Innovation Management

INNOVATION MANAGEMENT
A
PROJECT REPORT
Submitted by
Bharat A. Lalwani (09054)
&
Rajkumar D. Patel (09078)
Batch 2009 to 2011
Guided by
Dr. Tejash Pujara
To
Director (PGDM)
In partial fulfillment of the requirements of

Tolani Institute of Management Studies, Adipur
For the award of the degree of

Post Graduate Diploma in Management
Tolani Institute of Management Studies

Adipur- 370 025
March 2011
EXECUTIVE SUMMARY
This project has been divided into 8 sub parts. First part (CH-1) is an introductory
part, which gives definition of innovation, need of innovation, kinds of innovation. It
also explains how innovation process spread across globe to reduce a lead time of
product to reach market. It also consists of data of spending of multinational
companies on innovation which shows importance of innovation. End with barriers of
innovation.
Second part (CH-4) provides exhaustive information on product innovation. In which

4 forces have been discussed which are responsible for successful product innovation,
followed by 2 case studies.
Third part (CH-5) consists of process innovation, in which 5 various level of process
innovation has been discussed in detail. Then focus on TQM in context to process
innovation, and concluded that TQM is a hurdle for process innovation, followed by
case study.
Forth part (CH-6) focuses on inventory and logistics management. In inventory

management, Microsoft dynamic NAV software has been discusses with advantage
and disadvantage of software in inventory management. In logistic management, we
focus on reverse logistic, explained it with help of case study.
Fifth part (CH-7) consist of HR, it is important than other because to attract and retain
innovative workforce is not easy task, requires great effort. We take E-HRM as
innovation in HR.
Tolani Institute of Management Studies, Adipur Page 2

Sixth part (CH-8) focuses on fostering continuous innovation. It provides information

for idea generation to innovation in market. Each step has been described in detail.
Seventh part (CH-9) contains role of knowledge management in innovation

management, which explain than how knowledge management helps firm for
innovation management. In which 3 different models has been mentioned.
Eighth part (CH-10) we derived business platform variables and Technical platform
variables with help of 2 case studies.
Ninth part (CH-11) as our project is totally based on secondary data as time was short
we have mentioned some limitation of the project and further scope of the study on
same project title.
In the tenth part (CH-12) we conclude the whole project and mentioned the
importance of the Knowledge management and foster innovation by management for
continuous innovation.

TABLE OF CONTENT
Sr. No. Description Page no.

01 Executive summary 2
02 Table of content 4
03 List of table 7
04 List of figure 8
05 Abbreviation 9
06 List of Case studies 10
07 Preface 11
08 Declaration 12
09 Acknowledgement 13
10 CHAPTER 1 14
Introduction
1.1 Creativity and Innovation 15
1.2 Innovation v/s Invention 15
1.3 Innovation 15
1.4 Need for innovation 16
1.5 Types of innovation 17
1.6 Globalization of innovation process 18
1.7 Contribution of various multinationals in innovation 21
1.8 Impact of innovation on organization 22
1.9 Barriers to innovation 22
11 CHAPTER 2 25
Objectives
12 CHAPTER 3 27
Methodology

Sr. No. Description Page no.

13 CHAPTER 4 29
Product innovation
4.1 Introduction 30
4.2 4 major forces that drive new product performance 30
4.3 A case study on Automotive industry 32
4.4 A case study on Canon mini copier machine 35
14 CHAPTER 5 43
Process Innovation
5.1 Introduction 44
5.2 Various levels of process innovation 45
5.3 TQM and Process innovation. 48
5.4 A case study on BOI and HP. 50
15 CHAPTER 6 52
Innovation in Inventory management and logistics
6.1 Inventory management. 53
6.2 Inventory management software. 54
6.3 Inventory management in Microsoft Dynamic NAV 57
6.4 Innovation in logistics. 60
16 CHAPTER 7 65
Innovation in human resource management (HRM)
7.1 What is HR? 66
7.2 Objectives of HR. 66
7.3 Need of innovation in HR. 68
7.4 Innovation in HRM. 69
17 CHAPTER 8 75
How Management can foster continuous Innovation
8.1 How idea get transformed into innovation. 76
8.2 Idea generation process. 76
8.3 Phases of idea. 77

Sr. Description Page

No. no.
18 CHAPTER 9 83
Role Of knowledge management (KM) in innovation
management.
9.1 What is KM? 84
9.2 Important dimension of knowledge. 84
9.3 Role of KM in innovation management. 85
9.4 Knowledge in context to lead innovation 88
9.5 Effect of KM in innovation. 91
9.6 Influence of KM in competitiveness and innovation. 98
9.7 Networking process of continuous innovation based on KM. 102
19 CHAPTER 10 105
The Business platforms variables that influence the
Innovation management
10.1 What are technology platform variables? 106
10.2 What are business platform variables? 106
10.3 A case study of Windows operating system 107
10.4 A case study of Plain copier machine at Xerox. 113
20 CHAPTER 11 118
Limitation and further scope of Research
21 CHAPTER 12 121
Conclusion
22 CHAPTER 13 124
Bibliography

LIST OF TABLES

No. No.
01 Types of innovation 17
02 Features of Inventory management software- Microsoft dynamic 59
NAV
03 Activities in HR department 66

LIST OF FIGURES

No. No.
01 4 major forces that drive new product performance 30
02 Various levels of process innovation 44
03 DCL‘s reverse logistic system 63
04 Characteristics of individuals for innovation 68
05 Summary of E-HRM 70
06 Phases of ideas 76
07 Effect of knowledge management in innovation 91
08 Influence of knowledge management in competitiveness & 97
innovation
09 Networking process of continuous innovation based on knowledge 101
management
10 Innovation process of Windows operating system 111
11 Innovation process of Plain paper copier machine at Xerox 115
12 Conclusion 121

ABBREVIATIONS
Sr. No. Abbreviations Full form

01 KM Knowledge management
02 IM Innovation management
03 DCL Dis Copy Labs
04 ROI Return on Investment
05 FDI Foreign direct investment
06 PPP Purchasing power parity
07 SMEs Small medium enterprise
08 MC Machine copier

LIST OF CASE STUDIES
Sr. No. Case studies Page No.

01 Automotive industry- product innovation 32
02 Canon mini copier- Product Innovation 35
03 BOI & HP- Process Innovation 49
04 Reverse logistic of DCL- innovation in Inventory 60
05 Windows operating system for PC 105
06 Plain paper copier from Xerox 112

PREFACE
Project work is an essential part of the syllabus of PGDM program. In project work
student has to use his or her various skills like analytical skill, communication skill,
writing skill, etc. This is why included in PGDM program.
The proverb ―Practical makes man perfect‖ means a lot to the manager. Success does
not come easily, one has to work hard for it and achieve it at each and every stage of
life.
Conceptual studies are always observed during the project study. It gives us the
complete understanding of the real life situation and happenings in the real world.
From the practical point of view a project plays an important role for the student.
Before We present this project, We would like to say that it is mirror image of a
reflection to whatever We have observed and have come through during our project
work.

DECLARATION
We hereby declare that the project work entitled ―INNOVATION

MANAGEMENT‖ submitted to Tolani Institute of Management Studies, Adipur, is
work of an original record done by us under the guidance of Dr. Tejash Pujara,
(Assistant Professor & Head- Corporate relations) This project is not submitted for the
award of any other degree/ diploma/associate ship/fellowship or similar award.
Signature:
Name: Bharat A. Lalwani (09054)
Signature:
Name: Rajkumar D. Patel (09078)
Date: February 2011
Place: Adipur

ACKNOWLEDGEMENT
We wish to express our gratitude to ‗TOLANI INSTITUTE OF

MANAGEMENT STUDIES‘ for giving us an opportunity to enhance our knowledge
by granting permission to do my project under their guidance.
We are grateful to Dr. Tejash Pujara (Assistant Professor& Head- Corporate

relations) and all the staff of TOLANI INSTITUTE OF MANAGEMENT STUDIES,
who guided us and provided their valuable guidance and cooperation during the
course of the project. He provided us all the information and support whenever
needed that has been instrumental in completion of this project.

CHAPTER:- 1
INTRODUCTION

1.1 CREATIVITY AND INNOVATION

Creativity and innovation might sound similar in contextual meaning. Of course,
innovation typically involves creativity but it is not identical to it. Creativity is
typically used to refer to the act of producing new ideas, approaches or actions, while
innovation is the process of both generating and applying such creative ideas in some
specific context.
In simpler words, innovation involves successful implementation of creative ideas.

We can say that creativity is the act of producing new approaches and imaginative
ideas. But, Innovation is the production or implementation of an idea in some specific
context. So if we have ideas, but don‗t act on them, then it means that we are simply
imaginative but not creative.
1.2 INNOVATION VS INVENTION

Invention is the first occurrence of an idea for a new product or process, while
innovation is the first attempt to carry it out into practice. Interesting thing is that,
Innovation does occur when someone uses an invention or an idea to change how the
thing it works. So to make it more precise, invention is a ladder to reach the spot
called innovation.
1.3 INNOVATION
The US federal advisory committee on measuring innovation defines innovation as

follows. The design, invention, development and by implementation of new or altered
products, services, process, systems, organizational structure or business models for
the purpose of creating new value for customers and financial returns of the firm.
The Australia‗s most comprehensive Innovation Survey (1996) defines, ―An

innovation is any new or substantially improved goods or services which has been
commercialized or any new or substantially improved process used for the
commercial production of goods and services‖

First at the level of an individual firm, Innovation is defined as the application of

ideas that are new to the firm, whether the new ideas are embodied in products,
processes, services or in work organization, management or marketing systems.
The definition of innovation can be divided into two perspectives, namely

Opportunities to exploit and Opportunities to explore. Let‗s try to understand both of
them.
First perspective, opportunities or changes to exploit are those where most of the
parameters are well defined and understood. It is something like improving an
ongoing process, reducing cycle time, increasing throughout or reducing cost. So
these are basically incremental improvements.
On the other hand, opportunities/changes to explore are those areas, where we have
newly started and have little information about it. Here we have ideas and solutions
which are applied in new ways to solve new problems. It creates the environment for
transformational innovation.
1.4 NEED FOR INNOVATION

Why that innovation is playing a vital role in companies now? What is the need for
innovation and how does it impact company‘s growth? In every industry, the leading
companies are the innovators. They achieved that stage by extensive innovation and
market presence for years.
Meanwhile, today‗s innovators such as Wal-Mart (chain of retail shops), eBay (online
auctions) are themselves relative newcomers. Such high turnover at the top suggests
that the real problem is not with the lack of innovation, but it is sustained Innovation.
Companies may seize upon a good idea that gives them an advantage for a while, but
sooner or later, they cede this advantage to a competitor who has found an even better
idea.
As Nicholas Stein (2000) correctly mentioned, Innovation is at the heart of sustaining

a company‗s competitive advantage. This holds very true as long as any company

wants to stay on top of their competitors and win the innovation game. Innovation is
very important criterion for success in the future.
An important study done on the rate of return of 17 successful innovations shows a

mean return of 56% in comparison with an average Return on Investment (ROI) of
16%. It is clear that organizations need to innovate to survive and achieve good profit
figures.
1.5 KINDS OF INNOVATION

Based on the way, it is implemented Innovation can be divided into following major
categories:
Radical
Major Major innovation
Effect of innovation
innovation on Incremental Strategic
Minor
consumer habits innovation innovation
and behaviors Enhances Destroys
Effect of innovation on organization established firms
Table no. 1: Types of Innovation
(Source: Costas Markides, Paul A. Geroski racing to be 2nd: conquering the industries
of future, Business strategy review, vol 15, issue 4, Winter 2004, p25 to 31, Blackwell
publishing Ltd.)
1.5.1 Incremental Innovation

Incremental innovation projects are built upon an existing knowledge and resources
within an organization. As a result the existing competencies of the company are
being enhanced. There is a modest technological change and the traditional myths &
habits may change firms incompetent to the current market and it is no longer useful
existing product remains competitive in the market.

Literally, these organizations don‗t work against their competitors, instead build
innovation groups among their own different kind of products and be an active
competitor for their products.
For example, the Hewlett-Packard Company produces both laser and ink jet printers.
These products equally compete in the market. They came up with a plan, to divide
the markets of both the ink jet and laser divisions. As a result, HP has become the
leader in both laser and ink jet printers.
1.5.2 Radical Innovation

On the other hand, Radical Innovation projects are developed and implemented in a
completely new area of operation. So organizations require to completely acquiring
new knowledge and resources. In the execution, it involves large technological
advancements.
As a result the existing competence of the organization might get turmoil and become
obsolete. For example, Intel, one among the largest PC processor manufacturers,
appreciates radical innovation. It initially developed single core processors, however
as soon as it released its dual core processors, the former became obsolete and the
later gained its market. This process is endless, as Intel recently released its multi core
processor, which might cease the interest of dual core processors in future.
Literally, Intel cannibalizes its own business by constantly bringing out better
processors to replace the ones that are once market leaders.
1.6 GLOBALIZATION OF INNOVATION PROCESS
Innovations have acquired a key-role in the growth and competition strategies of firms
today. They are regarded as an essential tool to stimulate growth and enable firms to
master the competition brought about by the forces of globalization. In developed
countries they are thought to provide a vital buffer against challenges from low-cost
producers from emerging countries.

At the same time, innovations in today‘s ―globalized‖ world are hardly feasible in
isolation. World-wide economic reforms and far-reaching technological
advancements have brought to fore new economic powerhouses, such as China and
India, which possess strong scientific capabilities. Products are marketed
internationally which often necessitates adaptation to specific needs of targeted
markets. All these developments are leading to the ―globalization of innovation‖.
There are various factors which lead to innovation to globalization.
1.6.1 Access to global expertise and know-how

Many studies suggest that one of the most important drivers of global innovation is
the ―search for global expertise‖ (EIU, 2004). Whereas many Western countries are
experiencing a decline in the number of science and technology (S&T) students,
countries such as China and India are producing a large number of S&T graduates.
In China, 61% of undergraduates are studying for a science or engineering degree.

Also as far as the quality of the higher education is concerned many emerging
countries are able to produce world-level graduates. Three out of the top five Asian
schools for S&T are located in India (EIU, 2004). Asian countries are thought by
some to enjoy an edge in higher education (Guo, 2005).
Moreover, restrictive immigration policies in industrialized nations, especially in

USA and Western Europe prompt firms to establish R&D centers abroad in order to
tap global talent, see e.g. two reports by American Electronics Association
(Kazmierczak and James, 2005/2007).
1.6.2 Reduce bottlenecks in the R&D pipeline and shorten time-to-market

Global innovation activities may ensure that work can be carried out simultaneously
from multiple locations and on multiple projects if needed. Several independent
modules of a single project may be worked upon at the same time to shorten time-to-
market.
Following the same logic, even a single step of a project may be worked upon round
the clock in changing shifts the world-over whereby the data is transmitted
electronically from one center to next. Such a step could be of crucial importance for

time-critical projects, The shortened time-to-market may be crucial to ensure large

scale competitive advantage (BCG, 2006).
1.6.3 Meet demand for localized products in external (fast-growing) markets

The number of the middle class consumers is growing rapidly in emerging countries
particularly China and India. In India alone over 6 million new mobile phone
subscribers are added per month. The middle class in India, comprising of estimated
200 to 250 million people, is believed to be one of the largest worldwide. More and
more people in emerging economies are having financial resources to buy high-end
products (EIU, 2004).
1.6.4 Relieving cost pressures

Global activities, particularly in emerging countries, may lead to significant reduction
in the costs (EIU, 2004). According to a McKinsey study, a software developer costs
60 USD an hour in USA. A software developer with similar skill costs only one-tenth
of this amount in India (McKinsey, 2003).
The starting salary of a software developer working for the German software firm
SAP in India was reported at 8,000 euros per annum in 2004, while the salary for a
similarly qualified person at the headquarters in Germany was reported 5-times higher
at 40,000 euros (Müller, 2004).
1.6.5 Proximity to production centers

The globalization has moved production centers of many industries to emerging
countries, where new industry clusters have grown up. Some industry-specific
innovation activities, e.g. in Automotive sector, may require close interaction with the
production department. It may be useful to locate R&D facilities in the proximity of
the production center, unless other factors (e.g. availability of knowledge resources,
affordable costs etc.) threaten to hamper the process.
Especially German firms seem to locate their R&D activities in close vicinity of their
production centers. Whereas many international studies found ―access to knowledge
resources‖ as the leading reason for many international offshore R&D activities,

1.6.6 Learning from ―lead markets‖

Unsaturated, emerging economies in Asia are rapidly taking over the role of ―lead
markets‖ by their openness for consumption and the willingness to spend money on
technological innovation. The Asian consumers already play a key-role in the
electronics industry, today. The above mentioned advantages may be translated into a
―BCF‖ strategy, which enables a ―better, cheaper and faster‖ development of
products, process and/or services. The BCF factors may be regarded as characterizing
the ―goal model‖ of a modern, international firm.
1.7 CONTRIBUTION OF VARIOUS MULTINATIONALS IN INNOVATION

