Innovation Management

Dr.CarlaKoen P f Professor of fT Technology h l M Management tand dE Entrepreneurship t hi c.i.koen@tiasnimbas.edu c.i.koen@hotmail.com

Structure

I Innovation ti Management M t

1.

SettingtheScene Innovation:definition,types,strategy
Assessinginnovationcapabilities

2.Selectingandorganizinginnovationprojects 3.Thechallengeofdisruptiveinnovation

Originality is nothing but judicious plagiarism. Voltaire

Defining Innovation

What is innovation?

Musical flamethrower

Gas-filled umbrella

Cheese-flavoured cigarette g Decoy ducks & stay dry! Foetus Walkman

[Bessant, 2005]

Revolutionaries and revolutions...

Long-lived Firms that have changed industries

(average age of 105 years)
Company Goodrich Nokia 3M Phili Philips Founded 1870 1865 1902 1891 Original product Fire Hose Lumber Mining C b fil Carbon-filament l lamps Current business Aerospace Mobile Phones Office supplies Healthcare, H lh consumer lifestyle, lighting

DSM

1902

State-owned coal mining company

Chemicals, nutrition, coatings, etc

VanderLande

1948

Maintenance of textile machinery

Producer of material handling systems

Whatisinnovation?
New ideas New services New p products C ti Continuous I Improvement t Successful commercialisation

Conceiving Conceiving and then fully exploiting the latent potential of an idea.

Improved processes Radical ad ca c change a ge Patents New intellectual capital

Who do you recognize?

Entrepreneur Vacuum cleaner g machine Sewing Telegraphy W.H.Hoover Isaac Singer g Samuel Morse Inventor J.Murray Spengler Elias Howe many others

Action with vision, energy gy and strategic thinking about what can be accomplished

Specialist knowledge, perseverance, focus, passion, etc.

8

Innovationoccursindifferenttypesfordifferent marketlifecyclesandhownewitisintheeyesof consumer

Marketlifecycle
Emerging Growth Mature Decline

Disruptivenesstoconsumer

Newtotheworld Newadjacentcategory

Tec chnolog gy

Newinthecategory Improved I d

Time

Whatisstrategicaboutinnovation &whatisinnovationstrategy?

Wh t is What i a strategy t t anyway? ?

Exercise:

Please reflect and discuss for 10 min. with your neighbour i hb and db be ready d f for plenary l di discussion) i )

What is a technology strategy? What in your view should it include? How should strategy differ from technology strategy? What should be the relationship between them? When is a technology strategy useful? Do o you know o t the e st strategy ategy a and d tec technology o ogy st strategy ategy o of your company? What is the link between them?

11

Effectivestrategiesaddressthreekeychallenges:

Markets Howwillwecreatevalue? Technologies

Howwillwebuild theorganizational capabilities p necessaryto deliverit?

Howwillwecapture valueinthefaceof Competition?

And answer critical questions:

How will we create value?
H How will ill th the t technology h l evolve? l ? How will the market change?

How will we capture value?

How useful is uniqueness? Wh t complementary What l t assets t do d we need? d? Where should we compete in the value chain? How should we compete if standards are important? How should we design the business model?

How H will ill we d deliver li value? l ?

How do we manage the core business and growth simultaneously? How do we use our strategy gy to drive real resource allocation?
13

Technology Strategy on one slide

Create

Deliver

Capture

Assessing innovation capabilities

Assessingyourorganisations organisation sinnovationcapabilities

You are going to perform a preliminary assessment on your organisations innovation

Objective: Assess the innovation capabilities of your own organisation

Approach:
Complete Assessment Sheet provided 10 best practices for innovation Template-based Assess on typical yp situation not if a p pilot is in p place Be honest!
Time t o market

Innovation Capabilities Profile (preliminary)

Vision & St rat egy

Process improvement

5 4 3 2 1 0

Innovat ion Process

Leadership f or innovat ion

New Of f erings (as %sales)

Support ive cult ure

Resources f or innovat ion

2007 Codexx Associates Ltd

Learning Cust omer involvement

Innovation Capabilities Organization Assessment

No

Practice

Low (1)

Medium (3)

High (5)
Documented 5+ year business vision and strategy identifying key business trends and defining innovation goals and priorities. Created with the involvement of managers and employees, together with external stakeholders t k h ld and d communicated i t d throughout the firm.

