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  • Lesson 1
  • Lesson 2
  • Lesson 3
  • Lesson 4
  • Lesson 5
  • Lesson 6
  • Lesson 7
  • Lesson 8
  • Lesson 9
  • Lesson 10
  • Lesson 11
  • Lesson 12
  • Lesson 13


Jiří Vacek vacekj@kip.zcu.cz Department of Management, Innovations and Projects UWB, Faculty of Economics Summer semester 2009/10

Lesson 1
Introduction Basic concepts Importance of innovations

• Systematic collection of all impulses that could lead to innovation • Creativity of employees • Ability to evaluate the possibility of the innovation idea • Good team work • Project-based approach and ability to manage projects

• Cooperation with external experts (universities, research laboratories…) • Proper rate of risk-taking • Employees’ motivation (the employees are willing to improve the product and the operation of the whole company) • Continued education of employees • Ability to finance the innovation activities

Definition of innovation - 1
• ―Technological innovations are defined as new products and processes and major technological modifications to products and processes. An innovation is considered performed if it is introduced to the market (product innovation) or implemented in the production process (process innovation). Innovation includes many research, technological, organizational, financial and commercial activities.

Definition of innovation - 2
• R&D represents only one of these activities and can take place during various stages of the innovation process. It can play not only the role of the original source of the innovation ideas but also the role of problem solution framework, which can be turned to at any stage of the implementation.„ OECD, Frascati Manual 1992

• Organisational innovation – A new organisational method in business practices. equipment and/or software. software in the product. user friendliness or other functional characteristics. workplace organisation or external relations. product promotion or pricing.Oslo Manual • Product innovation – A good or service that is new or significantly improved. components and materials. This includes significant improvements in technical specifications. . This includes significant changes in techniques. • Marketing innovation – A new marketing method involving significant changes in product design or packaging. product placement. • Process innovation – A new or significantly improved production or delivery method.

invention. • Social innovations – in critical historic periods more important than technological ones (mail.• Technological innovations – based on specific technology. social systém. health care. discovery. …) . educational systém.

DEGREE OF NOVELTY • Incremental innovations • Radical innovations • Systemic innovations .

nanotechnology Improvement of components COMPONENT New Advanced components for materials existing systems improving component properties RADICAL „new for the world― INCREMENTAL „do better what „new for the we already do― company― . computers.Classification of innovations SYSTEM New series of cars. planes. TV New generation (MP3 and download as substitution of CD) Steam engine. biotechnology. ICT.

different. Innovators do not view any change as a threat but as an opportunity . It is always based on change.INNOVATION PROCESS • Research and development (R&D) • Production • Marketing Innovation is an opportunity for something new.

FOCUS • Use the limited resources in the most effective manner. focus on one of the following: – Operational output – Top-quality products – Perfect knowledge of customers .

RECOMMENDATIONS • Solve the correct problem correctly – be effective and efficient • Manage innovation as a project • Analyze risks • Use models. computer simulation • Study examples of succesful and unsuccesful innovation projects . scenarios.

2. Effective innovations are surprisingly simple. ask questions. They must be focused on specific needs and on specific final products.WHAT TO DO 1. 4. listen 3. A successful innovation always tries to win a leading position. otherwise you create opportunities for your competitors. . 5. Effective innovation start on a small scale. Go among people. Start with analysis and study of opportunities.

WHAT TO AVOID 1. 2. Don’t try to make innovations for the future but for today. Don’t try to be too ―clever‖. 3. An innovation can have a long-term impact but there must be an immediate need for it. . Focus on the core of the problem. All that is too sophisticated will almost certainly go wrong. Don’t try to do too many things at once.

cleverness or knowledge. Innovation must focus on a market. hard. concentrated and thorough work. 2.Three conditions for innovations 1. Successful innovations must build on your strong points. Innovation means work. The innovation must be important to the innovator. must be controlled by the market (market-pull). 3. . If these qualities are lacking then there is no use for the big talent.


intensive care beds. • Nursing-care products • Nursing beds. bedside cabinets. mattresses and other furniture. .Linet Želevčice • Hospital products • Hospital beds. bed accessories. medical furniture and other equipment increase the comfort of patients and help the nurses.

No comment … 1990 2005 .

Customized – the machines developed for the specific customer according to its requirements – market pull 2. Prototypes – there is no specific customer – market push .TOSHULIN Development of new machines: 1.

5 6 .6 2 5 .7 1 0 .35 30 25 20 15 10 5 0 1998 2000 2002 2004 2006 8 .5 9 .6 9 .8 3 0 .2 2 ti me of del i v ery (i n months ) cus tomi zati on coeffi ci ent (%) 9 .7 2 2 .7 2 8 .9 12 1 0 .8 8 .5 .4 8 .9 1 4 .3 9 .8 6 .8 9 .

however.Types of design engineers spouter of ideas suggests designs and problem solutions without detailed consideration of all possible results and consequences system designer finisher of ideas elaborates independently in details the ideas which he gets to elaborate routine engineer efficient and reliable engineer. without creative approach attendance engineer performs routine tasks examines all ideas and thoughts systematically [1%] [5%] [54%] [30%] [10%] .

Contipro Connective tissue products RNDr. . Vladimír Velebný. CSc.

Holding – current state 167 employees sales (2008) – 242 mil Kč export – 98% of total sales one of the biggest produces of hyaluronanu inthe world 30% of the world market 60% of the European market Customers in 43 countries .

Sales in regions .

3 pillars of success 1. Maximum attainable quality 2. Sharing expenses with customers 3. Development of original products .

3m.3M and post-it notes http://www.com/us/office/postit/pastpresent/history_ws.html .

com/wps/portal/3M/en_US/Ab out/3M/ .3m.More about 3M A Century of Innovation The 3M Story http://solutions.

facilitate the use of electronic devices • online catalogue. by 100% in the following year http://corporate.com/about_us.aspx . CRM • Customer .iGO – distribution of bateries • Bateries and accessories for notebooks. cameras and other equipment • Vision: to develop and sell simple and elegant solutions. e-commerce. flexibility • Growth of sales by 80% in the first year.igo.targeted marketing. mobiles.

Adaptors • Patented technology iGo Technology. powering of mobile electronic devices using single (universal) adaptor. • Power Technology Patent Brochure (PDF) .

Bang & Olufsen
• www.bang-olufsen.com • VISION: „Courage to constantly question the ordinary in search of surprising, long-lasting experiences.― • Founded in 1925 in Struer, Denmark, Bang & Olufsen a/s is world renowned for its distinctive range of quality audio, video and multimedia products that represent our vision: Courage to constantly question the ordinary in search of surprising, longlasting experiences. Bang & Olufsen employs over 2.550 staff members and had a turnover of DKK 4.092 million (EUR 548,6 million) in the 2007/2008 financial year. • Bang & Olufsen manufactures a highly distinctive and exclusive range of televisions, music systems, loudspeakers, telephones, and multimedia products that combine technological excellence with emotional appeal. Bang & Olufsen products are sold by over 1.200 dealers in more than 100 countries in an extensive network of retail stores. Approximately 65% of these stores are B1-stores, which exclusively sell Bang & Olufsen products. The B1 stores account for 81% of the total turnover. • Production also in the Czech Republic

Bang & Olufsen – products

More case studies
• IBM Case Studies:
http://www.ibm.com/search/?en=utf&v=14&lang=en&cc=u s&lv=c&q=case+study+innovation&x=13&y=5

• Industry podcasts: Midsized clients and
experts in seven industries share their insights http://www1.ibm.com/businesscenter/smb/us/en/mbpodcasts?&ca=s mbIndustryPodcasts101706&tactic=&me=W&met=inli&re =smbibmcomTopPagesIndustriesPromo1usen101706

More case studies
• Sustainable energy (hydrogen, fuel cells, biofuels, zero emission, … http://ec.europa.eu/research/energy/nn/nn_pu/ar ticle_1078_en.htm • http://www.zoner.com/ • http://www.kerio.com/

The most important innovations in last 30 years
• http://www.pbs.org/nbr/site/features/specia l/subdir/top-30-innovations_slide-show/

Lesson 2
Disruptive and open innovations

which are chepaer and targeted to new or less demanding customers. more user-friendly products. incumbents win • disruptive – commercialization of simpler. new entrants win .Innovation categories • sustaining – better products that can be sold with higher margin to demanding customers.

Companies focus on better products to be sold with higher margin to unsatisfied customers.Key elements of disruption • • Customers at each market has limited absorption capacity Technological progress usually is faster that the ability of the market to employ it. .

both incremental and radical..Sustaining vs. Incumbents have resources and motivation. cheaper..) and focus on new or less demanding customers. . disruptive • Sustaining: focused on demanding customers. • Disruptive: introduce products and services not as advanced as existing ones. more user friendly. . but offering other advantages (simpler.

Harvard Business Press.Clayton M. Christensen: The Innovator´s Solution. 2003 .

. not to defend themselves on „inferior― ones.• Due to technological progress the trajectory of the disruptive innovation after some time crosses the trajectory of demands of more demanding customers and starts to replace incumbents who are not principally ready to react adequatelly. as they are motivated to suceed at „better― markets.

Harvard Business Press. 2003 . Christensen: The Innovator´s Solution.Clayton M.

2003 . Christensen: The Innovator´s Solution. Harvard Business Press.Clayton M.

Clayton M. Harvard Business Press. 2003 . Christensen: The Innovator´s Solution.

