INNOVATION

MANAGEMENT MANUAL

287.740

DARON DIGGES 12237685

Abstract

This manual will contain a number of specific strategies that will be specific for NZ businesses, these processes will directly impact the overall innovation strategy.

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TABLE OF CONTENTS

Overview ................................................................................................................................................................. 2

Overview of NPD process ....................................................................................................................................... 2

Organisational identity ........................................................................................................................................... 3

Overall NPD strategy .............................................................................................................................................. 5

Corporate and business strategy ............................................................................................................................ 5

Innovation Strategy ................................................................................................................................................ 5

Innovation Framework ........................................................................................................................................... 8

Miles and Snow’s TYpes of companies ................................................................................................................. 10

Understanding the product .................................................................................................................................. 11

Innovation Supporting Strategies ......................................................................................................................... 11

Portfolio management.......................................................................................................................................... 13

Performance metrics ............................................................................................................................................ 17

Critical Evaluation ................................................................................................................................................. 18

References ............................................................................................................................................................ 19

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OVERVIEW

This manual will contain a number of specific strategies that will be specific for NZ businesses, these

processes will directly impact the overall innovation strategy.

The below will be discussed in detail:

Technology strategy, marketing strategy, platform strategy, open innovation, intellectual property.

Portfolio management section, we discuss the processes for project selection

A range of different processes which are appropriate to different innovation strategies.

OVERVIEW OF NPD PROCESS

Below is an outline of the process involved with NPD process, headings that will be covered in this assignment.

Figure 1 Decision Hierarchy Anderson (2016)

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ORGANISATIONAL IDENTITY

DO YOU HAVE A MISSION STATEMENT?

A statement that is the company’s creed, philosophy, purpose, business principles, or corporate beliefs. It

focusses on the energy resources of the organisation.

E.g. to be the leaders in….

WHAT IS YOUR COMPANY VISION?

A vision is the act of imagining the company and the plans for the future, this involves foresight and guided by

an informed notion of the realistic possibilities of the company. This vision should keep in mind the limitations

of the company as well as displays the most desirable outcome of the future of the company (Huldtgren,

Boming, Kahn, & Friedman, 2013).

WHAT ARE YOUR CORPORATE VALUES?

This is the code of conduct and behavior of the people involved with fulfilling the mission, this will from the

plan of action used to complete the mission which is the strategy.

E.g. to expand markets, create new markets or increase revenue? Keep in mind there needs to be a

quantifiable amount that the company can aim for.

DO YOU HAVE AN INNOVATION STRATEGY?

This is a plan of action used to achieve long-term or overall aims of the company (“Strategy”,2010). This

provides goals and direction for innovation across the company.

E.g. to improve technology or to increase external collaboration.

DO YOU HAVE A FUNCTIONAL STRATEGY

This is the process of innovating, this could be a new method, idea or product. (“Innovation”, 2010). A strategy

is about achieving objectives and planning ahead, while innovation is about discovery (you don’t know where

it’s going until you get there). Strategies used by functional departments to support business strategy.

E.g. Having an IT, HR, Sales or Marketing strategy.

WHAT YOUR COMPANY VISION AND GOALS SHOULD INCLUDE:

Figure 2 Vision and Goals

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ENTERPRISES SHOULD ALSO EMPHASISE

Planning and controlling systems with a high degree of flexibility

Respect for individual (employee) initiative and personal growth

Tolerance for mistakes and allowing room for failure

What types of Innovation

does your company do?

Modular and Architectural

Product and Process

Open and Closed

Incremental and Radical

Have a go at defining your company mission statement, vision and values.

Start to think about how your company innovates, what do you think the innovation strategy is? Even though

it may seem too complex to do now, it will be further explained in this report.

Now that you have defined the organisation identity, proceed to next section that covers the corporate,

business and innovation strategy.

Figure 3 Types of Innovation

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OVERALL NPD STRATEGY

This defines the company goals in terms of total product development effort, including the role of product

development in your business.

