INNOVATION_MANAGEMENT in New Business Studies

INNOVATION
MANAGEMENT
Jiří Vacek
vacekj@kip.zcu.cz
Department of Management, Innovations
and Projects
UWB, Faculty of Economics
Summer semester 2009/10

Lesson 1
Introduction
Basic concepts
Importance of innovations

CHARACTERISTICS OF SUCCESSFUL
INNOVATING COMPANIES - 1
• Systematic collection of all impulses that
could lead to innovation
• Creativity of employees
• Ability to evaluate the possibility of the
innovation idea
• Good team work
• Project-based approach and ability to
manage projects

CHARACTERISTICS OF SUCCESSFUL
INNOVATING COMPANIES - 2
• Cooperation with external experts
(universities, research laboratories…)
• Proper rate of risk-taking
• Employees’ motivation (the employees are
willing to improve the product and the
operation of the whole company)
• Continued education of employees
• Ability to finance the innovation activities

Definition of innovation - 1
• “Technological innovations are defined as new
products and processes and major technological
modifications to products and processes. An
innovation is considered performed if it is
introduced to the market (product innovation)
or implemented in the production process
(process innovation). Innovation includes
many research, technological, organizational,
financial and commercial activities.

Definition of innovation - 2
• R&D represents only one of these activities and
can take place during various stages of the
innovation process. It can play not only the role
of the original source of the innovation ideas but
also the role of problem solution framework,
which can be turned to at any stage of the
implementation.„
OECD, Frascati Manual 1992

Oslo Manual
• Product innovation
– A good or service that is new or significantly improved. This
includes significant improvements in technical specifications,
components and materials, software in the product, user
friendliness or other functional characteristics.
• Process innovation
– A new or significantly improved production or delivery method. This
includes significant changes in techniques, equipment and/or
software.
• Marketing innovation
– A new marketing method involving significant changes in product
design or packaging, product placement, product promotion or
pricing.
• Organisational innovation
– A new organisational method in business practices, workplace
organisation or external relations.

• Technological innovations – based on
specific technology, invention, discovery,
• Social innovations – in critical historic
periods more important than technological
ones (mail, educational systém, social
systém, health care, …)

DEGREE OF NOVELTY
• Incremental innovations
• Radical innovations
• Systemic innovations

Classification of innovations
SYSTEM New series of
cars, planes,
computers, TV
New generation
(MP3 and
download as
substitution of
CD)
Steam engine,
ICT,
biotechnology,
nanotechnology
COMPONENT
Improvement of
components
New
components for
existing systems
Advanced
materials
improving
component
properties
INCREMENTAL
„do better what
we already do“
„new for the
company“
RADICAL
„new for the
world“

INNOVATION PROCESS
• Research and development (R&D)
• Production
• Marketing
Innovation is an opportunity for something
new, different. It is always based on
change.
Innovators do not view any change as a
threat but as an opportunity

FOCUS
• Use the limited resources in the most
effective manner; focus on one of the
following:
– Operational output
– Top-quality products
– Perfect knowledge of customers

RECOMMENDATIONS
• Solve the correct problem correctly – be
effective and efficient
• Manage innovation as a project
• Analyze risks
• Use models, scenarios, computer
simulation
• Study examples of succesful and
unsuccesful innovation projects

WHAT TO DO
1. Start with analysis and study of opportunities.
2. Go among people, ask questions, listen
3. Effective innovations are surprisingly simple.
They must be focused on specific needs and
on specific final products.
4. Effective innovation start on a small scale.
5. A successful innovation always tries to win a
leading position, otherwise you create
opportunities for your competitors.

WHAT TO AVOID
1. Don’t try to be too “clever”. All that is too
sophisticated will almost certainly go
wrong.
2. Don’t try to do too many things at once.
Focus on the core of the problem.
3. Don’t try to make innovations for the
future but for today. An innovation can
have a long-term impact but there must
be an immediate need for it.

Three conditions for innovations
1. Innovation means work, hard, concentrated
and thorough work. If these qualities are
lacking then there is no use for the big talent,
cleverness or knowledge.
2. Successful innovations must build on your
strong points. The innovation must be
important to the innovator.
3. Innovation must focus on a market, must be
controlled by the market (market-pull).

Linet Želevčice
• Hospital products
• Hospital beds, intensive care beds, medical
furniture and other equipment increase the
comfort of patients and help the nurses.
• Nursing-care products
• Nursing beds, bed accessories, bedside
cabinets, mattresses and other furniture.

TOSHULIN
Development of new machines:
1. Customized – the machines developed
for the specific customer according to
its requirements – market pull
2. Prototypes – there is no specific
customer – market push

8 ,5
6 ,8
8 ,8
6 ,9
1 2
1 0 ,7 1 0 ,8
9 ,6 9 ,5
1 4 ,9
9 ,6
2 5 ,7
9 ,4
2 8 ,8
8 ,3
2 2 ,7
9 ,5
3 0 ,2 2
0
5
10
15
20
25
30
35
1998 2000 2002 2004 2006
time of delivery (in
months)
customization coefficient
(%)

Types of design engineers
spouter of
ideas
suggests designs
and problem
solutions without
detailed
consideration of all
possible results and
consequences
system designer
examines all ideas
and thoughts
systematically
finisher of
ideas
elaborates
independently in
details the ideas
which he gets to
elaborate
routine
engineer
efficient and
reliable engineer;
however, without
creative approach
attendance
engineer
performs routine
tasks
[1%] [5%] [54%] [30%] [10%]

Connective
tissue
products
RNDr. Vladimír Velebný, CSc.
Contipro

167 employees
sales (2008) – 242 mil Kč
export – 98% of total sales
one of the biggest produces of
hyaluronanu inthe world
30% of the world market
60% of the European
market
Customers in 43 countries
Holding – current state

1. Maximum attainable quality
2. Sharing expenses with customers
3. Development of original products
3 pillars of success

3M and post-it notes
http://www.3m.com/us/office/postit/pastpresent/history_ws.html

More about 3M
A Century of Innovation The 3M Story
http://solutions.3m.com/wps/portal/3M/en_US/Ab
out/3M/

iGO – distribution of bateries
• Bateries and accessories for notebooks,
mobiles, cameras and other equipment
• Vision: to develop and sell simple and elegant
solutions, facilitate the use of electronic
devices
• online catalogue, e-commerce, CRM
• Customer - targeted marketing, flexibility
• Growth of sales by 80% in the first year, by
100% in the following year
http://corporate.igo.com/about_us.aspx

Adaptors
• Patented technology iGo Technology,
powering of mobile electronic devices using
single (universal) adaptor;
• Power Technology Patent Brochure (PDF)

Bang & Olufsen
• www.bang-olufsen.com
• VISION: „Courage to constantly question the ordinary in
search of surprising, long-lasting experiences.“
• Founded in 1925 in Struer, Denmark, Bang & Olufsen a/s is
world renowned for its distinctive range of quality audio, video
and multimedia products that represent our vision: Courage to
constantly question the ordinary in search of surprising, long-
lasting experiences. Bang & Olufsen employs over 2.550 staff
members and had a turnover of DKK 4.092 million (EUR 548,6
million) in the 2007/2008 financial year.
• Bang & Olufsen manufactures a highly distinctive and exclusive
range of televisions, music systems, loudspeakers, telephones,
and multimedia products that combine technological excellence
with emotional appeal. Bang & Olufsen products are sold by
over 1.200 dealers in more than 100 countries in an extensive
network of retail stores. Approximately 65% of these stores are
B1-stores, which exclusively sell Bang & Olufsen products. The
B1 stores account for 81% of the total turnover.
• Production also in the Czech Republic

More case studies
• IBM Case Studies:
http://www.ibm.com/search/?en=utf&v=14&lang=en&cc=u
s&lv=c&q=case+study+innovation&x=13&y=5
• Industry podcasts: Midsized clients and
experts in seven industries share their insights -
http://www-
1.ibm.com/businesscenter/smb/us/en/mbpodcasts?&ca=s
mbIndustryPodcasts101706&tactic=&me=W&met=inli&re
=smbibmcomTopPagesIndustriesPromo1usen101706

More case studies
• Sustainable energy (hydrogen, fuel cells,
biofuels, zero emission, …
http://ec.europa.eu/research/energy/nn/nn_pu/ar
ticle_1078_en.htm
• http://www.zoner.com/
• http://www.kerio.com/

The most important innovations
in last 30 years
• http://www.pbs.org/nbr/site/features/specia
l/subdir/top-30-innovations_slide-show/

Lesson 2
Disruptive and open
innovations

Innovation categories
• sustaining – better products that can be
sold with higher margin to demanding
customers; incumbents win
• disruptive – commercialization of simpler,
more user-friendly products, which are
chepaer and targeted to new or less
demanding customers; new entrants win

Key elements of disruption
• Customers at each market has limited
absorption capacity
• Technological progress usually is faster
that the ability of the market to employ it.
Companies focus on better products to
be sold with higher margin to unsatisfied
customers.

Sustaining vs. disruptive
• Sustaining: focused on demanding customers;
both incremental and radical. Incumbents have
resources and motivation.
• Disruptive: introduce products and services not
as advanced as existing ones, but offering other
advantages (simpler, cheaper, more user
friendly, ...) and focus on new or less demanding
customers.

Clayton M. Christensen: The Innovator´s Solution, Harvard Business Press, 2003

• Due to technological progress the
trajectory of the disruptive innovation after
some time crosses the trajectory of
demands of more demanding customers
and starts to replace incumbents who are
not principally ready to react adequatelly,
as they are motivated to suceed at „better“
markets, not to defend themselves on
„inferior“ ones.

