The Challenge of Effectively
Managing Innovation
MBA Defence 1999
M.S.Howard
The Organisation and its Environment
Micro environment: industry profit potential
– threat new entrants, bargaining power ...
Organisation Environment – Critical Fit
Macro environment Industry Organisation
Political
Legislation, Policies (e.g. gran...
SWOT analysis examples
Strengths Weaknesses Opportunities Threats
Distinctive competencies
Market leader
Economies of scal...
Technology adoption curve
Laggards – tradition bound
Late majority – skeptical
Early majority – deliberate
Early adopters ...
Technology Life Cycle
Technical performance parameter
Time
Performance limit of mature technology
Performance limit of new...
Technology Life Cycle
Ref: Twiss
Technical performance parameter
Time
Performance limit of mature technology
Early develop...
Deterrents to New Entrants
Economies of scale
Accept cost disadvantage or risk large-scale
incumbent competitor reaction.
...
Organisation Evolution
Pioneering phase Systemisation phase Integration phase
Crisis
I'm getting too big
We want guideline...
Organisation Structures
Ref: adaptation Twiss
Organisation
structure
Basic or traditional
structure
Matrix Independent pro...
.Organisation Strategies
Ref: Freeman, Soete
Strategy/feature Offensive Defensive Imitative Traditional
Technical/market
p...
A Need for Organisation Change ?
Organisation as it is
Cultural audit
Innovation audit
Technical audit
The changing busine...
Innovative culture
Bias for action (encourage employees to quickly develop customer prototypes
Stick close to the customer...
Marketing Process
Key value driven business process that involves three basic steps
1. Choosing a value
Researching potent...
Ref: adaptation Twiss & Goodridge
Key roles in Product Innovation
Key role Description of role Character traits
Design eng...
Product Innovation Training & Project Problems
Interpersonal behaviour Creativity Analysis
Group working
Questioning & lis...
Project Manager Responsibility
Ref: Walley and Slack
Quality Cost Time scale People management
Responsible for project
per...
Project Management
Ref: Slack
Understanding the project environment
Internal & external influencing factors (macro, micro ...
Product Innovation
Ref: Wong, Fitzgerald, Quinn, Cooper, Maidique and Zirger
Encouragement/Success Discouragement/Failure
...
Project Management of Product Innovation
Technology
capture and
transfer Creativity
Ideas
generation.
Culture, organisatio...
Bibliography
Roy R & Wield D, Product Design & Technological Innovation, Open University press, 1989
Dosi et al, Technical...
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The Challenge of Effectively Managing Innovation : MBA Defence

  1. 1. The Challenge of Effectively Managing Innovation MBA Defence 1999 M.S.Howard
  2. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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

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