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MOI 9. Managing the
Internal Processes
Prof.V.Seshadri
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Figure 9.1 Innovation process model
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Stages in the Internal Processes
Picking up a wide range of signals and processing
them for relevance to the org.
Selecting projects which have a good strategic fit.
Monitoring and managing the projects
Deciding on project discontinuation or
acceleration
Preparing for effective launch.
Reviewing and capturing learnings
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Enabling effective Search
Picking up various kinds of trigger signals about
the technology, markets and competitor
behavior, shifts in political or regulatory
environment, new social trends etc. It involves:
1. Defining the boundaries of the marketplace
2. Understanding market dynamics
3. Trend- spotting
4. Monitoring technology trends
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Enabling effective Search
Possible sources from which links can be made:
Suppliers
Universities
Research/technology institutions Trade associations
International bodies (e.g. for standards)
e.g. Xerox: 23,000 technical representatives fromaround the world are linked into a network ofcommunities to share knowledge about unusualmachine faults and methods used to fixing them.
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Enabling effective Search
For effective search, various kinds of trigger signals
need to be captured. Approaches to explore and
extend the search space are:
1. Defining the boundaries of the marketplace
2. Understanding market dynamics
3. Trend spotting
4. Monitoring technological trends5. Technological Forecasting
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Enabling effective Search
6. Integrated future search
7. Learning from others
8. Involving stakeholders
9. Involving insiders
10. Mistakes management
11. Communication and connection
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Defining the boundaries of the marketplace
Analyse and decide on Current and potential
markets based on clear understanding of what
is the business we are in and want to be.
e.g. amazon.com from on-line retailer to
software developer and supplier also.
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Understanding market dynamics
Understanding where the potential markets may
arise.
E.g. Cell phones was earlier a specialized business
tool but is now used by everyone
E.g. low chloresterol health foods are being
adopted by the common man too.
E.g. Zara and Benetton have sophisticated I.T.system in place to quickly identify which lines are
selling well and base plans accordingly.
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Trend spotting
Developing antennae to pick up on the earlywarnings of developing trends in the marketfor new products or processes or services
where none exist at present.e.g. Use of mobile phone by school going
children
e.g. Kishore Biyani ( of Pantaloon) spotted trendtowards denim wear in college going studentsand adapted business towards this line.
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Monitoring technological trends
Identification of emerging trends intechnologies, where existing trajectories maybe challenged or re-directed as a result of new
knowledge. e.g. Open heart surgeries replaced with
Angioplasty.
Use of laser in place of knife for cataractoperations.
Use of laser for metal cutting.
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Case: Proctor & Gamble
connect and develop
P&G spends about $2 bn each year and employsaround 7000 people on research.
P&G sources much of the ideas for its research from
outside the company through a programme calledconnect and develop.
There are more than 1.5 million active researchersoutside working for the company. They are tapped by ateam of dedicated employees who track and mine theinformation using the internet and othercommunication channels and using sophisticatedsearch and visualization
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Case: Proctor & Gamble
connect and develop This team gathers intelligence on areas like technology,
market, behavioral, competitors, social and politicaltrends. These information are sorted and passed onwithin P&G, who may analyze them to trigger
innovations. The search process is complimented by internet based
tools (nine sigma.com. Innocentive.com etc.). Intranetgroups also connect the company with communities ofpractice around particular product groups,
technologies, market segments etc. Retired employeesare also part of the network.
Significant contributions from internal ideas are alsoconcurrently on.
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Market Forecasting
Tools such as simple extrapolation of currenttrends through to complex techniques forhandling discontinuous change, such as Delphipanels and Scenario writing are widelyemployed for market forecasting.
Apart from Sales, other factors like demographic,technological, environmental political and socialneed to be considered.
Identifying markets which do not as yet exist, butmay emerge in future need to be identified byusing appropriate techniques.
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Technology forecasting
Standard tools such as Delphi panels and scenariowriting are used to forecast technology also.
An effective technique is the use of S curves to try
and identify the point at which an emerging newtechnological trajectory takes over from an existingone.
We need to be watchful of possible discontinuousinnovation, where new opportunities may emergefrom making different use of existing technologiesconfigured in new ways.
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Integrated Future Search
A more accurate forecasting technique is to take anintegrated view of what different futures may look likeand then explore innovation triggers within thosespaces.
E.g Shell looked at possible scenarios for 2020 in termsof 2 alternatives: Business class and prism. Theformer offers a vision of connected freedom in whichcities become powerful at the expense of the centralgovt. The latter offers a scenario in which people
increasingly go to their roots and re-orient towardsvalues as the focus around which to organize theirlives. Within these two, the Shell team explored andsimulate various threats and opportunities.
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Learning from Others
Comparisons against competitors and other
organizations, looking at others best practices,
demonstration projects and reverse engineering.
For e.g. Early growth of Korean companies
happened by their learning from foreign
companies for whom they executed orders,
adopting the strategy of copy and develop. Benchmarking is a powerful tool used for learning
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Involving Stakeholders
Involve suppliers, customers, users, contractors togenerate new product, process or service ideas.
E.g. Danish pharma company Novo Nordisk developeda highly successful range of insulin delivery devices
which originated in a young English girls home madedevice.
Working with lead users is an effective method oftapping consumer requirements well before the needbeing widely felt by regular users. The company canrespond well within this time.
However, users response may not be always valid,particularly in the case of disruptive innovations
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Involving Insiders
In a study of large FMCG companies in U.K., it wasseen that they benefited immensely throughemployee involvement and suggestions.
