Professional Documents
Culture Documents
Ji Vacek vacekj@kip.zcu.cz Department of Management, Innovations and Projects UWB, Faculty of Economics Summer semester 2009/10
Lesson 1
Introduction Basic concepts Importance of innovations
Definition of innovation - 1
Technological innovations are defined as new products and processes and major technological modifications to products and processes. An innovation is considered performed if it is introduced to the market (product innovation) or implemented in the production process (process innovation). Innovation includes many research, technological, organizational, financial and commercial activities.
Definition of innovation - 2
R&D represents only one of these activities and can take place during various stages of the innovation process. It can play not only the role of the original source of the innovation ideas but also the role of problem solution framework, which can be turned to at any stage of the implementation. OECD, Frascati Manual 1992
Oslo Manual
Product innovation
A good or service that is new or significantly improved. This includes significant improvements in technical specifications, components and materials, software in the product, user friendliness or other functional characteristics.
Process innovation
A new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software.
Marketing innovation
A new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing.
Organisational innovation
A new organisational method in business practices, workplace organisation or external relations.
Technological innovations based on specific technology, invention, discovery, Social innovations in critical historic periods more important than technological ones (mail, educational systm, social systm, health care, )
DEGREE OF NOVELTY
Incremental innovations Radical innovations Systemic innovations
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
New Advanced components for materials existing systems improving component properties RADICAL new for the world
INNOVATION PROCESS
Research and development (R&D) Production Marketing Innovation is an opportunity for something new, different. It is always based on change. Innovators do not view any change as a threat but as an opportunity
FOCUS
Use the limited resources in the most effective manner; focus on one of the following:
Operational output Top-quality products Perfect knowledge of customers
RECOMMENDATIONS
Solve the correct problem correctly be effective and efficient Manage innovation as a project Analyze risks Use models, scenarios, computer simulation Study examples of succesful and unsuccesful innovation projects
WHAT TO DO
1. Start with analysis and study of opportunities. 2. Go among people, ask questions, listen 3. Effective innovations are surprisingly simple. They must be focused on specific needs and on specific final products. 4. Effective innovation start on a small scale. 5. A successful innovation always tries to win a leading position, otherwise you create opportunities for your competitors.
WHAT TO AVOID
1. Dont try to be too clever. All that is too sophisticated will almost certainly go wrong. 2. Dont try to do too many things at once. Focus on the core of the problem. 3. Dont try to make innovations for the future but for today. An innovation can have a long-term impact but there must be an immediate need for it.
CASE STUDIES
Linet elevice
Hospital products Hospital beds, intensive care beds, medical furniture and other equipment increase the comfort of patients and help the nurses. Nursing-care products Nursing beds, bed accessories, bedside cabinets, mattresses and other furniture.
No comment
1990
2005
TOSHULIN
Development of new machines: 1. Customized the machines developed for the specific customer according to its requirements market pull 2. Prototypes there is no specific customer market push
9 ,5
9 ,6
9 ,4
8 ,3
9 ,5
spouter of ideas
suggests designs and problem solutions without detailed consideration of all possible results and consequences
system designer
finisher of ideas
elaborates independently in details the ideas which he gets to elaborate
routine engineer
efficient and reliable engineer; however, without creative approach
attendance engineer
performs routine tasks
[1%]
[5%]
[54%]
[30%]
[10%]
Contipro
Connective tissue
products
RNDr. Vladimr Velebn, CSc.
Customers in 43 countries
Sales in regions
3 pillars of success
1. Maximum attainable quality 2. Sharing expenses with customers 3. Development of original products
http://www.3m.com/us/office/postit/pastpresent/history_ws.html
More about 3M
A Century of Innovation The 3M Story
http://solutions.3m.com/wps/portal/3M/en_US/Ab out/3M/
Adaptors
Patented technology iGo Technology, powering of mobile electronic devices using single (universal) adaptor; Power Technology Patent Brochure (PDF)
Lesson 2
Disruptive and open innovations
Innovation categories
sustaining better products that can be sold with higher margin to demanding customers; incumbents win disruptive commercialization of simpler, more user-friendly products, which are chepaer and targeted to new or less demanding customers; new entrants win
Due to technological progress the trajectory of the disruptive innovation after some time crosses the trajectory of demands of more demanding customers and starts to replace incumbents who are not principally ready to react adequatelly, as they are motivated to suceed at better markets, not to defend themselves on inferior ones.
Conditions of success - 1
Disruption is successful, as it is easier to defeat competition that tries to escape than the competition who fights Innovation must be disruptive for all companies in the industry Ex. Internet for Dell sustaining, they sold computers formerly by mail, phone, etc.
Conditions of success - 2
Following the trajectory upwards to market tiers where it is possible to attain higher margins is what good manager is expected to do. Each company therefore prepares its own disruption. This is the innovators dilemma, but also the start of innovators solution. The advice to new, growing firms: focus on products and markets ignored or neglected ba incumbents.
OPEN INNOVATION
Chesbrough, H., Open Innovation, Harvard Business School Publishing, Boston MA, 2003 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
Chesbrough H.W.: The Era of Open Innovation, MIT Sloan Management Review, Spring 203, p. 35 - 41
Closed innovation
All the best people are working for us
Open innovation
Not all the best people are working for us . We must work with clever people within and outside our company. External R&D can create remarkable value; to employ it, we need absorption capacity, often as internal R&D.
R&D creates profit only when we invent, develop and market everything ourselves.
