INNOVATION MANAGEMENT INSIGHTS

INNOVATION MANAGEMENT
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
CHARACTERISTICS OF SUCCESSFUL
INNOVATING COMPANIES - 1
Systematic collection of all impulses that
could lead to innovation
Creativity of employees
Ability to evaluate the possibility of the
innovation idea
Good team work
Project-based approach and ability to
manage projects
CHARACTERISTICS OF SUCCESSFUL
INNOVATING COMPANIES - 2
Cooperation with external experts
(universities, research laboratories)
Proper rate of risk-taking
Employees motivation (the employees are
willing to improve the product and the
operation of the whole company)
Continued education of employees
Ability to finance the innovation activities
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)
Improvement of
components
New
Advanced
components for materials
existing systems improving
component
properties
COMPONENT
INCREMENTAL
do better what
we already do
new for the

company
Steam engine,
ICT,
biotechnology,
nanotechnology
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.
Three conditions for innovations

1. Innovation means work, hard, concentrated
and thorough work. If these qualities are
lacking then there is no use for the big talent,
cleverness or knowledge.
2. Successful innovations must build on your
strong points. The innovation must be
important to the innovator.
3. Innovation must focus on a market, must be
controlled by the market (market-pull).
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
Types of design engineers
spouter of
ideas
system designer
finisher of ideas
routine
engineer
attendance
engineer
suggests designs
and problem
solutions without
detailed
consideration of all
possible results and
consequences
examines all ideas

and thoughts
systematically
elaborates
independently in
details the ideas
which he gets to
elaborate
efficient and
reliable engineer;
however, without
creative approach
performs routine
tasks
[1%]
[5%]
[54%]
[30%]
[10%]
Contipro
Connective
tissue
products
RNDr. Vladimr Velebn, CSc.
Holding current state

167 employees
sales (2008) 242 mil K
export 98% of total sales
one of the biggest produces of
hyaluronanu inthe world
30% of the world market
60% of the European
market
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
3M and post-it notes
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/
iGO distribution of bateries

Bateries and accessories for notebooks,
mobiles, cameras and other equipment
Vision: to develop and sell simple and elegant
solutions, facilitate the use of electronic
devices
online catalogue, e-commerce, CRM
Customer - targeted marketing, flexibility
Growth of sales by 80% in the first year, by
100% in the following year
http://corporate.igo.com/about_us.aspx
Adaptors
Patented technology iGo Technology,
powering of mobile electronic devices using
single (universal) adaptor;
Power Technology Patent Brochure (PDF)
Bang & Olufsen

www.bang-olufsen.com
VISION: Courage to constantly question the ordinary in
search of surprising, long-lasting experiences.
Founded in 1925 in Struer, Denmark, Bang & Olufsen a/s is
world renowned for its distinctive range of quality audio, video
and multimedia products that represent our vision: Courage to
constantly question the ordinary in search of surprising, longlasting experiences. Bang & Olufsen employs over 2.550 staff
members and had a turnover of DKK 4.092 million (EUR 548,6
million) in the 2007/2008 financial year.
Bang & Olufsen manufactures a highly distinctive and exclusive
range of televisions, music systems, loudspeakers, telephones,
and multimedia products that combine technological excellence
with emotional appeal. Bang & Olufsen products are sold by
over 1.200 dealers in more than 100 countries in an extensive
network of retail stores. Approximately 65% of these stores are
B1-stores, which exclusively sell Bang & Olufsen products. The
B1 stores account for 81% of the total turnover.
Production also in the Czech Republic
Bang & Olufsen products
More case studies

IBM Case Studies: http://www.ibm.com/search/?
en=utf&v=14&lang=en&cc=us&lv=c&q=case+study+innov
ation&x=13&y=5
Industry podcasts: Midsized clients and experts

in seven industries share their insights - http://www1.ibm.com/businesscenter/smb/us/en/mbpodcasts?
&ca=smbIndustryPodcasts101706&tactic=&me=W&met=i
nli&re=smbibmcomTopPagesIndustriesPromo1usen10170
6
More case studies

Sustainable energy (hydrogen, fuel cells,
biofuels, zero emission,
http://ec.europa.eu/research/energy/nn/nn_pu/ar
ticle_1078_en.htm
http://www.zoner.com/
http://www.kerio.com/
The most important innovations

in last 30 years
http://www.pbs.org/nbr/site/features/specia
l/subdir/top-30-innovations_slide-show/
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
Key elements of disruption
Customers at each market has limited

absorption capacity
Technological progress usually is faster
that the ability of the market to employ it.
Companies focus on better products to
be sold with higher margin to unsatisfied
customers.
Sustaining vs. disruptive

Sustaining: focused on demanding customers;
both incremental and radical. Incumbents have
resources and motivation.
Disruptive: introduce products and services not
as advanced as existing ones, but offering other
advantages (simpler, cheaper, more user
friendly, ...) and focus on new or less demanding
customers.
Clayton M. Christensen: The Innovators Solution, Harvard Business Press, 2003
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.
Harvard Business Press, 2003
Clayton M. Christensen: The Innovators Solution,
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.
Two types of disruption

New markets: compete with nonconsumption: simpler, more user frindly,
can be used by less sophisticated
customers (PC, transistor radio, desk
copiers).
Low-end: focus on lower tiers of main
markets (minimills, discount stores, Korean
auto-makers); motivate incumbents to
leave the market
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
Open innovation
All the best people are working for us
Not all the best people are working for us .