Chevron Texaco incorporates commitment tohigh-involvement innovation by employees andother stake holders in its mission statement. Itset up a system to involve all of its 56,000
employees worldwide with remarkable results. Kaizen is an excellent movement for promoting
fruitful and focused employee involvement.
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Mistakes Management
Trigger signals can also come from mistakes or apparentfailures which may open up new applications or untappedareas of technology.
For e.g. 3M s Post It technology was born out of a failed
experiment of a Polymer Scientist. For e.g. Pfizers blockbuster drug Viagra was born out a
failed experiment on a compound code named UK-92,480for the treatment of Angina.
The organization must create an atmosphere where
Scientists are encouraged to view failures positively. 11 out of 35 rejected projects of Xerox were later
commercialized by others ( such as Ethernet by 3Com andPostscript language by Adobe Systems.)
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Communication and Connection
User perspectives must be communicated to allconcerned in the organization so that they reallyunderstand and work towards these.
Concept of internal customers and job rotationof development personnel to marketing functionsare some useful tools to achieve this.
Informal interactions like in coffee areas or in
common parties help in promoting this. Some organizations have gate keepers who
disseminate information regularly.
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Figure 9.3
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Strategy Making
Framework for developing strategy
1. Strategic Analysis
2. Strategic Choice3. Strategic Monitoring
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Strategic Analysis
The basic criteria is does the innovation we
are considering help to reach the strategic
goals we have set ourselves? ( growth, market
share, profit share etc.)
There are many structured methodologies to
help organizations evolve the strategy. Usually
the exercise is done by top level team of theorganization at an outside venue.
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Strategic Choice
Most companies have to choose betweenmultiple innovation options. While theyusually concentrate on one or two core
product offerings, they have severalinnovation activities running at any moment.
3M has around 60,000 product portfolio andhence the choices are many and complicated.
There should be a balance between risk,reward, novelty, experience etc.
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Table 9.1 Problems arising from poor portfolio management
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Portfolio Management Approaches
1. Benefit Management Techniques
2. Economic Models
3. Portfolio Models
Benefit management techniques comprise of relativelysimple subjective judgments e.g. checklists
Economic models try to put in some quantitative or
financial data into the equation for e.g. payback timePortfolio models consider all the products and construct
multiple charts to develop an overall picture.
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Figure 9.4 Process innovation portfolio bubble chart
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Figure 9.5
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Knowledge acquisition phase
It involves
Generation of technological and
market knowledge
Technology transfer
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Knowledge acquisition phase
Effective management of R&D requires
1. Clear strategic direction
2. Effective communication and buy-in
3. Integration of effort across different groups4. Have a well developed network of external
sources which can supply needed inputs.
5. Ability to put that acquired technology to
effective use.6. Negotiate for full technology transfer including
know-why.
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Criteria for deciding on
sourcing of technology
Arthur D Little uses a matrix which groups
technological knowledge into 4 key groups
1. Base2. Key
3. Pacing
4. Emerging
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Base technologies
Technologies on which products/processes are
based. These are available with competitors
too.
May make sense to source from outside
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Key Technologies
Key Technologies are those which form the
core of current products/services and which
have a high competitive impact. They are
usually protected by Patents.
In house R&D or a carefully selected strategic
alliance/partner is needed
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Pacing Technologies
Pacing Technologies are those which are at the
leading edge. They may be under
experimentation by competitors also.
Work may be done in this area in own R&D of
large firms, but for SMEs these could be
sourced from outside
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Emerging Technologies
Are those which are at the technological
frontier, still under development and whose
impact is promising by as yet unclear.
These may be nurtured by tie-ups with
Universities or professional R&D set up. They
are best served by a watching strategy
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Figure 9.6
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Technology Acquisition Mechanisms
1. Mobilizing tacit knowledge
2. In-house formal R&D
3. Reverse engineering
4. Covert acquisition5. Technology transfer and acquisition
6. Contract R&D
7. Strategic R&D partnership
8. Licensing
9. M&A
10. Joint Ventures
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Figure 9.7
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Enabling Implementation
Implementation is the task of making innovationshappen moving the idea through to successfulproduct/process/service.
It is one of managing the development funnel. Managing innovations is a fine balancing act
between the cost of continuing with projectswhich may not eventually succeed and the
danger of closing down too soon and eliminatingpotentially fruitful options.
Stage gate approach is precisely meant for this.
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Figure 9.8 The development funnel
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Figure 9.9 Accelerating idea to market - the AIM process
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Table 9.4 Key features of emerging good practice model
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Classification of customization
1. Distribution e.g. amazon.com gift wrapping anddelivery services.
2. Features: colour, size, specs., e.g. Dell
Computers offer of customized computers. LevisStrauss tailored suits, BMW custom built carwhich owner can visit to see their car beingmade, if they wish.
3. Design customization: customer can make hisdesign from a software. Rapid prototyping andsimulation packages.
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Figure 9.10
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Launch
It is the process of identifying, exploring and
preparing the market and finally arranging for the
delivery mechanism. Enabling steps include:
1. Customer testing
2. Test Marketing
3. Develop a marketing strategy
4. Develop a marketing plan
5. Develop a support organization
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Figure 9.11
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Learning and Re-innovation
This is the final stage in the innovationprocess. It involves a review of the completedproject and an attempt to capture the
learnings from the experience. These learnings need to be consolidated along
with available accumulated tacit knowledge ofthe company.
The upgraded knowledge will be the platformfor re-innovations.
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