If we develop the product ourselves, we will R&D can create profit even if we do not be the first on the market. initialize and perform it ourselves. Winner is who gets the innovation to the market first. We will win if we develop most of the ideas (an the best of them). We must have our intellectual property under control so that our competitors can make advantage of it. To develop better business model is more important than to be the first in the market. We will win if we make best use of internal and external ideas. We must be able to profit from others using our intellectual property and we must license the intellectual property if it supports our business model.
Closed innovation
Examples: nuclear industry, mainframe computers Mostly internal ideas Low workforce mobility Low role of the venture capital Few new businesses, weak ones Universities are not important as the sources of ideas
Open innovation
Examples : PC, movies
Many external ideas High workforce mobility Active venture capital Many new businesses Universities are not important as the sources of ideas and people
Business model
Formulate value proposition, i.e. the value delivered to the customer by the product based on specific technology. Identify market segment, ie. users to whom the technology brings value and performs the job to be done. Define structure of the value chain, required for the product creation and distribution. Value creation is necessary, however not sufficient condition of profitability; value creation is conditioned by:
balance of forces among our business, suppliers and competitors presence of complementary assets (e.g. in production, distribution, etc.) necessary for supporting the company position in the value chain.
Product architecture
Hierarchy of connections between disparate functions within a system
Interdependent Architecture
System
Component A
Component C
Component B
Interdependent Architecture
changing one component requires changes in all other parts of the system, because the relationships between the parts are not clearly understood can be best managed through internal processes
Modular Architecture
System
Component A
Component B
Component C
Modular Architecture
components could change without causing any change in other components modular design enables to assemble system more easily, from plug and play components whose interfaces are well understood modular architecture makes it easy for many companies to innovate components without worrying about possible impact on other parts of the system
Lesson 3
Assessment of company innovation potential
B. MARKETING
1. Monitoring of current market trends 2. Evaluation of the market competition position 3. Customer-orientation 4. Monitoring of customers attitudes to the company product 5. Market information flow inside the company 6. Marketing and financial control
C. TECHNOLOGICAL PROCESS
1. Future companys competitiveness in the industry 2. Changes of technologies 3. Collection of impulses for implementation of technology changes 4. Evaluation of the return on investment 5. Calculation of production costs and their monitoring 6. Creation of resources for development
D. QUALITY, ENVIRONMENT
1. Monitoring of changes conditioning the quality management in the company 2. Employees personal contribution to the quality system 3. External quality audit in the company 4. Monitoring of the environmental impact 5. Impact of quality monitoring on the company processes 6. Covering of costs resulting from modifications of standards, regulations and legislation in the sphere of quality and environment
E. LOGISTICS
1. Organization of purchase and distribution channels in the company 2. Optimization of the company logistics 3. Information and communication flows between the company and its partners 4. Flexibility of logistics processes 5. Introduction of innovations in logistics 6. Logistics and financial control
F. ORGANIZATION AND HUMAN RESOURCES 1. 2. 3. 4. 5. 6. Employees satisfaction Employees motivation Management and communication Conflict resolution Company information system Company culture
Innovation potential assessm ent A 4,0 3,5 3,0 2,5 2,0 1,5 1,0 B C D E F
St ra te gy M ar ke tin g Te ch no lo gy
Lo gi st ic s
Q ua lity
Pe op le
Innovation potential assessm ent Strategy 4,0 People 3,0 2,0 1,0 Logistics Quality Technology Marketing
A B C D E F
Lesson 4
STRUCTURING THE NEW PRODUCT DEVELOPMENT PROCESSES EVALUATION OF THE NEW PRODUCT DEVELOPMENT AND R&D PROJECTS
Stage-gate process
R. Cooper, 1960s phases with inputs and outputs specified beforehand gates, in which the gatekeepers decide about the continuation of the process Activities were standardized and the indicators of the process performance significantly improved.
Evaluation criteria
Operational, realistic, differentiating Must meet: to kill not well proceeding projects as soon as possible Should meet: prioritization, support of portfolio management Strategic buckets: resources allocated to various strategic goals
Interdisciplinary view
Phase 0
results in product concept, including preliminary identification of customer requirements, market segments, competitive position, business opportunity and compliance with strategy
Nature of Work
High degree of certainty. Budgeted. Predictable, with increasing certainty, analysis, and documentation as the product release date gets closer. Multifunction product and/or process development team Milestone achievement.
Often uncertain, with a great deal of speculation. minimize risk and optimize potential Strengthened concepts.
Market pull
NCD components
Engine: represents management support Engine powers the five elements of the NCD model The engine and the five elements are placed on top of the influencing factors.
Stage-gate process
IDEA
Stage 3 Development
Stage 4 Testing
Stage 5 Commercialization
EVALUATION
Project feasibility
The stage-gate model divides the innovation process into five stages with gates, in which evaluators decide if to continue or kill the project. Each phase has its cost, duration and probability of success. Usually only the last stage generate profits. To justify the project development cost, we should prove at the very beginning its feasibility. Traditionally we have to show that the project net present value is greater than zero, i.e. that the whole project, taking into account the time value of the money, will generate net profit.
DCF methods
The generally accepted method of evaluation of investment, is based on discounted cash flows (DCF). The method is successfully used for investment projects with low level of uncertainty and duration from several months up to few years. In many cases it is not suited to long-term NPD and R&D projects, as it penalizes projects with high risk and potentially valuable projects can be rejected or terminated.
