Module 3-

MARKETING INNOVATION PRODUCTS

Strategic considerations in managing
innovation
• New ideas, systems, approaches, technologies – innovation is an
essential part of continuous improvement for any organisation.
• But innovation for its own sake is not enough – it must be focused on
supporting business goals and generating value.
• To achieve that, it is vital to consider how we manage innovation.
• With the rapid pace of change in today’s environment, innovation and
new technologies not only need to be embraced, but strategies need
to be in place for managing them effectively in order to use them to
support long-term aims.
Strategic considerations in managing innovation:John Saiz and Clemens Chaskel,
building on research insights from the University of Cambridge’s Institute of
Manufacturing (IfM

• 1. Strategy: linking innovation with business goals

• Innovation strategy needs to be closely linked to business strategy.
This can be a significant hurdle if the business strategy itself is not
well developed.
• Chaskel, an expert on the link between technology and corporate
strategy, explains that this often presents a challenge at the outset: “A
lot of companies don’t do strategy as such. They do planning and
forecasting – thinking about day-to-day requirements and related
budgeting.
Role of companies
• Companies need to think much more about their long-term vision, or
how they need to build the internal capability to deliver that vision
successfully within a chosen timeframe.”
• Using an approach like strategic road mapping can be an excellent
way for key stakeholders to come together to work out how to exploit
company strengths and chart a future direction.
• A strategy for managing innovation and technology becomes more
meaningful and relevant in the context of a well-formulated business
strategy. Once that business strategy is developed, decisions about
innovation and technology can be linked directly to business goals.
• 2. Leadership: articulating the vision
• Strategy development goes hand-in-hand with effective leadership.
Part of the responsibility of leaders, is to articulate a vision which
pulls together people and activities with a sense of shared endeavour.
• Leaders should be expanded into four priorities:
• i) Connect to the mission;
• ii) Enable change;
• iii) Remove obstacles; and
• iv) Make programs successful.
3. People: opportunities to be innovative

• There needs to be room for innovation to happen, and enough space

made for creative thinking to be fostered.
• Innovation doesn’t just happen through top-down investment in
Research and Development — it involves people across the company
identifying and acting on opportunities, and it manifests itself in a
wide variety of outcomes, from new products and services to new
business models and new ways of working.
Role of employees in building innovation
• Time Out — to give employees the space in their working day for
creative thought
• Expansive Roles — to help employees move beyond the confines of
their assigned job
• Competitions — to stimulate action and to get the creative juices
flowing
• Open Forums — to give employees a sense of direction and to foster
collaboration.
Traits of an innovative employee

• Visionary view on challenges and solutions

• Openness to change
• Persistency
• Thorough presentation of ideas and solutions
• Persuasive power
• Independent search for information, resources and support (Kanter 1982, p. 95ff)
• Proactivity in the pursuit of ideas and their transformation into an economic
value.
• Honesty and the ability to solve conflicts
• Intrinsic interest in the own work and/or problem solving
Culture to foster innovative behaviour
• Foster collaboration and communication across organizational
structures and hierarchies
• Free flow of information
• Independence to pursue ideas
• Trust in the employees competences
• Providing resources (time/money)
• Mechanisms to reward innovative behavior
4 Involvement: breadth of input into strategy

• For strategy development, it is important to ensure broad

involvement of staff who understand different aspects of the business
and can provide fresh perspectives.
• Senior leader should provide insights within organization and among
the employees by continuous interactions and communications. The
process then becomes better informed to make sound decisions.”
• And when an innovation strategy has been developed, the people
within an organisation need to be empowered and equipped with the
necessary skills to implement it. So, skills and organisational
structures also become an important part of the picture.
5. Implementation: framework for managing ideas

• A technology management framework can take the form of a toolkit

that includes decision-support capabilities for managing innovation.
Management toolkits need to be tailored for the organisation, but in
its generic form, the basic toolkit includes tools such as strategic
roadmapping, quality function deployment (linking grids), and a
methodology for managing portfolios of activities.
• This then extends into a practical process for translating vision and
big-picture strategy into objectives and tactical plans.
Innovation strategy
Set concrete objectives
The most fundamental piece of developing an innovation strategy is
setting concrete objectives. These objectives will set the direction for
all innovations in order to ensure alignment.
This will also help ensure that your organization’s innovation will work
to drive value. Ultimately, innovation without any defined value will be
a distraction.
Set innovation objectives by looking at your organization’s current
portfolio, industry data, and customer needs.
Innovation strategy
Determine what will (or won’t) work
• Not all innovation strategies will work for your organization. Determining
what will work for your organization and what won’t work will help prevent
unfruitful resource usage. Many large organizations stay innovative by
creating unique tactics that work for them
Encourage innovation amongst employees
• Now that your innovation strategy has objectives and a clear direction, it’s
time to motivate employees to innovate. Coupled with vocal support from
leadership, there are many effective tactics you can take to create
motivation for innovation, including contests, unstructured time, inventor
incentive programs, and more.
Innovation strategy
Measure your success
• Any strategy is incomplete without being able to measure its success.
To measure innovation’s success, determine innovation
benchmarks and put processes in place to measure against them.
Innovation metrics can be focused on processes, revenue generated,
costs, intellectual property, and more.
• A clear innovation strategy can help your organization build a
powerful innovation culture. An innovation culture impacts your
company’s brand, hiring, development, competitiveness and overall
value so it’s critical to build and nurture one in your organization
Types of innovation strategies

