INNOVATION MANAGEMENT - KIP

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5 Δεκ 2012 (πριν από 4 χρόνια και 8 μήνες)

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INNOVATION
MANAGEMENT

Jiří Vacek

vacekj
@
kip.zcu.cz

Department of Management, Innovations
and Projects

UWB, Faculty of Economics

Summer semester 2009/10

Lesson 1

Introduction

Basic concepts

Importance of innovations

CHARACTERISTIC
S

OF SUCCESSFUL
INNOVATING COMPANIES
-

1


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


CHARACTERISTIC
S

OF SUCCESSFUL
INNOVATING COMPANIES
-

2


Cooperation with external experts
(universities, research laboratories…)


Proper rate of risk
-
taking


Employees’ motivation (the employees are
willing to improve the product and the
operation of the whole company)


Continued education of employees


Ability to finance the innovation activities

Definition of innovation
-

1


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

Definition of innovation
-

2


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


OECD, Frascati Manual 1992


Oslo Manual


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.


Organisational innovation


A new organisational method in business practices, workplace
organisation or external relations.


Technological innovations


based on
specific technology, invention, discovery,


Social innovations


in critical historic
periods more important than technological
ones (mail, educational systém, social
systém, health care, …)

DEGREE OF NOVELTY


Incremental innovations



Radical innovations



System
ic

innovations


Classification of innovations

SYSTEM

New series of
cars, planes,
computers, TV

New generation
(MP3 and
download as
substitution of
CD)

Steam engine,
ICT,
biotechnology,
nanotechnology




COMPONENT

Improvement of
components

New
components for
existing systems

Advanced
materials
improving
component
properties

INCREMENTAL

„do better what
we already do“


„new for the
company“

RADICAL

„new for the
world“

INNOVATION PROCESS



Research and development (R&D)


Pr
oduction



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.
S
tart with analysis and study of opportunities.

2.
G
o among people, ask questions, listen

3.
Effective innovations are surprisingly simple
.
They

must be focused on specific needs and
on specific final products.

4.
Effective innovation start on a small scale.

5.
A successful innovation always tries to win a
leading position
,
other
wise

you create
opportunities for your competitors.


WHAT TO AVOID

1.
Don’t try to be too “clever”. All that is too
sophisticated will almost certainly go
wrong.

2.
Don’t try to do too many things at once.
Focus on the core of the problem.

3.
Don’t 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.
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.

2.
Successful innovations must build on
your

strong points. The innovation must be
important to the innovator.

3.
Innovation must focus on a market, must be
controlled by the market

(market
-
pull).

CASE STUDIES

Linet Želevčice


Hospital products


Hospital beds, intensive care beds, medical
furniture and other equipment increase the
comfort of patients and help the

nurses.



Nursing
-
care products


Nursing beds, bed accessories, bedside
cabinets, mattresses and other furniture.


No comment …

1990

2005

TOSHULIN

Development of new machines:

1.
Customized


the machines developed
for the specific customer according to
its requirements


market pull

2.
Prototypes


there is no specific
customer


market push

8,5
6,8
8,8
6,9
12
10,7
10,8
9,6
9,5
14,9
9,6
25,7
9,4
28,8
8,3
22,7
9,5
30,22
0
5
10
15
20
25
30
35
1998
2000
2002
2004
2006
ti me of del i very (i n
months)
customi zati on coeffi ci ent
(%)
Types of design engineers


spouter of
ideas

suggests designs
and problem
solutions without
detailed
consideration of all
possible results and
consequences

system designer

examines all ideas
and thoughts
systematically

finisher

of
ideas

elaborates
independently in
details the ideas
which he gets to
elaborate


routine
engineer

efficient and
reliable engineer;
however, without
creative approach


attendance
engineer

performs routine
tasks

[1%]

[5%]

[54%]

[30%]

[10%]

Con
nective


ti
ssue


pro
ducts


RNDr. Vladimír Velebný, CSc
.

Contipro

167 employees

sales (2008)


242 mil Kč

export


98% of total sales
one of the biggest produces of
hyaluronanu inthe world

30% of the world market

60% of the European
market

Customers in 43 countries

Holding


current state

Sales in regions


1.
Maximum attainable quality

2.
Sharing expenses with customers

3.
Development of original products

3 pillars of success

3M and post
-
it notes


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


More about 3M



A Century of Innovation The 3M Story



http://solutions.3m.com/wps/portal/3M/en_US/Ab
out/3M/

iGO


distribution of bateries



Bateries and accessories for notebooks,
mobiles, cameras and other equipment


Vision: to develop and sell simple and elegant
solutions, facilitate the use of electronic
devices


online catalogue, e
-
commerce, CRM


Customer
-

targeted marketing, flexibility


Growth of sales by 80% in the first year, by
100% in the following year

http://corporate.igo.com/about_us.aspx


Adaptors


Patented technology
iGo Technology
,
powering of mobile electronic devices using
single (universal) adaptor;


Power Technology Patent Brochure
(PDF)

Bang & Olufsen


www.bang
-
olufsen.com



VISION
: „
Courage to constantly question the ordinary in
search of surprising, long
-
lasting experiences
.“


Founded in 1925 in Struer, Denmark, Bang & Olufsen a/s is
world renowned for its distinctive range of quality audio, video
and multimedia products that represent our vision: Courage to
constantly question the ordinary in search of surprising, long
-
lasting experiences. Bang & Olufsen employs over 2.550 staff
members and had a turnover of DKK 4.092 million (EUR 548,6
million) in the 2007/2008 financial year.


Bang & Olufsen manufactures a highly distinctive and exclusive
range of televisions, music systems, loudspeakers, telephones,
and multimedia products that combine technological excellence
with emotional appeal. Bang & Olufsen products are sold by
over 1.200 dealers in more than 100 countries in an extensive
network of retail stores. Approximately 65% of these stores are
B1
-
stores, which exclusively sell Bang & Olufsen products. The
B1 stores account for 81% of the total turnover.