Clayton M. 2003 . Harvard Business Press. Christensen: The Innovator´s Solution.

1 • Disruption is successful. phone. as it is easier to defeat competition that tries to escape than the competition who fights • Innovation must be disruptive for all companies in the industry • Ex. Internet – for Dell sustaining. .Conditions of success . they sold computers formerly by mail. etc.

Conditions of success - 2
• Following the trajectory upwards to market tiers where it is possible to attain higher margins is what good manager is expected to do. • Each company therefore prepares its own disruption. This is the innovator´s dilemma, but also the start of innovator´s solution. • The advice to new, growing firms: focus on products and markets ignored or neglected ba incumbents.

Two types of disruption
• New markets: compete with nonconsumption: simpler, more user frindly, can be used by less sophisticated customers (PC, transistor radio, desk copiers). • Low-end: focus on lower tiers of main markets (minimills, discount stores, Korean auto-makers); motivate incumbents to leave the market

Harvard Business School Publishing. ―Open Innovation‖. Boston MA.requires control • Open innovation – companies use external as well as internal ideas and both external and internal ways to market – internal ideas can be taken to the market through external channels to generate additional value ..OPEN INNOVATION • Chesbrough. H. 2003 • Closed innovation .

MIT Sloan Management Review.41 . 35 .Chesbrough H.W. Spring 203. p.: The Era of Open Innovation.


develop and market everything ourselves. We must work with clever people within and outside our company. we need absorption capacity. to employ it. If we develop the product ourselves. . We will win if we develop most of the ideas (an the best of them). To develop better business model is more important than to be the first in the market. Winner is who gets the innovation to the market first. often as internal R&D. R&D creates profit only when we invent. We will win if we make best use of internal and external ideas.Closed innovation All the best people are working for us Open innovation Not all the best people are working for us . We must have our intellectual property under control so that our competitors can make advantage of it. we will R&D can create profit even if we do not be the first on the market. External R&D can create remarkable value. initialize and perform it ourselves. We must be able to profit from others using our intellectual property and we must license the intellectual property if it supports our business model.

mainframe computers Mostly internal ideas Low workforce mobility Low role of the venture capital Few new businesses.Closed innovation Examples: nuclear industry. movies Many external ideas High workforce mobility Active venture capital Many new businesses Universities are not important as the sources of ideas and people . weak ones Universities are not important as the sources of ideas Open innovation Examples : PC.

. Value creation is necessary. distribution.Business model • • • Formulate value proposition. required for the product creation and distribution. the value delivered to the customer by the product based on specific technology. etc. however not sufficient condition of profitability.) necessary for supporting the company position in the value chain. users to whom the technology brings value and performs the job to be done. in production. i. Identify market segment. Define structure of the value chain.e. value creation is conditioned by: – – balance of forces among our business. ie.g. suppliers and competitors presence of complementary assets (e.

including identification of potential alternative producers and competitors. Formulate competitive strategy enabling to the innovative company to gain and keep competitive advantage. • .Business model– cont´d • • Specify the mechanism of profit creation and evaluate product cost structure and target margin Describe the company position in the value network that connects suppliers and customers.

Product architecture Hierarchy of connections between disparate functions within a system .

Interdependent Architecture System Component A Component C Component B .

because the relationships between the parts are not clearly understood • can be best managed through internal processes .Interdependent Architecture • changing one component requires changes in all other parts of the system.

Modular Architecture System Component A Component B Component C .

from ―plug and play‖ components whose interfaces are well understood • modular architecture makes it easy for many companies to innovate components without worrying about possible impact on other parts of the system .Modular Architecture • components could change without causing any change in other components • modular design enables to assemble system more easily.

NGOs.IMPLICATIONS FOR NPD • extended circle of company stakeholders customers. but also environmentally friendly. local and regional governments • not only superior quality. where X can be quite large and multi-faceted set • after-sale service plays an increasing role – and brings increased turnover and profit . aesthetically appealing new products • designed for X.

Lesson 3 Assessment of company innovation potential .

COMPANY INNOVATION POTENTIAL A company with high innovation potential scores high in the following areas: • Strategy and planning • Marketing • Technological process • Quality management • Logistics • Human resources .

each with four possible answers. it is important to know its innovation potential. The answers are formulated so that they reflect the existing situation in the company. . there are six question. It can use the questionnaire • For every of the six areas.INNOVATION POTENTIAL ASSESSMENT • For a company.

STRATEGY AND PLANNING 1. 2. 5. Idea about the company future Vision and employees Company innovation programs Plan modifications Financial indicators of the plan Project management .A. 6. 4. 3.

Evaluation of the market competition position 3. Monitoring of customers’ attitudes to the company product 5. MARKETING 1. Customer-orientation 4. Monitoring of current market trends 2. Marketing and financial control . Market information flow inside the company 6.B.

Future company’s competitiveness in the industry 2. Calculation of production costs and their monitoring 6. Evaluation of the return on investment 5. Creation of resources for development . TECHNOLOGICAL PROCESS 1. Collection of impulses for implementation of technology changes 4.C. Changes of technologies 3.

Monitoring of the environmental impact 5.D. QUALITY. External quality audit in the company 4. regulations and legislation in the sphere of quality and environment . Employees’ personal contribution to the quality system 3. Monitoring of changes conditioning the quality management in the company 2. Impact of quality monitoring on the company processes 6. ENVIRONMENT 1. Covering of costs resulting from modifications of standards.

Organization of purchase and distribution channels in the company 2. Introduction of innovations in logistics 6. Optimization of the company logistics 3.E. Logistics and financial control . LOGISTICS 1. Flexibility of logistics processes 5. Information and communication flows between the company and its partners 4.

4.F. ORGANIZATION AND HUMAN RESOURCES 1. 6. Employees satisfaction Employees motivation Management and communication Conflict resolution Company information system Company culture . 3. 5. 2.

0 3.5 1.0 B C D E F St ra te gy M ar ke tin g Te ch no lo gy Lo gi st ic s Q ua lity Pe op le .5 3.5 2.0 2.0 1.Innovation potential assessm ent A 4.

Innovation potential assessm ent Strategy 4.0 Logistics Quality Technology Marketing A B C D E F .0 1.0 People 3.0 2.



The objectives of process models .

Stage-gate process • R. in which the gatekeepers decide about the continuation of the process • Activities were standardized and the indicators of the process performance significantly improved. . 1960´s • phases with inputs and outputs specified beforehand • gates. Cooper.

2-nd generation SG process .

differentiating • Must meet: to kill not well proceeding projects as soon as possible • Should meet: prioritization.Evaluation criteria • Operational. realistic. support of portfolio management • Strategic buckets: resources allocated to various strategic goals .

Interdisciplinary view .

Fuzzy Front End (FFE. why. what will be final costs. which projects will be realized. not strictly documented. FEI) • quality of pre-development phases significantly influence the product success • early phases to a large extent influence. time. . and – in the end – the final success in the market • highly dynamic. creativity competes with systemization.

business opportunity and compliance with strategy . market segments. competitive position.Phase 0 • results in product concept. including preliminary identification of customer requirements.

.Incremental vs. we need more flexible approaches with iterations and parallelization of activities • successful radical innovations often use rapid or virtual prototyping even in the 0-th or 1-st phase. as it allows better visualization and communication of the product concept. radical innovations • Koen: systematic approaches using process models can be successful in the case of incremental innovations. where both business and technical uncertainty is rather low • whenever at least one of those uncertainties is high.

New concept development model • in the early phases it is not suitable to use the same approaches as in the later. more structured process phases .

Multifunction product and/or process development team Milestone achievement. with increasing certainty. and documentation as the product release date gets closer. Predictable. analysis. with a great deal of speculation. Unpredictable or uncertain. often chaotic. Variable Disciplined and goal-oriented with a project plan. Budgeted. Revenue Expectations Activity Measures of Progress Often uncertain. . minimize risk and optimize potential Strengthened concepts. Can schedule work—but not invention. Nature of Work Commercialization Date Funding High degree of certainty. ―Eureka‖ moments.Difference Between FFE and NPD Fuzzy Front End (FFE) New Product Development (NPD) Experimental.

New concept development model (NCD) Technology push Market pull .

NCD components • Engine: represents management support • Engine powers the five elements of the NCD model • The engine and the five elements are placed on top of the influencing factors. .

the product development team can "see" all the deliverables at the gates • TSG: gates are opaque.Technology stage-gate process (TSG) • Management of high-risk projects within and at the transition between the fuzzy front end and new product development • traditional SG: gates are transparent. the team can only "see" to the next gate and understands that the deliverable may change as the technology is developed .

Traditional and technology stage-gate processes .


Stage-gate process IDEA Gate 1 Idea screening Stage 1 Preliminary evaluation Gate 2 Detailed evaluation Stage 2 Product definition Gate 3 Decision to develop Stage 3 Development Gate 4 Decision to test Stage 4 Testing Gate 5 Decision to commercialize Stage 5 Commercialization EVALUATION .

that the whole project. taking into account the time value of the money. will generate net profit.Project feasibility • The stage-gate model divides the innovation process into five stages with gates. • Each phase has its cost.e. i. • To justify the project development cost. Traditionally we have to show that the project net present value is greater than zero. we should prove at the very beginning its feasibility. in which evaluators decide if to continue or kill the project. Usually only the last stage generate profits. duration and probability of success. .

