©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 7 Producing Value via Innovation
1
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 7: PRODUCING VALUE VIA INNOVATION
A. IntroductionB. Product Innovation FrameworkC. Product Innovation: Idea GenerationD. Product Innovation: Preliminary AssessmentE. Product Innovation: Business Case PreparationF. Product Innovation: Product DevelopmentG. Product Innovation: Test Market & ValidationH. Product Innovation: Full Production & Follow-upI. Process Innovation
2
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
A. INTRODUCTION3M CORPORATION
3
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
A. INTRODUCTION 3M CORPORATION
Watching a movie on a mobile phone screen can be somewhat of an eyesore, and it is quite difficult to watch the movie with someone else. A new breed of projectors, however, is ushering in a new age for mobile phones, mp3 players, and other devices. For example, 3M’s MPro120 Pocket projector is a handheld device that can project high-quality images from 8 to 50 inches. A device that is approximately the size of a small TV remote control, this innovative product uses LED lamp technology that enables the device to run without any internal cooling system. Moreover, this technology enables the projectors to run for four hours while still keeping the total weight at 5.6 ounces1. Compatibility with personal computer formats, DVD players, iPods/iPhones, and other mobile phones ensures that this product will be enjoyed by many consumers
4
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
A. INTRODUCTION 3M CORPORATION
1. MPro 120 Projector
2. Pollution Prevention Pays (3P)
a. Reduce emissions
b. Eco-design of its products responds to customer demand for environmentally lean products
c. Life cycle management reviews
5
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
A. INTRODUCTION
2. Innovationa. Effort to create purposeful, focused change
in an enterprise’s economic, social, and ecological potential
b. Product innovation a. New goods and service that offer improvements in
technical abilities, functional characteristics, ease of use, and other dimensions
c. Process innovation a. Novel techniques for producing goods and services.
6
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
B. PRODUCT INNOVATION FRAMEWORK
1. Stage-gate a. Firms engage in a number of activities
between idea conception and the market launch of a product.
b. Stage: 1. Multi-functional phase that requires
interaction among marketing, R&D, production, and other activities internal and external to the firm.
7
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
B. PRODUCT INNOVATION FRAMEWORK
Idea Generation
Stage 1 Preliminary
Assessment
Stage 2 Business
Case
Stage 3 Product
Development
Stage 4 Testing & Validation
Stage 5Product LaunchGate points in the development process at which the firm
evaluates the potential for a product
Review8
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
C. PRODUCT INNOVATION: IDEA GENERATION
1. Idea Generationa. Sources:
1. Employees– Production blocking
2. Lead users
3. Vendors
4. Government
5. NGO’s9
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
C. PRODUCT INNOVATION: IDEA GENERATION
1. Idea Generationb. Internal events
1. Unexpected occurrences2. Incongruities3. Process Needs4. Market changes
c. External events1. Demographic Changes2. Changes in Perception3. New Knowledge
10
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
C. PRODUCT INNOVATION: IDEA GENERATION
1. Idea Generationc. GO-Kill
1. Distinguish must meet from should meet criteria
2. Funnel – not tunnel approach3. Criteria– feasibility, – strategic alignment, – synergy, – market attractiveness, – synergy with company’s core resources and
business4. No financial criteria11
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
D. PRODUCT INNOVATION: PRELIMINARY ASSESSMENT
1. Project teams: marketing, procurement, logistics, manufacturing, and R&D
A. Possess the capabilities to achieve the project’s objectivesB. Supported by resources and psychological support
2. MarketingA. Determine market potential and sizeB. On-line search for related productsC. Focus groups and interaction with key users to assess the likelihood
of marketplace acceptance of the product
3. ManufacturingA. Development feasibility B. Quantify the time and costs associated with manufacturing
12
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
D. PRODUCT INNOVATION: PRELIMINARY ASSESSMENT
4. GO-Killa. Not markedly different from earlierb. should meet criteria incorporate ideas from
sales and customersc. Financial criteria
1. Break even point
13
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
E. PRODUCT INNOVATION: BUSINESS CASE PREPARATION
1. Product Competitive Advantagea. Ecological benefits
2. Strategic Fit3. Market Attractiveness4. Core Competencies Relatedness5. Technical Feasibility6. Financial Risks and Rewards
14
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
E. PRODUCT INNOVATION: BUSINESS CASE PREPARATION
7. GO-Killa. Last stage before sizeable investmentb. Marketing
1. Assess consumer wants & needs2. Competitive analysis3. Patentability
c. Financial criteria1. Refined break even analysis
15
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
F. PRODUCT INNOVATION: PRODUCT DEVELOPMENT
1. Marketing and manufacturing activities move in parallel
2. Marketing a. Track the potential for the product
b. Obtain customer feedback concerning the ecological, social, and economic value
c. determine the extent to which consumers1. Understand, recognize, and value the benefits derived from the
product
3. Manufacturinga. Develop product prototype
b. Assesses the technical feasibility of the new product
16
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
G. PRODUCT INNOVATION: TEST MARKET & VALIDATION
1. triple bottom line criteria a. Must be observable in the test runs of the production
process
2. Manufacturinga. Observe by-products are provided by manufacturing
b. Examine the amount of greenhouse gases produced
c. Offset the cost of this operation by making carbon dioxide available to industry or via carbon offset trading
17
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
G. PRODUCT INNOVATION: TEST MARKET & VALIDATION
3. Marketinga. Determining the level of interest and
acceptance among consumers
b. Test market: implement a complete market strategy in a single market over a short-term horizon
1. Provides new information about consumer responses to products
2. Provides an estimate of sales and profitability
18
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
G. PRODUCT INNOVATION: TEST MARKET & VALIDATION
4. GO-Killa. Last stage before sizeable
investment
b. Financial criteria1. Estimate potential sales
2. Economic, social, & ecological product costs
3. Estimate profit potential19
