Volume 2

Innovative Business
Projects
Innovative Business
Projects
Breaking Complexities, Building
Performance
Volume Two
Financials, New Insights, and
ProjectSustainability
Rajagopal
Professor,
EGADE Business School
Tecnologico de M
onterrey
Mexico City, Mexico
&
Visiting Professor,
Department of A
dministrative Sciences,
Boston University, Boston, MA
Innovative Business Projects: Breaking Complexities, Building Performance,

Volume Two: Financials, New Insights, and Project Sustainability
Copyright Business Expert Press, LLC, 2017.
All rights reserved. No part of this publication may be reproduced,
stored in a retrieval system, or transmitted in any form or by any
meanselectronic, mechanical, photocopy, recording, or any other
except for brief quotations, not to exceed 400 words, without the prior
permission of the publisher.
First published in 2017 by
Business Expert Press, LLC
222 East 46th Street, New York, NY 10017
www.businessexpertpress.com
ISBN-13: 978-1-63157-531-0 (paperback)
ISBN-13: 978-1-63157-532-7 (e-book)
Business Expert Press Portfolio and Project Management Collection
Collection ISSN: 2156-8189 (print)
Collection ISSN: 2156-8200 (electronic)
Cover and interior design by Exeter Premedia Services Private Ltd.,
Chennai, India
First edition: 2017
10 9 8 7 6 5 4 3 2 1
Printed in the United States of America.
With love to Arati,

who inspires me to take up new projects and
encourages to achieve the best performance
Abstract
This book builds knowledge and skills on the technical aspects of the
project life cycle, the tools to plan project activities and budget, and tools
to accurately determine the status of business projects. Business projects
are different from the construction or engineering projects that entail a
sequential process. The business projects face enormous uncertainty and
demand localized treatment in carrying the project tasks. Equally important and challenging is the goal of satisfying a wide variety of stakeholder
demands. Project Managers must therefore understand the detailed
technical tools, as well as leadership, accountability, organizational structures, and alliances with external organizations. Hence, this book also
discusses the systems thinking approach in planning and implementation
of business projects.
Keywords
business projects, commercialization, consumer behavior, global marketplace, innovation management, market competitiveness, project management, technology management
Contents
Prefacexi
Acknowledgments................................................................................. xvii
Chapter 1 Project Financials and Risk Management...........................1
Chapter 2 New Designs of Innovative Business Projects...................41
Chapter 3 Breakthroughs in Innovative Business Projects.................79
Chapter 4 Complexities in Managing Business Projects..................117
Chapter 5 Globalization and Customer-Centric
Business Projects............................................................153
Index189
Preface
Globalization has opened many options to manage business projects
exploiting destination-specific opportunities. However, global competition in business has created a critical chain of business functions for
firms to succeed in the competitive marketplace. Thus, most companies
develop skills in carrying out the work dynamics over the given time and
space. This book extends the business theory to the realm of project management. Whether a production process or a new-product-development
project is at issue, this book guides managers to focus on managing business projects efficiently to increase the performance. The book argues that
companies need to take a broader perspective into account in order to
manage the most innovative projects.
New business projects involving high technology are prone to cost
overruns against original estimates if not accomplished within the predetermined time frame. An inadequate project design is often the cause for
cost escalation and low performance of project tasks. Corporate environments should encourage honest project appraisals and drive their project managers to align with the requirements of best project management
practices. The book suggests that verifying the nature of the problem,
reengineering the project, and identifying underestimated areas would
help the companies to manage business projects successfully. If the business projects fail a large amount of investment is drained as sunk cost
turning the financial health of the companies substantially weak. This
book also offers strategies for developing a recovery plan, refining the
scope of the troubled project, and reevaluating the leadership of the project team as the most important actions that must be pursued in a comprehensive recovery effort. The rules of the game are subject to change
without notice, amidst increasing market competition, which jeopardizes
the business projects seriously. Effective project management begins with
selecting and prioritizing the projects that support the companys mission
and strategy. Successful project implementation requires both technical
and social skills. This book builds knowledge and skills on the technical
xii Preface
aspects of the project life cycle, the tools to plan project activities and
budget, and tools to accurately determine the status of business projects.
Business projects are different from the construction or engineering projects that entail a sequential process. The business projects face enormous
uncertainty and demand localized treatment in carrying the project tasks.
Equally important and challenging is the goal of satisfying a wide variety
of stakeholder demands. Project managers must therefore understand the
detailed technical tools, as well as leadership, accountability, organizational structures, and alliances with external organizations. Hence, this
book also discusses the systems thinking approach in planning and implementation of business projects.
While developing business projects companies need to understand
the market ambience, resources, society, and culture, and analyze the
competitive choices on production and business operations to determine
its posture in the marketplace. An intriguing aspect in the business is that
the nature of competition can change over time and cloud uncertainty
in marketing its products. Business projects with focus on innovation
and technology-driven manufacturing, marketing, and customer services
face many challenges of increased complexity in project operations due
to time and cost limitations and inadequacy of risk management competencies. But it is observed that intuitively such business projects often
yield high returns. Hence, it is necessary for the companies to train their
managers on various tools and techniques to manage the business projects
of various dimensions. The secret is a willingness to redefine the process
of managing business projects on the basis of the changing business environment and the growing uncertainties at the global and local marketplaces. This book emerges as a managerial guide with the new techniques
of managing business projects protecting the interest of the company and
stakeholders against potential uncertainties in markets.
Business project management is the pivot to business growth in a
growing competitive market dynamics. Management of business projects
is carried out with several tasks like stage-gate presentations, executive
dashboards, and complex task reports. This book bridges the myths and
realities on management of business projects and suggests cost effective
and goal-oriented tools and techniques. In todays dynamic and competitive world, a project managers key challenge is coping with frequent
Preface
xiii
unexpected preferences of consumers and market demand. The traditional approach to project management emphasizes that success of
a project depends on stability of performance of the project across the
predefined stages. The success of a project can be achieved by focusing on
planning and on controlling and managing risks. This book describes the
key roles successful project managers can play such as developing collaboration during the project, integrating planning and review of the tasks
scheduled in the business projects, preventing major disruptions during
the project implementation, and maintaining the stakeholder value while
carrying out the business projects.
Evolving any idea for developing a business project is essentially a set
of key decisions that collectively determine how a business earns its revenue, incurs its costs, and manages its risks. This book argues innovations
to the business as a driver for business growth in a competitive marketplace and addresses several pertinent questions that include:
What mix of tools and techniques should be considered for
managing business projects?
What business decisions should companies make based on the
project performance?
How to take right decision in business projects? and
Why do key decision makers choose to stay conventional?
This book is the second volume of the principal subject of discussionManaging Innovative Business Projects and addresses the topics on financials, new insights, and sustainability of innovation projects.
This volume is divided in to five chapters and the core arguments, new
insights, and contemporary approaches in managing innovative business
projects have been discussed in reference to recent literature on innovation research, best practices followed by the international innovation
companies, and graphic illustrations. Chapter 1 discusses approaches that
demonstrate accuracy in estimation of costs in innovation projects and
delineates the use of earned value management approach in driving cost
efficiency in the projects. This chapter also discusses the new developments
in project planning process, project budgeting and control, and factors
affecting budgeting control and project administration. The project risk
xiv Preface
management and stakeholder value management also constitute the core

discussions in this chapter. Chapter 2 presents new designs for innovative
business projects by building contemporary discussions on the attributes
of commercialization of innovation adapting to new project designs. This
chapter also raises debate over the standardization versus customization
perspectives for introducing new products in the competitive markets.
Besides, this chapter delivers insights on managing lean projects and
benefitting innovation organizations through systems thinking. Many
new propositions and approaches have been discussed on breakthrough
in innovation projects in Chapter 3, in reference to managing reverse
innovations through the developing the cost effective and customer centric business projects. The attributes of innovation breakthrough projects
and driving the outreach of butterfly effects by making small changes for
larger benefits in the markets have also been addressed in this chapter.
Among many new insights on innovation, lean thinking in innovation
projects, and constituting project teams also contribute significantly to
this chapter. Chapter 4 contemplates analytical insights on the complexities in innovation management projects in reference to increasing market
chaos across the markets and rapid technology growth, which is creating
a wide gap between the diffusion and adaptation of innovative products.
This chapter argues that complexities in technology marketing are driven
by the temporal and spatial factors besides lack of adequate management
vision for the innovative products at low-end market segments. Chapter 5
discusses the globalization factors in managing innovation business projects using consumer analytics and developing customer oriented product
strategies. The synergy of technology and customer value, and growing
global perspectives of innovations have also been discussed in this chapter.
The thought process in evolving this book originated from the course
on Innovation, Technology and National Economic Development, which
I have been teaching at Boston University since 2013. Consequent upon
teaching this course I have authored the book Architecting Enterprise:
Managing Innovation, Technology, and Global Competitiveness and
over a short span another book on The Butterfly Effect in Competitive
Markets: Driving Small Changes for Larger Differences was authored
by me in 2015. This book on Innovative Business Projects: Breaking
Complexities, Building Performance in two volumes is an outgrowth
Preface
xv
of all the above reading, writings, deliveries and learning. This book
reviews categorically the project management theories, concepts, and
previous researches, and discusses the applied tools and techniques for
business projects. The book discusses contemporary project management
approaches for the companies to grow competitive along with the market
players and consumers. This book significantly contributes to the existing literature and serves as a learning post and a think tank for students,
researchers, and business managers.
Rajagopal
July 31, 2016
Boston
Acknowledgments
In completing this volume of the book, I have benefitted from the discussions of my colleagues within and outside the EGADE Business School.
I am thankful to Dr. Kip Becker and Dr. John Sullivan of Administrative
Sciences Department of Boston University, and Dr. Maria de Lourdes
Dieck Assad, Dean of EGADE Business School, who have always encouraged me to take up new challenges in teaching graduate courses, develop
new insights, and contribute to the existing literature prolifically. I thank
all my students at Boston University for sharing enriching ideas during
the classroom discussions that helped in building this book on the framework of innovative ideas.
I also acknowledge the outstanding support of Stewart Mattson,
Executive VP and Chief Operating Officer, and Scott Isenberg, E
xecutive
Acquisitions Editor, of Business Expert Press, who critically examined
the proposal, guided the manuscript preparation, and took the publication process forward. My special thanks to Timothy J. Kloppenborg,
Professor Emeritus from Williams College of Business, Xavier University
for his guidance and encouragement in bringing out the two volumes of
this book. I am thankful to various anonymous referees of my previous
research works on innovation and technology management, who helped
in looking deeper into the conceptual gaps and improving the quality of
the content with their valuable feedback.
Finally, I express my deep gratitude to my beloved wife Arati Rajagopal
who has been instrumental in completing this book like all other works
of mine. I acknowledge her help in copyediting the first draft of the
manuscript and for staying in touch until the final proofs were crosschecked and the index was developed.
CHAPTER 1
Project Financials and Risk