Figure 4 Areas for strategic focus (Anderson, 2016)

Where to deploy the NPD strategy:

Spending allocation across the areas

Which markets get how much focus, how many resources

In order to gain achieve your goals of becoming a successful business, each area should have an equal amount

of work put in to improving. Key practices can aid with NPD success and will be described further. There are

both internal and external capabilities required in terms of resources. Intellectual property is a strategy is

looked over and not focused on clearly but by following this manual, it will allow for successful development.

CORPORATE AND BUSINESS STRATEGY

This is the overarching strategy of a diversified organization, this should answer the question as to where the

business should compete on the market and demonstrate how synergy is created through getting this

business. The strategy should identify if there is a competitive advantage gained through the structure of the

company.

There are individual functional strategies of the company that can be combined to show the overall business

strategy. The following need departmental strategies:

Figure 5 Departmental Strategies that can be amalgamated

In the following notes, all of these areas will be involved, both directly and indirectly with the greatest

emphasis on new product development.

INNOVATION STRATEGY

Following from the initial description, the best (more successful) companies have shown to have a higher percent (76%) of new product strategies that integrate their entire NPD programs. The Rest have only 54%.

WHAT DEFINES A GOOD INNOVATION STRATEGY?

Areas for strategic

focus

Technology and

platforms

Markets or market

segments

Product types, lines or

categories

Marketing TechnologyNew Product Development

Supply ChainLegal

ResourcesHuman

ResourcesInformation Technology

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It should be tailored to the specific organization

The innovation strategy must provide a sound basis for providing alignment across the organization;

for establishing priorities; and for evaluating limitations.

Figure 6 NPD cycle taken from Anderson, (2016)

Looking at risk (cost of the product, previous customers, customer demand, and product sustainability),

reward (market research, size of the market, benefits, lifetime of sales) and strategic fit (generating future

opportunities). The combination is considered the evaluation for the outline of the innovation strategy. The

figure below shows the outline, where the goals for NPD are described, the selected areas for focus are

previously described, portfolio decisions are still to be mentioned.

Figure 7 Outline of Strategic plan and relation to the NPD process (Cooper & Edgett, 2010)

DOING THE PROCESS RIGHT

Alignment with company strategy by building on current products, growth in new areas and emphasis

on NPD for growth compared to the alternative of M&A (merger and acquisition).

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Portfolio selection and management should be consistent with currently planned capabilities of the

company. The current strategic alliances should be also be consistent with the company goals. IP is

important for NPD and should be consistent with the innovation direction of the company.

DOING THE RIGHT PROCESS

Appropriate systems and processes to support NPD e.g. Stage-Gate. The level of formality depends on

the size of business and the corporate structure. Making sure the process is fit for purpose is

important. (Re-evaluating this process could be important for this).

The organisational structure and HR management should allocate the overall resourcing, this includes

the internal and external needs for products. Line Management needs to be weighed up against

matrix management based on the size. Those with smaller company’s would find matrix structure

more beneficial for the cross functional aspect along with the team structure. Recognition and reward

is essential for incentives to product good new products.

Creating a creative/innovative culture and environment improves the working environment;

encouraging work and down time can be a tool to ensure the company is functioning as a team.

Having a clear vision and support from the top management is important for reinforcing this.

THREE PILLARS OF INNOVATION

Figure 8 Pillars of Innovation

Having a competent company is important to make sure that all the resources are aligned with the company

this includes the skill of the employees and the value of new products being delivered to customers. Correct

resource allocation is critical and based on a strategy as discussed. Management is an important pillar for the

innovation process and is sometimes the difference between a good and average business.

Now try to note down the business and the basics of the innovation strategy of the company (some

framework will help you later on in this manual to fully define this).

Ask yourself, are you doing the process right AND are you doing the right process? If not read over the

content again and maybe seek external sources such as an external consultancy to review your NPD process

for improvements. Spending this money on a consultant (or doing it internally) may pay off in the long run

with more products making it to market and successful products.

Ask yourself, is your company competent? Does it have a sound innovation strategy? Is there a clear and

thorough management of these projects?

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INNOVATION FRAMEWORK

INNOVATION MATRIX

Is a tool for managing innovation encompassing four basic types of innovation.