Clayton
M.
Christensen:
The
Innovator´s
Solution,
Harvard
Business
Press,
2003

Conditions of success - 1
• Disruption is successful, as it is easier to
defeat competition that tries to escape
than the competition who fights
• Innovation must be disruptive for all
companies in the industry
• Ex. Internet – for Dell sustaining, they
sold computers formerly by mail, phone,
etc.

Conditions of success - 2
• Following the trajectory upwards to market tiers
where it is possible to attain higher margins is
what good manager is expected to do.
• Each company therefore prepares its own
disruption. This is the innovator´s dilemma, but
also the start of innovator´s solution.
• The advice to new, growing firms: focus on
products and markets ignored or neglected ba
incumbents.

Two types of disruption
• New markets: compete with non-
consumption: simpler, more user frindly,
can be used by less sophisticated
customers (PC, transistor radio, desk
copiers).
• Low-end: focus on lower tiers of main
markets (minimills, discount stores,
Korean auto-makers); motivate
incumbents to leave the market

OPEN INNOVATION
• Chesbrough, H., “Open Innovation”, Harvard
Business School Publishing, Boston MA, 2003
• Closed innovation - requires control
• Open innovation
– companies use external as well as internal ideas and
both external and internal ways to market
– internal ideas can be taken to the market through
external channels to generate additional value

Chesbrough
H.W.:
The
Era
of
Open
Innovation,
MIT
Sloan
Management
Review,
Spring
203,
p.
35
-
41

Closed innovation Open innovation
All the best people are working for us Not all the best people are working for us .
We must work with clever people within
and outside our company.
R&D creates profit only when we invent,
develop and market everything ourselves.
External R&D can create remarkable value;
to employ it, we need absorption capacity,
often as internal R&D.
If we develop the product ourselves, we will
be the first on the market.
R&D can create profit even if we do not
initialize and perform it ourselves.
Winner is who gets the innovation to the
market first.
To develop better business model is more
important than to be the first in the market.
We will win if we develop most of the ideas
(an the best of them).
We will win if we make best use of internal
and external ideas.
We must have our intellectual property
under control so that our competitors can
make advantage of it.
We must be able to profit from others using
our intellectual property and we must
license the intellectual property if it
supports our business model.

Closed innovation Open innovation
Examples: nuclear industry,
mainframe computers
Examples : PC, movies
Mostly internal ideas Many external ideas
Low workforce mobility High workforce mobility
Low role of the venture capital Active venture capital
Few new businesses, weak ones Many new businesses
Universities are not important as the
sources of ideas
Universities are not important as the
sources of ideas and people

Business model
• Formulate value proposition, i.e. the value delivered
to the customer by the product based on specific
technology.
• Identify market segment, ie. users to whom the
technology brings value and performs the job to be
done.
• Define structure of the value chain, required for the
product creation and distribution. Value creation is
necessary, however not sufficient condition of
profitability; value creation is conditioned by:
– balance of forces among our business, suppliers and
competitors
– presence of complementary assets (e.g. in production,
distribution, etc.) necessary for supporting the company
position in the value chain.

Business model– cont´d
• Specify the mechanism of profit creation and
evaluate product cost structure and target
margin
• Describe the company position in the value
network that connects suppliers and
customers, including identification of potential
alternative producers and competitors.
• Formulate competitive strategy enabling to
the innovative company to gain and keep
competitive advantage.

Product architecture
Hierarchy of connections between
disparate functions within a
system

Interdependent Architecture
System
Component
A
Component
B
Component
C

Interdependent Architecture
• changing one component requires
changes in all other parts of the system,
because the relationships between the
parts are not clearly understood
• can be best managed through internal
processes

Modular Architecture
System
Component
A
Component
B
Component
C

Modular Architecture
• components could change without causing any
change in other components
• modular design enables to assemble system
more easily, from “plug and play” components
whose interfaces are well understood
• modular architecture makes it easy for many
companies to innovate components without
worrying about possible impact on other parts of
the system

IMPLICATIONS FOR NPD
• extended circle of company stakeholders -
customers, NGOs, local and regional
governments
• not only superior quality, but also
environmentally friendly, aesthetically appealing
new products
• designed for X, where X can be quite large and
multi-faceted set
• after-sale service plays an increasing role –
and brings increased turnover and profit

Lesson 3
Assessment of company
innovation potential

COMPANY INNOVATION POTENTIAL
A company with high innovation potential
scores high in the following areas:
• Strategy and planning
• Marketing
• Technological process
• Quality management
• Logistics
• Human resources

INNOVATION POTENTIAL ASSESSMENT
• For a company, it is important to know its
innovation potential. It can use the
questionnaire
• For every of the six areas, there are six
question, each with four possible answers.
The answers are formulated so that they
reflect the existing situation in the
company.

A. STRATEGY AND PLANNING
1. Idea about the company future
2. Vision and employees
3. Company innovation programs
4. Plan modifications
5. Financial indicators of the plan
6. Project management

B. MARKETING
1. Monitoring of current market trends
2. Evaluation of the market competition
position
3. Customer-orientation
4. Monitoring of customers’ attitudes to
the company product
5. Market information flow inside the
company
6. Marketing and financial control

C. TECHNOLOGICAL PROCESS
1. Future company’s competitiveness in the
industry
2. Changes of technologies
3. Collection of impulses for implementation
of technology changes
4. Evaluation of the return on investment
5. Calculation of production costs and their
monitoring
6. Creation of resources for development

D. QUALITY, ENVIRONMENT
1. Monitoring of changes conditioning the quality
management in the company
2. Employees’ personal contribution to the quality
system
3. External quality audit in the company
4. Monitoring of the environmental impact
5. Impact of quality monitoring on the company
processes
6. Covering of costs resulting from modifications of
standards, regulations and legislation in the
sphere of quality and environment

E. LOGISTICS
1. Organization of purchase and distribution
channels in the company
2. Optimization of the company logistics
3. Information and communication flows between
the company and its partners
4. Flexibility of logistics processes
5. Introduction of innovations in logistics
6. Logistics and financial control

F. ORGANIZATION AND HUMAN RESOURCES
1. Employees satisfaction
2. Employees motivation
3. Management and communication
4. Conflict resolution
5. Company information system
6. Company culture

Innovation potential assessment
1,0
1,5
2,0
2,5
3,0
3,5
4,0
Strategy
M
arketing
Technology
Q
uality
Logistics
People
A
B
C
D
E
F

Innovation potential assessment
1,0
2,0
3,0
4,0
Strategy
Marketing
Technology
Quality
Logistics
People
A
B
C
D
E
F

Lesson 4
STRUCTURING THE NEW PRODUCT
DEVELOPMENT PROCESSES
EVALUATION OF THE NEW PRODUCT
DEVELOPMENT AND R&D PROJECTS
HOW TO SELECT THE PORTFOLIO
OF NEW PRODUCT DEVELOPMENT PROJECTS

STRUCTURING THE NEW PRODUCT
DEVELOPMENT PROCESSES

The objectives of process models

Stage-gate process
• R. Cooper, 1960´s
• phases with inputs and outputs specified
beforehand
• gates, in which the gatekeepers decide
about the continuation of the process
• Activities were standardized and the
indicators of the process performance
significantly improved.

Evaluation criteria
• Operational, realistic, differentiating
• Must meet: to kill not well proceeding
projects as soon as possible
• Should meet: prioritization, support of
portfolio management
• Strategic buckets: resources allocated to
various strategic goals

Fuzzy Front End (FFE, FEI)
• quality of pre-development phases significantly
influence the product success
• early phases to a large extent influence, which
projects will be realized, why, what will be final
costs, time, and – in the end – the final success
in the market
• highly dynamic, not strictly documented,
creativity competes with systemization.

Phase 0
• results in product concept, including
preliminary identification of customer
requirements, market segments,
competitive position, business opportunity
and compliance with strategy

Incremental vs. radical innovations
• Koen: systematic approaches using process models can
be successful in the case of incremental innovations,
where both business and technical uncertainty is rather
low
• whenever at least one of those uncertainties is high, we
need more flexible approaches with iterations and
parallelization of activities
• successful radical innovations often use rapid or virtual
prototyping even in the 0-th or 1-st phase, as it allows
better visualization and communication of the product
concept.

New concept development model
• in the early phases it is not suitable to use the
same approaches as in the later, more
structured process phases

Difference Between FFE and NPD
Fuzzy Front End (FFE) New Product Development (NPD)
Nature of Work
Experimental, often chaotic.
“Eureka” moments. Can schedule
work—but not invention.
Disciplined and goal-oriented with a project
plan.
Commercialization
Date
Unpredictable or uncertain. High degree of certainty.
Funding Variable Budgeted.
Revenue
Expectations
Often uncertain, with a great deal of
speculation.
Predictable, with increasing certainty,
analysis, and documentation as the
product release date gets closer.
Activity minimize risk and optimize potential
Multifunction product and/or process
development team
Measures of
Progress
Strengthened concepts. Milestone achievement.

New concept development model (NCD)
Technology
push
Market
pull

NCD components
• Engine: represents management support
• Engine powers the five elements of the
NCD model
• The engine and the five elements are
placed on top of the influencing factors.