Success pC
Success pd
YES Development
YES Commercialization
PV
C
NO
ECV
D
NO
Failure Failure
ECV pd pc D C PV
= project expected commercial value = probability of successful development = probability of successful commercialization = development costs = commercialization costs = net present value of expected project earnings
Example
The first stage (1 year): laboratory tests; success probability 50%. The second stage (2 years): field tests; success probability 75%. If tests are successful, the necessary investment into the technology is $5M, expected earnings $8M project net present value $3M. Financial data are discounted, assuming the weighted capital costs WACC = 12%, risk-free discount rate 5%. Development costs and specific project risk are high resulting ECV negative (-$109 000) according to this criterion, project should be rejected.
50%
Stop
50%
Stop
Real options
The concept of real options is closely related to financial options that found their place in financial markets in recent decades. Real options relate to company opportunities and emphasize the basic idea that risk can bring the competitive advantage and as such it should be rewarded. The application of the real options theory is briefly described in [Boer 2003], the related website contains further information and references to more detailed resources. Here we will give only a brief account of basic concepts and terminology.
Specific risk
Specific for the partial situation At lest partly under your control (e.g. risk of a fire or risk of project failure) Can be diversified - we can use insurance to share fire risk and maintain the diversified project portfolio to protect against the risk of project failure Therefore the market does not pay any premium for specific risks Specific risk can be often characterized by its probability. Better management of specific risk can help us to achieve the competitive advantage.
Market risk
Is not under your control Cannot be diversified. The pharmaceutical company, as a part of health care sector, can do little to diversify the market risk. Traditionally, market risk increases the capital expenses and therefore decreases the project value. However, the situation is different with options: here the higher market risk, expressed as volatility, increases the option value, which can be quantified using the Black-Scholes algorithm, well known from financial options.
Volatility
Quantifies the rate of change of market value of the underlying asset, i.e. the asset to its ownership we are entitled by buying the option (technology, database of customers ). Is usually specific for the industry and can be estimated on the basis of information available from e.g. stock market, industry statistics, etc. The higher the volatility, the more advantageous is to hold the respective option. The higher volatility means the higher potential of both the increase and decrease of the related asset price. As the option holder we can fully exploit the increase, while in the case of decrease we do not realize the option and the maximum loss is limited by the option cost.
Application
Boer [Boer 2003] applies the real option model (OPT) with volatility equal to 50% to the example from Fig. 3 He shows that using this method the project value is $0,171M, i.e. it is positive and the project is feasible. The difference in project value assessed by ECV and OPT models is $0,279M, what is enough to justify the project. The difference is caused by market volatility. Boer also proves that in case of the zero market risk, i.e. the zero volatility, both methods give the same result. The method of real options brings the most significant effect to projects with high level of risk having slightly negative net present value determined by ECV or other models based on the discounted cash flow.
Conclusion
Illustration of the often neglected side of the new product development and R&D projects. The researchers, engineers, designers must work together with investors to determine before the project launch and in the gates how efficiently the capital invested into the effort is used. It is not an easy task; however, we hope that we succeeded to persuade the auditorium that this important task cannot be avoided.
References
[Boer 2003] BOER F.P. Risk-adjusted Valuation of R&D Projects, online, http://www.tigerscientific.com [Cooper 2001] COOPER R.G., EDGET S.J., KLEINSCHMIDT E.J. Portfolio Management for New Products, Basic Books, 2001, ISBN 0-7382-0514-1 [Cooper 2005] COOPER R.G. Product Leadership, Basic Books, 2005, ISBN 0-465-01433-X [Vacek 2006] Vacek J. Structuring the new product development processes, in AEDS 2006 Proceedings, pp. xx, University of West Bohemia, Pilsen, 2006, ISBN
Outline
Portfolio management, consequences of its lack Portfolio management goals
Goal 1: Maximizing the portfolio value Goal 2: Balance Goal 3: Strategic alignment
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Portfolio management
Resources are always limited, it is neither possible nor effective to invest in every idea without due consideration. It is important to select from many possibilities those with the highest potential; todays innovation projects decide about the future profile of the company, its customers and market share. Goal: to create such portfolio of products that is rooted in the company strategy and optimizes the company performance. Portfolio management: dynamic decision-making process of evaluation, selection and prioritization of new projects; active project can be fostered, put on hold or even killed; their priorities and allocation of resources can change. The process is characterised by uncertainty, changing information, dynamics of opportunities and threats, links between projects. The whole process must be based on the long-term company strategy and must support it
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Immediate result
A reluctance to kill projects. Many projects added to the list A total lack of focus Weak decision points (broad gates) Poor Go/Kill decisions No rigorous selection criteria Project selected on emotion, politics No strategic criteria for project selection
Too many projects resources thinly spread. Projects in the queue. Quality of execution suffers. Too many low value projects Good projects are starved
Too few stellar product winners Many ho hum launches Many failures
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Balance
3.
Strategic alignment
portfolio is strategically aligned and reflects the businesss strategy.
