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INNOVATION MANAGEMENT

Why this topic? If we dont manage creativity and innovation in the areas of Intellectual property, technology & distribution, companies will be challenged in the market place

Thinking provides knowledge, Knowledge makes you great.


Dr. APJ Abdul Kalam Honorable President of India from annual address at Saurashtra University, Rajkot, Gujarat

The Role of Knowledge


The creation, diffusion and use of knowledge have become the vital ingredient in economic growth and change. The innovation-driven economy builds upon these processes. (OECD)

Innovation
I

am convinced that if the rate of change inside the institution is less that the rate of change outside, the end is in sight. The only question is timing of the end.
Jack Welch, GE.

What is Innovation?
Innovation

means renewal or alter

Prerequisite

for innovation is the dissatisfaction with the current status and an inquisitive mind

Introduction

Innovation is more than a good idea It is the process that takes a good idea, improves it and implements it.
Purpose Commitment Ability Support

Defining Innovation, Creativity & Intelligence


Innovation

is using an existing idea for a laterally different purpose or application is doing things that has not been done before is the ability to learn and think

Creativity

Intelligence

Definition of innovation
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
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

Famous Remarks

On the Microchip: But what is it good for? Engineer at Advanced Computing Systems Division of IBM 1968 Home PC: There is no reason anyone would want a computer in their home Ken Olsen, President, Chairman and Founder of Digital Equipment Corp, 1977 Memory 640K is ought to be enough for anybody Bill Gates, 1981

Telephone: This telephone has too many shortcomings to be seriously considered as a means of communication. This device is inherently of no value to us Western UnionInternal memo Radio The wireless music box has no imaginable commercial value. Who would pay for a message sent to nobody in particular
David Sarnoffs associates in response to his urgings for investments in the Radio in the 1920s

Talking Pictures Who the hell wants to hear the actors talk?
HM Warner, Warner Brothers,1927

Beatles We dont like their sound, and guitar music is on their way out.
Decca Recording Corporation, rejecting Beatles, 1962

Airplanes Heavier-than-air Flying machines are impossible


Lord Kelvin, President, Royal Society , 1895

Airplanes are interesting toys but of no military value


Marechal Ferdinand Foch, Professor of Strategy, Ecole Superieure de Guerre

Oil Drill for Oil ? You mean drill into the ground to try and find oil? Youre crazy
Drillers whom Edwin L Drake tried to enlist to his project

Demonstrated creativity examples

George de Mestral's observation of how cockleburs attach to clothing leading to invent the hook-and-loop fastener known as Velcro
Art Fry's development of Post-It removable notes at 3M Corporation in 1974 Dr. Spencer Silver, another 3M scientist, had developed a polymer adhesive that formed microscopic spheres instead of a uniform coating, and thus was a poor adhesive that took years to set

Managing Creativity
"If

you do not know where you are going, you will not know when you arrive."
conventional view

"If

I knew what I was doing, it would not be research."


unorthodox view

CHARACTERISTICS OF SUCCESSFUL INNOVATING COMPANIES


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

CHARACTERISTICS OF SUCCESSFUL INNOVATING COMPANIES

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

Getting Innovation started

Innovation is like juggling. The organization needs to focus on purpose, commitment, ideas and support Most companies are not short of ideas. What they lack is the commitment of others, the weight required to overcome the obstacles Innovation needs people who think in different ways People who are good at problem solving and analysis People who are capable of following hunches and convert them into ideas People who are capable of implementing them Innovation will fail if it is left to a creative few

The idea process

Create thinking space:

What is the best surrounding one likes to think. Try to bring it into the office ( provided they fit the professional culture)

Bring

in Colour in the meeting rooms

Climb the ladder:


Top Rung One rung down Third rung Fourth rung Fifth rung How do I make the organization more innovative How do I Make my division more innovative How do I make my team more innovative How can I be more innovative How can I implement one new idea?

Tools of the Trade-Exploring

Brainstorming Best in groups Get the maximum number Do not evaluate ideas before the session finishes Clearly stated problem One person to jot the ideas
Mixing Metaphors Have something in mind that you want ideas about Pick an object to use as a metaphor List all characteristics of the object Stop and think about each characteristic If they give any ideas, list them Use another object if you want more ideas

Product innovation A good or service that is new or significantly improved. This includes significant improvements in technical specifications, components and materials, software in the product, user friendliness or other functional characteristics. Process innovation A new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software. Marketing innovation A new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing. Organizational innovation A new organizational method in business practices, workplace organization or external relations. Technological innovations based on specific technology, invention, discovery, Social innovations In critical historic periods more important than technological ones (mail, educational systm, social systm, health care, )

