Post on 03-Apr-2018
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INNOVATION
MANAGEMENT
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Introduction
Innovation is at the top of executive agendas today across all
industries, but no more so than in the consumer and packaged goods
industries. With tens of thousands of products launched annually, and
competition now on a truly global scale, companies must differentiate
their products by more than just price and promotional activities if
they are to gain a share of the consumers wallet. They must create
products that offer unique and novel consumer value. A lack of
innovation will result in the inability to differentiate their products
from their competitors and ultimately lead to market commoditization,
declining margins and reduced product profitability.
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In the organizational context, innovation may be linked toperformance and growth through improvements in efficiency,productivity, quality, competitive positioning, market share, etc.All organizations can innovate, including for example hospitals,
universities, and local governments.
While innovation typically adds value, innovation may also have anegative or destructive effect as new developments clear awayor change old organizational forms and practices. Organizations
that do not innovate effectively may be destroyed by those thatdo. Hence innovation typically involves risk. A key challenge ininnovation is maintaining a balance between process and productinnovations where process innovations tend to involve a
business model which may develop shareholder satisfaction
through improved efficiencies while product innovationsdevelop customer support however at the risk of costly R&Dthat can erode shareholder return
http://en.wikipedia.org/wiki/Productivityhttp://en.wikipedia.org/wiki/Qualityhttp://en.wikipedia.org/w/index.php?title=Competitive_positioning&action=edit&redlink=1http://en.wikipedia.org/wiki/Market_sharehttp://en.wikipedia.org/wiki/Business_modelhttp://en.wikipedia.org/wiki/R&Dhttp://en.wikipedia.org/wiki/R&Dhttp://en.wikipedia.org/wiki/Business_modelhttp://en.wikipedia.org/wiki/Market_sharehttp://en.wikipedia.org/w/index.php?title=Competitive_positioning&action=edit&redlink=1http://en.wikipedia.org/wiki/Qualityhttp://en.wikipedia.org/wiki/Productivity7/28/2019 Innovation Mangt
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What is Innovation?
One good definition is that innovation is the process of
taking an original idea and converting it into
measurable business value to an organization.
This can be achieved either by the commercialization ofthe idea into a product or service that can be taken to
market or by the institutionalization of an idea, like a
method or process, that enables the company to
achieve higher productivity and quality at lower total
cost.
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Meaning
Innovation means introduction of something new
and useful, for example introducing new
methods, techniques, or practices or new or
altered products and services.
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Definition
According to Luecke and Katz
"Innovation . . . is generally understood as the
successful introduction of a new thing or
method . . . Innovation is the embodiment,
combination, or synthesis of knowledge in
original, relevant, valued new products,
processes, or services.
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In general innovation means
The introduction of a new good that is one withwhich consumers are not yet familiaror of a new
quality of a good. The introduction of a new method of production,
which need by no means be founded upon adiscovery scientifically new, and can also exist in a
new way of handling a commodity commercially.Innovation = Creativity * Risk Taking
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Where does innovation fit into the corporate
framework?
In many organizations innovation management isan integral part of the business framework. The
graphic below illustrates this with the innovation
pipeline taking input from competitor and marketintelligence and driving that into the planning,
new product development and new product
introduction processes.
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Stages
Three stages of innovation
idea creation
development commercialization
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The importance of innovation
Why you have to innovate?
Advancing technology
Changing environment
Changing industrial structures and strategies
Evolving society
Evolving customer desires Competitors improve their products, processes and services
Customers stop buying your old products and services so you need toreplace them and add new products and services
Innovation happens in every industry
From new industries such as genetic engineering, electronics and Telecommunications through automotive and aerospace to old
industries such as shipbuilding and mining
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What happens if you don't
innovate? Customers stop buying your products, processes
and services
Sales drop
Revenues drop
Shareholder returns drop
Stock price drops
Key employees leave
More customers stop buying your products,processes and services
Sales drop
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Why innovation is becoming more important
?
