Assessment of Front-End Innovation Activities in Danish Mechatronic Companies

Transcription

1 MBA dissertation Assessment of Front-End Innovation Activities in Danish Mechatronic Companies Svend Haugaard / The Henley logo is property of Henley Management College 1

2 Contents Research Questions Research Methodology Literature Review Field Study Recommendations References 2

3 Research Questions What sources of ideas (innovation opportunities) should be leveraged? What front-end innovation activities should be stimulated and pursued? What innovation process should be in place to support business success? 3

4 Research Methodology Literature Review What do experts say about innovation? Field Study Questionnaire Interviews Compare and Contrast What do companies perform well? What could be improved? 4

5 Literature Review Definitions Creativity Innovation What do experts say about innovation? 5

6 Creativity and Innovation Creativity: The production of novel and useful ideas in any domain Innovation: Successful implementation of creative ideas within an organisation 6

7 Innovation Model Innovation Ideas Incubation Implementation Beneficial change Commercialisation Creativity Future needs Motivation Source: Own creation 7

8 Types of Innovation Type Description of change Examples Product Process Position Paradigm Things an organisation offers How things are created and delivered Context in which things are introduced to market Underlying mental models framing what the organisation does New product design New manufacturing process SmithKline Beecham relaunched convalescence drink Lucozade as a fitness drink From handmade cars to Ford T Recent shift to low-cost airlines Source: Tidd et al,

9 Innovation Space Incremental Paradigm Radical Process Innovation Product Business strategy Source: Tidd et al, 2005 Position 9

10 Degrees of Innovation (1) Extent of process change New core process Next generation process Platform Innovation Breakthrough Innovation Upgrade Incremental change Incremental Innovation Derivatives and Enhancements Addition to product family Next generation product New core product Extent of Product Change Source: Wheelwright and Clark,

11 Degrees of Innovation (2) Technology New Near to the Existing Semi-Radical Technology Driven Incremental Radical Semi-Radical Business Model Driven Near to the Existing New Business Model Source: Davila et al,

12 Degrees of Innovation (Summary) Risk & Reward High Medium to high Low Degree Radical Semi-radical Technology Semi-radical Business Model Platform Incremental Characteristics Creative destruction; New entrants; Disruptive technologies; New features; 5x performance; Cost -30%+; New core process and product Product and service; Process technology; Enabling technology Small change to business model Value proposition; Value chain; Target customer Small change to technology Next generation product and process architecture Small continuous product and process changes Source: Own creation 12

13 What is a need? Need - A lack of something requisite, desirable or useful - A condition requiring supply or relief (Merriam-Webster Online Dictionary) 13

14 Problem Type Domain Incremental innovation Tame problems Radical innovation Wild problems Solution known and agreed No Yes Complex problems Design better product Simple problems Leaking sink Wicked problems Issues Options Arguments Solution in search of problems Source: Rittel, 1973 Yes No Problem root cause known and agreed 14

15 Sources of Ideas Source: Cooper and Edgett,

16 Most profitable sources of innovation Degree Radical Platform Source Close contact between engineers/scientists and End Users Senior R&D management Source: Koen and Kohli, 1998 Hippel, 2005: Companies should identify and work in close cooperation with Lead Users Lead Users: Experience needs still unknown to the bulk of the market Benefit greatly if they obtain a solution to these needs 16

17 Front-End Innovation Framework Source: Cooper, 2001 Stage-Gate is a trademark of Innovation Management U3 17

18 Generic Strategy How do you intend to compete? Broad Market focus Focused Cost Leadership Differentiation Source of competitive advantage (Source: Adapted from Porter, 1980) 18

19 Growth Strategy How do you intend to grow your business? New Markets Market Development Diversification Existing Markets Market Penetration Product Development Existing Products New Products (Source: Adapted from Sondhi, 1999) 19

20 Innovation Strategy (1) 1. Define goals for NPD efforts - Specific, measurable, achievable, realistic and time-bound objectives. 2. Select areas of strategic focus - External analysis of markets and industry structure. - Internal analysis of value chain and core competencies. 3. Attack and entry strategy - Cost leadership, differentiation or focus strategy. - Options: Internal NPD, licensing, joint ventures or acquisitions. 4. Strategy deployment - Resource commitment and allocation, priorities and budgeting. 5. Strategic product roadmap - Major initiatives and platform developments. - Technology roadmaps for relating technology to products. 6. Tactical implementation - Portfolio management to select, resource and prioritise projects. - Balance risk and reward. Source: Cooper, 2001 Too rigid for a dynamic business environment 20

