1. Pre-Launch Decisions which Influence Innovation Success
Homework1. Read Case Study 7 and respond to question 2.2. Read Case Study 9 and
respond to question 1.CASE STUDY 7Pre-Launch Decisions which Influence Innovation
SuccessIt has been extensively documented in management literature that an incredibly
large share of firms’ investments in technological innovation do not generate substantial
financial returns. Three main reasons underlying this phenomenon can be identified. First,
technological innovation creates knowledge and technological assets that often remain
largely unexploited. Various studies show that between 70 and 90% of corporate
technology assets often never get used in core products or lines of business. Second, the
likelihood that an innovation project reaches completion and that the new product is
introduced into the market is strikingly low. It has been estimated that the probability of
new product commercialisation is about 40% in many industries, with some cases (e.g.,
pharmaceutics) where the mortality of innovation projects is much higher. Finally, a large
share of the innovations that ultimately reach the market do not experience a satisfactory
diffusion and their sales are discontinued. Empirical studies have shown indeed that on
average 40– 50% of fully commercialised new products turn out to be commercial
failures.An important managerial question is however left unanswered: which are the levers
a manager can act upon to achieve adoption network acceptance and early adopters’
acceptance for a high-tech innovation, having a given functional content and a set of
technical specifications, which is introduced within the scope of a given competitive and
product strategy (Table 7.5)?TABLE 7.5 Commercialisation factors influencing the adoption
of innovationsVariableDescriptionTiming– When will the innovation first be launched into
the market?– Will the firm announce the innovation to the press long before its market
launch?– Will the firm partner with external organisations long before the official market
launch?Targeting and positioning– Which market segments will the innovation will be
aIDressed to?– Which will be the position of the innovation in the eyes of potential adopters
in each of the targeted market segments?– Will the firm target different segments as long as
the commercialisation process progresses?Inter-firm relationships– Which external
organisations will the firm partner with during the commercialisation of the innovation?–
Which forms of relationships will be most appropriate (e.g., licensing agreements, strategic,
long-term partnerships) to organise such relationships?Product– Which bundle of
aIDitional aIDs-on, services and functionalities surrounding the ‘ core’ innovation will be
2. included in the basic configuration of the new product?Distribution– Which type of
distribution strategy (e.g., push or pull) will be needed to streamline the market penetration
of the innovation?– Which types of distribution channels will be chosen to deliver the
innovation to market (e.g., retail or specialised distributors)?– Which critical functions (e.g.,
customer education) will they be required to perform?Advertising and promotion– Which
message will be communicated during the pre-announcement and post-launch advertising
campaign?– Which types of communication channels will be employed for these advertising
and promotion initiatives (e.g., mass or specialised channels)?Pricing– Which pricing
strategy (e.g., skimming or penetration) will be used for the market introduction of the new
product?– Which pricing strategy will be adopted for complementary goods and aIDitional
services?CASE STUDY 9New Concept Development at PhilipsPhilipsPhilips has a proud
history of innovation and has been responsible for launching several ‘ new to the world’
product categories, like X-ray tubes in its early days, the Compact Cassette in the 1960s
followed by the Compact Disc in the 1980s, and more recently Ambilight TV. These
successes are linked to Philips’ deep understanding of innovation, enabled notably by
significant R&D investments and strong traditions in design.Since 2003, Philips has been
engaged in a market-driven change programme to rejuvenate its brand and approach to
new product innovation with expertise on end-user insights. Six years later, the end-user
insights approach has significantly influenced the way Philips innovates, in line with the
new brand promise of ‘ sense and simplicity’ . Yet in 2000, new product innovation was
still predominantly shaped by R&D, particularly in its lighting business. In that same year,
Philips incurred a net loss of EUR 3206 million. Management was focused on dissolving the
Components business, returning the Semiconductor business to profitability, simplifying
the organisation and making cost savings.Philips’ role in the global lighting industry had
always been dominant. Philips Lighting was Philips’ ‘ cash cow’ ; it operated in a mature,