According to UNCTAD, multinational firms spent on average 28% of their R&D
budget outside their home country. European firms spent on average 41%, American
24%, and Japanese 15% of their R&D budget abroad. Two-thirds of all respondents
foresaw a further increase in this expenditure. More than half (57%) of surveyed
multinationals already had ―an R&D presence in China, India or Singapore‖, and
―Developing Asia is the most often mentioned location for further R&D expansion by
firms‖, reveals UNCTAD (2005b). The same survey showed China as the most
preferred R&D destination for next 5 years, followed by the US and India in second
and third positions respectively.
The emerging markets of India and China have attracted substantial foreign direct
investment (FDI) in R&D sector. India as a R&D location has reportedly attracted
many Fortune 500 firms (Srinivasan, 2004). Over 100 of the Fortune 500 firms were
conducting a part of their R&D activities in India by 2003 (GOI, 2003The largest
investing country was the USA followed by Germany (TIFAC, 2006).
Domestic R&D expenditure in India and China increased substantially in recent years
as both countries are undertaking concerted efforts to build cutting edge scientific
capabilities. The EU counts India and China among ―major R&D performing
countries in the world‖ (INNO METRICS, 2006).
China‘s R&D expenditures surged from USD 17 billion in 1995 to USD 94 billion in
2004 in terms of purchasing power parity (PPP), registering an average growth of
nearly 20% per annum. China was projected to become the second largest R&D

investor worldwide by overtaking Japan in 2006 in PPP terms (Dyer, 2006; OECD,
2006).
According to figures available with UNCTAD (2005c), The trend of offshore R&D is
not limited to multinational concerns alone. Many small and medium-sized
enterprises (SMEs) too have started to recognize the opportunities that the
globalization enables not only in the production but also in R&D.
1.8 IMPACT OF INNOVATION ON ORGANIZATION

Arise the problems with managing changes, which are the results of innovation
activity. Most organizations are resistant to rapid and discontinuous change, because
of many factors like its traditional values, business strategies etc.; moreover it is
difficult for them to find solutions in a new direction in which their business is not
focused.
The fear of change makes many companies to stick in their standard mode of
operation. They work hard to bring up existing model work better and don‗t spend
time looking for a better model, or a better method of operation. Most companies are
built for continuous improvement, rather than for discontinuous innovation. They
know how to get better, but they don‗t know how to get different.
But successful companies deploy their managers to take responsibility for initiating
and directing change in addition to their objectives. Successful companies believe that
they need to do something that the world has not seen before. They change and
innovate so that they are first and unique in this wild and competitive market.
1.9 BARRIERS TO INNOVATION

There are 2 types of barriers, one which is significantly influenced by firm means
internal barriers and those which are not influenced by firm are external barriers.
1.9.1 External barriers

Top ―external‖ barriers to innovation, which owed their existence to external factors
and as such could not be influenced in a significant manner by the firm concerned,

included financing issues, the problems in finding suitable and qualified personnel,
bureaucratic hurdles, and the trouble finding ―right‖ cooperation partners, the negative
impact of these barriers can be gauged from the fact that the financial constraints
alone were cited 22 times as having led to abandonment of one or more innovation
projects in the surveyed SMEs within past 3 years. Whereas 42% of the project
abortions took place in the ―early phases‖ of a project, the rest had to be aborted in an
advanced stage of implementation (42%) or even marketing (16%), thereby
suggesting a significant loss in the form of sunk costs and lost opportunities.
1.9.1.1 Bureaucratic hurdles

There are several ways in which bureaucratic regulations may hamper the innovation
activities of firms in a region. To cite an example closely related to the previous issue
we can have a look at ―restrictive‖ labor laws in India, which according to a
McKinsey study cause many firms not to hire and thereby cause bottlenecks (Farrell,
2004).
1.9.2 Internal barriers

―Internal‖ barriers to innovation were reported, amongst others, in the areas of
marketing, conceptualization of innovative products, internationalization the extent to
which an industry-sector was hit by certain barriers to innovations varied
considerably. Figure 9 illustrates this point in an interesting manner. While the IT
sector had relatively less trouble managing its projects, the tradition-rich machine-
manufacturing sector faced more inconvenience with it. Also the shortage of suitable
and qualified personnel though present in both the sectors to a significant extent,
affected the latter more, reflecting the declining interest of the youth in studying
Engineering and Natural sciences.
1.9.2.1 Availability of Skilled Labour

Another major hurdle faced by the survey respondents related to the difficulty in
finding suitable, qualified personnel. In 33 instances, the firms cited vacant positions
in past 3 years which could not be filled owing to a lack of suitable candidates.
Almost all respondents who cited such a problem reported the shortage of experienced
engineers. However, experienced skilled labour was generally difficult to find. This
problem is particularly interesting since both Germany and its Hamburg region endure

substantial unemployment with an unemployment rate of nearly 10%. At the same

time the industry is unable to fill vacant positions with skilled labour. Other studies,
too, have pointed towards this discrepancy see e.g. (Rammer et al., 2005). Moreover,
this problem may be expected to worsen further due to the aging population and the
relatively low birth-rate in the society.

CHAPTER:- 2
OBJECTIVES

OBJECTIVES:
1. To Study the Innovation in followings:
 Product
 Process
 Inventory management& Logistic
 Human resource
2. To study how management can foster continuous Innovation.
3. To study Role of knowledge management in innovation management.
4. To study the business platform variables and Technical platform variables that
influences the innovation management.

CHAPTER:- 3
METHODOLOGY

In this project we focused on secondary data and case studies.
Secondary Data collection: Internet, Books and Journal.
In this project first we studied about the innovation and creativity then identified the
related factors that influence the innovation. After that we went for innovation in
product, process, inventory management and logistics and in Human resource
management so that we are able to understand the relationship between them.
Then we focused on the role of management in fostering innovation then we also

studied the role of Knowledge management in innovation management and then
understood some models to identify the relationship between innovation management
and knowledge Management.
We also viewed some Business variable platforms which influences the innovation
process and innovation management with help of the case studies.

CHAPTER:- 4
PRODUCT
INNOVATION

4.1 INTRODUCTION
We defined product innovation as development of new products, changes in
design of established products, or use of new materials or components in
manufacture of established products.
Product innovation means different things to different people. Indeed, since about
1970 there seems to have been a steady swing towards product improvement rather
than totally new products, throughout the industrial world1. We felt there was good
reason, therefore, to adopt a broad rather than a narrow view of product Innovation.
In other words, anything which is new to the business and its product range is counted
as innovation, even if similar products are available elsewhere or if the change is an
incremental one.
4.2 FOUR MAJOR FACTORS OR FORCES DRIVE A NEW PRODUCT

PERFORMANCE
Figure no. 1: 4 major factors that drive a new product performance
(Source: Successful product innovation, A collection of our best, By- Robert G.

Cooper & Scott J. Edgett.)

4.2.1 Strategy:
Top performing businesses put a product innovation and technology strategy in place,
driven by the leadership team and the strategic vision of the business. This product
innovation strategy guides the business‘s product innovation direction and helps to
steer resource allocation and project selection.
4.2.2 Resource investment and focusing on the right projects – portfolio

management:
Top performers commit sufficient resources to effectively undertake their new
product projects; and they boast an effective portfolio management system that helps
the leadership team effectively focus these resources on the right strategic arenas and
to a short list of high-value projects.
4.2.3 An idea-to-launch framework for doing new product development projects

right:
A best-in-class new product process exists in top performing businesses – a system or
process that drives new product projects from the idea phase through to launch and
beyond. This idea-to-launch system emphasizes quality-of-execution, up-front
homework, voice-of-customer input, and tough Go/Kill decision points. This is a vital
success driver for virtually all of the Best Performers.
4.2.4 The right climate and environment for innovation:

Senior managers in top performing businesses create a positive climate and culture for
innovation and entrepreneurship, foster effective cross-functional new product project
teams, and are themselves properly engaged in the product innovation decision
making process.
These are the main practices that separate the Best Performers from the rest. These
four themes make up the four points of performance of the Innovation Diamond. And
they are the keys to successful product innovation. While many investigations have
identified different sides of new product management as vital to success there is no
one key to success in product innovation. Thus management must step back from
looking just at a single driver or even individual new product projects, and consider

the broader picture. For example, having a great idea-to-launch process is not
sufficient – it‘s not a stand-alone driver of positive performance.
The Innovation Diamond highlights the main drivers and practices that are common to
the Best Performers in product innovation. This Diamond proves to be a valuable
model for helping senior managers focuses their efforts to improve their business‘s
new product development productivity and performance.
4.3 A CASE STUDY ON AUTOMOTIVE INDUSTRY

―Stagnation means regression‖ to innovation management in the automotive industry.
All of the auto executives whom Oliver Wyman interviewed in the course of the study
were convinced that innovation was one of the most important success factors to
maintaining a strong competitive position in the auto market. Innovation is also a key
to resolving most of the global challenges that the industry faces. Without innovations
by the auto industry, the entire concept of individual mobility is put at risk.
In 2005, the industry invested EUR 68 billion in R&D – that is 4.2 percent of sales, or
EUR 783 per vehicle. The continuous cost pressure in the automotive industry created
by legislation, competition, increasing risk and stagnating customer demands has a
strong impact on innovation management. Traditional cost-cutting programs are not
enough our forecast shows an additional EUR 1,500 of cost reduction (or 11 percent
of costs) must be implemented to make car production a profitable business in the
future. OEMs and suppliers will have to significantly improve efficiency in all R&D
processes to keep costs under control. Furthermore, the effectiveness of each
innovation must be investigated. Cost-improvement measures, such as offshoring of
engineering, complexity-reduction programs, standardization and modularization or
the development of low-cost cars will help the industry control some of the cost
increases produced by the growing number of functions.
This will be accompanied by structural changes in the auto industry‘s R&D

departments. OEMs will only slightly increase their R&D spending. While Western
car manufacturers will cap their R&D investments, OEMs from China, India and
South Korea will boost their spending on innovation. Overall, the supplier sector and
engineering service companies will be the winners of this development with

additional R&D spending of EUR 20 billion in 2015 (in 2005: EUR 46 billion). The
concentration process in the supplier industry will improve innovative strength and
networking opportunities with other partners – another way of cutting costs while
increasing the quality of innovations.
Oliver Wyman has analyzed the innovation strategies of the industry‘s most
successful auto companies. The study ―Car Innovation 2015‖ identifies the levers that
car manufacturers and suppliers must pull to become state-of-the-art innovation
leaders. Depending on the business design of the supplier and OEM, four dimensions
must be brought into alignment: innovation proposition, competence focus and
collaboration, innovation business case, and innovation organization and structure.
The leading suppliers in innovation management generate a 16 percent higher EBIT
margin than their peers – all by employing a clear innovation strategy and balance
along those four dimensions. The Oliver Wyman study ―Car Innovation 2015‖
concludes with five recommendations for innovation management in the automotive
industry:
 Increase customer orientation and marketing focus on R&D

 Generate a diverse innovation product & services portfolio
 Improve R&D effectiveness and efficiency; reduce innovation risks
 Enhance the innovation culture and organization
 Align innovation strategy according to Oliver Wyman‘s ―Innovation Strategy
Framework‖
The worldwide megatrends in politics, societies, economies and technology define the
requirements that future cars will have to fulfill – and these will affect almost every
aspect of the automobile. ―Car Innovation 2015‖ has identified 27 megatrends that
will have a significant impact on the automotive industry. Innovation strategies must
reflect the respective trends in order to meet technological standards, economic
imperatives, customer needs and government regulations.
At first glance, many of these trends may seem all too familiar and fail to inspire any
creative thinking. But long-range consequences to innovation strategies are linked to

each of these megatrends. Take the aging society. It is likely to have a powerful effect
on fashion cycles, technology penetration and even societal ideals. In ten years, the
average customer will be significantly older than today and will have a very different
set of needs. In order to succeed, technologies must be both easy to use and easy to
understand by older consumers.
The ongoing specialization in engineering and manufacturing will cause technological

product differentiation among manufacturers to continuously decrease. As a result, the
value proposition in the automotive industry will continue to move downstream, with
even larger amounts of production and of R&D shifting to suppliers. Modularization
is a necessary technique to better control the increasing complexity of cars. Car
manufacturers will focus their innovation efforts on module interfaces and on
modules‘ brand-defining features (for example, security for Volvo, comfort for
Mercedes-Benz, reliability for Toyota), and will outsource the safety issues to
suppliers. Overcapacities in all manufacturing areas will continue to exert enormous
cost pressures on the industry.
At the same time, raw materials prices will become increasingly volatile, making
flexible pricing a necessity. While the polarization in wealth distribution will not lead
to a collapse of the middle, it will support the success of low-cost cars as the vehicle
segment with the fastest growth worldwide. Toyota was the first to recognize the
chances of new low-cost designs as an enabler to new materials, methods of
production and design principles. Such ―cost innovations‖ will become a major R&D
focus driving the industry beyond 2015.
4.3.1 Cars for aging population:

In the majority of markets, the average new-car buyer is 40 years old. By 2015, that
age is expected to increase by four years. Developing cars for this target group does
not mean building ―old-age cars.‖ It means equipping cars with design and handling
features that the target group will find useful, exciting and desirable – without
sacrificing the model‘s overall statement. A car designed for an older target group
might feature:
 Ergonomically designed boarding, loading and seating solutions.

 Visual aids for better night and rain vision.

 Easy-to-use functions even for complicated devices.
 Timeless design features.
 Speed and special attention recommendation displays.
 Side and rear-view cameras.
 Customized mobility services.
4.3.2 Cars for Megacities:

In 2015, 40 percent of the world population will live in cities with more than one
million residents, 17 percent will live in megacities with more than five million
residents. The cruising speed in these cities will average not more than six miles per
hour while the typical driver will use his or her car three hours a day. Car design for
this environment will take a very different approach from that of current vehicles.
Some new focal points will be:
 Easy switching between relaxation and driving positions.

 Emphasis on passenger entertainment and information systems.
 Automation of stop-and-go traffic situations.
 Concealment of passengers from outside viewers.
 Protection of passengers from attacks.
 Effective smog protection and air conditioning.
 Nearly zero emissions.
4.4 A CASE STUDY ON THE CANON MINI COPIER—NEW PRODUCT

DEVELOPMENT AND INFORMATION CREATION
Canon was founded in 1933 with the aim of developing and manufacturing a 35 mm
camera. After World War II the company once again began to manufacture cameras.
Throughout the 1950s the company grew rapidly, developing a series of new single
reflex cameras. By the early 1960s, however, it became evident that Canon would
have to diversify into new areas to maintain its growth. Thus, in the 1960s Canon
began to diversify into office machinery through the development of electronic
calculators and copying machines.

In the mid-1970s, though, Canon ran into severe difficulties as demand for existing
products declined precipitously and Canon was forced to retreat from the low-priced
calculator market. In 1975 Canon had to suspend its dividend payments—a radical
step of a Japanese firm. In the words ―Canon was experiencing a managerial crisis.
Top management lacked coherence and direction; the company's inflexible corporate
structure made it impossible to deal effectively with diversification, and insufficient
attention had been paid to the rationalization of production. Or, as the new President,
Ryusaburo Kaku has put it, ‗Canon was like a ship that constantly changes course and
goes nowhere‘.‖
After a wrenching organizational restructuring Canon once again prospered, with an

average annual growth rate of over 20% from 1975 to 1985. Canon was well-
equipped to undertake difficult product development projects as it had accumulated a
large and diverse technical staff of over 3,000 engineers, consisting of mechanical
engineers (30%), electronics engineers (30%), physicists (17%), chemists (10%), and
computer-related and other fields (13%). The electronics engineers had been hired in
earlier relatively unsuccessful efforts to enter the synchro-reader and electronic
calculator fields. The accumulation and interaction of personnel with these diverse
technical capabilities provided an environment that induced the creative tension which
is necessary to lead to synthesis and new information creation. An evidence of its
successful technology development is the fact that in l988 Canon filed more patents in
the U.S. than any other company.
Canon does not separate technical personnel into departments according to discipline
so there is much greater mixing of research personnel (for the importance of this
method of organizing the innovation process, see Florida and Kenney (1990). This
heightens the possibility of new concepts and ideas emerging serendipitously. For
further discussion of Japanese strength in hybrid technologies, see, for example,
Kodama accelerate information creation Canon has had a policy of hiring mid-career
personnel from other firms to create ―counter-cultures‖ or diversity within Canon to
increase the potential for new information creation.
In fall 1970 Canon began internal development of a plain paper copier (PPC)
technology. In the early days diversification into PPCs was opposed by many in the

company, some going so far as to advocate discontinuation of the entire effort,

recommending instead that Canon concentrate on its camera industry. But in 1969
Canon introduced a PPC that used completely original technology and did not violate
any of Xerox's over 600 patents. By 1982, however, demand for PPC was leveling off
market saturation appeared to be complete. Rather than view the market as mature,
though, Canon began a process of re-conceptualizing the entire PPC market. Canon
came to think of the copier market not in terms of firms (i.e., does the firm have a
copier), but rather in terms of individual. With this new perspective the market
appeared for larger. If small offices could use a copier, so might small businesses, and
perhaps even home use would become prevalent. Further, large firms which had
already purchased a PPC might also be interested in purchasing a desk-side model.
Apparently, there would be an enormous market for a small copier.
A small copier (Mini Copier or MC) would require very different characteristics from
traditional PPCs. Obviously, the copier must produce clear copies, and be lightweight
and compact (less than 50 pounds). More problematic was that the MC might be used
only rarely and thus the cost of regular servicing would be exorbitant on a per copy
basis. Because of this, the MC must require either extremely simple maintenance or
none at all. Moreover, the initial price must be no more than 200,000 yen
(approximately $1,000 at that time). These constraints imposed a heavy burden on the
design team. Initially, a feasibility study team was formed to examine what would be
necessary to actualize an MC.
This team would form the core of the entire project and had an average age of 28. The
14-member team consisted of eight people from R&D, three from production, two
from marketing, and one from product design. The fundamental contradiction the
team faced was managing the inverse relationship between reliability and cost. That
is, when reliability was improved the costs of production increased, but when costs
were reduced service requirements increased. Managing Director Mitarai named this
objective ―Cost-Reliability Improvement‖. To resolve this contradiction the
development staff would have to create a new concept of how a copier operated. This
objective was so challenging that internally it was referred to as aiming a ―Canon
Revolution‖. To achieve this objective, joint efforts by Design and Production
Engineering were indispensable.

