Product developme

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ment, knowledge and innovation man
INNOVATION MANAGEMENT
Bartosz Bielecki

Tutor:
Marjan Leber

Maribor, June 2014.

anagement
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1. INTRODUCTION
1.1. Definition of innovation
Innovations result from ideas, if they are implemented in new products, services and
processes, which find real usage and thus penetrate the market.

Innovations dont always have to be completely new ideas. The term innovation rather
means the implementation of something new and results in a noticeable improvement for
the user. They are characterized by a special characteristic, clear originality and a
noticeable user benefit. Innovations are as a result qualitative new products, services,
processes, structures, markets and cultures.
Innovation management describes the decisions, activities, and practices that move an idea to
realization for the purpose of generating business value. It is managing the investment in
creating new opportunities for generating customer value that are needed to sustain and grow
the business or company.
Generally, innovation investment focuses on the development of new products, services, or
technologies. However, the types of innovation that can enhance business results go well
beyond these, including changes to a company's business model. Identifying and making these
investments successfully and repeatedly constitutes the key objective of innovation
management.
In the industrial era, the innovation processes in society and in a company were similar. The
cascades from science to technology and from technology to business were repeated in the
organization of the company. In the postindustrial era, the innovation process became a quest
to find and create new combinations between the technology and the business domains. In the
traditional innovation process, the screening criteria for continuation came sequentially
according to the progress through the functions: first scientific proof, then technical
feasibility, followed by commercial attractiveness, strategic fit, operational acceptability, and
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so on. From a management perspective, it is useful to see the innovation process as a supply
chain process with three main stages. Each stage needs to be operated efficiently and
optimized in its own right, and at the same time, the process has to be steered and optimized
as a whole. The three stages are: idea generation and crystallization, development and
demonstrating, and building capability and preparing for market launch. The final stage in the
innovation process is the entrepreneurial stage with three key aspects: investing in the supply
chain, actively managing residual risks, and preparing detailed business and launch plans. The
key objective is to successfully launch the new product with minimal risk to the company's
brand and reputation.
In today's rapidly changing business environment, managing innovation effectively has
become an essential requirement for staying competitive. Long term sustainability for a
business may be determined by a company's ability to competently direct innovation
resources to address a constantly changing market and economic environment.
2. INNOVATION NECESSITY OPPORTUNITIES THROUGH
INNOVATION
International competition, growing customer demands, rapid technological development as
well as new guidelines and norms (e.g. environmental protection standards) pose high
requirements for the development and management of new products and services


Figure 1 - Innovation necessity
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The competence of customer oriented and at the same time cost and time-efficient
creation of development processes thus is becoming an increasingly important factor of
success for companies. Further also diverse legal, social and ecological requirements
must be met. Innovations are an important factor of success in a competition which is
getting increasingly intense. Only those who are able to invent themselves over and
over again and thus gain new competitive advantages will be able to survive in the long
run. This is true for companies, organisations, teams, employees and countries. Today
there is more and more discussion about the necessity for innovation in companies, which is
subject to various factors. Figures 1 and 2 present the connection between the factors
and the necessary innovations.


Figure 2 - Innovation necessity
Innovations result from ideas, if they are implemented in new products, services and
processes, which find real usage and thus penetrate the market. Commercial success in the
future will therefore depend mainly on the companies abilities to create new products,
ideas and processes or take up innovations quickly. The requirements for this are good
innovation skills. To take up changes as real opportunities companies today first and
foremost
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need the skill to be able to predict new trends and if possible even create them. In
that case the increasingly rapid change brings advantages and opportunities for new
businesses or business areas. The winners in this situation are thus the companies that are
able to adapt faster to the new situation than the competition.
3. DECISIONS CRITICAL FOR SUCCESSFULL INNOVATION
Those involved with innovating will generally tell you that generating ideas is not the difficult
part of being successful with creation and change. Numerous decisions will be made that
impact the progression and ultimate success of good ideas. These good ideas need to be
related to solving a real business problem or growing an opportunity. Questions that hint at
these decisions include:
Is the potential innovation aligned with the business strategy?
How does the proposed change generate value for the customer?
What investment is required? Will the needed investment generate an acceptable
return?
What would be the impact of the innovation on the current business? Could it disrupt
existing profits?
How long will it take for the new concept to be realized and impact the business?
How might the innovation change or disrupt current markets?
Will the new concept generate new revenue or reduce costs?
How will the innovation enhance existing or create new barriers to competition?
Is there easy access to the competencies needed to realize the new concept?
Many of the decisions associated with innovation management are common to the choices
associated with a new venture start-up. Conflicts created by some of these choices points to
some of the dilemmas associated with disruptive innovation.
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Figure 3 - Evaluation process of ideas
4. REQUIREMENTS FOR INNOVATION MANAGEMENT
Having an innovation framework can be a key component to continuous effective change that
increases the capability of the business to generate customer value. A critical part of this
framework will be the decision making process that is used to funnel the potentially long list
of ideas down to the critical few that will deserve investment. For large organizations, this is
typically accomplished as part of a stage gate process, but multiple innovation models exist.
Often these investments are considered as part of an overall business investment portfolio
decision.
Innovation promotes the need for constant change and renewal, potentially impacting all areas
of a business. Change is often resisted, necessitating appropriate incentives and rewards to
promote needed innovation. Many of the most enduring innovations have required long term
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investment and staying power. This must be addressed as part of the organizational decision
making approach if an innovative environment is to be sustained.
The desire to create long term competitive advantage will often lead to intellectual property
and innovation being closely connected. As a result, innovation processes will often have
requirements for generation of intellectual property that can protect advantages created by an
innovation investment.
5. BENEFITS THAT COME FROM INNOVATION MANAGEMENT
Innovation management is quickly becoming a critical requirement for enabling a sustainable
business. Some of the benefits for doing it well include:
Improved timing for market introduction
Ability to maintain or improve business margins
Enabling access to new customers and markets
Increased market share
Improved and longer lasting competitive advantage
Increased employee engagement and initiative
Improved customer satisfaction
Sustainable increase in shareholder returns
6. TYPES OF INNOVATION MANAGEMENT
Different sorts of corporate innovations
We distinguish different forms of corporate innovations:
Product innovation
Process innovation
Market innovation
Structural innovation
Cultural innovation
Product innovation
Product innovation is the development of a new product to on the one hand keep up with the
technological development, but on the other hand also to in any case compensate the shift of
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demand on the side of the demanders. The necessity for product innovation lies in the change
of demand preferences and the rise of technological trends.
Process innovation
Process innovation is about the optimisation of the way goods and services are produced, and
not the service itself. Process innovations help companies to create their operating
procedures more efficient (that is to say cost and time efficient) and more creative. The
process includes the way as well as the order in which goods and services are produced in a
company.
Market innovation
Market innovations open up new business and buying markets, like new customer or
delivery groups and increase the turnover, decrease the buying price or increase the
quality of goods and services.