Management
Overview
Companies tend to gain more at less cost but often fail to accomplish
their goals as the business process and projects suffer time overrun escalating the predetermined cost. Thus, companies assume that little can
be done to reduce costs once a project design for innovative products
development is set. This belief has either driven foreclosure or delayed
the life cycles of many business projects. Cost and time management is
an important consideration for the business firms in completing their
projects successfully. Delay in innovative business projects causes market
nonresponsiveness for the new products, besides serious cost and time
overruns. Consequently, resources are drained out, causing a low performance and driving projects to turn black holes. This chapter discusses
applied approaches for laying project cost estimation and earned value
management (EVM), and developing risks and contingency plan. The
project budgeting and controls as well as equity and stakeholder management during the overall project process have been discussed in this
chapter with various examples.
Innovation, manufacturing, and commercialization of innovative
products have become essential to sustain market competition and stimulate business growth. Companies engage innovation think tanks such as
innovation consultants, start-up enterprises, and community innovators
to develop innovation-embedded business models. This practice has now
turned as a national strategy for many countries to combat slow economic growth, which is favorably viewed in context of the current trend
of on-shoring foreign manufacturing operations and off-shoring innovation consultation. Often, multinational companies prefer manufacturing
of innovative products also at off-shore destinations through the licensed
INNOVATIVE BUSINESS PROJECTS
contract enterprises such as maquiladora1 in Mexico. Financial management of innovation project is easier for large multinational companies by
following the off-shore or licensed manufacturing practices as the innovation projects are centrally designed at the corporate headquarters of the
company, which are implemented by the off-shore enterprises under the
project leadership of sponsor companies. The off-shore innovation projects are of mutual benefit to both the multinational companies and the
small and medium enterprises in the destination countries. Some of the
major attraction for the large multinational companies to let innovation
licensing for manufacturing are lower factors of production including
lower cost of land, infrastructure, wages, and easy capital in destination
markets. The advantages in the production factors help companies achieve
the economy of scale. As infrastructure and human capital develop inthe
local companies, there is a tendency to pursue advanced manufacturing
in support of higher-valued goods. The manufacturing process is then
outsourced to destinations that demonstrate lower costs and higher
project management efficiency. While this model suggests that current
efforts in revitalization of domestic manufacturing also raise the question on planning and implementation of project budgets effectively by
the organizations, the appreciable notion in outsourcing innovation-led
product manufacturing is that this trend is emerging as a rising tide and
is narrowing geographic and economic distances across the destinations
for achieving the global quality of life (Kazmer 2014).
Cost Estimations in Innovation Projects

Innovative projects often do not begin with abundant budget as they are
largely grown on an experimental basis where contingencies cannot be
Maquiladora is a small and medium-scale enterprise engaged in manufacturing
operation, where contracted companies import raw material and equipment on
a duty-free, cross-border, tariff-free basis for assembling, processing, or manufacturing their predesigned products. Upon manufacturing, these companies
exportthe products either back to the country of origin or to other destinations
through the export agencies. Such practices are also followed in the emerging
markets that have identified special economic zones and export-oriented units in
their countries.
1
Project Financials and Risk Management 3
fully avoided. Hence, the budget of the innovation projects is often unstable and they have to operate under limited funds and project managers
keep exploring the sources of new capital constantly in the various stages
of the project. However, the thumb rule to start an innovation project
is to first get the right budget for the project. This needs right estimates
of project cost by activities, time, and region. A cost estimate should be
realistic, transparent, and reliable. These factors are particularly important for start-up innovation enterprises because they operate with a small
budget. The project management teams use standard techniques of cost
calculations such as activity-based costing, expert judgments (EJs), and
vendor analysis (VA). Other cost estimation technique includes top-down
and bottom-up cost estimation approaches, analogous and parametric
approaches, three-point analysis, and cost of quality (COQ) measures.
Accurate costing of products is an essential activity in innovation
projects with a diverse task, time, and cost mix. It is a key requirement
for determining the profitability of the project. Analogous estimating uses
historical data from similar projects as a basis for the cost estimate. Project managers can adjust the estimate by understanding the differences
in reference to similar projects. This type of estimate is usually used in
the early phases of a project, though it appears less accurate than other
methods. One of the common methods of estimating project cost is to
base it on a previous work, though sometimes it leads to biased decisions.
Project managers search the data archives in the same company to find the
costing made in a similar project. It is believed that the cost data from the
previous projects of the same company are less biased. Sometimes, project
managers also get clues of costing from competitors if they are bidding
for identical or similar projects. Historical cost data referring to costs of
identified tasks for days, weeks, or months can also be extrapolated for
projecting the cost estimates in a project.
Cost estimations through analogous technique use the values of scope,
cost, budget, and duration or measures of scale such as time, profitability,
and complexity from a previous, similar project as the basis for estimating the same parameter for this project. It is most often used in the early
stages of a project when there is less information available to base the
cost estimates. In this type of estimation, estimates from a closed project
are used to determine the estimates for the new project. The accuracy
of analogous estimates is dependent on the similarities between the two

projects. The accuracy of the estimate depends upon the nature and similarity of the previous projects in terms of tasks, time, deliverables, scope
creep possibilities, and level of expertise and experience of the project
team. Analogous estimating may be considered as a form of expert judgment that is most reliable when the previous activities are similar to the
current activity and when the team members preparing the estimates have
the necessary experience.
The three-point estimates originated with the Program Evaluation
and Review Technique (PERT) and Critical Path Method (CPM) techniques. This method uses three estimates to define an approximate range
for the cost of each activity in reference to most likely, optimistic, and
pessimistic costs. The cost estimate is calculated using a weighted average:
Oc + 4 ( M lc ) + Pc
Ec =
6
In this equation, Ec denotes the expected cost, Oc and Mlc indicate
the optimistic and most likely costs, respectively, and Pc is expressed for
pessimistic cost. The statistical weight for each cost variable is used from
1 to 4 and some of the weights serve as the denominator in this equation.
Analyzing the expected time helps to bias time estimates away from the
unrealistically short cost scales normally assumed. In addition to various
costing estimates, project managers also use reserve analysis to determine
how much contingency reserve, if any, should be allocated to the project.
This funding is used to account for cost uncertainty. During cost estimation, assumptions about the COQ are recommended to include in the
project cost estimate. The COQ costing is estimated on the basis of the
money spent during the project to avoid failures and money spent during
and after the project due to failures. This is a very sensitive estimate but
is essential to support the overall budget of an innovation project. There
are many cost estimation techniques illustrated in Figure 1.1 that help
project managers to arrive at the right project costing.
Figure 1.1 exhibits the attributes of activity-based costing, EJ, VA,
top-down and bottom-up approaches, analogues method, parametric method, COQ, resource costing, and unit cost estimation as major
Vendor analysis
Supply costs
Price variations
Probability costing
Project
budgeting,
execution,
monitoring,
and evaluation
Bottom-up
costing
Task-based
estimation
Transparency
Tactical costing
Analogous
costing
Historical data
Similar decisions
Top-down costing
Low accuracy
Figure 1.1 Costing techniques for innovation projects
Cost estimation techniques in

an innovation project management
Activity based costing

Identifying activities
Work breakdown structure
Activity-wise costing
Fixed and variable costs
Overhead costs
Expert judgment
Cost assumptions
Expenditure mapping
Peer judgments
Historical costs data
Top-down
costing
Data availability
Analytical insights
Simple techniques
Low-cost exercise
Parametric
costing
Statistical
technique
Accuracy
Scalable costs
Resource costs salaries

Hiring costs and severance pay
Infrastructure costs
Raw material and process costs
Unit costs
Fixed costs
Variable costs
Marketing costs
Logistics and inventory costs
Contingencies
Best practices followed by the

companies like GE, IBM, Apple Inc.
Cost of quality
Resources use
Prevention costs
Appraisal costs
Failure costs

techniques to be used in innovation projects. Activity-based costing is

a methodology that identifies activities in a project and assigns the cost
of each activity with resources in reference to the actual consumption by
each. This model assigns more overhead costs into direct costs compared
with conventional costing. EJ is used extensively during the generation
of cost estimates. In this process, project managers along with the cost
accountants need to make numerous assumptions and judgments about
what they think a new product will cost. Cost estimates produced from
both algorithmic and nonalgorithmic cost models can be widely inaccurate, and innovation projects might require extensive use of judgment
in order to produce a meaningful result. Most judgments are based on
the results referring to historical costs data, and then adjusting up or
down accordingly in order to predict the cost of a new project. However,
through modeling the reasoning processes of EJ, it becomes possible to
capture, structure, and integrate EJ and rationale into the cost estimating process as estimates are being generated. Consequently, the project
managers are able to improve the understanding of estimates throughout
a product life cycle, and also take advanced management decisions based
upon these cost estimates.
VA-based costing largely estimates supplier-driven costs for projects at
predetermined prices. It also accounts for probabilities in price variations
for the supplies required for the project till its competition. VA-based
costing is useful for the projects that have continuous dependency on the
supplies. For example, the innovation projects in dairy industry depend
on the supply of milk from farmers, which is often uncertain and the
cost estimation should be based on the probability of the supply costs.
VA-based costing is also adopted by companies that fully depend on outsourcing their activities with original equipment manufacturers and serve
as value-added resellers, for example, Apple Inc. The top-down approach
can provide a balanced benefit to the innovation projects that are aiming
to align limited resources to explore lucrative new product opportunities. Project managers could integrate top-down approach to integrated
resource planning and initially develop a rough cost estimate. Topdown resource planning can be implemented early in the project cycle
using simple tools. The visibility provided by the top-down approach is
more than adequate to support the level of portfolio planning required
to maximize returns from the investment of R&D and other resources.