The crux of the problem was clearly outlined by research on the causes of copy
machine troubles. The researchers discovered that 90 percent of the problems
occurred around the drum. The conventional method of addressing this problem was
to seek methods of improving the durability of the drums and cleaners. As long as this
was the goal, however, it was impossible to escape the contradiction between major
cost savings and reliability improvement. Thus, what was necessary was a major
concept change, that is, a synthesis of the contradiction through the creation of a new
concept.
To solve the problem the members of the feasibility team engaged in heated
arguments at several spontaneously organized "camp" sessions. Camp sessions are
gatherings of project teams outside the workplace to brainstorm new solutions. They
are frequently used by Japanese corporations during product development efforts. In
this case the camp session provided an opportunity for the feasibility team to invite
people from other parts of Canon to discuss how to overcome the contradiction.
The new concept that emerged from the camp session was that the entire drum should
be a module that could be discarded after making a certain number of copies. With
this the copier would be essentially maintenance-free. Whereas in conventional
copiers the drum was a component with open-ended operating life which would
certainly fail and then need to be repaired, the team created an entirely new way of
thinking about the drum. It was
Re-conceptualized as a cartridge with a limited but known life-expectancy. This made

it necessary to develop a disposable photo receptor, disposable development
apparatus, and an instant toner-fuser—all within the target cost.
When many task force members said it was impossible to produce the drum
inexpensively, the feasibility team leader, Hiroshi Tanaka, had some disposable cans
of beer purchased and told them to drink the beer. Then he engaged the members in
an argument about how much the beer can cost and what made it so inexpensive. The
disposable beer can resembled the copier drum because it would be disposable. The
conceptual linking of the drum and beer can provided the taskforce members many
insights into methods of manufacturing the drum at a lower cost. This opening up of

new understandings revolutionized product development and added substantially to

the firm's capability. Hiroshi Nitanda, manager of First Design Department of
Reprographic Products, explains it this way (Nitanda, 1984)
―The idea of packaging the drum and surrounding components as a cartridge revealed
to us a great number of things. First of all, as everything is brought together, the
structure can be simplified and only a very small number of essential parts are needed.
So, high precision design becomes possible by combination in design. The product
becomes less messy. Also, the key module becomes quite compact as the release
mechanisms between units are no longer needed. So, low cost as well as high
reliability will be achieved at the same time.
Moreover, with a cartridge, the toner seal is opened only after reaching the customer.
This meant the plant is required to develop a production process without imaging
inspection. This led to better efficiency.‖ The big breakthrough on the cartridge then
led to a cascade of other improve73 meets in the chain reaction-style well described
by Usher (1954). After this the design conception and a feasibility model was
advanced by another early stage design team. When these were completed the
corporation decided to develop the MC.
It was clear from the beginning that the development of the MC would require all of
the talents in the firm, so a task force was formed to actualize the MC. At Canon task
forces are independent organizations whose team members are appointed by the
company president. With the exception of the tremendously successful AE-1 camera
task force, this task force would be the second largest horizontal development
organization Canon had ever formed (approximately 300 persons). It was also the first
such massive effort by the Reprographic Products Group. Tanaka, director of
Reprographic Products Development Center, was appointed as the chief of the task
force. Its advisor was Keizo Yamaji, Managing Director of Reprographic Products
Division.
A system also was organized for constant communication with the leaders of related
internal organizations such as Hajime Mitarai, managing director for Research and
Development; Teruo Yamanouchi, director of Corporate Technical Planning and

Operations Center; and Kazoo Naito, director of Production Engineering Research

Center. The importance attached to this effort was indicated by the symbolic
assignment of chiefs of related departments to the MC task force and the appointment
of active key corporate personnel as leaders. This appointment made these personnel
responsible for the project's success and thus also project champions. Further, the
project slogan became the "development" of the AE-1 of copiers. This helped create a
commitment among corporate personnel and was a powerful rallying point because
Canon's employees considered the AE- 1 the company's greatest product development
success.
From the planning stage the task force included Quality Assessment and Cost
Assessment groups. Because of the projected usage pattern for the MC, the Quality
Assessment group decided the repair frequency of television sets was the relevant
goal and proceeded to collect exhaustive information related to television sets. With
this information as a target, the group began the task of setting all quality standards
for charging, exposure, development, cleaning and fusing. Similarly, the Cost
Assessment group was working on cost and quality allocation for achieving a sales
price of 200,000 yen.
This was the first time in Canon‘s history that a task force had ever gone so far in the
planning process. A Market Task group was also created, consisting of copier sales
representatives from around the world to study marketing ideas. Finally, the Soft Task
group was to examine the ―software‖ aspects such as color copying and other possible
uses.
As a rule, teams of representatives from development-related groups and production

engineering-related groups held a managing committee meeting once a week to
decide all issues. This task-force system greatly contributed to a reduction of the time
from development planning to completion of the product. Kei Saito (1984), deputy
general manager of the Advanced Technology Development Department of the
Reprographic Products Development Center, recalled:
―In any company good products are created when production engineering and design
become fused for their development. I believe there were tangible and intangible cost

reductions. By becoming one with Production Engineering, one can propose uniform
parts design or assembly in one direction, how something should be assembled and in
what sequence, or that one should do this or that if possible, when attempting to
automate production, for example. If we (in product design) are by ourselves, it is
easy to prepare drawings, and do what we like without thinking that far ahead. So, our
discussions with Production Engineering people and working to accommodate their
various requests in our own ways resulted in both tangible and intangible cost
reductions.‖ Of course, such fusions are not simple, and Design and Production
Engineering often participated in outspoken arguments. These led to major synergistic
effects, however, reducing costs and speeding product development.
The new technologies that were developed for the cartridge then became a part of the
corporation's knowledge base and later would be applied to other products, such as
laser printers and facsimile machines. In this sense the MC innovation process
became continuous and spread throughout Canon. The knowledge generated in the
development of the MC became part of the Canon's competitive strength.
To lower price, new design technologies were invented which facilitated

miniaturization, weight reduction, adjustment-less assembly, and automated
assembly. The assembly line was automated by the installation of automated
inspection machinery and the actual production process was designed in coordination
with parts and material suppliers. Thus, further skills were created that carried over to
other office automation products such as microfilm readers, laser printers, word
processors and typewriters.
The development of the MC taught the product development and manufacturing

technology sections how to better cooperate. Further, the manufacturing technology
section which had previously concentrated only on cameras began to focus on the
rationalization of copier manufacturing. The total contribution of the MC in Canon‘s
sales increased from 24% in 1979 to over 35% in 1987, underlining the importance of
this line. By 1987, 74% of Canon‘s revenues would come from its Business Machines
Division, whereas 15 years earlier nearly all of Canon's revenues were from cameras.

CHAPTER:- 5
PROCESS
INNOVATION

5.1 INTRODUCTION
We do not wish to underestimate the importance of process innovation. By investing
in new plant and equipment, firms can gain in terms of productivity, material
utilization, quality or reliability. They can even gain the capacity to manufacture new
products which would otherwise have lain outside their reach.
It has often been pointed out that process innovation may be particularly helpful or
suitable for small firms, since by this means they can share in advanced technology
developed by larger firms. The adoption of a proven process technology may also
have the advantages of low risk and short-term payback.
The limitation of depending upon investments in process innovation, however, is that

any competitor can easily follow suit, removing the initial advantage gained from the
investment. Whereas new products tend to put a firm ahead of its competitors,
investment in available process technology merely brings a firm up to standard. From
the viewpoint of regional development, nevertheless, it is important that the process
technology used by local industry should be up to an adequate standard, since
otherwise the region will cease to be competitive with other regions where investment
in up-to-date technology is higher.
For the purposes of our study, a particular interest is how investment in process
technology relates to product innovation. Some advocates of investment in process
innovation have seen it as an alternative to product innovation, especially if it permits
existing products to be made at lower cost. The reverse is also possible: if products
can be given a new lease of life through modifications made at low cost, this may be
preferred to investment in sophisticated and costly equipment. Finally, it could be that
investment in new production equipment goes hand-in-hand with product
development.
This might take place simply because innovative firms are likely to innovate in
numerous ways. Or, similar technical expertise may be needed both to introduce new
equipment and to develop new products: this could be particularly true where the
same technology, such as that of microelectronics, was involved in both. Or again,
firms diversifying their product ranges may need new equipment to be able to make

the different types of products. We are also, of course, particularly interested in how
the regions differ in their use of new process technology.
5.2 VARIOUS LEVEL OF PROCESS INNOVATION

Process innovation can and should happen at various levels within the organization as
no organization can depend solely upon innovation occurring at one level only.
Successful organizations have an innovation process working its way through all
levels of the organization.
Figure no. 2: Various levels of process innovation
(Source: Process innovation, By John Jeston & John Nelis, consultants, touch point,
Business process services, Sydney, Australia.)
5.2.1 Redesign of Industry Value Chain

5.2.1.1 Customer Self Service
Booking travel tickets online has drastically changed the travel industry. More and
more customers book online, which provides two main benefits: firstly, customers
have more control; and, secondly, it provides a more optimal process, not just because
the customer enters the required information, but it also ensures that there is a higher
level of data integrity.

5.2.1.2 Customer-to-customer interactions

Customers do not only exchange ideas, information, and opinions; they are also able
to purchase and sell goods and services, for example, on eBay. This forces
organizations to refocus its attention on the value that it provides to customers and the
relationship between the organization and their customers. Many organizations make
use of customer forums or user groups for feedback.
5.2.2 Redesign of Business

5.2.2.1 Processes developed around customer wishes
A car insurance company representative who visits customers at a location convenient
for the customer, offering on-the-spot assessments and providing the customer the
choice between getting the damage repaired or providing immediate payment to
enable the customer to arrange for the repairs is fundamentally a different process
from insurance companies where the customer has to visit a pre-designated repairer.
This company was successful by fundamentally redesigning their business rather than
making marginal changes; and by ensuring that customer wishes, value proposition,
and their business processes were all aligned.
5.2.2.2 Flexibility is the process rather than the exception

Dell is a great example that undermines the commonly held idea that a reduction of
customer choice leads to more efficient processes. If you ensure that customer choice
(or, in other words, flexibility) is embedded in the process, it is possible to achieve
very competitive flexible customer focused processes. This sounds simple, but many
organizations still struggle with this concept: A white-good manufacturer produces
fridges with various options. Only after a detailed activity based costing does he
realize that the additional revenue for a few minor options (e.g., a few extra lights and
buttons) does not cover the additional costs such as, additional handling costs, storage
costs. and reduced economies of scale. Conclusion: If you do not build flexibility into
your process, your true cost of flexibility might outweigh the benefits.
5.2.3 Redesign of Processes

5.2.3.1 Use of real-time and geographical information.
The logistics industry has been able to improve its processes significantly: RFID
(Radio Frequency Identification) technology is a cheap way to track goods. The use of

real time information provides not just the current status, but also the predicted future
status. For example, the industry can assess what SLA penalties will be levied without
any pro-active correction action and what is the optimal action to ensure that the SLA
penalty will either be removed or reduced to a minimum, e.g., through re-routing of
the route. Furthermore, these options provide the customer with the ability to track or
trace their products real-time, at the same time reducing workload for the call center,
which previously would have had to answer calls from customers seeking this
information.
5.2.3.2 Workflow management and document management

Many companies still rely too much on paper-based files, making it difficult to assess
and track information. Companies have reported improving efficiency of up to 300%
by using these technologies. A European bank faced increasing processing times;
these caused the organization to enter a negative spiral: Longer processing times
caused an increase in customer inquiries about the status of their transaction, resulting
in more time spent answering these queries and less time in processing, which had the
effect of causing even more delay. An integrated workflow management and
document management system ensured that the processes became faster, more
predictable, independent of individuals (e.g., sickness and holidays), and the
answering of queries could be completed in real time, saving significant time and
effort.
5.2.4 Improvement of Sub-processes

5.2.4.1 Avoid having one standard process for a variety of situations
A mortgage company was able to reduce the processing time for 95% of its mortgages
from 3 weeks to 3 days by separating the odd 5% that require substantial additional
checking from the main stream straight-through processing, which could be done by
an automated solution.
5.2.4.2 Mobile communication

It allows employees and customers to access time-critical, location-based information.
Utility companies use mobile devices for a wide range of applications – providing
real-time details about customers through access to the back office. Sales staff is able
to process on-site quotations and process orders with instant and built-in validation as

to whether the order is complete and correct and that the required resources are
available. Our research has shown that up to 40% of orders contain errors where
forms are incomplete (not all fields filled), inconsistent (fields contradicting each
other or where a proposed configuration is impossible) or incorrect information (e.g.,
wrong address).
5.2.5 Biggest Challenge of All

Many initiatives are not aligned with the organizations strategy. Successful
organizations have a close interaction between organization strategy and the business
initiatives supporting the strategy. ―Porter has argued that many organizations talk
strategy, but have not followed through with the implications of the strategy. It didn't
make the hard choices required to actually implement a specific strategy, and hence, it
did not create the highly integrated business processes that are very difficult for rivals
to duplicate.
Many organizations fail in obtaining the benefits of their initiatives. The main cause is
that true business process innovation requires a variety of skills – business
knowledge, process thinking, IT literacy, people change management capability,
project management skills, and, last but not least, excellent stakeholder management.
Many organizations embark on this journey without a clear approach (way forward)
and get lost on the way.
 All these three challenges relate to management. Thus, management must be
both more open to process innovation and they must actively encourage
innovation to ―show the way‖ forward.
5.3 TQM & PROCESS INNOVATION:

The emergence of total quality management (TQM) has been one of the major
developments in management practice. Despite mixed results, in general, TQM has
been credited with providing a competitive advantage for organizations that
implement it properly. Essentially, TQM has been widely accepted as a management
model that, if implemented successfully, provides a competitive advantage for
companies through quality.

However, after more than a decade of being heralded as a competitive advantage,

substantial gains in quality performance ―across the board‖ mean that quality is no
longer a ―differentiator‖ and hence has begun to lose its value to other sources of
competitive advantage, most notably, innovation.
But TQM, as a management model and practice, is still a suitable resource for
competing in the future. The underlying reason is a premise suggesting that managing
innovation is fundamentally different from managing quality.
In this regard, Prajogo and Sohal (2001) have discussed the two competing
perspectives concerning the relationship between TQM and innovation.
A group of scholars has underscored the value of maintaining TQM in the future as
well as its positive link with innovation. Zairi (1994), for example, argues that the
arrival of TQM as a philosophy of modern competitiveness has to some extent
brought improvement in the areas of innovation practices. He further maintains that
TQM has also given organizations the impetus and commitment required for
establishing a climate of never-ending innovation. Similarly, Flynn (1994) argues that
TQM and product innovation share a common ground in terms of organizational
infrastructure, including product development process, cross-functional teamwork,
and supplier relationship, and therefore should be compatible to each other.
On the other hand, a number of scholars and researchers have articulated the
incompatibility of TQM with innovation, particularly in relation to the continuous
improvement and customer focus principles. Harari (1993), for example, strongly
argues that by emphasizing incremental improvement, companies could lead people to
work on unambitious goals and produce solutions which are not novel.
Supporting this argument, Samaha (1996) also holds that by emphasizing incremental
change, the concept of continuous improvement could lead people to focus on
maintaining the existing process. In this way, the companies would not only ignore
the potential of adopting breakthrough innovation, but also they would be led to work
continually on processes that are fundamentally flawed. In conjunction with this,
TQM also promotes standardization with the purpose being to achieve a high level of

quality. Standardization, to certain degree, could inhibit innovation because it tends to

reduce ambiguity of any task that is necessary to enforce innovation (Morgan, 1993).
5.4 A CASE STUDY OF BOI & HP

The Bank of India has a long heritage of prudence and caution as one of the five
largest banks in India. It was founded in 1906 and continued as a privately owned
bank until 1969 when it was nationalized. Beginning with one office in Mumbai, and
50 employees, the Bank of India was the first Indian Bank to open a branch outside
the country, starting with London in 1946. From this humble beginning, the bank has
blossomed into a global institution with over 3,000 domestic branches and 28 offices
in 15 countries which account for more than 20% of the Bank‗s total business.
The Bank of India has always been in the forefront of innovation whilst maintaining
traditional values and ethics in service and trust. It was among the first nationalized
banks to establish a fully computerized branch and ATM facility at its Mahalaxmi
branch in Mumbai back in 1989. It was also a founding member of SWIFT1, to foster
India‗s participation in the international financial community, and a pioneer in the
introduction of the Health Code System in 1982 for evaluating and rating credit risk.
When India opened its financial markets to outside competitors in 1991, the Bank of
India focused on fine-tuning its internal systems and introducing technology. In 2002,
when the government started focusing on technology as a platform and enabler, the
Bank of India realized it needed a game-changing strategy and technology
infrastructure upgrade—especially to win and retain younger customers who were
willing to pay for anywhere, anytime banking capabilities.
The Bank of India decided to leapfrog the competition with a next-generation core
banking solution, tied together with a new centralized data center and information
management warehouse. The Bank of India believed this comprehensive solution
would provide its growing branch network with the multi-channel, intra-branch
connectivity backed by the integrated, consolidated view of customers it required for
more effective up-selling, cross-selling and customer service.