• Proactive
• Companies with proactive innovation strategies tend to have strong
research orientation and first-mover advantage, and be a technology
market leader. They access knowledge from a broad range of sources and
take big bets/high risks. Examples include: Dupont, Apple and Singapore
Airlines.
• The types of technological innovation used in a proactive innovation
strategy are:
• radical - breakthroughs that change the nature of products and services
• incremental - the constant technological or process changes that lead to
improved performance of products and services.
Types of innovation strategies
• Active
• Active innovation strategies involve defending existing technologies
and markets while being prepared to respond quickly once markets
and technologies are proven. Companies using this approach also
have broad sources of knowledge and medium-to-low risk exposure;
they tend to hedge their bets. Examples include Microsoft, Dell and
British Airways.
• These companies use mainly incremental innovation with in-house
applied research and development.
Types of innovation strategies
• Reactive
• The reactive innovation strategy is used by companies:
• which are followers
• have a focus on operations
• take a wait-and-see approach
• look for low-risk opportunities.
• Passive
• Companies with passive innovation strategies wait until their customers
demand a change in their products or services. Examples include
automotive supply companies as they wait for their customers to demand
changes to specification before implementing these.
New product development strategy
• Product development strategy is the process of bringing a new
innovation to consumers from concept to testing through
distribution.
• When existing business revenue platforms have plateaued, it is time
to look at new growth strategies.
• New product development strategies look at improving existing
products to invigorate an existing market or create new products that
the market seeks.
New product development
• Improve Existing Products
• Improving existing products is an efficient method for product
development. It is not as expensive as creating a new product
because a lot of the time and resources were already devoted to
creating the original product. Businesses then take feedback from
consumers and find ways to improve upon products. .
• The technology industry is well known for this. Think about the latest
version of your smartphone or desktop operating system; the
foundation was created in a previous version. Sometimes there are 10
previous versions, each building on the one before.
• Bringing New Products to Market
• Crowdfunding, infomercials and television shows such as Shark Tank
encourage inventors to bring innovations to market.
• New products require that the maker identify a need and then
develop a solution to make life easier, safer or more enjoyable.
New product development process
• Stage 1: Idea generation
• It is a continuous, meticulous search for new, viable product
development opportunities. Often, companies employ basic internal
and external SWOT (strengths, weaknesses, opportunities and
threats) analyses and examine market trends to generate hundreds,
or even thousands of potential product ideas.
• Internal ideas can be sourced through R&D and employee
brainstorming, while external ideas tend to come from studying and
communicating with distributors, suppliers, customers and
competitors.
New product development process
• Some methods for generating new ideas include:
• Dimensional analysis – listing all physical characteristics of a product idea
and asking relevant questions to assess its potential for success.
• Scenario analysis – identifying market evolution to capitalize on
anticipated consumer needs.
• Problem analysis – formulating a list of existing consumer problems, pain
points and needs to serve as a basis for new product development ideas.
• Benefit structure analysis – identifying which product benefits and
features consumers desire or would be pleased to have, to determine
deficiencies in existing products and provide the market with enhanced, or
totally new solutions.
New product development process
• Stage 2: Idea screening
• This second step of new product development involves screening all newly-
generated ideas to sift the good ones from the not-so-good ones – and discarding
the latter, taking into account several factors:
• Your company’s strengths,
• Your company’s weaknesses,
• Customer needs,
• Current market trends,
• Expected/desired ROI,
• Affordability
• What your competitors are producing
• And more.
New product development process
• Stage 3: Concept development & testing
• Concept development
• All ideas passing the screening stage are developed into concepts, which
will subsequently be tested for real-world viability.
• A product concept is a detailed version or blueprint of your product
development idea, formulated into meaningful, relatable consumer terms
so that it is optimally presentable.
• For every feasible new product development idea, multiple alternative
concepts can be created, from which your company can select the one
most likely to appeal to your target audience. These alternatives can vary
according to several factors, such as quality, price point, features and
comfort/convenience of use.
New product development
• Concept testing
• Once concepts have been developed, each one is tested with sample
target consumer groups. The feedback these focus groups provide is