21 Innovation Strategy (2) Political Economic Social Technological Environmental - Legal Life Cycle Growth rate Suppliers Competitors Customers Substitutes New entrants Value Chain Product portfolio Competencies Incentives Innovation budget Ressource balance Metrics Source: Sondhi, 1999 Creativity Impact & Influence Creativity Generic strategy Growth strategy Recognises business dynamism 21

22 Discovering and Incubating Ideas Source: Cooper and Edgett, 2007 Make someone responsible for managing the I-Group 22

23 Gate 1 Scorecard Source: Cooper (2007b) 23

24 Scoping Ideas Technology Readiness Market Readiness Commercial Readiness Management Readiness Source: Cloverleaf Model adapted from Heslop et al,

25 Building the Business Case Project and product definition - Project scope - Target market - Product concept - Product benefits - Value proposition - Market positioning strategy - Price point - Product features and attributes - Performance requirements Project justification - Business issues - Financial issues - Profitability - Risk - Strategic rationale - Competitive advantage - Market attractiveness - Options for partnering and outsourcing Project plan - How and by whom will tasks be done - Resources needed money, people and equipment - Stage 3 detailed plan, other stages less detailed Source: Cooper,

26 Literature Review Summary Strategy Structure Style Staff Skills Shared values Systems Source: Own creation Innovation for sustainable competitive advantage; Innovation Space; Leverage internal and external sources of ideas Close contact between engineers/scientists and End (Lead) Users; Balanced cross-functional project teams; I-Group Committed to strategy; Seeking opportunities and early information; Fail early but avoid mistakes; Recognise dynamism of environments Motivation for generating new ideas Ability to manage new technologies in product development; Creative thinking; Expertise within professional field of knowledge; Problem solving (Tame & Wild problems) Care to understand user requirements that are new to organisation; Knowledge sharing across organisational entities Linking processes of creativity and innovation; NPD framework e.g. Stage-Gate ; Idea Vault 26

27 Field Study How do companies innovate? Online questionnaire Interviews 27

28 Purpose of Organisation 3% 10% 7% 0% Mechatronic products Education Consultancy Public service No response 80% 28

29 Age of Organisation 17% 53% 13% <= Old New 17% 29

30 Size of Organisation 21% 17% 13% Small 501+ Large 32% 17% 30

31 Main Industries / Markets 4% 13% Agriculture Automotive 20% 5% Chemicals and chemical products Construction and civil engineering 7% Fishing 7% Food and beverage 11% Forestry 9% 0% Mining and quarrying incl. oil and gas Other 24% No response 31

32 Job Positions of Respondents 0% 18% Owner 46% Senior manager Middle manager Project manager Employee No response 36% 32

33 Generic Strategy Findings Total Age Size 300 >300 Focused Differentiation 77% 29% 48% 32% 45% Broad Differentiation 27% 18% 9% 9% 18% Focused Cost Leadership 5% 0% 5% 5% 0% Broad Cost Leadership 0% 0% 0% 0% 0% 109% ~ Poor focus? (>100%) 33

34 Growth Strategy Findings Total Age Size 300 >300 Existing markets and products (Market penetration) 73% 32% 41% 27% 46% Existing markets, new products (Product development) 59% 20% 39% 32% 27% New markets, existing products (Market development) 41% 23% 18% 18% 23% New markets and products (Diversification) 14% 9% 5% 9% 5% 187% ~ Poor focus? (>100%) 34

35 Strategy and Innovation 5% 0% 10% Yes, innovation is included in writing and communicated by top management Yes, not in writing but communicated by top management No, innovation is not included in our business strategy Other 19% 66% No response 35

36 Importance of innovation Findings Total Age Size 300 >300 Very important 33% 11% 22% 19% 14% Important 48% 29% 19% 14% 34% Somewhat important 10% 5% 5% 5% 5% Less important 5% 0% 5% 5% 0% 36

37 Degrees of Innovation Findings Total Age Size 300 >300 Incremental 75% 27% 48% 35% 40% Semi-radical Tehnology 50% 30% 20% 20% 30% Semi-radical Business Model 25% 15% 10% 20% 5% Platform 25% 13% 12% 12% 13% No innovation 10% 5% 5% 0% 10% Radical 0% 0% 0% 0% 0% 37

38 Expected Changes within 3 Years 2 2 Incremental 3 1 Platform More of it 3 1 Semi-radical Business Semi-radical Technolory Radical Same as today Less of it Don't know No answer 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 38

39 2 Issues of Business Strategy and Innovation Long-term plan Resources balanced Low 1 Innovation budget Licensing etc. Fast follower Innovation leader Internal capabilities Goals communicated Strongly agree Agree Neither agree or disagree Disagree Strongly disagree N/A No answer 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 39