Score (1-5)

Vision and Strategy

No documented vision and strategy for the firm.

Documented 3-5 year vision and strategy, primarily focused on financial goals but with little or no definition of goals and priorities for innovation focus.

Do you have a Vision & Strategy in place that defines focus areas for innovation? Were they created with a high level of involvement of key stakeholders?
Comment Score (1-5)

Innovation Capabilities Organization Assessment

No

Practice

Low (1)

Medium (3)

High (5)

Score (1-5)

Innovation Process

No formal p process new service and process improvements emerge in an ad hoc fashion.

Basic innovation p process in place, using stage-gates, but not well deployed across the firm.

Formal stage-gate process in place for g p generating, g, selecting g and implementing new ideas for service and process improvement, supported by a management system.

Do you have a robust process in place for generating, selecting and implementing new ideas?

Comment

Score (1-5)

Innovation Capabilities Organization Assessment

No

Practice

Low (1)

Medium (3)

High (5)

Score (1-5)

Leadership for Innovation

Managers g are not active in promoting or supporting innovation in the firm.

There are some departments p in the firm where managers are active in driving innovation, but this is not firm-wide.

Management across the firm give p on innovation as leadership evidenced by their involvement in, and resourcing of, innovation projects and making innovativeness a core part of the gy and aK PI. firms strategy

How effective are management, incl. you at leading innovation in your firm?

Comment

Score (1-5)

Innovation Capabilities Organization Assessment

No

Practice

Low (1)

Medium (3)

High (5)

Score (1-5)

Supportive Culture

Innovation activities are seen as taking people away from daily business and hence regarded as a cost.

Innovation is sought g from Managers and senior employees only.

The firm values innovators and pp innovation champions. p It supports is known as an innovator. Managers are expected to lead innovation activities. Innovation is expected and encouraged from p y all employees.

How supportive is your culture for innovation?

Comment

Score (1-5)

Innovation Capabilities Organization Assessment

No

Practice

Low (1)

Medium (3)

High (5)

Score (1-5)

Learning

No formal process to capture and share learning from client projects and p across the improvements firm. At best learning is done within teams or departments.

The firm has some processes and IT systems in place to capture and share learning from projects and improvements, but these are often not used. Manager support for learning is typically half-hearted.

The firm has effective integrated g processes and IT systems in place to capture and share learning across the firm. Managers and employees are motivated to share learning. Partners support a learning culture in the firm.

Do you have effective processes for capturing and sharing learning?

Comment

Score (1-5)

Innovation Capabilities Organization Assessment

No

Practice

Low (1)

Medium (3)

High (5)

Score (1-5)

Customer Involvement

Customers are not involved in new innovations until the new product/service or process change is completed.

Customers are sometimes involved in new product/service development, but this is dependent on the manager involved and is not a formal q requirement.

The firm is close to customers g term and understands their longer business needs. The firm regularly seeks the opinion of key customers as part of developing new service and process g and this is p part of the offerings formal innovation process.

How are customers/clients involved in your innovation?

Comment

Score (1-5)

Innovation Capabilities Organization Assessment

No

Practice

Low (1)

Medium (3)

High (5)

Score (1-5)

Resources for Innovation

There is no coordination pp of or resourced support innovation activities in the firm. Little or no time is made available for innovation activities.

Innovation is managed on a project-by-project p j yp j basis and project-specific tools are made available. Time is made available for innovation activities on specified projects y only.

There is a group providing pp for coordination and support innovation activities within the firm together with appropriate tools. Time is made available to all employees for innovation activities.

What resources and skills are available for innovation activities?

Comment

Score (1-5)

Innovation Capabilities Organization Assessment

No

Practice

Low (1)

Medium (3)

High (5)

Score (1-5)

New Offerings

Few new products/services have been launched in the last 3 years.

Some new products/services have been launched in the last 3 years.

Many new products/services have been launched in the last three years. Firm is considered amongst the leaders for product/service innovation.

How much new innovation has there been in your products/services recently?