Following a long and methodical planning process, the Bank of India issued a detailed
Request for Proposal (RFP). After careful evaluation of more than 20 proposals from
major IT solutions providers, the Bank of India selected HP as its business
transformation partner. Bank of India‗s three pronged strategy required HP to play
multiple roles—hardware and software supplier, consulting and implementation
partner and finally business process outsourcer (BPO), with HP chosen to run the
bank‗s data center and help desk.
HP was selected for the strength and quality of its RFP response along with the low
investment and total operating costs. HP was also able to distinguish itself with its
deep banking expertise, financial strength and stability, recognized leadership in
technology and partnerships with industry leaders like Oracle, Cisco and Infosys. HP
provided a solid team with demonstrated experience in integrating and managing
large-scale projects, a truly collaborative approach and a single point of accountability
for the whole project.
Today, the Bank of India has a flexible and scalable architecture designed to meet the
needs of changing market dynamics and differentiate the Bank of India from
competition, while enabling it to aggressively compete with new private sector banks
and providing state-of-the-art capabilities, channels and products.
With HP’s help, the Bank of India is realizing phenomenal success—234% ROI
over five years. Combining core banking, business continuity and information
management, the Bank of India has doubled its revenue, and tripled its profits
with 12% fewer employees, all made possible by efficiencies from the HP
partnership where IT is now driving the bank’s strategy.

CHAPTER:- 6
INNOVATION IN
INVENTORY
MANAGEMENT AND
LOGISTICS

6.1 INVENTORY MANAGEMENT
Inventory management is primarily about specifying the size and placement of

stocked goods. Inventory management is required at different locations within a
facility or within multiple locations of a supply network to protect the regular and
planned course of production against the random disturbance of running out of
materials or goods.
The scope of inventory management also concerns the fine lines between
replenishment lead time, carrying costs of inventory, asset management, inventory
forecasting, inventory valuation, inventory visibility, future inventory price
forecasting, physical inventory, available physical space for inventory, quality
management, replenishment, returns and defective goods and demand forecasting.
Balancing these competing requirements leads to optimal inventory levels, which is

an on -going process as the business needs shift and react to the wider environment.
Inventory management involves a retailer seeking to acquire and maintain a proper
merchandise assortment while ordering, shipping, handling, and related costs are kept
in check. Systems and processes that identify inventory requirements, set targets,
provide replenishment techniques and report actual and projected inventory status.
Handles all functions related to the tracking and management of material. This would
include the monitoring of material moved into and out of stockroom locations and the
reconciling of the inventory balances.
Also may include ABC analysis, lot tracking, cycle counting support etc.
Management of the inventories, with the primary objective of determining/controlling
stock levels within the physical distribution function to balance the need for product
availability against the need for minimizing stock holding and handling costs.
Most manufacturing organizations usually divide their "goods for sale" inventory into

6.1.1 Raw materials: Materials and components scheduled for use in making a
product.
6.1.2 Work in process WIP: Materials and components that have begun their
transformation to finished goods.
6.1.3Finished goods: Goods ready for sale to customers.
6.1.4 Goods for resale: Returned goods that are salable.
6.2 INVENTORY MANAGEMENT SOFTWARE
Inventory management software is a computer-based system for tracking product

levels, orders, sales and deliveries.[1] It can also be used in the manufacturing industry
to create a work order, bill of materials and other production-related documents.
Companies use inventory management software to avoid product overstock and
outages. It is a tool for organizing inventory data that before was generally stored in
hard-copy form or in Microsoft Excel spreadsheets.
6.2.1 Purpose
Companies often use inventory management software to reduce their carrying costs.
The software is used to track products and parts as they are transported from a vendor
to a warehouse, between warehouses, and finally to a retail location or directly to a
customer.
Inventory management software is used for a variety of purposes, including:
• Maintaining a balance between too much and too little inventory.

• Tracking inventory as it is transported between locations.
• Receiving items into a warehouse or other location.
• Picking, packing and shipping items from a warehouse.
• Keeping track of product sales and inventory levels.
• Cutting down on product obsolescence and spoilage.

6.2.2 Components
Inventory management software is made up of several components, all working

together to create a cohesive inventory control system. These components include (in
alphabetical order):
6.2.2.1 Asset tracking
When a product is in a warehouse or store, it can be tracked via its barcode and/or
other tracking criteria, such as serial number, lot number or revision number.
6.2.2.2 Bar-coding
Barcodes are the means whereby data on products and orders is inputted into
inventory management software. A barcode reader is required to read barcodes and
look up information on the products they represent.
6.2.2.3 Order management
Once products reach a certain low level, a company‘s inventory management system
can be programmed to tell managers to reorder that product. This helps companies
avoid running out of products or tying up too much capital in inventory.
6.2.2.4 Service management
Companies that are primarily service-oriented rather than product-oriented can use
inventory management software to track the cost of the materials they use to provide
services, such as cleaning supplies. This way, they can attach prices to their services
that reflect the total cost of performing them.
6.2.3 Advantages
There are several advantages to using inventory management software in a business

setting.

6.2.3.1 Cost savings
In many cases, a company‘s inventory represents one of its largest investments, along
with its workforce and locations. Inventory management software helps companies
cut expenses by minimizing the amount of unnecessary parts and products in storage.
It also helps companies keep lost sales to a minimum by having enough stock on hand
to meet demand.
6.2.3.2 Warehouse organization
Inventory management software can help distributors, wholesalers, manufacturers and

retailers optimize their warehouses. If certain products are often sold together or are
more popular than others, those products can be grouped together or placed near the
delivery area to speed up the process of picking, packing and shipping to customers.
6.2.3.3 Updated data
Up-to-date data on inventory conditions and levels is also advantage inventory

management software gives companies. Company executives can usually access the
software through a mobile device, laptop or PC to check current inventory numbers.
6.2.3.4 Time savings
With the aid of restricted user rights, company managers can allow many employees
to assist in inventory management. They can grant employees enough information
access to receive products, make orders, transfer products and do other tasks without
compromising company security. This can speed up the inventory-management
process and save managers‘ time.
6.2.4 Disadvantages
The main disadvantages of inventory management software are its cost and
complexity.

6.2.4.1 Expense
Cost can be a major disadvantage of inventory management software. Many large

companies, such as Polo Ralph Lauren, Macy‘s,Nordstromand Wal-Mart, use
inventory management software, but small businesses can find it difficult to afford it.
Barcode readers and other hardware can compound this problem by adding even more
cost to companies. The advantage of allowing multiple employees to perform
inventory-management tasks is tempered by the cost of additional barcode readers.
6.2.4.2 Complexity
Inventory management software is not necessarily simple or easy to learn. A

company‘s management team must dedicate a certain amount of time to learning a
new system, including its software and hardware, in order to put it to use. Most
inventory management software includes training manuals and other information
available to users. Despite its apparent complexity, inventory management software
offers a degree of stability to companies. For example, if an IT employee in charge of
the system leaves the company, a replacement can be comparatively inexpensive to
train compared to if the company used multiple programs to store inventory data.
6.3 Inventory Management in Microsoft Dynamics NAV
Increased automation and item tracking capabilities help you improve inventory
accuracy and better match the goods you have on hand with customer demand.
6.3.1 Benefits
• Help reduce purchasing and inventory costs. Connect inventory control,
purchasing, and sales order processing with demand planning and help reduce
costs, improve cash flow, and help ensure that you have the right stock
available when you need it.
• Gain visibility into inventory processes. Effectively balance availability with
demand and track items and their possible expiration dates throughout the
supply chain to help minimize on-hand inventory, optimize replenishment, and
increase warehouse efficiency.

• Improve customer satisfaction. Make more accurate order promises and

intelligent last-minute exceptions with access to up-to-date inventory
information. Respond quickly and knowledgably to customer queries for
improved customer service.
• Reduce time to market. With integrated order, inventory, and distribution
processes, as well as item tracking capabilities, your business can reduce
manual data entry and get your goods to market fast.Quickly identify
discrepancies in your inventory by comparing actual quantities withsystem
records.
6.3.2 Features
Sr. Feature Description

No.
1 Inventory Understand item costs throughout your warehouse and
costing production processes, including inventory, work-in-process
(WIP), and cost of goods sold (COGS), to help efficiently
manage sales and purchase prices and line discounts with
customers and vendors. Break down costs according to
categories such as materials, capacity, subcontracting, and
overhead. Tighten control of closing processes, improve
batch-job costing, and streamline reconciliation with the
general ledger.
2 Automated Data Help increase the accuracy and efficiency of your warehouse
Collection management—picking and putting away of items, physical
System inventory counts, and moving items from bin to bin—with
(ADCS) ADCS.
3 Radio frequency Comply more easily with customer or supply chain
identification mandates for RFID.
(RFID)
enablement
4 Order Provide customers with accurate item availability and
processing deliver on time with support for available-to-promise (ATP)

and capable-to-promise (CTP) insight.

5 Returns Process returned inventory and account for additional costs.
management Automatically organize credit memos, replacement goods,
returns to vendors, and partial or combined return of
shipments or receipts. Exact cost reversal helps increase
inventory accuracy.
6 Item tracking Trace lot or serial numbers to quickly determine where
items were purchased, processed, or sold. Help eliminate
waste due to expiration of goods with support for first
expired/first out (FIFO) handling.
7 Item Offer customers alternative items when those they want are
substitution out of stock, or if the alternatives can be provided less
expensively with a higher profit margin.
8 Item cross- Identify what your customers want by cross-referencing any
references customer code, internal code, or vendor code.
9 Internal Pick or put away items and debit or credit inventory records
pick/put-away independently of purchase receipts, sales, or other source
documents to help maintain accurate inventory records even
when you access items for testing, display purposes, or other
internal or operational needs.
10 Multiple Provide customers who request non-stock items with
locations and immediate quotes. Automatically create non-stock items and
responsibility process them in the same way you process stock items.
centers
11 Location Manage items individually per location. By grouping items
transfers into stock keeping units, items can be described and
managed individually per location—including replenishment
methods, safety stock, and costs.
12 Stock keeping Handle inventory across multiple locations from one
units database to gain a complete, real time business overview and
create manageable cost and profit centers.
13 Warehouse Help reduce costs through effective warehouse processes
management such as directed pick and put-away and automatic bin

system replenishment.
14 Cycle counting Determine the counting frequency per item or stock keeping
unit to help increase inventory accuracy and meet shipping
deadlines.
15 Business Generate e-mail messages to alert your people, suppliers, or
notifications partners to changes in critical inventory levels, order status,
or replenishment needs.
Table no. 2: Features of Inventory management software- Microsoft NAV
(Source: www.microsoftdynamicnav.com)
6.4 INNOVATION IN LOGISTICS
6.4.1 What is Logistics?
Logistics is the process of anticipating customer needs and wants; acquiring the
capital, materials, people, technologies and information necessary to meet those needs
and wants; optimizing the good-or service-producing network to fulfil customer
request; utilising the network to fulfil the customer request in the timely manner.
6.4.2 What is 3rd party (3PL) Logistics?
Essentially, third party Logistics firm may be defined as external supplier that
performs all part of company‘s logistics services.
6.4.3 What is Reverse Logistics?
The process of moving or transporting goods from their final destination for the
purpose of capturing value or for proper disposal.

6.4.4 What is close loop supply chain?
Designed and managed to explicitly consider both forward and reverse flows
activities in a supply chain.
Now days Reverse logistics is one of the major problems for the any company.
However DCL is the great e.g. of providing the reverse and closed loop supply chain
services to companies and helps to save the big money for companies. Case describes
about the Innovation in logistics through use of IT and tracking the accurate
information of goods and place where it should be delivered.
Innovation in logistics can be best defined by Reverse logistics. Now days big
companies like Coca-Cola is saving good amount of money through efficient logistic
system.
6.4.5 About DCL

Despite the fact that returns have become a fact of life, most managers think that their
current supply chain systems can handle product returns efficiently. Unfortunately, as
Companies ramp up their sales and shipments, the sheer volume of returns and
potential disposition options overwhelms their infrastructure, making it impossible for
them to handle the task efficiently. With returns approaching 20% of outgoing
shipments, managing reverse logistics can be the difference between profitability and
loss.
Receiving, inspecting and doing something profitable with all of these returns is no
easy routine. Returns are a fact of life, and should be given the same management
priority as marketing, manufacturing, distribution and customer service. A good
reverse logistics system not only improves corporate bottom line, but it can also
improve customer trust and confidence – critical in today‘s tough business climate.
In 2000, Symantec Corporation acquired Axent Technologies, an electronics company

that specialized in enterprise class products and services for Network and Internet
Security markets. Symantec‘s customers range from small companies to Fortune 500

large multinationals spread over 36 countries. As part of a strategy to offer the same
level of service as their existing software products, Symantec incorporated DCL and
its Supply Chain Management Services as a key part of their integration strategy for
all Axent products.
Founded in 1984, DCL has emerged as the leading provider of next-generation

Supply Chain Services. More than a logistics company, DCL is a trusted business
partner who reduces operating costs and improves end-customer service via a full
menu of order entry/processing, call centres, warehousing, final assembly, fulfilment,
and returns management. DCL‘s advanced IT infrastructure is Internet-enabled for
complete integration with enterprise-level business systems; its customizable
solutions enable companies of all sizes to focus on their core competencies. DCL
currently serves some of the best-known names in the high-tech and healthcare fields.
Symantec recognized long ago that it wanted to sit above the supply chain, composing
and monitoring its daily performance, rather than sitting in the middle handling
physical goods. The company warranted that its supply chain partner, DCL, not only
provide operations but also provide visibility across the entire supply chain for all
activities, giving them full access to information about their customers, issues and
product dispositions.
This allowed Symantec to focus on its core competencies product development and
marketing not supply chain management. With the original emphasis on software
distribution, reverse logistics did not play a critical role in supply chain logistics, but
the addition of the Axent hardware line warranted a fresh look at the entire process.
Symantec realized that they needed to keep a tight limit on returned goods and their
disposition if they were to be competitive in the marketplace.
Internet Security is a very competitive marketplace where end users demand reliable
equipment but also with no down time. There is enormous pressure for a rapid
response time and for a quick turnaround of all customer requests including a
provision to provide replacement hardware under certain contractual conditions.
Furthermore, the cost of the hardware warrants that proper disposition is made of the

incoming hardware whether it is fixed and put back in the inventory or, disassembled
for spare parts. Either way, speed, accuracy, and communications are key elements
that have to be addressed during the entire process.
DCL developed a RMA process to accommodate Symantec‘s new operating realities.

The following flow chart process maps the new DCL reverse logistics process and IT
infrastructure to maximize the operating efficiencies of the entire process while
providing full visibility within all functional departments in Symantec.
E-factory - DCL‘s web-based IT system provides secure, comprehensive and timely

information to all phases in the supply chain - customer material, manufacturing and
fulfilment. This IT system played a vital role in designing the new E-factory R5
process at DCL. Since reverse logistics includes a number of processes such as
RMA‘s, warranty tracking, and vendor returns, the IT design had to be robust enough
to handle the new business rules imposed by Symantec while being nimble enough to
allow for quick disposition of the inventory. Credit authorization, normally a
customer service activity, also had to be triggered at the warehouse or distribution
centre to speed up the overall process. With the new E-factory R5 process at DCL,
Symantec was able to quickly integrate the new hardware product lines efficiently
into their overall distribution strategy.
Some unique characteristics of the E-factory R5 process include tracking of actual

manufacturing and shipping data for all returned goods, ability to distinguish warranty
status and make disposition decisions on a real time basis, ability to track returned
equipment to the original hardware manufacturer and, complete inventory
management to assure that proper customer credit is issued. Because returns are so
labour-intensive, the success of any returns program is going to be dependent upon
the ability of the people working to make quick and accurate decisions.
DCL recognized that with an improved process and a unique IT infrastructure reverse
logistics can be looked in a new light – not just a reality of doing business, but a
powerful tool to improve customer trust and confidence while managing the corporate
bottom line.

6.4.6 DCL’S Reverse Logistic System
Customer call
centre
Customer
Email to
DCL
DCLCustomer Svc Initial shipment

Issue Predefined
RMA within DCL of replacement
credit business rules
of product new
or refurbished
Complete Receiving
visibility of Original product
inventory status
Inspection
Warranty check &
legality check
Disposition
Rules by customer
redefined
Destroy Disassemble Remarks as Test and Return

and and return new and repackage to
document part to refurbished vendor
inventory
Keep track and unit

back to vendor
Figure no. 3: DCL’s reverse logistic system
(Source: Optimized supply chain solutions, A case study on RMA solution, By

Rogers & Tibben Lembke)

CHAPTER:- 7
INNOVATION IN
HUMAN RESOURCES
MANAGEMENT

7.1 What is HR?

Human resources department will provide best services in terms of manpower to
balance organizational needs to fulfill company‘s overall vision.
HR department provides quality HR services to attract, develop, motivate and retain a

diverse workforce within a supportive work environment to achieve company‘s
overall objectives.
7.2 Objectives of HR:

 Recruitment and selection of high caliber candidates according to
organizational needs to achieve overall objectives.
 Retention of potential candidates and planning for mobilization /
demobilization in association with line Project Managers.
 Enhance the Human Resource organizational capability and performance of
the Organization through development and management of organizational
structure, people, policy and process.
 Maintaining Remunerations and benefits as per industry norms.
 Decreasing the Training cost for the Company by identifying original training
needs.
 Motivating employees to generate suggestions for the betterment of
organization.
 Formulation of competent Performance Appraisal System and identification /
implementation of compensation schemes to motivate the employees to get the
job done with best practices.
Sr. Key result area Key performing Key performance Indicator

No. area
01 Recruitment / Recruitment  Reduce average time taken to
Selection fill vacancy.
 Reduce average cost per
recruit.
Selection  Finalize the selection as early
as possible for each individual

position.
02 Performance Performance  Formulate competent
appraisal / appraisal performance appraisal system.
Compensation  100% timely completion of
appraisal.
 Ensure transparent evaluation.
Compensation  Introduce new compensation
scheme for high performance.
 Maintain salaries as per
industry norms.
 Reduce overtime payments.
03 Skills enhancement Training  Identify training need &
arrange training program.
 Reduce training cost.
04 Work place Work  Create friendly work
management environment environment
05 Work force planning Demand &  Ensure timely mobilizing /

Supply demobilizing manpower.
Manpower  Ensure manpower available
availability for existing and forthcoming
projects.
06 Conflict management Solution  Minimize conflict rate and
transparent the solution.
Table no. 3: Activities in HR department
(Source: Human capital trends and innovations, August 2009, PEW centre on the
states, sponsored by PEW charitable trust.)

