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Innovation management

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Innovation management

  1. 1. INNOVATION MANAGEMENT By Anand Balaji Manu Mayur Kowshik Sharique Vidyashankar
  2. 2. CHARACTERISTICCHARACTERISTICSS OF SUCCESSFULOF SUCCESSFUL INNOVATING COMPANIESINNOVATING COMPANIES - 1- 1  Systematic collection of all impulses that could lead toSystematic collection of all impulses that could lead to innovationinnovation  Creativity of employeesCreativity of employees  Ability to evaluate the possibility of the innovation ideaAbility to evaluate the possibility of the innovation idea  Good team workGood team work  Project-based approach and ability to manage projectsProject-based approach and ability to manage projects MAYUR
  3. 3. CHARACTERISTICCHARACTERISTICSS OF SUCCESSFULOF SUCCESSFUL INNOVATINGINNOVATING COMPANIES - 2- 2  Cooperation with external experts (universities,Cooperation with external experts (universities, research laboratories…)research laboratories…)  Proper rate of risk-takingProper rate of risk-taking  Employees’ motivation (the employees are willing toEmployees’ motivation (the employees are willing to improve the product and the operation of the wholeimprove the product and the operation of the whole company)company)  Continued education of employeesContinued education of employees  Ability to finance the innovation activitiesAbility to finance the innovation activities
  4. 4. WHAT ISWHAT IS INNOVATIONINNOVATION  An innovation is considered performed if it isAn innovation is considered performed if it is introduced to the market (introduced to the market (product innovationproduct innovation)) or implemented in the production processor implemented in the production process ((process innovationprocess innovation).).  Innovation includes many research,Innovation includes many research, technological, organizational, financial andtechnological, organizational, financial and commercial activities.commercial activities.
  5. 5. CLASSIFICATION OF INNOVATIONS SYSTEM New series of cars, planes, computers, TV New generation (MP3 and download as substitution of CD) Steam engine, ICT, biotechnology, nanotechnology COMPONENT Improvement of components New components for existing systems Advanced materials improving component properties INCREMENTAL „do better what we already do“ „new for the company“ RADICAL „new for the world“
  6. 6. INNOVATION CATEGORIES  SUSTAININGSUSTAINING – better products that can be sold with– better products that can be sold with higher margin to demanding customers; incumbentshigher margin to demanding customers; incumbents winwin  DISRUPTIVEDISRUPTIVE – commercialization of simpler, more– commercialization of simpler, more user-friendly products, which are chepaer anduser-friendly products, which are chepaer and targeted to new or less demanding customers; newtargeted to new or less demanding customers; new entrants winentrants win
  7. 7. KEY ELEMENTS OF DISRUPTION  Customers at each market has limited absorptionCustomers at each market has limited absorption capacitycapacity  Technological progress usually is faster that theTechnological progress usually is faster that the ability of the market to employ it. Companies focusability of the market to employ it. Companies focus on better products to be sold with higher margin toon better products to be sold with higher margin to unsatisfied customers.unsatisfied customers.
  8. 8. SUSTAINING VS. DISRUPTIVE  SustainingSustaining: focused on demanding customers;: focused on demanding customers; both incremental and radical. Incumbents haveboth incremental and radical. Incumbents have resources and motivation.resources and motivation.  DisruptiveDisruptive: introduce products and services not: introduce products and services not as advanced as existing ones, but offering otheras advanced as existing ones, but offering other advantages (simpler, cheaper, more useradvantages (simpler, cheaper, more user friendly, ...) and focus on new or less demandingfriendly, ...) and focus on new or less demanding customers.customers.