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Project A B C D E F G H I J K L
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NPV 52,0 30,0 8,6 42,0 48,5 43,8 37,5 3,0 9,5 6,2 4,5 55,0
Bang-forbuck index 5,5 9,7 4,1 11,1 6,9 8,8 4,5 3,0 3,8 7,8 3,2 11,0
Immediate resource requirements 3,2 0,3 1,4 2,5 1,3 1,5 3,8 0,7 0,5 0,8 1,2 5,0
116
Project D L
B
F J E A
30,0
43,8 6,2 48,5 52,0
3,1
5,0 0,8 7,0 9,5
9,7
8,8 7,8 6,9 5,5
0,3
1,5 0,8 1,3 3,2
7,8
9,3 10,1 11,4 14,6
G
C I K H
37,5
8,6 9,5 4,5 3,0
8,3
2,1 2,5 1,4 1,0
4,5
4,1 3,8 3,2 3,0
3,8
1,4 0,5 1,2 0,7
18,4
19,8 20,3 21,5 22,2
117
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Project
PV
ECV
A B C D E F
5,00
5,00
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B E A F D C
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14,00 16,00
119
ECV
19,50 15,70 15,50 5,00 2,10 1,50
ECV model prioritizes more highly the projects with the following properties:
closer to launch (increase of PV and consequently of ECV), higher income streams after launch (increase of PV and consequently of ECV), less resources to be spent (decrease of D), higher probabilities of success (increase of ECV), utilize less of the constraining resource (its easier for them to be above the line).
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C
D E F
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10%
17% 12% 22%
5
12 20 6
3
2 4 1
90%
65% 90% 85%
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Project ranking
Project ranking procedure is the following
calculate adjusted values of IRR and NPV multiply them by PTS. rank projects according to adjusted values of IRR and NPV and according to SI. calculate the average value of those three rankings and use it for final ranking
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NPV * PTS
Ranking by NPV*PT S
SI
Ranking by SI
Avg.
Final
A B
16,0% 10,5%
2 5
8 1,4
2 6
5 2
1 4
1,67 5,00
1 6
C
D E F
9,0%
11,1% 10,8% 18,7%
6
3 4 1
4,5
7,8 18 5,1
5
3 1 4
3
2 4 1
3
4 2 6
4,67
3,33 2,33 3,67
5
3 2 4
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Scoring models
Give very good results. Important: selection of criteria that really separate the winners from the losers. Such criteria must be based on the analyses of your own company and other companies in the same industry. You must develop the expert base to be used in project valuation. One of the models described in [Cooper 2001] uses five main factors:
business strategy fit (2) strategic leverage (4) probability of technical success (4) probability of commercial success (6) reward to the company (project profitability) (3)
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Goal 2: Balance
In many cases, the project portfolio is not balanced; often it contains too many small projects and not enough of radical, visionary but highly risky projects necessary to maintain the company competitiveness. Suitable tools for creation of the balanced portfolio are bubble diagrams; most frequently used diagram is the risk reward bubble diagram, which is used by 44 % companies
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60 50
reward
40 30 20 10 0 0,00%
WHITE ELEPHANTS BREAD & BUTTER
10,00%
20,00%
30,00%
40,00%
50,00%
60,00%
70,00%
PTS
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Diagram quadrants
Pearls: potential star projects: high probability of success, high expected reward. We would like many of such projects. Oysters: highly speculative projects: low probability of success, high expected reward. Here the breakthroughs pave the way for solid payoffs. Bread and butter: simple projects, high probability of success, low expected reward. Often too many of them in the portfolio, consuming substantial ratio of resources. White elephants: low probability of success, low expected reward; projects that are difficult to kill, often from personal reasons.
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Top-down approach
from the strategy formulation (using principles, methods and procedures of strategic management, see e.g. [Grant 2008]). Objectives for new products are often stated in terms of ratio or growth of turnover, profit, market share, etc. during several (usually 3-5) years.
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Technology roadmaps
Technology strategic roadmaps, results of technology foresight and other studies performed often on the macro-economic level. In the Czech Republic such studies are prepared e.g. by Technology centre AV R (http://www.strast.cz/) and CESES Centre for social and economic strategies (http://www.ceses.cuni.cz/), at the EU level the Institute for Prospective Technology Studies in Sevilla (http://ipts.jrc.ec.europa.eu/). Technology roadmaps are developed also within the framework of technology platforms of the 7-th EU Framework Programme for Research, Development and Demonstrations (http://cordis.europa.eu/fp7, http://cordis.europa.eu/technologyplatforms).
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Strategic buckets
The company management, on the basis of strategy, decides what resources will be allocated to basic categories of development projects (e.g. X % to platforms, Y % to new products, Z % to incremental innovations) and projects are then prioritized within those buckets. Resources originally allocated to one category may not sufficient, while there are still free resources in the other bucket. In such a case the resources can be redistributed. However, after the final allocation of resources to strategic buckets it should not be possible to reshuffle the resources between buckets. Especially it should be avoided to take resources originally allocated for strategic, long-term goals and use them for short-term, more urgent projects, often backed from political reasons. Such redistribution undermines long-term strategic goals and all the strategic planning
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References
[Cooper 2001] COOPER R.G., EDGET S.J., KLEINSCHMIDT E.J. Portfolio Management for New Products, 2nd edition, Basic Books, 2001, ISBN 0-7382-0514-1 [Grant 2008] GRANT R.M., Contemporary Strategy Analysis, 6th edition, 2008, Blackwell Publishing, ISBN 978-1-4051-6309-5 [Vacek 2007] Vacek, J. Evaluation of the new product development and R&D projects. In AEDS 2007. Pilsen : University of West Bohemia, 2007, p.83-87. ISBN 978-80-7043-600-4. [Vacek 2006] Vacek, J. Structuring the new product development process. In AEDS 2006. Pilsen : University of West Bohemia, 2006, p.111-118. ISBN 80-7043-490-2. [Vacek 2004] Vacek, J. New product development and current trends in innovation management. In AEDS 2004 Workshop. Plze : University of West Bohemia, 2004, p.35-36. ISBN 80-7043-331-0.