used to further develop the concept to better meet customers’ needs
and demands. After all, you wouldn’t want to launch a product that
doesn’t have strong consumer appeal – and for that you need to test,
test, test..
Process for concept testing
• Here’s how the process works:
• A sample group is gathered and presented with the concepts, either
physically or using symbolic information.This helps them visualize the
product.
• The group asks representatives of your business questions to better
understand the concept and the solution it aims to provide.
• Your business asks the group members questions about their
perception of the concept – does it fulfill their wants and needs? Is it
something they are likely to buy? What is missing from the product,
and more.
• Stage 4: Business strategy analysis & development
• This requires an in-depth analysis of the methods your product
management, marketing and sales teams will ultimately use to create and
sell the product to your target audience. Necessary strategies, such as
product profitability and marketing mix will be determined. To do so, the
following strategic areas must be defined:
• Your target market,
• Your new product’s planned value proposition
• Sales, market share and profit goals for the first few years following your
new product’s launch
• Planned development, marketing, sales and distribution budgets
• Planned long-term product goals
• Stage 5: Business & financial analysis
• Detailed list of factors such as cost projections, demand projections,
relevant competitors, minimum required investment, profitability and
more must be considered and a system of input and output metrics to
monitor progress, such as the average time your team spend in each
NPD stage and the value of launched products, sales data and other
valuable feedback information should be employed.
• Stage 6: Product development
• The main actions involved in the product development stage include:
• Product construction
• Usage testing
• Packaging
• Branding
• Product positioning
• A physical prototype or limited production model is built and branding (and
other strategies) are tested and applied. This is meant to ensure that the
product idea can indeed function as a safe, effective and workable market
offering.
• Stage 7: Test marketing
• Unlike concept testing, test marketing involves placing an actual finished
product for sale in one or multiple sample market settings and observing
how well (or how poorly) it sells under the pre-determined marketing plan.
• Here again, customer feedback is crucial, this time relying on actual
observed customer behavior, as opposed to making inquiries about interest
in a proposed concept.
• . The goal of the test marketing stage of the NPD process is to validate the
entire concept behind the new product before the full investment is made
and ready the product for its imminent commercial launch. The actual
amount of test marketing needed can vary quite substantially with each
new product.
• Stage 8: Commercialization
• Product and all associated marketing strategies are ready for launch.
Now it’s time to implement a full marketing plan and production
process.
• Now it is time to scale up operations and start to capitalize on all the
hard work and dedication that has been got the new product this far.
Commercialization phase includes:
• Identifying the target market/customers
• From the test marketing carried out in the previous phase, you should have an initial
target market and customer profile already identified within the strategic plan
• Business plan and forecast
• Part of the business and commercialization plan is forecasting — generally looking ahead
three years. The forecast generally includes most of the following elements:
• Sales quantities
• Gross Margin and Gross Margin as a percentage of Sales
• Operating Income and Operating Income as a percentage of Sales
• CAPEX – CApital EXpenditure
• RONA – Return On Net Assets
Commercialization phase:
• Commercialization risks & issues
• As with any risk analysis, companies need to identify all the risks and
potential issues that could affect the commercialization of your
product. Once the risks have been written down, rate them from high
to low and ensure you have risk mitigation actions in place to
overcome the risks.
FMEA
Risk analysis plan may include :
Risk Description:- Detailed description of the risk
Rank the Likelihood of the risk occurring: – How likely is the risk to occur?
Rank the impact of the risk occurring: – What will the impact be if the risk
did occur??
Calculate risk value:- multiply the two values to get a risk value
Assess risk values:- Assess the risk values. A good way of doing this is with
a Pareto chart which shows both bar and line graph
Generate action plan for all critical risks:- Actions need to be generated
that mitigate the risks as best can be
Re-evaluate risks after actions are in-place:- Re-evaluation will allow you to
review and assess how successful the actions will be when implemented.
NPD is for filling the gap
• New product development
• New product development (NPD) is the process which identifies, develops
and tests new product opportunities. Firms may develop new products for
a number of reasons. These include:
• replacing declining products
• adding to the current portfolio
• filling a gap in the market
• maintaining competitive advantage
• competing with rivals' products
• attracting new customers.
Considerations in developing NPD