Figure 9 Innovation Matrix (PDMA 2016)

.

Sometimes when the product is very ‘new’ the problem or the target area may not be well defined. Research grants and others can help fund research in specific innovation areas like in NZ where there are few larger enterprises. Profit is also a good method of funding projects and research but this needs to be profitable to be sustainable for NPD, sometimes these 3 innovation techniques can be combined in a portfolio of projects, to ease risk.

Basic Research

Breakthrough/Radicle Innovation

Although some problems are well defined, business can get stuck trying to solve the problem, sometimes it is a NPD process issue.

These types of problems can be solved through synthesizing across domains in order to pull in diverse resources.

Large organizations tend to be very good at improving current technology, through product iterations, but because of the large resources large companies are good at this. For smaller companies in NZ, this type of innovation is not so common and lean towards more unconventional types such as breakthrough.

Only develops existing markets (does not create new ones) with better value added to the products.

Gradual improvements are the focus of this area and cane be done through

This is the most troublesome area because its value isn’t always immediately apparent. Many companies both large and small can miss the opportunity due to this problem.

Risk is a big factor when developing in this area because for smaller companies in NZ, the radical develop that is not profitable could be detrimental to the business as a whole.

There are generally a light target market or non-current consumers and would require a new business model leading to high failure rates (not the norm).

Helps create a new market and value network if done right, the initial focus should be on a small influential target market, like NZ. Where the new product targets specific needs of an existing product so they can get a foot hold in the market.

With this method, more customers can become converted to the new product by having a competitive edge and eventually converting existing competitor product users.

Sustaining/Routine Innovation

Disruptive Innovation

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PORTER STRATEGIC FRAMEWORK (PORTER, 2008)

If an increased market share was one of your previously written down goals (in the practical example) then Michael Porter’s company’s strengths might appeal to your company by looking at these three strategies:

COST LEADERSHIP STRATEGY

Growing the company’s market share by appealing to those customers that are shopping around for the most affordable product for the most value, is more relevant to economies of scale so do not apply to NZ specifically. If this is your company proceed to STEP 1 below to see how NPD relates to this strategy.

DIFFERENTIATION STRATEGY

Focussing on a broad product base gaining a larger market share by delivering unique and superior products. This is not very beneficial for the NZ market, where the market scale is smaller so will not be beneficial. Customers will stay loyal through this but constant innovation is important to deliver new product features that are attractive, equally delivering a product that is not up to the stated value with reduce market share drastically. If this is your company proceed to STEP 2 below to see how NPD relates to this strategy.

SEGMENTATION STRATEGY

This adopts a narrow market focus, perfect for the NZ market. This is based on having a sound knowledge of

the key market and therefore provides a strong focus on marketing and NPD effort. This method provides the

opportunity to fully understand customer needs and provides the opportunity for higher margins. Alternatively

there is danger with being dependent on a single narrow market.

If this is your company proceed to STEP 3 below to see how NPD relates to this strategy.

RELATION OF THE STRATEGY TO NPD FOCUS

Step 1

• The level of NPD funding is low. • The major emphasis is on minor product changes, often centered on cost reductions. • There is little to no focus on long term research or development. • Technology will often play an important role but mainly in improving manufacturing systems.

Step 2

• A significantly higher level of NPD than for cost leadership. • Products and their differentiating features that can command a price premium. • Intimacy with customers, to fully understand their current and future needs. • Sound foresighting to predict short to medium term trends. • Relatively strong emphasis on research and longer term development.

Step 3

• The level of NPD funding is generally higher than for cost leadership of differentiation. But, it is highly dependent on the product category and its potential for creation of high margins.

• Major emphasis is on customer intimacy (now and the future) • Often working with lead user groups in the target market to identify new opportunities. • Technology often playing an important role in the development of new product features.

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MILES AND SNOW’S TYPES OF COMPANIES

WHICH ONE DO YOU ADOPT?

The selection of strategies outlined in previous slides provide a framework or guide to developing the NPD

strategy. A combination or hybrid of these various strategies is likely to be best for specific applications,

smaller markets like NZ generally find it beneficial to take a more conservative approach or have a hybrid

strategy ‘not putting all their eggs on basket.’