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Lesson 5
Innovation impulses
EXTERNAL
5. Demographic changes 6. Changes in the world view 7. New knowledge
1. Unexpected event
Unexpected success
1. 2. 3. 4. What will the use of the offered opportunity mean to us? Where will its introduction take us? What do we need to do for its implementation? How can we achieve that?
2. Contradiction
Non-compliance with economic reality Contradiction between reality and anticipations about it Contradiction between the anticipated and real behavior of customers and their values
3. Change of process
realize the necessity of change, identify the weak point of the chain be convinced that if something does not work the way it should, then it is necessary to attempt a change the solution must be convenient for those who will implement it. It must place moderate and feasible requirements
5. Demography
easiest to describe and to predict influence what will be bought, who and in which amounts will purchase
6. Change of attitudes
change in the approach to health: healthcare, food, spending the leisure time upper-middle class: a chance to offer non-standard services at non-standard prices increasing migration, feminism, regionalism etc Timing is essential - to be the first
7. New knowledge
Based on convergence or synergy of various kinds of knowledge, their success requires, high rate of risk
Thorough analysis of all factors. identify the missing elements of the chain and possibilities of their supplementing or substitution; Focus on winning the strategic position at the market. the second chance usually does not come; Entrepreneurial management style. Quality is not what is technically perfect but what adds the product its value for the end user
Customers
product presentation realistic simple, demonstrative and precise moderate representative sample of customers
Suppliers Competitors
INTERNAL IMPULSES
usually combined with external sources supported by
creative techniques innovation tools
REGISTER OF IMPULSES
Lesson 6
Innovation management tools
INNOMAT http://www.inno-pro.com/aainn0.htm
BENCHMARKING
BRAINSTORMING
REENGINEERING
CHANGE MANAGEMENT
SPECIFIC TECHNIQUE
time management techniques
SWOT analysis
force field analysis internal marketing techniques strategic planning techniques
TECHNOLOGY AUDIT
TECHNOLOGY FORECAST
VALUE ANALYSIS
DESIGN FOR X
<>
X - examples
Design for Manufacturing Design for Environment and Assembly (DFMA) (DFE) Design for Dimensional Control (DDC) Design for Storability Design for Electromagnetic Compatibility Design for Inspectability Design for Reliability (DFR) Design for Disassembly (DFD)
House of Quality
Interrelationships
Technical Features
Voice of the Customer Relationship between Customer Desired Traits and Technical Features
PEER EVALUATION
TEAM BUILDING
ISO 9000
ISO14000
refers to procedures for ensuring sustainable and environmentally friendly operations EIA Environmental Impact Assessment
LEAN THINKING
CONTINUOUS IMPROVEMENT
CONCURRENT ENGINEERING
INNOSKILLS
FASTER
Lesson 7
CREATIVITY BASICS & TECHNIQUES
creativity results:
in producing or bringing about something partly or wholly new; in investing an existing object with new properties or characteristics; in imagining new possibilities that were not conceived of before; and in seeing or performing something in a manner different from what was thought possible or normal previously.
Many creative ideas are generated when somebody discards preconceived assumptions and decides on a new approach or method that might seem to others unthinkable Serendipity - effect by which one accidentally discovers something fortunate, especially while looking for something else entirely
Quotations on serendipity
"In the field of observation, chance favors only the prepared mind." Louis Pasteur "Serendipity. Look for something, find something else, and realize that what you've found is more suited to your needs than what you thought you were looking for." Lawrence Block "The most exciting phrase to hear in science, the one that heralds new discoveries, is not 'Eureka!', but 'That's funny '" Isaac Asimov "In reality, serendipity accounts for one percent of the blessings we receive in life, work and love. The other 99 percent is due to our efforts." Peter McWilliams "Serendipity is looking in a haystack for a needle and discovering a farmer's daughter." Julius Comroe Jr. "Serendipity is putting a quarter in the gumball machine and having three pieces come rattling out instead of oneall red." Peter H. Reynolds "--- you don't reach Serendib by plotting a course for it. You have to set out in good faith for elsewhere and lose your bearings ... serendipitously." John Barth, The Last Voyage of Somebody the Sailor "Serendipity is the art of making an unsought finding." Pek van Andel (1994) source: wikipedia
BASIC CONCEPTS
Creative thinking represents a combination of logic and intuitive approaches Being creative means dealing with the aspects and possibilities of today and tomorrow That requires a person to be open to everything new, do not stick to things that we are all used to, do not adhere to yesterday so much Creativity does not mean dreaming, it means productive managing of specific tasks. Only a creative approach to the problem solution can be successful.
Creativity in organizations
Amabile: to enhance creativity in business, three components are needed:
Expertise (technical, procedural & intellectual knowledge), Creative thinking skills (how flexibly and imaginatively people approach problems), and Motivation (especially intrinsic motivation).
Nonaka: creativity and knowledge creation are important to the success of organizations. In particular, he emphasized the role that tacit knowledge has to play in the creative process.
Barriers to creativity - 1
The value of getting things right time can induce a fear of mistakes and experimentation. So can a blame culture where people become afraid of making mistakes. Managers who are not as secure as they should be can resist or block ideas that are not their own or which they see as threatening. A culture that over emphasizes cost containment, processes, consistency or efficiency. A reward system that too exclusively celebrates getting things done fast with no mistakes. A general fear of risk taking, wanting to analyze everything to death, to wait and see what others do in the market before acting.