Corporate planning Market planning

Technology Opportunity
management analysis/serendipity
Ansoff matrix-NPD strategy for growth
Market penetration growth strategy

• Market penetration is refers to a growth strategy where a company focuses on

selling existing products into existing markets. By the help of market
penetration growth strategy a company seeks to achieve four main objectives:
1 Company wants to maintain or increase the market share of current products.
A company can achieve this by a combination of competitive pricing strategies,
sales promotion, advertising, and perhaps more resources dedicated to personal
selling.
2 Secure supremacy of growth markets
3 Company wants to reorganize a mature market by driving out competitors. For
this purpose company require a much more aggressive promotional campaign,
supported by a suitable pricing strategy designed to make the market unattractive
for competitor’s products.
4 Increase the usage of a particular product or brand by existing customers for
example by introducing loyalty schemes in the market.
Market development growth strategy

• Market development refers to a growth strategy where the company seeks to

sell/offer its existing products or services into new markets. In other words we
can say this is a market expansion strategy for an existing product or brand.
• The possible ways of approaching development growth strategy include:
• Find a new geographical markets for example exporting the company existing
product to a new country
• New product dimensions or packaging for a product according to new market
requirements
• Develop & organize new distribution channels for example a company who is
selling its products or brand via retail can move on e-commerce and mail order
etc.
• Make different pricing policies to attract more customers or to create new
market segments
Product development growth strategy