Production also in the Czech Republic

Bang & Olufsen


products

More case studies


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


Industry podcasts:
Midsized clients and
experts in seven industries share their insights

-

http://www
-
1.ibm.com/businesscenter/smb/us/en/mbpodcasts?&ca=s
mbIndustryPodcasts101706&tactic=&me=W&met=inli&re
=smbibmcomTopPagesIndustriesPromo1usen101706

More case studies


Sustainable energy (hydrogen, fuel cells,
biofuels, zero emission, …
http://ec.europa.eu/research/energy/nn/nn_pu/ar
ticle_1078_en.htm


http://www.zoner.com/



http://www.kerio.com/


The most important innovations

in last 30 years


http://www.pbs.org/nbr/site/features/specia
l/subdir/top
-
30
-
innovations_slide
-
show/


Lesson 2

Disruptive and open
innovations

Innovation categories


sustaining



better products that can be
sold with higher margin to demanding
customers; incumbents win


disruptive



commercialization of simpler,
more user
-
friendly products, which are
chepaer and targeted to new or less
demanding customers; new entrants win

Key elements of disruption



Customers at each market has limited
absorption capacity


Technological progress usually is faster
that the ability of the market to employ it.
Companies focus on better products to
be sold with higher margin to unsatisfied
customers.


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.

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


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

Clayton M. Christensen: The Innovator
´
s Solution,

Harvard Business Press, 2003

Clayton M. Christensen: The Innovator
´
s Solution,

Harvard Business Press, 2003

Clayton M. Christensen: The Innovator
´
s Solution,

Harvard Business Press, 2003

Clayton M. Christensen: The Innovator
´
s Solution,

Harvard Business Press, 2003

Conditions of success

-

1


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.

Conditions of success
-

2


Following the trajectory upwards to market tiers
where it is possible to attain higher margins is
what good manager is expected to do.


Each company therefore prepares its own
disruption. This is the innovator
´
s dilemma, but
also the start of innovator
´
s solution.


The advice to new, growing firms: focus on
products and markets ignored or neglected ba
incumbents.

Two types of disruption



New markets: compete with non
-
consumption: simpler, more user frindly,
can be used by less sophisticated
customers (PC, transistor radio, desk
copiers).


Low
-
end: focus on lower tiers of main
markets (minimills, discount stores,
Korean auto
-
makers); motivate
incumbents to leave the market

OPEN INNOVATION



Chesbrough, H., “
Open Innovation
”, Harvard
Business School Publishing, Boston MA, 2003


Closed innovation

-

requires control


Open innovation


companies use external as well as internal ideas and
both external and internal ways to market


internal ideas can be taken to the market through
external channels to generate additional value

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

41

Closed

innovation

Open

innovation

All the best people are working for us

Not all the best people are working for us

.
We must work with clever people within
and outside our company.

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

External R&D can create remarkable value;
to employ it, we need absorption capacity,
often as internal R&D.

If we develop the product ourselves, we will
be the first on the market.

R
&
D can create profit even if we do not
initialize an
d

perform it ourselves.

Winner is who gets the innovation to the
market first.

To develop better
business model

is more
important than to be the first in the market.

We will win if we develop most of the ideas
(an the best of them).

We will win if we make best use of
intern
al

and

extern
al ideas.

We must have our intellectual property
under control so that our competitors can
make advantage of it.

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.

Closed

innovation

Open
innovation

Examples
:
nuclear industry,
mainframe computers

Examples

: PC,
movies

Mostly
intern
al ideas

Many external ideas

Low workforce mobility

High workforce mobility

Low

role
of the venture capital

Active venture capital

Few new businesses, weak ones

Many new businesses

Universities are not important as the
sources of ideas

Universities are not important as the
sources of ideas and people

Business model



Formulate
value proposition
,

i.e. the value delivered
to the customer by the product based on specific
technology.


Identify
market

segment
, ie. users to whom the
technology brings value and performs the job to be
done.


Define structure of the
value chain
, required for the
product creation and distribution. Value creation is
necessary, however not sufficient condition of
profitability; value creation is conditioned by:


balance of forces among our business, suppliers and
competitors


presence of complementary assets (e.g. in production,
distribution, etc.) necessary for supporting the company
position in the value chain.

Business model


cont
´
d


Specify the mechanism of profit creation and
evaluate product
cost

structure
and
target
margin


Describe the company position in the
value
network
that connects suppliers and
customers, including identification of potential
alternative producers and competitors.


Formulate
competitive strategy
enabling to
the

innovative company to gain and keep
competitive advantage.

Product architecture


Hierarchy of connections between
disparate functions within a
system


Interdependent Architecture


System

Component
A


Component
B

Component
C

Interdependent Architecture


changing one component requires
changes in all other parts of the system,
because the relationships between the
parts are not clearly understood


can be best managed through internal
processes

Modular Architecture


System

Component
A


Component
B

Component
C

Modular Architecture


components could change without causing any
change in other components


modular design enables to assemble system
more easily, from “plug and play” components
whose interfaces are well understood


modular architecture makes it easy for many
companies to innovate components without
worrying about possible impact on other parts of
the system


IMPLICATIONS FOR NPD


extended circle of company
stakeholders

-

customers, NGOs, local and regional
governments


not only superior quality, but also
environmentally friendly, aesthetically appealing
new products


designed for X
, where X can be quite large and
multi
-
faceted set


after
-
sale service

plays an increasing role


and brings increased turnover and profit

Lesson 3

Assessment of company
innovation potential


COMPANY INNOVATION POTENTIAL

A company with high innovation potential

scores high

in the following
areas
:


Strategy and planning


Marketing


Technological process


Quality management


Logistics


Human resources

INNOVATION POTENTIAL ASSESSMENT


For a company, it is important to know its
innovation potential. It can use the
questionnaire


F
or 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.

A
.
STRATEGY AND PLANNING


1.
Idea about the company future

2.
Vision and employees


3.
Company innovation programs


4.
Plan modifications


5.
Financial indicators of the plan


6.
Project management


B
.
MARKETING

1.
Monitoring of current market trends


2.
Evaluation of the market competition
position


3.
Customer
-
orientation

4.
Monitoring of customers’ attitudes to
the company product


5.
Market information flow inside the
company


6.
Marketing and financial control


C
.

TECHNOLOGICAL PROCESS


1.
Future company’s competitiveness in the
industry


2.
Changes of technologies


3.
Collection of impulses for implementation
of technology changes


4.
Evaluation of the
return on
investment

5.
C
alculation
of p
roduction costs and their
monitoring

6.
Creation of resources for development

D.
QUALITY, ENVIRONMENT


1.
Monitoring of changes conditioning the quality
management in the company


2.
E
mployees’ personal contribution to the quality
system

3.
External quality audit in the company


4.
Monitoring of the

environment
al

impact

5.
Impact of quality monitoring on the company

process
es

6.
Covering of
costs resulting from modifications of
standards, regulations and legislation in the
sphere of quality and environment


E
.
LOGISTICS

1.
Organization of purchase and distribution
channels in the company


2.
Optimization of the company logistics


3.
I
nformation and communication
flows between
the
company

and it
s partners


4.
Flexibility of logistics processes

5.
Introduction of innovations in logistics


6.
Logistics and financial control


F
.