• In many cases it is not suited to long-term NPD and R&D projects.DCF methods • The generally accepted method of evaluation of investment. as it penalizes projects with high risk and potentially valuable projects can be rejected or terminated. is based on discounted cash flows (DCF). . • The method is successfully used for investment projects with low level of uncertainty and duration from several months up to few years.

investments into NPD or R&D projects are incremental and the evaluators at the gates decides about the project fate on the basis of changing situation.Weakness of DCF methods • Do not take into account the typical nature of the NPD and R&D projects that can be divided into stages separated by gates. . deciding about project continuation or termination. However. • Financial models assume that the decision about the project realization is done at its very beginning and is irreversible.

duration and probability of success • The project is modeled by the probability tree. • The stage duration. is reflected in the net present value calculation. • Illustration: project with only two stages – development and commercialization . together with the discount rate.Project Expected Commercial Value (ECV) • Takes into consideration all three important characteristics of each phase – its cost.

Success pC Success pd YES Development YES Commercialization PV C NO ECV D NO Failure Failure ECV pd pc D C PV = project expected commercial value = probability of successful development = probability of successful commercialization = development costs = commercialization costs = net present value of expected project earnings ECV = [(PV * pc – C) * pd] – D according to [Cooper 2001] .

expected earnings $8M  project net present value $3M. • If tests are successful. . • Development costs and specific project risk are high resulting ECV negative (-$109 000) • according to this criterion. success probability 75%. assuming the weighted capital costs WACC = 12%. risk-free discount rate 5%. project should be rejected. the necessary investment into the technology is $5M.Example • The first stage (1 year): laboratory tests. • The second stage (2 years): field tests. success probability 50%. • Financial data are discounted.

265 .0 M DCF = $1.706M = 0.907-1.907M Stage 2 – Year 2 Cost = $0.0.5 M DCF = -$0.0.150 .5% x (1.109M 37.446M) = -0.5% x (1.356M 75% 12.907-(0.5 M DCF = -$0.Probability tree in project evaluation ECV = 0.356+0.399M Stage 1 – Year 1 Cost = $0.150M 25% 50% Stop 50% Stop 50% x (-0.399+0.223 = -0.201M) = -0.223M áccording to [Boer 2003] .446)) = = 37.5% x 0.265M Stage 3 – Year 4 NPV = $3.5 M DCF = -$0.5% x (-1.446M Stage 2 – Year 3 Cost = $0.201) = = 37.

Real options
• The concept of real options is closely related to financial options that found their place in financial markets in recent decades. Real options relate to company opportunities and emphasize the basic idea that risk can bring the competitive advantage and as such it should be rewarded. • The application of the real options theory is briefly described in [Boer 2003], the related website contains further information and references to more detailed resources. Here we will give only a brief account of basic concepts and terminology.

Two kinds of risks
• specific risk • market risk

Specific risk
• Specific for the partial situation • At lest partly under your control (e.g. risk of a fire or risk of project failure) • Can be diversified - we can use insurance to share fire risk and maintain the diversified project portfolio to protect against the risk of project failure • Therefore the market does not pay any premium for specific risks • Specific risk can be often characterized by its probability. • Better management of specific risk can help us to achieve the competitive advantage.

Market risk
 Is not under your control  Cannot be diversified. The pharmaceutical company, as a part of health care sector, can do little to diversify the market risk.  Traditionally, market risk increases the capital expenses and therefore decreases the project value.  However, the situation is different with options: here the higher market risk, expressed as volatility, increases the option value, which can be quantified using the Black-Scholes algorithm, well known from financial options.

• Quantifies the rate of change of market value of the underlying asset, i.e. the asset to its ownership we are entitled by buying the option (technology, database of customers …). • Is usually specific for the industry and can be estimated on the basis of information available from e.g. stock market, industry statistics, etc. • The higher the volatility, the more advantageous is to hold the respective option. • The higher volatility means the higher potential of both the increase and decrease of the related asset price. As the option holder we can fully exploit the increase, while in the case of decrease we do not realize the option and the maximum loss is limited by the option cost.

• Boer [Boer 2003] applies the real option model (OPT) with volatility equal to 50% to the example from Fig. 3 • He shows that using this method the project value is $0,171M, i.e. it is positive and the project is feasible. • The difference in project value assessed by ECV and OPT models is $0,279M, what is enough to justify the project. The difference is caused by market volatility. • Boer also proves that in case of the zero market risk, i.e. the zero volatility, both methods give the same result. • The method of real options brings the most significant effect to projects with high level of risk having slightly negative net present value determined by ECV or other models based on the discounted cash flow.

Conclusion • Illustration of the often neglected side of the new product development and R&D projects. . engineers. designers must work together with investors to determine before the project launch and in the gates how efficiently the capital invested into the effort is used. however. • It is not an easy task. we hope that we succeeded to persuade the auditorium that this important task cannot be avoided. • The researchers.

2001. Risk-adjusted Valuation of R&D Projects.J.References • [Boer 2003] BOER F. http://www. pp. ISBN .com • [Cooper 2001] COOPER R. ISBN 0-465-01433-X • [Vacek 2006] Vacek J. Portfolio Management for New Products. Basic Books. University of West Bohemia. Product Leadership. 2006.G. online.G..P.J. xx. ISBN 0-7382-0514-1 • [Cooper 2005] COOPER R.. ―Structuring the new product development processes‖. 2005. in AEDS 2006 Proceedings. Pilsen.tigerscientific. EDGET S. Basic Books. KLEINSCHMIDT E.


11. KIP FEK UWB 111 .Jiří Vacek.2008 AEDS 2008 . consequences of its lack Portfolio management goals – Goal 1: Maximizing the portfolio value – Goal 2: Balance – Goal 3: Strategic alignment 31.Outline • • Portfolio management.10.-1.

2008 AEDS 2008 . • Portfolio management: dynamic decision-making process of evaluation.Portfolio management • Resources are always limited. • The process is characterised by uncertainty. changing information. links between projects.11. dynamics of opportunities and threats. its customers and market share. KIP FEK UWB 112 . selection and prioritization of new projects. put on hold or even killed. it is neither possible nor effective to invest in every idea without due consideration.10. The whole process must be based on the long-term company strategy and must support it 31.Jiří Vacek. today’s innovation projects decide about the future profile of the company. • It is important to select from many possibilities those with the highest potential. • Goal: to create such portfolio of products that is rooted in the company strategy and optimizes the company performance. active project can be fostered.-1. their priorities and allocation of resources can change.

Too many low value projects Good projects are starved Increased time to market Higher failure rates Too few stellar product winners Many ho hum launches Many failures Wrong projects are selected Projects lack strategic direction Projects not strategically aligned AEDS 2008 .2008 113 . KIP FEK UWB Scatter gun effort Does not support strategy 31. Projects in the queue.10.Jiří Vacek.No portfolio management means … Immediate result End result: poor new product performance A reluctance to kill projects. Quality of execution suffers. politics No strategic criteria for project selection Too many projects – resources thinly spread.-1. Many projects added to the list A total lack of focus Weak decision points (broad gates) Poor Go/Kill decisions No rigorous selection criteria Project selected on emotion.11.

Focus on different market segments (don’t pull all eggs into one basket). Different project types: new products. 31. 2.10. incremental innovation).g.Jiří Vacek. Balance • • • • • 3. cost reductions. fast ones. lower-risk sure bets (e.2008 AEDS 2008 . High risk projects with high potential vs. frontier research. improvements. return on investment. … Long-term projects vs. KIP FEK UWB 114 . short. probability of success.-1. Different technologies. Strategic alignment • portfolio is strategically aligned and reflects the business’s strategy.Portfolio management goals 1.11. Maximization of value • long-term profitability. radical vs.

2008 AEDS 2008 .Goal 1 Maximizing the portfolio value • • • • Net present value.10.11. KIP FEK UWB 115 .-1. bang for buck Expected commercial value Multi-criteria project valuation Scoring models 31.Jiří Vacek.

0 48.5 3.0 Immediate resource requirements 3.0 Bang-forbuck index 5.0 9.2008 NPV 52.10.5 3.8 3.11.Projects net present values and resource requirements Remaining resource requirements 9.0 3.9 8.2 5.5 0.Jiří Vacek.-1.3 1.8 7.4 5.8 4. KIP FEK UWB Project A B C D E F G H I J K L 31.2 4.5 6.7 4.2 0.8 1.1 2.5 1.3 1.5 55.0 8.7 0.0 AEDS 2008 .6 42.0 2.0 30.8 7.8 0.1 11.3 1.5 9.4 2.0 5.5 43.1 3.2 11.0 8.5 3.8 37.8 1.5 3.0 116 .5 0.1 6.

5 1.0 55.9 5.8 1.6 9.4 14.3 1.5 0.5 9.2008 AEDS 2008 .5 7.Rank-ordered list of projects Remaining resource requireme nts 3.8 1.5 22.0 3.5 5.5 3.2 48.5 1.8 6.0 9.6 G C I K H 37.8 9.2 7.5 4.2 3.8 6.7 8.2 0.3 2.0 43. KIP FEK UWB .0 3.0 Project D L NPV 42.5 B F J E A 30.8 7.0 0.11.0 8.1 5.3 21.4 19.4 1.1 3.5 4.-1.1 11.8 7.5 52.0 2.0 4.0 Bang-forbuck index 11.3 3.1 11.0 Cumulative Immediate immediate resource resource requirements requirements 2.8 3.5 8.4 0.1 2.7 18.3 10.8 20.Jiří Vacek.8 5.2 117 31.5 0.10.