Comment

Score (1-5)

Innovation Capabilities Organization Assessment

No

Practice

Low (1)

Medium (3)

High (5)

Score (1-5)

Process Improvement

The firm has made negligible changes in key business processes over the last 3 years.

The firm has made some significant changes in key business processes over the last 3 years.

The firm has made major improvements in business processes over the last 3 years, which have significantly improved its competitiveness.

What degree of business process improvement has been achieved in the last 3 years?

Comment

Score (1-5)

Innovation Capabilities Organization Assessment

N o

Practice

Low (1)

Medium (3)

High (5)

Score (1-5)

10

Time to Market

Few new offerings or process improvements p p are completed on schedule and budget Typically very slow to market/ go-live.

Many new offerings or process p are completed p on improvements schedule and budget. Pretty variable in time to market/go-live

Most new offerings or process p are completed p on improvements schedule and budget Typically fast to market/go-live.

How successful is your business at bringing new innovations to market or first use quickly and to budget?

Comment

Score (1-5)

Innovation capabilities what you learn? did y

TOTAL SCORE (Q1-7)
(Min =7, Max = 35)

TOTAL SCORE (Q8-10)

(Min = 3, 3 Max = 15)

Structure

Innovation Management

1.

SettingtheScene Innovation:definition,types,strategy
Assessinginnovationcapabilities

2.Selectingandorganizinginnovationprojects 3.Thechallengeofdisruptiveinnovation

Fromstrategy gyallelseflows
B i Business strategy t t
PIT strategy

Portfolio Pipeline Stagegateprocess Projectmanagement

Cooper&Edgett,2009

WhydidthingsgobadlywrongatMedtronic?

OfallthethingsthatMedtronicdidtofixitsprocess,whatdoyouthink wasthemostimportant?Why?

Whydidthenewproductdevelopmentsystemthattheyputinplacehelp?

Fromcatchuptoleadershipposition

Heavy-weight y g & light-weight team

Career Path: project j t mgt. t> functional mgt.

No failure after commitment review Commitment review

Ensure integration and alignment of the market and tech. perspectives

Focus -Speed - cost - Innovativeness

Determine what types of new products to develop -CEO - marketing mgr. -Product development Differentiate technology from product development Technology strategy Business analysis phase

Gate documents

-Product quality

-Cycle time Fixed review dates Set start and completion dates for projects j - fully allocated cost - Market share - Defects/million

Source advanced technology

Design platform products with an up-front plan for derivative models

Train Schedule

31

Alternativep project j teamstructures

Functional structure
Function manager Liaison (L)

Lightweight team

Working level L L L Market Concept

Heavyweight team

Project manager

Autonomous, tiger team

ENG Market Concept

MFG

M K G

Market Concept

Source:K im Clark and Steven Wheelwright Revolutionizing New Product Development

32

Multidimensionalteam:Exampleofapersonalcomputer manufacturer f
Product Managers
(Engineering) Cross-functional teams

Product team: terminals

Component Team: printed circuit boards

Component Team:K eybo ards

Product team: Low-end PCs

Product team: High-end PCs

Teams of Engineering and purchasing representatives

Conflict resolution l ti team

VP Purchasing

- component team leaders - product team leaders - product managers - engineering manager - computer architect

Chaired by technically trained managers from purchasing

33

Otherfirmshaveexperimentedwithhybridorganizational structures
Centers of Excellence
Ceo

Teams
Heavyweight team

Market Product Concept

Matrix
Ceo

Market A

Market B

Market C

Market A

Market B

Market C

R&D area 1 R&D area 2 R&D area 3

Product Concept

ENG F ti 1 Function MNG Function 2 Function 3 MKG

ENG MNG MKG

ENG MNG MKG

Pros

Build key expertise centrally e.g. central basic research Supports necessary scale for critical technologies Manage career paths of key individuals to maintain the skill base of the org. Leverage key learning across the firm

Focused cross functional coordination Strong identification with and commitment to projects More efficient development Development of team and general management g skills at all levels of the org. g

Focused attention to multiple objectives Makes the tension between functional expertise and product/customer focus explicit Best of both worlds: coordination and specialization