• Product development refers to a growth strategy where a company aims to

introduce new or innovative products into existing markets. For this strategy a
company may require the development of new competencies as well as to
develop modified products which can appeal to existing markets.
• A company which wants to differentiate its product to remain competitive can
use the strategy of product development.
• Marketing emphasis of successful product development strategy is on:
• Research & development about the product and make innovation in products
• Company should have deep concern with customer needs, change in customer
need and how company will satisfied their changing needs
• Being first to market (new product or modification)
Diversification
• In this type of strategy a company or a business usually introduces
new products & brand in new market. There may be some sort of risk
in diversification growth strategy because the business or company
may have not such experience.
• Before adopting the diversification growth strategy it is necessary for
a company that it must have a clear idea which is being expected
from this strategy. Risks should also be kept in mind before adopting
this strategy.
Types of diversification
• 1. Concentric diversification
• Concentric diversification involves adding similar products or services
to the existing business. For example, when a computer company that
primarily produces computers starts manufacturing laptops, it is
pursuing a concentric diversification strategy.
• 2. Horizontal diversification
• Horizontal diversification involves providing new and unrelated
products or services to existing consumers. For example, a notebook
manufacturer that enters the pen market is pursuing a horizontal
diversification strategy.
Types of diversification
• 3. Conglomerate diversification
• Conglomerate diversification involves adding new products or
services that are significantly unrelated and with no technological or
commercial similarities. For example, if a computer company decides
to produce notebooks, the company is pursuing a conglomerate
diversification strategy.
• Of the three types of diversification techniques, conglomerate
diversification is the riskiest strategy.
Risks in Product Diversification

• The Attractiveness Test – The industries or markets chosen for

diversification must be attractive. Porter’s 5 Forces Analysis can be
done to determine the attractiveness of an industry.
• The Cost-of-entry Test – The cost of entry must not capitalize all
future profits.
• The Better-off Test – There must be synergy; the new unit must gain a
competitive advantage from the corporation or vice-versa.
Successful examples of Diversification
• General Electric
• General Electric commonly comes in discussions when talking about
successful diversification stories. GE began as an 1892 merger between two
electric companies and now operates in several segments: Aviation, energy
connections, healthcare, lighting, oil and gas, power, renewable energy,
transportation, and more.

• Walt Disney
• Walt Disney Company successfully diversified from its core animation
business to theme parks, cruise lines, resorts, TV broadcasting, live
entertainment, and more.
Classification of new products
Additions to New to the
New to firms
the existing line world
• HP color ink – • Samsung • Ipod.
jet printer entered the • Digital camera
mobile
market
Classification of new products

Improvements
Cost reductions Repositioning
and revision
• Due to • Bringing new
improved dimensions
technology • Eg asprin
entered over
the counter
medicines
Models of NPD
• 1.Departmental –stage model.
• 2.activity-stage models and concurrent engineering.
• 3.cross-functional models.
• 4.decision-stage models.
• 5.conversion-process models.
• 6.response models.
• 7.Network models.
Over –the wall model
Over-the wall model
• Marketing – Tries to understand the future needs of the customer.
• Research – Develops the technology to meet the needs identified by
Marketing.
• Design -Uses the technology developed by Research to design
products to meet the needs of the customer.
• Manufacturing – Develops the methods to manufacture the products
designed by the design department.
• Sales – Develop plans and executes the plans to sell the products to
the customer.
Activity –stage model
Network models
Process innovation
• Process innovation means the implementation of a new or significantly
improved production or delivery method (including significant changes in
techniques, equipment and/or software).
• Minor changes or improvements, an increase in production or service
capabilities through the addition of manufacturing or logistical systems
which are very similar to those already in use,
• ceasing to use a process
• , simple capital replacement or extension, changes resulting purely from
changes in factor prices, customisation,
• regular seasonal and other cyclical changes, trading of new or significantly
improved products are not considered innovations.
Characteristics of Process innovation
• Process innovation can be called as creating radical or game-changing
shifts.
• In addition to the introduction of a radically new approach or
technology, process innovation generally requires a longer planning
time and support from high-level management.
• It’s also riskier than incremental improvements and requires a higher
level of cultural and structural change.
• Process innovation also typically impacts a broader portion of an
organization than do incremental improvements.
Characteristics of Process innovation
• Process innovation can generate value to either internal customers,
including employees or the actual organization itself, or it can create value
to external customers, including business partners, end users or actual
consumers.
• Values stemming from process innovation include reducing the time it
takes to produce a product or perform a service; increasing the number of
products produced or services provided within a time frame; and reducing
the costs per product produced or service provided.
• Process innovation can generate significant gains in product quality and
service levels.
• Overall, an individual organization needs to see a significant increase in
some of its key performance indicators (KPIs) to be a true process
innovation.
Process innovation in India
• Process innovations appear strong with companies in India. One of
the biggest reasons for process innovation is resource efficiency and
cost reduction.
• Tata Group’s Computational Research Laboratories (CRL) developed a
parallel processing library technology. Thanks to this process
innovation, CRL has been able to develop the fourth fastest computer
in the world, sustaining a speed of performing 117.9 trillion floating
operations per second in 2007.
Steps in process innovation
• A Structured Approach
• Process innovation steps consist of a structured approach to identify
the best possible way to achieve an end result. There are four high-
level steps typically used in process
innovation: ideation, innovation, incubation and implementation.
This can be applied to existing processes as well as the development
of new processes as it relates to supporting a new system or product.
Process innovation steps create a roadmap for organizations in the
pursuit of innovation.
• Step 1: Ideation
• During this step, ideas are generated and at a high level, researched,
evaluated and measured to better understand the pros and cons of
each idea. Fresh ideas help organizations create a competitive
advantage. No industry stays stagnant, so constant idea generation is
imperative for organizations to survive.
• Step 2 : innovation wherein the industry devises new ways to
produce together with the technology .
• Step 3 : incubation :Incubators and accelerators are organizations
that are ideally suited for helping corporations identify and
explore open-ended ideas that are associated with long-
term timelines to ROI.
• Step 4 : process used after training and prototyping.
BPR : Business process reengineering
• Business Process Reengineering involves the radical redesign of core
business processes to achieve dramatic improvements in productivity,
cycle times and quality.
• In Business Process Reengineering, companies start with a blank
sheet of paper and rethink existing processes to deliver more value to
the customer. They typically adopt a new value system that places
increased emphasis on customer needs.
How Business Process Reengineering works:

• Business Process Reengineering is a dramatic change initiative that

contains five major steps that managers should take:
• Refocus company values on customer needs
• Redesign core processes, often using information technology to
enable improvements
• Reorganize a business into cross-functional teams with end-to-end
responsibility for a process
• Rethink basic organizational and people issues
• Improve business processes across the organization
Total Quality Management

• Total Quality management is defined as a continuous effort by the management as well

as employees of a particular organization to ensure long term customer loyalty and
customer satisfaction.
• Planning Phase
• Planning is the most crucial phase of total quality management. In this phase employees
have to come up with their problems and queries which need to be addressed. They
need to come up with the various challenges they face in their day to day operations and
also analyze the problem’s root cause. Employees are required to do necessary research
and collect relevant data which would help them find solutions to all the problems.
• Doing Phase
• In the doing phase, employees develop a solution for the problems defined in planning
phase. Strategies are devised and implemented to overcome the challenges faced by
employees. The effectiveness of solutions and strategies is also measured in this stage.
TQM steps
• Checking Phase
• Checking phase is the stage where people actually do a comparison
analysis of before and after data to confirm the effectiveness of the
processes and measure the results.
• Acting Phase
• In this phase employees document their results and prepare
themselves to address other problems.
Kaizen
• Kaizen (Continuous Improvement) is a strategy where employees at all
levels of a company work together proactively to achieve regular,
incremental improvements to the manufacturing process.
• THE DUAL NATURE OF KAIZEN
• Kaizen is part action plan and part philosophy.
• As an action plan, Kaizen is about organizing events focused on improving
specific areas within the company. These events involve teams of
employees at all levels, with an especially strong emphasis on involving
plant floor employees
• As a philosophy, Kaizen is about building a culture where all employees
are actively engaged in suggesting and implementing improvements to the
company. In truly lean companies, it becomes a natural way of thinking for
both managers and plant floor employees.
• The Gujarat Government
• Gujarat is one of the most significant states in the country of India,
the world’s largest democracy. In late 2012, the Kaizen Institute of
India reported that the Education Department of the Gujarat
government commissioned two weeks of Kaizen training for more
than 80 employees, as an attempt to improve the functionality of its
public sector.
• This is a great example of how Kaizen can help government and
municipal organizations, not just private companies.
Lean production
• Lean manufacturing is a series of techniques that allow production of
one unit at a time, at a formulated rate, while eliminating non-value
adding wait time, queue time, and other kinds of delays.
• One of the significant features of lean manufacturing is that here the
product is pulled as per the customers’ demand rather than pushing it
on the basis of a planning system.
• It is about producing the product using the least amount of non-value
adding activities that add time and cost to the manufacturing process
thereby reducing the manufacturing lead time.
• Lean manufacturing provides the ability to change the output rate
every day according to the changes in customer demands.
Business Model Innovation