We must work with clever people within
and outside our company.
R&D creates profit only when we invent,

develop and market everything ourselves.
External R&D can create remarkable value;

to employ it, we need absorption capacity,
often as internal R&D.
If we develop the product ourselves, we will

be the first on the market.
R&D can create profit even if we do not

initialize and perform it ourselves.
Winner is who gets the innovation to the

market first.
To develop better business model is more

important than to be the first in the market.
We will win if we develop most of the ideas

(an the best of them).
We will win if we make best use of internal

and external ideas.
We must have our intellectual property

under control so that our competitors can
make advantage of it.
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
Open innovation
Examples: nuclear industry,

mainframe computers
Examples : PC, movies
Mostly internal ideas
Many external ideas
Low workforce mobility
High workforce mobility
Low role of the venture capital
Active venture capital
Few new businesses, weak ones
Many new businesses
Universities are not important as the

sources of ideas
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.
Business model contd
Specify the mechanism of profit creation and

evaluate product cost structure and target
margin
Describe the company position in the value
network that connects suppliers and
customers, including identification of potential
alternative producers and competitors.
Formulate competitive strategy enabling to
the innovative company to gain and keep
competitive advantage.
Product architecture
Hierarchy of connections between
disparate functions within a
system
Interdependent Architecture
System
Component
B
Component
A
Component
C
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
IMPLICATIONS FOR NPD

extended circle of company stakeholders customers, NGOs, local and regional
governments
not only superior quality, but also
environmentally friendly, aesthetically appealing
new products
designed for X, where X can be quite large and
multi-faceted set
after-sale service plays an increasing role
and brings increased turnover and profit
Lesson 3
Assessment of company
innovation potential
COMPANY INNOVATION POTENTIAL

A company with high innovation potential
scores high in the following areas:
Strategy and planning
Marketing
Technological process
Quality management
Logistics
Human resources
INNOVATION POTENTIAL ASSESSMENT

For a company, it is important to know its
innovation potential. It can use the
questionnaire
For every of the six areas, there are six
question, each with four possible answers.
The answers are formulated so that they
reflect the existing situation in the
company.
A. STRATEGY AND PLANNING

1.
2.
3.
4.
5.
6.
Idea about the company future

Vision and employees
Company innovation programs
Plan modifications
Financial indicators of the plan
Project management
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
Lesson 4
STRUCTURING THE NEW PRODUCT
DEVELOPMENT PROCESSES
EVALUATION OF THE NEW PRODUCT
DEVELOPMENT AND R&D PROJECTS
HOW TO SELECT THE PORTFOLIO
OF NEW PRODUCT DEVELOPMENT PROJECTS
STRUCTURING THE NEW PRODUCT

DEVELOPMENT PROCESSES
The objectives of process models
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.
2-nd generation SG process
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
Fuzzy Front End (FFE, FEI)

quality of pre-development phases significantly
influence the product success
early phases to a large extent influence, which
projects will be realized, why, what will be final
costs, time, and in the end the final success
in the market
highly dynamic, not strictly documented,
creativity competes with systemization.
Phase 0
results in product concept, including
preliminary identification of customer
requirements, market segments,
competitive position, business opportunity
and compliance with strategy
Incremental vs. radical innovations

Koen: systematic approaches using process models can
be successful in the case of incremental innovations,
where both business and technical uncertainty is rather
low
whenever at least one of those uncertainties is high, we
need more flexible approaches with iterations and
parallelization of activities
successful radical innovations often use rapid or virtual
prototyping even in the 0-th or 1-st phase, as it allows
better visualization and communication of the product
concept.
New concept development model

in the early phases it is not suitable to use the
same approaches as in the later, more structured
process phases
Difference Between FFE and NPD

Fuzzy Front End (FFE)
New Product Development (NPD)
Nature of Work
Experimental, often chaotic.

Eureka moments. Can schedule
workbut not invention.
Disciplined and goal-oriented with a project

plan.
Commercialization
Date
Unpredictable or uncertain.
High degree of certainty.
Funding
Variable
Budgeted.
Revenue
Expectations
Often uncertain, with a great deal of

speculation.
Predictable, with increasing certainty,

analysis, and documentation as the
product release date gets closer.
Activity
minimize risk and optimize potential
Multifunction product and/or process

development team
Measures of
Progress
Strengthened concepts.
Milestone achievement.
New concept development model (NCD)

Technology
push
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.
Technology stage-gate process (TSG)

Management of high-risk projects within and at
the transition between the fuzzy front end and
new product development
traditional SG: gates are transparent, the
product development team can "see" all the
deliverables at the gates
TSG: gates are opaque, the team can only "see"
to the next gate and understands that the
deliverable may change as the technology is
developed
Traditional and technology

stage-gate processes
EVALUATION OF THE NEW PRODUCT

DEVELOPMENT AND R&D PROJECTS
Stage-gate process
IDEA
Gate 1
Idea screening
Gate 2
Detailed evaluation
Gate 3
Decision to develop
Gate 4
Decision to test
Gate 5
Decision to commercialize
Stage 1
Preliminary evaluation
Stage 2
Product definition
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.
Weakness of DCF methods

Do not take into account the typical nature of the
NPD and R&D projects that can be divided into
stages separated by gates, deciding about
project continuation or termination.
Financial models assume that the decision
about the project realization is done at its very
beginning and is irreversible. However,
investments into NPD or R&D projects are
incremental and the evaluators at the gates
decides about the project fate on the basis of
changing situation.
Project Expected Commercial