The bottom-up approach uses project planning techniques to create taskbased estimates. The bottom-up resource planning requires a detailed
project plan and supporting project management software for calculating
the cost accurately.
Analogous costing is used by the project managers when limited information on the project is available. In this method, cost is estimated on the
basis of historical data of similar projects. Analogous estimate is similar
to top-down cost estimation approach and is generally not as accurate
as other estimating techniques. Parametric estimating is a more accurate
technique for estimating cost and time. This estimation technique uses
the relationship between variables to calculate the cost, time, and risk.
Essentially, a parametric estimate is determined by identifying the unit
cost or duration and the number of units required for the project or activity. COQ is a methodology for estimating the cost of innovation projects
that allows the project managers to determine the extent to which its
resources are used for activities that prevent poor quality of tasks and
deliverables. COQ appraises the quality of the deliverables to suggest preventive costs, and internal and external failures. Quality-related activities
that incur costs in an innovation project may be divided into prevention
costs, appraisal costs, and internal and external failure costs. The prevention costs in an innovation project are associated with the design protection, tasks implementation, and maintenance of the innovation project
system. The appraisal costs are associated with measuring and monitoring
activities related to quality. The failure costs consist of internal and external letdowns while implementing the project task, such as raw material
wastes, repetitive tasks, and poor-quality products. Resource costs include
the costs of all elements used to carry out business activities, such as salaries of the project staff and the cost of materials. Another type of cost
estimation is the unit cost in reference to the total expenditure incurred in
a project to generate required deliverables, store, and sell one unit of it in
the marketplace. Unit costs include all fixed costs, or overhead costs, and
all variable costs, or direct material costs and direct labor costs, involved
in production.
Besides the nonconventional costing practices, a common technique
for cost estimation used conventionally by low resources enterprises is to
list the resources required for the project and summing up their total costs.
Typically, the basic resources include human resources, equipment, material, services, and labor. You can get costs for equipment, raw material,
infrastructure, technology, services, risk coverage, and marketing costs.
Project managers may allow a buffer cost of about 10 percent over the
list price of the requirements on account of the probability of cost escalation. The start-up innovation enterprises use resource costing method to
prepare budget for a larger or more complicated projects. However, small
and less complicated projects where the taskstime grid is easy to manage, a cost-per-unit (CPU) method can be used for mapping the project
costs and preparing the budget. The CPU is a unit measure of the task in
the different segments of the project that is summed up as the total cost
of the project. It might be a cubic foot, a square foot, cost of the work
station, or an area of the project serving as a cost center. Typical cost areas
in an innovation project include the cost of ideation process, research and
development, design process, prototype development, testing at various
stages, fabrication, technology services, market test, commercialization,
and customer services. Costs should be calculated in the convertible currency of the respective regions to present the project to the sponsor for
financial aid. Upon multiplying from the number of units required to
complete the task, the total cost of the project can be calculated.
A project budget is a detailed time-phased estimate of all resource
costs of an innovation project, which is developed from an initial rough
estimate to a detailed estimate to a completed, approved project budget.
A project budget includes both direct and indirect costs.
It is necessary for the project managers to account for the direct costs
that are incurred toward salaries for team members, raw materials and
indented supplies, equipment and infrastructure, logistics and inventory, and all subcontracts that provide operational support to the project.
The indirect costs should be categorized in to operational overhead and
administrative overhead costs. The costs of the former category should
be accounted for the money spent on the products and services that are
difficult to subdivide and allocate directly under the structured head of
the budget proposal, for example, employee benefits, office space rent,
general supplies, and the costs of furniture, fixtures, and recurring costs
on office equipment. The project team should be aware of administrative
overhead costs that lead to expenditure on the functionality of the project

within the organization. Often large organizations allocate high resources
on this budgetary head as they plan for long hierarchical set-up of project supervisory, monitoring, and evaluation staff. Besides, the administrative overhead costs in an innovation project include also the expenses
that account for executive entertainment and legal services. One basic
assumption to be made while estimating project costs is whether the estimates will be limited to direct project costs only or whether the estimates
will also include indirect costs. Indirect costs are those costs that cannot
be directly traced to a specific project and therefore will be accumulated
and allocated equitably over multiple projects by the formally approved
and documented accounting procedure. Cost estimates are influenced by
numerous variables such as labor rates, material costs, inflation, risk factors, and other variables.
Parametric estimation is used to calculate the cost by using the
following formula when the productivity rate of the resource performing
the activity is available:
Activity cost = Units of work in the activity/Productivity rate of the
resources.
Parametric estimation leverages mechanical calculations that take
historical information as the input, makes assumptions, and then extra
polates the information to compute the overall cost estimates. The accuracy of parametric estimation is dependent on the assumptions used
in the calculations. This technique is used with the time-series data by
establishing the statistical relationship that converges costs and the tasks
in the project. It provides the following advantages in cost estimation:
It consumes lesser time in estimations than other techniques,
It is based on quantitative inputs that are linked to algorithms, which allows the project manager to trace the costs by
tasks and monitor the spending process accordingly,
Parametric models provide a consistent estimate format and
provide scope for documenting the estimation and simulate
the cost projections, and
10
It provides variable costs for a range of input values, extrapolating to derive costs for projects of a different size or nature
from the cost estimates of the previous projects.
Large innovation companies generally explore the role for activity-
based costing and measure customer profitability when they incur financial losses. In the competitive marketplace today, customers tend to
demand increasingly more specialized services for higher convenience,
which needs the companies to pump more capital in the project for planning deliverables of higher quality. However, allocating more resources
and spending more money on an innovation project without proper
market assessment often turns into losses as customers are often unpredictable and shift their preferences toward buying substitute products.
Pricing is based on a fixed markup of the cost of the purchased item. The
managers feel that the fixed markup may not be compensating them for
the higher costs and standard deliverables of the project (Kaplan 2001).
Reserve analysis cost estimates include contingency reserves to account
for cost uncertainty. The contingency reserve may be a percentage of the
estimated cost, a fixed number, or may be developed by using quantitative
analysis methods. One method of calculating the contingency reserve is to
take a percentage of the original activity cost estimate, and when more information about the project becomes available, the contingency reserve can be
reduced or eliminated. Probable contingencies in the innovation projects
management should be clearly identified in cost documentation, and the
cost estimations to meet the identified contingencies should be estimated
based on the responsive bids from qualified vendors. Where projects are
awarded to a vendor under competitive processes, additional cost estimating
work can be required of the project team to examine the price of individual
deliverables and to derive a cost that supports the final total project cost.
Multinational companies such as General Electric are switching to
industrial production at economy of scale by achieving innovative differentiation and cost efficiency. More companies are following similar
strategies as the option for managing innovation projects continues to
expand. The cost estimations are usually done on activity and unit basis
in innovation projects to accommodate critical and peripheral activities in
all segments of the innovation projects. It has been observed that in many
start-up enterprises that are engaged in developing innovative products

with competitive differentiation, the commercialization of innovation has
turned out as one of the major challenges. Lack of right commercialization approach of innovation is driving several manufacturing projects to
be decommissioned. However, customer-centric innovations quickly gain
advantages in the competitive marketplace (DAveni 2015).
Earned Value Management

EVM is a project management technique for measuring project performance and progress in an objective manner. EVM is a well-known
technique to control time and cost performance of a project. It is a
methodology used since the 1960s, which relies on a set of often straightforward metrics to measure and evaluate the general health of a project.
These metrics serve as early warning signals for timely detection of problems or for exploitation of project opportunities. Controlling a project is
key to the success or failure of the project. EVM provides the opportunity
to measure the project performance along the life cycle of the project and
predict early warning signals that can be used as triggers for corrective
actions in case the project is in danger. EVM analysis makes a significant
impact on the areas of planning and control and helps in improving both
scope of the project and the overall project performance. Previous research
indicates that the principles of EVM are positive predictors of project
success. This technique has become popular in the recent years beyond
the large projects as its importance continues to rise as well among the
start-up enterprises engaged in innovation projects management. EVM
emerged as a financial analysis specialty in U.S. government programs in
the 1960s, but it has since become a significant branch of project management and cost engineering. Implementation of EVM can be scaled
to fit projects of all sizes and complexities. The essential features of the
EVM implementation help the project managers in mapping the work to
be accomplished according to a project plan, calculating the EMV with
reference to the planned value (PV) or budgeted cost of work scheduled
(BCWS), and earned value (EV) or budgeted cost of work performed
(BCWP). However, the EV of a project has major implications of the
actual cost incurred in various tasks performed in the project.
12
EVM implementations for large or complex projects need analysis of

cost and risk indicators and forecasts of cost performance to measure the
over- or under-budget performance of the projects. EVM is also h
elpful in
determining time plans of the project and measuring whether the projects
are on time, behind, or ahead of schedule situations. However, the most
basic requirement of an EVM system is that it quantifies progress using
PVs and EVs in a project. An EVM system is an aid to both the EVM
contractor and EVM customer. The benefits of implementing an EVM
can be summarized as follows:

Improves the planning process;

Fosters a clear definition of the work scope;
Establishes clear responsibility for work effort;
Integrates technical, schedule, and cost performance;
Provides early warning and analysis of potential EV problems;
Identifies problem areas for immediate and proactive management attention;
Enables more accurate reporting of cost and schedule impacts
of known problems;
Enhances the ability to assess and integrate technical,
schedule, cost, systems analysis, and risk factors;
Provides consistent and clear communication of progress at all
management levels; and
Improves project visibility and accountability.
A simple explanation to the EV in a project is the difference between

the proposed budget for completion of the project and the actual cost
incurred, as exhibited in Figure 1.2.
Figure 1.2 exhibits that the basic premise of EVM is that the expenditure incurred on a task is equal to the amount of funds budgeted to
complete it. However, the schedule variance that determines the project scheduleson time, delayed, or ahead of scheduleand the cost
variance that explains the corresponding expenditure on each task of
the project determine the earned value of a project at the point of
assessment of EVM. The schedule variance is the difference between the
amounts budgeted for the work actually performed and for the work
Project span
Assessment date for

measuring the
earned value of the
project
Cost variance
Under-budget
performance
Schedule variance
Project runs behind
schedule
Figure 1.2 Earned value management in an innovation project
Expenditure
AP-planned value (PV)

AE-earned value (EV)
AC-actual cost
The gap between the

planned value (AP) and
actual cost (AC) denotes
the earned value (AE) of
the innovation projects. The
earned value of a project is
influenced by the schedule
variance and cost variance.
Date of completion of
the project

14
planned to do. This expenditure is related to the variance in time (more

or less) to the scheduled project time. The cost variance is explained as the
difference between the amount budgeted and the amount actually spent
for the work performed. Project time management involves the processes
required to ensure timely completion of a project as stated as follows:

Activity definition
Activity sequencing
Activity duration estimating
Schedule development
Schedule control
The ratio of the approved budget for the work performed to the
approved budget for the work planned is analyzed to measure the variations in utilization of the financial resources of the project. The schedule
performance index (SPI) reflects the relative amount by which the project
is ahead of or behind schedule, sometimes referred to as the projects
schedule efficiency. Project managers can use SPI to predict the schedule
performance for the remainder of the task. The ratio of the approved
budget for work performed to what you actually spent for the work, the
cost performance index (CPI) reflects the relative value of work done as
compared to the amount paid for it, sometimes referred to as the p
rojects
cost efficiency. The project team can use the CPI to predict the cost
performance for the remaining tasks in the project. The schedule and
cost variances and performance indicators are defined mathematically as
follows:
1. Schedule variance (SV) = Earned value (EV) - Planned value (PV)
2. Cost variance (CV) = Earned value (EV) - Actual cost (AC)
3. Schedule performance index (SPI) = Earned value (EV)/Planned
value (PV)
4. Cost performance index (CPI) = Earned value (EV)/Actual cost (AC)
The final project performance can be measured by analyzing the
expenditures upon completion of all tasks required for offering the
deliverables and creating value among the stakeholders. The budgetary
estimate at completion (EAC) is estimated for a project at the current

prices to know the resources commitment of the project and sponsor.
However, such budgetary provision can be adjusted with the projected
increase in the cost per task and project team can arrive at the estimate
to complete (ETC) the project, which offers a holistic estimate of the
amount of funds required to complete all tasks planned in the project. By
assuming that the cost performance for the remainder of the task will be
the same, the EAC can be calculated as:
EAC = Budget at completion (BAC)/Cumulative cost performance
index (CPI)
One of the most fundamental requirement is that the contractor must
establish a work breakdown structure (WBS) extended down to a level
that describes the tasks that will be performed as well as their relationship
to product deliverables. This is the foundation for ensuring the project
planning, scheduling, budgeting, work authorization, and cost accumulation processes are fully integrated. The integrated master schedule is
the projects road map to meet project objectives. This schedule must be
resource loaded to determine the budget for the work as scheduled. The
resource-loaded schedule is the basis for the monthly budget, or BCWS,
for each task and thus the project. This time-phased budget is the performance measurement baseline. The total budget for each task, control
account, or the entire project is defined as the budget at complete (BAC).
Because most projects are initiated with some level of uncertainty, the
project managers typically keep aside a proportion of budget of the total
project value as a management reserve, which is added to the BAC while
finalizing the total project budgeted value of the project.
The EVM is fundamentally applicable in the planning, implementation, and control. During the project planning process, EVM requires
the establishment of a performance measurement baseline. This requirement strengthens scope of the project, schedule, and cost. EVM raises
the need for the executable project work and fixing accountability for
improving the performance of the project. EVM is also a fundamental
requirement for implementing and monitoring the WBS by dividing into
executable tasks and small controllable accounts. The start-up enterprises
16
generally fail in managing innovation projects as they are unable to logically schedule and manage resources in a work plan. The work scope,
schedule, and cost need to be integrated and recorded in a time-phased
budget known as a performance measurement baseline. In the planning
process, assigning budgetary EV also needs to be established. In addition
to routine project management planning, EV measurement techniques
are selected and applied for each task, based on scope, schedule, and cost
considerations.
Project Planning Process

The project planning for innovation business projects begins with the
ideation process. Idea generation in the process of new product development is a major exercise. This technique calls for listing of all major
attributes of the existing product and the needed attributes in order to
improve the same product. The forced relationship of the new product
with the existing accessories also needs to be studied, for example, developing a new television set may be related with the consumer need of
clock, multichannel viewing on one screen, microphone attachment, and
a built-in video game. Such forced relationship has to be identified by the
company before launching the product. The morphological analysis calls
for identifying the structural dimensions of a problem and examining
the relationships among them. The need identification can be done by
interacting with the potential and existing customers in a focus group
meet. Industrial marketers can identify new product ideas working in
association with the lead users of the product. Brainstorming has a major
role in the idea generation process. Contemporary methods for ranking
the relative merits of ideas generated by brainstorming sessions rely on
comparing average scores across members of the group. The average is
a measure of the overall merit assigned to an idea but does not measure
unanimity or the concentration of opinion across members of the group
with respect to the idea under consideration. The standard deviation of
responses is the accepted measure of group consensus but is rarely used in
brainstorming, possibly because the ranking of ideas is a more complex
cognitive procedure when the two statistics, mean and standard deviation, are considered separately or possibly because most voting schemes
are very simple (Walsh and Wood 1992).
There are many approaches to drive the ideation process for putting
through the project management process. The most contemporary ideation approached for innovative products include crowdsourcing and
co-designing new products with the start-up enterprises. Most multinational companies engaged in bringing out the new innovative and competitively differentiated products in the market prefer the latter approach
of co-designing. After the globalization effect experienced by the companies in the recent past, the product had changed in many ways. The switch
from a shared house phone to a personal phone has had a significant
impact on product appearance as well as product use. People do not use
their personal phone only for calling, but also for taking pictures, making
movies, playing games, listening to music, and as an agenda. This has
changed the consumer attitudes toward a phone. What once was a rather
functional product has become a product that expresses ones personality.
Therefore, customers require their phone to be modern, easy to use, and of
good quality. In the meantime, they do not want the phone to be expensive, as they would like to buy a new one periodically. The needs of these
consumers reflect in increasing demand on the one hand and increasing
product complexity on the other. Hence, developing innovative products
require a far-reaching integration of the different knowledge domains of
the actors from different disciplines during the collaborative new product
development (Co-NPD) process (Garcia and Calantone 2002). During
Co-NPD, knowledge management should focus on knowledge integration instead of focusing on knowledge transfer. They also stated that the
effectiveness of knowledge integration required a mutual understanding
of the actors contributions. This is in line with research on design communication, which finds that the quality of the Co-NPD project is dependent on the process of creating a shared understanding (Dong 2005). In
developing collaborative product designs, managers should consider the
following perspectives:
Be an involved consumer of your own and competitors goods
and services
Transfer of knowledge
Document experiences to retain personal knowledge
Relativity of needs in reference to average consumers
Obtaining information through mutual cooperation
18
Critically observe and live with consumers

Critical observation rather than casual viewing
Investing time
Realistic and precise conclusions
Talk to consumers and get needs information
Structured, in-depth, one-on-one, situational interviews
Engineer trade-offs during product development
Technical design information
Exploring tacit and product-related needs of consumers
Co-NPD process is considered as a socio-organizational process. In
collaborative new product development, many actors are involved in the
process. An actor executes three main activities during this social process.
The first activity is the construction of the task that an actor needs to
perform. This allows the actor to understand that the task is a part of a
system and that others perform different and complementary tasks. Thus,
an actor may relate his action to those of others. This shows that the relations among actors are not predefined but constructed during the process
and that actors depend on findings from other actors. A result derived by
an actor performing a development task may lead another actor to make
an interactive loop (Weick and Roberts 1993).
A product development manager should actively observe the activities
of the team during their regular meetings by taking notes about the most
important issues concerning communication about the design c ontent.
During the regular face-to-face meetings with the separate actors, which
are now mostly about planning and monitoring issues and design problems or changes, the project leader could use the notes as input for
discussing the collaborative aspects with the actors. This form of storytelling will provide the project leader with knowledge about the collaborative
aspects of the design process. A project leader should also learn to distill
the barriers and enablers from these conversations (Maaike, Buijs, and
Valkenburg 2010).
Besides the ideation element in the innovation projects, there are
three approved starting requirements including the scope, schedule, and
cost baselines. These project requirements determine whether or not the
project is on track during the execution of the project. These requirements in an innovation project help the project team in documenting
how variances to the baselines will be handled throughout the project.
Each project baseline will need to be reviewed and managed periodically,
irrespective of the size of the project. Sometimes the project needs to be
supported with new tasks (project scope creep) that require additional
planning, with the possibility that the baseline(s) will change. Project
management plans document what the project team will do when variances to the baselines occur, including what process will be followed, who
will be notified, how the changes will be funded, and so on. The key players in the team have specific roles in the project process, which include:
Project sponsor owns and funds the entire project. He is
responsible for reviewing and approving all aspects of the plan.
The business experts define requirements for the deliverables.
They help the project teams to develop the scope baseline
and approve the documents relating to scope and schedule
(timeline).
Project manager creates, executes, and controls the project
plan. The project manager serves not only as a team leader but
is also accountable for the commercialization of the deliverables. Hence, in innovation business projects, the project
managers work closely in association with the market team.
The project team contributes to the development of many
aspects of the plan, such as identifying risks, quality, and
design issues, and produces the right deliverables that are
defined by the stakeholders. Commonly, the consumers
or end-users are the stakeholders for the public innovation
deliverables. However, in many projects leading to mass
commercialization, sponsors and other investors constitute
stakeholders.
Others, such as auditors, quality and risk analysts, and procurement specialists, also participate in the implementation
of innovation business project. They may need sponsors to
approve the quality or procurement plan.
20
In order to initiate the project, a kickoff meeting is considered to

be an effective way to bring stakeholders and project team together to
discuss the competitive differentiation and commercialization potential
of the project. It is a dynamic option to initiate the planning process
and can be used to start building trust among the team members and
to bring everyone on the operational platform to plan and implement
the project. Kickoff meetings also demonstrate commitment from the
sponsor for the project. These meetings are essentially held in the initial
phase of the project to discuss the business vision and strategy, and project vision, roles and responsibilities, building teams and commitments,
defining decision ladder, and setting ground rules. The scope statement
is the most important document in the project plan that presents the
project deliverables. It describes the project and is used to get common
agreement among the stakeholders about the scope. It is the basis for getting approval of the project from the sponsor and other stakeholders and
provides a clear communication about the project. The project charter is
another important document, which includes the business need and the
uniqueness the project, core objectives, WBS, and benefits of completing
the project as well as the project justification. The project scope states and
justifies the deliverables to be included and excluded from the project,
while the project charter emphasizes the key milestones, techniques, and
other components by the size and nature of the project.
Once the deliverables are confirmed in the scope statement, they need
to be developed into a WBS, which is a decomposition of all the deliverables in the project. This deliverable WBS forms the scope baseline and
identifies all the deliverables produced on the project, and therefore, identifies all the work to be done. The WBS should be mapped by breaking
large deliverables into a hierarchy of smaller deliverables by dividing the
project tasks into the work package to correspond to listed activities and
tasks in the project plan. The WBS is often thought of as a task breakdown, but activities and tasks are a separate breakdown, as identified in
the next step. The next step involved in developing the schedule and cost
baselines by identifying activities and tasks needed to produce each of the
work packages, creating a WBS of tasks. At this stage, the project team
should identify resources for each task and estimate the time span for
completing each task. The cost of each task should be estimated using an
average hourly rate for each resource.
Once the project scope, task schedule, and cost baselines have been
established, the project team should create the plans to manage potential
variances in the project. All these management plans usually include a
review and approval process for modifying the baselines. Project quality
consists of ensuring project deliverables and creating value to the stakeholders. The emphasis on project quality should be made from the viewpoint to prevent errors, rather than inspecting the deliverables at the end
of the project and then eliminating errors. Project quality recognizes that
quality is a responsibility of the project management team and should be
maintained throughout the project. Creating the Quality Plan involves
setting the standards, acceptance criteria, and metrics that will be used
throughout the project. The project plan should be periodically reviewed
and revised and the project should be implemented and measured periodically to monitor the performance and stakeholder value generated
throughout the project.
Project Budgeting and Control