00 0.60 0.50 31.11.75 1.00 63. KIP FEK UWB 118 .00 15.10 1.00 5.50 0.50 3.80 0.50 2.75 0.00 2.Jiří Vacek.75 1.50 0.00 5.50 0.-1.00 10.75 9.00 66.50 1.25 0.00 50.70 2.00 2.00 5.80 3.2008 AEDS 2008 .00 0.00 0.10.00 5.00 1.62 3.00 15.Project expected value (ECV) Probability of technical success Probability of commercial success Development cost* Commercializat ion cost* Project PV ECV A B C D E F 30.00 19.80 0.

00 16.55 1.05 5.10.00 119 AEDS 2008 .Rank-ordered list according to ECV/D.2008 19.00 13.00 26.11.10 3.Jiří Vacek.50 1.14 1.00 5.90 3. KIP FEK UWB . resource constraint 15 mil Project ECV ECV/D Cumulative development costs Adjusted cumulative development costs B E A F D C 31.00 10.00 10.00 15.00 (23.00) 24.50 2.-1.70 5.67 1.50 1.00 14.50 15.00 13.

50 15.10 1.50 Cumulative development costs 5.11.Rank-ordered list according to ECV Project B E F A C D 31.2008 ECV 19.00 26.-1.70 15.00 23.00 10. KIP FEK UWB .00 2.50 5.Jiří Vacek.00 25.00 20.10.00 120 AEDS 2008 .

– utilize less of the constraining resource (it’s easier for them to be above the line). – less resources to be spent (decrease of D).-1. – higher probabilities of success (increase of ECV).Jiří Vacek.2008 AEDS 2008 .• ECV model prioritizes more highly the projects with the following properties: – closer to launch (increase of PV and consequently of ECV). 31.11. KIP FEK UWB 121 .10. – higher income streams after launch (increase of PV and consequently of ECV).

Multi-criteria project valuation input data Project A B IRR 20% 15% NPV 10 2 SI 5 2 PTS 80% 70% C D E F 31.Jiří Vacek.-1. KIP FEK UWB .10.11.2008 10% 17% 12% 22% 5 12 20 6 3 2 4 1 90% 65% 90% 85% 122 AEDS 2008 .

Jiří Vacek.2008 AEDS 2008 .10.Project ranking • Project ranking procedure is the following – calculate adjusted values of IRR and NPV – multiply them by PTS.-1. – rank projects according to adjusted values of IRR and NPV and according to SI. – calculate the average value of those three rankings and use it for final ranking 31. KIP FEK UWB 123 .11.

00 1 6 C D E F 9.67 3.5 7.4 2 6 5 2 1 4 1.1 5 3 1 4 3 2 4 1 3 4 2 6 4.2008 AEDS 2008 . final project ranking Project IRR * PTS Ranking by IPR*PTS NPV * PTS Ranking by NPV*PT S SI Ranking by SI Avg.33 3.8 18 5. Final A B 16.8% 18.Jiří Vacek.67 5 3 2 4 31.33 2.1% 10.10. KIP FEK UWB 124 .11.-1.67 5.7% 6 3 4 1 4.Multi-criteria project valuation.0% 11.5% 2 5 8 1.0% 10.

11. they should be combined with non-financial models 31.Applicability of financial models • Main weakness: unreliability of input data.Jiří Vacek. • The complexity and sophistication of financial models fairly exceeds the quality of input data • It does not mean that we should not pay proper attention to financial data in the initial project stages. • Small errors in probabilities of success rapidly propagate and can result in significant differences. However.2008 AEDS 2008 . especially in the initial project stage they should be used only in later stages. KIP FEK UWB 125 .10.-1. we should not make decisions solely on their basis.

Such criteria must be based on the analyses of your own company and other companies in the same industry.11.Scoring models • Give very good results.10.-1. You must develop the expert base to be used in project valuation. KIP FEK UWB 126 .2008 AEDS 2008 .Jiří Vacek. • Important: selection of criteria that really separate the winners from the losers. • One of the models described in [Cooper 2001] uses five main factors: – – – – – business strategy fit (2) strategic leverage (4) probability of technical success (4) probability of commercial success (6) reward to the company (project profitability) (3) 31.

11.Goal 2: Balance • In many cases.10.Jiří Vacek. • Suitable tools for creation of the balanced portfolio are bubble diagrams. which is used by 44 % companies 31. most frequently used diagram is the risk – reward bubble diagram. KIP FEK UWB 127 . visionary but highly risky projects necessary to maintain the company competitiveness. the project portfolio is not balanced.-1. often it contains too many small projects and not enough of radical.2008 AEDS 2008 .

00% 40. KIP FEK UWB 128 .Risk-Reward bubble diagram Reward vs.00% PTS 31.2008 AEDS 2008 .10.Jiří Vacek.00% 60.00% 70.11.00% 30.00% 50.-1. risk 70 OYSTERS PEARLS 60 50 reward 40 30 20 10 0 0.00% WHITE ELEPHANTS BREAD & BUTTER 10.00% 20.

KIP FEK UWB 129 . Here the breakthroughs pave the way for solid payoffs. Often too many of them in the portfolio. 31.11.Jiří Vacek. • Bread and butter: simple projects. • Oysters: highly speculative projects: low probability of success. high probability of success. high expected reward. low expected reward.10. often from personal reasons.-1. high expected reward.Diagram quadrants • Pearls: potential „star― projects: high probability of success.2008 AEDS 2008 . low expected reward. We would like many of such projects. projects that are difficult to kill. consuming substantial ratio of resources. • White elephants: low probability of success.

-1. – Allocation of resources reflects specified strategic goals and objectives. strategy is only paperwork.Goal 3: Strategic alignment • Strategy and allocation of resources are closely linked: until we start allocating resources to specific activities. KIP FEK UWB 130 . – All projects contribute to achievement of strategic goals and objectives. bottom-up and combined.10. 31. – In portfolio management we use three basic approaches: top-down.11. In portfolio creation we will follow the following objectives: – Projects are aligned with business strategy.2008 AEDS 2008 .Jiří Vacek.

Top-down approach • from the strategy formulation (using principles. Objectives for new products are often stated in terms of ratio or growth of turnover.2008 AEDS 2008 . etc.Jiří Vacek.g. during several (usually 3-5) years.-1. 31. see e. market share. profit.10. KIP FEK UWB 131 . methods and procedures of strategic management.11. [Grant 2008]).

cz/).jrc.11.europa.strast.ceses.-1.eu/).cz/) and CESES – Centre for social and economic strategies (http://www. • Technology roadmaps are developed also within the framework of technology platforms of the 7-th EU Framework Programme for Research. http://cordis.europa. by Technology centre AV ČR (http://www.cuni. • at the EU level the Institute for Prospective Technology Studies in Sevilla (http://ipts.eu/technologyplatforms).ec. • In the Czech Republic such studies are prepared e.2008 AEDS 2008 .Jiří Vacek. 31.Technology roadmaps • Technology strategic roadmaps. KIP FEK UWB 132 . Development and Demonstrations (http://cordis. results of technology foresight and other studies performed often on the macro-economic level.europa.eu/fp7.g.10.

Jiří Vacek. KIP FEK UWB 133 . more ―urgent‖ projects.2008 AEDS 2008 . • However.10. often backed from ―political‖ reasons.-1. decides what resources will be allocated to basic categories of development projects (e. on the basis of strategy. X % to platforms.Strategic buckets • The company management. • Resources originally allocated to one category may not sufficient.g. after the final allocation of resources to strategic buckets it should not be possible to reshuffle the resources between buckets. Z % to incremental innovations) and projects are then prioritized within those buckets. Especially it should be avoided to take resources originally allocated for strategic. long-term goals and use them for short-term. while there are still free resources in the other bucket. Y % to new products. Such redistribution undermines long-term strategic goals and all the strategic planning 31. In such a case the resources can be redistributed.11.

-1.11. KIP FEK UWB 134 . however it cannot guarantee allocation of resources in compliance with strategic priorities. • This weakness can be overcome by the use of combined approach: we first use the top-down approach to establish strategic buckets.2008 AEDS 2008 .Bottom-up and combined approaches • Bottom-up approach build strategic criteria into the model of project selection.10. • This approach guarantees that all projects are strategy aligned. and then we evaluate all active projects and projects on hold and prepare their ranked list. usually to the scoring model. • Usually this first iteration is not completely satisfactory and it is necessary to use more iterations to reach satisfactory results. Finally we assign projects to corresponding categories (buckets) and study the exhaustion of resources.Jiří Vacek. 31.

p. Structuring the new product development process. ISBN 978-1-4051-6309-5 • [Vacek 2007] Vacek. ISBN 80-7043-490-2.J.J. Pilsen : University of West Bohemia. 2007. In AEDS 2006.G. Plzeň : University of West Bohemia. 2004.83-87. Evaluation of the new product development and R&D projects. Pilsen : University of West Bohemia.35-36. J. KLEINSCHMIDT E. J.2008 AEDS 2008 . ISBN 80-7043-331-0. 6th edition. J. ISBN 978-80-7043-600-4. 2006..10. In AEDS 2004 Workshop. p. 2001. Portfolio Management for New Products. p. Blackwell Publishing.Jiří Vacek. New product development and current trends in innovation management. 31.-1. EDGET S. Contemporary Strategy Analysis.11. • [Vacek 2004] Vacek.M. 2nd edition. 2008. KIP FEK UWB 135 .. ISBN 0-7382-0514-1 • [Grant 2008] GRANT R. In AEDS 2007.References • [Cooper 2001] COOPER R.111-118. • [Vacek 2006] Vacek.. Basic Books.