Value (ECV)
Takes into consideration all three important
characteristics of each phase its cost, duration
and probability of success
The project is modeled by the probability tree.
The stage duration, together with the discount
rate, is reflected in the net present value
calculation.
Illustration: project with only two stages
development and commercialization
Success
pC
Success
pd
YES
ECV
YES
PV
Commercialization
Development
NO
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
ECV = [(PV * pc C) * pd] D

according to [Cooper 2001]
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.
Probability tree in project evaluation

37,5% x
(1,907(0,356+0,399+0,446)) =
= 37,5% x (1,907-1,201) =
ECV = 0,265 - 0,150 - 0,223 = -0,109M
= 37,5%
x 0,706M
=
Stage
3 Year
4
NPV
= $3,0 M
0,265M
DCF = $1,907M
Stage 2 Year 2
Cost = $0,5 M
DCF = -$0,399M
Stage 1 Year 1
Cost = $0,5 M
DCF = -$0,446M
Stage 2 Year 3
Cost = $0,5 M
DCF = -$0,356M
12,5% x (-1,201M) =
-0,150M
25%
Stop
50%
50%
75%
Stop
50% x (-0,446M) =
-0,223M
ccording to [Boer 2003]
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.
Two kinds of risks

specific risk
market risk
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
HOW TO SELECT THE PORTFOLIO

OF NEW PRODUCT DEVELOPMENT
PROJECTS
Outline
Portfolio management, consequences

of its lack
Portfolio management goals
Goal 1: Maximizing the portfolio value
Goal 2: Balance
Goal 3: Strategic alignment
31.10.-1.11.2008
AEDS 2008 - Ji Vacek, KIP FEK UWB
111
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
31.10.-1.11.2008
112
No portfolio management
means
Immediate
result
End result: poor new

product performance
A reluctance to kill projects.

Many projects added to the
list
A total lack of focus
Too many projects

resources thinly spread.
Projects in the queue.
Quality of execution suffers.
Increased time to
market
Higher failure rates
Weak decision points (broad

gates)
Poor Go/Kill decisions
Too many low value projects

Good projects are starved
Too few stellar product

winners
Many ho hum launches
No rigorous selection criteria

Project selected on emotion,
politics
Wrong projects are selected
Many failures
No strategic criteria for

project selection
Projects lack strategic

direction
Projects not strategically
aligned
Scatter gun effort

Does not support
strategy
31.10.-1.11.2008
113
Portfolio management goals

1.
2.
Maximization of value
Balance
3.
long-term profitability, return on investment, probability of

success,
Long-term projects vs. short, fast ones;
High risk projects with high potential vs. lower-risk sure bets (e.g.
radical vs. incremental innovation);
Focus on different market segments (dont pull all eggs into one
basket);
Different technologies;
Different project types: new products, improvements, cost
reductions, frontier research.
Strategic alignment
31.10.-1.11.2008
portfolio is strategically aligned and reflects the businesss

strategy.
114
Goal 1
Maximizing the portfolio value
Net present value, bang for buck

Expected commercial value
Multi-criteria project valuation
Scoring models
31.10.-1.11.2008
115
Projects net present values and resource

requirements
Project
NPV
Remaining
resource
requirements
52,0
9,5
5,5
3,2
30,0
3,1
9,7
0,3
8,6
2,1
4,1
1,4
42,0
3,8
11,1
2,5
48,5
7,0
6,9
1,3
43,8
5,0
8,8
1,5
37,5
8,3
4,5
3,8
3,0
1,0
3,0
0,7
9,5
2,5
3,8
0,5
6,2
0,8
7,8
0,8
4,5
1,4
3,2
1,2
55,0
5,0
11,0
5,0
31.10.-1.11.2008
Bang-forbuck
index
Immediate
resource
requirements
116
Rank-ordered list of projects

Project
NPV
Remaining
resource
requireme
nts
42,0
3,8
11,1
2,5
2,5
55,0
5,0
11,0
5,0
7,5
30,0
3,1
9,7
0,3
7,8
43,8
5,0
8,8
1,5
9,3
6,2
0,8
7,8
0,8
10,1
48,5
7,0
6,9
1,3
11,4
52,0
9,5
5,5
3,2
14,6
37,5
8,3
4,5
3,8
18,4
8,6
2,1
4,1
1,4
19,8
9,5
2,5
3,8
0,5
20,3
4,5
1,4
3,2
1,2
21,5
3,0
1,0
3,0
0,7
22,2
31.10.-1.11.2008
Bang-forbuck
index
Cumulative
Immediate
immediate
resource
resource
requirements
requirements
117
Project expected value (ECV)

Probability of
technical
success
Probability of
commercial
success
Development
cost*
Commercializat
ion cost*
Project
PV
30,00
0,80
0,50
3,00
5,00
63,75
0,50
0,80
5,00
2,00 19,50
9,62
0,75
0,75
2,00
1,00
2,10
3,00
1,00
1,00
1,00
0,50
1,50
50,00
0,60
0,75
5,00
3,00 15,70
66,25
0,50
0,80
10,00
2,00 15,50
31.10.-1.11.2008
ECV
5,00
118
Rank-ordered list according to ECV/D,

resource constraint 15 mil
Project
ECV
Cumulative
development costs
ECV/D
Adjusted cumulative
development costs
19,50
3,90
5,00
5,00
15,70
3,14
10,00
10,00
5,00
1,67
13,00
13,00
15,50
1,55
(23,00)
1,50
1,50
24,00
14,00
2,10
1,05
26,00
16,00
31.10.-1.11.2008
119
Rank-ordered list according to ECV