Cons

Centralized groups can degenerate into ivory towers Potential isolation from global needs uneasy transfer of technologies to subsidiaries worldwide

Confusion of team roles & responsibilities Shortage of effective project leaders Degradation of functional skills

Confusion of roles & responsibilities High overhead Powerful individuals tip the balance of power Worst of both worlds

34

Whatarethecriticalvariables?
Heavyweight H i h & lightweight team structures Platform strategy Technology strategy

Train schedule process Gate G t documents d t to t force integration structure & process No failure after it t commitment process Measures of performance and success - incentives
35

Changes in career paths - incentives

Whyhaveastrategy?
1.Tomakechoices

Freedomwithoutcontrol control

Successinvolves
Doing projects right funnel thinking
e.g. cross-functional teams, doing the up-front homework prior to the development p stage, g , building g in the voice of the customer, , getting a sharp, early, and stable product definition, etc.

Doing the right projects portfolio thinking

Project selection and portfolio management

UnderstandCapacity
Identify the Functions Most Involved in New Product Development and Understand their Staffing Structures Estimate the Demands of f Product P d t Support S t and Administration Efforts by Functions over Time Consider the Current Portfolio of New Projects and the Continuing Demands of non non-NPD NPD to Determine Overall Demand for Development Resources Estimate the Resource Requirements of a New Product Development Project by Breaking Out Project Tasks

Understand the Impact of Current Commitments Upon Resource Supply, Identify Bottlenecks and OverCommitment

MeasureResourcesversusRequirements
Projects Product.Mgt.
Persondays Cumulative

Marketing
Persondays Cumulative

Research Group A
Persondays Cumulative

Research Group B
Persondays Cumulative

Alpha Beta Gamma Delta Epsilon Foxtrot

Available Persondays % Utilization

3 4 3 5 6 6

3 7 10 15 21 27 20 135.00%

2 2 2 3 3 2

2 4 6 9 12 14 10 140.00%

10 10 15 15 5 5

10 20 35 50 55 60 60 100.00%

5 5 5 8 8 5

5 10 15 23 31 36 40 90.00%

M ki real Making l decisions d ii with ith real data

Technology Strategy in Practice

Strategies are worthless unless they are linked to real resource allocation decisions Decide
Who will make the decisions How often By what criteria

AnAssignmentGiventoSmallGroupsofManagersat CompanyXYZCo. Co
1. Identify ythesalientcharacteristicsofyour y organizations g innovationfunnel Wheredonewideascomefrom When Wh ared decisions i i made? d ? Whoisinvolvedinthesedecisions?

2.Drawadiagramoftheinnovationfunnelthatcapturesthese characteristics

Groep A
Senior M Management Injector Marketing Inputs

Screen 1 Department Changes

Screen 2 Final Evaluation

Group B
Quality control Research Senior mgt. g

Cont.

Marketing Engineering

Strategic g Planning

Exercise:FunnelsYou(Have)Know(n)
Wh td What doesth thei innovation ti f funnel l@your companylook l klik like? ?
1 1. Identify the salient characteristics of your organization organizations s innovation funnel
- Where do new ideas come from - When are decisions made? - Who is involved in these decisions?

2. Draw a diagram of the innovation funnel that captures these characteristics 3. Provide examples of projects that are in the funnel

Bereadytopresent.

The p perfect funnel

Screen 1 Product vision Business model Screen 2 Product spec. Business case Individual projects goals: a. Timing b B b. Budget d t - cost t & spend d c. Performance

Innovative ideas from Customers and Marketing Engineering Manufacturing Suppliers etc.

Pre - development Investigations

Development Projects

Source: Wheelwright & Clark

Th ideal The id l innovation i ti funnel f l

Ph Phase I

Ph Phase II

Ph Phase III

L Launch h

Each phase is cross-functional In each phase information is gathered to drive uncertainties down. Each phase costs more than the preceding one: incremental commitment

The Ideal Innovation Funnel

Defined separation between stages: Clearly defined criteria: a way to kill living living dead dead projects Senior managers engaged at the right time Capture ideas from everywhere, everywhere manage ideas in an organized way so that they turn into products A continuous process: Does this fit with our strategy? A picture of the business: an overview of the shape of the pp pipeline Gives teams the freedom they need between gates