Lesson 5 Innovation impulses .

technology • Production divisions (production.SOURCES OF INNOVATION IMPULSES Internal environment • Own R&D • Technical divisions – design. provision of services) • Marketing and sales • Logistics (purchase and supplies) • Guarantee and post-guarantee service • Owners .

public sector • Legislation • Globalization . certification agencies • State institutions. Internet • Exhibitions.SOURCES OF INNOVATION IMPULSES External environment • • • • Customers Suppliers Competitors Consultants. R&D institutions • Schools. fairs. specialized seminars and conferences • • • • Advertising agencies Investors Media Authorized testing laboratories. universities • Professional publications.

extension of the existing offer or decrease of price – impulses for continuous. incremental innovations or for process innovations • Research and development push – looking for commercial use of new impulses resulting from the R&D results – generating of new markets for conceptually different products .R&D PUSH • Market pull – looking for the best way of satisfying a newly emerging customer demand – improvement of the existing products.MARKET PULL .

unexpected event contradiction change of work process change in the structure of industry or market EXTERNAL 5. Changes in the world view 7.7 SOURCES OF INNOVATION IMPULSES (Drucker) INTERNAL 1. 4. 2. New knowledge . Demographic changes 6. 3.

3. What will the use of the offered opportunity mean to us? Where will its introduction take us? What do we need to do for its implementation? How can we achieve that? • Unexpected failure • Unexpected external event . Unexpected event • Unexpected success • • • • 1.1. 4. 2.

Contradiction • Non-compliance with economic reality • Contradiction between reality and anticipations about it • Contradiction between the anticipated and real behavior of customers and their values .2.

identify the weak point of the chain • be convinced that if something does not work the way it should. It must place moderate and feasible requirements . then it is necessary to attempt a change • the solution must be convenient for those who will implement it. Change of process • realize the necessity of change.3.

use of computers in telecommunications) • Rapid change of the industry and resulting need of a structural change . Change in the structure of industry and market • Rapid growth of the industry • Identification of new market segments • Convergence of technologies (e.g.4.

Demography • easiest to describe and to predict • influence what will be bought. who and in which amounts will purchase .5.

to be the first . spending the leisure time • ―upper-middle class‖: a chance to offer non-standard services at non-standard prices • increasing migration. food. feminism.6. Change of attitudes • change in the approach to health: healthcare. regionalism etc • Timing is essential .

their success requires. – Focus on winning the strategic position at the market. the second chance usually does not come. high rate of risk – Thorough analysis of all factors. Quality is not what is technically perfect but what adds the product its value for the end user . New knowledge • Based on convergence or synergy of various kinds of knowledge.7. identify the ―missing elements‖ of the chain and possibilities of their supplementing or substitution. – Entrepreneurial management style.

IMPULSES FROM THE MARKET ENVIRONMENT • Customers product presentation – realistic – simple. demonstrative and precise – moderate – representative sample of customers • Suppliers • Competitors .

technical and economic information and identify innovation impulses applicable in the company • basic research • applied research: acquire knowledge and means applicable for the meeting of specific.INNOVATION IMPULSES OF THE R&D • identification research: to monitor the scientific. beforehanddefined goals • development: systemic use of knowledge and means acquired in the applied research for the creation of a new or improvement of the existing product or for the creation or modification of processes .

INTERNAL IMPULSES • usually combined with external sources • supported by – creative techniques – innovation tools • REGISTER OF IMPULSES .

Lesson 6 Innovation management tools INNOMAT http://www.com/aainn0.htm .inno-pro.


General Innovation Tools .





htm . CHANGE MANAGEMENT STEP Making time SPECIFIC TECHNIQUE time management techniques Preparing a vision statement Identify what factors will hinder change Selling the change Developing a plan Learning Monitoring effectiveness SWOT analysis force field analysis internal marketing techniques strategic planning techniques INNOVATION MANAGEMENT TOOLS http://www.uk/innovate/website/pages/atoz/atoz.co.wiley.Specific techniques useful at the different change management process steps.




Product Innovation Tools .


„X― .examples Design for Manufacturing Design for Environment and Assembly (DFMA) (DFE) Design for Dimensional Control (DDC) Design for Storability Design for Electromagnetic Compatibility Design for Inspectability Design for Reliability (DFR) Design for Disassembly (DFD) .


House of Quality Interrelationships Technical Features Voice of the Customer Relationship between Customer Desired Traits and Technical Features Importance Assessment of Traits to of Customer Competition Importance of Technical Features .

Identify Technical Characteristics to Deploy in the Final Product Design .House of Quality: Steps for Generation 1. Identify Supporting Technical Characteristics 3. Assign Priorities to Customer Requirements and Technical Features 5. Evaluate Competitors’ Stances and Products 6. Correlate Customer Attributes with Supporting Technical Features 4. Identify Customer Attributes 2.

Managerial Innovation Tools .


htm .wiley.uk/innovate/website/pages/atoz/atoz.INNOVATION MANAGEMENT TOOLS http://www.co.

wiley.uk/innovate/website/pages/atoz/atoz.co.htm .INNOVATION MANAGEMENT TOOLS http://www.



ISO 9000 ISO14000 refers to procedures for ensuring sustainable and environmentally friendly operations EIA – Environmental Impact Assessment .


Process Innovation Tools .









Innovation and creativity • creativity is manifested in the production of a creative work (for example. – creativity by individuals and teams is a starting point for innovation. a new work of art or a scientific hypothesis) that is both original and useful • innovation begins with creative ideas. the first is a necessary but not sufficient condition for the second .

– and in seeing or performing something in a manner different from what was thought possible or normal previously. – in imagining new possibilities that were not conceived of before. – in investing an existing object with new properties or characteristics. .• creativity results: – in producing or bringing about something partly or wholly new.

• Many creative ideas are generated when somebody discards preconceived assumptions and decides on a new approach or method that might seem to others unthinkable • Serendipity . especially while looking for something else entirely .effect by which one accidentally discovers something fortunate.

and realize that what you've found is more suited to your needs than what you thought you were looking for. serendipitously.. but 'That's funny …'" Isaac Asimov "In reality. Look for something. The Last Voyage of Somebody the Sailor "Serendipity is the art of making an unsought finding." Lawrence Block "The most exciting phrase to hear in science." Pek van Andel (1994) source: wikipedia . You have to set out in good faith for elsewhere and lose your bearings .Quotations on serendipity • • • • • • • • "In the field of observation.you don't reach Serendib by plotting a course for it. chance favors only the prepared mind." John Barth. find something else. work and love. serendipity accounts for one percent of the blessings we receive in life. Reynolds "--. is not 'Eureka!'." Louis Pasteur "Serendipity." Julius Comroe Jr. The other 99 percent is due to our efforts." Peter McWilliams "Serendipity is looking in a haystack for a needle and discovering a farmer's daughter." Peter H. "Serendipity is putting a quarter in the gumball machine and having three pieces come rattling out instead of one—all red.. the one that heralds new discoveries.

. • Only a creative approach to the problem solution can be successful. do not adhere to yesterday so much • Creativity does not mean dreaming. it means productive managing of specific tasks.BASIC CONCEPTS • Creative thinking represents a combination of logic and intuitive approaches • Being creative means dealing with the aspects and possibilities of today and tomorrow • That requires a person to be open to everything new. do not stick to things that we are all used to.

• Nonaka: creativity and knowledge creation are important to the success of organizations. – and Motivation (especially intrinsic motivation). he emphasized the role that tacit knowledge has to play in the creative process. – Creative thinking skills (how flexibly and imaginatively people approach problems). procedural & intellectual knowledge).Creativity in organizations • Amabile: to enhance creativity in business. . three components are needed: – Expertise (technical. In particular.

• Important aspect to understanding Entrepreneurship. creative products are protected by intellectual property laws. Creativity leads to capital. Richard Florida in The Rise of the Creative Class. .Creativity and economics • Joseph Schumpeter: creative destruction . consequently. 2002 popularized the notion that regions with "3 T's of economic development: Technology.the way in which old ways of doing things are endogenously destroyed and replaced by the new. • The creative class as important driver of modern economies. economic growth. • Paul Romer: the recombination of elements to produce new technologies and products and. Talent and Tolerance" also have high concentrations of creative professionals and tend to have a higher level of economic development.

intention to create • Preparation: Information collection. creation of ideas • Realization: transformation of the idea into reality • Verification: evaluation. problem formulation • Incubation: seeking solution.Stages of creative process • Orientation: Need identification. learning. unconscious thinking • Illumination (Eureka!): synthesis. evaluation of variants. improvement .

Barriers to creativity . processes. • A general fear of risk taking. • So can a blame culture where people become afraid of making mistakes. to wait and see what others do in the market before acting. wanting to analyze everything to death. consistency or efficiency. • A culture that over emphasizes cost containment. • Managers who are not as secure as they should be can resist or block ideas that are not their own or which they see as threatening. • A reward system that too exclusively celebrates getting things done fast with no mistakes.1 • The value of getting things right time can induce a fear of mistakes and experimentation. .