7.3 NEED OF INNOVATION IN HUMAN RECOURSE MANAGEMENT

Innovative people should have diverse capabilities like the ability to view the
technology both in terms of the market requirements as well as that of the shop floor
or laboratory. Innovation pre-supposes basic creative critical thinking skills. This is
important as it enables one to express oneself cogently. Innovation in humans,
therefore, calls for multifarious capabilities, some of which are shown in Fig.
Figure No.4: Characteristics of individuals for innovation

(Source: Managing change and innovation, ch-7, Prentice hall, 2001)
Coming to innovation leaders: "What distinguishes leaders from laggards, and

greatness from mediocrity, is the ability to uniquely imagine what could be".
Innovation leaders, having foresight and intuitive capabilities, are indispensable for
seeing through an innovation cycle from concept creation to success. In any
innovation process, a leader needs to set appropriate milestones, monitor the progress,
liaison with the top management for resources, cooperate actively in the actual
development, give advice when necessary and offer constant encouragement.

7.4 INNOVATION IN HRM
7.4.1 E-HRM:
E-HRM is a way of implementing HR strategies, policies, and practices in
organizations through a conscious and directed support of and/or with the full use of
web-technology-based channels. The word ‗implementing‘ in this context has a broad
meaning, such as making something work, putting something into practice, or having
something realized. E-HRM, therefore, is a concept - a way of ‗doing‘ HRM.
7.4.2 The state of HRM in an organization

Organizations do not start with nothing when they step out onto the E-HRM road. For
a start there will be certain implicit or explicit HRM policy assumptions and practices
already in use. Further, every management decision contains some HRM component.
Beer et al. speak about HRM policy choices. The set of HRM policy choices within
an organization can be categorized into one of the three types distinguished by Beer et
al. the bureaucratic policy, the market policy, and the clan policy. From the existing
state of the HRM in an organization (the frame of reference), the individuals and
groups involved (the stakeholders) make choices with regard to E-HRM. As these are
made within a certain context, the choices are purpose driven.
7.4.3 E-HRM goals

What goals drive stakeholders when deciding about e-HRM? Based upon a scan of
professionally-oriented and academic journals, we can draw conclusions about the
reasons or goals of organizations making steps towards e-HRM.
1. Improving the strategic orientation of HRM

2. Cost reduction/efficiency gains
3. Client service improvement/facilitating management and employees.
7.4.4 CLAN (Centre Led Action Networks) Approach

CLAN organizational model was launched in 1991 and is still the approach preferred
by high-performing 'group' companies who want to enjoy the best of two worlds:
autonomous business units within the group, and an across-the-group connection

which ensures that the whole is greater than the sum of the parts. In the CLAN model,
action takes place in the businesses whilst networking between them is driven from
the centre.
CLAN's attraction is that it provides a powerful and more stable, yet still flexible,
alternative to centralized or de-centralized management of key business functions.
Traditionally, a company structure is likened to a pyramid. Solid this may be, but one
side of the business cannot see across to the other, and the stones at the bottom cannot
see where the top is pointing. We prefer the imagery of the light, transparent
connected structure.
But CLANs are not always the right solution. There are occasions when autocratic
top-down leadership is essential, for example in a time of corporate crisis. Likewise it
is unlikely to be the right choice in a company that is so intent upon task that it
ignores the 'processes' whereby people work together.
7.4.5 Types of E-HRM

E-HRM is not a specific stage in the development of HRM, but a choice for an
approach to HRM. Wright and Dyer (2000) distinguish three areas of HRM where
organizations can choose to ‗offer‘ HR services face-to-face or through an electronic
means: transactional HRM, traditional HRM, and transformational HRM. Lepak and
Snell (1998) make a similar distinction, namely operational HRM, relational HRM
and transformational HRM.
7.4.6 E-HRM outcomes

We assume, based upon Beer et al.‘s ideas about the expected results or outcomes of
HRM, that E-HRM also aim to achieve a certain set of outcomes. All HRM activities,
and therefore also all E-HRM activities, will implicitly or explicitly be directed
towards these ‗overall‘ outcomes. Beer et al. (1984) distinguish four possibilities:
high commitment, high competence, cost effectiveness, and higher congruence.
These outcomes, in turn, may change the state of HRM in an organization, or through
individuals and/or groups within an organization actually result in a new HRM state.

This closes the circle. With the addition of the E-HRM outcomes, the building blocks
have been identified that are needed to finalize our E-HRM model (see Figure):
Figure No.5: Summery of E HRM

(Source: E HRM: innovation or irritation, An explorative empirical study in 5 large
companies on web based HRM, By- Huub Ruel, Utrecht school of governance)
7.4.7 Consequences for the HRM department
The literature seems to clear: e-HRM will not leave HR departments ‗untouched‘.
Less administrative tasks for the HR department and therefore less administrative
positions, more focus on the strategic goals of the organization and therefore an HRM
staff consisting mainly of ‗thinkers‘; this is, in essence, what HR departments can
expect or are already facing and experiencing. From our definition of, and approach
to, e-HRM the following can be concluded about the consequences of e-HRM for the
HR department.
E-HRM will assume an active role for line management and employees in
implementing HRM strategies, policies, and practices. In terms of the more
operational and information processing work, such as administration, registration and

information distribution, there will be less demand for HR people. This seems most
logical for organizations with an operational e-HRM approach. However, also with a
relational e-HRM approach dominating, a smaller HR staff will be necessary if line
management and employees pick up and use the HRM instruments provided by the
HR intranet. There will still be HR experience necessary for the renewal of
instruments and to prepare them for easy intranet-based use. Finally, with a more
transformational e-HRM approach, strategic HRM expertise will be necessary in
order to formulate adequate strategic HRM plans. The scarce empirical studies on this
topic suggest that an investment in e-HRM seems to result in companies reducing the
number of HRM employees. Based on the earlier arguments, it is likely that this
concerns primarily the operational/administrative HRM workers.
At the tactical and strategic levels, HRM staff will remain necessary, but will see a
shift in their expertise from face-to-face skills towards intranet and internet activities.
In other words, the web-dimension will be added to the toolkit of HRM professionals.
7.4.8 Conclusion:
Based upon the research of (HuubRuël – Utrecht School of Governance, Tanya
Bondarouk – University of Twente, Jan KeesLooise – University of Twente) draw
conclusions regarding the followingthree topics: (1) e-HRM goals in the companies,
(2) types of e-HRM, and (3) e-HRMoutcomes.
7.4.8.1 E-HRM goals

First of all, the three types of goals identified in our research model (efficiency/cost
reduction; improving client service; improving HR‘s strategic orientation) were all
observed in the case studies. What seems to be new is that, especially in the
international companies included in our study, a main goal for introducing e-HRM is
the standardization and harmonization of HR policies and practices across all parts of
the company. This was explained by the initiators in the companies as being necessary
in order to strengthen the company‘s image as a global entity, not just an
internationally dispersed one.

7.4.8.2 Types of E-HRM

Secondly, we found that there is a ‗gap‘ between e-HRM in a technical sense (the
available functionality) and the real use made of web-based HRM tools by employees,
line managements, and HR. That means that, technically, e-HRM can have the
intention of having a transformational (highly advanced) nature, but in practice (real
use of tools) it can be of an operational nature (basic personal data management and
use as an information source). What has shown up clearly is that a company with
HRM policies and practices that are of the bureaucratic type cannot just jump to a
transformational type of e-HRM: other stages have to be gone through first. The cases
in this study clearly suggest that it is impossible to ‗jump‘ immediately to a
transformational type of e-HRM without first going through operational and relational
e-HRM stages.
7.4.8.3 E-HRM outcomes

Thirdly, the overall realized outcomes of e- HRM in the companies studied were
primarily a reduction of costs, mainly due to reducing the administrative burden; an
improvement in client satisfaction with HR services; and an improvement in the
perceived quality of communication within the organization. Changes, let alone
improvements, in the competences and commitment of the workforce were very
limited. Alongside these main conclusions, we observed a number of additional
aspects: Firstly, e-HRM seems to be providing an important ‗push‘: to put HR
responsibility in the hands of the line manager. The introduction of e-HRM is
accompanied by the decentralization of HR tasks and by the harmonization and
standardization of HR processes.
For the HR department, introducing e-HRM shows itself to be a ‗push- factor‘ for
changing HRM within an organization: from a bureaucratic approach towards a
market/clan approach.
Turning to the employees, the introduction of e-HRM brings changes in the way they
experience HRM in their company and in the HR tools and instruments they get
offered. They acquire the opportunity to get updated in terms of organizational
dynamics, take part in online discussions, and choose their career path. However, not
all employees are willing to accept full responsibility for their personal career
development through the available web-based HR tools. Some (and the case studies

suggest a specific group) require their managers to come up with career development
initiatives.
Interestingly, in those companies that had an ‗industrial‘ nature, PC availability in all

‗corners‘ of the company and the PC skills of employees was found to be a crucial
element in successful switching to e-HRM. Employees in the plants or factory (unlike
those in offices) tended not have access, or at best only limited access, to online HR
tools because of a lack of PCs or because of cost considerations. Perhaps one can
speak of a cyber-division at the organizational level? The implementation of e-HRM
in international and global companies seems to be difficult in the sense that it is hard
to convince the local HRM departments to contribute and to collaborate because it is
difficult to make the advantages of e-HRM visible and tangible to them in the first
place. To make local HRM professionals change their way of working is difficult.
When implementing e-HRM globally it can be difficult to get the support of the
relatively small components of the company.
When implementing e-HRM on a global scale it is not easy to make e-HRM appear
advantageous on a local scale. That makes it hard to get local HRM professionals
enthusiastic. Guaranteeing the security and confidentiality of input data is an
important issue for employees in order that they should feel ‗safe‘ when using web-
based HR tools.
Our final observation is that employees and line managers‘ mindsets need to be
changed: they have to realize and accept the usefulness of web-based HR tools. They
generally feel that they lack the time and space needed to work quietly and
thoughtfully with web-based HR tools and so, if there is no real need, they will not do
it.

CHAPTER:- 8
HOW MANAGEMENT
CAN FOSTER
CONTINEOUS
INNOVATION

8.1 HOW IDEAS GET TRANSFORMED INTO INNOVATION
No distance is too far and no dream is too large because the cycle of life keeps
changing. Certainly, changes bring improved lifestyle and technological progress,
consecutively to keep the momentum of improvements one has to really appreciate
innovation.
But where does the innovation come from? An apple in Newton‗s head sparked to
deliver an Idea, which plays a vital role in everyone‗s life till today. Innovation can be
considered to be as creativity, i.e., to create new ideas and knowledge creation.
However it goes beyond idea generation to putting those ideas into action. So it is
important to evaluate the ideas in order to yield good innovation. An idea that is
developed and put into action creates innovation.
8.2 IDEA GENERATION PROCESS

The idea generation process is nothing but the whole process from thinking to action,
i.e., from the generation of first ideas to the final innovative result. Understanding
these phases will helps us to review the ways of combining and creating knowledge
that can relate to reality. The idea generation process and thereby innovations are
strongly connected to people‗s attitudes. People and organizations have to exceed
what is pre-defined in their functions.
8.2.1 Organization role on innovation

In this section, let us discuss about the strategies and tactics that organizations need to
follow in order to gain advantage from idea generation process. Important skills that
organization‘s need for idea generation and Innovation are
 The long term vision,

 The ability to identify or even anticipate market tendencies
 The will and ability to gather and integrate the process.
 The ability to take risk (Calculated risk)
 Internal co-operation between the different functional department
 The external cooperation, with public investigation, with consulting services.

8.3 PHASES OF IDEA

There are many theories about the individual phases of ideas; different authors
postulate different number of phases in the idea generation process. They divide
innovation process as a sequential three phases.
 Idea Generation
 Idea Conversion
 Idea Diffusion
 Idea Assessment
Idea
generation
Idea
conversion
Idea
diffusion
Idea
assesment
Figure No.6: Phases of ides
8.3.1 Idea Generation

A good start is half of the work. Similarly a good start for an innovation/innovative
product is GOOD IDEAS. But where do these good ideas come from? People who
make difference in an organization are the key resource of idea generation process. So
the fragments of ideas that come across the organization will influence in generating a
creative idea.

For the idea generation phase, the financial, practical, physical limitation and other
business parameters are not considered, this is to ease seamless flow of ideas and to
encourage out of box thinking.
8.3.1.1 Sources of ideas:

Besides depending on the internal sources, organizations need to be open to gain
information from external sources for idea generation. This could be from customers,
end users, competitors, universities, independent entrepreneurs, investors, inventors,
scientists and suppliers who play a vital role.
8.3.2 Idea Conversion

Now we have lots of good ideas, but how are we utilize it? This is handled by this
phase. The main objective of this phase is to filter out ideas, so that only feasible and
refined ideas are selected.
Refined ideas are the ones identified to be financially successful and technically
viable. It doesn‗t mean that ideas are simply put away, but it is in this phase ideas are
turned into revenue generating products, services and processes.
Typical methodology that could be used in this phase is brainstorming, to analyze the
feasibility and problems. The possible problems might vary from one company to the
other. It has to be noted the tight budgets, conventional thinking and strict funding
criteria caused many novel ideas to shut down.
Involving people with differences (can be based on lingual, cultural, geographical,

ethnic etc.,) can be used in such brainstorming discussions. Because this gives room
to ask as many weird and challenging questions about the ideas, which involve
people‗s educational, professional and cultural diversity.
The generation of high number of ideas depends on the tools & techniques that an
organization adapts. Consequently, this helps to avoid strangling the innovation
process for lack of ideas.

8.3.2.1 Market surveys

Market surveys can be done through interviews, through panels or by monitoring the
evolution of a set of demographical, economical and consumption indicators as well
as others.
8.3.2.2 Benchmarking
Benchmarking is an important tool for competition analysis. Benchmarking is an
ongoing process of measuring and improving business practices against the
companies that can be identified as the best worldwide. It emphasizes the importance
of improving, rather than maintaining the status quo.
8.3.2.3 Collecting Ideas from

a. Employees: The collection of employee‗s ideas can be done through a specific
program or through more informal methods in smaller groups. Through series of
continuous meetings, employees propose several ideas and the bossed have to approve
or reject them right there on the spot. These programs are successful as they allow
people to have a safe place to share ideas without any kind of restriction.
b. Suppliers: In business terms, competitive suppliers usually have a better

knowledge of what they are selling and how the client can obtain better benefits.
When suppliers are experts on their area, they may even present solutions for the
company‗s specific needs. So collecting ideas from the suppliers is very important.
c. Customers: Customers are the important source of proposals concerning changes

in products and services. Building relationship with clients is also an important
criterion as it creates a strong information source. However getting inputs/feedback
from the end customers is not easy.
8.3.2.4 Co-operation
Co-operation with institutions like universities and industrial associations help the
organization to have new ideas through co-operation settlements/agreements. Where
organization gets and provides inputs. Member organizations participate and form an
ideal source for development of innovative ideas.