low-growth oligopoly market in which finding new approaches to realise bottom-line
growth was the main challenge. End-user driven innovation was a new approach to
innovation, perhaps truly a ‘ radical’ one given the division’ s history. How was this new
approach piloted?Exploratory StagesFollowing Albert Einstein’ s notion that ‘ insanity is
doing the same things over and over again and expecting different results’ , senior
management realised that something had to change. Consequently, in early 2001 the Chief
Technology Officer of the Lamps business initiated a set of complementary activities of an
exploratory nature in order to catalyse learning opportunities and help shape a platform for
a future vision. These activities were:? A vision team in the Central Lighting Development
Lab. This involved four employees with an equal male and female representation, two of the
people were new to the development lab, the other two were well established and anchored
informal leaders. The team’ s role was to bring outside inspiration into the development
organisation via lectures, workshops, visits and books. These activities resulted in the start
of two ‘ out of the box’ innovation projects in 2002, one of which led to the invention of
Ambilight TV.? An exploratory automotive project for car headlights. This involved piloting
a combination of the Dialog Decision Process (IDP)1 and a Philips Design innovation
process based on socio-cultural insights.? A Philips Lighting ‘ New Business Creation’
(NBC) group. This involved a team of four senior managers and one lateral thinker, whose
3. role was to challenge mainstream business assumptions by asking simple questions.
Established as a new organisational unit in a six month period, the NBC group was set up to
provide the environment for ‘ out of the box’ business development. Once the unit was
created, the main open question was how to fill the NBC idea pipeline?Think the Lighting
Future ProjectBuilding on the experiences of these three exploratory projects and using
other Philips knowledge on radical innovation, the ‘ Think the Lighting Future’ project
(TTLF) was defined at the end of 2001. It was established in response to the CEO’ s
ambition to identify a 10% top-line growth opportunity (approximately EUR 500 million)
which could be achieved in a five to seven year time-frame. Senior management was
instrumental in initiating the TTLF project. The project had three tangible deliverables for
the end of 2002:? Clarify alternative scope definitions for Philips Lighting that could deliver
10% top-line growth in the longer term.? Define two to three New Business Creation
projects.? Define a process for knowledge sharing and updating the NBC long-list.In aIDition
there were several ‘ intangible’ aspirations for the project – for example, it was envisaged
that it would:? Provide a ‘ growing in opportunity’ for the senior management team, thus
creating commitment for aIDitional scope.? Prepare for implementation (avoid ‘ not
invented here syndrome’ ) for critical mass of colleagues.? Radiate, let involved colleagues
experience that the whole exercise is about doing different things…and doing them
differently…? Create the confidence to deal with a stretching vision.‘ Think the Lighting
Future’ was a ‘ presidential project’ with core team participation from each Lighting
business group, Philips Design and Philips Research: which was – next to its scope of 10
years ahead – an innovation in itself. In aIDition, special attention was put on forming a
diverse team to enable different views to be captured. Importantly this project provided
opportunities for learning and improvement of the corporate innovation process – for
example, the original three-step design process (information sharing, ideation, idea
development and concept definition) was expanded by a fourth step (translation to
action).Emphasis was also placed on creating broad ownership from the beginning both in
management via the IDP approach and in the executing functions via multifunctional
workshops. Subsequently the dialogue decision process was further expanded to a
‘ trialog’ process involving the decision team, the core team (i.e. the decision preparation
team) and the implementation team.Vital to orchestrating communication was the set-up of
Think the Lighting Future as an extended Dialogue (trialog) Decision Process around three
key innovation dimensions:? People – understanding and serving both end-users’ explicit
current as well as their implicit emerging needs.? Technology – understanding and using
current and emerging technology options to enable user relevant functionality.? Business –
understanding current and emerging market characteristics and dynamics; applying
appropriate and future-proof business models.Thirty-two colleagues were invited to two
workshops. They came from different innovation backgrounds (marketing, business
development, R&D) and from different Lighting businesses, Design and Research teams.