Example stage-gate innovation process

Defined idea Defined concept Validated concept Developed Innovation Piloted Innovatio n Available Innovatio n

1 Idea Capture

Concept Definition

"
G2

Concept C t Validation

q
G3

6 Launch

Development

Pilot

Product Service Process Strategy Market

G1

G4

G5

G6

GO TO CONCEPT

GO TO VALIDATION

GO TO DEVELOPMENT

GO TO PILOT

GO TO LAUNCH

LEARN

Example: Gate Selection Criteria

Gatekeeper Gatekeeper Gatekeeper Gatekeeper Idea Generation Feasibility Capability Launch & Rollout

Contract Charter
SELECTION CRITERIA
Key consumer needs identified. Product ideas meet identified consumer need, can be successfully communicated and delivered, and are perceived to be unique and different by consumers Ideas pass strategic fit assessment: Fits portfolio Potential to strengthen a priority brand Potential to be deliverable Can pass minimum financial criteria (Pay, Margin g Contribution) ) Back, Project fits product line architecture.

Launch Proposal

Post Launch Review

SELECTION CRITERIA
Concept, product and packaging meeting agreed quantified action standards. Satisfactory assessment of practical feasibility, and financial viability of formulation, packaging, supply chain, customer and total project Capital expenditure proposal ready Human resource and other resource requirements are acceptable. Defined and agreed action standards for consumer tests to pass Stage III.

SELECTION CRITERIA
Product and Marketing mix elements successfully meet previously defined action standards. Safety requirements satisfied. Capital proposal has been implemented. Key functional areas approve launch plan. Total project is commercially viable and fits company plan.

Criteria may change depending on strategic intent!

M ki a funnel Making f l work k

Formally:
Pacing g the funnel to the needs of the business, not the other way around Involving key decision makers early

Informally:
Leadership: tolerating high respect, high conflict debate Trust: T t but b t thi this would ld only l work k if we told t ld the th truth t th Consistency

But .
By B what h t criteria it i do d we make k d decisions ii at t the th
gates?

Using g decision tools that allow y you to compare initiatives against each other h
Making gates effective

Analytical Tools for Making Choices

Benefit measurement methods
- Scoring S i models d l - Checklists
Use at earlier Gates

Financial or Economic Tools:

Max. value

IRR & NPV Decision Trees Si l i Simulations Option pricing Risk vs Return ( (Bubble diagrams) g )

Use at later Gates when more reliable d t i data is available il bl

Portfolio Concepts:
The Aggregate Project

Seeking the right balance

Scenario Analysis

Checklist from the Dutch waste processing company AVR (2001)

Must Haves Strategic fit of the project Market attractiveness Technical feasibility Compliance with our investment rules Availability of research staff Is there sufficient budget Should haves Are we beating the competition Contribution to turnover/sales Contribution to our image Risk vis--vis our current processes S Synergy effects ff Benefits for the environment Yes No Further research required

Scoring Card AVR

Weight
Financial IRR Sensitivity of IRR Payback Share in sales Market Market opportunity Market growth Market size Competitive advantage Sustainability of this advantage Innovativeness Strategic Fit Strategic importance Risk vis--vis current processes Synergies Technical Technical feasibility Available technical knowledge Reinforcement of competencies Enlargement of portfolio Remaining Required permissions Improvement of company image Ch ll Challenge for f employees l Benefits for the environment Total Score

Score

Bottom Value

Result

Scoring systems
Good for Early appraisal Supporting exploratory initiatives Complex, C l multi-stage, lti t projects j t Relative ranking and selection Must g give way y progressively g y to harder valuations as projects mature

IRR and NPV

Ag great p place to begin g but a terrible p place to f finish?