Prospector Strategy Adopters

•They are risk tolerant and keen to explore new opportunities.

•Flexible in developing and applying new technologies.

•Value speed to market in order to capture greater market share.

Analyser Strategy Adopters

•They balance the priorities of a prospector and a defender.

•They are moderately risk tolerant.

•They often follow prospector companies with imitator products –also called “fast followers”

•Imitation products that adds greater value to the market

•The costs associated with NPD for the analyser are lower than for prospectors.

•The NPD capability is based on product and market analysis combined with skills in reverse engineering and design improvements.

•Technology often plays an important part in re-engineering.

Defender Strategy Adopters

•Risk averse - focus on a narrow and stable market and category of products.

•Focus on core capabilities, even a single technology.

•Resist radical developments

•Swift to respond to competitive threats

•Cover a full range of product variants within its focus product category

•NPD focused on product enhancements

•Not usually technologically aggressive

Reactor Strategy Adopters

•Have no clear strategic goals

•Responds to market changes with no clear plan for technology development or market entry

•Are generally regarded as not successful long-term

Do some research and understand what type of innovating technique you are trying to accomplish.

After asking yourself the in the previous exercise on the basics of your innovation strategy, now properly

defined your strategy based on the porter strategic framework that your company falls under, then do the

same to see which Miles and Snow strategy is best for you to adopt.

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UNDERSTANDING THE PRODUCT

Understanding what makes up a product is important for innovation, essentially for those strategies that

require adding value to current products. NZ is a good market for testing product viability on a smaller market

scale but also have a higher risk of the market not conforming so the whole product should be developed

thoroughly from the core outward to the basic then augmented which often reveals potential for new product

opportunities as shown in the figure below.

Figure 10 Product Benefits (Anderson, 2016)

PRODUCT DIFFERENTIATION

INNOVATION SUPPORTING STRATEGIES

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Figure 11 Supporting Strategies (Markham & Lee, 2013)

Platform Strategy

•Platform Strategy is not a product, it is a collection of common elements especially underlying core technology implemented over a range of products.

•It enables products to be deployed rapidly and consistently encouraging a longer term type of strategy.

•It can influence underlying operational efficiencies and create a ‘platform’ that is easy for the company and the market to both understand.

Technology Strategy

•It supports future growth or the company to aid with achieving strategic goals.

•Technology driven organisations are depended on achieving a competitive edge though new technologies.

•Market driven technological organisations are heavily focussed on meeting customer needs.

•Most organisations will fall in the middle ground with a strong focus on meeting customer needs (foresight is needed for this strategy).

Marketing Strategy

•Is better suited for the NZ market by focussing on the best opportunities with a limited resource availability, achieving a unique competitive advantage.

•Must be aligned with the goals of the company (Previously described in the example)

•To fully identify the need the current market (Market mix) and product portfolio should be defined.

Intellectual Property Strategy

•IP is the creation of the mind, inventing. Just like other forms of property, they can be sold, licensed, exchanged or given away.

•You may decide that your company is going to develop a IP product that will be protected by law (e.g. patents) to earn recognition or financial reward.

After going through the information you will have a general understanding on the product needs.

Go back over the strategy you have already developed in the previous example and change it to better suit

the supporting strategies if needed. Remember is it okay to have a hybrid strategy combining two or more

ideas as long as you weigh up the risks involved with each strategy as described.

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PORTFOLIO MANAGEMENT

NPD STRATEGIC CYCLE

Figure 12 NPD Strategic Cycle (Anderson,2016)

PORTFOLIO PLANNING STEPS

Step 1. Identification, selection & prioritization of opportunities - It is important that there is strategic

alignment and have a positive financial criteria.

Step 2. Balancing of portfolio - Balance between number & project type (risk & cost), resources & capabilities

Step 3. Resource allocation - Based on availability, strategy, project requirements & investment plan.

Step 4. Align and finalize product portfolio plans - Existing and new projects may be accelerated or killed.