Technology stage-gate process (TSG)
• Management of high-risk projects within and at
the transition between the fuzzy front end and
new product development
• traditional SG: gates are transparent, the
product development team can "see" all the
deliverables at the gates
• TSG: gates are opaque, the team can only "see"
to the next gate and understands that the
deliverable may change as the technology is
developed

Traditional and technology
stage-gate processes

EVALUATION OF THE NEW PRODUCT
DEVELOPMENT AND R&D PROJECTS

Stage-gate process
IDEA Gate 1
Idea screening
Stage 1
Preliminary evaluation
Gate 2
Detailed evaluation
Stage 2
Product definition
Gate 3
Decision to develop
Stage 3
Development
Gate 4
Decision to test
Stage 4
Testing
Gate 5
Decision to commercialize
Stage 5
Commercialization EVALUATION

Project feasibility
• The stage-gate model divides the innovation
process into five stages with gates, in which
evaluators decide if to continue or kill the project.
• Each phase has its cost, duration and probability
of success. Usually only the last stage generate
profits.
• To justify the project development cost, we
should prove at the very beginning its feasibility.
Traditionally we have to show that the project
net present value is greater than zero, i.e. that
the whole project, taking into account the time
value of the money, will generate net profit.

DCF methods
• The generally accepted method of evaluation of
investment, is based on discounted cash flows
(DCF).
• The method is successfully used for investment
projects with low level of uncertainty and
duration from several months up to few years.
• In many cases it is not suited to long-term NPD
and R&D projects, as it penalizes projects with
high risk and potentially valuable projects can be
rejected or terminated.

Weakness of DCF methods
• Do not take into account the typical nature of the
NPD and R&D projects that can be divided into
stages separated by gates, deciding about
project continuation or termination.
• Financial models assume that the decision
about the project realization is done at its very
beginning and is irreversible. However,
investments into NPD or R&D projects are
incremental and the evaluators at the gates
decides about the project fate on the basis of
changing situation.

Project Expected Commercial
Value (ECV)
• Takes into consideration all three important
characteristics of each phase – its cost, duration
and probability of success
• The project is modeled by the probability tree.
• The stage duration, together with the discount
rate, is reflected in the net present value
calculation.
• Illustration: project with only two stages –
development and commercialization

Development
D
ECV
YES
NO
Success
pd
Failure
Commercialization
C
YES
NO
Success
pC
Failure
PV
ECV = project expected commercial value
pd = probability of successful development
pc = probability of successful commercialization
D = development costs
C = commercialization costs
PV = net present value of expected project earnings
ECV = [(PV * pc – C) * pd] – D
according to [Cooper 2001]

Example
• The first stage (1 year): laboratory tests; success
probability 50%.
• The second stage (2 years): field tests; success
probability 75%.
• If tests are successful, the necessary investment into the
technology is $5M, expected earnings $8M  project net
present value $3M.
• Financial data are discounted, assuming the weighted
capital costs WACC = 12%, risk-free discount rate 5%.
• Development costs and specific project risk are high
resulting ECV negative (-$109 000)
• according to this criterion, project should be rejected.

Probability tree in project evaluation
Stage 1 – Year 1
Cost = $0,5 M
DCF = -$0,446M
Stage 2 – Year 2
Cost = $0,5 M
DCF = -$0,399M
Stage 2 – Year 3
Cost = $0,5 M
DCF = -$0,356M
Stage 3 – Year 4
NPV = $3,0 M
DCF = $1,907M
50%
50%
25%
75%
Stop
Stop
50% x (-0,446M) = -0,223M
12,5% x (-1,201M) = -0,150M
37,5% x
(1,907-(0,356+0,399+0,446)) =
= 37,5% x (1,907-1,201) =
= 37,5% x 0,706M = 0,265M
ECV = 0,265 - 0,150 - 0,223 = -0,109M
áccording to [Boer 2003]

Real options
• The concept of real options is closely related to financial
options that found their place in financial markets in
recent decades. Real options relate to company
opportunities and emphasize the basic idea that risk can
bring the competitive advantage and as such it should be
rewarded.
• The application of the real options theory is briefly
described in [Boer 2003], the related website contains
further information and references to more detailed
resources. Here we will give only a brief account of basic
concepts and terminology.

Two kinds of risks
• specific risk
• market risk

Specific risk
• Specific for the partial situation
• At lest partly under your control (e.g. risk of a fire or risk
of project failure)
• Can be diversified - we can use insurance to share fire
risk and maintain the diversified project portfolio to
protect against the risk of project failure
• Therefore the market does not pay any premium for
specific risks
• Specific risk can be often characterized by its probability.
• Better management of specific risk can help us to
achieve the competitive advantage.

Market risk
 Is not under your control
 Cannot be diversified. The pharmaceutical
company, as a part of health care sector, can do
little to diversify the market risk.
 Traditionally, market risk increases the capital
expenses and therefore decreases the project
value.
 However, the situation is different with options:
here the higher market risk, expressed as
volatility, increases the option value, which can
be quantified using the Black-Scholes algorithm,
well known from financial options.

Volatility
• Quantifies the rate of change of market value of the
underlying asset, i.e. the asset to its ownership we are
entitled by buying the option (technology, database of
customers …).
• Is usually specific for the industry and can be estimated
on the basis of information available from e.g. stock
market, industry statistics, etc.
• The higher the volatility, the more advantageous is to
hold the respective option.
• The higher volatility means the higher potential of both
the increase and decrease of the related asset price. As
the option holder we can fully exploit the increase, while
in the case of decrease we do not realize the option and
the maximum loss is limited by the option cost.

Application
• Boer [Boer 2003] applies the real option model (OPT)
with volatility equal to 50% to the example from Fig. 3
• He shows that using this method the project value is
$0,171M, i.e. it is positive and the project is feasible.
• The difference in project value assessed by ECV and
OPT models is $0,279M, what is enough to justify the
project. The difference is caused by market volatility.
• Boer also proves that in case of the zero market risk, i.e.
the zero volatility, both methods give the same result.
• The method of real options brings the most significant
effect to projects with high level of risk having
slightly negative net present value determined by
ECV or other models based on the discounted cash flow.

Conclusion
• Illustration of the often neglected side of the new
product development and R&D projects.
• The researchers, engineers, designers must
work together with investors to determine before
the project launch and in the gates how
efficiently the capital invested into the effort is
used.
• It is not an easy task; however, we hope that we
succeeded to persuade the auditorium that this
important task cannot be avoided.

References
• [Boer 2003] BOER F.P. Risk-adjusted Valuation of
R&D Projects, online, http://www.tigerscientific.com
• [Cooper 2001] COOPER R.G., EDGET S.J.,
KLEINSCHMIDT E.J. Portfolio Management for New
Products, Basic Books, 2001, ISBN 0-7382-0514-1
• [Cooper 2005] COOPER R.G. Product Leadership,
Basic Books, 2005, ISBN 0-465-01433-X
• [Vacek 2006] Vacek J. “Structuring the new product
development processes”, in AEDS 2006 Proceedings,
pp. xx, University of West Bohemia, Pilsen, 2006, ISBN

HOW TO SELECT THE PORTFOLIO
OF NEW PRODUCT DEVELOPMENT
PROJECTS

31.10.-1.11.2008 AEDS 2008 - Jiří Vacek, KIP FEK UWB 111
Outline
• Portfolio management, consequences
of its lack
• Portfolio management goals
– Goal 1: Maximizing the portfolio value
– Goal 2: Balance
– Goal 3: Strategic alignment

Portfolio management
• Resources are always limited, it is neither possible nor effective to
invest in every idea without due consideration.
• It is important to select from many possibilities those with the highest
potential; today’s innovation projects decide about the future profile
of the company, its customers and market share.
• Goal: to create such portfolio of products that is rooted in the
company strategy and optimizes the company performance.
• Portfolio management: dynamic decision-making process of
evaluation, selection and prioritization of new projects; active project
can be fostered, put on hold or even killed; their priorities and
allocation of resources can change.
• The process is characterised by uncertainty, changing information,
dynamics of opportunities and threats, links between projects. The
whole process must be based on the long-term company strategy
and must support it

A reluctance to kill projects.
Many projects added to the
list
A total lack of focus
Too many projects –
resources thinly spread.
Projects in the queue.
Quality of execution suffers.
Increased time to
market
Higher failure rates
Weak decision points (broad
gates)
Poor Go/Kill decisions
Too many low value projects
Good projects are starved
Too few stellar product
winners
Many ho hum launches
No rigorous selection criteria
Project selected on emotion,
politics
Wrong projects are selected Many failures
No strategic criteria for
project selection
Projects lack strategic
direction
Projects not strategically
aligned
Scatter gun effort
Does not support
strategy
No portfolio management
means …
Immediate
result
End result: poor new
product performance

Portfolio management goals
1. Maximization of value
• long-term profitability, return on investment, probability of
success, …
2. Balance
• Long-term projects vs. short, fast ones;
• High risk projects with high potential vs. lower-risk sure bets (e.g.
radical vs. incremental innovation);
• Focus on different market segments (don’t pull all eggs into one
basket);
• Different technologies;
• Different project types: new products, improvements, cost
reductions, frontier research.
3. Strategic alignment
• portfolio is strategically aligned and reflects the business’s
strategy.