Strengths A focus on the quantifiable costs and benefits of the project Allows for easy ranking and comparison

Weaknesses F Forces af focus on the h numbers Neglects the role of uncertainty Neglects strategic considerations Ignores interdependency between projects

Financial analysis methods

NPV is very widely used But rated lowest by users for decision-making Input data often inadequate Market outcomes poorly predicted Single g p point p prediction g gives a spurious p feeling g of accuracy Problems in use Bias against novelty Least L t reliable li bl when h most t neededd d in i early l stages t May fail to value management options

The businesses with the poorest performing portfolio rely almost exclusively on financial selection approaches
- Cooper, 2001, 218

H Here is i why h
Procter and Gambles two-in-one conditioner and shampoo technology platform is a technological breakthrough. It has spawned winning products such as Pert and Pantene.
The program did not pass the financial criteria applied to P&G projects, because it was such an uncertain and high-risk project - P&G senior manager

H Here is i why h
Procter and Gambles two-in-one conditioner and shampoo technology platform is a technological breakthrough. It has spawned winning products such as Pert and Pantene.
The program did not pass the financial criteria applied to P&G projects, because it was such an uncertain and high-risk project - P&G senior manager

Decision Trees
Pros
Incorporates decision making and uncertainty Determines optimal decisions Transparent and easy to understand Building block for other more complicated valuation methods

Cons
Trees can become complicated with many decisions and uncertainties Essentially limited to discrete decisions and discrete characterization of uncertainties

Decision tree approach

Initial I iti l R&D investment

Launch

Most M t likely lik l outcome

-$15M -$6M

+$10M

NPV@12% = -$6m

-$15m/1.12

+$10m/1.122 = -$11.4m

Decision tree approach

Initial R&D i investment t t decision probability R&D outcome t Launch Market outcome

excellent 0.3 yes 0.6 good 01 0.1 poor no

-$15M $15M

+$60M

-$15M

+$10M

-$6M -$15M -$60M

Option/Decision tree approach

Initial R&D investment decision R&D outcome Launch decision yes excellent 0.3 yes d 0 6 good 0.6 no 01 0.1 poor no no Market outcome

-$15M

+$60M

-$6M

But what are the problems?

Option value ( (ECV) )= -$6m - 0.3 $15m + 0.3 $ 60m = $7.5m (from -11.4)

Why is an option valuable?

Thinking of investments as options values uncertainty more appropriately Delaying investment until there is more information can be very valuable

Portfolio Concepts:
Risk-reward bubble diagram g Aggregate Project Planning Tools

Risk-Return Bubble diagram (for chemical company)

High
Auto Seal

Pearls
Deck Coat

Grade A Sealant

Bread and Butter

Prob bability of f ( Technic cal) Succe ess

TP-40

Top Floor D-50 U.V.Seal

$10M

6
Top Coat A

4
T-400 Solvent 1

0 Reward - Return (NPV)

Edge Coat

Solvent 800

Oysters
Top Seal

SPL First Coat

Circle size = resources (annual) Color li line and d Shading Sh di = product d t

Low

White Elephants
70
Cooper et al., 2001

The Aggregate Project Plan (1)

Entirely new benefit Radical

M k ti Impact Marketing I t
Improvement No change

Breakthrough

(10%)

Platform Technology R h Reach

(30%)

Derivative
Off the shelf

(60%)

Product P d t Support

C/T Matrix - Balancing the portfolio

Consumer/Technology Matrix
Consumer Value Perception Enabling Technology Radical New Core Product New Benefits Improvement Variant No Change (Business benefit only)

Portfolio clustered top left

B kth Breakthrough h Platform

Next Generation

Derivative
Incremental

Brand Support
Base

This portfolio contains a significantly high proportion of projects in the high-risk upper left hand area of the matrix. This does not fit well with a strategy for an existing business as it exposes the business to the risk of potential launch failures and, at the same time, fails to support existing brands through less ambitious brand support projects.
6/1/95

Scale: Bubble Size Indicates Resource Demand or expected NPS

APPINTR.ppt

Low

Med

High

Consumer Value Perception Consumer/Technology Matrix

Consumer Value Perception Enabling Technology New Core Product New Benefits Improvement Variant No Change (Business benefit only)

Enabling Techn nology

Radical

Breakthrough

Portfolio clustered bottom right

This portfolio could potentially illustrate a scenario in which a business follows, rather than leads, the market and / or does not invest adequately in support of its brand through technology or product innovation. p
6/1/95

Next Generation

Platform

Derivative

Incremental

Brand Support
Base

Scale: Bubble Size Indicates Resource Demand or expected NPS

APPINTR.ppt

Low

Med

High

Consumer/Technology Matrix
Consumer Value Perception Enabling Technology Radical

Consumer Value Perception New New Core

Product Benefits

Improvement

Variant

No Change (Business benefit only)

Breakthrough

Enabling Technology

Next Generation

Platform

Balanced portfolio
There is no ideal but, generally a well balanced portfolio will tend to be distributed along the diagonal top left - bottom right.