STEP 1: IDENTIFICATION, SELECTION & PRIORITIZATION OF OPPORTUNITIES

This involves discovering a project and determining the product pipeline performance, this is measuring the

performance from the start to the end, estimating how this would affect other projects and influence other

opportunities that may arise.

STEP 2: BALANCING OF PORTFOLIO

•Financial models and indices

•Probabilistic financial models

•Options pricing theoryFinancial

•Strategic buckets

•Scoring models and checklists

•Analytical hierarchy approaches

•Behavioral approaches

•Mapping approaches – bubble diagrams, product roadmaps

Strategic

•Strategic and financial

•Strategic with mapping approaches

•Strategic, financial and scoring models

Multiple Methods

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From the above, take the financial or strategic route (or both which is preferred) that can be used to balance

portfolios, from this they can be compared with each other to determine which ones are the best suited.

NOTE: This stage is essential to avoid biasing the results, having this stage influenced can possibly have the

negative affect of choosing a project that is not viable and could possible ruin a smaller company (NZ SME).

Below is an example of a strategic mapping matrix, a variation of projects can be plotted on here depending on

the financial or strategic viability, the size of the project is represented by the size of the circle. At the end, this

can be weighed up and balanced so that smaller companies (in NZ) can make a fully informed decision on the

type of project that would be the most rewarding and less risky.

It is important to develop an effective innovation portfolio that has one primary area of focus (one quadrant),

but also pursues other quadrants of the matrix as well and builds synergies between varied approaches.

Effective portfolio management entails being able to infuse core principles into everyday operations Satell, G.

(2013).

HOW TO BE HAVE A BETTER PORTFOLIO

(Cooper & Edgett, 2010) Have suggested that having the following will improve the performance and quality of

the portfolio:

Financial approaches are most popular and dominate portfolio decisions.

Benchmark businesses place less emphasis on financial approaches and more on strategic methods.

Benchmark businesses tend to use multiple methods (e.g. strategic with scoring methods).

Focus on high value, high impact NPD projects.

Those that use both financial and strategic method for modelling projects seem to better in terms of success

compared to others by visually weighing up projects before they are commenced. Bubble diagrams, options

pricing, scoring models and payback period were included in the methods that lead to better portfolios.

Having the product aligned with the company business strategy is equally important, smaller businesses have

shown to be better performers when projects have been completed that relate to major product revisions,

new to the business products as well as new to world products, which is beneficial to NZ who has a smaller

market to work within PDMA 2006.

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TECHNOLOGY PLANNING

Provides the guidance to evolve and mature relevant technologies to address the vision and goals of an

organization (alignment of the business). It is an active document that is influenced though future foresighting

and changes in company strategy

FORESIGNTING

Figure 13 Foresighting (Anderson, 2016)

Above is a figure describing the foresighting paradigm that influences how it can be done on the basis of

creating future projects and predicting what the market will do in the future.

STRATEGY

This is how technology is utlised as part of the organisation’s overall corporate and business strategy or the

task of building and exploiting an organisation’s technological assets:

ROADMAPPING

This technique can be used for new product and or processes that involves short-term and long-term goals

with specific technology (solutions) to help meet the goals. There are several technologies to the correct one

should be chosen to proceed, the development of multiple technologies can be coordinated with a road map

What technology is required?

•Developed Internally

•Sourced Externally

What competencies are required?

•Developed as a core competence

•Sourced externally

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and is done on a basis of a set time. The figure below identifies the interdepartmental roadmaps and how they

link to the overarching roadmap to complete project.

Figure 14 Road mapping (Petricka & Echols, 2003)

STEP 3: RESOUURCE ALLOCATION

STRATEGIC BUCKETS

Strategic buckets are is a common tool for companies to adopt to place a certain percentage of profit for

developing future new products. An example can be seen below, where this is done mainly in a top down

approach, this can be adapted to NZ market as a strategic tool for identifying budgets and scoping smaller

project to ensure that the NPD projects do not cause the company to be financially vulnerable.

Figure 15 Strategic Buckets (Anderson, 2016)

Try using the four planning steps to start creating or to update your existing project portfolio, remember to

identify and align projects with the company strategy previously defined.