Goal 1
Maximizing the portfolio value
• Net present value, bang for buck
• Expected commercial value
• Multi-criteria project valuation
• Scoring models

Project NPV
Remaining
resource
requirements
Bang-for-
buck
index
Immediate
resource
requirements
A 52,0 9,5 5,5 3,2
B 30,0 3,1 9,7 0,3
C 8,6 2,1 4,1 1,4
D 42,0 3,8 11,1 2,5
E 48,5 7,0 6,9 1,3
F 43,8 5,0 8,8 1,5
G 37,5 8,3 4,5 3,8
H 3,0 1,0 3,0 0,7
I 9,5 2,5 3,8 0,5
J 6,2 0,8 7,8 0,8
K 4,5 1,4 3,2 1,2
L 55,0 5,0 11,0 5,0
Projects net present values and resource
requirements

Rank-ordered list of projects
Project NPV
Remaining
resource
requireme
nts
Bang-for-
buck
index
Immediate
resource
requirements
Cumulative
immediate
resource
requirements
D 42,0 3,8 11,1 2,5 2,5
L 55,0 5,0 11,0 5,0 7,5
B 30,0 3,1 9,7 0,3 7,8
F 43,8 5,0 8,8 1,5 9,3
J 6,2 0,8 7,8 0,8 10,1
E 48,5 7,0 6,9 1,3 11,4
A 52,0 9,5 5,5 3,2 14,6
G 37,5 8,3 4,5 3,8 18,4
C 8,6 2,1 4,1 1,4 19,8
I 9,5 2,5 3,8 0,5 20,3
K 4,5 1,4 3,2 1,2 21,5
H 3,0 1,0 3,0 0,7 22,2

Project expected value (ECV)
Project PV
Probability of
technical
success
Probability of
commercial
success
Development
cost*
Commercializat
ion cost* ECV
A 30,00 0,80 0,50 3,00 5,00 5,00
B 63,75 0,50 0,80 5,00 2,00 19,50
C 9,62 0,75 0,75 2,00 1,00 2,10
D 3,00 1,00 1,00 1,00 0,50 1,50
E 50,00 0,60 0,75 5,00 3,00 15,70
F 66,25 0,50 0,80 10,00 2,00 15,50

Rank-ordered list according to ECV/D,
resource constraint 15 mil
Project ECV ECV/D
Cumulative
development costs
Adjusted cumulative
development costs
B 19,50 3,90 5,00 5,00
E 15,70 3,14 10,00 10,00
A 5,00 1,67 13,00 13,00
F 15,50 1,55 (23,00)
D 1,50 1,50 24,00 14,00
C 2,10 1,05 26,00 16,00

Rank-ordered list according to ECV
Project ECV
Cumulative
development
costs
B 19,50 5,00
E 15,70 10,00
F 15,50 20,00
A 5,00 23,00
C 2,10 25,00
D 1,50 26,00

• ECV model prioritizes more highly the projects
with the following properties:
– closer to launch (increase of PV and consequently of
ECV),
– higher income streams after launch (increase of PV
and consequently of ECV),
– less resources to be spent (decrease of D),
– higher probabilities of success (increase of ECV),
– utilize less of the constraining resource (it’s easier for
them to be above the line).

Multi-criteria project valuation
input data
Project IRR NPV SI PTS
A 20% 10 5 80%
B 15% 2 2 70%
C 10% 5 3 90%
D 17% 12 2 65%
E 12% 20 4 90%
F 22% 6 1 85%

Project ranking
• Project ranking procedure is the following
– calculate adjusted values of IRR and NPV –
multiply them by PTS.
– rank projects according to adjusted values of
IRR and NPV and according to SI.
– calculate the average value of those three
rankings and use it for final ranking

Multi-criteria project valuation,
final project ranking
Project IRR * PTS
Ranking by
IPR*PTS NPV * PTS
Ranking by
NPV*PT
S SI
Ranking by
SI Avg. Final
A 16,0% 2 8 2 5 1 1,67 1
B 10,5% 5 1,4 6 2 4 5,00 6
C 9,0% 6 4,5 5 3 3 4,67 5
D 11,1% 3 7,8 3 2 4 3,33 3
E 10,8% 4 18 1 4 2 2,33 2
F 18,7% 1 5,1 4 1 6 3,67 4

Applicability of financial models
• Main weakness: unreliability of input data, especially in
the initial project stage they should be used only in
later stages.
• Small errors in probabilities of success rapidly propagate
and can result in significant differences.
• The complexity and sophistication of financial models
fairly exceeds the quality of input data
• It does not mean that we should not pay proper attention
to financial data in the initial project stages. However, we
should not make decisions solely on their basis; they
should be combined with non-financial models

Scoring models
• Give very good results.
• Important: selection of criteria that really separate the
winners from the losers. Such criteria must be based on
the analyses of your own company and other companies
in the same industry. You must develop the expert base
to be used in project valuation.
• One of the models described in [Cooper 2001] uses five
main factors:
– business strategy fit (2)
– strategic leverage (4)
– probability of technical success (4)
– probability of commercial success (6)
– reward to the company (project profitability) (3)

Goal 2: Balance
• In many cases, the project portfolio is not
balanced; often it contains too many small
projects and not enough of radical, visionary but
highly risky projects necessary to maintain the
company competitiveness.
• Suitable tools for creation of the balanced
portfolio are bubble diagrams; most frequently
used diagram is the risk – reward bubble
diagram, which is used by 44 % companies

Risk-Reward bubble diagram
Reward vs. risk
0
10
20
30
40
50
60
70
0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 60,00% 70,00%
PTS
reward
PEARLS
OYSTERS
BREAD &
BUTTER
WHITE
ELEPHANTS

Diagram quadrants
• Pearls: potential „star“ projects: high probability of
success, high expected reward. We would like many of
such projects.
• Oysters: highly speculative projects: low probability of
success, high expected reward. Here the breakthroughs
pave the way for solid payoffs.
• Bread and butter: simple projects, high probability of
success, low expected reward. Often too many of them
in the portfolio, consuming substantial ratio of resources.
• White elephants: low probability of success, low
expected reward; projects that are difficult to kill, often
from personal reasons.

Goal 3: Strategic alignment
• Strategy and allocation of resources are closely
linked: until we start allocating resources to
specific activities, strategy is only paperwork. In
portfolio creation we will follow the following
objectives:
– Projects are aligned with business strategy;
– All projects contribute to achievement of strategic
goals and objectives;
– Allocation of resources reflects specified strategic
goals and objectives.
– In portfolio management we use three basic
approaches: top-down, bottom-up and combined.

Top-down approach
• from the strategy formulation (using
principles, methods and procedures of
strategic management, see e.g. [Grant
2008]). Objectives for new products are
often stated in terms of ratio or growth of
turnover, profit, market share, etc. during
several (usually 3-5) years.

Technology roadmaps
• Technology strategic roadmaps, results of technology foresight and
other studies performed often on the macro-economic level.
• In the Czech Republic such studies are prepared e.g. by Technology
centre AV ČR (http://www.strast.cz/) and CESES – Centre for social
and economic strategies (http://www.ceses.cuni.cz/),
• at the EU level the Institute for Prospective Technology Studies
in Sevilla (http://ipts.jrc.ec.europa.eu/).
• Technology roadmaps are developed also within the framework of
technology platforms of the 7-th EU Framework Programme for
Research, Development and Demonstrations
(http://cordis.europa.eu/fp7, http://cordis.europa.eu/technology-
platforms).

Strategic buckets
• The company management, on the basis of strategy, decides what
resources will be allocated to basic categories of development
projects (e.g. X % to platforms, Y % to new products, Z % to
incremental innovations) and projects are then prioritized within
those buckets.
• Resources originally allocated to one category may not sufficient,
while there are still free resources in the other bucket. In such a
case the resources can be redistributed.
• However, after the final allocation of resources to strategic buckets it
should not be possible to reshuffle the resources between buckets.
Especially it should be avoided to take resources originally allocated
for strategic, long-term goals and use them for short-term, more
“urgent” projects, often backed from “political” reasons. Such
redistribution undermines long-term strategic goals and all the
strategic planning

Bottom-up
and combined approaches
• Bottom-up approach build strategic criteria into the model of project
selection, usually to the scoring model.
• This approach guarantees that all projects are strategy aligned,
however it cannot guarantee allocation of resources in compliance
with strategic priorities.
• This weakness can be overcome by the use of combined approach:
we first use the top-down approach to establish strategic buckets,
and then we evaluate all active projects and projects on hold and
prepare their ranked list. Finally we assign projects to corresponding
categories (buckets) and study the exhaustion of resources.
• Usually this first iteration is not completely satisfactory and it is
necessary to use more iterations to reach satisfactory results.

References
• [Cooper 2001] COOPER R.G., EDGET S.J., KLEINSCHMIDT E.J.
Portfolio Management for New Products, 2nd edition, Basic Books,
2001, ISBN 0-7382-0514-1
• [Grant 2008] GRANT R.M., Contemporary Strategy Analysis, 6th
edition, 2008, Blackwell Publishing, ISBN 978-1-4051-6309-5
• [Vacek 2007] Vacek, J. Evaluation of the new product development
and R&D projects. In AEDS 2007. Pilsen : University of West
Bohemia, 2007, p.83-87. ISBN 978-80-7043-600-4.
• [Vacek 2006] Vacek, J. Structuring the new product development
process. In AEDS 2006. Pilsen : University of West Bohemia, 2006,
p.111-118. ISBN 80-7043-490-2.
• [Vacek 2004] Vacek, J. New product development and current
trends in innovation management. In AEDS 2004 Workshop. Plzeň :
University of West Bohemia, 2004, p.35-36. ISBN 80-7043-331-0.