  9. 9. TWO TYPES OF DISRUPTION  New markets: compete with non-consumption:New markets: compete with non-consumption: simpler, more user frindly, can be used by lesssimpler, more user frindly, can be used by less sophisticated customers (PC, transistor radio, desksophisticated customers (PC, transistor radio, desk copiers).copiers).  Low-end: focus on lower tiers of main marketsLow-end: focus on lower tiers of main markets (minimills, discount stores, Korean auto-makers);(minimills, discount stores, Korean auto-makers); motivate incumbents to leave the marketmotivate incumbents to leave the market
  10. 10. SOURCES OF INNOVATION IMPULSESSOURCES OF INNOVATION IMPULSES InInternalternal environmentenvironment  Own R&DOwn R&D  Technical divisions – design, technologyTechnical divisions – design, technology  Production divisions (production, provision ofProduction divisions (production, provision of services)services)  Marketing and salesMarketing and sales  Logistics (purchase and supplies)Logistics (purchase and supplies)  Guarantee and post-guarantee serviceGuarantee and post-guarantee service  OwnersOwners MANU
  11. 11. SOURCES OF INNOVATION IMPULSESSOURCES OF INNOVATION IMPULSES ExternalExternal environmentenvironment  CustomersCustomers  SuppliersSuppliers  CompetitorsCompetitors  Consultants, R&DConsultants, R&D institutionsinstitutions  Schools, universitiesSchools, universities  Professional publications,Professional publications, InternetInternet  Exhibitions, fairs,Exhibitions, fairs, specialized seminars andspecialized seminars and conferencesconferences  Advertising agenciesAdvertising agencies  InvestorsInvestors  MediaMedia  Authorized testingAuthorized testing laboratories, certificationlaboratories, certification agenciesagencies  State institutions, publicState institutions, public sectorsector  LegislationLegislation  GlobalizationGlobalization
  12. 12. MARKET PULLMARKET PULL -- R&DR&D PUSHPUSH  Market pullMarket pull – looking for the best way of satisfying a newlylooking for the best way of satisfying a newly emerging customer demandemerging customer demand – improvement of the existing products, extension ofimprovement of the existing products, extension of the existing offer or decrease of pricethe existing offer or decrease of price – iimpulses for continuous, incremental innovations ormpulses for continuous, incremental innovations or for process innovationsfor process innovations  Research and Development pushResearch and Development push – looking for commercial use of new impulseslooking for commercial use of new impulses resulting from the R&D resultsresulting from the R&D results – generating of new markets for conceptuallygenerating of new markets for conceptually different productsdifferent products
  13. 13. OPEN INNOVATION  Chesbrough, H., “Chesbrough, H., “Open InnovationOpen Innovation”, Harvard”, Harvard Business School Publishing, Boston MA, 2003Business School Publishing, Boston MA, 2003  Closed innovationClosed innovation - requires control- requires control  Open innovationOpen innovation – companies use external as well as internal ideascompanies use external as well as internal ideas and both external and internal ways to marketand both external and internal ways to market – internal ideas can be taken to the market throughinternal ideas can be taken to the market through external channels to generate additional valueexternal channels to generate additional value
  14. 14. COMPANY INNOVATION POTENTIALCOMPANY INNOVATION POTENTIAL A company with high innovation potentialA company with high innovation potential scores highscores high in the followingin the following areasareas::  Strategy and planningStrategy and planning  MarketingMarketing  Technological processTechnological process  Quality managementQuality management  LogisticsLogistics  Human resourcesHuman resources KOWSHIK
  15. 15. INNOVATION POTENTIAL ASSESSMENT  For a company, it is important to know its innovationFor a company, it is important to know its innovation potential. It can use the questionnairepotential. It can use the questionnaire  FFor everyor every of the six areas, there are six question, eachof the six areas, there are six question, each with four possible answers.with four possible answers. The answers areThe answers are formulated so that they reflect the existing situation informulated so that they reflect the existing situation in the company.the company.
  16. 16. A. STRATEGY AND PLANNING 1.1. Idea about the company futureIdea about the company future 2.2. Vision and employeesVision and employees 3.3. Company innovation programsCompany innovation programs 4.4. Plan modificationsPlan modifications 5.5. Financial indicators of the planFinancial indicators of the plan 6.6. Project managementProject management
  17. 17. B. MARKETING 1.1. Monitoring of current market trendsMonitoring of current market trends 2.2. Evaluation of the market competition positionEvaluation of the market competition position 3.3. Customer-orientationCustomer-orientation 4.4. Monitoring of customers’ attitudes to theMonitoring of customers’ attitudes to the company productcompany product 5.5. Market information flow inside the companyMarket information flow inside the company 6.6. Marketing and financial controlMarketing and financial control
  18. 18. C. TECHNOLOGICAL PROCESS 1.1. Future company’s competitiveness in theFuture company’s competitiveness in the industryindustry 2.2. Changes of technologiesChanges of technologies 3.3. Collection of impulses for implementationCollection of impulses for implementation of technology changesof technology changes 4.4. Evaluation of theEvaluation of the return onreturn on investmentinvestment 5.5. CCalculationalculation of pof production costs and theirroduction costs and their monitoringmonitoring 6.6. Creation of resources for developmentCreation of resources for development