Derivative

Incremental

Brand Support

Base

Scale: Bubble Size Indicates Resource Demand or expected NPS

APPINTR.ppt

Low

Med

High

6/1/95

Before: Medical Products Co.

makes k an automated d di diagnostic i system that h contains i three h components - electro l optical i l hardware, h d software f and a disposable panel for bio material.

Very small effort while competitors were investing heavily

Product Changes

Process Changes
New C N Core Process Next N Generation Process
WATER FIRE CALIFORNIA

Single Si l Dept. Upgrade

Tuning T i and d Incremental Improvement

No N Change

New Core Product

ALPHA EARTH

Next generation of Core Product

Not a single new platform in 7 to 8 years

NEW YOR K

Addition to Product Family

FINCH

SPARROW OWL SIGMA

ROME V ROME VI SUMMER

ROME I ROME II

ROME III ROME IV

GEMINI 1-10 (10 PROJECTS) CROW DALLAS AUSTIN SANTA FE FLAGSTAFF ROLAND LEO CLEO OA K CEDAR PINE

Aimed at increasing functionality and features, counter No Change to what customers wanted

Add-Ons and E h Enhancements

K ENYA DELTA O SOLSTACE HAW K SPRING WINTER FALL

B-THROUGH / PLATFORM

DERIVATIVE / CPS

After: Medical Products Co.

Process Changes
New Core Process Next Generation Process Single Dept Dept. Upgrade Tuning and Improvement Incremental No Change

Product Changes

New Core Product

ALPHA

Next generation of Core Product

GAMMA VENUS

Addition to Product Family

BETA

MARS ZEUS ATLANTIS ROME V DELTA DELTA I DELPHI SIGMA DELTA II ROLAND PINE ROME I ROME II ROME III LEO CLEO OA K CEDAR

Add-Ons and Enhancements

No Change B-THROUGH / PLATFORM

DERIVATIVE / CPS

Within one year of implementing APP, the companys product development restructuring process had the following effects...

 Eliminated all but one of the breakthrough projects, and subsequently eliminated all breakthroughs. g Eliminated a lot of derivatives and feature enhancements that werent adding value to customers. New partnered platform project: Outside companies are doing the hardware and software components. The Th client li company is i doing d i the h bio bi components. Sufficient amount of resources have been allocated to ensure that the project q y staffed to meet all p project j requirements. q is adequately Focus Development efforts to be in line with core competencies and establish alliances to do all other tasks outside their own business. Results: Cut C t R&D spending di from f $65mm $65 to t $35mm. $35

Less Is More: Medical Products Co.

36

21

8 5

B f Before

Aft After

B f Before

Aft After

# of Projects in Portfolio

# of Projects Launched /Year

By focusing their innovation efforts they saw more product launches in 1993 than 1992, even though they had fewer projects and spend fewer dollars.

BenefitsofanAggregateProjectPlan:
Explicitchoiceofprojectsbalancesthelongandshortterm,allowsfor theexplicitdiscussionofthematchtostrategy Matchbetweenprojecttypeandorganizationalformallowsfora focusonthegenerationofcompetence Focusbuildsspeedandproductivityfortheindividualandthe organization i ti

EightstepsoftheAggregateProjectPlan:
Defineprojecttypesaseitherbreakthrough,platform,derivative,R&D, orpartnershipprojects Identifyexistingprojectsandclassifybyprojecttype Estimatetheaveragetimeandresourcesneededforeachprojecttype basedonpastexperience Identifyexistingresourcecapacity Determinethedesiredmixofprojects Estimatethenumberofprojectsthatexistingresourcescansupport Decide D id which hi hspecific ifi projects j t t topursue Worktoimprovedevelopmentcapabilities

Thankyou
Prof.Dr.CarlaI.Koen