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
H. PRODUCT INNOVATION: FULL PRODUCTION & FOLLOW-UP
1. Review product development process a. Reconcile marketplace and production realities
against the projectionsb. Data associated with
1. Expenditures, 2. Revenues, 3. Profits, 4. Timing 5. Compared to related projections 6. Identify opportunities to learn from the new product
development process c. Exercise should be performed regardless of the
degree of success with the project.20
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
I. PROCESS INNOVATION
1. Standardized processes a. enhance communications and information
systems across departments and firmsb. hand-off sub-components and products
efficiently between functional groupsc. outsource activities more easily
21
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
I. PROCESS INNOVATION
2. Operational standards enable the firm to evaluate operations
a. standards emerge due to the simultaneity activity in multiple organizations and locations
1. Supply Chain Operations Reference (SCOR) model
– detailed visibility of how work is accomplished– promotes team building – process improvement by addressing the entire supply chain
22
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
I. PROCESS INNOVATION
2. Operational standards enable the firm to evaluate operations
b. Process performance evaluation1. Compare results to external service
providers and competitors
c. Process management standards 1. assess how well processes are managed
2. evaluate the performance of alternative providers of a process
23
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
I. PROCESS INNOVATION
3. Theory of inventive problem solving a. Action dedicated to solving one issue often has
negative outcomes for another aspect of the system
b. Contradiction 1. Anything that limits the performance of a system
relative to its goal
24
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
I. PROCESS INNOVATION
•Illustrating how the present
process addresses a problem
•Identifies how a process works
•Identifies the materials,
information flows, and energy
associated with a process
•Specifies the input materials used
in a process
•Specify tools that transform the
process and the action undertaken
by the tool
Analyze Specific Problem in Detail
Match Specific Problem to an Abstract Problem
Search for an Abstract Solution
Transform the Abstract Solution into a Specific Solution
25
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
I. PROCESS INNOVATION
1. Contradiction matrix
a. Thirty-nine factors represent the potentially favorable or harmful outcomes associated with a process
b. Matrix matches each factor against all other factors in the matrix
c. At 39 factors, the number of potential constraints is 1482 (392 – 39)
26
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Contradiction MatrixWorsening feature 1. Weight of
moving object… 22. Loss of energy … 39. Productivity
Improving feature
1. Weight of moving object + 6, 2, 34, 19* 35, 3, 24, 37*...22. Loss of energy 15, 6, 19, 28* , + 28, 10, 29, 35*
...39. Productivity 35, 26, 24,
37*28, 10, 29, 35* +
* The numbers represent 40 abstract principles previously used to address the 1,482 abstract problems in the matrix:
2. Taking outSeparate an interfering property or part from an object.3. Local qualityChange an object's structure from uniform to non-uniform, or make each part fulfill multiple functions.6. UniversalityMake a part or object perform multiple functions, or eliminate the need for other parts.
24. IntermediaryUse an intermediary process or an intermediary carrier article, or temporarily merge one object with another.26. CopyingReplace unavailable, expensive, fragile object with simpler and inexpensive copies28. Mechanics substitutionReplace a mechanical means with a sensory means, or use magnetic and electric fields to interact with the object. 29. Pneumatics and hydraulicsUse liquid or gas parts of an object instead of solid parts
27
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
I. PROCESS INNOVATION
Analyze Specific Problem in Detail
Match Specific Problem to an Abstract Problem
The auditing process in the auto industry requires personnel to count and report on location of inventory.Hand-held computers process information, but the amount of transmissions requires large, heavy capacitors (batteries). How can we lighten the load & still complete the audit?
How can we lighten the load & still complete the audit?Abstract: reduce the loss of energy without increasing product weight.
•illustrating how the present process addresses a problem•identifies how a process works•identifies the materials, information flows, and energy associated with a process •specifies the input materials used in a process •Specify tools that transform the process and the action undertaken by the tool
28
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Contradiction MatrixWorsening feature 1. Weight of
moving object… 22. Loss of energy … 39. Productivity
Improving feature
1. Weight of moving object + 6, 2, 34, 19* 35, 3, 24, 37*...22. Loss of energy 15, 6, 19, 28* , + 28, 10, 29, 35*
...39. Productivity 35, 26, 24,
37*28, 10, 29, 35* +
* The numbers represent 40 abstract principles previously used to address the 1,482 abstract problems in the matrix:
2. Taking outSeparate an interfering property or part from an object.3. Local qualityChange an object's structure from uniform to non-uniform, or make each part fulfill multiple functions.6. UniversalityMake a part or object perform multiple functions, or eliminate the need for other parts.
24. IntermediaryUse an intermediary process or an intermediary carrier article, or temporarily merge one object with another.26. CopyingReplace unavailable, expensive, fragile object with simpler and inexpensive copies28. Mechanics substitutionReplace a mechanical means with a sensory means, or use magnetic and electric fields to interact with the object. 29. Pneumatics and hydraulicsUse liquid or gas parts of an object instead of solid parts
29
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
I. PROCESS INNOVATION
Analyze Specific Problem in Detail
Match Specific Problem to an Abstract Problem
Search for an Abstract Solution
Transform the Abstract Solution into a Specific Solution
The auditing process in the auto industry requires personnel to count and report on location of inventory.Hand-held computers process information, but the amount of transmissions requires large, heavy capacitors (batteries).
How can we lighten the load & still complete the audit?Abstract: reduce the loss of energy without increasing product weight.
Via 28. Mechanics substitutionReplace a mechanical means with a sensory means, or use magnetic and electric fields to interact with the object.
Install photo-voltaic cells on hand-held devices.
30