ORGANIZATION AND HUMAN RESOURCES


1.
Employees satisfaction


2.
Employees motivation


3.
Management and communication


4.
Conflict resolution


5.
Company information system


6.
Company culture



Innovation potential assessment
1,0
1,5
2,0
2,5
3,0
3,5
4,0
Strategy
Marketing
Technology
Quality
Logistics
People
A
B
C
D
E
F
Innovation potential assessment
1,0
2,0
3,0
4,0
Strategy
Marketing
Technology
Quality
Logistics
People
A
B
C
D
E
F
Lesson 4

STRUCTURING THE NEW PRODUCT
DEVELOPMENT PROCESSES


EVALUATION OF THE NEW PRODUCT
DEVELOPMENT AND R&
D
PROJECTS


HOW TO SELECT THE PORTFOLIO

OF NEW PRODUCT DEVELOPMENT PROJECTS

STRUCTURING THE NEW PRODUCT
DEVELOPMENT PROCESSES


The objectives of process models


Stage
-
gate process



R. Cooper, 1960
´
s


phases with inputs and outputs specified
beforehand


gates, in which the gatekeepers decide
about the continuation of the process


Activities were standardized and the
indicators of the process performance
significantly improved.


2
-
nd
generation
SG

process


Evaluation criteria


Operational, realistic, differentiating


Must meet
: to kill not well proceeding
projects as soon as possible


Should meet
: prioritization, support of
portfolio management


Strategic buckets
: resources allocated to
various strategic goals


I
nterdisciplinary view

F
uzzy
F
ront
E
nd
(FFE, FEI)


quality of pre
-
development phases significantly
influence the product success


early phases to a large extent influence, which
projects will be realized, why, what will be final
costs, time, and


in the end


the final success
in the market


highly dynamic, not strictly documented
,
creativity competes with systemization.


P
hase 0


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


Incremental vs. radical innovations


Koen: systematic approaches using process models can
be successful in the case of incremental innovations,
where both business and technical uncertainty is rather
low


whenever at least one of those uncertainties is high, we
need more flexible approaches with iterations and
parallelization of activities


successful radical innovations often use rapid or virtual
prototyping even in the 0
-
th or 1
-
st phase, as it allows
better visualization and communication of the product
concept.

New concept development model



in th
e early
phases it is not suitable to use the
same approaches as in the later, more
structured process phases



Difference Between FFE and NPD

Fuzzy Front End (FFE)

New Product Development (NPD)

Nature of Work

Experimental, often chaotic.

“Eureka” moments. Can schedule
work

but not invention.

Disciplined and goal
-
oriented with a project
plan.

Commercialization
Date

Unpredictable or uncertain.

High degree of certainty.

Funding

Variable

Budgeted.

Revenue
Expectations

Often uncertain, with a great deal of
speculation.

Predictable, with increasing certainty,
analysis, and documentation as the
product release date gets closer.

Activity

minimize risk and optimize potential

Multifunction product and/or process
development team

Measures of
Progress

Strengthened concepts.

Milestone achievement.

N
ew concept development model

(NCD)


Technology
push

Market
pull

NCD components


Engine
:

represents management support


Engine
powers the five elements of the
NCD model


The engine and the five elements are
placed on top of the influencing factors.

Technology stage
-
gate process

(TSG)


Management of
high
-
risk projects within and at
the transition between the fuzzy front end and
new product development


traditional SG
:

gates are transparent
, t
he
product development team can "see" all the
deliverables at the gates


TSG
:
gates are opaque
, th
e team can only "see"
to the next gate and understands that the
deliverable may change as the technology is
developed


Traditional and technology
stage
-
gate processes


EVALUATION OF THE NEW PRODUCT
DEVELOPMENT AND R&
D
PROJECTS

Stage
-
gate process

IDEA

Gate 1

Idea screening

Stage 1

Preliminary evaluation

Gate 2

Detailed evaluation

Stage 2

Product definition

Gate 3

Decision to develop

Stage 3

Development

Gate 4

Decision to test

Stage 4

Testing

Gate 5

Decision to commercialize

Stage 5

Commercialization

EVALUATION

Project feasibility


The stage
-
gate model divides the innovation
process into five stages with gates, in which
evaluators decide if to continue or kill the project.


Each phase has its cost, duration and probability
of success. Usually only the last stage generate
profits.


To justify the project development cost, we
should prove at the very beginning its feasibility.
Traditionally we have to show that the project
net present value is greater than zero, i.e. that
the whole project, taking into account the time
value of the money, will generate net profit.

DCF methods


T
he generally accepted method of evaluation of
investment
,
is based on discounted cash flows
(DCF).


The method is successfully used for investment
projects with low level of uncertainty and
duration from several months up to few years.


I
n many cases
it i
s not suited to long
-
term NPD
and R&D projects, as it penalizes projects with
high risk and potentially valuable projects can be
rejected or terminated.

Weakness of DCF methods


D
o not take into account the typical nature of the
NPD and R&D projects that can be divide
d

into
stages separated by gates, deciding about
project continuation or termination.


Financial models assume that the decision
about the project realization is done at its very
beginning and is irreversible. However,
investments into NPD or R&D projects are
incremental and the evaluators at the gates
decides about the project fate on the basis of
changing situation.

Project Expected Commercial
Value (ECV)



Takes into
consideration

all three important
characteristics of each phase


its cost, duration
and probability of success


The project is modeled by the probability tree.


The stage duration, together with the discount
rate, is reflected in the net present value
calculation.


Illustration: project with only two stages


development and commercialization

Development

D


ECV

YES

NO

Success

p
d

Failure

Commercialization

C

YES

NO

Success

p
C

Failure


P
V

ECV

= project expected commercial value

p
d


= probability of successful development

p
c


= probability of successful commercialization

D

= development costs

C

= commercialization costs

PV

= net present value of expected project earnings


ECV = [(PV * p
c



C) * p
d
]


D


according to [Cooper 2001]


Example


The first stage (1 year): laboratory tests; success
probability 50%.


The second stage (2 years): field tests; success
probability 75%.


If tests are successful, the necessary investment into the
technology is $5M, expected earnings $8M


project net
present value $3M.