SOURCES OF INNOVATION IMPULSES
Internal environment
• Own R&D
• Technical divisions – design, technology
• Production divisions (production, provision of
services)
• Marketing and sales
• Logistics (purchase and supplies)
• Guarantee and post-guarantee service
• Owners

SOURCES OF INNOVATION IMPULSES
External environment
• Customers
• Suppliers
• Competitors
• Consultants, R&D
institutions
• Schools, universities
• Professional publications,
Internet
• Exhibitions, fairs,
specialized seminars and
conferences
• Advertising agencies
• Investors
• Media
• Authorized testing
laboratories, certification
agencies
• State institutions, public
sector
• Legislation
• Globalization

MARKET PULL - R&D PUSH
• Market pull
– looking for the best way of satisfying a newly
emerging customer demand
– improvement of the existing products, extension of
the existing offer or decrease of price
– impulses for continuous, incremental innovations or
for process innovations
• Research and development push
– looking for commercial use of new impulses resulting
from the R&D results
– generating of new markets for conceptually different
products

7 SOURCES OF INNOVATION IMPULSES
(Drucker)
INTERNAL
1. unexpected event
2. contradiction
3. change of work process
4. change in the structure of industry or market
EXTERNAL
5. Demographic changes
6. Changes in the world view
7. New knowledge

1. Unexpected event
• Unexpected success
• 1. What will the use of the offered opportunity mean to us?
• 2. Where will its introduction take us?
• 3. What do we need to do for its implementation?
• 4. How can we achieve that?
• Unexpected failure
• Unexpected external event

2. Contradiction
• Non-compliance with economic reality
• Contradiction between reality and
anticipations about it
• Contradiction between the anticipated and
real behavior of customers and their
values

3. Change of process
• realize the necessity of change, identify
the weak point of the chain
• be convinced that if something does not
work the way it should, then it is necessary
to attempt a change
• the solution must be convenient for those
who will implement it. It must place
moderate and feasible requirements

4. Change in the structure of
industry and market
• Rapid growth of the industry
• Identification of new market segments
• Convergence of technologies (e.g. use of
computers in telecommunications)
• Rapid change of the industry and resulting
need of a structural change

5. Demography
• easiest to describe and to predict
• influence what will be bought, who and in
which amounts will purchase

6. Change of attitudes
• change in the approach to health: health-
care, food, spending the leisure time
• “upper-middle class”: a chance to offer
non-standard services at non-standard
prices
• increasing migration, feminism,
regionalism etc
• Timing is essential - to be the first

7. New knowledge
• Based on convergence or synergy of various
kinds of knowledge, their success requires, high
rate of risk
– Thorough analysis of all factors. identify the “missing
elements” of the chain and possibilities of their
supplementing or substitution;
– Focus on winning the strategic position at the market.
the second chance usually does not come;
– Entrepreneurial management style. Quality is not
what is technically perfect but what adds the product
its value for the end user

IMPULSES FROM THE MARKET
ENVIRONMENT
• Customers
product presentation
– realistic
– simple, demonstrative and precise
– moderate
– representative sample of customers
• Suppliers
• Competitors

INNOVATION IMPULSES OF THE R&D
• identification research: to monitor the scientific,
technical and economic information and identify
innovation impulses applicable in the company
• basic research
• applied research: acquire knowledge and means
applicable for the meeting of specific, beforehand-
defined goals
• development: systemic use of knowledge and means
acquired in the applied research for the creation of a new
or improvement of the existing product or for the creation
or modification of processes

INTERNAL IMPULSES
• usually combined with external sources
• supported by
– creative techniques
– innovation tools
• REGISTER OF IMPULSES

Lesson 6
Innovation management tools
INNOMAT
http://www.inno-pro.com/aainn0.htm

Specific techniques useful at the different
change management process steps.
CHANGE MANAGEMENT STEP SPECIFIC TECHNIQUE
Making time time management techniques
Preparing a vision statement SWOT analysis
Identify what factors will hinder
change
force field analysis
Selling the change internal marketing techniques
Developing a plan strategic planning techniques
Learning
Monitoring effectiveness
INNOVATION MANAGEMENT TOOLS
http://www.wiley.co.uk/innovate/website/pages/atoz/atoz.htm

„X“ - examples
Design for Manufacturing
and Assembly (DFMA)
Design for Environment
(DFE)
Design for Dimensional
Control (DDC)
Design for Inspectability
Design for Storability
Design for Reliability
(DFR)
Design for
Electromagnetic
Compatibility
Design for Disassembly
(DFD)

House of Quality
Interrelationships
Technical Features
Relationship
between Customer
Desired Traits and
Technical Features
Importance of
Technical Features
Importance
of Traits to
Customer
Assessment
of
Competition
Voice of
the
Customer

House of Quality:
Steps for Generation
1. Identify Customer Attributes
2. Identify Supporting Technical Characteristics
3. Correlate Customer Attributes with Supporting Technical
Features
4. Assign Priorities to Customer Requirements and Technical
Features
5. Evaluate Competitors’ Stances and Products
6. Identify Technical Characteristics to Deploy in the Final
Product Design

FAILURE MODE AND EFFECT
ANALYSIS (FMEA)

INNOVATION MANAGEMENT TOOLS
http://www.wiley.co.uk/innovate/website/pages/atoz/atoz.htm

ISO 9000
ISO14000
refers to procedures for ensuring sustainable and
environmentally friendly operations
EIA – Environmental Impact Assessment

DESIGN FOR MANUFACTURING
AND ASSEMBLY (DFMA)

Lesson 7
CREATIVITY
BASICS & TECHNIQUES

Innovation and creativity
• creativity is manifested in the production of
a creative work (for example, a new work
of art or a scientific hypothesis) that is both
original and useful
• innovation begins with creative ideas,
– creativity by individuals and teams is a
starting point for innovation; the first is a
necessary but not sufficient condition for the
second

• creativity results:
– in producing or bringing about something
partly or wholly new;
– in investing an existing object with new
properties or characteristics;
– in imagining new possibilities that were not
conceived of before;
– and in seeing or performing something in a
manner different from what was thought
possible or normal previously.

• Many creative ideas are generated when
somebody discards preconceived
assumptions and decides on a new
approach or method that might seem to
others unthinkable
• Serendipity - effect by which one
accidentally discovers something
fortunate, especially while looking for
something else entirely

Quotations on serendipity
• "In the field of observation, chance favors only the prepared mind." Louis
Pasteur
• "Serendipity. Look for something, find something else, and realize that what
you've found is more suited to your needs than what you thought you were
looking for." Lawrence Block
• "The most exciting phrase to hear in science, the one that heralds new
discoveries, is not 'Eureka!', but 'That's funny …'" Isaac Asimov
• "In reality, serendipity accounts for one percent of the blessings we receive
in life, work and love. The other 99 percent is due to our efforts." Peter
McWilliams
• "Serendipity is looking in a haystack for a needle and discovering a farmer's
daughter." Julius Comroe Jr.
• "Serendipity is putting a quarter in the gumball machine and having three
pieces come rattling out instead of one—all red." Peter H. Reynolds
• "--- you don't reach Serendib by plotting a course for it. You have to set out
in good faith for elsewhere and lose your bearings ... serendipitously." John
Barth, The Last Voyage of Somebody the Sailor
• "Serendipity is the art of making an unsought finding." Pek van Andel (1994)
source: wikipedia

BASIC CONCEPTS
• Creative thinking represents a combination
of logic and intuitive approaches
• Being creative means dealing with the aspects
and possibilities of today and tomorrow
• That requires a person to be open to everything
new, do not stick to things that we are all used
to, do not adhere to yesterday so much
• Creativity does not mean dreaming, it means
productive managing of specific tasks.
• Only a creative approach to the problem solution
can be successful.

Creativity in organizations
• Amabile: to enhance creativity in business,
three components are needed:
– Expertise (technical, procedural & intellectual
knowledge),
– Creative thinking skills (how flexibly and imaginatively
people approach problems),
– and Motivation (especially intrinsic motivation).
• Nonaka: creativity and knowledge creation are
important to the success of organizations. In
particular, he emphasized the role that tacit
knowledge has to play in the creative process.

Creativity and economics
• Joseph Schumpeter: creative destruction - the way in
which old ways of doing things are endogenously
destroyed and replaced by the new.
• Paul Romer: the recombination of elements to produce
new technologies and products and, consequently,
economic growth. Creativity leads to capital, creative
products are protected by intellectual property laws.
• The creative class as important driver of modern
economies. Richard Florida in The Rise of the Creative
Class, 2002 popularized the notion that regions with "3
T's of economic development: Technology, Talent and
Tolerance" also have high concentrations of creative
professionals and tend to have a higher level of
economic development.
• Important aspect to understanding Entrepreneurship.

Stages of creative process
• Orientation: Need identification, intention to
create
• Preparation: Information collection, problem
formulation
• Incubation: seeking solution, evaluation of
variants, unconscious thinking
• Illumination (Eureka!): synthesis, creation of
ideas
• Realization: transformation of the idea into
reality
• Verification: evaluation, learning, improvement

Barriers to creativity - 1
• The value of getting things right time can induce a fear of
mistakes and experimentation.
• So can a blame culture where people become afraid of
making mistakes.
• Managers who are not as secure as they should be can
resist or block ideas that are not their own or which they
see as threatening.
• A culture that over emphasizes cost containment,
processes, consistency or efficiency.
• A reward system that too exclusively celebrates getting
things done fast with no mistakes.
• A general fear of risk taking, wanting to analyze
everything to death, to wait and see what others do in
the market before acting.

• A lack of explicit funding for experimentation.
• A strict requirement to demonstrate the value of an idea
before it has a chance to prove itself.
• A tendency to shoot down novel ideas as a way of
scoring points.
• An over allegiance to past successes, proven experience
and tried and tested methods.
• A suspicion of novelty, a fear of the unproven.
• A resistance to learning from mistakes or trial and error,
a tendency to blame external factors or other people for
failures rather than to learn from them.
• Short termism - a drive to meet short term financial goals
rather than to invest in the future.