2 • A lack of explicit funding for experimentation. . • An over allegiance to past successes. • A tendency to shoot down novel ideas as a way of scoring points.Barriers to creativity .a drive to meet short term financial goals rather than to invest in the future. • Short termism . • A suspicion of novelty. a fear of the unproven. proven experience and tried and tested methods. a tendency to blame external factors or other people for failures rather than to learn from them. • A strict requirement to demonstrate the value of an idea before it has a chance to prove itself. • A resistance to learning from mistakes or trial and error.

au/~charles5 7/Creative/Basics/obstacles.com.optusnet.htm .3 • http://members.Barriers to creativity .

nothing comes for free .CREATIVITY STIMULATION • • • • • • • • • • Keep in touch with creative people Accommodate the effort to the targets Evaluate and appreciate the effort Protect creative employees Leave them peace and time Provide them with security Tolerate failures Maintain creative atmosphere Evaluate the creative ideas quickly Be persistent .

especially internal motivation Encouraging confidence and a willingness to take risks Focusing on mastery and self-competition Promoting supportable beliefs about creativity Providing opportunities for choice and discovery Developing self-management (metacognitive skills) Teaching techniques and strategies for facilitating creative performance Providing balance .Fostering creativity • • • • • • • • • • • • Establishing purpose and intention Building basic skills Encouraging acquisitions of domain-specific knowledge Stimulating and rewarding curiosity and exploration Building motivation.

METHODS OF CREATIVE ACTIVITY • increasing the individual’s or team’s creative potential • contributing to the improvement of the creative work conditions • facilitating the problem solution .

and all aspects associated with defining the problem clearly.com/Category:Creativity_Techniques . • http://www. • Idea Selection .mycoted. • Idea Generation .including problem analysis. redefinition.Turning the refined ideas in reality.The divergent process of coming up with ideas.. • Processes .Creative Process • Problem Definition .The convergent process of reducing all the many ideas into realistic solutions • Idea Implementation .Schemes and techniques which look at the overall process from start to finish (or at least 3 of the above 4 areas).

pragmatic.Brain hemispheres Left brain functions sequential Right brain functions simultaneous analytical verbal logical linear algorithmic processing mathematics: perception of counting/measurement present and past language: grammar/words. pattern perception. contextual . literal holistic imagistic intuitive holistical algorithmic processing mathematics: perception of shapes/motions present and future language: intonation/emphasis. prosody.

correct solution to a problem • Divergent thinking involves creative generation of multiple answers to a set problem.Convergent vs. . divergent thinking • Convergent thinking involves aiming for a single.

– Lateral thinking (courtesy of Edward de Bono). . both developed by the Russian scientist Genrich Altshuller.CREATIVITY TECHNIQUES • • • • trial and error brainstorming Inspirational questions psychological-cognitive. such as: – Osborn-Parnes Creative problem solving (CPS) – Synectics. • the highly-structured. such as: – TRIZ (the Theory of Inventive Problem-Solving). and – Computer-Aided Morphological analysis. – ARIZ (the Algorithm of Inventive Problem-Solving).

Nevertheless. • more successful with simple problems. The process ends when a possibility yields a solution. select (or generate) another possibility that is subsequently tried. often resorted to when no apparent rule applies. apply it to the problem and. for an individual can be methodical in manipulating the variables in an attempt to sort through possibilities that may result in success. • the approach need not be careless. this method is often used by people who have little knowledge in the problem area .Trial and error • select a possible answer. if not successful.

features • solution-oriented: trial and error makes no attempt to discover why a solution works. • non-optimal: trial and error is an attempt to find a solution. merely that it is a solution. and not the best solution. not all solutions.Trial and error . . • needs little knowledge: trials and error can proceed where there is little or no knowledge of the subject. • problem-specific: trial and error makes no attempt to generalise a solution to other problems.

time.Inspirational questions . people. processes. materials or people? What materials. products or components can I combine? Where can I build synergy? What part of the product could I change? And in exchange for what? What if I were to change the characteristics of a component? What happens if I warp or exaggerate a feature or component? What will happen if I modify the process in some way? What other market could I use this product in? Who or what else might be able to use it? What if I did it the other way round? What if I reverse the order it is done or the way it is used? How would I achieve the opposite effect? .1 • • • • • • • • • • • • • • What can I substitute to make an improvement? What if I swap this for that and see what happens? How can I substitute the place. features.

2 • Who else has solved this problem? • What similar area of expertise might have solved this problem? • Is there anyone else in the company who knows how to solve this? • What else could we use to solve the problem? • Where else might this problem have been solved? • What other companies might know how to solve this? • What similar problems have been solved. and how? • What other industries face the same problem and what do they do about it? .Inspirational questions .

3 • • • • • • • • • How would they think? What objects and items would they be using? Where would they be doing it? How would they see the problem? What action would they take? How would they explain the problem? How would they solve the problem? What does your situation or your problem remind you of? What other areas of life/work experience similar situations? • Who does similar things but not in your area of expertise? .Inspirational questions .

4 • What would my perfect solution be? • What effect would my ideal solution have? • What if money/morals/laws did not matter at all? • What would I do if I had unlimited power and resources? • What would my ideal solution look like? Source:Wikipedia .Inspirational questions .

4. 2. 3. each with a divergent and a convergent phase. 1. Objective Finding (or Mess Finding): Sensitise yourself for issues that need to be tackled. Idea Finding: generate as many ideas as possible 5.CPS (OFPISA) • six stage process. Fact Finding: Gather information about the problem. Acceptance finding: How can the suggestion you have just selected be made up to standard and put into practice? . Then choose the best of these improved ideas for further development 6. Problem Finding: convert a fuzzy statement of the problem into a broad statement more suitable for idea finding. Solution finding: Generate and select obvious evaluation criteria and develop the short-listed ideas from Idea Finding as much as possible in the light of these criteria.

Synectics • problem solving approach that stimulates thought processes of which the subject is generally unaware. • Synectics is more demanding of the subject than brainstorming. on the other hand. as the many steps involved mean that the process is more complicated and requires more time and effort." • Encourages • fundamental problem-analysis and. . and alienate things that are trusted. • developed by William Gordon. • central principle: "Trust things that are alien. • the alienation of the original problem through the creation of analogies • It is thus possible for new and surprising solutions to emerge.

steps • • • • • • • • • • Analysis and definition of the problem Spontaneous solutions Reformulation of the problem Creation of direct analogies Personal analogies (identification) Symbolic analogies (contradictions) Direct analogies Analysis of the direct analogies Application to the problem Development of possible solutions .Synectics .

which is a feature lateral thinking shares with a joke • We may need to solve some problems not by removing the cause but by designing the way forward even if the cause remains in place • http://en. but when a good idea is discovered in this way it is usually obvious in hindsight.org/wiki/Lateral_thinking .Lateral thinking • de Bono • methods of thinking concerned with changing concepts and perception. ideas that may not be obtainable by using only traditional step-by-step logic • shifting of thinking patterns. away from entrenched or predictable thinking to new or unexpected ideas.wikipedia. reasoning that is not immediately obvious. • A new idea that is the result of lateral thinking is not always a helpful one.

.Lateral thinking vs. • Critical thinking is like a post-mortem while lateral thinking is like diagnosis. • Lateral thinking is more concerned with the movement value of statements and ideas. critical thinking • Critical thinking is primarily concerned with judging the truth value of statements and seeking errors. A person would use lateral thinking when they want to move from one known idea to creating new ideas.

• Challenge: Simply challenge the way things have always been done or seen. This is done not to show there is anything wrong with the existing situation but simply to direct your perceptions to exploring outside the current area. • Provocation: Declare the usual perception out of bounds. or a noun from a dictionary. .inspiration • Random Entry: Choose an object at random. Prefix the provocation with the term 'Po" to signal that the provocation is not a valid idea put up for judgement but a stimulus for new perception. and associate that with the area you are thinking about.Lateral thinking . or provide some provocative alternative to the usual situation under consideration. or the way they are.

" "Conductor hat. negative aspects." "thinking about thinking". positive aspects. facts and figures (objective) • Red hat (Fire): Intuition. why it will work (objective) • Black hat (Judge's robe): Criticism.Six de Bono hats • White hat (Blank sheet): Information & reports. modus tollens (objective) • Green hat (Plant): Creativeness. overall process (overview) ." "Meta hat. opinion & emotion. new approaches & 'everything goes'. Alternatives. feelings (subjective) • Yellow hat (Sun): Praise. judgment. idea generation & provocations (speculative/creative) • Blue hat (Sky): "Big Picture.


• Next the discussion may move to the (Yellow then) Green hat in order to generate ideas and possible solutions.meeting • The meeting may start with everyone assuming the Blue hat to discuss how the meeting will be conducted and to develop the goals and objectives. This phase may also be used to develop constraints for the actual solution such as who will be affected by the problem and/or solutions. • Next the discussion may move between White hat thinking as part of developing information and • Black hat thinking to develop criticisms of the solution set. • The discussion may then move to Red hat thinking in order to collect opinions and reactions to the problem.Example . .

TRIZ. ARIZ • Теория решения изобретательских задач‖ (Teoriya Resheniya Izobretatelskikh Zadatch) = Theory of inventive problem solving • Inventing is the removal of a technical contradiction with the help of certain principles .