Financial data are discounted, assuming the weighted
capital costs WACC = 12%, risk
-
free discount rate 5%.


Development costs and specific project risk are high

resulting ECV negative (
-
$109

000)


according to this criterion, project should be rejected.

Probability tree in project evaluation

Stage 1


Year 1

Cost =
$0,5 M

DCF =
-
$
0,446M

Stage 2


Year 2

Cost =
$0,5 M

DCF =
-
$
0,399M

Stage 2


Year 3

Cost =
$0,5 M

DCF =
-
$
0,356M

Stage 3


Year 4

NPV =
$3,0 M

DCF = $1,907
M

50%

50%

25%

75%

Stop

Stop

50% x (
-
0,446M) =
-
0,223M

12,5% x (
-
1,201M) =
-
0,150M

37,5% x


(1,907
-
(0,356+0,399+0,446)) =

= 37,5% x (1,907
-
1,201) =

= 37,5% x 0,706M = 0,265M

ECV = 0,265
-

0,150
-

0,223 =
-
0,109M

áccording to
[
Boer 2003
]


Real options


The concept of real options is closely related to financial
options that found their place in financial markets in
recent decades. Real options relate to company
opportunities and emphasize the basic idea that risk can
bring the competitive advantage and as such it should be
rewarded.


The application of the real options theory is briefly
described in [Boer 2003], the related website contains
further information and references to more detailed
resources. Here we will give only a brief account of basic
concepts and terminology.

Two kinds of risks



specific risk



market risk


Specific risk



Specific for the partial situation


At lest partly under your control (e.g. risk of a fire or risk
of project failure)


Can be diversified
-

we can use insurance to share fire
risk and maintain the diversified project portfolio to
protect against the risk of project failure


Therefore the market does not pay any premium for
specific risks


Specific risk can be often characterized by its probability.


Better management of specific risk can help us to
achieve the competitive advantage.


Market risk



I
s not under your control


C
annot be diversified. The pharmaceutical
company, as a part of health care sector, can do
little to diversify the market risk.


Traditionally, market risk increases the capital
expenses and therefore decreases the project
value.


However, the situation is different with options:
here the higher market risk, expressed as
volatility, increases the option value, which can
be quantified using the Black
-
Scholes algorithm,
well known from financial options.

Volatility


Quantifies the rate of change of market value of the
underlying asset,
i.e. the asset to its ownership we are
entitled by buying the option (technology, database of
customers …).


Is usually specific for the industry and can be estimated
on the basis of information available from e.g. stock
market, industry statistics, etc.


The higher the volatility, the more advantageous is to
hold the respective option.


The higher volatility means the higher potential of both
the increase and decrease of the related asset price. As
the option holder we can fully exploit the increase, while
in the case of decrease we do not realize the option and
the maximum loss is limited by the option cost.

Application


Boer [Boer 2003] applies the real option model (OPT)
with volatility equal to 50% to the example from Fig. 3


H
e shows that using this method the project value is
$0,171M, i.e. it is positive and the project is
feasible
.


The difference in project value assessed by ECV and
OPT models is
$0,279M, w
hat is enough to justify the
project. The difference is caused by market volatility.


Boer also proves that in case of the zero market risk, i.e.
the zero volatility, both methods give the same result.


The method of real options brings the most significant
effect to
projects with high level of risk having
slightly negative net present value

determined by
ECV or other models based on the discounted cash flow.

Conclusion


Illustration of the often neglected side of the new
product development and R&D projects.


The researchers, engineers, designers must
work together with investors to determine before
the project launch and in the gates how
efficiently the capital invested into the effort is
used.


It is not an easy task; however, we hope that we
succeeded to persuade the auditorium that this
important task cannot be avoided.

References


[Boer 2003]

BOER F.P.
Risk
-
adjusted Valuation of
R&D Projects
, online,
http://www.tigerscientific.com



[Cooper 2001]

COOPER R.G., EDGET S.J.,
KLEINSCHMIDT E.J.
Portfolio Management for New
Products
, Basic Books, 2001, ISBN 0
-
7382
-
0514
-
1


[Cooper 2005]

COOPER R.G.
Product Leadership
,
Basic Books, 2005, ISBN 0
-
465
-
01433
-
X


[Vacek 2006] Vacek J. “Structuring the new product
development processes”, in
AEDS 2006 Proceedings
,
pp. xx, University of West Bohemia, Pilsen, 2006, ISBN

HOW TO SELECT THE PORTFOLIO

OF NEW PRODUCT DEVELOPMENT
PROJECTS

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O
utline


Portfolio management, consequences
of its lack



Portfolio management goals



Goal 1: Maximizing the portfolio value



Goal 2: Balance


Goal 3: Strategic alignment


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Portfolio management


Resources are always limited, it is neither possible nor effective to
invest in every idea without due consideration.


It is important to select from many possibilities those with the highest
potential
;
today’s innovation projects decide about the future profile
of the company, its customers and market share.


G
oal: to create such portfolio of products that is rooted in the
company strategy and optimizes the company performance.


Portfolio management: dynamic decision
-
making process of
evaluation, selection and prioritization of new project
s
;
active

project
can be fostered, put on hold or even killed; their priorities and
allocation of resources can change.


The process is characterised by uncertainty, changing information,
dynamics of opportunities and threats, links between projects. The
whole process must be based on the long
-
term company strategy
and must support it

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A reluctance to kill projects.

Many projects added to the
list

A total lack of focus

Too many projects


resources thinly spread.

Projects in the queue.

Quality of execution suffers.

Increased time to
market

Higher failure rates

Weak decision points (broad
gates)

Poor Go/Kill decisions

Too many low value projects

Good projects are starved

Too few stellar product
winners

Many ho hum launches

No rigorous selection criteria

Project selected on emotion,
politics

W
r
ong projects are selected

Many failures

No strategic criteria for
project selection

Projects lack strategic
direction

Projects not strategically
aligned

Scatter gun effort

Does not support
strategy

No portfolio management
means



Immediate
result

End result: poor new
product performance

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Portfolio management goals


1.
Maximization

of

value


long
-
term

profitability,

return

on

investment,

probability

of

success
,




2.
Balance


Long
-
term projects vs. short, fast ones;


High risk projects with high potential vs. lower
-
risk sure bets (e.g.
radical vs. incremental innovation);


Focus on different market segments (don’t pull all eggs into one
basket);


Different technologies;


Different project types: new products, improvements, cost
reductions, frontier research.