  19. 19. D.D. QUALITY, ENVIRONMENTQUALITY, ENVIRONMENT 1.1. Monitoring of changes conditioning the qualityMonitoring of changes conditioning the quality management in the companymanagement in the company 2.2. EEmployees’ personal contribution to themployees’ personal contribution to the quality systemquality system 3.3. External quality audit in the companyExternal quality audit in the company 4.4. Monitoring of theMonitoring of the environmentenvironmentalal impactimpact 5.5. Impact of quality monitoring on the companyImpact of quality monitoring on the company processprocesseses 6.6. Covering ofCovering of costs resulting from modificationscosts resulting from modifications of standards, regulations and legislation in theof standards, regulations and legislation in the sphere of quality and environmentsphere of quality and environment
  20. 20. EE.. LOGISTICSLOGISTICS 1.1. Organization of purchase and distributionOrganization of purchase and distribution channels in the companychannels in the company 2.2. Optimization of the company logisticsOptimization of the company logistics 3.3. IInformation and communicationnformation and communication flowsflows between thebetween the companycompany and itand its partnerss partners 4.4. Flexibility of logistics processesFlexibility of logistics processes 5.5. Introduction of innovations in logisticsIntroduction of innovations in logistics 6.6. Logistics and financial controlLogistics and financial control
  21. 21. FF.. ORGANIZATION AND HUMAN RESOURCESORGANIZATION AND HUMAN RESOURCES 1.1. Employees satisfactionEmployees satisfaction 2.2. Employees motivationEmployees motivation 3.3. Management and communicationManagement and communication 4.4. Conflict resolutionConflict resolution 5.5. Company information systemCompany information system 6.6. Company cultureCompany culture
  22. 22. AN EFFECTIVE INNOVATIONAN EFFECTIVE INNOVATION STRATEGY ANSWERS THREE KEYSTRATEGY ANSWERS THREE KEY QUESTIONS:QUESTIONS: How will we Create value? How will we Deliver value? How will we Capture value? VIDYASHANKAR
  23. 23. STEP 1: CREATING VALUESTEP 1: CREATING VALUE  How will the technology evolve?How will the technology evolve?  How will the market change?How will the market change?  How will consumer preferences and behavior change?How will consumer preferences and behavior change?  Where will innovations come from?Where will innovations come from?  What is our value proposition?What is our value proposition?
  24. 24. STEP 2: CAPTURING VALUESTEP 2: CAPTURING VALUE  How should we design the business model?How should we design the business model?  Where should we compete in the value chain?Where should we compete in the value chain?  How should we compete if standards are important?How should we compete if standards are important?
  25. 25. STEP 3: DELIVERING VALUESTEP 3: DELIVERING VALUE  How do we manage the core business and growthHow do we manage the core business and growth simultaneously?simultaneously?  How do we use our strategy to drive real resourceHow do we use our strategy to drive real resource allocation?allocation?  What organizational structure, processes, measurements,What organizational structure, processes, measurements, and incentive mechanisms do we use?and incentive mechanisms do we use?
  26. 26. EXAMPLESEXAMPLES  Personal computersPersonal computers  RetailRetail  PhotographyPhotography  Video gamesVideo games
  27. 27. A HARDER QUESTION:A HARDER QUESTION: Can you think of an industry thatCan you think of an industry that hashas notnot gone through drasticgone through drastic changes in the past severalchanges in the past several decades in terms of technology,decades in terms of technology, business models, and majorbusiness models, and major players?players?
  28. 28. EXAMPLESEXAMPLES  Soft drinksSoft drinks  Ready-to-eat breakfast cerealsReady-to-eat breakfast cereals  Rough diamondsRough diamonds  Business education?Business education?
  29. 29. THE TRADITIONAL MODEL OF INDUSTRY LIFE CYCLETHE TRADITIONAL MODEL OF INDUSTRY LIFE CYCLE Time Salesvolume Fermentation Shakeout Maturity Decline
  30. 30. AN ALTERNATE MODEL OF INDUSTRY LIFE CYCLEAN ALTERNATE MODEL OF INDUSTRY LIFE CYCLE Time Salesvolume Emergence Convergence Coexistence Dominance Established Industry Emerging Industry
  31. 31. SOURCES OF INNOVATIONSOURCES OF INNOVATION According to Peter F. DruckerAccording to Peter F. Drucker  Industry and market changesIndustry and market changes  Demographic changesDemographic changes  New knowledgeNew knowledge  Changes in perceptionChanges in perception  Unexpected occurrencesUnexpected occurrences  IncongruitiesIncongruities  Process needsProcess needs
  32. 32. INNOVATION MANAGEMENT TOOLSINNOVATION MANAGEMENT TOOLS B A L A J I
  33. 33. General Innovation ToolsGeneral Innovation Tools
  34. 34. BENCHMARKINGBENCHMARKING
  35. 35. BRAINSTORMINGBRAINSTORMING
  36. 36. CHANGE MANAGEMENTCHANGE MANAGEMENT
  37. 37. TECHNOLOGY AUDITTECHNOLOGY AUDIT
  38. 38. TECHNOLOGY FORECASTTECHNOLOGY FORECAST
  39. 39. Managerial Innovation ToolsManagerial Innovation Tools SHARIQUE
  40. 40. PEER EVALUATIONPEER EVALUATION
  41. 41. TEAM BUILDINGTEAM BUILDING
  42. 42. ISO 9000ISO 9000 ISO14000ISO14000 refers to procedures for ensuring sustainable andrefers to procedures for ensuring sustainable and environmentally friendly operationsenvironmentally friendly operations EIA – Environmental Impact AssessmentEIA – Environmental Impact Assessment
  43. 43. JUST IN TIME (JIT)JUST IN TIME (JIT)
  44. 44. THE SECOND OF THREE KEY QUESTIONS...THE SECOND OF THREE KEY QUESTIONS... How will we Create value? How will we Deliver value? How will we Capture value?