Budgeting sets control standards and follows systematic checks and balances in innovation projects, where there are possibilities of some loose
ends in WBS that might drain the financial resources. Hence, it is necessary to have a very realistic and accurate budget to manage the innovation projects where actual costs can be compared with and measured
against the budget. In order for the project plan to determine whether
scope, budget, or schedule needs adjustment when project costs begin
to escalate, the project manager should revisit the requirements for project deliverables. Innovation projects demand a flexible budgeting policy
as innovation process may encounter several contingencies during the
project phases. The cost estimations made at the initiation of the project
might change as some phases may suffer from cost and time overrun due
to test and trials. Hence, activity-based costing with enhanced time elapse
would be the appropriate budgeting strategy for managing innovation
projects. However, it is also important for the project managers to set
22
boundaries on budgeting to reduce the cost spree. The project budgets

should be realistic, which should neither overpump the resources nor create paucity of resources to make the project management run through
the budgetary extremes. Accordingly, simple rules should be laid to set
budgetary boundaries, such as 5 percent reduction in time toward performing the tasks, decrease in administrative costs as a percentage of revenue by setting realistic measures, and reduction in inventories in project
managementsay 2 percent task by task (TBT). The budget should also
have the qualitative perspectives such as how the goals can be achieved
in a TBT manner and contribute to the revenue stream of the project
within the resource boundaries. The project budget is a linear projections
exercise based on the assumptions to the current project status. Hence,
project managers should meticulously look at the assumptions they are
making to prepare a budget for innovation projects. Usually budgeters
take a referral point to start with the budgeting exercise, which is either a
previous project or sheer assumption.
In 1997, building on its earlier success with Tokyo Disneyland, Oriental Land Corp. Japan and the Walt Disney Co. discussed the possibility
of a new joint project known as the Tokyo Disney Sea Park. Both companies had different approaches toward capital budgeting, and distinct
corporate governance regimes led the two firms to evaluate the project
in different ways. Budgetary proposals are often regarded as the principal
instrument for integrating innovation projects between two companies.
Although globalization of Japanese economy has advanced rapidly, the
management philosophy and capital budgeting techniques still differ significantly among Japanese and American firms. As innovation projects are
largely outsourced by the sponsor organizations and are initiated by the
start-up enterprises, the budget appropriation in innovation projects are
often less realistic and suffer from financial setbacks. In a joint venture,
such differences have a momentous impact on the decision-making processes (Misawa 2006).
Project managers of start-up enterprises should also allocate budget
for the various management phases during the postcommercialization
situation in the market. These budgetary stages begin from the point an
innovation project delivers the outcome to sponsors and is positioned in
the market for everyday operations. The budget at this stage should be
within the overall resource limits of the project that is preplanned with
the estimates of the returns on investment. Over a period, an innovation
positioned in the market would move to the second phase of incremental innovation, which demands improvements in the existing product
according to the customer experience and it is necessary to reach higher
efficiencies in managing the innovation by driving it cheaper. It is necessary to allocate budget to manage incremental innovation for driving
faster business growth of the product. Innovation in a competitive marketplace has a short life cycle. Hence, companies try to earn maximum
profit within a short span, which often pushes the innovations off the
market by competing products. However, some innovations sustain in
the market with different versions of products, because some companies
take care of such innovations by building customer networks and loyalty
by providing adequate budgetary support for the marketing activities. It
is likely that the growth of innovative products is transformed by the
disruptive innovations that appear in the market with new customer values (Villanueva 2013; Anderson and Narus 1998). Companies need to
earmark budget to manage disruptive innovations in the market also at
this stage. Thus, it should be understood by the companies that once
innovation projects are on, they continue till the deliverables stay in the
market and it is necessary to allocate budget for serving the products in
the market till their life span (Power and Stanton 2014).
The project manager should carry out prebudgetary exercises, and
upon simulation, allocate all costs to the predetermined project activities,
including the cost of internal and external human resources, equipment,
travel, materials, and supplies. The budget should be comprehensive,
realistic, and more accurate to implement the project without financial
disruption. Corporate budgeting, resource allocation, and risk control
should be designed to promote predictability and efficiency as there are
chances of project scope creep during the project, which may hit the budgetary allocations in the project midway. Project managers can increase
return on projects by rigorously extracting value from them by fixing
such loose ends of budgets and minimizing their downsides. Innovation
leaders of the start-up projects should expand their project insights on
deliverables to the customers, markets, and catering to the future trends
of related innovative products and services. The project team also needs
24
to magnify the impact of periodical project reviews by sharing among

their team members. Such qualitative project analytics with the project
team and supporting staff will build trust and goodwill and encourage
future initiatives. Project managers should guard the innovation projects
against execution failures by encouraging more openness among the team
members to respond to the probable risks. Mistakes are the inevitable
consequence of trying something new, but project managers can fence
tremendous value and develop right mindset to meet the challenges
(Birkinshaw and Hass 2016).
Most organizations have policies, procedures, and guidelines for
handling cost budgeting. It is necessary to ensure that all project team
members, administrative staff, and supporting manpower are well
acquainted with the project budget and cooperate in implementing the

project with the approved budgetary norms. The project team should find
a controller who will help the project team to understand how project
fits into the overall financial structures of the project as well as of the
company and sponsors organizational needs. The project managers
require the f ollowing information to prepare the project budget:

Activity Cost Estimates

Basis of Estimates
Scope Baseline
Project Schedule
Resource Calendars
Contracts
The project team should prepare the cost checklists for estimating the
project budget, which should include the cost of the human resources and
the equipment and materials required to perform the work. The method
of acquiring new project staff or drawing staff from the other departments within the organization will incur cost to the project cost center.
Hence, the project manager should also account for the hiring cost of
human resources in the project budget. As the budget estimate is being
developed, additional tasks may be identified and accordingly the WBS
and the project schedule should be updated to include the other activities
in the budget estimation. The principal deliverables need to be listed for

developing budget estimations and controls.
In addition to many common budgeting practices, there are two main
approaches. The top-down approach of budgeting estimates and decides
the total cost of the project by categorically allocating the costs between
the work packages. The bottom-up approach is used for estimating the
total cost of the project by costing the lowest-level work packages and
rolling up. Both approaches have their advantages and disadvantages, and
a project manager will be faced with both at some time while managing the project. A decision on project costing and budgeting is usually
made by the senior management. This amount is divided between the
work packages. This approach is more than extrapolating the budgetary requirements referring to the previous experience. Managers need to
explain how the tasks in the project can be performed within the allocated budget for each work package. Prior experience from other projects
will help in validating the budget allocation for work packages. However,
project managers need to ascertain whether the budget appears realistic
based on experience from past projects. The advantage of the top-down
budgeting approach is that it focuses on achieving the project within the
budget allocated and leads to deliver the performance with desired efficiencies by reducing wasteful practices that escalate costs and time. However, the top-down budgeting approach is subjective as it assumes that
the budget makers have substantial knowledge and expertise to make a
reasonable cost estimate. Conflicts with assumptions would lead to unrealistic budget proposal that is insufficient to deliver the project on the plea
of cost savings. In the bottom-up budgeting approach, the project team
identifies the tasks and activities needed to complete the project based
on the lowest-level work packages. The project team sums up the total
project cost, including the direct and indirect costs, calculated for each
work package. The bottom-up budgeting approach is more accurate than
the arbitrary estimates made in the top-down budgetary method. It is
good for the team morale because the project manager involves the team
in budget creation. One of the major risks in the bottom-up approach
is the missing of any tasks and forcing it to include later when the gap
is noticed. Such loose-end WBS and work packages drive the need for
26
supplementary budgeting, which is considered as a serious flaw in the

project financial management.
There are three types of budget estimates during the project cycle,
which include rough order of estimate, contract, and definitive. These
estimates vary marginally from each other in the way they are calculated,
adjusted, and used in the budget document. Project managers develop the
first budget estimate for use before or during the project initiation phase
with rough estimates with arbitrary rounding of cost figures and appropriations. The rough budget estimates of a project are based on matching
the goals of the project with the predetermined project deliverables. Most
rough estimates, depending on the project, have a range of variance from
25 percent (underestimations) to +50 percent (overestimations) of the
costing exercise. Contrary to the rough budgetary estimates, the contract
estimate is more accurate and can be developed in the first stage of the
project by collecting the required financial information from the sponsor
and the innovation project handling company. The exercise for developing
the contract estimate can be started right from the stage of formulating
objectives and enhanced while developing the WBS. Definitive estimate
is the most accurate of all the estimate types but time consuming. The
definitive estimate makes use of the WBS, which is a deliverables-oriented
decomposition of the project scope. This type of estimate is usually done
during the planning phase of the project to get detailed information on
all the project costs are available and work packages are created for each
tasks. The definitive budgets provide the organizational chart of accounts
to track costs in the accounting system and impose required controls.
The definitive estimate is used to estimate final project costs and for making purchase decisions where the actual costs are required before making
payments.
Executing the budget is the act of authorizing the expenses approved
on the project budget allowing the project manager to initiate spending.
This follows budget approval and then the project is scheduled to begin
operations according to the project plan. In the meantime, the finance
department of the organization and the sponsor would have established
a disbursement schedule through an authorized financial institution.
Acompany can pursue either an internal, organic approach to its financing options or an external, inorganic approach that uses borrowed funds
to make acquisitions it hopes will increase its business. This is the route
taken by Bharti Airtel Limited, Indias leading telecommunications giant.
Beginning in 2010, it has borrowed heavily on the international market
to invest in acquisitions of a 3G license in India, in Zain Africa, and in
the broadband wireless access branch of Qualcomm Inc. However, due to
many politico-economic reasons, including the effects of the global recession on the industry, high market competitiveness in the Indian telecom
industry, restructuring and disorganization within the management levels
in the organization, and lack of innovation in offering and delivering new
services in India, the profitability is seriously affected. Lack of appropriate
budgeting, cost estimations, and profit projects were found to be other
prominent setbacks in the operations of the company. Such decline in
the business growth has reflected in the quality of the deliverables and
stakeholders value (Goel 2014).
Factors Affecting Budgeting, Control, and