Barriers to creativity - 2
A lack of explicit funding for experimentation. A strict requirement to demonstrate the value of an idea before it has a chance to prove itself. A tendency to shoot down novel ideas as a way of scoring points. An over allegiance to past successes, proven experience and tried and tested methods. A suspicion of novelty, a fear of the unproven. A resistance to learning from mistakes or trial and error, a tendency to blame external factors or other people for failures rather than to learn from them. Short termism - a drive to meet short term financial goals rather than to invest in the future.
Barriers to creativity - 3
http://members.optusnet.com.au/~charles5 7/Creative/Basics/obstacles.htm
CREATIVITY STIMULATION
Keep in touch with creative people Accommodate the effort to the targets Evaluate and appreciate the effort Protect creative employees Leave them peace and time Provide them with security Tolerate failures Maintain creative atmosphere Evaluate the creative ideas quickly Be persistent - nothing comes for free
Fostering creativity
Establishing purpose and intention Building basic skills Encouraging acquisitions of domain-specific knowledge Stimulating and rewarding curiosity and exploration Building motivation, especially internal motivation Encouraging confidence and a willingness to take risks Focusing on mastery and self-competition Promoting supportable beliefs about creativity Providing opportunities for choice and discovery Developing self-management (metacognitive skills) Teaching techniques and strategies for facilitating creative performance Providing balance
Creative Process
Problem Definition - including problem analysis, redefinition, and all aspects associated with defining the problem clearly. Idea Generation - The divergent process of coming up with ideas. Idea Selection - The convergent process of reducing all the many ideas into realistic solutions Idea Implementation - Turning the refined ideas in reality. Processes - Schemes and techniques which look at the overall process from start to finish (or at least 3 of the above 4 areas)..
http://www.mycoted.com/Category:Creativity_Techniques
Brain hemispheres
Left brain functions sequential Right brain functions simultaneous
analytical verbal
logical linear algorithmic processing mathematics: perception of counting/measurement present and past language: grammar/words, pattern perception, literal
holistic imagistic
intuitive holistical algorithmic processing mathematics: perception of shapes/motions present and future language: intonation/emphasis, prosody, pragmatic, contextual
CREATIVITY TECHNIQUES
trial and error brainstorming Inspirational questions psychological-cognitive, such as:
Osborn-Parnes Creative problem solving (CPS) Synectics; Lateral thinking (courtesy of Edward de Bono),
Inspirational questions - 1
What can I substitute to make an improvement? What if I swap this for that and see what happens? How can I substitute the place, time, materials or people? What materials, features, processes, people, products or components can I combine? Where can I build synergy? What part of the product could I change? And in exchange for what? What if I were to change the characteristics of a component? What happens if I warp or exaggerate a feature or component? What will happen if I modify the process in some way? What other market could I use this product in? Who or what else might be able to use it? What if I did it the other way round? What if I reverse the order it is done or the way it is used? How would I achieve the opposite effect?
Inspirational questions - 2
Who else has solved this problem? What similar area of expertise might have solved this problem? Is there anyone else in the company who knows how to solve this? What else could we use to solve the problem? Where else might this problem have been solved? What other companies might know how to solve this? What similar problems have been solved, and how? What other industries face the same problem and what do they do about it?
Inspirational questions - 3
How would they think? What objects and items would they be using? Where would they be doing it? How would they see the problem? What action would they take? How would they explain the problem? How would they solve the problem? What does your situation or your problem remind you of? What other areas of life/work experience similar situations? Who does similar things but not in your area of expertise?
Inspirational questions - 4
What would my perfect solution be? What effect would my ideal solution have? What if money/morals/laws did not matter at all? What would I do if I had unlimited power and resources? What would my ideal solution look like? Source:Wikipedia
CPS (OFPISA)
six stage process, each with a divergent and a convergent phase.
1. Objective Finding (or Mess Finding): Sensitise yourself for issues that need to be tackled. 2. Fact Finding: Gather information about the problem. 3. Problem Finding: convert a fuzzy statement of the problem into a broad statement more suitable for idea finding. 4. Idea Finding: generate as many ideas as possible 5. Solution finding: Generate and select obvious evaluation criteria and develop the short-listed ideas from Idea Finding as much as possible in the light of these criteria. Then choose the best of these improved ideas for further development 6. Acceptance finding: How can the suggestion you have just selected be made up to standard and put into practice?
Synectics
problem solving approach that stimulates thought processes of which the subject is generally unaware. developed by William Gordon, central principle: "Trust things that are alien, and alienate things that are trusted." Encourages fundamental problem-analysis and, on the other hand, the alienation of the original problem through the creation of analogies It is thus possible for new and surprising solutions to emerge. Synectics is more demanding of the subject than brainstorming, as the many steps involved mean that the process is more complicated and requires more time and effort.