8.3.2.5 Brainstorming
Brainstorming is a widely used technique, in which a group of people were put
together and discuss their ideas that they can think of, even if apparently foolish. The
important thumb rule of this technique is not to criticize ideas presented until the
discussion ends. An advantage of this method is the fact that the association of several
ideas can trigger new ones.
8.3.3 Idea Diffusion

In this phase we diffuse products and practices. Organizations must get the relevant
constituencies within the organization to support and spread the new products,
business and practices across desirable geographic locations, channels and customer
groups.
This phase is particularly important for the large companies who have their divisions
in many geographical locations. So the biggest question that, what is the impact of
diffusing of ideas within the organization? One possible negative upshot could be
leaking of your idea to the competitors.
The company P&G first launched Pampers diapers in Germany, and then it developed
ideas to establish the product in France. However it has taken long time to do so, P&G
can able to launch its product only after five years. Meanwhile, Colgate Palmolive
sensed that idea and launched its line of diapers in France two years before to P&G‗s
launch.
This is a typical example of improper diffusion of ideas. Idea specification is

important in case there are several ideas to change a given product, service or process.
Idea specification consists of choosing the idea that will have better advantages in
being applied or combine existing ideas, to find a solution that is superior to each idea
by itself. There are several tool and techniques for idea selection process,
8.3.3.1 Feasibility Analysis:

Feasibility analysis is a preliminary study undertaken to determine a project‗s
viability, which helps to ensure the successful completion of specific project goals
and objectives. In addition, feasibility analysis gives a clear picture, if an existing

system is worth upgrading or not. Feasibility analysis can be done in two

perspectives, technical perspective and business perspective. However feasibility
analysis can be done in many kinds.
In the technical point of view, the feasibility study is carried out to check if it is
possible to implement the idea at an acceptable cost. This involves questions such as
whether the technology needed for the system exists, how difficult it will be to build,
and whether the organization has prior experience using that technology in the
business perspective.
The feasibility study is conducted to check the factors affecting the commercial
viability of the business. Also to ensure the cost-effectiveness of the proposed system
i.e. if the benefits of the new idea do not outweigh the costs, then it is not worth going
ahead.
8.3.3.2 Financial and Risk Analysis

In a financial analysis, there is an attempt to project all the predictable revenue in
relation to the predictable costs. Then it is applied financial calculation to evaluate the
process‗s profitability towards a value.
From the comparison between the idea‗s profitability and the risk associated to the
same, a decision can be made about the idea. With a raising number of ideas analyzed
and processed there is a better understanding of the risk level of several types of ideas
and the costs each one brings. The study of this technique is strongly supported by a
wide bibliography related to the economical and financial areas.
8.3.4 Idea Assessment

The word Assessment in this context refers to Metric and Measurement of Ideas. Idea
Measurement is a simplified & quantified observation of ideas. Idea Metric is a
comparative measure of the performance of the ideas and product or process.
By using metrics we can find the deviation i.e., what is planned against what is
achieved? Idea Assessment is very important to any organizations to monitor the
trends in the actual effort spent on Idea generation process. This helps to understand

where does company stand and find areas of improvements. It also helps to re-plan or
alter the ideas so that it is more technically viable.
The outcomes of innovative activity need to be tracked and measure to determine

fully the impact of innovation on the economy. This is on a macro level, simply
means to evaluate the variations. Considering companies at a micro level, it is indeed
important that Idea Assessment need not be made with the variations but also from
customers (internal & external) survey and feedbacks.
In order to gain advantage of sustainable innovation, we need to evaluate the ideas

and organization‘s need to have some metric in place to access the progress. Metrics
can be customized by the managers to keep track on innovation success in their
companies. These metrics can help senior executives assess their company‗s
innovativeness and hence combat the insidious strategy decay that often afflicts a
company‗s business. The organization‘s strategies can be decayed mainly by four
reasons.
 Over time they get replicated and they lose their distinctiveness and, therefore,
their power to produce above-average returns.
 Strategies also get exhausted as markets become saturated.
 Customers get bored, or optimization programs reach the point of diminishing
returns.
 Finally, strategies get eviscerated. Customers or suppliers become so powerful
that they can dictate much lower prices than before.

CHAPTER:- 9
ROLE OF
KNOWLEDGE
MANAGEMENT IN
INNOVATION
MANAGEMENT

9.1 What is Knowledge management?
It refers to the set of business processes develop in the organization to create, store,
transfer and apply Knowledge. Knowledge is an important part for the Innovation
Management. Knowledge residing in the minds of the employees that has not been
documented called tacit knowledge. Knowledge has been documented is called
explicit knowledge.
9.2 IMPORTANT DIMENSION OF KNOWLEDGE
9.2.1 Knowledge is a firm’s asset
Knowledge is an Intangible Asset. The transformation of data into useful

informational and knowledge requires organizational resources. Knowledge is not
subjects to the law of diminishing returns as per physical assets, but instead
experiences network effects as its value increases as more people share it.
9.2.2 Knowledge has different forms
Knowledge can be either implicit or explicit (codified). Knowledge involves Know-

how, craft and skill. Knowledge involves knowing how to follow the procedure.
Knowledge involves knowing why, not simply when, things happen (causality).
9.2.3 Knowledge has a location

Knowledge is a cognitive event involves mental models and maps of individuals.
There is a both social and individual basis of knowledge. Knowledge is ‗sticky‘ (hard
to move), situated (enmeshed in firm‘s culture), and contextual (work only in certain
situations).
9.2.4 Knowledge is situational

Knowledge is confidential: Knowing when to apply procedure is just as important as
knowing the procedure. Knowledge is related to the context: You must know how to
use certain tool and under what circumstances.

9.3 ROLE OF THE KNOWLEDGE MANAGEMENT IN INNOVATION

MANAGEMENT
9.3.1 Knowledge management assists in creating tools, platforms and processes

for tacit knowledge creation, sharing and leverage in the organization, which
plays an important role in the innovation process
Knowledge management provides a focus in the organization on the value of tacit
knowledge and assists in creating the environment for tacit knowledge creation,
sharing and leverage to take place. An example would be through creation of
communities of practice around areas of innovation that requires attention in the
organization. Knowledge could also provide other platforms and processes for tacit
knowledge sharing, such as breakfast briefings. Knowledge management can also
facilitate tacit knowledge transfer across organizational and inter-organizational
boundaries through ensuring that experts with relevant expert knowledge have
opportunities to share their tacit knowledge through collaboration. Knowledge
management can also assist in identifying stocks of available tacit knowledge.
9.3.2 Knowledge management assists in converting tacit knowledge to explicit

knowledge
It can provide both the platforms as well as the processes to ensure that tacit
knowledge becomes explicit. Examples of codification platforms include discussion
databases or online collaborative communities of practice. An example of a process to
codify tacit knowledge to explicit knowledge is the capturing of tacit knowledge at
tacit knowledge sharing events such as breakfast briefings into an electronic form
where the knowledge can be organized and retrieved for later use. This adds a lot of
value to the organization as it is known what knowledge is available, and it is
retrievable for future re-use.
9.3.3 Knowledge management facilitates collaboration in the innovation process

Knowledge management allows collaboration across functional boundaries within
organizations, but also across organizational boundaries through online collaboration
forums as well as organizational tools and platforms such as intranets and extranets.
These collaboration forums are extremely valuable as they ensure the codification of
knowledge utilized as input to the innovation process, but also generated as output of

the innovation process. It provides accessibility to the knowledge and provides

identification of collaborators in the knowledge sharing and innovation process, thus
building up a reference of expertise and where it resides in the organization. It also
ensures that knowledge external to the organization relevant to the organization‘s
innovation processes is available and accessible.
9.3.4 Knowledge management ensures the availability and accessibility of both

tacit and explicit knowledge used in the innovation process using knowledge
organization and retrieval skills and tools, such as taxonomies:
It allows the organization and retrieval knowledge in a structured way according to
the unique structures and value chain of the organization. It also provides search
facilities and tools (e.g. Autonomy and others) to enable staff to search for knowledge
required in the innovation process. It provides a unique corporate structure to the
corporate knowledge base. It can also make tacit knowledge more accessible through
directories that identify individuals‘ areas of expertise in the organization.
9.3.5 Knowledge management ensures the flow of knowledge used in the

innovation process:
Through the provision of collaboration forums and knowledge management
processes, knowledge required for the innovation process can flow easily across
functional boundaries as well as across organizational boundaries to facilitate internal
and external collaboration. Creation of a knowledge sharing culture, which is an
essential part of any knowledge management program, also stimulates knowledge
flow, which is beneficial for innovation.
9.3.6 Knowledge management provides platforms, tools and processes to ensure

integration of an organization’s knowledge base
Through knowledge management structures such as taxonomies, knowledge
management can ensure the integration of the corporate knowledge base. This enables
staff members to have an integrated view of what knowledge is available, where it can
be accessed, and also what the gaps in the knowledge base are. This is extremely
important in the innovation process to ensure that knowledge as resource is utilized to
its maximum benefit and to ensure that knowledge is not recreated in the innovation
process.

9.3.7 Knowledge management assists in identifying gaps in the knowledge base

and provides processes to fill the gaps in order to aid innovation
Through the structured provision of access to knowledge, knowledge management
provides an overview of what is available in the organization. This allows the
organization to understand in which areas knowledge is lacking and to systematically
build the knowledge base in these areas. The organization may do this through the
innovation program itself if the gaps are in strategic areas, but it may also do it
through knowledge management processes or operational business processes.
9.3.8 Knowledge management assists in building competencies required in the

innovation process
Through knowledge accessibility and knowledge flow, staff members are able to
increase their skills levels and knowledge both formally and informally. An increase
in skills can improve the quality of innovation. The flow of knowledge across
functional boundaries ensures that a wider base of knowledge is available to
employees than only the knowledge they use in their day-to-day activities. Employees
therefore have a wider frame of reference of the context in which they work and will
therefore be able to innovate more efficiently. Knowledge management also provides
a culture of knowledge sharing and accessibility of knowledge, creating an
environment conducive to skills and competency building, which aids innovation.
9.3.9 Knowledge management provides organizational context to the body of

knowledge in the organization:
Every organization‘s corporate memory is unique. The structures provided to organize

and retrieve knowledge from the corporate knowledge base will therefore be
providing a unique context to each particular organizational knowledge base.
Provision of organizational context is critical in the innovation process, as innovation
in the organization also takes place within a very specific business context.
Knowledge management assists in identifying and understanding this organizational
context.

9.3.10 Knowledge management assists in steady growth of the knowledge base

through gathering and capturing of explicit and tacit knowledge:
It also assists specifically in addressing gaps in the knowledge base through specific
acquisition of knowledge in those areas where gaps exist, or through knowledge
creation and innovation itself. This in turn feeds the innovation process through
creation of a much broader knowledge base that is available as resource for the
innovation process. The tacit knowledge base also grows through building of skills
due to the availability of knowledge.
9.3.11 Knowledge management provides a knowledge-driven culture within

which innovations can be incubated:
Knowledge sharing is enhanced by a culture where the role of knowledge, knowledge
management, innovation and creative thinking is encouraged. Most knowledge
management programs have a strong knowledge culture element through which an
organizational culture of knowledge generation and sharing is emphasized. This
benefits innovation programs as it provides knowledge as resource, but it also
provides a culture within which innovation, creativity and learning through mistakes
are encouraged and valued.
9.4 KNOWLEDGE IN CONTEXT TO LEAD INNOVATION
9.4.1 In-sourcing innovation-related customer knowledge
Recently, a new understanding has begun to take shape. Instead of nurtured only in-
house, innovation-related knowledge can also be in-sourced from the outside and
combine with internal skills and expertise. The spread and subsequent ubiquity of the
internet has breathed new life into the use of technology as a device to capture market
information and knowledge. Companies have made use of it to facilitate interactions
between them and their customers. They have, over a period of time upgraded their
technological interface with their customers, such as setting u web-based
communities, to gain an insight into customers‘ behavior computer-mediated
environments Invaluable though this form of knowledge may be, it is still limited to
technology-mediated forms – data, information, numbers and figures – all of which

need to be contextualized, interpreted and absorbed by internal resources. But these

processes have proved difficult to be achieved in many companies.
Although the reconfiguration of such information through sorting, adding

categorizing, categorizing, re-contextualizing and combining with internal
information may lead to a generation of new ideas and knowledge, thereby
uncovering explicit and latent customer needs and wants, the process still has its
limitations in that it takes place many steps removed from the customers‘ tacit
dimension, and abstraction from their feelings and emotions. In the past, companies
have used their sales force as a channel to capture part of this sticky information and
knowledge.
Today, information technology media are often used for capturing and diffusing
explicit knowledge and information. However face-to-face interactions and the
sharing of context and perspectives is still the preferred way to capture tacit
knowledge. The increased reliance on technology as an interface with customers has
led companies to realize that their knowledge of the customers is not on par with
customers‘ changing and fluid needs and wants.
9.4.2 Outsourcing innovation to intermediaries

Assuming that it would be too costly to capture customer information and knowledge
that is tacit, idiosyncratic, subtle or difficult to articulate, companies are resorting the
more conventional approaches whenever possible. For example, they have started to
outsource some of their innovation-related knowledge to the external suppliers of
information, knowledge brokers and innovation intermediaries who are closer to
customers in the distribution channels. In fact, innovation-related knowledge can be
bought from information intermediaries, knowledge brokers and innovation mediators
who are able to enter into a deeper and more intimate relationship with customers.
The rise of knowledge intermediaries can be explained by their superior ability to

organize communities of consumers, users and scientists from all over the world and
to elicit from them tacit insights and contextual knowledge that producers and
manufacturers are unable to obtain. Customers feel more at ease with such
intermediaries, for these can be viewed as more neutral than the so-called ―greedy‖

companies. However, there is more to this than just financial incentives. Scientists
engage in these challenges for intellectual reasons as well. Innovation intermediaries
fulfill two main functions. From the ―seeker‖ companies‘ perspective, they are a cost-
effective, convenient and speedy way of tapping scientific knowledge – knowledge
that transcends the boundaries of organizations and nations.
They allow a company to expand its R&D capacity without increasing its size and
incurring supplementary costs, since all payment is contingent upon satisfactory
solutions. Furthermore, as scientists participating in the challenge may be versed in
different fields of expertise and may not come from one nation or one continent, the
synergy of different approaches and perspectives may be a creative way to solve
problems that would otherwise prove hard to solve.
The increase in the various forms of innovation intermediaries can be accounted for in
terms of the increase in the mobility of knowledge as the result of the mobility of
workers, who spill out ideas from companies‘ R&D departments. Combined with the
growing availability of private venture capitalists – which have helped finance new
players to commercialize ideas spilled outside the silos of corporate research labs,
innovation tends to migrate towards the open model. Furthermore, tight connections
and intensive communications between the company and its external sources of
innovative ideas through new information technologies reduce the cost of transaction
and interaction.
9.4.3 Outsourcing innovation to customers

Another approach increasingly used by companies is to outsource innovation-related
tasks to customers by involving them in the new product development process.
Innovation is farmed out to customers because of the immobility of their knowledge.
It seems easier and less costly to push innovation to where tacit knowledge resides,
rather than to attempt to extract it, bring it to the firm and use it as an input in
innovation processes. Involving the customer in the innovation process would reduce
the risk of failure and speed up product cycles. For example, customers of computer
and electronic equipment (C&EE) are increasingly putting pressures on their suppliers
to design more and more complex and sophisticated solutions to their business

problems. Given that customers are not in a position to thoroughly spell out to their
suppliers in explicit forms what they are seeking, they enter into various forms of
partnerships, in which they work together with the aim of uncovering or defining
―problems for which solutions are required‖.
This view suggests that neither a ―push‖ nor a ―pull‖ approach is called for. Instead,
what is needed is an interactive and relational approach between customers and
suppliers. The role of C&EE suppliers is changing from product providers to
―solutions‖ providers. Solution-based businesses may either develop the solutions
internally or in-source them from outside partners. The solution components should
be ―architecturally compliant, i.e. easily integrated using industry standard
technology‖ in order for them to be streamlined and integrated with the rest of a
system‘s components with minimum friction. It is a challenge for solutions providers
to build the required competencies and organizational adjustments to meet the needs
of customers and to establish an effective environment based on a close relationship
with them – an environment that locks both sides into a mutually advantageous long-
term commitment.
Solutions to the problems are created jointly in a process of negotiation and

conversation between the suppliers and the customers. Farming out parts of the
innovation process to customers also implies that firms.

Fig No: 7 Effect of Knowledge Management in Innovation
(Source: www.emeraldinsight.com/0263-5577.htm).
This chart is model of effect of Knowledge management in innovation of the product

and process. This charts shows the effect of KM (Knowledge management)
characteristics, KM capability and organization learning on KM capability.
9.5.1 Knowledge characteristics:
If knowledge is complex, it will raise the cost of acquiring or exploiting a firm‘s

knowledge and thus reduce efficiency organizational leaning because of the
difficulties in accessing individuals‘ knowledge. On the contrary, modularity and
explicitly will increase the levels of organization learning. Modularity follows a new
model for managing knowledge that leads to the focus of learning activities in the
firm.