• http://members.optusnet.com.au/~charles5
7/Creative/Basics/obstacles.htm

CREATIVITY STIMULATION
• Keep in touch with creative people
• Accommodate the effort to the targets
• Evaluate and appreciate the effort
• Protect creative employees
• Leave them peace and time
• Provide them with security
• Tolerate failures
• Maintain creative atmosphere
• Evaluate the creative ideas quickly
• Be persistent - nothing comes for free

Fostering creativity
• Establishing purpose and intention
• Building basic skills
• Encouraging acquisitions of domain-specific
knowledge
• Stimulating and rewarding curiosity and exploration
• Building motivation, especially internal motivation
• Encouraging confidence and a willingness to take risks
• Focusing on mastery and self-competition
• Promoting supportable beliefs about creativity
• Providing opportunities for choice and discovery
• Developing self-management (metacognitive skills)
• Teaching techniques and strategies for facilitating
creative performance
• Providing balance

METHODS OF CREATIVE ACTIVITY
• increasing the individual’s or team’s
creative potential
• contributing to the improvement of the
creative work conditions
• facilitating the problem solution

Creative Process
• Problem Definition - including problem analysis,
redefinition, and all aspects associated with defining the
problem clearly.
• Idea Generation - The divergent process of coming up
with ideas.
• Idea Selection - The convergent process of reducing all
the many ideas into realistic solutions
• Idea Implementation - Turning the refined ideas in
reality.
• Processes - Schemes and techniques which look at the
overall process from start to finish (or at least 3 of the
above 4 areas)..
• http://www.mycoted.com/Category:Creativity_Techniques

Brain hemispheres
Left brain functions Right brain functions
sequential simultaneous
analytical holistic
verbal imagistic
logical intuitive
linear algorithmic processing holistical algorithmic processing
mathematics: perception of
counting/measurement
mathematics: perception of
shapes/motions
present and past present and future
language: grammar/words, pattern
perception, literal
language: intonation/emphasis, prosody,
pragmatic, contextual

Convergent vs. divergent thinking
• Convergent thinking involves aiming for a
single, correct solution to a problem
• Divergent thinking involves creative
generation of multiple answers to a set
problem.

CREATIVITY TECHNIQUES
• trial and error
• brainstorming
• Inspirational questions
• psychological-cognitive, such as:
– Osborn-Parnes Creative problem solving (CPS)
– Synectics;
– Lateral thinking (courtesy of Edward de Bono),
• the highly-structured, such as:
– TRIZ (the Theory of Inventive Problem-Solving);
– ARIZ (the Algorithm of Inventive Problem-Solving), both
developed by the Russian scientist Genrich Altshuller; and
– Computer-Aided Morphological analysis.

Trial and error
• select a possible answer, apply it to the problem and, if
not successful, select (or generate) another possibility
that is subsequently tried. The process ends when a
possibility yields a solution.
• more successful with simple problems, often resorted to
when no apparent rule applies.
• the approach need not be careless, for an individual can
be methodical in manipulating the variables in an attempt
to sort through possibilities that may result in success.
Nevertheless, this method is often used by people who
have little knowledge in the problem area

Trial and error - features
• solution-oriented: trial and error makes no
attempt to discover why a solution works, merely
that it is a solution.
• problem-specific: trial and error makes no
attempt to generalise a solution to other
problems.
• non-optimal: trial and error is an attempt to find a
solution, not all solutions, and not the best
solution.
• needs little knowledge: trials and error can
proceed where there is little or no knowledge of
the subject.

Inspirational questions - 1
• What can I substitute to make an improvement?
• What if I swap this for that and see what happens?
• How can I substitute the place, time, materials or people?
• What materials, features, processes, people, products or
components can I combine?
• Where can I build synergy?
• What part of the product could I change? And in exchange for what?
• What if I were to change the characteristics of a component?
• What happens if I warp or exaggerate a feature or component?
• What will happen if I modify the process in some way?
• What other market could I use this product in?
• Who or what else might be able to use it?
• What if I did it the other way round?
• What if I reverse the order it is done or the way it is used?
• How would I achieve the opposite effect?

• Who else has solved this problem?
• What similar area of expertise might have solved this
problem?
• Is there anyone else in the company who knows how to
solve this?
• What else could we use to solve the problem?
• Where else might this problem have been solved?
• What other companies might know how to solve this?
• What similar problems have been solved, and how?
• What other industries face the same problem and what
do they do about it?

• How would they think?
• What objects and items would they be using?
• Where would they be doing it?
• How would they see the problem?
• What action would they take?
• How would they explain the problem?
• How would they solve the problem?
• What does your situation or your problem remind you of?
• What other areas of life/work experience similar
situations?
• Who does similar things but not in your area of
expertise?

• What would my perfect solution be?
• What effect would my ideal solution have?
• What if money/morals/laws did not matter
at all?
• What would I do if I had unlimited power
and resources?
• What would my ideal solution look like?
Source:Wikipedia

CPS (OFPISA)
• six stage process, each with a divergent and a
convergent phase.
1. Objective Finding (or Mess Finding): Sensitise yourself for
issues that need to be tackled.
2. Fact Finding: Gather information about the problem.
3. Problem Finding: convert a fuzzy statement of the problem into
a broad statement more suitable for idea finding.
4. Idea Finding: generate as many ideas as possible
5. Solution finding: Generate and select obvious evaluation criteria
and develop the short-listed ideas from Idea Finding as much as
possible in the light of these criteria. Then choose the best of
these improved ideas for further development
6. Acceptance finding: How can the suggestion you have just
selected be made up to standard and put into practice?

Synectics
• problem solving approach that stimulates thought
processes of which the subject is generally unaware.
• developed by William Gordon,
• central principle: "Trust things that are alien, and alienate
things that are trusted."
• Encourages
• fundamental problem-analysis and, on the other hand,
• the alienation of the original problem through the
creation of analogies
• It is thus possible for new and surprising solutions to
emerge.
• Synectics is more demanding of the subject than
brainstorming, as the many steps involved mean that the
process is more complicated and requires more time and
effort.

Synectics - steps
• Analysis and definition of the problem
• Spontaneous solutions
• Reformulation of the problem
• Creation of direct analogies
• Personal analogies (identification)
• Symbolic analogies (contradictions)
• Direct analogies
• Analysis of the direct analogies
• Application to the problem
• Development of possible solutions

Lateral thinking
• de Bono
• methods of thinking concerned with changing concepts
and perception; reasoning that is not immediately
obvious, ideas that may not be obtainable by using only
traditional step-by-step logic
• shifting of thinking patterns, away from entrenched or
predictable thinking to new or unexpected ideas.
• A new idea that is the result of lateral thinking is not
always a helpful one, but when a good idea is
discovered in this way it is usually obvious in hindsight,
which is a feature lateral thinking shares with a joke
• We may need to solve some problems not by removing
the cause but by designing the way forward even if the
cause remains in place
• http://en.wikipedia.org/wiki/Lateral_thinking

Lateral thinking vs. critical thinking
• Critical thinking is primarily concerned with
judging the truth value of statements and
seeking errors.
• Lateral thinking is more concerned with the
movement value of statements and ideas. A
person would use lateral thinking when they
want to move from one known idea to creating
new ideas.
• Critical thinking is like a post-mortem while
lateral thinking is like diagnosis.

Lateral thinking - inspiration
• Random Entry: Choose an object at random, or a noun
from a dictionary, and associate that with the area you
are thinking about.
• Provocation: Declare the usual perception out of
bounds, or provide some provocative alternative to the
usual situation under consideration. Prefix the
provocation with the term 'Po" to signal that the
provocation is not a valid idea put up for judgement but a
stimulus for new perception.
• Challenge: Simply challenge the way things have
always been done or seen, or the way they are. This is
done not to show there is anything wrong with the
existing situation but simply to direct your perceptions to
exploring outside the current area.

Six de Bono hats
• White hat (Blank sheet): Information & reports, facts and
figures (objective)
• Red hat (Fire): Intuition, opinion & emotion, feelings
(subjective)
• Yellow hat (Sun): Praise, positive aspects, why it will
work (objective)
• Black hat (Judge's robe): Criticism, judgment, negative
aspects, modus tollens (objective)
• Green hat (Plant): Creativeness, Alternatives, new
approaches & 'everything goes', idea generation &
provocations (speculative/creative)
• Blue hat (Sky): "Big Picture," "Conductor hat," "Meta
hat," "thinking about thinking", overall process (overview)

Example - meeting
• The meeting may start with everyone assuming the Blue
hat to discuss how the meeting will be conducted and to
develop the goals and objectives.
• The discussion may then move to Red hat thinking in
order to collect opinions and reactions to the problem.
This phase may also be used to develop constraints for
the actual solution such as who will be affected by the
problem and/or solutions.
• Next the discussion may move to the (Yellow then)
Green hat in order to generate ideas and possible
solutions.
• Next the discussion may move between White hat
thinking as part of developing information and
• Black hat thinking to develop criticisms of the solution
set.

TRIZ, ARIZ
• Теория решения изобретательских
задач” (Teoriya Resheniya
Izobretatelskikh Zadatch) = Theory of
inventive problem solving
• Inventing is the removal of a technical
contradiction with the help of certain
principles

TRIZ process for creative problem solving

Contradictions
• Inventive problems stem from contradictions (one of the
basic TRIZ concepts) between two or more elements,
such as, "If we want more acceleration, we need a larger
engine; but that will increase the cost of the car," that is,
more of something desirable also brings more of
something less desirable, or less of something else also
desirable. These are called Technical Contradictions.
• Physical or inherent contradictions: More of one thing
and less of another may be needed. For instance, a
higher temperature may be needed to melt a compound
more rapidly, but a lower temperature may be needed to
achieve a homogeneous mixture.

Matrix of Contradictions
• 40 inventive principles
• rows: 39 system features that one typically
wants to improve, such as speed, weight,
accuracy of measurement and so on.
• columns: typical undesired results.
• matrix cell: points to principles that have
been most frequently used in patents in
order to resolve the contradiction.

