youthful appearance. when low differentiation, seller reliant. projects. Focus on customer results. Technological Bargaining power suppliers Structure Development & diffusion paths. Related High when no substitute, industry supplied a Inflexible Bureaucratic traditional. For innovation – flat, change clusters (paradigms). Rate of small customer, switching costs high, supplier organic, cellular.Organisation evolution. adoption S curve & life cycle. product critical. Substitute products Individuals and roles High threat when they have improving Training, motivated, teams, champions, T shaped price/performance. 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 Obsolete facilities New markets Enter new competitors competencies Lack management New market segments Substitute products Market leader depth Complementary Low market growth Economies of scale Lack of key skills products Government policies Cost advantage Lack of competencies Diversify related Vulnerability to Quality of management Weak image in market products recession Financial resources R&D lags competitors Vertical integration Power of suppliers Product differentiation Lack financial resources Market growth Power of buyers Record of innovation Lack strategic direction Competitor complacency Demographic changes
  • 5. Technology adoption curve % acceptance by adopters 100 Laggards – tradition bound 80 Late majority – skeptical 60 40 Early majority – deliberate Early adopters – careful opinion leaders 20 Innovators – venturesome Time from introductionRef: Kotler
  • 6. Technology Life Cycle Technical performance parameter Performance limit of new technology Performance limit of mature technology Old technology New technology Early development Rapid growth Approach of maturity TimeRef: Twiss
  • 7. Technology Life Cycle Technical performance parameter 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 TimeRef: Twiss
  • 8. Deterrents to New Entrants Economies of scale Product differentiation Accept cost disadvantage or risk large-scale New entrants must incur expenditure to overcome incumbent competitor reaction. loyalties. Brand development difficult, costly, risky. Switching costs Access to distribution channels The one off cost of a buyer switching from one Often difficult for new entrants to obtain distribution supplier to another (e.g. retraining). for new products. Government policy Likely competitor reaction Influence of Monopolies Commission, government A history of vigorous retaliation & well-resourced & policy standards. highly committed incumbents & slow industry growth may deter. Capital requirements Cost advantages independent of The commitment of substantial resources, scale especially unrecoverable ones (e.g. R&D) is a Incumbents may enjoy proprietary technology, large deterrent favourable relationships, and learning curve effectsRef: Kotler
  • 9. Organisation Evolution Pioneering phase Systemisation phase Integration phase Loyalty and warmth Clear systems mean well Autonomy, systems Few people organised integration Little formality Consistency & production Positive management of Fast growth efficiency change Quick return on effort Organisation charts More concern for the Specialist functions customer Departments high self interest Decentralisation Crisis Lost touch with the customer Crisis Too much paperwork Size Im getting too big Low risk attitude Time We want guidelines Too many meetings Unclear about priorities Empire building Pioneer entrepreneur loses Departments set own agenda touch Total internal focus Too much fire fightingRef: Stewart
  • 10. Organisation Structures Organisation Basic or traditional Matrix Independent project / Venture team/ structure structure entrepreneurship intrapreneurship Characteristics Hierarchical, Organic, Self contained group of Small self-contained (medium to large Bureaucratic, More informal, full time members with team of full time organisations) Division of work by Division of work by all necessary multidisciplined people. product &/or discipline, product &/or discipline disciplines Risk takers, broad Discipline or product but project manager A project manager objectives, freedom, focus. oversees project & oversees the complete minimum rules & secondes staff, project & is given the regulations. Project & task focus. necessary resources Ideas development & for implementation. exploitation. Project path Serially between S.E within project S.E within full time S.E within full time (SE = simultaneous. departments teams independent teams independent teams engineering) Appropriateness Incremental or minor Complex projects that Completely new Completely new innovation with little require simultaneous solution or product is solution or product novelty interdisciplinary required req., high uncertainty. engineering. Advantages for No structural changes, Task & project focus Full time team efforts, As for the independent product innovation Project appears more ensures project loyalty, On completion team project organisation relevant to those in Team structures are return to basic mainstream activities adaptable & flexible structure or continue Disadvantages for Short term focus of P.M. relies on Team members may It is essential to have product innovation mainstream personnel functional heads for be isolated from basic all the necessary hinders innovation, planning inf., structure & knowledge, factors in favour of (PM = project Innovation likely to Human/financial/facility At the start of the such teams (e.g. total manager) receive very low resources bargaining project there will be higher management priority, with functional heads disturbances to the support sufficient High discipline poorly (difficult if low priority), basic structure as resources, high calibre suited to flexibility, Complex planning & personnel are personnel) & Department managers co-ordination may transferred, unfortunately, this is tend to focus on dept. hinder creative flexible On completion, there rare. needs rather than environment, may be no job security. those of the final Team members have product. divided loyalties.Ref: adaptation Twiss
  • 11. Organisation Strategies. rganisationO Strategy/feature Offensive Defensive Imitative Traditional Technical/market Leadership Follow just behind the Follow a long way Few comparable firms: position leader behind the leaders niche market position Nature of product Fundamental research Emphasise product Develop well Reliance on traditional innovation intensive differentiation established technology craft skills with virtually Patent emphasis Advanced A few minor secondary no innovation development, patents knowledge research, Rely on others More emphasis on pioneering work production & marketing, Emphasise low less on patents production costs R&D strategy Generate scientific & In touch with latest Make minor Not likely to have any technical information technology improvements on the significant strategy or Develop ext. Quickly develop new industry leaders R&D facilities technology improvements to original products & Build special scientific leaders technology learn from their community links mistakes Strong R&D & fast Ensure technical development process strength to do this Extensively use technology forecasting Corporate strategy Long term planning Long term planning Content to lag a long Exploit traditional Accept high risks Less risk accepted way behind the leaders values with a lower risk Employ many Don’t seek to be first to with lower risk Short shorter term view scientifically trained market but also not to term view people be left behind General comments Few firms can sustain Most firms follow this Typically create A high degree of long this in the long term approach licensed technology term risk because of Often firms rest on their production in third the reliance on a niche laurels in long term world mature market eg need captive marketRef: Freeman, Soete
  • 12. A Need for Organisation Change ? Organisation as it is The changing business environment Cultural audit Environmental analysis Innovation audit Technical audit The need for change Culture Strategy Organisation Systems Innovative organisation features Technical & corporate strategic impact Management Technology The organisations Specific technical change programmes future & successful implementationRef: 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)Ref: Kotler Organising, implementing and controlling the marketing effort (e.g. annual budgeting).