ProjectAdministration
In addition to the internal and external factors influencing the project
financial, analytical, organizational, and system-based rationale significantly affect the planning and project budget execution. Project managers
and sponsors of innovation projects should decide upon the analytical
rationale in drawing the project budget, considering whether the project
performance should lean toward increasing stakeholder value or profitability of the project. Analytical perspectives that are developed through
reasoning and based on project information, economic trends, and market forces guide meticulously the budgeting process of innovation projects. The financial strategies derived from this perspective are simple,
specific, and prescriptive to the project goals. The organizational rationale
in developing budget considers the corporate values of the start-up enterprises or sponsor companies, and applies them to the situation to make an
appropriate financial decision. While it might be expected that analytic
rationale would play a far greater role in innovation strategy and m
arket
appropriateness, the organizational identity is also a very significant
variable in developing and implementing the innovation projects. The
organizational perspective in innovation projects is usually cohesive with
28
the project goals. The project team may find some latent objectives, tasks,
and deliverables that might get aligned with the predetermined tasks of
the project over time. The organizational rationale in budgeting helps
the project team identify such latent expenditure points to plan for well
in advance. This perspective of in-depth exploration over the costs also
fosters a long-term view. The system-based rationale in an organization
employs a mixture of experience and insight in reference to the experience
of the organization in a similar project in the past and new insights in creating the commercial success through sustainable branding. The overall
knowledge developed through the profound knowledge of the real-time
prospects of the project deliverables in the market would help the project team to refine the budgetary provisions as well as allocate additional
financial provisions for the post-project management of deliverables in the
market. The systems perspective also guides the project team to develop a
sustainable business model for commercializing the innovative products
emerging as project deliverables. Each project has different orientation
toward managing the project financials. For example, Google, Johnson
& Johnson, and Ikea adopt a single best-suitable perspective for planning
the innovation projects and developing budget. Some companies such as
IBM and General Electric have excelled on more than one perspective
analytical insight, organizational rationale, and systems approach and
integration has helped these companies to develop their innovation and
business growth stronger as compared to the companies that are still performing with a single approach (Pea and Enric 2015).
Besides the internal and external factors affecting the budgeting process, the most significant and core requirement is the commitment of
management to the budget of the innovation project. This factor is apparently the foundation on which any robust budgetary provisions to the
innovation projects can be developed. Management needs to understand
that innovation is not merely an add-on or a privilege but key to the
profitability. This sense of project would help the project team to get the
fair cost estimates and provision TBT resources allocation in the project.
Some studied reveal that in successful firms, CEOs and executive board
members act as leaders of the innovation journey and stimulate the project team passionately by providing substantial resources for the project.
Allocating adequate financial resources in the budget not only helps the
teams to complete the project but also supports the robust innovation for
gaining competitive advantage. In public companies, often stakeholders
overpower the corporate management and seek explanations on project
finance and budgetary appropriations. Hence, it is important for the
project team to take the stakeholder into confidence about preparing the
project budget and its implementation. It is also necessary for the project manager to be proactive in communications with the project team
and supporting staff, sponsors, and other stakeholders to monitor the
project deliverables and expectations in the innovation process. Openly
and actively communicating with employees, for example, earns their
trust and engagement. In order to develop participation in the developing innovation project plan and budgeting, project managers should go
beyond brainstorming among the stakeholders and sponsor. The project
team should link strategy and purpose with project and initiative development by implementing a process of idea generation, selection, and
conversion, known as front-end innovation. Once the project charter
is complete, the debate on project budgeting can be initiated by assessing
the adequacy of financial resources, people, and competencies to execute
new innovation plans. The project team can accordingly make changes in
hiring people, cost estimations, and contingency planning with required
skills (Joan and Joaquim 2016).
Project Risk Management

The risk in the innovation projects exists similar to any other manufacturing project linked to commercialization. Among various types of risks,
the financial, human resource, and quality of supplies risks are very significant. The financial risks in a project are often seen as cash flow shortage
during third quarter and onwards due to the project scope creep to handle
additional tasks. Human resources risks also pose financial implication in
the project because of a wrong decision in human resources management
such as unexpected retrenchments of employees or forced downsizing.
Such situation is also aggravated by employees leaving the organization
voluntarily, abandoning the tasks midway. Hiring of substitute staff
demands additional capital through supplementary budgeting, which is
often a difficult task for the project managers. Supply delays or changes
30
in the attributes of products are commonly incurred during the project

unless the project staff foresees such contingencies and maintains adequate inventory of supplies. Supplier risks include also escalation of price,
variations in the quality, and client services. Such supply risks jeopardize
the financial plans and budgeting process in the innovation projects. The
quality risks are often associated with the low-cost suppliers who are not
consistent with the quality supplies.
In order to overcome the projects risks, the project managers should
identify the possible contingencies and prioritize them to resolve them
timely. Planning for managing the predicted and latent project risks prevents the project tasks from any unsmooth transitions and chaos, which
lowers the operational efficiency and quality of deliverables. To prioritize
the risks and map their expected occurrence, project managers should
conduct periodical project audits, make an assessment of negative impact
on the project at each risk, assign probability of occurrence to each risk,
budget for the contingency plan, and rank the risk audit. A proper audit
to identify the project risks would help the project managers in streamlining the project financials by allocating adequate budgetary provisions,
checks and balances, and loss prevention. Some risks like cost escalation
cannot be avoided, while others can be reduced. Hence, every innovation
project should have a contingency plan and the project team should be
trained in implementing this plan when the need is felt (Gary 2005).
Innovation project teams should undertake a systematic, disciplined
review of their innovation portfolios and increase the number of major
innovations at an acceptable level of risk. In mapping and managing the
risks in the innovation projects, the project teams may consider the following risk-fixing tools:
The project team may construct a risk matrix, which would
graphically reveal the distribution of risk across the project
stages and within the entire innovation portfolio. The matrix
allows the project leader and team members to estimate the
probability of each risk and the success or failure of managing
the risk based on its spatial and temporal size, impact, estimated loss, and the cost of fixing such risk. It is observed in
several innovation projects that the less familiar the product

or technology and the intended market, the higher the risk.
The second tool is an internal competence map exhibiting
decision on R-W-W (real-win-worth it) parameters that allows
the project teams to evaluate the risks and potential of project
solutions by answering six fundamental questions such as: Is
the risk apparent, does it affect the deliverable, and how the
commercialization of project outcome would affect the profitability of the project? The project team should also explore the
impact of risk on the customers needs, their willingness to
buy, and the size of the potential market (Day 2007).
Big projects are susceptible to failures as they often suffer from cost
and time overrun, causing lack of market competitiveness toward price,
quality, services, and competitive advantage. The high-budget and complex long-term projects are developed by a series of teams working along
parallel tracks by customizing their deliverables to the specific geodemographic end-user segments. Managers fail to anticipate everything that
might fall through the cracks, those tracks will not converge successfully
at the end to reach the goal due to widespread customization of the project deliverables across the regions and customer segments. Take a companywide customer relations management (CRM) project. Traditionally,
one team might analyze customers, another selects the software, a third
develops training programs, and so forth. For example, innovating CRM
services upon completion of the project may face the jeopardy of educating consumers on the benefits of innovation, which could decline the
performance of the project deliverables. Under such circumstances, the
way to uncover unanticipated problems is to inject into the overall plan a
series of mini projects, or rapid-results initiatives, to provide quick and
sustainable solutions of educating the consumers, bringing consumers
close to the innovative product, allowing rapid experience sharing, and
reducing the cost of the innovation at the end-user level. The World Bank
has used rapid-results initiatives to great effect to keep a sweeping 16-year
project on track and deliver visible results years ahead of schedule (Matta
and Ashkenas 2003).
32
Managing innovation projects is a challenging task for the project

team. Failure may be inevitable but, if managed well, can be very useful.
A certain amount of failure can help the project team keep options open,
find out the troubleshooting tasks, create the conditions to attract new
resources and expert attention, make room for new leaders, develop intuition to success, and improve the project management skills. Sometimes
the project failures at the middle of the project process can be considered as intelligent failure as such situations provide the project team
to learn from the failures and strengthen their strategies for succeeding
in the tasks ahead. It is necessary for the project managers to document
initial assumptions, test and revise them as the work moves on to the
next stages, and share them with the project team. Project managers can
limit the number of uncertainties in innovation projects and build a culture to increase failure resistance (McGrath 2011). The real challenge in
budgetary estimates is optimizing the trade-off between the direct costs
on the one hand and the hidden costs on the other. The senior managers
should adjust to their particular context to ensure that the most promising innovation proposals stand a good chance of being implemented
(Reitzig 2011).
Stakeholder Management
Large firms engaged in multidimensional business optimize their value
chain activities and competition to leverage valuable capabilities to
acquire sustainable competitive advantage. Effectively performing value
chain activities allow firms to develop capabilities to outmaneuver competitors and gain strategic advantage in enhancing their market share.
However, value chain activities are not of equal significance to all firms
due to varied specific goals. In order to understand the elements of the
value chain, it is important to first understand the resources and abilities
that create these underlying elements of the chain. The resource-based
view of the firm indicates that firms can achieve sustainable competitive advantage by implementing value-creating strategies with their valuable, uncommon, inimitable, and nonsubstitutable resources (Prajogo,
McDermott, and Goh 2008).
The postulate of value chain concept suggests that firms may achieve
competitive advantage as a result of intensive organizational expertise in
successfully performing value chain activities. As firms build higher proficiency in performing the backward (knowledge, technology, resources,
and manpower) and forward (supply chain, retailing, and marketing)
value chain activities, they may develop sustainable growth and posture in the marketplace (Porter 1985). The companies known for their
exceptional backward linkages having efficiency in technology, managerial know-how, and resources allocation include Honda, Intel, and Du
Pont. Similarly, Sony and Toyota are noted for both excellent backward
and forward value chains in reference to manufacturing and marketing
competencies, respectively, while Procter & Gamble and Wal-Mart are
acclaimed for their effective forward linkage concerning brand promotion
and distribution system, respectively.
Firms need to clearly understand the term value chain that suggests an orderly progression of activities allowing managers to formulate profitable strategies and coordinate operations with suppliers and
customers. The value chain should be integrated within a value grid.
The grid approach allows firms to identify opportunities and threats in
the competitive marketplace. It drives managers to understand the power
balance between suppliers and manufacturers. The new pathways to value
can be vertical as firms explore opportunities upstream or downstream
from the adjacent tiers in their value chain, while horizontal pathways
can be determined by identifying opportunities from spanning similar
tiers in multiple value chains among all functionaries and customers (Pil
and Holweg 2006).
Social media can be an extremely valuable way to create the stakeholder value by enriching culture toward adaptation of innovative products and enhancing the scope of commercialization of project deliverables.
However, managing stakeholder value through the social media is sensitive to misconceptions of communications about the new and untested
innovations. The main reason that some social media initiatives fail to
bring benefits to companies is because the initiatives are unable to create emotional capital to establish connection between stakeholders and
the company. Marketing firms should develop strategic value chain for
34
enhancing organizational capability for getting fast response to rapidly

evolving market dynamics (Huy and Shipilov 2012). In order to efficiently implement the value chain, firms should strive at finding response
to some of critical questions that include:

Where is value being created?

