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Transcript of Innovation Management and New Product · PDF fileInnovation Management and New Product...
Innovation Management andNew Product DevelopmentFifth Edition
Paul TrottPortsmouth Business School
Financial TimesPrentice Hallis an imprint of
Harlow, England • London • New York • Boston • San Francisco • Toronto • Sydney • Singapore • Hong KongTokyo • Seoul • Taipei • New Delhi • Cape Town • Madrid • Mexico City • Amsterdam • Munich • Paris • Milan
Contents
Preface ~ xixForeword by Professor Guus Berkhout xxiiiAcknowledgements xxivPlan of the book xxviii
Part One Innovation management 1
Innovation management: an introduction 2
The importance of innovation 4The study of innovation 6
Recent and contemporary studies 9The need to view innovation in an organisational context 10
Individuals in the innovation process 11Problems of definition and vocabulary ' 12
Entrepreneurship 12Design 13Innovation and invention 15Successful and unsuccessful innovations 16Different types of innovation , 16Technology and science . " 18
Popular views of innovation 20Models of innovation - 20
Serendipity 21Linear models 21Simultaneous coupling model 23Architectural innovation 23Interactive model 24Innovation life cycle and dominant designs 25Open innovation and the need to share and exchange knowledge
(network models) ' 25Discontinuous innovation - step changes 27Innovation as a management process 28
A framework for the management of innovation 29New skills . 31Innovation and new product development 32
Case study: The success of the iPod and iPhone raises the licensing questionfor Apple . . . again 33
vii ,
Contents
Chapter summary 40Discussion questions 40Key words and phrases 41References 41Further reading 44
Economics and market adopt ion 46
Innovation in its wider context - 48The role of the state and national 'systems' of innovation . 50
How national states can facilitate innovation 51Fostering innovation in the United States and Japan 52The right business environment is key to innovation 54
Waves of innovation and growth: historical overview 54Fostering innovation in 'late-industrialising' countries 57Innovation within the 25 EU states 58
Improving the innovation performance of the EU 60The times they are a changing: how frugal innovation is providing a future
path for firms in emerging markets 61Innovation and the market 61
Innovation and market vision 62Innovative new products and consumption patterns 62Marketing insights to facilitate innovation 64Lead users 66
Innovation diffusion theories 67Adopting new products and embracing change 69Market adoption theories 71
Case study: How three students built a business that could affectworld trade 71
Chapter summary 77Discussion questions 78Key words and phrases 78References ' 78Further reading 80
Managing innovation within firms 82
Organisations and innovation 84The dilemma of innovation management 84Managing uncertainty 85
Pearson's uncertainty map 86Applying the uncertainty map in practice 88
Managing innovation projects 89Organisational characteristics that facilitate the innovation process 91
Growth orientation 93
VIII
Contents
Organisational heritage and innovation experience 94Vigilance and external links 95Commitment to technology and R&D intensity . 95Acceptance of risks 95Cross-functional cooperation and coordination within organisational structure 95
'.. Receptivity 96;: Space for creativity 96* Strategy towards innovation 96• Diverse range of skills 97| : Industrial firms are different: a classification 99
Organisational structures and innovation 101Formalisation 101Complexity 102Centralisation 102Organisational size 103
The role of the individual in the innovation process 103IT systems and their impact on innovation 104Management tools for innovation 107Innovation management tools and techniques 107
Applying the tools arid guidelines 109
' Case study: Gore-Tex® and W.L. Gore & Associates: An innovative company/ and a contemporary culture 110
;- Chapter summary , 114"• Discussion questions 114I Key words and phrases 115JT, References 115h Further reading 117
Innovation and operations management 118Richard Noble, University of Portsmouth
Operations management 120The nature of design and innovation in the context of operations 121
Design requirements 122Design and volumes 124Craft-based products 126Design simplification • 127
Process design and innovation 128Innovation in the management of the pperations process 129
Triggers for innovation 130Design of the organisation and its suppliers - supply chain management 135
Business process re-engineering (BPR) 138Operations and technology 139Innovation as an operations process itself 144
Case study: Novels, new products and Harry Potter 145
Chapter summary 151
IX
Contents
Discussion questions 151Key words and phrases 151References 152Further reading 153
Managing intellectual property 154
Intellectual propertyTrade secretsAn introduction to patents
NoveltyInventive stepIndustrial applications
Exclusions from patentsThe patenting of lifeHuman genetic patentingThe configuration of a patentPatent harmonisation: first to file and first to inventSome famous patent casesPatents in practiceExpiry of a patent and patent extensions
Patent extensionsThe use of patents in innovation managementDo patents hinder or encourage innovation?Alternatives to patentingTrademarks
Should satisfy the requirements of section 1(1)DistinctiveNon-deceptiveNot confusing
Brand namesUsing brands to protect intellectual property
Exploiting new opportunitiesBrands, trademarks and the internet
Duration of registration, infringement and passing offRegistered designsCopyrightRemedy against infringement
DamagesInjunctionAccounts
Counterfeit goods and IP
Case study: Pricing, patents and profits in the pharmaceutical industry