40 Predicting Business Future < 44% 40

41 Types of Projects OK for minor product variants For new products with fundamental changes Project Focus Customer Systems Process Management 7% Operations management 57% Management by projects 7% Project management 29% Source: Adapted from Turner et al (1996) Routine Novel Nature of Work OK if customers requirements are known & stable OK if projects have defined goals and work methods 41

42 Position in chosen project 6% 28% 11% Chairman of the project steering committee Member of the project steering committee Project manager Member of the project team 33% No response 22% 42

43 Sources of ideas in chosen project R&D employees Lead users Existing customers Senior managers Project managers Competitors Suppliers Non-R&D employees Internal sales and service Consultants Middle managers Academia Trade show or exhibition Trade association Joint venture Others 0% 10% 20% 30% 40% 50% 60% 70% 80% 43

44 2 Issues of capturing ideas Fundamental R&D 1 Platform management 3 End user contact Reward Review ideas Storing ideas Strongly agree Agree Neither agree or disagree Disagree Strongly disagree N/A No answer 2 Capturing ideas 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 44

45 Initial screening of new ideas 45

46 2 Developing ideas 1 3 Poor (external) market focus? 46

47 Risk Analysis < 50% 47

48 Initiating the project Formal checklist Impact on other projects Project time schedule Financial analysis Manufacturing Product concept Competing products Strongly agree Agree Neither agree or disagree Disagree Strongly disagree N/A Strategic consequences? No answer Users' needs and wants 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 48

49 Outcome of Innovation How many new ideas were captured by your organisation in 2007? How many % of your turnover in 2007 was due to products launched within the last 3 years? How many % of your turnover was spent on developing new products and services in 2007? No specific answers 49

50 Interviews 4 interviews Old & small organisation Old & large organisation New & small organisation New & large organisation Interviews confirmed the results of the online questionnaire 50

51 Recommendations for Improvements to Business Practice Perform a gap analysis of current business practice vs. Best practice (literature study) Actions to consider: Define sustainable competitive strategy with future scenarios and strategic options Add business process for capturing and incubating new innovative ideas Add business process for scoping and screening new innovative ideas Improve business practice for building the business case Seek advice from consultants and share experiences with other organisations 51

52 Sustainable competitive strategy Source: Sondhi,

53 Discovering and Incubating Ideas Senior managers Other managers Sales & service R&D Non R&D Suppliers Joint venture Existing customers Lead users Consultants Competitors Trade associations Trade shows & exhibitions Academia (Universities etc.) Type of innovation Product Process Position Paradigm Source: Cooper, 2001 Degree of innovation Radical Semi-radical Tehnology Semi-radical Business Model Platform Incremental No innovation 53

54 Scoping and Screening Ideas Source: Cooper, 2001 Stage-Gate is a trademark of Innovation Management U3 G1 Preliminary market assessment Preliminary technical assessment Preliminary financial assessment G2 Can we sell it? Canwemakeit? Will it make money? 54

55 R4: Building the Business Case Source: Cooper, 2001 Stage-Gate is a trademark of Innovation Management U3 G2 Project and product definition Project justification Portfolio management Project plan G3 55

56 References Cooper, R. G. (2001) Winning at New Products Accelerating the Process from Idea to Launch, 3. Edition, Basic Books Cooper, R. G. (2007) Generating Breakthrough New Product Ideas, Seminar by Innovation Management U3, Copenhagen October 8, 2007 Cooper, R. G. and Edgett, S. J. (2007) Generating Breakthrough New product Ideas, Product Development Institute Davila, T., Epstein, M. J. and Shelton, R. (2006) Making Innovation Work: How to Manage It, Measure It and Profit from It, Wharton School Publishing Heslop, L. A., McGregor, E. and Griffith, M. (2001) Development of a Technology Readiness Assessment Measure: The Cloverleaf Model of Technology Transfer, The Journal of Technology Transfer, Vol. 26, No. 4, pp Hippel, E. von (2005) Democratizing Innovation, The MIT Press Porter, M. (1980) Competitive Strategy; Techniques for analyzing Industries and Competitors, The Free Press Rittel, H. W. J. and Webber, M. M. (1973) Dilemmas in a General Theory of Planning, Policy Sciences, pp Sondhi, R. (1999) Total Strategy, Airworthy Publications International Ltd. Tidd, J., Bessant, J. and Pavitt, K. (2005) Managing Innovation. Integrating Technological, Market and Organisational Change, John Wiley & Sons Ltd. Wheelwright, S. C. and Clark, K. B. (1992) Revolutionizing Product Development: Quantum Leaps in Speed, Efficiency, and Quality, Free Press Additional references are used in the full dissertation report 56