Project
31.10.-1.11.2008
Cumulative
development
costs
ECV
19,50
5,00
15,70
10,00
15,50
20,00
5,00
23,00
2,10
25,00
1,50
26,00
120
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).
31.10.-1.11.2008
121
Multi-criteria project valuation

input data
Project
IRR
NPV
SI
PTS
20%
10
80%
15%
70%
10%
90%
17%
12
65%
12%
20
90%
22%
85%
31.10.-1.11.2008
122
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
31.10.-1.11.2008
123
Multi-criteria project valuation,

final project ranking
NPV * PTS
Ranking by
NPV*PT
S
SI
Ranking by
SI
Avg.
Final
Project
IRR * PTS
Ranking by
IPR*PTS
16,0%
1,67
10,5%
1,4
5,00
9,0%
4,5
4,67
11,1%
7,8
3,33
10,8%
18
2,33
18,7%
5,1
3,67
31.10.-1.11.2008
124
Applicability of financial models

Main weakness: unreliability of input data, especially in
the initial project stage
they should be used only in
later stages.
Small errors in probabilities of success rapidly propagate
and can result in significant differences.
The complexity and sophistication of financial models
fairly exceeds the quality of input data
It does not mean that we should not pay proper attention
to financial data in the initial project stages. However, we
should not make decisions solely on their basis; they
should be combined with non-financial models
31.10.-1.11.2008
125
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)
31.10.-1.11.2008
126
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
31.10.-1.11.2008
127
Risk-Reward bubble diagram

OYSTERS
WHITE
ELEPHANTS
31.10.-1.11.2008
PEARLS
BREAD &
BUTTER
128
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.
31.10.-1.11.2008
129
Goal 3: Strategic alignment

Strategy and allocation of resources are closely
linked: until we start allocating resources to
specific activities, strategy is only paperwork. In
portfolio creation we will follow the following
objectives:
Projects are aligned with business strategy;
All projects contribute to achievement of strategic
goals and objectives;
Allocation of resources reflects specified strategic
goals and objectives.
In portfolio management we use three basic
approaches: top-down, bottom-up and combined.
31.10.-1.11.2008
130
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.
31.10.-1.11.2008
131
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).
31.10.-1.11.2008
132
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
31.10.-1.11.2008
133
Bottom-up
and combined approaches
Bottom-up approach build strategic criteria into the model of project

selection, usually to the scoring model.
This approach guarantees that all projects are strategy aligned,
however it cannot guarantee allocation of resources in compliance
with strategic priorities.
This weakness can be overcome by the use of combined approach :
we first use the top-down approach to establish strategic buckets,
and then we evaluate all active projects and projects on hold and
prepare their ranked list. Finally we assign projects to corresponding
categories (buckets) and study the exhaustion of resources.
Usually this first iteration is not completely satisfactory and it is
necessary to use more iterations to reach satisfactory results.
31.10.-1.11.2008
134
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.
31.10.-1.11.2008
135
Lesson 5
Innovation impulses
SOURCES OF INNOVATION IMPULSES

Internal environment
Own R&D
Technical divisions design, technology
Production divisions (production, provision of
services)
Marketing and sales
Logistics (purchase and supplies)
Guarantee and post-guarantee service
Owners
SOURCES OF INNOVATION IMPULSES

External environment
Customers
Suppliers
Competitors
Consultants, R&D
institutions
Schools, universities
Professional publications,
Internet
Exhibitions, fairs,
specialized seminars and
conferences
Advertising agencies
Investors
Media
Authorized testing
laboratories, certification
agencies
State institutions, public
sector
Legislation
Globalization
MARKET PULL - R&D PUSH

Market pull
looking for the best way of satisfying a newly emerging
customer demand
improvement of the existing products, extension of the
existing offer or decrease of price
impulses for continuous, incremental innovations or for
process innovations
Research and development push

looking for commercial use of new impulses resulting
from the R&D results
generating of new markets for conceptually different
products
7 SOURCES OF INNOVATION IMPULSES

(Drucker)
INTERNAL
1.
2.
3.
4.
unexpected event
contradiction
change of work process
change in the structure of industry or market
EXTERNAL
Demographic changes
Changes in the world view
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?
Unexpected failure
Unexpected external event
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
4. Change in the structure of

industry and market
Rapid growth of the industry
Identification of new market segments
Convergence of technologies (e.g. use of
computers in telecommunications)
Rapid change of the industry and resulting
need of a structural change
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
IMPULSES FROM THE MARKET