3.
Strategic

alignment


portfolio

is

strategically

aligned

and

reflects

the

business’s

strategy
.

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Goal 1

Maximizing the portfolio value



Net present value, bang for buck



Expected commercial value



Multi
-
criteria project valuation



Scoring models


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Project

NPV

Remaining
resource
requirements

Bang
-
for
-
buck
index

Immediate
resource
requirements

A

52,0

9,5

5,5

3,2

B

30,0

3,1

9,7

0,3

C

8,6

2,1

4,1

1,4

D

42,0

3,8

11,1

2,5

E

48,5

7,0

6,9

1,3

F

43,8

5,0

8,8

1,5

G

37,5

8,3

4,5

3,8

H

3,0

1,0

3,0

0,7

I

9,5

2,5

3,8

0,5

J

6,2

0,8

7,8

0,8

K

4,5

1,4

3,2

1,2

L

55,0

5,0

11,0

5,0

Projects net present values and resource
requirements


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Rank
-
ordered list of projects


Project

NPV

Remaining
resource
requireme
nts

Bang
-
for
-
buck
index

Immediate
resource
requirements

Cumulative
immediate
resource
requirements

D

42,0

3,8

11,1

2,5

2,5

L

55,0

5,0

11,0

5,0

7,5

B

30,0

3,1

9,7

0,3

7,8

F

43,8

5,0

8,8

1,5

9,3

J

6,2

0,8

7,8

0,8

10,1

E

48,5

7,0

6,9

1,3

11,4

A

52,0

9,5

5,5

3,2

14,6

G

37,5

8,3

4,5

3,8

18,4

C

8,6

2,1

4,1

1,4

19,8

I

9,5

2,5

3,8

0,5

20,3

K

4,5

1,4

3,2

1,2

21,5

H

3,0

1,0

3,0

0,7

22,2

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Project expected value (ECV)


Project

PV

Probability of
technical
success

Probability of
commercial
success

Development
cost*

Commercializat
ion cost*

ECV

A

30,00

0,80

0,50

3,00

5,00

5,00

B

63,75

0,50

0,80

5,00

2,00

19,50

C

9,62

0,75

0,75

2,00

1,00

2,10

D

3,00

1,00

1,00

1,00

0,50

1,50

E

50,00

0,60

0,75

5,00

3,00

15,70

F

66,25

0,50

0,80

10,00

2,00

15,50

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Rank
-
ordered list according to ECV/D,
resource constraint 15 mil


Project

ECV

ECV/D

Cumulative
development costs

Adjusted cumulative
development costs

B

19,50

3,90

5,00

5,00

E

15,70

3,14

10,00

10,00

A

5,00

1,67

13,00

13,00

F

15,50

1,55

(23,00)



D

1,50

1,50

24,00

14,00

C

2,10

1,05

26,00

16,00

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Rank
-
ordered list according to ECV


Project

ECV

Cumulative
development
costs

B

19,50

5,00

E

15,70

10,00

F

15,50

20,00

A

5,00

23,00

C

2,10

25,00

D

1,50

26,00

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ECV model prioritizes more highly the projects
with the following properties:


closer to launch (increase of PV and consequently of
ECV),


higher income streams after launch (increase of PV
and consequently of ECV),


less resources to be spent (decrease of D),


higher probabilities of success (increase of ECV),


utilize less of the constraining resource (it’s easier for
them to be above the line).

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Multi
-
criteria project valuation

input data


Project

IRR

NPV

SI

PTS

A

20%

10

5

80%

B

15%

2

2

70%

C

10%

5

3

90%

D

17%

12

2

65%

E

12%

20

4

90%

F

22%

6

1

85%

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Project ranking


Project ranking procedure is the following


calculate adjusted values of IRR and NPV


multiply them by PTS.


rank projects according to adjusted values of
IRR and NPV and according to SI.


calculate the average value of those three
rankings and use it for final ranking

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Multi
-
criteria project valuation,
final project ranking


Project

IRR * PTS

Ranking
by

IPR*PTS

NPV * PTS

Ranking
by
NPV*PT
S

SI

Ranking
by

SI

Avg
.

Final

A

16,0%

2

8

2

5

1

1,67

1

B

10,5%

5

1,4

6

2

4

5,00

6

C

9,0%

6

4,5

5

3

3

4,67

5

D

11,1%

3

7,8

3

2

4

3,33

3

E

10,8%

4

18

1

4

2

2,33

2

F

18,7%

1

5,1

4

1

6

3,67

4

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Applicability of financial models


M
ain weakness
:

unreliability of input data, especially in
the initial project stage

t
hey should be used only in
later stages.


Small errors in probabilities of success rapidly propagate
and can result in significant differences.


T
he complexity and sophistication of financial models
fairly exceeds the quality of input data


It does not mean that we should not pay proper attention
to financial data in the initial project stages. However, we
should not make decisions solely on their basis; they
should be combined with non
-
financial models

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Scoring models



G
ive very good results.


I
mportant
:

selection of criteria that really separate the
winners from the losers. Such criteria must be based on
the analyses of your own company and other companies
in the same industry. You must develop the expert base
to be used in project valuation.


One of the models described in [Cooper 2001] uses five
main factors:


business strategy fit (2)


strategic leverage (4)


probability of technical success (4)


probability of commercial success (6)


reward to the company (project profitability) (3)

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Goal 2: Balance



In many cases, the project portfolio is not
balanced; often it contains too many small
projects and not enough of radical, visionary but
highly risky projects necessary to maintain the
company competitiveness.


Suitable tools for creation of the balanced
portfolio are bubble diagrams; most frequently
used diagram is the risk


reward bubble
diagram, which is used by 44 % companies

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Risk
-
Reward bubble diagram


Reward vs. risk
0
10
20
30
40
50
60
70
0,00%
10,00%
20,00%
30,00%
40,00%
50,00%
60,00%
70,00%
PTS
reward
PEARLS

OYSTERS

BREAD
&

BUTTER

WHITE
ELEPHANTS

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Diagram quadrants


Pearls
: potential „star“ projects: high probability of
success, high expected reward. We would like many of
such projects.


Oysters
: highly speculative projects: low probability of
success, high expected reward. Here the breakthroughs
pave the way for solid payoffs.


Bread and butter
: simple projects, high probability of
success, low expected reward. Often too many of them
in the portfolio, consuming substantial ratio of resources.


