Innovation Management

Unit 3

Invention
A new product or system or process that has never existed before, created by study and experimentation.

Invention
One of the top inventions of all times was the Telephone.
In the 1870s, two inventors Elisha Gray and Alexander Graham Bell both independently designed devices that could transmit speech electrically (the telephone). Both men rushed their respective designs to the patent office within hours of each other, Alexander Graham Bell patented his telephone first.

Invention
Another popular invention was the Light Bulb!

Invention
Contrary to popular belief, Thomas Alva Edison didn't "invent" the light bulb, but rather he improved upon a 50-year-old idea.

In 1809, Humphry Davy, an English chemist, invented the first electric light. In 1879, Thomas Alva Edison invented a carbon filament that burned for forty hours.

Innovation
An improvement of an existing technological product, system, or method of doing something.

Innovation
A very popular innovation today is the Cell Phone.
In 1979, the first commercial cellular phone system began operation in Tokyo. -- By the end of 2004, the number of wireless subscribers in the USA surpassed 180.5 million.

Innovation Involves
Being Creative!

Making New Things!

Patent
A patent for an invention is the grant of a property right to the inventor, issued by the Patent and Trademark Office. Generally, the term of a new patent is 20 years from the date on which the application for the patent was filed.

Patent
Patent Pending or Patent Applied For are phrases that often appears on manufactured items. It means that someone has applied for a patent on an invention that is contained in the manufactured item.
On November 15, 1904, patent #775,134 was granted to King C. Gillette for a safety 'razor'.

Serendipity
An accidental discovery! Some inventions come about accidentally.

Serendipity
Charles Goodyears (1800 -1860) name is now part of the Goodyear Tire & Rubber Company. He was working for years on how to vulcanize (or strengthen) rubber without much success until he accidentally dropped a bit of rubber with some sulfur onto a hot stove.

Design
It is the creative planning process that leads to useful products and systems. Designers plan and conceive ideas in their minds. Design can also refer to making drawings, patterns, or sketches. One type of design is called Engineering Design.

The Design Loop

Different tasks to be completed
Suggested, rather than prescriptive

1. 2. 3. 4. 5. 6. 7.

Identify the problem Investigating Developing ideas Refining the idea Modeling/prototyping Evaluating/assessing Communicating

1. Understand the Problem

Before solving the problem, we must:
Analyze the situation Determine what is the actual problem? Define the problem Understand the problem

2. Investigate the Problem

Explore possible alternative solutions Conduct research
Past experiences and knowledge Observations (examine similar problems/solutions) Talk with others with the same type problem (interviews, telephone calls, e-mail) Search for new information (books, Internet, search of similar products) Explore community resources (shops, businesses, museums, industries)

3. Develop Ideas & Potential Solutions

Ask questions!
Brainstorm Generate multiple ideas Think of consequences Identify alternatives Consider constraints Consider limits Consider specifications Consider risks/benefits

4. Refine & Detail Ideas

Sketches and drawings Combining/separating ideas Evaluate pros & cons of different ideas Idea selection Creating rough and final drawings

5. Mock-ups, Models & Prototypes

Models give a representation of final product Models give a chance to make last minute changes Prototype is the first working version of product Test prototypes and refine product Finally mass produce product

6. Evaluation & Assessment

Testing the solution
Did the product/system solve the problem?

Evaluating the process What could be changed in the future? Is the proposed solution the simplest possible?

7. Communication
Recording and presenting the idea
Drawings, sketches, graphs, materials lists

Documentation of:
Major steps Materials/techniques used Discarded ideas

Demonstration of proposed solution Future changes/ideas Important for those who will use your ideas in the future

Change of the design paradigm

Design process must incorporate such disciplines as
innovation management team work creativity knowledge management

Design-driven cost reduction

Four cornerstones of the design-driven cost reduction:
Process discipline imposed at every stage Target setting and transparent monitoring Cross-functional organization removing organizational barriers and fostering collaboration and creativity Management commitment, empowering design teams to make and implement difficult decisions

Stage-Gate process

Kill unsuccessful projects in early stages, before they waste significant resources

Top 10 Inventions: About .Com

Here are the most popular inventions researched by their readers. 1) The Telephone 2) The History of Computers 3) Television 4) The Automobile 5) The Cotton Gin 6) The Camera 7) The Steam Engine 8) The Sewing Machine 9) The Light Bulb 10) Penicillin

Sources of Innovation
Companies Private non-profit organizations Individuals Universities Government agencies

Sources of Innovation
Innovation need not arise from any one specific source but may emerge from one or more components of the system or the linkages between them. It begins with the generation of new ideas. Innovation is not only the generation of creative ideas but converting those ideas into some new products, processes or services. This requires a combination of creative idea with resource and expertise that makes it possible to convert the idea into a working idea.

Types of Innovation

In business and economics, innovation is often divided into five types: 1. Product innovation, which involves the introduction of a new good or service that is substantially improved. This might include improvements in functional characteristics, technical abilities, ease of use, or any other dimension. 2. Process innovation involves the implementation of a new or significantly improved production or delivery method.