How to expand business?
Does the firm need outsourcing?
Which areas need investment?
How to optimize the value chain? and
Does the firm need to establish strategic alliance?
Firms are required to employ economic value-added analysis and

strategic value assessment such as customer preferences, the rate of
change of underlying technology, and competitive position in the marketplace (Fine et al. 2002). Most multinational firms are targeting the
bottom-of-the-pyramid market segments to acquire higher market share
in the mass market and these firms are fostering to develop sustainable
value chain by building local capacity through 4As comprising awareness,
acceptance, adaptability, and affordability. Firms also invest in educating
local market players and alliance partners, developing infrastructure, and
providing basic community services. The large firms also create shared
value opportunities by improving products and reorganizing market segments, redefining productivity in the value chain, and enabling local cluster development. As discussed earlier, large and emerging firms also aim at
co-creation of products and business models to upgrade the shareholder
value and enhance the value creation process. Emerging companies such
as AXA Group, dealing with financial and insurance business, is engaged
in dramatically redesigning the upper- and lower-end value chain architecture by reinventing the concept of customer value (Thomke and von
Hippel 2002). Companies should not only focus on operational efficiencies, but also modify their activities in the value chain to reach low-
income consumers or small suppliers (Anderson and Billou 2007). The
creation and governing of value chains in the firms will be critical to successful implementation of the strategy for effective backward and forward
linkages. Firms should stay in the marketplace constantly innovating new
products and processes and understand the changing behavior of markets

to develop long-term customer-centric strategies and efficient value chain
models (Esko, Zeromskis, and Hsuan 2013).
Managing stakeholder trust is difficult because there are many different stakeholder groups, each with its own particular needs and perspective. That is, trust is multidimensional, and its not obvious which
dimension do executives need to focus on when dealing with any particular constituency. The new framework challenges some existing beliefs
and sheds light on areas that companies would be wise not to ignore.
Indeed, as the authors illustrate, fundamental misunderstandings about
stakeholder trust have tripped up corporations such as Coca-Cola, Google, Apple, Delta Air Lines, Mattel, and Sprint. A deeper knowledge of
stakeholder trust will help businesses reap numerous benefits, including
improved cooperation with suppliers, increased motivation and productivity among employees, enhanced loyalty from customers, and higher
levels of support from investors (Pirson and Malhotra 2008).
A social media activist may have a mix of experience with product
design, marketing, software applications, and the extended reach of communication. Companies should analyze consumer experience centered on
social interactions to develop community-linked marketing approaches.
Such consumer connectivity helps the managers stay on social media platforms, such as a Facebook page and work with the social media account
management, social advertising, and social media campaign management,
that are the typical consumer-centric marketing tasks for a company. As
the social networks are growing fast and gaining the psychodynamics, there
emerges a need for a new executive level as social marketing strategist,
who can fully embrace the focus on social marketing. Companies should
develop social media strategies on the basis of Hub and Spoke model, where
a hub is located around social media. The hub may be led by the corporate
social strategist to monitor the core communication movements within
the networks and draw a framework of marketing strategy integrating
consumer attributes and corporate policy. The hub marketing framework
need to be further converged with the functionaries accountable in various
departments of the company that denotes spokes in the model.
Social media enveloping several consumer networks across the
regions in the world has rapidly gained share and attention among mass
36
consumers and companies, often at the cost of traditional media. Hence,

most companies have started to redefine key aspects of their marketing
mix, considering the activities of the informal networks of consumers.
With advertising and online word of mouth competing for shrinking
marketing budgets, many companies regard having an active presence in
social media as a viable alternative to traditional advertising. A comparison of advertising and word of mouth shows that social media follows
rules that are very different from traditional advertising. Social media can
start conversations or build brand recognition, but the results are much
more difficult to predict or measure (Armelini and Villanueva 2011).
Social technologies are forcing marketers to form new kinds of relationships with customers, but traditional brand management models
are different for these new kinds of interactions between companies and
consumers. Brand marketers need to update their models to include new-
media mentors, who are digitally knowledgeable executives and intend to
move fast, understand how to integrate social media into corporate communications, and can organize cross-functional teams (Spenner 2010).
The pharmaceutical industry provides a good example of interventions of
social networks in marketing. It has been observed that social networks
play a key role in doctors prescribing choices. Doctors tend to be slow to
recommend a drug despite being proven effective, and patients and pharmacists often wait until the doctors they trust start doing so. Studies have
shown that physicians were much more likely to prescribe the diabetes
medication Januvia if they had Januvia adopters in their networks. Social
connections can also work the other way, turning physicians away from
certain drugs. Sales of Pfizers cholesterol drug Lipitor declined quickly
when a generic penetrated the U.S. market. Consequently, interconnected
doctors switched their prescriptions accordingly. The drug industry is an
apparent place for the activists of social networks to comment on drugs,
doctors, and hospitals (Miller and Christakis 2011).
Most consumer-centric companies in the postglobalization era are
leaning toward decentralization of organizations and declining operational boundaries, because coordination increasingly occurs through
networks of informal relations. As such, firms are moving to various
network forms through joint ventures, alliances, and other collaborative
relationships, executives generally pay little attention to assessing and
supporting informal networks within their own organizations. Social

network analysis is valuable in facilitating collaboration among various
strategic groups in the company such as leadership networks, strategic
business units, new product development teams, communities of practice, joint ventures, and mergers. By making informal networks visible,
social network analysis helps managers systematically assess and support
strategically important collaboration (Cross, Borgatti, and Parkar 2002).
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Index
AATAR principle. See Attributes,
awareness, trial, availability,
and repeat (AATAR) principle
Abernathy-Utterback (AU) model,
6064
Attributes, awareness, trial,
availability, and repeat
(AATAR) principle, 140
BAC. See Budget at complete (BAC)
Behavioral shifts, 117118
Blue ocean innovation, 83
BPO. See Business process
outsourcing (BPO)
Brainstorming, 16
Budget. See Project budgeting and
control
Budget at complete (BAC), 15
Business process outsourcing (BPO),
96
Butterfly effects
cannibalization, 111, 112
competitive marketplace, 113
contemporary global business
models, 108
global corporation, 109
global marketing, 109
large firms operation, 112
markets and consumer segments,
106107
product differentiation, 107, 110
regional marketing efforts, 109
technology firms, 108
Cannibalization, 111, 112
Citizen Sector Organizations (CSOs),
181
Coca-Cola, 109
Collaborative new product
development (Co-NPD),
1718
Commercialization attributes, 4142

consumer segment, 4445
customer value, 46
11 Ps, 42
Google, 45
innovation-led products, 43
Internet, 4849
lead users, 43
QFD, 4748
Commitment, 102
Community creation model, 123
Competence-based theory, 59
Competition-linked market
turbulence syndrome, 63
Competitive intelligence, 127
Co-NPD. See Collaborative new
product development
(Co-NPD)
Consumer analytics
cognitive drivers, consumer
behavior, 162
consumer behavior, 158
cultural dimensions, 161
cultural values affect, 158159
customer-centric market, 156
Departmental stores and Lifestyle
Centers, 163164
distinctiveness behavior, 157158
emerging markets, 160
fashion and designer apparel, 158
internal and external resources, 157
manufacturers and marketers
develop, 162163
market stimulants, 156
modern market, 160
optimal distinctiveness, 157
outshopping, personality attributes
of consumers, 159160
retail and departmental stores, 159
shopping behavior, 163
store brands, 164166
190 Index
three-dimensional Automatic
Made-to-Measure scheme,
160161
Consumer-oriented innovation, 143
Consumer values, 160
Contemporary global business
models, 108
COQ. See Cost of quality (COQ)
Corporate awareness, 82
Corporate success, 79
Cost-benefit analysis, 57
Cost-effective projects
applications, 9293
business process outsourcing
(BPO), 96
companies, integrated approach,
93
control, 92
cost budgeting, 92
cost estimation, 9192
cost management, 91, 94
earned value management (EVM)
analysis, 95, 96
innovation mix, 94
new product development (NPD),
95
Cost estimations
activity-based costing, 6
analogous estimates, 34, 7
bottom-up approach, 7
CPU, 8
EJ, 6
indirect costs, 89
parametric estimation, 7, 910
project budget, 8
reserve analysis cost estimates, 10
three-point estimates, 4
top-down approach, 67
VA-based costing, 6
Cost of quality (COQ), 4, 7
Cost performance index (CPI), 14,
9596
Cost-per-unit (CPU), 8
CPI. See Cost performance index
CPM. See Critical Path Method
Critical Path Method (CPM), 4
CRM. See Customer relations
management
CSOs. See Citizen Sector

Organizations
Customer-centric business projects
call centers, 98
commitment, 102
consumer analytics, 156166
contemporary generations, 103
customer product strategies,
166169
global-local marketing, 172180
global manufacturing companies,
97
good manufacturing practices,
9899
growth-related business decisions,
99
innovation, global perspectives of,
180182
innovation, local effects, 153156
marketing philosophy, 100
new product development (NPD),
97
profit-oriented customer-centric
projects, 101
psychodynamism, 102103
Six Sigma methodology, 98
social media, 102
synergy of technology and customer
value, 169172
technology-based services, 100
traditional marketing research
methods, 102
word-of-mouth communication,
101
Customer-centric innovations, 84, 85
Customer product strategies
appropriate promotional strategies,
168169
customer-centric approaches, 167
determination and development,
166
good manufacturing practices,
167168
ideation process, 166167
product development manager, 168
scientific approaches, 166
systematically explored concepts,
168
Index 191
Customer relations management