Technology is changing fast, new products come from new competitors
Fast changing environment, product lifetimes shorter, need to replaceproducts sooner
Products are increasingly difficult to differentiate
Customers are more sophisticated, segmented and demanding, and
expect more in terms of customization, newness, quality and price Customers have more choice
New technologies no-one understands
Apparently separate technologies come together
Markets forming and changing fast
With markets and technology changing fast, and good ideas quicklycopied, there is continual pressure to devise new and better products,processes and services faster
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Innovation as your corporate
strategy Poor implementation of many recent corporate initiatives -
such as ERP implementation, ISO 9000 implementation,reengineering, and downsizing - hasn't resulted in fastgrowth. Often it's led to a reduction in quality levels and
stagnation in sales Innovation leads to faster growth, increased market share
and better corporate positioning
Innovation is the prime strategy for the first decade of thetwenty-first century
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The difficulty of innovation The failure rate is high
Barriers to innovation
Why innovation is so difficult to manage Reasons for failure to innovate
Misjudgments about the future
Reasons for misjudgments
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The failure rate is high
Less than 10% of proposed innovations get
to the market
Less than 10% of new products succeed in
the marketplace
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Barriers to innovation
Organization not conducive to innovation
Environment not conducive to innovation
Insufficient resources Traditional management behavior
Group behavior
Individual behavior Traditional accounting practices
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Organization not conducive to innovation
Interdepartmental borders prevent communication of innovative ideas
Incorrect measures hinder the advance of innovative products andservices
No processes defined for innovation
Not listening to customers
Not knowing what customers really want to buy
No recognition of the need for a creativity process
Inappropriate incentives
Incompatible innovations producing confusion rather than growth
Inability to handle uncertainties about risks, results and timing ofinnovationLack of information on markets and technologies
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Environment not conducive to innovation
Over-regulated market prevents introduction ofnew products
No competitive pressure (Necessity is the motherof invention)
Government rules make it difficult to introducenew services
Lack of opportunity for partnerships with otherorganizations
No opportunity to see how similar companies andindustries are innovating
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Insufficient resources
Good people not available
Funding not available
Facilities not available
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Traditional management behavior Management desire to be in control prevents people being creative
Middle managers prevent innovations getting top level visibility
Poor leadership style
Maintaining traditional ways of thinking
Intolerance of fanatics wanting to change the world
Excessive rules, constraints and bureaucracy Unwillingness to change a winning formula
Resistance to change
Excessive demands to produce lengthy written reports
No free time allowed for new ideas
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Group Behavior
Interdepartmental warfare - everyday insults and lack oftrust
Traditional mind set - 'we are right, they are wrong'
Negative influence of peer group - 'we the developers, theythe shop floor'
Not Invented Here
Middle management warfare - everyday fights, plots andtraps
Interdepartmental rivalry
Indifference of peer group Fear of offending peer group
Fear of being excluded from peer group
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Individual behavior
Fear of trying
Fear of risk
Fear of change
Fear of being laughed at
Fear of making mistakes
Fear of appearing stupid by proposing something that is not possible Fear of showing ignorance
Fear of showing personal thoughts
Fear that personal ideas are so easy to copy they can not be sharedwith colleaguesJealousy of colleagues
Never done before, don't know how to do
Holding on to past successes
People feeling indifferent and apathetic about their work
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Traditional accounting practices
Bean counter mentality
Short term focus
Accounting practices that don't value innovation
Conventional financial projections and planning Innovation costs too high
Lack of finance
Payback period too long
Excessive apparent risks of innovative productsand services
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Why innovation is so difficult to manage
Management is used to running the existing
business, not building the future business
Management hasn't set aside time to focus on
innovation Management is too far removed from the details of
individual products and services
Nobody knows what will happen in the future
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Reasons for failure to innovate
Innovation is a long-term activity (failure tomaintain interest)
Innovation has a long payback period
Innovation is expensive (failure to continue to
invest) Innovation is too complex to manage
Everyone's overloaded with everyday problems
Competing priorities
Management systems can't handle innovation
Innovation costs are too hard to control
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Misjudgments about the future
The Commissioner of US Patents said thateverything that can be invented has been invented(1899)
Thomas Watson forecast a world market for aboutfive computers (1943)
Ken Olsen, founder of Digital EquipmentCorporation, said no one needed to have a
personal computer at home (1977) Bill Gates said that 640K would be enough
memory for anyone (1981)
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Reasons for misjudgments
Difficulty of forecasting the future
Unwillingness to listen to customers
Inability to read the market
Belief in the infallibility of corporatestrategy committees
Belief in the infallibility of the boss
Innovation is not just about products andR&D
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Benefits and examples of good innovation
Typical reasons for innovating
Benefits of good innovation
Examples of good innovation Different ways to innovate
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Typical reasons for innovating
Responding to customers
Increasing market share
Being at the forefront of industry
Establishing a new market
Improving the quality and speed of service
Expanding the product range
Meeting Government standards/regulations
Reducing costs Increasing revenues
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Benefits of good innovation
First to market
Premium prices
Best customers Large market share
Increased shareholder return
Increased employee motivation and morale
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Examples of good innovation
Dell Computer
Microsoft Corp.