Structural innovation
Structural innovations are amongst others innovations in the functionality of the
working structure like e.g. the implementation of new working hours, work places or
enhanced processes of human resources development, but also enhancements in the
structure of distribution, marketing, organisation or logistics. They serve to increase
employee motivation and qualification or the rationalisation of operational processes.

Cultural innovation
Cultural innovations are enhancements in the social area for individuals as well as in the
relationship between individuals.




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7. FACTORS OF SUCCESS IN PRODUCT DEVELOPMENT
The following list contains success factors in product development:
Success oriented corporate culture
Organizational structure for interdisciplinary projects
Clear market, technology and cooperation strategies
Precise market-oriented product and project definitions
Efficient interdisciplinary teamwork
Stronger weighting of predevelopment and product definition phase
Structured innovation process, transparent Go/Stop decisions
Efficient project management
Usage of integrated development methods
Support of creativity
Simultaneous product, production and marketing development.
Market-oriented cost and quality management.
Prototyping and customer oriented product tests
8. INNOVATION MANAGEMENT METHODS
8.1 Integrated product development
Successful products can in the future most likely be expected from those companies
that are able to organize innovations according to the decisive success factors like
market, customer demands, etc. and implement them efficiently (in regard to time and
costs). Integrated Product Development (IPD) offers an efficient development and
management concept comprehensively taking into consideration the success factors
mentioned under point 1.2.3. The basic thought of IPD is to form all resources and processes,
which are necessary for the successful creation and marketing efficiently and in a coordinated
way already parallel to the product.
This includes for example the product-specific processes acquisition, production,
marketing, controlling and/or logistics. As holistic and efficient concept IPD supports the
creation of products from the idea to the successful commercial launch. IPD can be used
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for the development of products and services and supports the development of essential
innovation resources. (e.g. core competencies, organization, strategy, etc.)
All components that are necessary to create successful goods and services for the customer
together form the goods and services system (Figure 3). The interaction of these
components is finally decisive for the new products success.

Figure 4 - Goods and services system











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9. HOUSE OF INNOVATION

Rysunek 5 - ouse of Innovation !" #earny
Based on experiences in innovation consulting for different branches A.T.Kearney has
developed the House of Innovation. This model depicts the most important building blocks
of successful innovation management. The roof of the House of Innovation is innovation
strategy, a planning process that clearly defines for which corporate goals innovations
are necessary and how they can be supported by resources, processes, technologies and
behaviours within the company. A company aligned for innovation should next to
innovation strategy also include this goal in its organisation and corporate culture.



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From the market to the market

Figure $ - From t%e market to market
From market to product idea Suggestions and information are taken from the market which
cause an idea finding initiative. The company realizes a problem, a new opportunity is
recognized, customer feedback comes in which contains new suggestions. Or information
comes from market research because the company gave a specific search order. Further
increasingly creative teams come in at this stage which support the companies professionally
in the idea finding process. The result of this phase are product ideas, which now have to
go through different evaluation methods leading to specific, usable products.


From product idea to product
In this phase of the product development process specific products are formed from the ideas
and their production methods are worked out. In this stage the product is made ready for
production and ready for market. The difficult hurdle must be cleared in this phase to
implement the developed concepts.