Morphological analysis
• designed for multi-dimensional, non-
quantifiable problems where causal
modeling and simulation do not function
well or at all
• Fritz Zwicky (1967, 1969) - exploring all
the possible solutions to a multi-
dimensional, non-quantified problem
complex

Morphological analysis - steps
1. The problem to be solved must be very concisely
formulated.
2. All of the parameters that might be of importance for the
solution of the given problem must be localized and
analyzed.
3. The morphological box or multidimensional matrix,
which contains all of the potential solutions of the given
problem, is constructed
4. All the solutions contained in the morphological box are
closely scrutinized and evaluated with respect to the
purposes that are to be achieved.
5. The optimally suitable solutions are selected and are
practically applied, provided the necessary means are
available.

Example 1 - energy conversion
initial transmission final storage
kinetic – K kinetic – K kinetic – K
electrical – E electrical – E electrical – E
chemical – C chemical – C chemical – C
thermal – T thermal – T thermal – T
nuclear - N nuclear - N nuclear - N

Example 1 - continued
• K->E->C: hydroelectric generation which is
then stored in a battery.
• C->T->K: internal combustion engine
(chemical energy transformed into thermal
energy) leading to energy being stored in
a flywheel.
• E->C->T: common refrigerator

Example 2 – cardboard packaging
Parameter Parameter values
separated
media
solid /
solid
solid /
fluid
solid /
gas
fluid /
fluid
fluid /
gas
gas /
gas
level of
separation
total partial
protection
against
gravitation mechanical
forces
heat radiation sound
combination
with
paper plastic wood paint nothing
solution: throwaway beverage packaging

http://www.sciencenewsforkids.org/articles/20041027/PuzzleZone.asp
16 dots, 6 lines

Dots and lines - generalization
• a three-dot-by-three-dot puzzle requires
four lines.
• a four-dot-by-four-dot puzzle requires six
lines,
• a five-dot-by-five-dot puzzle requires eight
lines, and
• an n-dot-by-n-dot puzzle requires 2(n – 1)
dots.

Puzzle Archive
• http://www.sciencenewsforkids.org/pages/
zonearchive.asp?type=1

TEAM DEFINITION
• group of people whose individual
members share a common goal
• their expert skills and personal abilities are
complementary
• its members work activities and skills are
purposefully and smoothly linked together.

TEAM EFFECTIVENESS
• dynamic balance among
– Necessity to perform a joint task
– Individual needs of team members
– Necessity to maintain a team
• synergic effect: every member
– contributes to performance of the mutual task
– adopts specific roles necessary for the effective team
functioning.
– contributes to the satisfaction of the individual needs
of other team members

Successful team characteristics
• Team members identify themselves with the team
• There is relaxed, non-bureaucratic atmosphere, interest
in achieving joint goals, optimistic work mood.
• Tasks and goals are clear to all members and all identify
themselves with them. Differences in opinions are
accepted. Disputable points are discussed and a solution
is looked for.
• Communication is open, spontaneous, and fluent. Team
members are sincere to each other, listen to each other.
Criticism is constructive and it is not taken personally.
• Team management is of participative, eventually
consulting, character. Rules are clearly defined.

Unsuccessful team characteristics
• Team members do not identify themselves with team.
• Strained atmosphere, blocked communication is. Team
members hide their real feelings and opinions.
• Autocratic supervision, discussion about goals and tasks
not allowed.
• Diversity of opinions leads to conflicts. Disagreement is
not openly expressed; the decision is undermined.
• Personal issues are settled by means of criticism.
People gossip.
• The rules are not clearly defined.

Team structure and organization
• Formal: clearly visible, represents
distribution of work among the team
members in order to ensure performance
of certain functions.
• Informal: influences procedures, in which
things are actually done – prestige of
people, their influence, power, seniority,
ability to convince others play roles there.

TEAM DEVELOPMENT
Forming
Storming
Norming
Performing
Dissolving

ROLES IN THE TEAM
• Initiator
• Company employee
• Chairman
• Forming person
• Operational employee
• Coordinator
• Resource researcher
• Observer
• Team worker
• Finisher
• Orienting member
• Energy supplier
• Recorder
• Harmonizer

Advantages and disadvantages
of team work
• (+) Mutual cooperation and support
• (?) teams often accept more risk than
individuals
• (+) can produce high quality ideas by
accepting the conflict and exploring
differences in the individual members’
opinions

Group cohesion
• (+) larger degree of cooperation, better
communication, higher resistance against
frustration, lower fluctuation and
absences, lower level of tolerance towards
lazy people
• (-) difficult for new members, limited
possibility to enforce new ideas, opposition
against changes in work procedures, often
overprotective against outsiders

Team forming by a manager
Manager On the way to rigidity On the way to teamwork
Defines Everything if possible Vision
Prefers Conformity Individuality, mutuality
Believes in Plan, task, control Trust, motivation climate
Views the problem
solving by the team
As denial of his/ her
authority, waste of time
As natural and necessary
Communicates with team
members
When they require it or need
it
As much as possible
Conflicts inside or outside
the team
Ignores them or solves them
him- or herself
Opens them for team
solving before they
become destructive
Understands group unity As a potential threat to his/
her position
As necessity
Anticipates People’s worries of
responsibility
Independence and
responsibility of people

DECISION PROCESS
1. Identify the problem
2. Specify objectives and decision criteria
3. Develop alternatives
4. Analyze and compare alternatives
5. Select the best alternative
6. Implement the chosen alternative
7. Monitor the results

REASONS FOR POOR DECISIONS
• Mistakes in the decision process
– quick decisions
– failure to recognize consequences
– manager´s ego – unwillingness to admit mistake,
unability to make a decision
• Bounded rationality
– limits – not optimum, but satisfactory solution
• Suboptimization
– departmentalization

MODELS
Model: abstraction of reality, adequately
portrays real-life phenomena
• Physical
• Schematic
• Mathematical
• Computer

USE OF MODELS
1. The purpose of the model
2. How to use model to generate results
3. How results are interpreted and used
4. What assumptions and limitations apply
Be aware of the assumptions and
limitations of each model

BENEFITS OF THE USE OF MODELS
1. Easy to use, less expensive
2. Require to organize and quantify information, indicate
need of additional information
3. Provide a systematic approach to problem solving
4. Increase understanding of the problem
5. Enable to ask „what if …?“
6. Require users to be very specific about objectives
7. Serve as a consistent tool for evaluation
8. Enable to bring power of mathematics
9. Provide standardized format for problem analysis

LIMITATIONS OF MODELS
1. Overemphasis of quantitative over
qualitative information
2. Incorrect application, misinterpretation of
results
3. Highly sophisticated models in hands of
users who cannot fully comprehend the
conditions and limitations of the model
use
4. Model building as an end to itself

QUANTITATIVE APPROACHES
• Linear programming
• Queing techniques
• Inventory models
• Project models (PERT, CPM, TOC)
• Forecasting models
• Statistical models
Quantitative methods are typically more difficult to
understand without a fair amount of explanation
and demonstration

TRADE-OFFS
List advantages and and disadvantages of
opposing courses of action to gain better
understanding of the consequences of
potential decisions.
Example – quality control
advantages disadvantages
Fewer defectives
slipping through by
increasing inspections
Increase in costs

SENSITIVITY ANALYSIS
How sensitive the solution is to a change
in one or more parameters
Example:  = (A2 – A1) / 0,5*(A2 + A1)
x = 5 k = 1 k = 2 
A = kx + 4000 4005 4010 0,03%
B = kx + 4 9 4 10,87%

THE SYSTEM APPROACH
• interrelations among subsystems and/or
elements
• system boundary – environment
• Feedback
Consequence: evaluate „optimal“ solutions
in terms of larger framework
The whole is greater than the sum
of its individual parts

DECISION ENVIRONMNENTS
• CERTAINTY – relevant parameters have
known values
• RISK – certain parameters have
probabilistic outcomes
• UNCERTAINTY – it is impossible to
assess the likelihood of various possible
outcomes

DECISION THEORY
1. Identify possible future conditions – states of
nature
2. Develop a list of possible alternatives
3. Determine or estimate payoff associated with
each alternative for every possible state of
nature
4. Estimate the likelihood of every possible state
of nature (if possible)
5. Evaluate alternatives according to decision
criterion and select best alternative

PAYOFF TABLE
Alternatives –
facility size
Possible future demand
low moderate high
Small 10 10 10
Medium 7 12 12
Large -4 2 16

Decision making under certainty
Choose the alternative with the highest
payoff
Demand Highest payoff Best alternative
Low 10 small
Moderate 12 medium
High 16 large

Decision making under uncertainty
• Maximin – determine the worst possible payoff
for each alternative, and than choose the
alternative with the „best worst“
• Maximax – determine the best possible payoff,
and choose the alternative with this payoff
• Laplace - determine the average payoff for each
alternative, and choose the alternative with the
best average
• Minimax regret - determine the worst regret for
each alternative, and than choose the alternative
with the „best worst“

• Maximin: worst payoffs are
the best is 10 - choose small facility
• Maximax: the best overall payoff is 16 – choose large
• Laplace:
• The best average is 10,33 - choose medium
Alternative small medium large
Payoff 10 7 -4
Alternative small medium large
Average payoff 10 10,33 4,67

• Minimax regret:
Opportunity loss, regret: subtract every payoff in a
column from the largest positive payoff in that column
The lowest regret is 4 – choose medium
Alternative
regrets
worst
low moderate high
Small 0 2 6 6
Medium 3 0 4 4
Large 14 10 0 14

Decision making under risk
• Expexted monetary value (EMV) criterion:
calculate expected value (EV) for each alternative
and select one with the highest EV
• Appropriate when decision maker is risk-neutral
Alternative probability EV
Small 0,30 10
Medium 0,50 10.5
Large 0,20 3

