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Chapter 19

The Management of Innovation,


Product Development, and
Entrepreneurship

PowerPoint Presentation by Charlie Cook


© Copyright The McGraw-Hill Companies, Inc., 2003. All rights reserved.
Innovation, Technological Change
and Competition
• Technology
The skills, knowledge, experience, body of
scientific knowledge, tools, computers, machines
used in the design and production of goods and
services.
• Quantum Technological Change
A fundamental shift in technology that results in
innovation of new kinds of goods and services.
• The shifts from vinyl records to tape to CD to MP3
represent quantum technological changes in the recording
industry.

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Innovation, Technological Change and
Competition
• Incremental Technological Change
Change that refines existing technology and
leads to gradual improvements or
refinements of products over time.
• Improvements in gas mileage for internal combustion
engines represent incremental technological changes
in automotive manufacturing.

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Effects of Technological Change
• Technological change can be threatening to
firms that are slow to change while, at the
same time, providing benefits to those firms
that change and adapt.
Microsoft was quick to embrace graphic user
interface programs and now is predominant
in the software business.
Microsoft failed to recognize the importance
of the Internet and initially fell behind its
competitors in the development of a web
browser for its software customers.

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Product Life Cycles and
Product Development
• Product Life Cycle
Changes in product demand from its
introduction through its growth and maturity to
its decline.
• Embryonic stage: product is not widely accepted and
has minimal demand.
• Growth stage: many consumers seek out the product
and buy it for the first time.
• Mature stage: demand peaks since most buyers already
have the product and only buy replacements.
• Decline stage: demand falls off as the product becomes
obsolete.

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A Product Life Cycle

Figure19.1
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Product Life Cycles and
Product Development
• The Rate of Technological Change
The rate of change determines the length of
the product life cycle demand curve.
• In the computer industry, life cycle is about 18
months; in the steel industry, it is many years.

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The Relationship Between Technological
Change and Length of the Product Life
Cycle

Figure 19.2
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Four Goals of New Product Development

Figure 19.4
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Principles of Product Development
• Principle 1: Use a Stage-Gate Development
Funnel
Forces managers to make choices among
competing projects to avoid spreading
organizational resources too thin.
• Stage 1 considers all new ideas that are feasible and
meet the strategic goals of the firm.
• Stage 2 focuses on reviewing product development
plans; with the best continuing on.
• Stage 3 issues a contract book and focuses on
responsibilities, budgets, and resources in a symbolic
launch of the formal development.

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A Stage-Gate Development Funnel

Figure 19.5
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Principles of Product Development
(cont’d)
• Principle 2: Establish Cross-Functional Teams
Cross functional teams are a crucial part of
effective product development.
• Core members of the team are the people primarily
responsible for the development effort.
• Management must ensure there is coordination and
communications between team members.
• Teams are often located physically together.
• Successful teams will develop a clear sense of their
objectives and share a common mission.

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Principles of Product Development
(cont’d)
• Principle 3: Concurrent Engineering
The traditional engineering approach follows
a sequential flow resulting in long
development times and poor quality if
managers do not communicate between
departments.
• By working concurrently, design and production
issues are considered together.
• Production concerns are addressed while the product
is designed and can still be changed.

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Sequential vs.
Parallel Development
Processes

Figure 19.7
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Principles of Product Development
(cont’d)
• Principle 4: Involve Both Customers and
Suppliers
Products fail because their design does not
meet the needs of customers.
• Customer ideas and needs should be included in the
design process.
• Solicit customer input from many sources.
Suppliers are also critical to the success of a
product.
• Include them during concurrent engineering.
• Seek out their ideas and input early in the process.

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Entrepreneurship
• Entrepreneurs
Individuals who notice opportunities and take
the responsibility for mobilizing the resources
necessary to produce new and improved
goods and services.
• Entrepreneurs start new businesses and carry out all
of the management functions.
• Entrepreneurs assume all of the risks for losses and
receive all of the returns (profits) from their ventures.

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Entrepreneurship (cont’d)
• Intrapreneurs
Individuals (managers, scientists, or
researchers) who work inside an existing
organization and notice an opportunity for
product improvements and are responsible
for managing the product development
process.
• Intrapreneurs frustrated with the lack of support or
opportunity at their firm often leave and form their
own new ventures.

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Entrepreneurship and New Ventures
• Characteristics of entrepreneurs—most share
these common traits:
Open to experience: they are original
thinkers and take risks.
Internal locus of control: they take
responsibility for their own actions.
High self-esteem: they feel competent and
capable.
High need for achievement: they set high
goals and enjoy working toward them.

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Entrepreneurship and Management
• To become involved in an entrepreneurial firm:
Start your own business as an entrepreneur.
Work for a growing entrepreneur in their
firm.
Develop a plan for the new business
• Designing a plan to guide the business is similar to a
product development plan.
• Firms without plan usually fail
Franchising allows you to purchase a plan
and the experience of existing firm to reduce
risk.

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Developing a Plan for a New Business
Step 1 Notice product opportunity and develop a basic
business idea: What goods/services to produce and
who are the customers/markets?

Step 2 Conduct strategic analysis (SWOT) to identify:


Strengths, Weakness, Opportunities, Threats.

Step 3 Is the business opportunity feasible?

Step 4 Prepare a detailed business plan including mission,


goals, strategic and financial objectives, resources
required, and a timeline of events.

Table 19.1
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