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Different ways to innovate
Traditional approaches
Best practices
New approaches
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Traditional approaches
Necessity - the mother of invention
Market pressure
Brainstorming sessions
Employee suggestion box
Laboratory research
Literature search Copy and improve competitor's products
Copy the process used to develop past innovations
Benefit from weaknesses of slow-moving public organizations
Provide everyone time for innovation
Fill the funnel
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Best practices
Questionnaires and assessments
Search for alternative solutions
Monitor patent applications
Use Web search engines
Various benchmarking activities
Look in the value chain
Learn from customers
Product platforms
Quality Function Deployment
Look in unexplored fields
Strategic alliances
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New approaches
Apply TRIZ
Virtual prototyping
Implement a knowledge management system
Rapid prototyping and market experimentation
Hire the finest
Import external innovators
Cultivate visionaries
Distributed network of experts
Build an incubator
Offer everyone a venture planning toolkit Set up a venture finance team
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Principles of good innovation
Strategies of the success stories
Understand the market
Be open
Keep a firm grip on technology
Create the organizational conditions in whichinnovation can flourish
Get everyone on board
Define the business processes for innovation
Demonstrate management commitment
Be patient but tough
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Strategies of the success stories
Learn from the experience of the best
innovators
Identify the key success factors
Build your organization's principles of good
innovation
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Understand the market
Understand customer desires - articulated
and unarticulated
Get as much information as possible about
customer desires
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Be open
Open to any type of innovation, not just product innovation Open to any source of innovation, not just R&D
Open to ideas from outside the organization
Open to partnerships with other companies
Open to partnerships with companies in other industries
Open to research, advice and information from educational establishments
Open to the market
Open to customers, listening to what they ask for, listening to what theycomplain they
can't get, looking at what they are doing
Aware of competitors, watching what they are offering, how they are evolving
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Keep a firm grip on technology
Develop and communicate the technical
vision
Keep abreast of advanced technology
Get as much information as possible about
technology
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Create the organizational conditions in which innovation can flourish
An environment for innovation
A flexible organization
Build an infrastructure that encourages
communication
Put in place a good Change Management program
Create measures of innovation performance
Build a climate of trust
Provide venture finance for innovation projects
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Get everyone on board
Implement cross-functional and inter-company teamstructures
Enable collaborative working
Ensure working relationships are win-win not win-lose
Provide incentives - financial and other - for innovation
Train your people to be great innovators
Encourage people to be creative
Create the desire to innovate
Provide career and skills development opportunities
Provide role-modeling
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Define the business processes for
innovation
Innovation process
Product Development process
Process Development process Service Development process
Engineering Change process
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Demonstrate management commitment
Develop, communicate and implement theinnovation strategy
Communicate the right top-down messages
Take the lead on the road to innovation
Set goals for innovation - aim to be themarket leader
Challenge orthodoxies Review progress
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Be patient but tough
Innovation can take time, so don't expect instantresults
Review progress, screen results, analyze risks, beprepared to weed out low potential innovations sothat resources are available for the best hopes
Remove the blockers who are afraid of change andafraid of success
Remove the cynics who lack confidence in yourpeople and ideas