9.5.2 Organization learning:
Complex knowledge is slow to transfer and thus more difficult to apply and convert.
Complexity of knowledge increases an understanding of the form that knowledge
takes and the ways by which knowledge that enhances rather than destroys exciting
knowledge. In other words, modularity decomposes knowledge into specific retinues
that helps employees implement operation activities and then promotes the companies
KM capability. Similarly, the more tacit the company‘s knowledge, the less employee
company‘s knowledge, the less employees can communicate with their peers.
9.5.3 Knowledge integration
Firms have always had some process to synthesize their experience and integrate it
with knowledge. Knowledge integration helps the firm create condition under which
multiple employees can integrate their knowledge through system and
communication. However, integration has been viewed as depended upon the
characteristics or the knowledge or technology manipulated. The four mechanisms are
rules and directives, sequencing, routines and group problem solving and decision
making for knowledge integration related to characteristics of knowledge.
9.5.4 Knowledge capabilities

9.5.4.1 Influences of knowledge characteristics, organizational learning and
knowledge integration on KM capability
A wide range of dimensions is used to characterize different types of knowledge.
Knowledge classified into two categories: explicit knowledge and tacit knowledge. It
is suggested that the knowledge characteristics of complexity and tacitness will affect
the performance. Complexity is usually defined as the increase of difficulty in
comprehending how an organization functions or produces some outcomes.
Tacitness is the nature of knowledge, which derives from an inability to articulate the
principles that influence the performance. Propose that modularity represents the
standard interface specification which allows the separation of the production
processes. Furthermore, most papers claim that explicitness, complexity and

modularity are the main dimensions of knowledge characteristics. We believe that

based on the operation patterns of our sample firms, all in the technology
manufacturing industry, these three factors can be representative of the main
dimensions of knowledge characteristics.
Organizational learning is hard to achieve, especially for the sharing of tacit
knowledge. The key elements that enable learning are channels of communication
which encourage individuals to make use of ―enquiry‖ rather than rely on otherwise
―Inaccessible‖ tacit knowledge. Certain attributes of knowledge play a key role in the
knowledge creation process When knowledge can be accessed explicitly, such as in
the form of language, shared meaning, or mutual cognition of the knowledge domain,
it is likely more efficient for a firm to share, apply and convert the knowledge.
Contends that the more complex, tacit and systemic knowledge is, the more difficult it
will be to acquire and exploit it. Therefore, the lower the complexity of the knowledge
or the higher the modularity and explicitness, the more firms will enhance their KM
capability.
By using modularity of knowledge, integration of newly developed components into

the existing knowledge system becomes easier. It seems to suggest that modular
knowledge is regarded as routines that are helpful for efficient and flexible integration
of KM within the organization. In addition, explicit knowledge also contributes to
knowledge integration. The tacitness of some knowledge is difficult for the possessor
to explain and communicate. When specialized knowledge must be reduced to general
knowledge in order to facilitate communication, it is inevitable that substantial
information will be lost. Thus, higher levels of knowledge complexity result in more
difficulties that a company may encounter in the knowledge integration process.
9.5.4.2 Influences of organizational learning, knowledge integration and KM

capability on innovation
Organizational learning activities provide an improved understanding of the whole
organization and create open communications with minimum defensiveness.
Organizational learning gets people to contribute to the organizational knowledge
base. Through organizational learning, the employees have more chances to interact

with each other so that KM capability consisting of acquiring, conversion and

dissemination of existing knowledge can be achieved.
The operative learning of the organization reinforces existing knowledge and the
sharing of it throughout the organization. Learning organization in a dynamic
environment will enhance the quality and quantity of information transfer and
knowledge accumulation. Firm‘s learning capability will enhance knowledge
application and creation. Thus, it seems to suggest that a firm‘s organizational
learning will influence its KM capability.
Through a spiral of organizational learning activities, firms capture and use

knowledge by means of KM processes to foster innovation. Organizational learning
emphasizes expertise development and decentralizes bureaucracy to support initiative
and creativity. For this reason, innovation is the by-product of a learning organization.
Thus, organizational learning has an impact on a firm‘s innovation. A firm with better
organizational learning has greater capability to develop products or process
innovation. An excellent learning environment in an organization will leverage the
use of all resources, including the activities that accompany market orientation and
innovation.
Continuous orientation toward organizational learning will improve the efficiency and
effectiveness of a firm‘s innovative activities. Organizational design needs to access,
and integrate transfer knowledge among members of an organization. Knowledge
integration helps firms to combine internal and external knowledge through
communication and systems integration. Knowledge as integrated within the
organization in order to create KM capability. He proposes that most organizational
capabilities require the integration of knowledge from a number of individuals. Firm‘s
competitiveness depends on its capacity to integrate knowledge in an effective
manner. Without effective knowledge integration, the firm needs to spend more time
and resources administering and guarding information, thus impeding innovation. The
wider the scope of knowledge that is integrated, the greater the diversity of the
individuals involved.

Diversity resulting from knowledge and information helps individuals in the

organization communicate with each other and stimulates more ideas. Furth when a
firm has the ability to acquire knowledge and integrate existing knowledge with new
knowledge, the firm should be good at producing process or product innovations.
Firm‘s capability for reconfiguring existing knowledge is a way of promoting
continuous innovation.
KM capability is defined as the ability of firms in the acquisition, conversion and
application of knowledge. Knowledge will not be able to promote innovation if it
cannot be shared or distributed to the relevant people. By the assistance of
information technology such as intranets, data systems, or non-information
technology tools such as brainstorming sessions and research collaboration, firms can
exploit knowledge within the organization. Thus, firms can increase innovation
through the application of knowledge. By conversion process, firms can share,
assimilate and improve innovation performance via transforming tacit knowledge into
codified or explicit knowledge. Thus, firms can promote their KM ability and create
more innovation.
9.5.4.3 The influences of KM strategy on organizational learning and KM

capability
Organizational learning is the process by which firms can detect problems and
provide solutions. Knowledge from internal and external learning activities has
become a strategic process that facilitates the acquisition and deployment of an
organization‘s stock and flow of knowledge. Different knowledge bases and different
strategies in developing and deploying knowledge result in performance differences
between firms. However, while the importance of creating, managing and transferring
knowledge have been recognized by firms, most have not been able to transform this
into an effective KM strategy. Thus, it is a big challenge for firms to establish a
suitable knowledge strategy that improves organizational learning and further creates
superior KM capability. Firms with human oriented KM strategy will have a better
attitude toward learning and innovation, because the sense of care gives rise to trust
and empathy, which can encourage organization members to communicate and
cooperate better. It is argued that, within a culture of care, individuals may have more
favorable perceptions of KM activities.


9.5.4.4 The influence of KM strategy on knowledge integration and KM

capability
In a highly competitive market, firms need to simultaneously realign organizational
structure and strategy so that a more unique, flexible, and firm specific configuration
could provide significant effects on KM capability. Firms having capability to
integrate existing knowledge into new architectural knowledge can provide a platform
for carrying out new product-market combinations. Firms can integrate knowledge
through three major dimensions: efficiency, scope and flexibility. Context in which a
firm operates determines the type of integration process which is required. In other
words, a contingency fit is required to typologies of KM strategy and types of
knowledge integration to achieve better KM capability and innovation. System
oriented KM strategy will enhance knowledge integration and KM capability for
explicit knowledge.

9.6 INFLUENCE OF KNOWLEDGE MANAGEMENT IN

COMPEVTITIVENESS AND INNOVATION:

Figure No 8: Influence of Knowledge Management in competitiveness and

innovation
(Source: Alberta Carmeiro, Journal of knowledge management, Volume. 4,

Number.2, 20)
The influence of KM on management decisions effectiveness should be considered to

support and also provide insight into how knowledge workers can contribute to obtain
better results. However, management must consider that knowledge is not a simple
and unique entity. The commitment to generate new discoveries and a more
demanding understanding is not enough. The organizations need to look for the
knowledge that is able to add value. Value adding knowledge is very different to an
information mix.
This mix can be important, but first it is necessary to find out how the markets
perceive the presence of value. These considerations can be taken as a guideline for
KM.
There are perhaps an unlimited number of factors that can define management
attitudes regarding the role of intellectual capital into organizations' life. Some
managers evaluate significantly this capital as a very important resource that should
be used to obtain adequate profits. Therefore this capital should be constantly
improved.
As can be seen in Figure, a conceptual model of KM is proposed. It emphasizes that

innovation and competitiveness can be a function of the KM. This model takes into
account numerous determinants (determinant factors) of the relationships among
various fields. The top portion of the model shows the most common factors that
usually define management's attitudes and deals with the following questions:
 How important is intellectual capital?
 How does management evaluate knowledge development?
 Is training one of the important aspects to be planned?
 Is knowledge considered as a strategic tool?
 Are managers prepared to motivate knowledge development?

 Are managers able to stimulate the potential capacities of their knowledge

workers?
KM has to deal with two domains:

1. Personal characteristics of each knowledge worker;
2. Factors that affect personal development.
The most common factors that affect initially the personal characteristics of a
knowledge worker are education level, attitudes and values, innovativeness and
creativity. Innovativeness is an important factor for supporting innovative efforts and
it contributes also to define the personality. However, it is not enough to desire new
products or new processes. In fact, an innovation that an enterprise presents into the
market may be also due to the creativity of its knowledge workers.
Personal development is directly related to professional experience. Any personal

experience may be an information source and a learning situation. As a result from a
personal or a managerial decision, training courses may contribute to reawaken
previously acquired knowledge and to facilitate the access to a higher knowledge
level. The development of each knowledge worker has its own dynamics, which is
related with personal objectives. The more demanding the objectives are the more the
learning efforts should be intensified. Nowadays, learning processes and knowledge
updating procedures depend on information technology. Moreover, it has a decisive
role on knowledge development because competitive advantage can only be
maintained by the use of information for innovation.
Nowadays, managers have to decide whether they want to obtain better results from
their knowledge workers or they prefer to lose the creative power that they possess in
their minds and their professional experience. Managers' attention must be focused on
personal development. To obtain an effective knowledge level, investment in
knowledge development is needed. Managers should improve their ability to motivate
knowledge workers to attain higher knowledge levels, because the arousal of this set
of intellectual needs may be caused by external stimuli. Motivations should be

intensified, because they should impel knowledge workers to increase their

knowledge levels.
This movement will be decisive in terms of innovation and can contribute to a

stronger competitiveness. Even when no innovation is possible, an improved
knowledge of the market and competitors can lead to more competitive movements.
The technical capacities of a modern information technology will help this
motivational scheme. Companies have to find ways to reach knowledge workers'
involvement. A person's level of involvement plays a role in how much effort is used
to learn new subjects or to deepen knowledge. Moreover, this involvement is an
adequate condition for information sharing among knowledge workers. Adding IT,
creativity and knowledge leads to a particularly potent combination.
Managers can obtain impressive results in what concerns the companies' abilities to
innovate if they are able to develop the stimulation of innovative proposals through
motivational methods and adequate rewards. The same can be said in what concerns
key success factors: managers should practice frequently the stimulation of
competitive efforts, provided through utilization of both existing and new
technologies. This conceptual model intends to interpret the relationship between KM,
innovation, and competitiveness. It may contribute to an integrated understanding of
the knowledge development process and its influences into the domains where
management efforts should be focused.

9.7. NETWORKING PROCESS OF CONTINEOUS INNOVATION BASED

ON KNOWLEDGE MANAGEMENT:
Figure No.9: Networking process of Continuous innovation based on innovation

(Source: Jing Xu, Re´my Houssin, Emmanuel Caillaud and Mickae¨ l Gardoni,
Journal of knowledge management,Vol.14.No4,2010)
Due to the multifaceted nature of knowledge and innovation, the relationships

between innovation and KM are complex and should be investigated from the view of
systems thinking. Based on our proposition about the additional phase of
internalization for innovation, a networking process of continuous innovation is
presented below by integrating the KM process into it. Then the detailed functioning
of internalization phase is discussed through the lens of KM. The networking process
provides a global but simplified view of the interactions between KM activities and
innovation.
Innovating in a continuous manner is necessary for sustaining the advantage. The

capabilities of continuous innovation are closely associated with the knowledge
management systems and processes in a company. Considering the intensive
iterations and feedbacks during innovation process, we propose that the continuous
innovation should be a networking process for better communication and cooperation
in a dynamic environment.

By summarizing the basic common phases in the reviewed innovation processes, we

include four basic phases in the networking process of innovation such as idea
generation, research and development, prototyping and manufacturing, and marketing,
sales and diffusion. Based on our previous analyses of innovation process, the
activities after the phase of commercialization are scarcely mentioned but important
for continuous innovation. Thus a phase of internalization is introduced into the
networking process from the perspective of lifecycle, as illustrated in Figure.9
In the networking process, the common phases and the additional phase of
internalization interact with each other and communicate with the knowledge bases
through KM process. The common phases can keep the compatibility with existing
best practices of innovation, while the internalization phase parallel to the common
phases provides a powerful conduit for integrating the KM process into innovation.
Then the functioning of internalization phase is discussed.
Despite that knowledge is a key component for continuous innovation, the deliberate
KM in order to support innovation has still not found its ways into all companies.
That is partially because of the absence of a way to integrate KM process into
innovation. Since there are increasing requirements to integrate the KM process into
business process, including the process of innovation, the phase of internalization can
provide a platform for carrying out the activities of KM. This platform will facilitate
the interactions and iterations in innovation and KM. In previous research, this phase
has been performed in an implicit way such as market research, capitalization of
experience, community of practice and so on.
Owing to the changing customer needs, extensive competition and rapid technological
change, innovation is extremely dependent on the availability of internal and external
knowledge. Through the additional phase of internalization, innovation process can
exchange rapidly knowledge and information with internal and external knowledge
bases. The feedbacks from customers, the responses from competitors, best practices,
errors and lessons learned about the innovation project will be capitalized so as to be
transferred to and assimilated by the stakeholders. By this way, the capabilities of the
continuous innovation can be improved.

The internalization phase makes the networking process of innovation more flat and
concurrent. The iterations and feedbacks can be rapidly transmitted to the right place
and the right person. Organizational learning in double loop can emerge and a
learning network can be built on this platform. The requirements of the latter phases
in innovation can be better considered in its early phases. This phase will increase the
shared common understanding during the innovation process and improve the
knowledge level in the knowledge bases. Furthermore, the sparks and impulses of
new ideas are conceived and matured for continuous innovation. With the phase of
internalization continuously providing seeds for more innovation, the continuous
innovation can become a propeller of companies.
To summarize, we conclude that five phases exist in the continuous innovation

process, which are idea generation, research and development, implementation
(prototype and manufacturing), commercialization (marketing, sales, diffusion), and
internalization (analysis, reflection, synthesis). The intensive interactions between the
networking process of innovation and knowledge bases reflect the necessity of the
integration of KM process in innovation. The additional phase of internalization
provides a suitable platform for this requirement. In the following, the mechanisms of
KM for innovation are expounded.

CHAPTER:- 10
THE BUSINESS
PLATFORM
VARIABLES THAT
INFLUENCE THE
INNOVATION
MANAGEMENT.

Technology platform variables and Business platform variables helps in managing the
innovation and measures the whole organisation performance related to the
profitability and technological Innovation.
10.1 What are Technology platform variables?

These variables are concerned with the mechanism of technology, which has
influence on the development of continuing innovations. The study allows the
understanding of the way innovator builds up a technological capability to gain a
competitive advantage.
10.2 What are Business platform variables?

These variables are concerned with business capabilities, which have a great impact
on the profitability and advantage in new follow on businesses. The study allows an
understanding of the factors that help an innovator gain a sustainable competitive
advantage.
10.3 Case on Windows operating system for PC

[Source: The use of strategies in managing technological innovation, Jarunee
Wonglimpiyarat, European Journal of Innovation Management, Volume 7 · Number 3
· 2004 · 229-250]
The attempt to compete for potential platform creation began when Xerox and Apple
launched Xerox Star and Apple Lisa. By tying the operating system to their own
hardware, Xerox and Apple expected to command a high price and establish
proprietary business platforms. However, the price they set was regarded by the
customers as too expensive (Xerox Star $16,595 and Apple Lisa $10,000 comparing
to a standalone PC $2,000). Moreover, as Xerox Star and Apple Lisa ran as a closed
system, this prevented software development firms from writing application
programmes.
Thus, the machines of Xerox and Apple were not seen as valuable for the customers
to purchase. The result was that both Xerox and Apple failed to establish a business
platform even though they were early movers in the PC Windows operating system
market and might have established their technologies as standard. Apple in its launch

of Macintosh continued the strategy of not licensing MacOS to Original Equipment

Manufacturer (OEM) hardware suppliers. In other words, Apple thought superior
Macintosh technology would make it the industry standard, allowing Apple to gain
proprietary benefits. However, Apple did not realise that Microsoft was a close
follower who was ready to launch the Microsoft Windows which had similar
characteristics to MacOS and would reduce the point of differentiation of Apple‘s
Graphical User Interface (GUI) that Apple intended to use for gaining superior
benefits (Apple Macintosh was launched in 1984; Microsoft Windows was launched
in 1985).
The strategy of not licensing also showed that Apple overlooked the importance of
speed in using other PC manufacturers‘ distribution capability to bring the innovation
to market. As a result, the MacOS failed to take off as quickly as Microsoft Windows.
The strategy of not licensing constrained the growth in the installed base of Apple
machines, lowered Apple‘s capability to compete and limited the potential to create a
business platform. Among the competitors launching the innovation of Windows
operating system for PC (Microsoft, IBM, Apple, Xerox), only Microsoft could create
technology platform and business platform. The development of Microsoft‘s
Windows created a technology platform in terms of generating further related
software products including scalable operating systems for intelligent devices, PCs
and servers, software development tools and internet and intranet software and
technologies.
Microsoft also created its business platform by pursuing a low-cost licensing strategy
to license its Windows via OEM arrangements with the PC manufacturers. Microsoft
business platform was reinforced by a product bundling strategy to include software
applications running on its operating system in the OEM deal which further increased
the value of Microsoft Windows to PC users, increased the demand for its products
and reduced the scope for competing suppliers. The distribution strength of global PC
manufacturers and the value of application programmes running on Microsoft
Windows enabled Microsoft Windows to reach wide adoption and become a de facto
standard. The wide adoption and the de facto standard of Microsoft Windows
operating system then served as a strong business platform that helped Microsoft to
successfully launch subsequent Windows products such as Windows 95, 97, 98, 2000,

Windows NT, Windows CE, Windows ME, and Windows Media and enter the new
businesses such as the Internet browser, Web TV business, and computer game.
Although IBM had a great presence in the mainframe computer business and
operating systems since the 1960s, IBM lost the opportunity to extend its competitive
position into operating system for PCs. The launch of IBM OS/2, although technically
superior to Windows 3.1 and Windows 95, could not compete with Microsoft
Windows. This is because IBM OS/2 was a closed system, not offered with other PCs
and was seen as too complicated and unwieldy for the customers. Thus IBM failed to
establish its OS/2 as standard operating system although IBM had a strong
distribution capability. IBM‘s aim of developing an operating system business
platform creation was unsuccessful. From the study, it can be seen that the way that
innovators launched successive Windows products to match their competitors within a
few years suggests that technology can quickly be caught up.
Taking into account the competitive position among innovators, it is worth noting that
Microsoft enjoyed platform advantage through ownership of over 90 per cent of PC
customers.
Microsoft developed platform advantage from its control over the technology
platform, business platform and de facto standard for operating systems. However,
Microsoft‘s business platform is vulnerable to erosion by state regulation rather than
from competitors reacting to Microsoft‘s anticompetitive software bundling and
predatory pricing of software. Microsoft‘s declining share price was a result of legal
action by the US authorities against Microsoft‘s anti competitive behaviour in the
market for PC operating systems and software.
To remain competitiveness in the software business, Microsoft aggressively upgraded

its technology platform and business platform by purchasing/acquiring the software
firms, e.g. Forethought, Fox Software and Visio Corp. Microsoft‘s market
capitalisation and high market to- book ratio reflects its platform ownership. The
overall financial performance of Microsoft compared with those in the PC-operating
system market demonstrates the competitive advantage of Microsoft in the operating

system market the progress of Windows operating system for PC innovation as a

result of innovators ‗using strategies in managing innovation. The outer circle
represents the total revenue pool of innovation. The inner circle represents the size of
market share of individual innovator. In the innovation process, Apple MacOS and
Microsoft Windows were the major competing Windows operating systems.
However, the use of the low price licensing strategy by Microsoft enabled it to
achieve adoption for a variety of manufacturers and hence to create.
10.3.1 Technology platform analysis: Windows operating system for PC

Technology platform variables Description.
1. High performance relative to existing practices in several dimensions of

performance: Multithreading – the running of programs simultaneously;
memory protection – the control of the areas of read/write of programs so that
programs cannot interfere with each other; operating system based on the
capacity of microprocessor technology, e.g. from Intel‘s X86 series to MHz
series.
2. Variety of continuing applications: Microsoft Windows 95, 97, 98,
Windows NT, Windows 2000, Windows ME, Microsoft.Net, Windows.Net,
WebTV product with each application focusing on different markets
3. Intermediary serving multiple value chains: Windows operating system to
serve PC and variety of devices
4. Subject to obsolescence from new technology: Linux operating system and
Sun‘s Java technology as a possible Windows NT alternative for the network
operating system; Symbian as a possible Windows CE alternative for the
hand-held markets.
5. Mostly single ownership: GUI Windows product by Microsoft, Apple, IBM
6. Controls channel of supply to customers: Microsoft controls channel of
supplying Windows operating system through PC makers by pursuing the low
price licensing strategy
7. Utilising numerically intensive analytic processing: This applies in
particular for the information highway.