TRIZ process for creative problem solving .

a higher temperature may be needed to melt a compound more rapidly. "If we want more acceleration. more of something desirable also brings more of something less desirable. These are called Technical Contradictions. we need a larger engine. For instance. • Physical or inherent contradictions: More of one thing and less of another may be needed." that is. but that will increase the cost of the car. such as.Contradictions • Inventive problems stem from contradictions (one of the basic TRIZ concepts) between two or more elements. or less of something else also desirable. . but a lower temperature may be needed to achieve a homogeneous mixture.

such as speed. accuracy of measurement and so on. weight.Matrix of Contradictions • 40 inventive principles • rows: 39 system features that one typically wants to improve. • columns: typical undesired results. • matrix cell: points to principles that have been most frequently used in patents in order to resolve the contradiction. .


Morphological analysis • designed for multi-dimensional. non-quantified problem complex . 1969) . nonquantifiable problems where causal modeling and simulation do not function well or at all • Fritz Zwicky (1967.exploring all the possible solutions to a multidimensional.

provided the necessary means are available. All of the parameters that might be of importance for the solution of the given problem must be localized and analyzed. is constructed 4. 5. The problem to be solved must be very concisely formulated. The morphological box or multidimensional matrix.Morphological analysis . 3. The optimally suitable solutions are selected and are practically applied. All the solutions contained in the morphological box are closely scrutinized and evaluated with respect to the purposes that are to be achieved. which contains all of the potential solutions of the given problem.steps 1. 2. .

energy conversion initial kinetic – K transmission kinetic – K final storage kinetic – K electrical – E chemical – C thermal – nuclear T N electrical – E chemical – C thermal – nuclear T N electrical – E chemical – C thermal – nuclear T N .Example 1 .

Example 1 . • E->C->T: common refrigerator . • C->T->K: internal combustion engine (chemical energy transformed into thermal energy) leading to energy being stored in a flywheel.continued • K->E->C: hydroelectric generation which is then stored in a battery.

Example 2 – cardboard packaging Parameter separated media level of separation solid / solid total solid / fluid partial Parameter values solid / gas fluid / fluid fluid / gas gas / gas protection against combination with gravitation paper mechanical forces plastic heat wood radiation paint sound nothing solution: throwaway beverage packaging .

Think outside the box .


6 lines http://www.asp .16 dots.org/articles/20041027/PuzzleZone.sciencenewsforkids.


generalization • a three-dot-by-three-dot puzzle requires four lines. and • an n-dot-by-n-dot puzzle requires 2(n – 1) dots. .Dots and lines . • a five-dot-by-five-dot puzzle requires eight lines. • a four-dot-by-four-dot puzzle requires six lines.

Puzzle Archive • http://www.asp?type=1 .org/pages/ zonearchive.sciencenewsforkids.

Lesson 8 TEAM WORK .

.TEAM DEFINITION • group of people whose individual members share a common goal • their expert skills and personal abilities are complementary • its members work activities and skills are purposefully and smoothly linked together.

TEAM EFFECTIVENESS • dynamic balance among – Necessity to perform a joint task – Individual needs of team members – Necessity to maintain a team • synergic effect: every member – contributes to performance of the mutual task – adopts specific roles necessary for the effective team functioning. – contributes to the satisfaction of the individual needs of other team members .

Differences in opinions are accepted. non-bureaucratic atmosphere. Disputable points are discussed and a solution is looked for. .Successful team characteristics • Team members identify themselves with the team • There is relaxed. Criticism is constructive and it is not taken personally. eventually consulting. • Tasks and goals are clear to all members and all identify themselves with them. spontaneous. character. • Communication is open. Rules are clearly defined. • Team management is of participative. Team members are sincere to each other. interest in achieving joint goals. and fluent. listen to each other. optimistic work mood.

• Personal issues are settled by means of criticism.Unsuccessful team characteristics • Team members do not identify themselves with team. • The rules are not clearly defined. • Strained atmosphere. Disagreement is not openly expressed. Team members hide their real feelings and opinions. . the decision is undermined. discussion about goals and tasks not allowed. • Autocratic supervision. blocked communication is. • Diversity of opinions leads to conflicts. People gossip.

seniority. • Informal: influences procedures. their influence.Team structure and organization • Formal: clearly visible. represents distribution of work among the team members in order to ensure performance of certain functions. power. in which things are actually done – prestige of people. ability to convince others play roles there. .

TEAM DEVELOPMENT Forming Storming Norming Performing Dissolving .

ROLES IN THE TEAM • • • • • • • Initiator Company employee Chairman Forming person Operational employee Coordinator Resource researcher • • • • • • • Observer Team worker Finisher Orienting member Energy supplier Recorder Harmonizer .

Advantages and disadvantages of team work • (+) Mutual cooperation and support • (?) teams often accept more risk than individuals • (+) can produce high quality ideas by accepting the conflict and exploring differences in the individual members’ opinions .

lower fluctuation and absences. limited possibility to enforce new ideas. better communication. higher resistance against frustration. lower level of tolerance towards lazy people • (-) difficult for new members.Group cohesion • (+) larger degree of cooperation. opposition against changes in work procedures. often overprotective against outsiders .

waste of time When they require it or need it On the way to teamwork Vision Individuality. task.or herself Understands group unity Anticipates As a potential threat to his/ her position People’s worries of responsibility . mutuality Trust.Team forming by a manager Manager Defines Prefers Believes in Views the problem solving by the team Communicates with team members On the way to rigidity Everything if possible Conformity Plan. control As denial of his/ her authority. motivation climate As natural and necessary As much as possible Opens them for team solving before they become destructive As necessity Independence and responsibility of people Conflicts inside or outside Ignores them or solves them the team him.


4.DECISION PROCESS 1. 7. 6. 3. Identify the problem Specify objectives and decision criteria Develop alternatives Analyze and compare alternatives Select the best alternative Implement the chosen alternative Monitor the results . 2. 5.

REASONS FOR POOR DECISIONS • Mistakes in the decision process – quick decisions – failure to recognize consequences – manager´s ego – unwillingness to admit mistake. unability to make a decision • Bounded rationality – limits – not optimum. but satisfactory solution • Suboptimization – departmentalization .

MODELS Model: abstraction of reality. adequately portrays real-life phenomena • Physical • Schematic • Mathematical • Computer .

2. 3.USE OF MODELS 1. 4. The purpose of the model How to use model to generate results How results are interpreted and used What assumptions and limitations apply Be aware of the assumptions and limitations of each model .

4.BENEFITS OF THE USE OF MODELS 1. less expensive Require to organize and quantify information. Easy to use. indicate need of additional information Provide a systematic approach to problem solving Increase understanding of the problem Enable to ask „what if …?― Require users to be very specific about objectives Serve as a consistent tool for evaluation Enable to bring power of mathematics Provide standardized format for problem analysis . 3. 9. 6. 8. 2. 7. 5.

Highly sophisticated models in hands of users who cannot fully comprehend the conditions and limitations of the model use 4.LIMITATIONS OF MODELS 1. Incorrect application. Overemphasis of quantitative over qualitative information 2. misinterpretation of results 3. Model building as an end to itself .

TOC) • Forecasting models • Statistical models Quantitative methods are typically more difficult to understand without a fair amount of explanation and demonstration . CPM.QUANTITATIVE APPROACHES • Linear programming • Queing techniques • Inventory models • Project models (PERT.

TRADE-OFFS List advantages and and disadvantages of opposing courses of action to gain better understanding of the consequences of potential decisions. Example – quality control advantages disadvantages Fewer defectives slipping through by increasing inspections Increase in costs .

5*(A2 + A1) x=5 A = kx + 4000 B = kx + 4 k=1 4005 9 k=2 4010 4  0.87% .03% 10.SENSITIVITY ANALYSIS How sensitive the solution is to a change in one or more parameters Example:  = (A2 – A1) / 0.

THE SYSTEM APPROACH • interrelations among subsystems and/or elements • system boundary – environment • Feedback The whole is greater than the sum of its individual parts Consequence: evaluate „optimal― solutions in terms of larger framework .

DECISION ENVIRONMNENTS • CERTAINTY – relevant parameters have known values • RISK – certain parameters have probabilistic outcomes • UNCERTAINTY – it is impossible to assess the likelihood of various possible outcomes .

Develop a list of possible alternatives 3. Estimate the likelihood of every possible state of nature (if possible) 5. Evaluate alternatives according to decision criterion and select best alternative . Identify possible future conditions – states of nature 2. Determine or estimate payoff associated with each alternative for every possible state of nature 4.DECISION THEORY 1.

PAYOFF TABLE Possible future demand Alternatives – facility size Small Medium Large low 10 7 -4 moderate 10 12 2 high 10 12 16 .

Decision making under certainty Choose the alternative with the highest payoff Demand Highest payoff Best alternative Low Moderate High 10 12 16 small medium large .

