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Slide 1. 3 Introduction • Innovation management is not exclusively associated with products • New ways of doing business in service sector • Innovation management involves change, particularly technological change • Sometimes this involves product, service and process changes • The level of change is an important dimension Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 4 Product technology advantages • Pfizer’s Sildenfil – aka Viagra: The fastest selling human drug • Gore Associates’ Gore-Tex: he versatile polymer polytetrafluoroethylene (PTFE) • Dyson’s vacuum cleaner: Revolutionised a very stable mature industry Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 5 Process technologies • Enterprise Resource Planning (ERP) business software; virtually all large firms have installed it. • SAP, Oracle, Baan and PeopleSoft. • SAP has over 20,000 products installed worldwide and Oracle has installed databases in nearly every one of the world’s top 500 companies. • Moreover, it has changed the way they work (Gartner, 2002).

Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 6 Introduction Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 7 Introduction Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 8 Introduction • Technological innovations have also been an important component in the progress of human societes Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 9

Introduction • Not all firms develop innovative new products, but they still seem to survive. Do they thrive? Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 10 The study of innovation • Innovation has long been argued to be the engine of growth • 19. century economic historians observed that acceleration in economic growth was the result of technological progress. • In 1930s, Joseph Schumpeter was the first to realise that the development and diffusion of new technologies by profit seeking enrepreneurs formes the source of economic progress .

Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 11 The study of innovation • His student Robert Solow who won the Nobel prize argued that sustained economic growth arises from competition among firms. • Firms try to increase their profits by devoting resources to creating new products and developing new ways of making existing products. • This economic theory underpins most innovation management and new product development theories.

Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 12 The study of innovation • During Second World War, R&D expenditures rapidly increased • Significant technological advances had been produceslike radars, aerospace and new weapons • Economists found that there was no direct correlation between R&D spending and national rates of economic growth. • The linkages were more complex than first thought. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 13 The study of innovation In 1950s a cross-discipline approach incorporating economics,organisational behaviour, business and management • The generation of new knowledge • The application of this knowledge in the development of products and processes • The commercial exploitation of these products and services in terms of financial income generation • Since 1960s researchs try to find • why some firms appeares to be more succesful given the same economic and market conditions, Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 14 The study of innovation

Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 15 The study of innovation Recent studies: • Hamel and Prahalad (1994), Christensen (2003) suggest listening to your customer stifle technoloical innovation and be detrimental to long-term business success Christensen (2003) distinguishes disruptive and sustaining innovations (radical vs incremental) • Added features of computers software • 3. 5 inch disk versus 5. 25 inch disk • Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 16

The study of innovation • Recent innovations are associated with organisations rather than individuals • Today huge amount of resources are required in terms of knowledge, skills, money and market experience Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 17 The study of innovation Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 18 The study of innovation • If two different firms similar in size, operating in the same industry spend the same on R&D will their level of innovation be the same?

Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 19 Problems of definition and vocabulary • Innovation seen as a process or a single event? Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 20 Problems of definition and vocabulary • Innovation seen as a process or a single event? • Inventions are new discoveries, new ways of doing things, and that products are the eventual outputs from the inventions, that process from new discovery to eventual product is the innovation process.

A useful analogy would be education, where qualifications are the formal outputs of the education process. Education, like innovation, is not and cannot be viewed as an event. • Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 21 Problems of definition and vocabulary • Innovation vs invention Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 22 Problems of definition and vocabulary • Innovation vs invention Innovation is the management of all the activities involved in the process of idea generation, technology development, manufacturing and marketing of a new (or improved) product or manufacturing process or equipment. This definition of innovation as a management process also offers a distinction between an innovation and a product, the latter being the output of innovation Innovation = theoretical conception + technical invention + commercial exploitation 3M R&D Vice President : Creativity: the thinking of novel and appropriate ideas. Innovation: the successful implementation of those ideas within an organisation.

Illustration 1. 4 Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 • • • • Slide 1. 23 Problems of definition and vocabulary • Design • • Traditionally design referred to the development of drawings, plans and sketches. The definition of design with regard to business seems to be widening ever further and encompassing almost all aspects of business Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 24 Problems of definition and vocabulary

The interaction between development activities and design environment Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 25 Problems of definition and vocabulary • Successful and unsuccesful innovations • Apple’s iPhone set to be succesful as the iPod but Apple has experienced similar success before with its Apple Mac computer and eventually lost oout to Microsoft. Will history repeat itself? Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 6 Typology of innovations Type of innovation Product innovation Process innovation Example The development of a new or improved product The development of a new manufacturing process such as Pilkington’s float glass process Organisational innovation A new venture division, a new internal communication system; introduction a new accounting procedure Management innovation TQM (total quality management) systems, BPR (business process re-engineering); introduction of SAPR3 Production innovations Quality circles, JIT manufacturing system, new production planning software, e. g.