3. Marketing innovation is the development of new marketing methods with improvement in product design or packaging, product promotion or pricing. 4. Organizational innovation (also referred to as social innovation) involves the creation of new organizations, business practices, ways of running organizations or new organizational behavior. 5. Business Model innovation involves changing the way business is done in terms of capturing value e.g. Compaq vs. Dell.

Innovation strategy

Strategies of Innovation
Product innovation Vs Process innovation Radical Vs Incremental Competence enhancing Vs competence destroying Architectural Vs Component Sustaining Vs Disruptive

Product Vs Process Innovation

Product innovations are related to the development, modifications or upgrades of products Whereas Process innovations are pertaining to development, modifications or upgrades of processes. New processes may, in most of the cases lead to new products. Similarly, new products may lead to the development of new processes. Also, a product innovation for one company may actually be a process innovation for the other.

Radical Vs. Incremental innovation

Radical means the degree of newness and differentness A radical innovation may introduce a technology that is new to the existing products or services or processes. Radical innovations may also be exceptionally different from the previously existing products or services or processes. Whereas, incremental might not be exceptionally differentit might just be a modification or updation to the existing product or service or process. Incremental may thus be already known and may involve minor change.

Competence enhancing Vs. Competence destroying innovation

If an innovation capitalize on and builds existing knowledge base of an organization, it is called competence enhancing. (Ex MS Windows) Whereas if an innovation destroys the existing knowledge base of an organization, it is known as Competence destroying innovation.

Architectural Vs. Component innovation

If an innovation leads to a change in one or more of the components of a system but not to the overall architecture, then it is known as Component innovation. Whereas if the overall design of a system or the manner in which components interact changes, then such an innovation is known as Architectural innovation.

DISRUPTIVE INNOVATION
Even the best managed companies, focused on their best customers and most profitable markets, often fail in competition with far less technologically sophisticated products.

Sustaining vs.disruptive innovation

sustaining: focus on better product that can be sold with greater margin disruptive: brings to the market simpler, more convenient, cheaper product that at the beginning appeals to new or unattractive customers

The disruptive innovation model

Christensen 2003, p.33

Low-end disruption
focuses on the low end of the mainstream market (minimills, discount retail stores, Korean car makers) there are customers happy to purchase a cheaper product with less (but good enough) performance it is possible to create a business model making money at lower price per unit sold.

Innovator's dilemma and solution

moving up the trajectory into successively higher-margin tiers of the market and shedding less-profitable products at the low end is something that all good managers must do innovators dilemma each company prepares its own disruption start of the innovators solution: the company has to be prepared to disrupt itself, before anybody else does it

The innovators dilemma

The farther that any company seeks to innovate, as measured by the degrees of change from its base markets and technologies, the greater the likelyhood that its innovation efforts will fail. And yet, the less that a firm seeks to innovate, across the board, the greater the likelyhood that the corporation itself will fail.

New market disruption

products compete with nonconsumption.
more affordable and simpler to use by new users (PC, transistor radio, desk copiers) as their performance improves, they become good enough for the mainstream market with all the consequences

there has to be sufficient number of less skilled or less affluent people who can own and use the technology that was formerly available only to more skilled or more affluent people, possibly only in centralized, inconvenient location.

Patterns in Technological Innovation

Numerous studies of innovation have revealed recurring patterns in how technologies emerge, evolve and are adopted and displaced by other technologies. Both the rate of technologys performance improvement and the rate at which the technology is adopted in the marketplace have been shown to conform to an S-shaped curve.

Towards incrementalist models

Trend towards incrementalism, experimentalism and learning (e.g. explore a range of possible trends, ensure broad participation, use multiple sources for innovation, change strategies in the light of new knowledge etc. Because... Formalization undercuts planning, managers beliefs about the company are often wrong, difficulties in forecasting over the long term; under conditions of fast and continuous change incrementalism is better than rationalism

Two approaches towards innovation

Competive

The dynamic capabilities approach

Emphasizes the two aspects:
The shifting character of the environment Adapting, integrating, and re-configuring internal and external organizational skills, resources and functional competencies towards a changing environment.

Three key variables:

Positions (e.g. systems of innovation and rivalry) paths (e.g. core competencies and tech trajectories) processes (e.g. control and organization)

Concurrent Engineering

Outlin e
Elements of CE Status of CE Acceptance of CE Novel Applications Challenges Progress in Standards and Groupware

Definition
Systematic approach to integrated product development that emphasizes response to customer expectations and embodies team values of cooperation, trust and sharing in such a manner that decision making proceeds with large intervals of parallel working by all life-cycle perspectives, synchronized by comparatively brief exchanges to produce consensus.

Concurrent Engineering
Concurrent engineering methodologies permit the separate tasks of the product development process to be carried out simultaneously rather than sequentially. Product design, testing, manufacturing and process planning through logistics, for example, are done side-by-side and interactively. Potential problems in fabrication, assembly, support and quality are identified and resolved early in the design process.