  45. 45. OR:OR: WHAT DETERMINES THE INNOVATOR’SWHAT DETERMINES THE INNOVATOR’S SHARE?SHARE? Customers Innovator Suppliers Imitators, followers
  46. 46. SOURCES OF UNIQUENESSSOURCES OF UNIQUENESS  Intellectual property protectionIntellectual property protection – PatentsPatents • Finite lengthFinite length • The right to prohibit “producing”The right to prohibit “producing” – CopyrightsCopyrights • The right to prohibit “copying”The right to prohibit “copying”  SecrecySecrecy – Trade secrets & non-compete clausesTrade secrets & non-compete clauses – ““Tacit” knowledgeTacit” knowledge – Causal ambiguityCausal ambiguity  SpeedSpeed
  47. 47. UNIQUENESS IS POWERFUL BUT OFTENUNIQUENESS IS POWERFUL BUT OFTEN DIFFICULT TO MAINTAINDIFFICULT TO MAINTAIN  Legal mechanisms can be costly to create, and thenLegal mechanisms can be costly to create, and then even more costly to enforce: and sometimes theyeven more costly to enforce: and sometimes they require public disclosurerequire public disclosure  Secrecy may be difficult to maintainSecrecy may be difficult to maintain  Speed is hard work, and sometimes imitableSpeed is hard work, and sometimes imitable
  48. 48. WHAT ARE COMPLEMENTARY ASSETS?WHAT ARE COMPLEMENTARY ASSETS?  Those assets that allow a firm to make money, even ifThose assets that allow a firm to make money, even if the innovation is not unique.the innovation is not unique.  The answer to the question:The answer to the question: – If our innovations were instantly available to ourIf our innovations were instantly available to our competitors, would we still make money? Why?competitors, would we still make money? Why? ANAND
  49. 49. TYPES OF COMPLEMENTARY ASSETSTYPES OF COMPLEMENTARY ASSETS  Things One can doThings One can do – Manufacturing capabilitiesManufacturing capabilities – Sales and service expertiseSales and service expertise – Strategic alliancesStrategic alliances  Things One ownThings One own – Brand nameBrand name – Distribution channelsDistribution channels – Customer relationshipsCustomer relationships COMPETENCIES RESOURCES
  50. 50. Exercise:Exercise: Complementary assets are: Available Tightly held Position: Soft drinks Windows Office Book publishing Travel agencies Your industry/firm Easy to maintain Hard to maintain Uniqueness is: AB DC
  51. 51. Uniqueness & Complementary AssetsUniqueness & Complementary Assets over the Life Cycle:over the Life Cycle: Ferment Takeoff Maturity Uniqueness Complementary Assets
  52. 52. The last of three key questions...The last of three key questions... How will we Create value? How will we Deliver value? How will we Capture value?
  53. 53. DISCONTINUOUS INNOVATIONDISCONTINUOUS INNOVATION as a strategic problemas a strategic problem  Genuine uncertaintyGenuine uncertainty – It’s not going to happen – certainly not nowIt’s not going to happen – certainly not now  CannibalizationCannibalization – It will compete with our current productsIt will compete with our current products  Shifts in the customer baseShifts in the customer base – Our current customers don’t want itOur current customers don’t want it  Margin erosionMargin erosion – It will make less moneyIt will make less money
  54. 54. The new opportunityThe new opportunity doesn’t meet our currentdoesn’t meet our current customer’s needscustomer’s needs
  55. 55. The new opportunityThe new opportunity doesn’t offer nearly thedoesn’t offer nearly the same margins and profitsame margins and profit opportunityopportunity
  56. 56. Discontinuous InnovationDiscontinuous Innovation as anas an Organizational ProblemOrganizational Problem
  57. 57. My experience has been that creatingMy experience has been that creating a compelling new technology is soa compelling new technology is so much harder than you think it will bemuch harder than you think it will be that you're almost dead when you getthat you're almost dead when you get to the other shore.to the other shore. --Steve Jobs--Steve Jobs
  58. 58. Discontinuous InnovationDiscontinuous Innovation as an organizational problemas an organizational problem  Time horizons & IncentivesTime horizons & Incentives  Fear of (individual) cannibalizationFear of (individual) cannibalization  OverloadOverload  Competency TrapsCompetency Traps
  59. 59. THANK YOUTHANK YOU

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