Chapter summaryDiscussion questionsKey words and phrasesReferencesFurther reading
156159160161162162162163163164165166167167169170170172173175175175175176177178179179180181183183184184184
185
189189189189191
Contents
Part Two Turning technology into business 193
Managing organisational knowledge 194
The battle of Trafalgar 196Technology trajectories 197
The acquisition of firm-specific knowledge 198The resource-based perspective 198Dynamic competence-based theory of the firm 199Developing firm-specific competencies 200Competencies and profits 202Technology development and effort required 203
The knowledge base of an organisation 203The whole can be more than the sum of the parts 204Organisational heritage 205When the performance of the organisation is greater than the abilities
of individuals 205Japanese organisations and the role of organisational knowledge 206Characterising the knowledge base of the organisation 207
The learning organisation 209Innovation, competition and further innovation 209
Dominant design 211How firms cope with radical and incremental innovation 212
Developing innovation strategies 216Leader/offensive 216Fast follower/defensive 217Cost minimisation/imitative 218Market segmentation specialist/traditional 218
A technology strategy provides a link between innovation strategy andbusiness strategy / 218
Case study: The cork industry, the wine industry and the need for closure 219
Chapter summary 228Discussion questions 228Key words and phrases 228References 229Further reading 231
Strategic alliances and networks 232
Defining strategic alliances 234The fall of the go-it-alone strategy and the rise of the octopus strategy 236Complementary capabilities and embedded technologies 237
Interfirm knowledge-sharing routines 238Forms of strategic alliance 239
Licensing 239Supplier relations 240Outsourcing 240Joint venture 241
XI
Contents
Collaboration (non-joint ventures) 241R&D consortia 241Industry clusters 242Innovation networks 243The 'virtual company' 245
Motives for establishing an alliance 246The process of forming a successful strategic alliance 247Negotiating a licensing deal 248
Terms for the agreement ; 248Rights granted 249Licence restrictions 249Improvements 249Consideration (monetary value) 249Reports and auditing of accounts 249Representations/warranties 250Infringement 250Confidentiality 250Arbitration .. 250Termination 250
Risks and limitations with strategic alliances 250The role of trust in strategic alliances 253
The concept of trust 253Innovation risks in strategic outsourcing 255Eating you alive from the toes up 257
The use of game theory to analyse strategic alliances 258Game theory and the prisoner's dilemma 259Use of alliances in implementing technology strategy 260
Case study: And the winner is Sony's Blu-ray - the high-definition DVD format war 261
Chapter summary 267Discussion questions •' 268Key words and phrases 268References 268Further reading 271
Management of research and development 272
What is research and development? 274The traditional view of R&D • 275
R&D management and the industrial context 275R&D investment and company success 278Classifying R&D 281
The operations that make up R&D 283R&D management and its link with business strategy 285
Integration of R&D 286Strategic pressures on R&D 288
The technology portfolio 289The difficulty of managing capital-intensive production plants in a dynamic
environment 290
xii
Contents
Which business to support and how? 291Technology leverage and R&D strategies 293Strengths and limitations of this approach 294
Allocation of funds to R&D , 295Setting the R&D budget 296
Level of R&D expenditure v 298
Case study: The long and difficult 13-year journey to the marketplace forPfizer's Viagra 299
Chapter summary 306Discussion questions 306Key words and phrases 307References 307Further reading 308
Managing R&D projects 310
Successful technology management . 312The changing nature of R&D management 314
Organising industrial R&D 317The acquisition of external technology 318
Level of control of technology required 319Forms of external R&D 320
Effective R&D management 323Managing scientific freedom 324Skunk works 327
The link with the product innovation process 328The effect of R&D investment on products 329
Evaluating R&D projects 330Evaluation criteria 330
Case study: CSI and genetic fingerprinting 334
Chapter summary 340Discussion questions 340Key words and phrases 340References . 341Further reading 343
Open innovation and technology transfer 344
Background 346The dominant economic perspective 347
Open innovation 348Introduction to technology transfer 350
Information transfer and knowledge transfer 350p Models of technology transfer 351|J Licensing 352| | ; Science park model 352
Intermediary agency model 353
;' xiii '
~* Contents
Directory model 353Knowledge Transfer Partnership model 353Ferret model 353Hiring skilled employees 355Technology transfer units 355Research clubs 355European Space Agency (ESA) 356Consultancy 356
Limitations and barriers to technology transfer 356NIH syndrome 357
Internal organisational factors and inward technology transfer 358Absorbtive capacity: developing a receptive environment for technology transfer 359Identifying external technology: the importance of scanning and networking 361
Linking external technology to internal capabilities 362Managing the inward transfer of technology 362
Technology transfer and organisational learning 363
Case study: Sony-Ericsson mobile phone joint venture dependent ontechnology transfer 365
Chapter summary , 373Discussion questions 373Key words and phrases 373References 373Further reading - 376
Part Three New product development 377
Product and brand strategy 378
Capabilities, networks and platformsProduct platforms.