ENVIRONMENT
Customers
product presentation
realistic
simple, demonstrative and precise
moderate
representative sample of customers
Suppliers
Competitors
INNOVATION IMPULSES OF THE R&D

identification research: to monitor the scientific,
technical and economic information and identify
innovation impulses applicable in the company
basic research
applied research: acquire knowledge and means
applicable for the meeting of specific, beforehanddefined goals
development: systemic use of knowledge and means
acquired in the applied research for the creation of a new
or improvement of the existing product or for the creation
or modification of processes
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
General Innovation Tools
BENCHMARKING
BRAINSTORMING
REENGINEERING
CHANGE MANAGEMENT
Specific techniques useful at the different

change management process steps.
CHANGE MANAGEMENT STEP
SPECIFIC TECHNIQUE
Making time
time management techniques
Preparing a vision statement
SWOT analysis
Identify what factors will hinder

change
force field analysis
Selling the change
internal marketing techniques
Developing a plan
strategic planning techniques
Learning
Monitoring effectiveness
INNOVATION MANAGEMENT TOOLS
http://www.wiley.co.uk/innovate/website/pages/atoz/atoz.htm
TECHNOLOGY AUDIT
TECHNOLOGY FORECAST
VALUE ANALYSIS
Product Innovation Tools
DESIGN FOR X
<>
X - examples
Design for Manufacturing Design for Environment
and Assembly (DFMA)
(DFE)
Design for Dimensional
Control (DDC)
Design for Inspectability
Design for Storability
Design for Reliability

(DFR)
Design for
Electromagnetic
Compatibility
Design for Disassembly

(DFD)
QUALITY FUNCTION
DEPLOYMENT
House of Quality
Interrelationships
Technical Features
Voice of
the
Customer
Relationship
between Customer
Desired Traits and
Technical Features
Importance of
Technical Features
Importance Assessment
of Traits to of
Customer
Competition
House of Quality:
Steps for Generation
1. Identify Customer Attributes
2. Identify Supporting Technical Characteristics
3. Correlate Customer Attributes with Supporting Technical
Features
4. Assign Priorities to Customer Requirements and Technical
Features
5. Evaluate Competitors Stances and Products
6. Identify Technical Characteristics to Deploy in the Final
Product Design
Managerial Innovation Tools
FAILURE MODE AND EFFECT

ANALYSIS (FMEA)


PEER EVALUATION
TEAM BUILDING
ISO 9000
ISO14000
refers to procedures for ensuring sustainable and
environmentally friendly operations
EIA Environmental Impact Assessment
TOTAL PRODUCTIVE
MAINTENANCE
Process Innovation Tools
DESIGN FOR MANUFACTURING

AND ASSEMBLY (DFMA)
LEAN THINKING
CONTINUOUS IMPROVEMENT
CONCURRENT ENGINEERING
JUST IN TIME (JIT)
INNOSKILLS
FASTER
Lesson 7
CREATIVITY
BASICS & TECHNIQUES
Innovation and creativity

creativity is manifested in the production of
a creative work (for example, a new work
of art or a scientific hypothesis) that is
both original and useful
innovation begins with creative ideas,
creativity by individuals and teams is a
starting point for innovation; the first is a
necessary but not sufficient condition for the
second
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.
Creativity and economics

Joseph Schumpeter: creative destruction - the way in
which old ways of doing things are endogenously
destroyed and replaced by the new.
Paul Romer: the recombination of elements to produce
new technologies and products and, consequently,
economic growth. Creativity leads to capital, creative
products are protected by intellectual property laws.
The creative class as important driver of modern
economies. Richard Florida in The Rise of the Creative
Class, 2002 popularized the notion that regions with "3
T's of economic development: Technology, Talent and
Tolerance" also have high concentrations of creative
professionals and tend to have a higher level of
economic development.
Important aspect to understanding Entrepreneurship.
Stages of creative process

Orientation: Need identification, intention to
create
Preparation: Information collection, problem
formulation
Incubation: seeking solution, evaluation of
variants, unconscious thinking
Illumination (Eureka!): synthesis, creation of
ideas
Realization: transformation of the idea into
reality
Verification: evaluation, learning, improvement
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.
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.
http://members.optusnet.com.au/~charles
57/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
METHODS OF CREATIVE ACTIVITY

increasing the individuals or teams
creative potential
contributing to the improvement of the
creative work conditions
facilitating the problem solution
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
Right brain functions
sequential
simultaneous
analytical
holistic
verbal
imagistic
logical
intuitive
linear algorithmic processing
holistical algorithmic processing
mathematics: perception of
counting/measurement
mathematics: perception of
shapes/motions
present and past
present and future
language: grammar/words, pattern

perception, literal
language: intonation/emphasis, prosody,

pragmatic, contextual
Convergent vs. divergent thinking

Convergent thinking involves aiming for a
single, correct solution to a problem
Divergent thinking involves creative
generation of multiple answers to a set
problem.
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),
the highly-structured, such as:

TRIZ (the Theory of Inventive Problem-Solving);
ARIZ (the Algorithm of Inventive Problem-Solving), both
developed by the Russian scientist Genrich Altshuller; and
Computer-Aided Morphological analysis.
Trial and error

select a possible answer, apply it to the problem and, if
not successful, select (or generate) another possibility
that is subsequently tried. The process ends when a
possibility yields a solution.
more successful with simple problems, often resorted to
when no apparent rule applies.
the approach need not be careless, for an individual can
be methodical in manipulating the variables in an attempt
to sort through possibilities that may result in success.
Nevertheless, this method is often used by people who
have little knowledge in the problem area
Trial and error - features

solution-oriented: trial and error makes no
attempt to discover why a solution works, merely
that it is a solution.
problem-specific: trial and error makes no
attempt to generalise a solution to other
problems.
non-optimal: trial and error is an attempt to find a
solution, not all solutions, and not the best
solution.
needs little knowledge: trials and error can
proceed where there is little or no knowledge of
the subject.
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?
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?
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?
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
Lateral thinking vs. critical thinking