DECISION TREES
• Particularly useful for situations that
involve sequential decisions
• Nodes:
– decision points 
– chance events 
• Branches leaving
–  alternatives
–  states of nature

EXPECTED VALUE
OF PERFECT INFORMATION (EVPI)
• Option: postpone a decision, purchase
additional information
• Question: is the cost of the option less than the
expected gain?
upper limit decision maker should be willing to spend to
obtain perfect information
EVPI = expected payoff under certainty -
expected payoff under risk

EVPI - example
• expected payoff under certainty = 0,30*10 + 0,50*12 +
0,20*16 = 12,2
• EVPI = 12,2 – 10,5 = 1,7
Demand Best payoff probability
Low 10 0,30
Moderate 12 0,50
High 16 0,20

SENSITIVITY ANALYSIS
State of nature
Alternative #1 #2
A 4 12
B 16 2
C 12 8

LINEAR PROGRAMMING (LP)
• Objective function – maximization or
minimization
• Decision variables
• Constraints – feasible solution space
• Parameters – fixed values

LP - ASSUMPTIONS
• Linearity (objective function &constraints)
• Divisibility (non-integer values of variables
acceptable)
• Certainty (values of parameters known,
constatnt
• Non-negativity (negative values of
variables unacceptable)

LP – EXAMPLE 1
• Decision variables: x1, x2, x3 – quantities of
products to produce
• Maximize profit 5 x1 + 8 x2 + 4 x3
• Subject to constraints:
– Labor 2 x1 + 4 x2 + 3 x3  250 hours
– Material 7 x1 + 6 x2 + 5 x3  100 pounds
– Product 1 x1  10 units
– Non-negativity x1, x2, x3  0

LP – solution 1
decision variables
X1 10
X2 5
X3 0
objective function
P 90
constraints
1 40 250
2 100 100
3 10 10

LP – Graphical method
For two-variable problem, graphical
method can be used
Example:
Minimize P = 8x + 12y
Subject to 5x + 2y ≥ 20
4x + 3y ≥ 24
y ≥ 2
x, y ≥ 0
Solution: x = 4,5, y = 2, P = 60

LP – Graphical method
0
2
4
6
8
10
12
0 1 2 3 4 5 6 7 8 9 1 1 1
y1
y2
y3
P

Conflict management
• Conflict cannot always be avoided, but it can be
managed
• Sources of conflicts:
– Aggressive or conflict-prone personality
– Ambiguous or conflicting roles, interdependence
– Difference in objectives, values, perceptions
– Inadequate authority, oppressive management
– Inadequate resources
– Unsatisfactory communication

Conflict consequences
• Positive:
– Competition tends to enhance the general welfare, if
the conflict level is not too high
– Loyalty increases when people unite against a
common foe
– If problems are recognized, solutions may be
forthcoming
• Negative:
– Activities, not results, become important
– Attack individual rather than problem
– Blocked communication
– Need of strong leaders

Two-dimensional model of a conflict

Conflict resolution styles - 1
• Avoidance: no assertiveness, no cooperation –
problem solution postponed
• Accommodation: no assertiveness, cooperation
– give in
• Collaboration: assertiveness and cooperation -
problem solving, win-win
• Competition: assertiveness, no cooperation -
win-lose, adhere to rules, do not seek to harm
the other’s self-image, impulse to change and
improve the organization
• Authoritarianism: aggression, no cooperation

Conflict resolution styles - 2
• Smoothing: low assertion, low cooperation –
focus on similarities, seeks resolution, move
parties to a common goal
• Superordinate goals: increasing assertiveness,
increasing cooperation – attempt to find a
common set of objectives, forget the differences
• Bargaining (compromise): moderate assertion,
moderate cooperation – give-and-také, both
parties satisfy some of their needs

Lesson 11
COMPANY INNOVATION
CULTURE
„Successful companies address the
human needs and give them priority“
Thomas J. Peters, Robert H.Waterman

COMPANY CULTURE
• Organization culture: a pattern of ideas,
opinions and attitudes that majority of
people in the company understands,
respects, acknowledges, adopts and
relates to them.
• Influences the company’s economic
success and competitiveness

Main elements of the company culture
• Behavior standards
• Key values
• Management and leadership style
• Roles
• Organizational structure and diversification
Influenced by:
• Organization’s strategy
• Organization’s system
• Level of cooperation between the individual organization
structures
• Employees’ abilities

Four types of company orientation
Organizations preferring
• power
• roles
• tasks
• human side of their processes and people

MANAGEMENT STYLES
shift from directive to participative style of
management
4 basic management styles:
• Exploiting authoritative
• Benevolent authoritative
• Consultative
• Participative

Motivation /
performance cycle
(MPC)

Motivation / performance cycle (MPC)
1. Are the individuals´s needs satisfied? / Need
creation
2. Are organization and manager aware of
needs? Are they willing and able to offer need
satisfiers?
3. Organization and manager offer extrinsic and
intrinsic need satisfiers and rewards
4. The individual searches for alternatives,
evaluate the consequences of possible
actions, makes a decision

MPC- continued
5. The individual is motivated to expend
effort and does so
6. Does the individual have appropriate training,
abilities, and tools, and know the objective?
7. Performance
8. Does the individual receive need
satisfier? Do the organization and manager
provide need satisfier?

MPC- continued
9. Does the individual reassess the
situation?
10.Will the individual be motivated in the
same way?
Note:
normal – individual
italic – organization and manager

Hierarchy of needs (A. Maslow)
1. Physiological needs – immediate survival,
food, shelter, clothing, bodily needs
2. Security needs – stability, protection, freedom
from fear, provisions for the future
3. Social needs – acceptance, affection,
affiliation, love, interaction
4. Esteem needs – self-esteem, esteem of
others, status, power, autonomy, competence,
prestige, recognition
5. Self actualization – achieving one’s full
potential, personal growth, creative fulfillment

Characteristics of peak performers
1. Vision and the ability to plan strategically
2. The drive to surpass previous level of
performance
3. High levels of self-confidence and self-
esteem
4. A high need for responsibility and control
5. Strong communication and salesmanship
skills

Characteristics of peak performers - 2
6. The habit of mentally rehearsing before
critical events
7. Little need for outside praise or
recognition
8. A willingness to take risks
9. The ability to accept feedback and make
self-corrections
10.An ownership attitude toward their ideas
and products

Need satisfiers
Frederick A. Herzberg
• Hygiene factors – dissatisfiers, extrinsic
(pay, supervision)
• Motivators – satisfiers, intrinsic
(achievement, recognition for
performance)

Maslow Herzberg
Self-actualization Work itself, achievement,
possibility of growth,
responsibility
Esteem Advancement, recognition,
status
Social Interpersonal relations
Safety and security Company policy, job security
Physiological Working conditions, salary,
personal life

The management challenges
1. Recognizing needs
2. The changing nature of individual needs,
expectations
3. The impact of cultural diversity on a manager’s
ability to recognize needs
4. Being able to choose the right satisfiers and
then being able to obtain and offer them
5. Managing the process aspects of the cycle

Lesson 12
INNOVATION PROGRAMS
AND EDUCATION

Paradigm shifts
• Information and knowledge society
• Lifelong learning
• Lean companies, networking
• Information and communication
technologies (ICT)
– e-business, e-commerce, e-learning, e-
government, e-…, m-…

Learning organization
• The education that does not follow the specific
objective and does not improve the results is a
luxury the company cannot afford.
• Learning has been effective if a person knows
something he has not known earlier and he can do
something what he has not been able to do earlier
• The mission of the managerial education is the
development of the competencies and performance
of managers
• Learn by doing - follow what your more experienced
colleagues (but experiment as well)

KEY COMPETENCIES
• technical qualification - technical knowledge,
skill, talent and attitudes related technologic,
economic, financial, structural and procedural
aspects of work
• Soft skills, behavior and acting - related to work
with people, influencing the communication and
dealing with individuals and groups both within
and outside the company.

Company training programs
1. Training programs content, methods and goals
must take into account the basics of the
managerial work in real situations;
2. Attention should be paid to the improvement of
behavior and motivation and not only to
acquisition of technical skills;
3. The active training methods should be
preferred before passive ones. The abstract
concepts should be rooted in the practical
experience of companies.

Design of training programs
Define before the start of the training:
• What we want to achieve (goals)
• How we want to achieve the goals
(methodology)
• How the progress will be monitored
(monitoring)
• How the results will be evaluated
(evaluation)

Lesson 13
COURSE CONCLUSION
TERM PAPER PRESENTATIONS

Adapt the knowledge to your culture, local
conditions, …
But at the same time, do not over-adapt, try
also to affect your environment
Good luck

COMPANY INNOVATION SYSTEM
• Company strategy
• Collection of innovation impulses
• Setting of priorities
• Looking for innovation ideas and their
discussion
• Feasibility study
• Decision about project preparation
• Project preparation
• Project implementation
• Monitoring of innovation performance

Strategy
development
Strategy
development
Product
development
Product
development
Design
modification
according +
customer‘s
requirements
Design
modification
according +
customer‘s
requirements
Product
delivery
Product
delivery
Development of production capacities
Communication with customer
Idea
Production
Development
MARKET
CUSTOMER
PROCESS MAP

REGULAR „INNOVATION“ MEETINGS
• Sort collected impulses according to their topics
• Select the technique for development of innovation
proposals
• Present generated innovation proposals and prepare
their preliminary evaluation
• Submit results to the management for the decision
about the feasibility study performance for selected
proposals
• Report the feasibility study results to the management
for the decision about the project development
• Report on
– the state of the projects under development
– the state of the currently implemented projects
– the monitoring of already implemented projects

INNOVATION_MANAGEMENT in New Business Studies

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