Synectics - steps
Analysis and definition of the problem Spontaneous solutions Reformulation of the problem Creation of direct analogies Personal analogies (identification) Symbolic analogies (contradictions) Direct analogies Analysis of the direct analogies Application to the problem Development of possible solutions
Lateral thinking
de Bono methods of thinking concerned with changing concepts and perception; reasoning that is not immediately obvious, ideas that may not be obtainable by using only traditional step-by-step logic shifting of thinking patterns, away from entrenched or predictable thinking to new or unexpected ideas. A new idea that is the result of lateral thinking is not always a helpful one, but when a good idea is discovered in this way it is usually obvious in hindsight, which is a feature lateral thinking shares with a joke We may need to solve some problems not by removing the cause but by designing the way forward even if the cause remains in place http://en.wikipedia.org/wiki/Lateral_thinking
Example - meeting
The meeting may start with everyone assuming the Blue hat to discuss how the meeting will be conducted and to develop the goals and objectives. The discussion may then move to Red hat thinking in order to collect opinions and reactions to the problem. This phase may also be used to develop constraints for the actual solution such as who will be affected by the problem and/or solutions. Next the discussion may move to the (Yellow then) Green hat in order to generate ideas and possible solutions. Next the discussion may move between White hat thinking as part of developing information and Black hat thinking to develop criticisms of the solution set.
TRIZ, ARIZ
(Teoriya Resheniya Izobretatelskikh Zadatch) = Theory of inventive problem solving Inventing is the removal of a technical contradiction with the help of certain principles
Contradictions
Inventive problems stem from contradictions (one of the basic TRIZ concepts) between two or more elements, such as, "If we want more acceleration, we need a larger engine; but that will increase the cost of the car," that is, more of something desirable also brings more of something less desirable, or less of something else also desirable. These are called Technical Contradictions. Physical or inherent contradictions: More of one thing and less of another may be needed. For instance, a higher temperature may be needed to melt a compound more rapidly, but a lower temperature may be needed to achieve a homogeneous mixture.
Matrix of Contradictions
40 inventive principles rows: 39 system features that one typically wants to improve, such as speed, weight, accuracy of measurement and so on. columns: typical undesired results. matrix cell: points to principles that have been most frequently used in patents in order to resolve the contradiction.
Morphological analysis
designed for multi-dimensional, nonquantifiable problems where causal modeling and simulation do not function well or at all Fritz Zwicky (1967, 1969) - exploring all the possible solutions to a multidimensional, non-quantified problem complex
Example 1 - continued
K->E->C: hydroelectric generation which is then stored in a battery. C->T->K: internal combustion engine (chemical energy transformed into thermal energy) leading to energy being stored in a flywheel. E->C->T: common refrigerator
protection against
combination with
gravitation
paper
mechanical forces
plastic
heat
wood
radiation
paint
sound
nothing
16 dots, 6 lines
http://www.sciencenewsforkids.org/articles/20041027/PuzzleZone.asp
Puzzle Archive
http://www.sciencenewsforkids.org/pages/ zonearchive.asp?type=1
Lesson 8
TEAM WORK
TEAM DEFINITION
group of people whose individual members share a common goal their expert skills and personal abilities are complementary its members work activities and skills are purposefully and smoothly linked together.
TEAM EFFECTIVENESS
dynamic balance among
Necessity to perform a joint task Individual needs of team members Necessity to maintain a team
TEAM DEVELOPMENT
Forming Storming Norming Performing Dissolving
Group cohesion
(+) larger degree of cooperation, better communication, higher resistance against frustration, lower fluctuation and absences, lower level of tolerance towards lazy people (-) difficult for new members, limited possibility to enforce new ideas, opposition against changes in work procedures, often overprotective against outsiders
Conflicts inside or outside Ignores them or solves them the team him- or herself Understands group unity Anticipates As a potential threat to his/ her position Peoples worries of responsibility
Lesson 9
DECISION MAKING
DECISION PROCESS
1. 2. 3. 4. 5. 6. 7. Identify the problem Specify objectives and decision criteria Develop alternatives Analyze and compare alternatives Select the best alternative Implement the chosen alternative Monitor the results
Bounded rationality
limits not optimum, but satisfactory solution
Suboptimization
departmentalization
MODELS
Model: abstraction of reality, adequately portrays real-life phenomena
Physical Schematic Mathematical Computer
USE OF MODELS
1. 2. 3. 4. The purpose of the model How to use model to generate results How results are interpreted and used What assumptions and limitations apply
Be aware of the assumptions and limitations of each model
LIMITATIONS OF MODELS
1. Overemphasis of quantitative over qualitative information 2. Incorrect application, misinterpretation of results 3. Highly sophisticated models in hands of users who cannot fully comprehend the conditions and limitations of the model use 4. Model building as an end to itself
QUANTITATIVE APPROACHES
Linear programming Queing techniques Inventory models Project models (PERT, CPM, TOC) Forecasting models Statistical models Quantitative methods are typically more difficult to understand without a fair amount of explanation and demonstration
TRADE-OFFS
List advantages and and disadvantages of opposing courses of action to gain better understanding of the consequences of potential decisions.