Product planningProduct strategy
Competitive strategyProduct portfolios
The competitive environmentDifferentiation and positioning
DifferentiationProduct positioning
Competing with other productsManaging brands
Brands and blind product testsBrand strategy
Brand extensionsMarket entryLaunch and continuing improvementWithdrawing productsManaging mature products
xiv '
Contents
Case study: Developing a new product for the tooth whitening market 407
Chapter summary 413Discussion questions 414Key words and phrases 414References 414Further reading 415
New product development 416
Innovation management and NPD 418Product development as a series of decisions 419New products and prosperity 420
Considerations when developing an NPD strategy 420Ongoing corporate planning 420Ongoing market planning 421Ongoing technology management 421Opportunity analysis/serendipity 421
NPD as a strategy for growth 422Market penetration 422Market development 423Product development 423Diversification 423A range of product development opportunities 423
What is a new product? 426Defining a new product 427Classification of new products 429Repositioning and brand extensions 431New product development as an industry innovation cycle 432
Overview of NPD theories 433The fuzzy front end 434Time to market 436Agile NPD 437
Models of new product development 437Departmental-stage models 438Activity-stage models and concurrent engineering 439Cross-functional models (teams) 441Decision-stage models 441Conversion-process models 441Response models 441Network models 442
Case study: Launching innocent into the growing fruit smoothie market 443
Chapter summary 450Discussion questions 451Key words and phrases 451References 451Further reading 454
xv
Contents
O
Packaging and product development 456
Wrapping and packaging products 458
The basic principles of packaging 461
Protection 461
Containment 462
Identification 463
Labelling 463
Characteristics of packaging 465
Dispensing 465
Storage 465
Stability 466
Handling 466
Opening/resealing 466
After use and secondary use 468
Disposal v 468
Product rejuvenation 468
New product opportunities through packaging 470
Product and pack size variation 471
Packaging systems 473
Retailer acceptance . 475
Revitalising mature packaged goods 476
Case study: Halfords Motor Oil - redesign and rebranding of an
existing product 477
Chapter summary 482
Discussion questions 482
Key words and phrases 482
References 483
Further reading 483
New service innovat ion 486
The growth in services 488Growth in knowledge-intensive business services (KIBS) 488Outsourcing and service growth 489
Different types of services 493Technology and new service development 495New services and new business models 495
Characteristics of services and how they differ from products 496Intangibility 497Heterogeneity 498Simultaneous production and consumption 498Perishability 498
Classification of service innovations - 499The new service development process 499
New service development models 501Sequential service development models or stage-gate models 502Concurrent service development models 504
• xv i
Service innovation and the consumerConsumer user toolkitsConsumer testing of services
Case study: Developing new services at the world's most successfulinternet-based company, eBay
Chapter summaryDiscussion questionsKey words and phrasesReferencesFurther reading
Contents
505506507
508
516516516517520
o Market research and its influence on new productdevelopment 522
Market research and new product development 524The purpose of,new product testing 525Testing new products 526Techniques used in consumer testing of new products 527
Concept tests 528Test centres , 528Hall tests/mobile shops 528Product-use tests 528Trade shows - 529Monadic tests 529Paired comparisons 529In-home placement tests 529Test panels 529
When market research has too much influence 529Discontinuous new products 532Market research and discontinuous new products : 533Circumstances when market research may hinder the development of *
discontinuous new products 533Technology-intensive products 534Breaking with convention and winning new markets 536When it may be correct to ignore your customers 539Striking the balance between new technology and market research 540The challenge for senior management • 542
Case study: Dyson, Hoover and the bagless vacuum cleaner 543
Chapter summary 551Discussion questions 551Key words and phrases 552References 552Further reading 553
Managing the new product development process 554
New products as projects 556The Valley of Death 557
xvii :
Contents
The key activities that need to be managed 558Assembling knowledge 560The generation of business opportunities 560Developing product concepts: turning business opportunities into
product concepts 564The screening of business opportunities 564New technology product blogs 567Development of product prototypes 567Technical testing 569Market testing and consumer research 569How virtual worlds can help real-world innovations 570Market introduction 571
NPD across different industries 572Organisational structures and cross-functional teams 572
Teams and project management 573Functional structures 573Matrix structures 574Corporate venturing 576Project management 576Reducing product development times through computer-aided design 577
The marketing/R&D interface 577High attrition rate of new products 578
Case study: An analysis of 3M, the innovation company 581
Chapter summary 586Discussion questions 586Key words and phrases 587References 587Further reading 589
Appendix: Guinness patent . 590Index . 606
XVIII