Critical thinking is primarily concerned with
judging the truth value of statements and
seeking errors.
Lateral thinking is more concerned with the
movement value of statements and ideas. A
person would use lateral thinking when they
want to move from one known idea to creating
new ideas.
Critical thinking is like a post-mortem while
lateral thinking is like diagnosis.
Lateral thinking - inspiration

Random Entry: Choose an object at random, or a noun
from a dictionary, and associate that with the area you
are thinking about.
Provocation: Declare the usual perception out of
bounds, or provide some provocative alternative to the
usual situation under consideration. Prefix the
provocation with the term 'Po" to signal that the
provocation is not a valid idea put up for judgement but a
stimulus for new perception.
Challenge: Simply challenge the way things have
always been done or seen, or the way they are. This is
done not to show there is anything wrong with the
existing situation but simply to direct your perceptions to
exploring outside the current area.
Six de Bono hats

White hat (Blank sheet): Information & reports, facts and
figures (objective)
Red hat (Fire): Intuition, opinion & emotion, feelings
(subjective)
Yellow hat (Sun): Praise, positive aspects, why it will
work (objective)
Black hat (Judge's robe): Criticism, judgment, negative
aspects, modus tollens (objective)
Green hat (Plant): Creativeness, Alternatives, new
approaches & 'everything goes', idea generation &
provocations (speculative/creative)
Blue hat (Sky): "Big Picture," "Conductor hat," "Meta
hat," "thinking about thinking", overall process (overview)
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
TRIZ process for creative problem solving
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
Morphological analysis - steps

1. The problem to be solved must be very concisely
formulated.
2. All of the parameters that might be of importance for the
solution of the given problem must be localized and
analyzed.
3. The morphological box or multidimensional matrix, which
contains all of the potential solutions of the given
problem, is constructed
4. All the solutions contained in the morphological box are
closely scrutinized and evaluated with respect to the
purposes that are to be achieved.
5. The optimally suitable solutions are selected and are
practically applied, provided the necessary means are
available.
Example 1 - energy conversion

initial
kinetic
transmission
final storage
kinetic
kinetic
electrical E
electrical E
electrical E
chemical C
chemical C
chemical C
thermal
thermal
thermal
nuclear -
nuclear -
nuclear -
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
Example 2 cardboard packaging

Parameter
Parameter values
separated
media
solid /
solid
solid /
fluid
solid /
gas
fluid /
fluid
fluid /
gas
level of
separation
total
partial
protection
against
gravitation
mechanical
forces
heat
radiation
sound
combination
with
paper
plastic
wood
paint
nothing
solution: throwaway beverage packaging
gas /
gas
Think outside the box
16 dots, 6 lines
http://www.sciencenewsforkids.org/articles/20041027/PuzzleZone.asp
Dots and lines - generalization

a three-dot-by-three-dot puzzle requires
four lines.
a four-dot-by-four-dot puzzle requires six
lines,
a five-dot-by-five-dot puzzle requires eight
lines, and
an n-dot-by-n-dot puzzle requires 2(n 1)
dots.
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
synergic effect: every member

contributes to performance of the mutual task
adopts specific roles necessary for the effective team
functioning.
contributes to the satisfaction of the individual needs
of other team members
Successful team characteristics

Team members identify themselves with the team
There is relaxed, non-bureaucratic atmosphere, interest
in achieving joint goals, optimistic work mood.
Tasks and goals are clear to all members and all identify
themselves with them. Differences in opinions are
accepted. Disputable points are discussed and a solution
is looked for.
Communication is open, spontaneous, and fluent. Team
members are sincere to each other, listen to each other.
Criticism is constructive and it is not taken personally.
Team management is of participative, eventually
consulting, character. Rules are clearly defined.
Unsuccessful team characteristics

Team members do not identify themselves with team.
Strained atmosphere, blocked communication is. Team
members hide their real feelings and opinions.
Autocratic supervision, discussion about goals and tasks
not allowed.
Diversity of opinions leads to conflicts. Disagreement is
not openly expressed; the decision is undermined.
Personal issues are settled by means of criticism.
People gossip.
The rules are not clearly defined.
Team structure and organization

Formal: clearly visible, represents
distribution of work among the team
members in order to ensure performance
of certain functions.
Informal: influences procedures, in which
things are actually done prestige of
people, their influence, power, seniority,
ability to convince others play roles there.
TEAM DEVELOPMENT
Forming
Storming
Norming
Performing
Dissolving
ROLES IN THE TEAM
Initiator
Company employee
Chairman
Forming person
Operational employee
Coordinator
Resource researcher
Observer
Team worker
Finisher
Orienting member
Energy supplier
Recorder
Harmonizer
Advantages and disadvantages

of team work
(+) Mutual cooperation and support
(?) teams often accept more risk than
individuals
(+) can produce high quality ideas by
accepting the conflict and exploring
differences in the individual members
opinions
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
Team forming by a manager

Manager
On the way to rigidity
On the way to teamwork
Defines
Everything if possible
Vision
Prefers
Conformity
Individuality, mutuality
Believes in
Plan, task, control
Trust, motivation climate
Views the problem

solving by the team
As denial of his/ her

authority, waste of time
As natural and necessary
Communicates with team

members
When they require it or need

it
As much as possible
Conflicts inside or outside Ignores them or solves them

the team
him- or herself
Opens them for team

solving before they
become destructive
Understands group unity
As a potential threat to his/

her position
As necessity
Anticipates
Peoples worries of
responsibility
Independence and
responsibility of people
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
REASONS FOR POOR DECISIONS