Example quality control advantages disadvantages
Increase in costs
SENSITIVITY ANALYSIS
How sensitive the solution is to a change in one or more parameters
Example: = (A2 A1) / 0,5*(A2 + A1) x=5 A = kx + 4000 B = kx + 4 k=1 4005 9 k=2 4010 4 0,03% 10,87%
DECISION ENVIRONMNENTS
CERTAINTY relevant parameters have known values RISK certain parameters have probabilistic outcomes UNCERTAINTY it is impossible to assess the likelihood of various possible outcomes
DECISION THEORY
1. Identify possible future conditions states of nature 2. Develop a list of possible alternatives 3. Determine or estimate payoff associated with each alternative for every possible state of nature 4. Estimate the likelihood of every possible state of nature (if possible) 5. Evaluate alternatives according to decision criterion and select best alternative
PAYOFF TABLE
Possible future demand
Alternatives facility size Small Medium Large low 10 7 -4 moderate 10 12 2 high 10 12 16
Low
Moderate High
10
12 16
small
medium large
the best is 10 - choose small facility Maximax: the best overall payoff is 16 choose large Laplace:
Alternative Average payoff small 10 medium 10,33 large 4,67
Minimax regret:
Opportunity loss, regret: subtract every payoff in a column from the largest positive payoff in that column
Small
Medium
0
3
2
0
6
4
6
4
Large
14
10
14
Small
Medium Large
0,30
0,50 0,20
10
10.5 3
DECISION TREES
DECISION TREES
Particularly useful for situations that involve sequential decisions Nodes:
decision points chance events
Branches leaving
alternatives states of nature
EVPI - example
Demand
Low Moderate High
Best payoff
10 12 16
probability
0,30 0,50 0,20
expected payoff under certainty = 0,30*10 + 0,50*12 + 0,20*16 = 12,2 EVPI = 12,2 10,5 = 1,7
SENSITIVITY ANALYSIS
State of nature Alternative A #1 4 #2 12
B C
16 12
2 8
Sensitivity Analysis
LP - ASSUMPTIONS
Linearity (objective function &constraints) Divisibility (non-integer values of variables acceptable) Certainty (values of parameters known, constatnt Non-negativity (negative values of variables unacceptable)
LP EXAMPLE 1
Decision variables: x1, x2, x3 quantities of products to produce Maximize profit 5 x 1 + 8 x2 + 4 x 3 Subject to constraints:
Labor Material Product 1 Non-negativity 2 x1 + 4 x2 + 3 x3 250 hours 7 x1 + 6 x2 + 5 x3 100 pounds x1 10 units x1, x2, x3 0
LP solution 1
decision variables X1 X2 X3 10 5 0 90 40 100 10 250 100 10
objective function
P
constraints
1 2 3
LP Graphical method
For two-variable problem, graphical method can be used
Example: Minimize Subject to P = 8x + 12y 5x + 2y 20 4x + 3y 24 y2 x, y 0 x = 4,5, y = 2, P = 60
Solution:
LP Graphical method
12 10 8 6 4 2 0 0 1 2 3 4 5 6 7 8 9 1 1 1 y1 y2 y3 P
Lesson 10
CONFLICT RESOLUTION
Conflict management
Conflict cannot always be avoided, but it can be managed Sources of conflicts:
Aggressive or conflict-prone personality Ambiguous or conflicting roles, interdependence Difference in objectives, values, perceptions Inadequate authority, oppressive management Inadequate resources Unsatisfactory communication
Conflict consequences
Positive:
Competition tends to enhance the general welfare, if the conflict level is not too high Loyalty increases when people unite against a common foe If problems are recognized, solutions may be forthcoming
Negative:
Activities, not results, become important Attack individual rather than problem Blocked communication Need of strong leaders
Lesson 11
COMPANY INNOVATION CULTURE
Successful companies address the human needs and give them priority Thomas J. Peters, Robert H.Waterman
COMPANY CULTURE
Organization culture: a pattern of ideas, opinions and attitudes that majority of people in the company understands, respects, acknowledges, adopts and relates to them. Influences the companys economic success and competitiveness
Influenced by:
Organizations strategy Organizations system Level of cooperation between the individual organization structures Employees abilities
MANAGEMENT STYLES
shift from directive to participative style of management 4 basic management styles:
Exploiting authoritative Benevolent authoritative Consultative Participative
MPC- continued
5. The individual is motivated to expend effort and does so
6. Does the individual have appropriate training, abilities, and tools, and know the objective? 7. Performance
8. Does the individual receive need satisfier? Do the organization and manager
provide need satisfier?
MPC- continued
9. Does the individual reassess the situation? 10. Will the individual be motivated in the same way?
Need satisfiers
Frederick A. Herzberg Hygiene factors dissatisfiers, extrinsic (pay, supervision) Motivators satisfiers, intrinsic (achievement, recognition for performance)
Maslow
Herzberg
Self-actualization
Esteem Social
Work itself, achievement, possibility of growth, responsibility Advancement, recognition, status Interpersonal relations Company policy, job security
Working conditions, salary, personal life
Lesson 12
INNOVATION PROGRAMS AND EDUCATION
Paradigm shifts
Information and knowledge society Lifelong learning Lean companies, networking Information and communication technologies (ICT)
e-business, e-commerce, e-learning, egovernment, e-, m-
Learning organization
The education that does not follow the specific objective and does not improve the results is a luxury the company cannot afford. Learning has been effective if a person knows something he has not known earlier and he can do something what he has not been able to do earlier The mission of the managerial education is the development of the competencies and performance of managers Learn by doing - follow what your more experienced colleagues (but experiment as well)
KEY COMPETENCIES
technical qualification - technical knowledge, skill, talent and attitudes related technologic, economic, financial, structural and procedural aspects of work Soft skills, behavior and acting - related to work with people, influencing the communication and dealing with individuals and groups both within and outside the company.
Lesson 13
COURSE CONCLUSION TERM PAPER PRESENTATIONS
Adapt the knowledge to your culture, local conditions, But at the same time, do not over-adapt, try also to affect your environment
Good luck
PROCESS MAP
Communication with customer
MARKET
Idea Development
CUSTOMER
Production
Design Design modification modification according + according + customers customers requirements requirements