DEGREE OF NOVELTY

Incremental innovations Incremental innovation (sometimes referred to as sustaining innovation) uses existing forms or technologies as a starting point. It either makes incremental improvements to something or some process or it reconfigures it so that it may serve some other purpose. Radical innovations Radical innovations (sometime referred to as breakthrough, discontinuousor disruptive innovations)provide something new to the world that we live in by uprooting industry conventions and by significantly changing customer expectations in a positive way. Ultimately, they often end up replacing existing methods / technologies. Systemic innovations
Innovation is not about simply improving your existing offerings, nor is it about coming up with clever new offerings. Innovation is about fulfilling customer needs. Ask yourself, why do customers purchase my product or service? If you manufacture automobiles, for example, you may think that customers buy your models because of certain features, colors or price points. But what is the job that a car fulfills? Getting the customer from place to place safely, conveniently and cost-effectively. If you do this job better than the competition, you will win customers. Systematic Innovation builds on this concept, but provides a combination of tools and techniques to help you fulfill the customer job once youve identified it. The specific techniques may vary, but typically involve a mix of creativity and ideation techniques combined with Lean and Six Sigma tools. This approach enables you to identify the job, or customer need, brainstorm innovative ways to fulfill the need, design the best solution (be it a new product, service offering, or both), and test the solution before bringing it to market. Systematic Innovation also teaches companies how to define their organic growth strategy (which, after all, is the reason youre innovating in the first place). It also advocates the use of a balanced innovation portfolio, one that tempers breakthrough innovation with less risky projects.

Classification of innovations
SYSTEM New series of cars, planes, computers, TV New generation (MP3 and download as substitution of CD) Steam engine, ICT, biotechnology, nanotechnolog y

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

INNOVATION PROCESS

Research and development (R&D) Production Marketing

Innovation is an opportunity for something new, different. It is always based on change. Innovators do not view any change as a threat but as an opportunity

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, scenarios, computer simulation Study examples of succesful and unsuccesful innovation projects

WHAT TO DO
1. 2. 3.

4. 5.

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

WHAT TO AVOID
1.

Dont try to be too clever. All that is too sophisticated will almost certainly go wrong. Dont try to do too many things at once. Focus on the core of the problem.

1.

1.

Dont try to make innovations for the future but for today. An innovation can have a long-term impact but there must be an immediate need for it.

Three conditions for innovations


1.

2.

3.

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

What are innovation drivers?


Market Pull
Inno vations

Technology Push

Society demand

Main focus: Innovations based on own technologies and on market knowledge

Main focus: Innovation trends backed by governmental funds and regulations

Development of new machines:


1.

Customized the machines developed for the specific customer according to its requirements market pull Prototypes there is no specific customer market push

2.

3 pillars of success

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

Examples

1990

2005

3M and post-it notes

http://www.3m.com/us/office/postit/pastpresent/history_ws.html

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

Innovation categories
sustaining

better products that can be sold with higher margin to demanding customers; incumbents win commercialization of simpler, more user-friendly products, which are cheaper and targeted to new or less demanding customers; new entrants win

disruptive

Sustaining vs. disruptive


Sustaining:

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

Conditions of success
Disruption

is successful, 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, they sold computers formerly by mail, phone, etc.

Closed Open

innovation - requires control

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

innovation

Closed innovation
All the best people are working for us

Open innovation
Not all the best people are working for us . We must work with clever people within and outside our company. External R&D can create remarkable value; to employ it, we need absorption capacity, often as internal R&D.

R&D creates profit only when we invent, develop and market everything ourselves.

If we develop the product ourselves, we will R&D can create profit even if we do not be the first on the market. initialize and perform it ourselves. Winner is who gets the innovation to the market first. We will win if we develop most of the ideas (an the best of them). We must have our intellectual property under control so that our competitors can make advantage of it. To develop better business model is more important than to be the first in the market. We will win if we make best use of internal and external ideas. 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.

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

INNOVATION POTENTIAL ASSESSMENT


For

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

For

A. STRATEGY AND PLANNING


1. 2. 3. 4. 5.

6.

Idea about the company future Vision and employees Company innovation programs Plan modifications Financial indicators of the plan Project management

B. MARKETING
1. 2.

3.
4. 5. 6.

Monitoring of current market trends Evaluation of the market competition position Customer-orientation Monitoring of customers attitudes to the company product Market information flow inside the company Marketing and financial control

C. TECHNOLOGICAL PROCESS
1. 2.

3.
4. 5. 6.

Future companys competitiveness in the industry Changes of technologies Collection of impulses for implementation of technology changes Evaluation of the return on investment Calculation of production costs and their monitoring Creation of resources for development

D. QUALITY, ENVIRONMENT
1. 2. 3. 4. 5. 6.

Monitoring of changes conditioning the quality management in the company Employees personal contribution to the quality system External quality audit in the company Monitoring of the environmental impact Impact of quality monitoring on the company processes Covering of costs resulting from modifications of standards, regulations and legislation in the sphere of quality and environment

E. LOGISTICS
1. 2.

3.
4. 5. 6.

Organization of purchase and distribution channels in the company Optimization of the company logistics Information and communication flows between the company and its partners Flexibility of logistics processes Introduction of innovations in logistics Logistics and financial control

F. ORGANIZATION AND HUMAN RESOURCES


1. 2. 3. 4. 5. 6.

Employees satisfaction Employees motivation Management and communication Conflict resolution Company information system Company culture

Innovation potential assessm ent A 4,0 3,5 3,0 2,5 2,0 1,5 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

Innovation potential assessm ent Strategy 4,0 People 3,0 2,0 1,0 Logistics Quality Technology Marketing

A B C D E F