Mistakes in the decision process
quick decisions
failure to recognize consequences
managers ego unwillingness to admit mistake,
unability to make a decision
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
BENEFITS OF THE USE OF MODELS

1.
2.
3.
4.
5.
6.
7.
8.
9.
Easy to use, less expensive

Require to organize and quantify information, indicate
need of additional information
Provide a systematic approach to problem solving
Increase understanding of the problem
Enable to ask what if ?
Require users to be very specific about objectives
Serve as a consistent tool for evaluation
Enable to bring power of mathematics
Provide standardized format for problem analysis
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
Fewer defectives
slipping through by
increasing inspections
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
k=1
k=2
A = kx + 4000
4005
4010
0,03%
10,87%
B = kx + 4
THE SYSTEM APPROACH

interrelations among subsystems and/or
elements
system boundary environment
Feedback
The whole is greater than the sum
of its individual parts
Consequence: evaluate optimal solutions
in terms of larger framework
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
low
moderate
high
Small
10
10
10
Medium
12
12
Large
-4
16
Decision making under certainty

Choose the alternative with the highest
payoff
Demand
Highest payoff
Best alternative
Low
10
small
Moderate
12
medium
High
16
large
Decision making under uncertainty

Maximin determine the worst possible payoff
for each alternative, and than choose the
alternative with the best worst
Maximax determine the best possible payoff,
and choose the alternative with this payoff
Laplace - determine the average payoff for each
alternative, and choose the alternative with the
best average
Minimax regret - determine the worst regret for
each alternative, and than choose the alternative
with the best worst
Maximin: worst payoffs are

Alternative
Payoff
small
medium
large
10
-4
the best is 10 - choose small facility

Maximax: the best overall payoff is 16 choose large
Laplace:
Alternative
Average payoff
small
medium
large
10
10,33
4,67
The best average is 10,33 - choose medium
Minimax regret:
Opportunity loss, regret: subtract every payoff in a
column from the largest positive payoff in that column
Alternative
low
regrets
moderate
Small
Medium
Large
0
3
14
2
0
10
high
worst
6
4
0
6
4
14
The lowest regret is 4 choose medium
Decision making under risk

Expexted monetary value (EMV) criterion:
calculate expected value (EV) for each alternative
and select one with the highest EV
Alternative
probability
EV
Small
0,30
10
Medium
0,50
10.5
Large
0,20
Appropriate when decision maker is risk-neutral
DECISION TREES
DECISION TREES
Particularly useful for situations that
involve sequential decisions
Nodes:
decision points
chance events
Branches leaving
alternatives
states of nature
DECISION TREES - Example
EXPECTED VALUE
OF PERFECT INFORMATION (EVPI)
Option: postpone a decision, purchase
additional information
Question: is the cost of the option less than the
expected gain?
EVPI = expected payoff under certainty expected payoff under risk
upper limit decision maker should be willing to spend to
obtain perfect information
EVPI - example
Demand
Best payoff
probability
Low
10
0,30
Moderate
12
0,50
High
16
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
#1
#2
12
16
12
Sensitivity Analysis
LINEAR PROGRAMMING (LP)

Objective function maximization or
minimization
Decision variables
Constraints feasible solution space
Parameters fixed values
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 x1 + 8 x2 + 4 x3
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
LP solution 1
decision variables
X1
10
X2
X3
objective function
P
90
constraints
1
40
250
100
100
10
10
LP Graphical method
For two-variable problem, graphical
method can be used
Example:
Minimize
Subject to
Solution:
P = 8x + 12y
5x + 2y 20
4x + 3y 24
y2
x, y 0
x = 4,5, y = 2, P = 60
LP Graphical method
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
Two-dimensional model of a conflict
Conflict resolution styles - 1

Avoidance: no assertiveness, no cooperation
problem solution postponed
Accommodation: no assertiveness, cooperation
give in
Collaboration: assertiveness and cooperation
-problem solving, win-win
Competition: assertiveness, no cooperation -winlose, adhere to rules, do not seek to harm the
others self-image, impulse to change and improve
the organization
Authoritarianism: aggression, no cooperation
Conflict resolution styles - 2

Smoothing: low assertion, low cooperation
focus on similarities, seeks resolution, move
parties to a common goal
Superordinate goals: increasing assertiveness,
increasing cooperation attempt to find a
common set of objectives, forget the differences
Bargaining (compromise): moderate assertion,
moderate cooperation give-and-tak, both
parties satisfy some of their needs
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
Main elements of the company culture
Behavior standards
Key values
Management and leadership style
Roles
Organizational structure and diversification
Influenced by:
Organizations strategy
Organizations system
Level of cooperation between the individual organization
structures
Employees abilities
Four types of company orientation

Organizations preferring
power
roles
tasks
human side of their processes and people
MANAGEMENT STYLES
shift from directive to participative style of
management
4 basic management styles:
Exploiting authoritative
Benevolent authoritative
Consultative
Participative
Motivation /
performance cycle
(MPC)
Motivation / performance cycle (MPC)