(CRM), 31
Customer value
DuPont, 169
high-value-high-technology goods,
sales and services, 169170
mobile marketing, 171
self-service retail stores, 170, 171
service organization, technology,
172
Darwinian effect, 90
Darwinian principle, 145
Demand variability, 139
Departmental stores, 163164
Derived innovation, 84
DICE model, 50
Digital socioeconomic
communication, 118
Disruptive innovation, 84, 131132
DuPont, 169
EAC. See Estimate at completion
Earned value management (EVM),
1116, 95, 96
Eastman Kodak Company, 107
Economic environment, 127
Enterprise integration, 82
Estimate at completion (EAC), 15
Estimate to complete (ETC), 15
ETC. See Estimate to complete
EVM. See Earned value management
Expert judgment (EJ), 6
Freeform design platform, 161
Front-end innovation, 29
Frugal innovation, 83
Fujifilm, 128
GE Healthcare, 86
General Electric (GE) Company,
6970, 106
Global enterprises, 180, 182
Globalization, 80, 153
consumer analytics, 156166
customer product strategies,
166169
global-local marketing, 172180

innovation, global perspectives of,
180182
innovation, local effects, 153156
synergy of technology and customer
value, 169172
Global-local marketing
competition, children to, 176177
conducting business, 175
diverse communication strategies,
180
economic advancement,
contemporary concepts of,
177
economic policies, virtual shopping
and liberalization, 175
hybrid business cultures, 173
keys of, 172173
knowledge-based competition,
175176
market access, 173, 179
market competition, 178179
production process, specialization
of, 174175
production sharing, 174
relationships, 176
Global marketing, 109
Godrej Consumer Products, 93
Good manufacturing practices,
9899, 167168
Google, 91
Grapevine innovation, 83
Haier Group, 93
Hamburguesas Memorables, 93
Harley-Davidson Company, 102, 103
Hewlett-Packard, 129
High active innovation, 83
High-value integrated solutions, 141
Holistic thinking, 74
Hub and Spoke model, 35
IBM. See nternational Business
Machines Corporation (IBM)
Ideation process, 166167
IFG. See Innovation facilities group
Information technology, 90
192 Index
Innovation assimilation group, 82

Innovation breakthrough projects
crowdsourcing, 103104
General Electric (GE) Company,
106
Internet and open innovation, 105
lead user process, 106
mentoring and peer networks,
104105
sustaining innovation, 104
Innovation facilities group (IFG), 82
Innovative business projects
behavioral shifts, 117118
and butterfly effects, 106113
cost-effective projects, 9196
customer-centric business projects,
97103
innovation breakthrough projects,
103106
low-end market segment, 144148
market chaos, 118126
reverse innovation business
projects, 8491
technology growth, 126135
technology marketing, complexities
in, 135138
temporal and spatial factors,
138144
trends and taxonomy, 7984
Integrated product development, 139
Intelligent failure, 32
Interactive design, 75
Interactivity, 75
International Business Machines
Corporation (IBM), 174
International innovation companies,
85
Internet, 103, 105
Kickoff meetings, 20
Knowledge-based competition,
175176
Kodak, 128
Leadership, Innovation, and Growth
(LIG) program, 6970
Lean project management, 6465
error-proofing/poka-yoke, 67
expectations, 6869
gemba walk, 6768
kaizen, 6667
LIG, 6970
OCT, 70
one-piece flow, 66
organic products, 71
system optimization, 67
systems thinking, 7175
value stream mapping, 66
work packages, 66
Lifestyle Centers, 163164
LIG program. See Leadership,
Innovation, and Growth
(LIG) program
Local effects
economic and relational
characteristics of consumers,
154155
geodemographic attributes, 154
global firms, 156
marketplace, 153
market segmentation, 155
sociocultural attributes, 154
traditional marketing strategies,
155
Local market competition, 117
Low-end market segments
bottom-of-the-pyramid market
segment, firms penetrating,
147148
brand associations, 148
consumer behavior, 145
Darwinian principle, 145
global companies, 146
globalization thrust, 147
multinational companies (MNCs),
145146
Mahindra and Mahindra, 93
Managerial decision making, 58
Maquiladora, 2
Market chaos
assessments, 122123
community creation model,
123124
companies, substantial efforts, 124
critical parameters, 122
differentiated product, 126
and differentiation, 125126
and disruption attributes, 119, 120
dynamic behavior, 118119
Index 193
factor determination, 121

information technology and
business forecasting tools, 124
Nissan Automobiles, 125
outmaneuvering, 122
theory of, 119
Market competition, 7981
Market-driven innovation, 82
MCDM. See Multiple-criteria
decision-making
Medical-Surgical Markets Division,
106
Microeconomic environment, 127
MNCs. See Multinational companies
Multinational companies, 81
Multinational companies (MNCs),
145146
Multiple-criteria decision-making
(MCDM), 59
New product development (NPD),
95, 97
New project designs, 4951
Abernathy-Utterback (AU) model,
6064
commercialization attributes (see
commercialization attributes)
DICE, 50
innovation products, 5254
lean project management (see Lean
project management)
project management, 54
SMART, 52
standardization vs. customization,
5560
STARS, 55
transitions, 5455
Next-generation products, 102
Nissan, 125
NPD. See New product development
OCT. See Organic cosmetics and
toiletries
Online communication, 101
Open-market innovation, 84
Operational thinking, 7475
Optimal distinctiveness theory, 157
Organic cosmetics and toiletries
(OCT), 70
Organizational integration, 182

Outshopping, 159160
Passive innovation, 84
Pepsi-Cola company, 109
Perceptual mapping, 97, 98
PERT. See Program Evaluation and
Review Technique
Photo film products, 128
Point-of-sales (POS), 144
Products and services innovations,
8384
Profit-oriented customer-centric
projects, 101
Program Evaluation and Review
Technique (PERT), 4
Project budgeting and control
bottom-up approach, 2526
execution, 2627
incremental innovation, 23
management, 2829
postcommercialization, 22
project managers, 2224
task by task (TBT), 22
top-down approach, 25
types, 26
Project planning process
brainstorming, 16
Co-NPD, 1718
kickoff meetings, 20
roles, 19
WBS, 2021
Project risk management, 2932
Psychodynamism, 102103
QFD. See Quality Function
Deployment
Quality Function Deployment
(QFD), 4748
Real-win-worth it (R-W-W), 31
Red ocean innovation, 83
Reverse innovation business projects,
8391
attributes of, 86, 87
commercialization, 85
customer-centric innovations,
8485
fundamental driver, 8990
194 Index
GE Healthcare, 86
Google, 91
information technology, 90
international innovation
companies, 85, 88
phases, 8889
Risk. See Project risk management
Risk matrix, 3031
R-W-W. See Real-win-worth it
Schedule performance index (SPI), 14
S-curve technology, 6263
Self-service retail stores, 170
Shopping behavior, 163
Situation, turnaround, accelerated
growth, realignment, and
sustainability (STARS), 55
SMART. See Strategic, measurable,
adaptable, responsive, and
timely
Social Cognitive Theory, 163
Social media, 103
Societal value and lifestyle (VALS)
system, 160
SPI. See Schedule performance index
Spidergram approach, 58, 59
Stakeholder management
firms, 34
social media, 3336
value chain, 3233
Starbucks Corporation, 109
STARS. See Situation, turnaround,
accelerated growth,
realignment, and
sustainability
Store brands, 164
Strategic, measurable, adaptable,
responsive, and timely
(SMART), 52
Tata Motors Corporation, 125
Technology
synergy of, 169172
Technology-based services, 100
Technology-based start-ups, 59
Technology growth
attractive product market and
consumers, 133
competitive intelligence, 127
disruptive innovation, 131132
e-commerce transactions, 133134
economic environment, 127
global marketplace, cannibalization,
130131
growing competition, 133
market attractiveness, 127
mobile phones, market of, 129
ongoing process, 126127
in photo film products, 128
technology-led innovations and
business models, 128
U.S., Japanese and European
companies, 132
Teradyne, 129
TIC effect. See Trust, involvement,
and commitment effect
Toyota Production System (TPS), 64
TPS. See Toyota Production System
Trust, involvement, and commitment
(TIC) effect, 101
User-driven innovation, 84
Value chain, 3233
Vendor analysis (VA), 6
WBS. See Work breakdown structure
Word-of-mouth communication, 101
Work breakdown structure (WBS),
15, 2021
Xiaomi, 129

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Innovative Business

Innovative Business Projects: Breaking Complexities, Building Performance,

With love to Arati,

management and stakeholder value management also constitute the core

Project Financials and Risk

INNOVATIVE BUSINESS PROJECTS

Cost Estimations in Innovation Projects

Project Financials and Risk Management 3

INNOVATIVE BUSINESS PROJECTS

of analogous estimates is dependent on the similarities between the two

Figure 1.1 Costing techniques for innovation projects

Cost estimation techniques in

Activity based costing

Resource costs salaries

Best practices followed by the

INNOVATIVE BUSINESS PROJECTS

techniques to be used in innovation projects. Activity-based costing is

Project Financials and Risk Management 7

to maximize returns from the investment of R&D and other resources.

INNOVATIVE BUSINESS PROJECTS

Project Financials and Risk Management 9

overhead costs that lead to expenditure on the functionality of the project

INNOVATIVE BUSINESS PROJECTS

Project Financials and Risk Management 11

start-up enterprises that are engaged in developing innovative products

Earned Value Management

INNOVATIVE BUSINESS PROJECTS

EVM implementations for large or complex projects need analysis of

Improves the planning process;

A simple explanation to the EV in a project is the difference between

Assessment date for

Figure 1.2 Earned value management in an innovation project

AP-planned value (PV)

The gap between the

INNOVATIVE BUSINESS PROJECTS

planned to do. This expenditure is related to the variance in time (more

Project Financials and Risk Management 15

estimate at completion (EAC) is estimated for a project at the current

INNOVATIVE BUSINESS PROJECTS

Project Planning Process

Project Financials and Risk Management 17

INNOVATIVE BUSINESS PROJECTS

Critically observe and live with consumers

Project Financials and Risk Management 19

INNOVATIVE BUSINESS PROJECTS

In order to initiate the project, a kickoff meeting is considered to

Project Financials and Risk Management 21

Project Budgeting and Control

INNOVATIVE BUSINESS PROJECTS

boundaries on budgeting to reduce the cost spree. The project budgets

Project Financials and Risk Management 23

INNOVATIVE BUSINESS PROJECTS

to magnify the impact of periodical project reviews by sharing among

acquainted with the project budget and cooperate in implementing the

require the f ollowing information to prepare the project budget:

Activity Cost Estimates

Project Financials and Risk Management 25

in the budget estimation. The principal deliverables need to be listed for

INNOVATIVE BUSINESS PROJECTS

supplementary budgeting, which is considered as a serious flaw in the

Project Financials and Risk Management 27

Factors Affecting Budgeting, Control, and

INNOVATIVE BUSINESS PROJECTS

Project Financials and Risk Management 29