Concep t
s u p p o rt
co m m o n p r o d u ct co n cep t

d e s ig n

a n a ly s is

s up po rt

m a te r i a l s

u n ifie d pm r o dn u pc rt o dc u o c mt m u n i c a o c o m n e tw o r k n c c o c no c e e pp t t

d e s ig n

m a n a g e m e
m a n u f a c tu r i n g

m a n u f a c t u r in g

m a t e r ia ls

m a r k e t in g

T a a po c e mp r a h

V ir tu a l te a m a p p ro a c h N e tw o r k e d c o - lo c a tio n U n ifie d v is io n

Elements of CE
Structure the TEAM for doing the work with clear ROLES and strong LEADERSHIP and EMPOWERMENT. Sharpen the VISION of what is the goal. Organize the COMPANY around the WORKFLOW. NETWORK the organization humanly and electronically. Involve every PERSPECTIVE in the full cycle of decision making from the BEGINNING. Propagate information EARLY. Implement systems for ease of SHARING.

IMPROVE work processes to shorten TIME and increase CONCURRENCY. COORDINATE around TASKS, and DATA resulting from tasks. Maintain a CUSTOMER-derived slant for assessing status. Resolve CONFLICTS (a) when absolutely necessary (b) by CONSENSUS.

Nuts and Bolts

Basic Tenets of Concurrent Engineering -Doing things simultaneously -Focusing on the Process -Converting hierarchical organizations into teams

Nuts and Bolts

Basic Goals of Concurrent Engineering -Dramatic improvements in time to market and costs -Improvements to product quality and performance -Do more with less

Nuts and Bolts

Concurrent Engineering = Teamwork -The more communication exists, the the product.

better

Balances Needs -Customer,

Supplier, Engineers, Marketing, and Manufacturing needs.

Nuts and Bolts

Management -Good mgmt is vitally important -Encourage communication -Strong mgmt support

How it Works
3 Main Areas to Concurrent Engineering 1) People 2) Process 3) Technology

How It Works
Area 1: People -Formation of teams -Training

How It Works
Area 2: Process -Changes in your processes -Be open to change

How It Works
Area 3: Technology -CAD/CAM -Software. Hardware, and Networking

Economics of Innovation

Introduction and Basic Concepts

Demand side versus Supply side Exogenous (outside system) versus endogenous Two approaches to system change
Mechanical (identical firm, representative, equilibrium concept regardless of time and place) Evolutionary (creation, variation, path dependence, selection)

Introduction and Basic Concepts

Evolutionary reasoning with three principles:
Variation (inter-firm differences in productive efficiency or capability) Heredity (the existence of copying mechanism retaining stability of the form, transmits information from one generation to another, ex. education and training) Selection (the differential reproduction of individuals that differ uniquely in their adaptive superiority)
Variety ensures the scope for selection

Introduction and Basic Concepts

Technique (knowledge, tools and organization of the production process) Technology (set of techniques) Technological change (addition of new technique into the set of knowledge or improvement in the existing) Knowledge
Codified versus tacit (not codified)

Technology
Embodied (within) versus disembodied

Innovation, Systems and Evolution: Introduction and Basic Concepts

Process of innovation (all activities which bring about technological change and the dynamic interactions among them) Elements of innovation R&D
Basic versus applied

Stages in the innovation process

Invention (creation) Innovation (commercial application of inventions for the first time) Imitation (or diffusion) (post-innovation adoption of new technology

Introduction and Basic Concepts

Science push
Technological innovation is driven or pushed by science (by pure scientific research) Linear model of innovation Scientific activity and invention

Demand pull
Market demand exclusively determined what applied research was undertaken Observe demand and innovate to produce

Perspectives on Innovation: Product and Process Innovations

Process of innovation Elements of the innovation process Stages in the innovation process The impact of technological change Production and technological progress (exogenous, endogenous, factor augmentation)

Innovation and The Economics of Demand

Consumer demand Static consumer demand analysis Introducing new products Dynamic demand analysis (adoption and diffusion) Producers demand for inputs and innovation

Innovation and Production Costs

The cost function The impact of progress Productivity, technical efficiency and cost R&D costs Learning, routines and R&D

Innovation and The Firm Innovation, Competition and Industry Structure

The firm Exogenous technological change The incentive to innovate Costly innovation in the firm Strategic innovation investment Innovation and boundaries of the firm Market structure and innovation

Industrial Innovation
The Industrial Revolution The age of electricity and steel Process innovations in oil and chemicals Synthetic materials Mass production and the automobile Electronics and computers

Importance of innovation
innovation is critical to success product life cycle is getting shorter and shorter new products must me introduced ever more frequently design-push approach must be changed to market-pull

Problems encountered
most new products are overengineered majority of businesses commercialize less than 20% of promising ideas the biggest barrier is a lack of people with adequate skills

Possible solutions
technological excellence is necessary, however often not sufficient for the innovations success technical skills must be combined with business and managerial ones information and communication technologies, can support design process innovation

OPEN INNOVATION
Closed innovation - requires control Open innovation
companies use external as well as internal ideas and both external and internal ways to market internal ideas can be taken to the market through external channels to generate additional value