• Business model innovation refers to the creation, or reinvention, of a

business itself.
• A business model innovation results in an entirely different type of
company that competes not only on the value proposition of its
offerings, but aligns its profit formula, resources and processes to
enhance that value proposition, capture new market segments and
alienate competitors
Examples of Business model innovation
• Amul or Gujarat Cooperative Milk Marketing Federation (GCMMF) has
evolved as the world‟s biggest co-operative with the largest amount
of milk processed globally. Amul follows a hierarchy of cooperatives
and procures milk daily from its 15 dairy unions. The innovative
strategy of capitalising on the vast rural base of India is the primary
growth driver for the company. The unions in total have over 3 million
members, spread across more than 15,000 villages in the country.
Amul has targeted to produce 20 million litres of milk per day by
2020, after it achieved the 10 million litres per day mark in 2009
Business model innovation
• Indian Tobacco Company (ITC) innovated its sourcing channel by
introducing E-Choupal, a tool empowering farmers with internet-based
kiosks in villages for direct transactions, thereby eliminating
themiddleman.
• The innovation divided the procurement of raw materials into two parts –
information related to pricing, and transactions that involved weighing and
delivery. Apart from educating farmers about best practices, the kiosks
provide them the best price for their crop, information related to grading
standards, and the cost and availability of cost-effective raw materials
(seeds, fertiliser information). The next step of procurement is carried
through ITC‟s warehouses set up in villages, which help in reducing the
transaction cost, screening for quality and efficient logistics due to single
point of transaction.
Service innovation
• A new service idea is an innovation if it:
• • Is an intentional change in the service provided
• • Provides a new or substantially improved benefit to the customer
• • Significantly improves the service firm’s profitability
Definition of Service Innovation
• Service innovation as identified by , involves the multidisciplinary
process of designing, realizing and marketing a combination of
existing and/or new services and products with the final attempt to
create valuable customer experience.
• Service innovation is multidimensional involving different parties and
stakeholders during the process of service innovation , to create value
to the customer and organization as a main purpose of service
innovation.
Types of Service innovations
• Major or radical service Innovations.
• Start –up businesses.
• New services for current markets.
• Service Line extensions.
• Service improvements
Classification of service innovation
Radical new service Innovations
• Radical Innovations
• In radical innovation new service system with final service product,
technical and competence characteristics replaces the old service
system.
• It can visualize as step change in some measure of growth like sales
and efficiency.
Radical new service Innovation
Major Innovation
 New service for markets as yet undefined mostly driven by
information and computer based technology such as eBay
 Start-up Business
 New services in a market that is already served by existing services
such as make-my-trip, clear trip
 New Services for the Market Presently Served
 New service offerings to existing customers of an organization such
as ATMs at Airport
Incremental innovations
• Incremental Innovations Incremental innovation results due to
modest changes in the existing services.
• It can take different forms.
• Service Line Extensions – Augmentation of existing service line such
as new menu items in some restaurants
• Service Improvements – Changes in features of currently offered
service such as web based check-in services offered by airlines
• Style Changes – Modest visible changes in appearances such as
changes in aesthetics
• Example: Service Innovation Dell Computer Corporation offers same
design of computers (laptops) and utilizes similar manufacturing
systems as their competitors, but they differ significantly in terms of
how they serve their customers’ needs both in terms of sales and
after sales services. Dell’s strategy of skipping the middleman (i.e., the
sales agent) and allowing customers to configure their computers to
their own requirements have kept Dell apart from its competitors and
helped build its significant market share. At the same time Dell
provides online after sales service, where engineers can interact with
the customer and rectify the problems using internet.
New service design will include
New Service development examples
New service development requires :
Structural Elements and managerial elements
• Structural Elements The decisions pertaining to structural elements are of
strategic in nature, which have to be planned considering long-time
horizon while designing service delivery system.
• These structural elements are presented below.
• Delivery System
• Front & back office operations
• Automation like self-service technologies
• Customer participation Facility Design
• Size of facility
• Aesthetics and ambience
• Layout and expansion consideration
Managerial elements
• Service Encounter
• Characteristics of service provider, employees & customer
• Quality
• Reducing gaps between customer expectation and perceptions
• Managing capacity & demand
• Information
Service firms innovate in three ways:
• a) Changes to the service itself, or what is being offered. Innovative
services are ones that did not exist before, or that have been
substantially redesigned to meet customers’ needs more effectively.
b) Changes to the service delivery process, or how the service is
being provided. Innovative service processes include new or
improved production, delivery, or distribution methods often
involving the incorporation of new information technologies.
• The process innovation may involve significant changes in the roles of
staff, strategic partners, and/or customers.
• 3 Changes to the organisational and managerial structure, or how
service provision is supported.
• Organisational innovations include new or improved managerial
techniques (e.g., total quality management, quality assurance
system), significantly revised organisational structures, and/or the
implementation of new or substantially changed corporate strategies.
Service innovation process
Service innovation
• Knowledge–based and dynamic environment, an organization pays
more attention to using strategies and techniques to increase value to
their customer and obtain competitive advantages.
• Services and service innovation present a key impact in an
organizational profitability.
• Fast developing and growing in service innovation is seen as a
competitive advantage in industry, firms, and the economy.
• According to increasing competition among industries and customer
expectations, it is essential for all industries to develop new ways and
approaches to service in addition to delivering high service quality
Service innovation
• Uber – changing the taxi business
• Airbnb – changing the accommodation industry
• Amazon – changing retailing
• Technology companies creating new markets / industries
• Google – with ” Search, etc. ” for a much better online experience
• – changed the Advertising world with Adwords
• – impacting the mobile, car, utility, etc. industries
• . Facebook – established the ” social network ” market
• WhatsApp – established the personal communications market
Service design innovation
• Service design is the practice of designing services, systems, and
processes to deliver an excellent customer experience.
• The service design process means understanding the details of the
customers’ world and how your business really operates.
• The purpose is to simplify, and enhance the way your organization
delivers its service so that it will meet customer expectations.
Shift from a product to service-centric global
economy
• Services: Not just intangible economic goods Unlike products that
are tangible, services render value to customers by solving their
stated and latent needs.
• Today, brands must have a robust ecosystem of services in place in
order to enhance the value of their core product. In fact, the quality
of services has the power to create a brand in the most unusual of
places.
• A classic example: Mumbai’s iconic dabbawalas, who supply almost
200,000 tiffin boxes every day across the city with magical precision,
are a brand in themselves.
Disruption in service experience/bringing
Uniqueness
• Customers are differentiating products based on value of the
services .
• Cab-hailing service provider Ola has been constantly reimagining its
services. The recently-launched ‘Ola Play’ offers a rider easy access to
entertainment over Wi-Fi.
Orchestrating the frontstage and backstage to
create a complete experience
• Service Design is about orchestrating front stage-oriented, user-
centric design techniques with backstage methods for designing a
service driven organization.
• Example in a typical restaurant the experience is flurry of activities
both front and behind stage.
• A lot of work goes in behind the scene, or backstage, to deliver the
service, shape the experience, and represent a brand.
• The quality of the service experience delivered is then determined
during the final ‘service encounter’ that occurs at the front stage.
Create service experiences that are
purposefully distinct
• Brands must identify the ways they can substitute, augment and
innovate their products and services –through digitization and be
purposefully distinct from the competition
 William Gibson, author of Neuromancer, “The future is here. It’s just not evenly
distributed.” Much of this is already happening in disconnected pockets in different
industries or with different retailers. The real opportunity is not necessarily in creating a
new specific touchpoint experience but in bringing all of them together in a holistic,
systemic and branded way. Service design lends systems thinking model for this