MRP II, new inspection system Commercial/marketing innovations New financing arrangements, new sales approach, e. g. direct marketing Service innovations ebay; Internet banking, etc. (Internet based financial services) Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 27 Problems of definition and vocabulary • Technology and science • Technology is knowledge applied to products or production processes. • Akio Morita (chairman of Sony) suggested that • Technology comes from employing and manipulating science into concepts, processes and devices.

These, in turn, can be used to make our life or work more efficient, convenient and powerful. If entrepreneurs cannot protect their ideas and inventions from competitors, innovation will be stifled and the progress of capitalism undermined. (supported by CEOs of software (Bill Gates) and pharmaceutical companies ??????? • Joseph Schumpeter vs Adam Smith • Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 28 Popular view of innovation: The lone inventor/mad professor. But, such views lead to misunderstanding. Science does not equal innovation.

Innovation is much more than science, e. g. scientific discoveries pre-date commercial products by many years. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 29 Popular view of innovation: Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 30 Three key schools of thought: 1. Market-based view of innovation; market conditions provide the context which facilitate or constrain the extent of firm innovation activity (Slater & Narver, 1994; Porter, 1980, 1985). . Resource-based view of the firm; a firm’s own resources provide a much more stable context in which to develop its innovation activity, and to shape its markets in accordance to its own view (Tidd et al. , 2001; Shavinina, L. V. (ed. ) (2003); Patel, P. and Pavitt, K. 2000). 3. Serendipity Innovation is all due to luck and good fortune Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 31 Conceptual framework Creation of new knowledge dominated by universities and large science-based organisations

Technology developmentdominated by organisations Consumers express their needs and wants through the consumption of products Science and technology base Technological developments Needs of the market Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 32 Table showing the chronological development of models of innovation 1950/60s Technology push Simple linear sequential process. Emphasis on R&D. The market is a receptacle for the fruits of R&D. 970s Market-pull Simple linear sequential process. Emphasis on marketing. The market is the source for directing R&D. R&D has a reactive role. 1980s 1980/90s 1990 s/00 2000s Coupling model Interactive model Network models Open innovation Emphsis on integrating R&D and marketing Combinations of push and pull. Emphasis on external linkages Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 33 Linear models of innovation management Technology push Research and development Manufacturing

Marketing User Market pull Marketing Research and development Manufacturing User Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 34 Coupling model of innovation management Manufacturing Research and development Marketing Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 35 Interactive model of innovation Source: Adapted from B. Rothwell and W. Zegveld (1985) Reindustrialisation and Technology, Longman, London.

Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 36 Innovation as a management process EXTERNAL INPUTS: macro factors ROI costs; competition. Organisation and business strategy Organisation’s knowledge base accumulates knowledge over time EXTERNAL INPUTS: scientific and technological development; competitors; suppliers; customers; university departments. EXTERNAL INPUTS: societal needs; competitors; supplier partnerships; distributors; customers; strategic alliances. Source: Trott, 2005

New products Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 37 Explanations for innovative capability Innovative firm Apple Google Samsung Procter & Gamble IBM BMW Starbucks Toyota Explanation for innovative capability Innovative chief executive Scientific freedom for employees Speed of product development Utilisation of external sources of technology Share patents with collaborators Design In-depth understanding of customers and their cultures Close co-operation with suppliers

Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008 Slide 1. 38 Implications for developing products and services • • • • • Role of the market is important Role of technology is important It’s a cross functional process Role of external linkages and networks are important Skills and knowledge are acquired over time and firms develop competencies Useful references: Patel, P. and Pavitt, K. 2000) ‘How technological competencies help define the core (not the boundaries) of the firm’, in Dosi, G. , Nelson, R. and Winter, S. G. (eds) The Nature and Dynamics of Organisational Capabilities, Oxford University Press, Oxford. Shavinina, L. V. ( ed. ) (2003) The international handbook on Innovation, Pergamon, Oxford. Tidd, J. , Bessant, J. and Pavitt, K. (2001) Managing Innovation, 2nd edn, John Wiley & Sons, Chichester. Paul Trott, Innovation Management and New Product Development, 4th Edition, © Pearson Education Limited 2008

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