Maximal possible global presence was established. Since TTLF was a highly visible
presidential project, workshop participation was seen as an honour. The workshops served
several tangible and intangible purposes, including:? Enriching the core-team work by
existing corporate knowledge.? Generation of business ideas seeds.? Preparing for later
4. implementation.? Building a ‘ performing’ team around a shared vision.All workshop flows
and all tools used during the workshops were especially designed such that the holistic
outcomes became highly probable by equally and simultaneously focusing on the different
dimensions: people and their needs, technology enabling new solution spaces and business
including generic competition and existing next to emerging business models facilitating
value creation.By the end of 2002, TTLF was concluded and was regarded as a successful
exploration and visioning project. It led to the selection of a ‘ theme’ for new business:
Atmosphere Provider, which was about ‘ empowering people to become their own light
designers’ . It also led to three new business creation projects and delivered a list of ideas
for New Business Creation. However, no aIDitional turnover had yet been generated. The
real work was about to start…Atmosphere Provider ProgrammeIn July 2003 senior
management launched the ‘ Atmosphere Provider’ programme. The programme lasted
two and half years and was given some explicit and several implicit deliverables:? Bring
‘ Atmosphere Provider’ as a theme to life.? Create a ‘ need-scape’ for the new innovation
area.? Envisage the boundaries/solution space of the innovation and growth opportunities.?
Initiate the creation of a related patent portfolio.? Prove the business potential by piloting
the three new business creation projects.? Exploration towards new business proposition
definition including initial product concepts.? Prototyping and market testing.? Business
case development and transfer to mainstream business.And implicitly – ? Prepare for
transfer and scaling up.? Initiate the building of an Atmosphere Provider network (with
shared vision, creativity, cross-functional and discipline perspectives, embracing the
required new way of working, etc.).? Pioneer the end-user driven innovation approach.The
programme’ s architecture was designed to ensure cross-fertilisation between the
development of the broader business theme and the three new business creation projects;
emerging insights from creating the new business were captured via foundation documents;
general observations derived from the theme development were fed back into NBC
projects.The core of the programme comprised a team of four people: the overall
programme manager who had led the TTLF project and three project managers, of whom
one had been a TTLF core team member whilst the other two were new to Philips Lighting.
Over time, a small support team became involved: a lighting designer, an experienced
market researcher, a marketing specialist and several colleagues from Philips Design. The
team was small and flexible; aIDitional skills and capacity were brought in on an as-needed
basis, which in turn required good communication skills from the project managers and the
commitment from senior management to ensure the needed resources were made available
to the team when required.Initiation:? 10 July 2003 in the Philips Lighting Senior
Management meeting.Deliverables:? Bring the Atmosphere Provider theme to life.? Show
proof points via business potential in the three selected projects.? Investment: EUR 2.85
million from August 2003 to December 2005.Context of assignment:? Cross-functional with
impact on Philips Lighting level beyond a single Business Group, positioned under Global
Marketing, unclear ownership on executive level, no standard processes or tools => learn as
you go.Characteristics of assignment:? Innovation for aIDitional profitable growth (out of
the box), market-led, pioneering, emphasis on results in the form of content, high risk and
high reward, phase 1 of change management.Core team:? Dorothea Seebode, Gerard Harkin,
5. Benedicte van Houtert, Paul Brulez, followed up by Stefan Verbrugh (from April
2004).Extended team:? Markus Reisinger, Liesbeth Ploeg (from Dec.04), Ronald Dalderup
(from Jan.05).Mindset:? Focus on results, commitment, dialogue.By the end of 2005:? In
total over 1800 people had been involved globally, across and beyond Philips Lighting.?
Three foundation documents were published with over 1000 copies distributed.? Patents: >
50 IDs submitted, > 25 patents filed, > 10 patents in pipeline.Case Questions1.Identify the
key stages in the development process, starting at the initial brief to the final selection of the
three business cases.2.What role did senior management and leadership play in the
development of the new concepts?3.How did cross-functional teams contribute to the
translation of concepts into business cases?Source: Extract from Dorothea Seebode, Gerard
Harkin and John Bessant (2009) Radical Innovation at Philips Lighting.