10.3.2 Business platform analysis: Windows-operating system for PC Business

platform variables Description:
1. High performance in several dimensions of services: Microsoft Windows

with different versions according to different markets, e.g. server market,
desktop market, hand-held market 2.
2. Variety of continuing markets: Microsoft‘s Windows for Smart Cards,
mobile phones, computer game, Internet, Web TV business
3. Consolidating multiple value chains: Acquisitions of/investments in
technology firms in many areas, e.g. Internet, mobile telecommunications,
browser
4. Subject to obsolescence from new channel: Smart phones, Web phones,
internet kiosks, mobile phones and other specialised access devices as new
delivery channels
5. Often complex collaborative ownership: None
6. Controls channels of distribution to customers: Microsoft Windows
controls the delivery channel of PCs through the channels of global PC
manufacturers
7. Utilising data-intensive analytic processing: None
8. Firm-specific competencies: Monopoly power of Microsoft over Windows
for the PCs
9. Extensive scale, scope and experience: Microsoft‘s scale economies from its
largest software operation and a number of acquisitions virtual standards. The
self-reinforcing effect was evident in that the pursuit of low price licensing
strategy to the PC manufacturers led to the growing installed base of PCs
running Microsoft Windows operating system.
A larger installed base of the Wintel machines led to a greater availability of

software applications. In turn, this increased the value of Microsoft Windows
to PC users and increased the demand for its products. Microsoft gained the
largest market share (the internal benefits represented by the size of the circle).
Microsoft‘s benefits from exploiting non collaborative innovation were high
relative to the total benefits. In other words, Microsoft Windows becomes a de
facto standard established from Microsoft‘s non-collaboration approach

Microsoft‘s ability to establish its technology as industry standards then allows

it to control the delivery channels, own the customers and enjoy a continuing
advantage (the main benefits from owning the customers can be seen in terms
of the largest market share of Microsoft in the Windows operating system for
PC market). Thus, Microsoft did not see collaboration as important.

The innovation process of Windows-operating system for PC
Figure no 10 The innovation process of windows operating system for PCs

10.4 : Plain paper copier machine of Xerox

[Jarunee Wonglimpiyarat, European Journal of Innovation Management, Volume 7 ·
Number 3 · 2004 · 229-250 243]
The process of platform creation in the plain paper copier market began in the early
years of the Xerox copier. The development of Xerox copier created a technology
platform of xerography/ electro photography in that the underlying technology was
capable of driving a variety of imaging applications including printer, copier, fax and
scanner which could be created using common parts and technologies.
The launch of the model 914 enabled Xerox to create a business platform. The model
914 which was easier to use than the existing copying machines using different
technologies created a strong demand for Xerox‘s copier. The demand for Xerox‘s
copier can be seen from the 15 per cent annual growth in terms of copying volume in
the 1960s. The combination of capabilities in terms of the product feature, the
strength of Xerox‘s brand and sales force served as a strong business platform that
helped Xerox enjoy a competitive advantage in terms of uninterrupted sales growth
and profits through the 1960s. In the year 1965, Xerox‘s sales growth was 10 times
higher than the first year sales (962 per cent increase).
In 1969, Xerox‘s profit increased by 600 per cent from$23 million in 1963 to $161
million. Further, Xerox‘s business platform enabled it to enter the new businesses
such as PC, Office of the future (office automation), plug-and-play products, internet
business, insurance and financial services. In the late 1970s, the technology platform
of Xerox began to erode when most of its patents expired. Japanese competitors
entered the fray to compete with the price which was 25 per cent below the cost of
Xerox copier. As a result of Xerox‘s technology platform of xerography/ electro
photography being matched by the liquid toner technology of the Japanese firms, the
market share of Xerox was reduced from over 94 per cent in 1970 to 41 per cent in the
early 1980s.
The way that Xerox‘s technology platform was destroyed thus demonstrates that
technology could not be permanently monopolised and could provide only temporary
competitive advantage (Xerox copier was launched in 1960 and matched in the late

1970s). The business platform of Xerox was also undermined as a result of strong
competition from the Japanese copiers (stated above). The falling market share during
the 1970s-1980s indicated that Xerox‘s business platform was eroded. Although
Xerox had brand strength and the capabilities of PARC [3] that enabled it to enter
new businesses (stated above), Xerox was slow to bring the new products to
commercialisation.
Thus Xerox could not fully exploit its business platform capabilities to subsequent
advantage. The competition in the plain paper copier market increased in the 1990s as
non-traditional competitors in the printer business like Hewlett- Packard took printed
pages away from the copier business. The Japanese copiers, e.g. Canon, Ricoh, and
Konica also continued to take the share in the copier business. The situation became
worse when Xerox‘s attempt to reorganise its sales force backfired. Xerox kept losing
market share and was in a state of near collapse. The falling business platform is
reflected in Xerox‘s stock price plunge. Xerox‘s market value was 8 times lower than
that of Hewlett-Packard and not much larger than the Japanese competitors‘.
The market to book value and operating profit of Xerox were dwarfed by the major
rivals like Hewlett-Packard and Canon. The market share of only 25.8 per cent in the
late 1990s comparing to the share of 90 per cent-100 per cent in the 1970s indicates
that Xerox is much less competitive than before and charts the erosion of its business
platform. From the study, Xerox built a technology platform as well as business
platform but could not maintain them to enjoy continued platform advantage. As the
market is now moving towards the digital copier and networked solutions, there are
many competitors who are ready to compete in the light of this new opportunity.
Canon, a rival of Xerox, is a pioneer in digital and colour copiers.
Hewlett-Packard also competes in the digital market with its high-speed digital
electronic copier and printer. These are indications of increased competition in the
copier market. Xerox strategy to rival Canon or Hewlett-Packard and rebuild its
platform with its strategy of ―document processing‖ has attracted little confidence in
the market. Figure gives an overview of the progress of plain paper copier innovation
as a result of innovators ‗using strategies in managing innovation. The circle
represents the total revenue pool of innovation in the plain paper copier market. Xerox

had the dominant market share during the 1960s-1970s because its superior copier
protected by the strong patent and the aggressive direct selling enabled Xerox to
develop a new market.
In other words, Xerox could get rid of competing copiers (alternative copiers with
different technologies) with the launch of its superior one-touch copier (copier model
914). Also, Xerox initiated the concept of leasing which not only allowed it to remove
technology risk for customers but also gave it an extremely strong position in the
marketplace. In the early 1970s, Xerox controlled the plain paper copier market with
100 per cent market share. The largest market share could best be adjudged as the
internal benefits. Xerox was satisfied with its internal benefits and therefore did not
see collaboration as important.
10.4.1 Technology platform analysis: Plain paper copier

1. High performance relative to existing practices in several dimensions of
performance: Colour printing – dye-sublimation for continuous-tone,
photographic-quality output; high-density optical storage for encoding
pictorial information capacity; photoreceptor for laser printing digitization
technology for faster and sharper printing.
2. Variety of continuing applications: Electro photography as a photo
conducting imaging platform towards electronic copier, duplicator, scanner,
printer, facsimile.
3. Intermediary serving multiple value chains: None
4. Subject to obsolescence from new technology: Selenium-coated drums
replaced by photoreceptor (imaging medium); xerographic technology
(powder technology) replaced by liquid toner technology; analogue
technology will be replaced by digital electronic and networking technology
5. Mostly single ownership: Xerox, Canon, Ricoh, Sharp, Minolta
6. Controls channel of supply to customers: None
7. Utilising numerically intensive analytic processing: None

Figure No: 11: The innovation process of plan paper machine of Xerox

Business platform analysis – plain paper copier:

1. High performance in several dimension of service: The document product
for different market segment, production publishing solution, document
outsourcing the networked office and small/home office market.
2. Variety of continuing market: Xerox‘s expansion into PC business, office of
the future, insurance and financial services, plug-and-play products, Internet
business
3. Consolidating multiple value chains: Joint ventures and acquisitions in

related area, e.g. colour printing, software tools, fax system, networked
equipment.
4. Subject to obsolescence from new channel: None

5. Often complex collaborative ownership: None
6. Controls channels of distribution to customers: None
7. Utilising data-intensive analytic processing: None
8. Firm-specific competencies: Patented technology of xerography (up to
1970s); powerful brand synonymous with copying process.

CHAPTER:- 11
LIMITATION AND
FURTHER SCOPE OF
RESEARCH

In this project we have used only secondary data. Our project is lack of primary data.
Today in the era of cut through competition, most of the organizations want to reduce
lead time for their new or innovative product. So it leads to ‗Globalization of
innovation process‘ in which innovation process is divided in several steps and work
on each single step done at the same time in different parts of the world. It also
enhances local adaption of product, because it enables customization. So interested
candidates will go for the more depth of ‗Globalization of innovation process‘
There are mainly 2 types of innovation; Incremental & Radical innovation. Both
innovations require different types of resources, technology support, and
management. So in future He/ She may identify and study different resources,
technology support, and management which will be required for both type of
innovation separately.
In product innovation we have mentioned 4 major forces that affect performance of

innovative product. But we are sure that there are many other forces that affect the
performance. It will be interesting topic for further research. Process innovation is too
complex process, so limitation is that, it is somewhat more technical, so technical
person have good scope in process innovation.
By practising TQM, 5R, 5S, Lean manufacturing system, JIT system, 6-sigma, almost
production excellence has been achieved. If we talk about India, because of poor
infrastructure, logistic will remain darker side of management. So lot of work has
been required to improve logistic system.
Some companies like Apple, Microsoft, GE are excellent to attract and retain
innovative workforce, while on another side some innovative project failed with only
the reason of ‗stability of innovative workforce‘. So various HR tactics which can
identify, motivate, retain innovative people. It may be an interesting topic for
researcher.
Up to now, idea diffusion phase has been proved to be more risky for organizations.
So interested candidates may find reason for that and also find our precaution which
has been required at idea diffusion phase.

At last from case studies, we have identified 9 ‗various business platforms‘ which will
be useful during innovation for obtaining excellence performance. These 9 variables
may increase over the time as business became more complex.

CHAPTER: - 12
CONCLUSION

Foster of
Knowledge
continuous
management
innovation by
management
Product Process Inventory Human

management resource
and Logistics management
Business
platform
variables and
Technical
platform
variables
Innovation
management
Fig no. 13: Conclusion

As per our objective and figure13 we started with different innovation in product,
process, inventory management & logistics and human resource management. We
studied the different types of innovation and innovation management techniques and
tools. We also went through for some case studies in the same and conclude that
continuous innovation in the activities of the organization is necessary as well as
management of the same is necessary for that knowledge management of the
organization had to play a crucial role.
Knowledge is an asset for any organization. Knowledge management helps any

organization to achieve a competitive advantage through innovation. So in that we
conclude that knowledge management is playing a key role in innovation
management.
As mentioned in the figure no.13 management role in fostering continuous innovation

is important. In that we discussed about the idea generation model. For the storage
and implementation of that idea KM is very crucial. Continuous foster by the
management helps the organization for continuous innovation in product, process,
inventory management & logistics and HRM.
Continuous innovation is measured on two variables. These variables are also the
mechanism of continuous and successful innovation management. In that part we
included two cases and measures companies innovation on that variables. A company
have to introduce incremental as well as radical innovation in any part of the business
activities according to mechanism of the given variables.

CHAPTER: - 13
BIBLIOGRAPHY

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 Innovation: creating best practices of tomorrow, By- Paul Sloane.
 An integrated approach to managing innovation, A white paper, project leader
international Ltd.
 Mapping your innovation strategy, By- Scott D. Anthony
 Technology & innovation, A working paper, July 2007, IIM- Banglore

ROLE OF KNOWLEDG MANAGEMENT IN INNOVATION

MANAGEMENT
 How does KM influence the innovation and competitiveness by Alberto

Carneiro.
 KM and innovation performance by Bengt-A° ke Lundvall and Peter Nielsen
Aalborg University, Aalborg, Denmark.
www.emeraldinsight.com/0143-7720.htm
 Macro process of knowledge management for continuous innovation by Jing
Xu, Re´my Houssin, Emmanuel Caillaud and Mickaei Gardoni
 Fostering innovation and knowledge creation: the role of management context
by Nekane Aramburu, Josune Sa´enz and Olga Rivera
 The role of knowledge management in innovation by Marina du Plessis
 Supporting Innovation with Knowledge Management by Marjan Leber,
Andrej Polajnar, Petja Pizmoht, and Iztok Palcic, University of Maribor
Slovenia.
Book:
 Kenneth C. Laudon, Jane P. Laudon by Management Information System(10e,

Pearson prentice Hall, Page No. 462-500)
BUSINESS PLATFORM VARIABLES THAT INFLUENCE INNOVATION

MANAGEMENT
 The use of strategies in managing technological innovation by Jarunee

Wonglimpiyarat.
 http://www.zaipul.com
 www.emeraldinsight.com/1061-0421.htm

Innovation Management

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Innovation Management

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INNOVATION MANAGEMENT

In partial fulfillment of the requirements of

For the award of the degree of

Tolani Institute of Management Studies

Second part (CH-4) provides exhaustive information on product innovation. In which

Forth part (CH-6) focuses on inventory and logistics management. In inventory

Tolani Institute of Management Studies, Adipur Page 2

Sixth part (CH-8) focuses on fostering continuous innovation. It provides information

Seventh part (CH-9) contains role of knowledge management in innovation

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Sr. No. Description Page no.

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Sr. No. Description Page no.

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Sr. Description Page

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Sr. Description Page

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Sr. Description Page

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Sr. No. Abbreviations Full form

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LIST OF CASE STUDIES

Sr. No. Case studies Page No.

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We hereby declare that the project work entitled ―INNOVATION

Name: Bharat A. Lalwani (09054)

Name: Rajkumar D. Patel (09078)

Date: February 2011

Tolani Institute of Management Studies, Adipur Page 12

We wish to express our gratitude to ‗TOLANI INSTITUTE OF

We are grateful to Dr. Tejash Pujara (Assistant Professor& Head- Corporate

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1.1 CREATIVITY AND INNOVATION

In simpler words, innovation involves successful implementation of creative ideas.

1.2 INNOVATION VS INVENTION

The US federal advisory committee on measuring innovation defines innovation as

The Australia‗s most comprehensive Innovation Survey (1996) defines, ―An

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First at the level of an individual firm, Innovation is defined as the application of

The definition of innovation can be divided into two perspectives, namely

1.4 NEED FOR INNOVATION

As Nicholas Stein (2000) correctly mentioned, Innovation is at the heart of sustaining

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An important study done on the rate of return of 17 successful innovations shows a

1.5 KINDS OF INNOVATION

1.5.1 Incremental Innovation

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1.5.2 Radical Innovation

1.6 GLOBALIZATION OF INNOVATION PROCESS

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1.6.1 Access to global expertise and know-how

In China, 61% of undergraduates are studying for a science or engineering degree.

Moreover, restrictive immigration policies in industrialized nations, especially in

1.6.2 Reduce bottlenecks in the R&D pipeline and shorten time-to-market

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time-critical projects, The shortened time-to-market may be crucial to ensure large

1.6.3 Meet demand for localized products in external (fast-growing) markets

1.6.4 Relieving cost pressures

1.6.5 Proximity to production centers

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1.6.6 Learning from ―lead markets‖