Once the balancing of the portfolio has been done, draw up a matrix and plot your own projects.

Use the tools of road mapping, foresighting and strategy to come up with future possible project. This may

take a team to do but is a good exercise for all.

Lastly, strategic buckets can be used to develop budgets and to scope these defined projects within different

developed areas.

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PERFORMANCE METRICS

It is important to have a measurement criteria for performance and to keep a score of ‘winning’ which has

been proved to be beneficial by top performing companies. Business strategy metrics:

Product innovation & technology strategy metrics (e.g., % Growth from new products in strategic

buckets)

Portfolio management metrics (e.g., prioritized list metrics – NPV, ECV - value maximization, balance

and strategic alignment).

Project metrics (e.g., gate criteria and post launch reviews).

MEASURING PERFORMANCE

A two dimensional metric is that involves the type of NPD project and the timing of the project using the

following criteria:

Lagging – past performance

Real time – current performance

Leading – likely future performance

Learning – provides learning from all measures to target in specific future areas

KEY FINDINGS TO INCREASE NPD PERFORMANCE

1. Shorten Time to Market

2. Establish Strategy

3. Manage the Portfolio

4. Modify NPD Process

5. Structure and Management

Using this information, determine what your company performance metrics are, are they to increase % of

growth from new products?

Now use this two dimensional metrics to learn from past, current and future performance. This tool is

important for learning and improving. Keep in mind the key findings for evaluating future performance.

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CRITICAL EVALUATION

By reading through this manual and completing the relevance exercises after each section you should be able

to:

Identify your company’s mission statement, corporate values, goals, innovation type and functional

strategy

The NPD strategy should be clearly defined along with the corporate and business strategies, making

sure that your company is doing the process right AND doing the right process.

Innovation strategies should be developed through research; identifying the innovation type and

using Porter’s framework do determine the company NPD strategy.

This is later refined with the types of products completed identified by Miles and Snow, to adopt for

your specific company.

Understanding the product is crucial for understanding the method of innovation to change the

strategy further if needed to better suit the supporting strategies.

Your company portfolio should have been clearly developed and managed by following the four

simple steps given.

This portfolio should have been planned including the need for possible resources, allowing for future

planning including foresighting, strategic planning and road mapping and practical resource

allocation.

The performance of the current project should be compared to the past and the possible future. This

learning tool is essential for improving and essentially measuring progress.

As a final exercise use Cooper’s success factors (Cooper & Edgett, 2010) to evaluate your current

performance. Ask yourself this whenever you are handling a NPD project:

Is it a unique, superior product?

Does it have a strong market orientation?

How does it look to the world?

Is there lots of pre-development work?

Is there a clear project definition?

Is there a solid marketing plan?

Is there a good organisational structure and climate?

Is there top management support

Are there leverage core competencies?

Does it have market attractiveness?

Are there tough go/no go decisions?

What are the completeness and consistency of execution?

Are all resources in place?

What is the speed but not at expense of quality?

Is there a clear NPD process?

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REFERENCES

Cooper, R. G., & Edgett, S. J. (2010). Devekiping a product Innovation and Technology Strategy for your

Business. Research Technology Management, 33-40.

Huldtgren, A., Boming, A., Kahn, P. H., & Friedman, B. (2013). Value Sensitive Design and Information Systems.

Philosophy of Engineering and Technology, 55-95.

Markham, S. K., & Lee, H. (2013). Product Development and Management Association’s . Journal of Product

Innovation Management, 1-48.

Petricka, I. J., & Echols, A. E. (2003). Technology roadmapping in review: A tool for making sustainable new

product development decisions. Technological Forecasting & Social Change, 81-100.

Strategy. (2010). Oxford dictionary of English (3 ed). Retrieved from http://www.oxforddictionaries.com/

Innovation. (2010). Oxford dictionary of English (3 ed). Retrieved from http://www.oxforddictionaries.com/

Anderson, A, M. (2016). Overview of strategic NPD managment. [PowerPoint slides]. Retrieved from

http://stream.massey.ac.nz/

Satell, G. (2013) How to manage innovation. Retrieved from http://www.forbes.com/