1. Are the individualss needs satisfied? / Need
creation
2. Are organization and manager aware of
needs? Are they willing and able to offer need
satisfiers?
3. Organization and manager offer extrinsic and
intrinsic need satisfiers and rewards
4. The individual searches for alternatives,
evaluate the consequences of possible
actions, makes a decision
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?
Note:
normal individual
italic organization and manager
Hierarchy of needs (A. Maslow)

1. Physiological needs immediate survival, food,
shelter, clothing, bodily needs
2. Security needs stability, protection, freedom
from fear, provisions for the future
3. Social needs acceptance, affection, affiliation,
love, interaction
4. Esteem needs self-esteem, esteem of others,
status, power, autonomy, competence,
prestige, recognition
5. Self actualization achieving ones full
potential, personal growth, creative fulfillment
Characteristics of peak performers

1. Vision and the ability to plan strategically
2. The drive to surpass previous level of
performance
3. High levels of self-confidence and selfesteem
4. A high need for responsibility and control
5. Strong communication and
salesmanship skills
Characteristics of peak performers - 2

6. The habit of mentally rehearsing before
critical events
7. Little need for outside praise or
recognition
8. A willingness to take risks
9. The ability to accept feedback and make
self-corrections
10. An ownership attitude toward their ideas
and products
Need satisfiers
Frederick A. Herzberg
Hygiene factors dissatisfiers, extrinsic
(pay, supervision)
Motivators satisfiers, intrinsic
(achievement, recognition for
performance)
Maslow
Herzberg
Self-actualization
Work itself, achievement,

possibility of growth,
responsibility
Esteem
Advancement, recognition,
status
Social
Interpersonal relations
Safety and security
Company policy, job security
Physiological
Working conditions, salary,

personal life
The management challenges

1. Recognizing needs
2. The changing nature of individual needs,
expectations
3. The impact of cultural diversity on a managers
ability to recognize needs
4. Being able to choose the right satisfiers and
then being able to obtain and offer them
5. Managing the process aspects of the cycle
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.
Company training programs

1. Training programs content, methods and goals
must take into account the basics of the
managerial work in real situations;
2. Attention should be paid to the improvement of
behavior and motivation and not only to
acquisition of technical skills;
3. The active training methods should be
preferred before passive ones. The abstract
concepts should be rooted in the practical
experience of companies.
Design of training programs

Define before the start of the training:
What we want to achieve (goals)
How we want to achieve the goals
(methodology)
How the progress will be monitored
(monitoring)
How the results will be evaluated
(evaluation)
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
COMPANY INNOVATION SYSTEM
Company strategy
Collection of innovation impulses
Setting of priorities
Looking for innovation ideas and their
discussion
Feasibility study
Decision about project preparation
Project preparation
Project implementation
Monitoring of innovation performance
PROCESS MAP
MARKET
Communication with customer

CUSTOMER
Idea
Strategy
Strategy
development
development
Development
Production
Product
Product
development
development
Design
Design
modification
modification
according
according++
customers
customers
requirements
requirements
Development of production capacities
Product
Product
delivery
delivery
REGULAR INNOVATION MEETINGS
Sort collected impulses according to their topics

Select the technique for development of innovation
proposals
Present generated innovation proposals and prepare
their preliminary evaluation
Submit results to the management for the decision
about the feasibility study performance for selected
proposals
Report the feasibility study results to the management
for the decision about the project development
Report on
the state of the projects under development

the state of the currently implemented projects
the monitoring of already implemented projects

INNOVATION MANAGEMENT INSIGHTS

Încărcat de

Informații document

Descriere originală:

Titlu original

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

INNOVATION MANAGEMENT INSIGHTS

Încărcat de

Drepturi de autor:

Formate disponibile

INNOVATION MANAGEMENT

Technological innovations based on

new for the

Research and development (R&D)

Three conditions for innovations

Types of design engineers

examines all ideas

Holding current state

1. Maximum attainable quality

3M and post-it notes

iGO distribution of bateries

Bang & Olufsen

Bang & Olufsen products

More case studies

Industry podcasts: Midsized clients and experts

More case studies

The most important innovations

Key elements of disruption

Customers at each market has limited

Sustaining vs. disruptive

Clayton M. Christensen: The Innovators Solution, Harvard Business Press, 2003

Due to technological progress the

Harvard Business Press, 2003

Clayton M. Christensen: The Innovators Solution,

Harvard Business Press, 2003

Clayton M. Christensen: The Innovators Solution,

Harvard Business Press, 2003

Clayton M. Christensen: The Innovators Solution,

Harvard Business Press, 2003

Clayton M. Christensen: The Innovators Solution,

Two types of disruption

Chesbrough H.W.: The Era of Open Innovation,

All the best people are working for us

Not all the best people are working for us .

R&D creates profit only when we invent,

External R&D can create remarkable value;

If we develop the product ourselves, we will

R&D can create profit even if we do not

Winner is who gets the innovation to the

To develop better business model is more

We will win if we develop most of the ideas

We will win if we make best use of internal

We must have our intellectual property

We must be able to profit from others using

Examples: nuclear industry,

Examples : PC, movies

Mostly internal ideas

Many external ideas

Low workforce mobility

High workforce mobility

Low role of the venture capital

Active venture capital

Few new businesses, weak ones

Many new businesses

Universities are not important as the

Universities are not important as the

Formulate value proposition, i.e. the value delivered

balance of forces among our business, suppliers and

Business model contd

Specify the mechanism of profit creation and

IMPLICATIONS FOR NPD

COMPANY INNOVATION POTENTIAL