White elephants
: low probability of success, low
expected reward; projects that are difficult to kill, often
from personal reasons.


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Goal 3: Strategic alignment



Strategy and allocation of resources are closely
linked: until we start allocating resources to
specific activities, strategy is only paperwork. In
portfolio creation we will follow the following
objectives:


Projects are aligned with business strategy;


All projects contribute to achievement of strategic
goals and objectives;


Allocation of resources reflects specified strategic
goals and objectives.


In portfolio management we use three basic
approaches: top
-
down, bottom
-
up and combined.

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Top
-
down approach



from the strategy formulation (using
principles, methods and procedures of
strategic management, see e.g. [Grant
2008]). Objectives for new products are
often stated in terms of ratio or growth of
turnover, profit, market share, etc. during
several (usually 3
-
5) years.

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Technology roadmaps


Technology strategic roadmaps, results of technology foresight and
other studies performed often on the macro
-
economic level.


In the Czech Republic such studies are prepared e.g. by Technology
centre AV ČR (
http://www.strast.cz/
) and CESES


Centre for social
and economic strategies (
http://www.ceses.cuni.cz/
),


at the EU level the Institute for Prospective Technology Studies
in

Sevilla (
http://ipts.jrc.ec.europa.eu/
).


Technology roadmaps are developed also within the framework of
technology platforms of the 7
-
th EU Framework Programme for
Research, Development and Demonstrations
(
http://cordis.europa.eu/fp7
,
http://cordis.europa.eu/technology
-
platforms
).


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Strategic buckets



The company management, on the basis of strategy, decides what
resources will be allocated to basic categories of development
projects (e.g. X % to platforms, Y % to new products, Z % to
incremental innovations) and projects are then prioritized within
those buckets.


Resources originally allocated to one category may not sufficient,
while there are still free resources in the other bucket. In such a
case the resources can be redistributed.


However, after the final allocation of resources to strategic buckets it
should not be possible to reshuffle the resources between buckets.
Especially it should be avoided to take resources originally allocated
for strategic, long
-
term goals and use them for short
-
term, more
“urgent” projects, often backed from “political” reasons. Such
redistribution undermines long
-
term strategic goals and all the
strategic planning

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Bottom
-
up

and combined approaches



Bottom
-
up approach build strategic criteria into the model of project
selection, usually to the scoring model
.



This approach guarantees that all projects are strategy aligned,
however it cannot guarantee allocation of resources in compliance
with strategic priorities.


This weakness can be overcome by the use of combined approach
:
we first use the top
-
down approach to establish strategic buckets,
and then we evaluate all active projects and project
s

on hold and
prepare their ranked list. Finally we assign projects to corresponding
categories (buckets) and study the exhaustion of resources.


Usually this first iteration is not completely satisfactory and it is
necessary to use more iterations to reach satisfactory results.

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135

References


[Cooper 2001] COOPER R.G., EDGET S.J., KLEINSCHMIDT E.J.
Portfolio Management for New Products
, 2nd edition, Basic Books,
2001, ISBN 0
-
7382
-
0514
-
1


[Grant 2008] GRANT R.M.,
Contemporary Strategy Analysis
, 6th
edition, 2008, Blackwell Publishing, ISBN 978
-
1
-
4051
-
6309
-
5


[Vacek 2007] Vacek, J. Evaluation of the new product development
and R&D projects. In
AEDS 2007
. Pilsen : University of West
Bohemia, 2007,
p
.83
-
87. ISBN 978
-
80
-
7043
-
600
-
4.


[Vacek 2006] Vacek, J. Structuring the new product development
process. In
AEDS 2006
. Pilsen : University of West Bohemia, 2006,
p
.111
-
118. ISBN 80
-
7043
-
490
-
2.


[Vacek 2004] Vacek, J. New product development and current
trends in innovation management. In
AEDS 2004

Workshop. Plzeň :
University of West Bohemia, 2004,
p
.35
-
36. ISBN 80
-
7043
-
331
-
0.


Lesson 5

Innovation impulses


SOURCES OF INNOVATION IMPULSES


In
ternal

environment




Own R&D



Technical divisions


design, technology



Production divisions (production, provision of
services)



Marketing and sales



Logistics (purchase and supplies)


Guarantee and post
-
guarantee service


Owners



SOURCES OF INNOVATION IMPULSES


External

environment


Customers


Suppliers


Competitors


Consultants, R&D
institutions


Schools, universities


Professional publications,
Internet


Exhibitions, fairs,
specialized seminars and
conferences



Advertising agencies


Investors


Media


Authorized testing
laboratories, certification
agencies


State institutions, public
sector


Legislation


Globalization


MARKET PULL

-

R&D

PUSH


Market pull


looking for the best way of satisfying a newly
emerging customer demand


i
mprovement of the existing products, extension of
the existing offer or decrease of price


i
mpulses for continuous, incremental innovations or
for process innovations



Research and development push


looking for commercial use of new impulses resulting
from the R&D results


generating of new markets for conceptually different
products


7

SOURCES OF INNOVATION IMPULSES

(Drucker)

INTERNAL


1.
un
expected event

2.
c
ontradiction

3.
change of work process

4.
c
hange in the structure of industry or market

EXTERNAL

5.
Demographic changes

6.
Changes in the world view

7.
New knowledge


1.
Unexpected event



Unexpected success



1
.


What

will

the

use

of

the

offered

opportunity

mean

to

us?


2
.


Where

will

its

introduction

take

us?


3
.


What

do

we

need

to

do

for

its

implementation?


4
.


How

can

we

achieve

that?


Unexpected failure


Unexpected external event


2.
Contradiction



Non
-
compliance with economic reality



Contradiction between reality and
anticipations about it



Contradiction between the anticipated and
real behavior of customers and their
values


3.
Change of process



realize the necessity of change, identify
the weak point of the chain


be convinced that if something does not
work the way it should, then it is necessary
to attempt a change


t
he solution must be convenient for those
who will implement it. It must place
moderate and feasible requirements

4
.

Change in the structure of
industry and market



Rapid growth of the industry


Identification of new market segments


Convergence of technologies (e.g. use of
computers in telecommunications)


Rapid change of the industry and resulting
need of a structural change


5.
Demography


easiest to describe and to predict


influence what will be bought, who and in
which amounts will purchase

6
.

Change of attitudes



c
hange in the approach to health
:

health
-
care, food, spending the leisure time


“upper
-
middle class”
:
a chance to offer
non
-
standard services at non
-
standard
prices


increasing migration
,

feminism,
regionalism etc


Timing is essential

-

to be the first


7
.