Decision making under uncertainty
• Maximin – determine the worst possible payoff for each alternative, and than choose the alternative with the „best worst― • Maximax – determine the best possible payoff, and choose the alternative with this payoff • Laplace - determine the average payoff for each alternative, and choose the alternative with the best average • Minimax regret - determine the worst regret for each alternative, and than choose the alternative with the „best worst―

• Maximin: worst payoffs are
Alternative Payoff small 10 medium 7 large -4

the best is 10 - choose small facility • Maximax: the best overall payoff is 16 – choose large • Laplace:
Alternative Average payoff small 10 medium 10,33 large 4,67

• The best average is 10,33 - choose medium

• Minimax regret:
Opportunity loss, regret: subtract every payoff in a column from the largest positive payoff in that column

regrets Alternative low moderate high worst











The lowest regret is 4 – choose medium

Decision making under risk
• Expexted monetary value (EMV) criterion: calculate expected value (EV) for each alternative and select one with the highest EV
Alternative probability EV

Medium Large

0,50 0,20

10.5 3

• Appropriate when decision maker is risk-neutral


• Particularly useful for situations that involve sequential decisions • Nodes:
– decision points – chance events  

• Branches leaving
–  alternatives –  states of nature


purchase additional information • Question: is the cost of the option less than the expected gain? EVPI = expected payoff under certainty expected payoff under risk upper limit decision maker should be willing to spend to obtain perfect information .EXPECTED VALUE OF PERFECT INFORMATION (EVPI) • Option: postpone a decision.

20*16 = 12.50 0.EVPI .50*12 + 0.2 – 10.20 • expected payoff under certainty = 0.example Demand Low Moderate High Best payoff 10 12 16 probability 0.5 = 1.7 .2 • EVPI = 12.30 0.30*10 + 0.

SENSITIVITY ANALYSIS State of nature Alternative A #1 4 #2 12 B C 16 12 2 8 .

Sensitivity Analysis .

LINEAR PROGRAMMING (LP) • Objective function – maximization or minimization • Decision variables • Constraints – feasible solution space • Parameters – fixed values .

constatnt • Non-negativity (negative values of variables unacceptable) .ASSUMPTIONS • Linearity (objective function &constraints) • Divisibility (non-integer values of variables acceptable) • Certainty (values of parameters known.LP .

x2.LP – EXAMPLE 1 • Decision variables: x1. x3 0 . x2. x3 – quantities of products to produce • Maximize profit 5 x 1 + 8 x2 + 4 x 3 • Subject to constraints: – – – – Labor Material Product 1 Non-negativity 2 x1 + 4 x2 + 3 x3  250 hours 7 x1 + 6 x2 + 5 x3  100 pounds x1  10 units x1.

LP – solution 1 decision variables X1 X2 X3 10 5 0 90 40 100 10 250 100 10 objective function P constraints 1 2 3 .

y = 2. graphical method can be used Example: Minimize Subject to P = 8x + 12y 5x + 2y ≥ 20 4x + 3y ≥ 24 y≥2 x.5. y ≥ 0 x = 4. P = 60 Solution: .LP – Graphical method For two-variable problem.

LP – Graphical method 12 10 8 6 4 2 0 0 1 2 3 4 5 6 7 8 9 1 1 1 y1 y2 y3 P .


oppressive management Inadequate resources Unsatisfactory communication . but it can be managed • Sources of conflicts: – – – – – – Aggressive or conflict-prone personality Ambiguous or conflicting roles. values.Conflict management • Conflict cannot always be avoided. perceptions Inadequate authority. interdependence Difference in objectives.

not results. solutions may be forthcoming • Negative: – – – – Activities. become important Attack individual rather than problem Blocked communication Need of strong leaders . if the conflict level is not too high – Loyalty increases when people unite against a common foe – If problems are recognized.Conflict consequences • Positive: – Competition tends to enhance the general welfare.

Two-dimensional model of a conflict .

no cooperation . no cooperation win-lose. do not seek to harm the other’s self-image. cooperation – give in • Collaboration: assertiveness and cooperation problem solving. win-win • Competition: assertiveness. impulse to change and improve the organization • Authoritarianism: aggression. adhere to rules. no cooperation – problem solution postponed • Accommodation: no assertiveness.Conflict resolution styles .1 • Avoidance: no assertiveness.

low cooperation – focus on similarities. forget the differences • Bargaining (compromise): moderate assertion. moderate cooperation – give-and-také.Conflict resolution styles . seeks resolution.2 • Smoothing: low assertion. both parties satisfy some of their needs . move parties to a common goal • Superordinate goals: increasing assertiveness. increasing cooperation – attempt to find a common set of objectives.

Robert H.Waterman . Peters.Lesson 11 COMPANY INNOVATION CULTURE „Successful companies address the human needs and give them priority“ Thomas J.

• Influences the company’s economic success and competitiveness . respects. adopts and relates to them. opinions and attitudes that majority of people in the company understands. acknowledges.COMPANY CULTURE • Organization culture: a pattern of ideas.

Main elements of the company culture • • • • • Behavior standards Key values Management and leadership style Roles Organizational structure and diversification Influenced by: • Organization’s strategy • Organization’s system • Level of cooperation between the individual organization structures • Employees’ abilities .

Four types of company orientation Organizations preferring • power • roles • tasks • human side of their processes and people .

MANAGEMENT STYLES shift from directive to participative style of management 4 basic management styles: • Exploiting authoritative • Benevolent authoritative • Consultative • Participative .

Motivation / performance cycle (MPC) .

Motivation / performance cycle (MPC) 1. Are organization and manager aware of needs? Are they willing and able to offer need satisfiers? 3. makes a decision . The individual searches for alternatives. Organization and manager offer extrinsic and intrinsic need satisfiers and rewards 4. evaluate the consequences of possible actions. Are the individuals´s needs satisfied? / Need creation 2.

continued 5. Performance 8. The individual is motivated to expend effort and does so 6. Does the individual receive need satisfier? Do the organization and manager provide need satisfier? . and tools. Does the individual have appropriate training.MPC. and know the objective? 7. abilities.

continued 9. Will the individual be motivated in the same way? Note: normal – individual italic – organization and manager .MPC. Does the individual reassess the situation? 10.

Maslow) 1. protection. bodily needs 2. Security needs – stability. autonomy. prestige. affiliation. provisions for the future 3. creative fulfillment . Self actualization – achieving one’s full potential. personal growth. clothing. status. recognition 5. food.Hierarchy of needs (A. competence. Social needs – acceptance. esteem of others. Physiological needs – immediate survival. freedom from fear. affection. love. power. Esteem needs – self-esteem. shelter. interaction 4.

Vision and the ability to plan strategically 2.Characteristics of peak performers 1. High levels of self-confidence and selfesteem 4. The drive to surpass previous level of performance 3. Strong communication and salesmanship skills . A high need for responsibility and control 5.

Little need for outside praise or recognition 8.Characteristics of peak performers . The habit of mentally rehearsing before critical events 7. The ability to accept feedback and make self-corrections 10. A willingness to take risks 9.2 6. An ownership attitude toward their ideas and products .

Herzberg • Hygiene factors – dissatisfiers.Need satisfiers Frederick A. recognition for performance) . intrinsic (achievement. extrinsic (pay. supervision) • Motivators – satisfiers.

possibility of growth. job security Working conditions. responsibility Advancement. status Interpersonal relations Company policy.Maslow Herzberg Self-actualization Esteem Social Work itself. recognition. personal life Safety and security Physiological . achievement. salary.

The impact of cultural diversity on a manager’s ability to recognize needs 4. Managing the process aspects of the cycle . Recognizing needs 2. Being able to choose the right satisfiers and then being able to obtain and offer them 5.The management challenges 1. The changing nature of individual needs. expectations 3.


m-… . e-…. egovernment. e-learning. networking • Information and communication technologies (ICT) – e-business. e-commerce.Paradigm shifts • Information and knowledge society • Lifelong learning • Lean companies.

follow what your more experienced colleagues (but experiment as well) . • Learning has been effective if a person knows something he has not known earlier and he can do something what he has not been able to do earlier • The mission of the managerial education is the development of the competencies and performance of managers • Learn by doing .Learning organization • The education that does not follow the specific objective and does not improve the results is a luxury the company cannot afford.

financial. talent and attitudes related technologic.KEY COMPETENCIES • technical qualification .technical knowledge. influencing the communication and dealing with individuals and groups both within and outside the company. structural and procedural aspects of work • Soft skills. economic. behavior and acting . . skill.related to work with people.

Attention should be paid to the improvement of behavior and motivation and not only to acquisition of technical skills. methods and goals must take into account the basics of the managerial work in real situations. 2. 3. Training programs content. . The abstract concepts should be rooted in the practical experience of companies.Company training programs 1. The active training methods should be preferred before passive ones.

Design of training programs Define before the start of the training: • What we want to achieve (goals) • How we want to achieve the goals (methodology) • How the progress will be monitored (monitoring) • How the results will be evaluated (evaluation) .


… But at the same time.Adapt the knowledge to your culture. try also to affect your environment Good luck . local conditions. do not over-adapt.

COMPANY INNOVATION SYSTEM • • • • • • • • • Company strategy Collection of innovation impulses Setting of priorities Looking for innovation ideas and their discussion Feasibility study Decision about project preparation Project preparation Project implementation Monitoring of innovation performance .

PROCESS MAP Communication with customer MARKET Idea Development CUSTOMER Production Strategy Strategy development development Product Product development development Design Design modification modification according according+ + customer‘s customer‘s requirements requirements Product Product delivery delivery Development of production capacities .

REGULAR „INNOVATION“ MEETINGS • • • • • Sort collected impulses according to their topics Select the technique for development of innovation proposals Present generated innovation proposals and prepare their preliminary evaluation Submit results to the management for the decision about the feasibility study performance for selected proposals Report the feasibility study results to the management for the decision about the project development Report on – – – the state of the projects under development the state of the currently implemented projects the monitoring of already implemented projects • .

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