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From product to market
This final phase describes the actual implementation of a service or product innovation
to the market. This is where the circle is complete. All activity comes from the market,
end it also ends here.
10. INNOVATION CIRCLE
The innovation circle shows the whole innovation management in one picture. The
innovation circle itself is the core piece, which pictures the innovation process
consisting of the sub processes input, project management and implementation.
Organisational factors, which so to speak embrace the main field, consist of strategy,
corporate culture, human resources, budget and cooperations. These tell us if the
environment is also suited for promoting innovations. To put it another way the whole
process from idea to the implementation of new products/services to the market is pictured.
The environment, which is dealt with in the next chapter, contains so-called
organisational factors, which again consist of the strategy, the corporate culture, human
resources, the budget and cooperations.
Ideally SMEs consider all areas, the process of innovations itself as well as the environment,
because the areas interlock very closely. Based on these aspects, the corporate
innovation management can be analysed, evaluated and finally enhanced or adapted. The
project goal is the increase of innovation skills in SMEs.
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Figure & - Innovation circle
The core piece is the innovation circle itself, which looks at the process steps from input over
project management until business launch, e.g. the allocation of new products and/or services,
the practicability of process enhancements, the opening of new markets or the development of
business models.


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Figure ' - Innovation circle in narro(er sense
Input: The following questions will be answered: Where do the ideas come from?
How can you act actively and systematically in this early innovation phase?
Innovation management: How systematically should the innovation process be organized?
Implementation or realization: How can or should new products be introduced to the
market? Accompanied by a controlling of the whole process.
11. INPUT
The starting point for successful new products and services are initially ideas, which can be
derived from various company-internal and external sources. Finding those ideas can be
significantly supported by different organisational and methodological measures. The end
of this chapter will deal with idea generation/creativity.
The next decisive step is the systematic evaluation of ideas and the careful planning
of the development process. To ensure the success of the new product as early as
possible the potential of the product idea must be evaluated. Here internal and external
factors must be taken into consideration, like e.g. customer value, market attractiveness,
differentiation potential, strategic accordance, necessary technological infrastructure and the
available resources.
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Another important element in the preparation and evaluation of the development project
is the business plan. Here the goals and requirements as well as the profitability of the project
are pictured and evaluated in detail.
Therefore the business plan is the suitable basis for decisions made on the
management level about the realisation of the development project.
The driving force behind innovations are not only commercial or technological breakthroughs
(science or technology push), but also the demand for problem solutions (market
pull/need pull/demand pull.
11.1 Market as innovation input
The market demand (market pull) is a strategy, where initiative comes from the market.
Customers for example define new needs and demands. Competitors initiate successful
new products. Internal and external sources of information can provide new impulses for
market trends.
This is also true for new standards and norms, which demand new solutions. Many examples
can e.g. increasingly be found in the environmental sector.
Internal departments as sources of input
A company may use various internal departments as sources of information
for current market initiatives
Distribution customer data, competition surveys
Marketing regular market research surveys
Management visit of fairs, congresses, conferences
Production animation and enhancements of performances
Customers as sources of input
There are often customers, who are looking for the solution to a certain problem
earlier than others or are generally interested in new solutions earlier. These so called lead
users should be directly incorporated into the development process of innovations.
Business partners as sources of input
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Companies often have abroad network of external business partners and service
providers. This group of people can offer important impulses for the generation of ideas
and their successful implementation.
11.2 Technology push as innovation input
A technology push is marked by innovations coming from a venture and its R&D
efforts. This new technology generates a product that wakes new needs and often has the
potential to create new markets. In a technology push strategy basically potential market
applications are largely unknown.
From a traditional perspective innovation management is one of the tasks of the R&D
department. In many branches and companies the R&D department does not have the
resources anymore to develop new skills on its own.
Normally they have to rely on competent internal and external partners. This is why they for
example use the knowledge of external research facilities like universities and technical
colleges.
The results of a technology push strategy are often radical innovations with high
potential yield, whose realization is often combined with a high expenditure of time and
substantial risks. Here the risk to find no market at all, especially for radical innovations, is
confronted with the opportunity to open up new markets through new technologies.










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12. CONCLUSIONS
The importance of innovation is obvious, as well as its role in growth of companies. Pursuing
new ideas makes the companies more competitive on the specific market. For that reason lot
of entrepreneurs invest so much money in Research & Development departments and
laboratories in order to provide their employees with friendly and challenging working
environment. On the other end of the process of developing new ideas into physical products
are the employees responsible for evaluating the ideas and decide which of them should be
further developed and which should be considered in longer perspective of time.
Innovation is demanded not only by the companies themselves but also externally from
customers, who are seeking for a solution to their specific problems, which they encounter in
their field of industry. In many cases companies seek outside counsel, which also stimulates
the academic workers and provides them with opportunity to confront academic knowledge
with real-life problems.















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13. SOURCES
1. http://www.innovation-management.org/
2. ftp://ftp.cordis.europa.eu
3. http://hypeinnovation.com
4. http://www.decision-making-solutions.com
5. Jan Verloop "Insight in Innovation"
6. James M.Higgins, Gerold G.Giese "Innovationsmanagement"
7. Roland Winkler, "Methoden der Ideengenerierung -bewertungen"