New knowledge



B
ased

on

convergence

or

synergy

of

various

kinds

of

knowledge
,

their

success

requires
,

high

rate

of

risk



Thorough

analysis

of

all

factors
.

identify

the

“missing

elements”

of

the

chain

and

possibilities

of

their

supplementing

or

substitution
;


Focus

on

winning

the

strategic

position

at

the

market
.

the

second

chance

usually

does

not

come
;


Entrepreneurial

management

style
.

Quality

is

not

what

is

technically

perfect

but

what

adds

the

product

its

value

for

the

end

user

IMPULSES FROM THE MARKET
ENVIRONMENT



Customers


product presentation



realistic



simple, demonstrative and precise



moderate



representative sample
of customers



Suppliers



Competitors



INNOVATION IMPULSES OF THE R&D



identification research
:
to monitor the scientific,
technical and economic information and identify
innovation impulses applicable in the company




basic

research


applied research
:
acquire knowledge and means
applicable for the meeting of specific, beforehand
-
defined goals




d
evelopment
:
systemic use of knowledge and means
acquired in the applied research for the creation of a new
or improvement of the existing product or for the creation
or modification of processes



INTERNAL IMPULSES



usually

combined

with

external

sources


supported

by


c
reative

techniques



innovation

tools



REGISTER

OF

IMPULSES



Lesson 6

Innovation management tools




INNOMAT

http://www.inno
-
pro.com/aainn0.htm

General Innovation Tools

BENCHMARKING

BRAINSTORMING

REENGINEERING

CHANGE MANAGEMENT

Specific techniques
useful at the different
change management process steps.

CHANGE MANAGEMENT STEP

SPECIFIC TECHNIQUE

Making time

time management techniques

Preparing a vision statement

SWOT analysis

Identify what factors will hinder
change

force field analysis

Selling the change

internal marketing techniques

Developing a plan

strategic planning techniques

Learning


Monitoring effectiveness


INNOVATION MANAGEMENT TOOLS

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

TECHNOLOGY AUDIT

TECHNOLOGY FORECAST

VALUE ANALYSIS

Product Innovation Tools

DESIGN FOR X




<>

„X“
-

examples

Design for Manufacturing
and Assembly (DFMA)

Design for Environment
(DFE)

Design for Dimensional
Control (DDC)

Design for Inspectability

Design for Storability

Design for Reliability
(DFR)

Design for
Electromagnetic
Compatibility

Design for Disassembly
(DFD)

QUALITY FUNCTION
DEPLOYMENT

House of Quality

Interrelationships

Technical Features

Relationship
between Customer
Desired Traits and
Technical Features

Importance of
Technical Features

Importance
of Traits to
Customer

Assessment
of
Competition

Voice of
the
Customer

House of Quality:

Steps for Generation

1
. Identify Customer Attributes

2. Identify Supporting Technical Characteristics

3. Correlate Customer Attributes with Supporting Technical
Features

4. Assign Priorities to Customer Requirements and Technical
Features

5. Evaluate Competitors’ Stances and Products

6. Identify Technical Characteristics to Deploy in the Final
Product Design

Managerial Innovation Tools

FAILURE MODE AND EFFECT
ANALYSIS (FMEA)

INNOVATION MANAGEMENT TOOLS

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

INNOVATION MANAGEMENT TOOLS

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

PEER EVALUATION

TEAM BUILDING

ISO 9000

ISO14000


refers to procedures for ensuring sustainable and
environmentally friendly operations

EIA


Environmental Impact Assessment

TOTAL PRODUCTIVE
MAINTENANCE

Process Innovation Tools

DESIGN FOR MANUFACTURING
AND ASSEMBLY (DFMA)

LEAN THINKING

CONTINUOUS IMPROVEMENT

CONCURRENT ENGINEERING

JUST IN TIME (JIT)

INNOSKILLS

FASTER

Lesson 7

CREATIVITY

BASICS

& TECHNIQUES


Innovation and creativity


creativity is manifested in the production of
a creative work (for example, a new work
of art or a scientific hypothesis) that is both
original

and
useful



innovation begins with creative ideas,


creativity by individuals and teams
is a
starting point for innovation
; the first is a
necessary
but not sufficient

condition for the
second


creativity results:


in producing or bringing about something
partly or wholly new;


in investing an existing object with new
properties or characteristics;


in imagining new possibilities that were not
conceived of before;


and in seeing or performing something in a
manner different from what was thought
possible or normal previously.



Many creative ideas are generated when
somebody discards preconceived
assumptions and decides on a new
approach or method that might seem to
others unthinkable


Serendipity
-

effect by which one
accidentally discovers something
fortunate, especially while looking for
something else entirely

Quotations on serendipity



"In the field of observation, chance favors only the prepared mind."
Louis
Pasteur



"Serendipity. Look for something, find something else, and realize that what
you've found is more suited to your needs than what you thought you were
looking for."
Lawrence Block



"The most exciting phrase to hear in science, the one that heralds new
discoveries, is not 'Eureka!', but 'That's funny …'"
Isaac Asimov



"In reality, serendipity accounts for one percent of the blessings we receive
in life, work and love. The other 99 percent is due to our efforts."
Peter
McWilliams



"Serendipity is looking in a haystack for a needle and discovering a farmer's
daughter."
Julius Comroe Jr.



"Serendipity is putting a quarter in the gumball machine and having three
pieces come rattling out instead of one

all red."
Peter H. Reynolds



"
---

you don't reach Serendib by plotting a course for it. You have to set out
in good faith for elsewhere and lose your bearings ... serendipitously."
John
Barth
,
The Last Voyage of Somebody the Sailor



"Serendipity is the art of making an unsought finding."
Pek van Andel

(1994)

source: wikipedia

BASIC CONCEPTS


Creative thinking represents a combination
of logic and intuitive approaches



Being creative means dealing with the aspects
and possibilities of today and tomorrow


That requires a person to be open to everything
new, do not stick to things that we are all used
to, do not adhere to yesterday so much


Creativity does not mean dreaming, it means
productive managing of specific tasks.


Only a creative approach to the problem solution
can be successful.

Creativity in organizations


Amabile
: to enhance creativity in business,
three components
are

needed:


Expertise (technical, procedural & intellectual
knowledge),


Creative thinking skills (how flexibly and imaginatively
people approach problems),


and Motivation (especially intrinsic motivation).