purpose .
Service Design is a process

1. Its initial steps include a status quo analysis of business environment,

formulating a business hypothesis, developing a vision and a value
proposition.
2. Second all assumptions are verified with a control group. Material
conclusions result from interviews, ethnographic surveys or quantitative
data analyses.
3. Third a map of relationships is developed, which are evaluated in terms
of quality and value. The analysis includes both a direct relation with a
client and the entire mechanism underlying the provided service.
4. Service Blueprint, a document including the current status assessment, a
new service prototype, change strategy and new process efficiency
indicators is the final deliverable.
Service design is process of creating all touch
points
• Service design is all about making the services we use usable, easy
and desirable.
• Services are all around us - buses, shops, libraries, dentists,
restaurants and the post office help us get to work, get our food, or
keep in contact with each other.
• A service happens over time and is made up of touchpoints – the
people, information, products and spaces that we encounter. For
instance a menu, a chair or a waitress are all touchpoints that make
up a restaurant service
Design tools and methods
Diamond method explained
• 1. The Discover phase
• Objectives • Identify the problem, opportunity or needs to be
addressed through design
• Define the solution space
• Build a rich knowledge resource with inspiration and insights.
In the Discover phase we begin to identify the problem, opportunity or
need to be addressed as well as define some of the boundaries of the
solution space
• 2. The Define phase
• Objectives
• • Analyse the outputs of the Discover phase
• • Synthesise the findings into a reduced number of opportunities
• • Define a clear brief for sign off by all stakeholders.
• The initial Discover phase is about opening out and exploring the
challenge to identify problems and opportunities. The Define stage
channels these towards actionable tasks.
• 3. The Develop phase
• Objectives
• • Develop the initial brief into a product or service for
implementation
• • Design service components in detail and as part of a holistic
experience
• • Iteratively test concepts with end users.
• 4. The Deliver phase
• Objectives
• • Taking product or service to launch
• • Ensure customer feedback mechanisms are in place
• • Share lessons from development process back into the
organisation.
Discover tools
• A User Journey Map is a visual
representation of a user’s journey
through a service, showing all the
different interactions they have.
• This allows us to see what parts of
the service work for the user
(magic moments) and what parts
might need improving (pain
points).
• A User Journey Map takes the
user’s point of view and explains
their actual experience of the
service
• Identify the key elements of a
service
• • Understand the links between all
the different elements over time
• • Identify problem areas in a
service or areas where new things
can be added
• • Create empathy with different
types of users
User diaries
• User Diaries are a method for • Gather information about real user
gathering in-depth qualitative needs
information from users by giving • • Get understanding and empathy
them a way of recording away from about other people’s experiences
researchers.
• It allows people to tell about their • • Get a sense of a user’s life over a
own lives in their own time, and longer period of time.
explain what they do over a
number of days or weeks.
• Sometimes cameras or other
documentation equipment is
provided to gather visual feedback
for researchers.
Service safari
• Service Safari is a research
method for understanding
services.
• Researchers go ‘on location’ and
experience a service first hand to
find out what service
experiences are like.
• Gather information about a
service in the real world
• • Identify what makes for a
good service experience across
many different service types.
User shadowing
• Shadowing is a research method
for understanding how people
interact with the world around
them (including services).
• It involves observing a user
directly to identify and understand
their needs.
• Researchers follow a particular
person as they go about their lives
or use a service and document
what happens in an unobtrusive
way
• • Gather information about real
user needs
• • Get understanding and empathy
about other people’s experiences
• • Understand the different parts of
a service such as staging,
interactions and touchpoints
• • Identifying barriers and
opportunities for service
innovation.
User personas
• Personas are normally created as a set, showing different types of
users with different needs.
• User personas can be communicated in a wide variety of formats but
are normally a combination of images and text.
• A Persona can cover information such as name, age, occupation,
where they live, family, hobbies & interests, likes & dislikes, and most
importantly needs
Brainstorming
• Brainstorming and other
ideation techniques are used to
generate alternative solutions
and opportunities quickly.
• They identify the most
interesting or important ideas to
take forward as part of the
design process.
•
• Generate a large number of
potential ideas
• • Identify key ideas to develop
further
• • Create a shared understanding
of potential opportunities
around a topic or theme
Service Blueprint
• A Service Blueprint is a visual map or diagram identifying the key
stages, touchpoints and other components that make up a service.
• This combination of text and graphics may be supported with photos
or illustrations, showing particular touchpoints in more detail or
offering additional explanation.
• Depending on complexity, a service blueprint may contain a key to
make it understandable
Design brief
• A Design Brief is a clear definition of the fundamental challenge or
problem to be addressed through a design-led product or service.
• It is a structured statement that outlines goals, constraints, budgets
and timelines. It communicates project outcomes, identifies potential
risks and highlights how these will be mitigated
Experience prototyping
• Experience Prototyping is a way of testing new service ideas or
designs for specific touchpoints.
• Experience Prototypes are about communicating what the experience
will be like and allow the design team to test and refine their
solutions with potential users.
Design scenarios
• Design scenarios are stories of a future situation or service.
• By creating a concrete story about a potential future, or set of
futures, Design Scenarios help create shared understanding and
enable meaningful discussion.
• . Design Scenarios should create a compelling story that
communicates potential futures in an engaging way.
Multiple product options ,portfolios and
standards
• Success of any product depends on Excellence.
• There should be excellence along the entire product creation process.
• Product proliferation in everything from cars to mobile handsets has
exploded in the past two decades. It has increased both consumer
choice and market confusion, and as a result, products need to hit
their target customer’s “sweet spot” exactly to be successful. Because
of this, product investments are more at risk today than ever.
Product excellence or standards can be
maintained by:
• A robust product portfolio strategy.
• Develop balance and module based product strategy against the
need to optimize complexity.
• Develop a product planning and management process.
• Focus on product positioning and concept development.
• Concentrate on integrating design to-value techniques.
• Work on effective commercial-launch management
Product portfolio management
• It is a practice designed to manage all aspects of the products sold by
a business.
• This involves:
• Evaluating performance
• Identifying risks and opportunities
• Prioritizing high-value products
• Optimizing resource allocation across the portfolio
• Balancing the portfolio's product mix to maximize return on
investment
Objectives of portfolio management
• Value Maximization
• The product portfolio management involves allocation of resources
for maximizing the value of the portfolio through a number of key
objectives like ROI, profitability, and acceptable risk. A variety of
procedures are used for achieving this objective of value
maximization that ranges from financial procedures to scoring
models.
• Balance
• Product portfolio management involves achievement of desired
balance of projects by considering various parameters.
• · Risk versus return
• · Short-term versus long-term
• · Business arenas and technologies
• Business Strategy Alignment
• The portfolio of projects should reflect product innovation strategy of
the organization and that the expenditures and spending should be in
line with strategic priorities of the organization.
• Pipeline Balance
• In order to achieve the proper balance between the demands of
various projects in pipeline and available resources, the pipeline
balance and management is done in the product portfolio
management. The objective is to avoid pipeline gridlock caused by
the presence of many projects with little resources at any given time.
• Approaches for pipeline management
• · Rank ordered priority list
• · Resource supply and demand assessment
Advantages of Product Portfolio Management

• With proper implementation of the Product portfolio management,

organisation can reap huge benefits in the long run.
• · Building a strong link between project selection and business strategy
• · Achieving efficient and effective allocation of scarce resources
• · Communicating priorities
• · Achieving balance
• · Maximizing the return on various product innovation investments
• · Enabling objective project selection
• · Achieving focus in activities
• · Maintaining the competitive position of organisation