  • 15. Key roles in Product Innovation Key role Description of role Character traits Design engineer Source of creativity. Strong willed. Innovative & creative. Technically well edu ucated. Enjoys advanced problems often initially working alone. To some extent non -conformist. Constantly questioning. Free thinker. Project manager Detailed control &co- Well organised. (managerial leadership for ordination of the project. Effective planner. mainly for new products Sensitive to peoples needs. closely linked to existing Can cope with new changes, adjust resources & instil urgency. business) Good business knowledge. Intrapreneur & project An individual who is or Aggressive creativity for selling a new idea. champion could be an entrepreneur Committed to achieve by any means. (entrepreneurial leadership in a large organisation. Broad range of interests & hands on team leader. mainly for newto the world Develop internal space, More emotional than rational. products) freedom to create, Looks beyond the constraints of the organisation. innovate ,drive through Skills in R&D, business strategy, pioneering, marketing & production new ideas & products management. Highly developed project management skills. Adaptive & divergent decision making style. Shaper/resource investigator/ideas person. High-risk orientation. Opts out of formal status structure. Technology gatekeeper Brings technical or Good communicator. marketing information into Genuine interest in technical or marketing aspects of product. the organisation Well read in technical journals etc. Knowledgeable & experienced. Gives inf. to many people & initiates many product directions. Sponsor Senior protector & Mature & senior. (collegial leadership for advocate of new ideas A large amount of experience. entering new businesse s & Supportive with a personal interest in new ideas & people. product line additions)Ref: adaptation Twiss & Goodridge
  • 16. Product Innovation Training & Project Problems Interpersonal Creativity Analysis behaviour Group working Creativity circles Problem solving & evaluation Questioning & listening skills Brainstorming Force-field analysis Assertiveness Scenario writing Data presentation Mentoring Think tanks Planning Suggestion schemes Stakeholder & job analysis Cost benefit & bench marking 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 wantRef: MBA thesis, M.S.Howard and Gasson et al
  • 17. Project Manager Responsibility Quality Cost Time scale People management Responsible for project Cost estimates Principal competitive Assemble a team from performance criteria is often delivery available specialists Cost control (one off speed Often requires nature - unforeseen Help them work together considerable technical problems, inaccurate Use variety of planning using team building knowledge estimates) tools (Gantt charts, critical path methods) Contain & resolve conflicts to improve delivery speed Client liaison (inform of progress, ask for resources)Ref: Walley and Slack
  • 18. Project Management Understanding the project environment Internal & external influencing factors (macro, micro & organisation environment) Project definition Changes 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 Corrective action 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 Project control Monitoring performance (cost, quality, time) Assessing performance (of above e.g. cumulative budget against project % completion) during and Technical execution post execution (e.g. what went right, wrong, future) Management of change (individuals react differently, gain champion, communicate Intervening with corrective actions & changes progress, sell project benefits, arrange training to assist changes) (variance trends & use wide consultation of impact)Ref: Slack
  • 19. Product Innovation Encouragement/Success Discouragement/FailureTop executives create a clear vision, direction, support. Too late to market.Marketing proficiency (e.g. early & imaginative identification of potential Customers needs not met with poor customer & good product/organisation fit). Market misunderstood (e.g. chose poor 4P combination).Customer & market orientation. A competitive market where many new product introductionsUnique features give superior benefits that customer’s value. Competitor retaliation through price etc.Product provides high contribution margin. Technical problems.Strong in house R&D & can finance R&D over long periods. Resource deficiencies in development process (e.g. skills).Conduct basic research, close links with scientific world. Poorly undertaken activities in development process.Technology orientation (encourage learning/experimenting). Top management isolation from customers & employees.Patent protection & positive rewards for innovating. Short term results at the expense of long term requirements.Fast development process (first to market with idea). Poor traditional accounting practices (e.g. too cost focused).Entrepreneurship with & readiness to take risks. Management preference for excessive rationalism.Good co-ordination & synergy of R&D/production/marketing. Inflexible bureaucracy (e.g. everything by the book).Small, flat organisation, small multidisciplinary project teams. Intolerance of fanatics (punishing out of line behaviour).Skunkworks emulate small entrepreneurial organisations. Inappropriate incentives that discourage entrepreneurial activity, punishConstructive & managed internal competition. risk takers, & those who experiment.A reliance on individuals & acceptance of the unorthodox. Total reliance on systems.Ref: Wong, Fitzgerald, Quinn, Cooper, Maidique and Zirger
  • 20. Project Management of Product Innovation Culture, organisation, strategy Environment suitable for product innovation Formal management processes Technology Implementation; capture and Specification Evaluation Planning transfer Creativity Product Ideas Design Control generation. Process Champion or project manager System Effective R & D and cross functional teams Needs Involvement Purchase or use The user : internal or customerRef: 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, 1996Ref: MBA thesis, M.S.Howard