Nonaka
: creativity and knowledge creation are
important to the success of organizations. In
particular, he emphasized the role that tacit
knowledge has to play in the creative process.

Creativity and economics


Joseph Schumpeter:
creative destruction

-


the way in
which old ways of doing things are endogenously
destroyed and replaced by the new.


Paul Romer: the recombination of elements to produce
new technologies and products and, consequently,
economic growth. Creativity leads to capital
,
creative
products are protected by intellectual property laws.


The
creative class

as

important driver of modern
economies. Richard Florida

in
The Rise of the Creative
Class
, 2002 popularized the notion that regions with "3
T's of economic development: Technology, Talent and
Tolerance" also have high concentrations of creative
professionals and tend to have a higher level of
economic development.


I
mportant aspect to understanding
Entrepreneurship
.


Stages of creative process


Orientation
: Need identification, intention to
create


Preparation:

Information collection, problem
formulation


Incubation
: seeking solution, evaluation of
variants, unconscious thinking


Illumination


(Eureka!)
: synthesis, creation of
ideas


Realization:
transformation of the idea into
reality


Verification:
evaluation, learning, improvement

Barriers to creativity

-

1



The value of getting things right time can induce a fear of
mistakes and experimentation.


So can a blame culture where people become afraid of
making mistakes.


Managers who are not as secure as they should be can
resist or block ideas that are not their own or which they
see as threatening.


A culture that over emphasizes cost containment,
processes, consistency or efficiency.


A reward system that too exclusively celebrates getting
things done fast with no mistakes.


A general fear of risk taking, wanting to analyze
everything to death, to wait and see what others do in
the market before acting.

Barriers to creativity

-

2


A lack of explicit funding for experimentation.


A strict requirement to demonstrate the value of an idea
before it has a chance to prove itself.


A tendency to shoot down novel ideas as a way of
scoring points.


An over allegiance to past successes, proven experience
and tried and tested methods.


A suspicion of novelty, a fear of the unproven.


A resistance to learning from mistakes or trial and error,
a tendency to blame external factors or other people for
failures rather than to learn from them.


Short termism
-

a drive to meet short term financial goals
rather than to invest in the future.


Barriers to creativity

-

3


http://members.optusnet.com.au/~charles5
7/Creative/Basics/obstacles.htm

CREATIVITY STIMULATION



Keep in touch with creative people


Accommodate the effort to the targets


Evaluate and appreciate the effort


Protect creative employees


Leave them peace and time


Provide them with security


Tolerate failures


Maintain creative atmosphere


Evaluate the creative ideas quickly


Be persistent
-

nothing comes for free

Fostering creativity


Establishing purpose and intention


Building basic skills


Encouraging acquisitions of domain
-
specific
knowledge


Stimulating and rewarding curiosity and exploration


Building motivation, especially internal motivation


Encouraging confidence and a willingness to take risks


Focusing on mastery and self
-
competition


Promoting supportable beliefs about creativity


Providing opportunities for choice and discovery


Developing self
-
management (metacognitive skills)


Teaching techniques and strategies for facilitating
creative performance


Providing balance

METHODS OF CREATIVE ACTIVITY



increasing the individual’s or team’s
creative potential


contributing to the improvement of the
creative work conditions


facilitating the problem solution

Creative Process


Problem Definition

-

including problem analysis,
redefinition, and all aspects associated with defining the
problem clearly.


Idea Generation

-

The divergent process of coming up
with ideas.


Idea Selection

-

The convergent process of reducing all
the many ideas into realistic solutions


Idea Implementation

-

Turning the refined ideas in
reality.



Processes
-

Schemes and techniques which look at the
overall process from start to finish (or at least 3 of the
above 4 areas)..



http://www.mycoted.com/Category:Creativity_Techniques


Brain hemispheres

Left brain functions

Right brain functions

sequential

simultaneous

analytical

holistic

verbal

imagistic

logical

intuitive

linear algorithmic processing

holistical algorithmic processing

mathematics: perception of
counting/measurement

mathematics: perception of
shapes/motions

present and past

present and future

language: grammar/words, pattern
perception, literal

language: intonation/emphasis, prosody,
pragmatic, contextual

Convergent vs. divergent thinking


Convergent thinking involves aiming for a
single, correct solution to a problem


Divergent thinking involves creative
generation of multiple answers to a set
problem.


CREATIVITY TECHNIQUES


trial and error


brainstorming


Inspirational questions


psychological
-
cognitive, such as:


Osborn
-
Parnes Creative problem solving
(CPS)


Synectics;


Lateral thinking (courtesy of Edward de Bono),


the highly
-
structured, such as:


TRIZ (the Theory of Inventive Problem
-
Solving);


ARIZ (the Algorithm of Inventive Problem
-
Solving), both
developed by the Russian scientist Genrich Altshuller; and


Computer
-
Aided Morphological analysis.

Trial and error


select a possible answer, apply it to the problem and, if
not successful, select (or generate) another possibility
that is subsequently tried. The process ends when a
possibility yields a solution.


more successful with simple problems, often resorted to
when no apparent rule applies.


the approach need not be careless, for an individual can
be methodical in manipulating the variables in an attempt
to sort through possibilities that may result in success.
Nevertheless, this method is often used by people who
have little knowledge in the problem area

Trial and error

-

features


solution
-
oriented: trial and error makes no
attempt to discover
why

a solution works, merely
that it
is

a solution.


problem
-
specific: trial and error makes no
attempt to generalise a solution to other
problems.


non
-
optimal: trial and error is an attempt to find
a

solution, not
all

solutions, and not the
best

solution.


needs little knowledge: trials and error can
proceed where there is little or no knowledge of
the subject.

Inspirational questions
-

1


What can I substitute to make an improvement?


What if I swap this for that and see what happens?


How can I substitute the place, time, materials or people?


What materials, features, processes, people, products or
components can I combine?


Where can I build synergy?


What part of the product could I change? And in exchange for what?


What if I were to change the characteristics of a component?


What happens if I warp or exaggerate a feature or component?


What will happen if I modify the process in some way?


What other market could I use this product in?


Who or what else might be able to use it?


What if I did it the other way round?


What if I reverse the order it is done or the way it is used?


How would I achieve the opposite effect?

Inspirational questions
-

2


Who else has solved this problem?


What similar area of expertise might have solved this
problem?


Is there anyone else in the company who knows how to
solve this?


What else could we use to solve the problem?



Where else might this problem have been solved?


What other companies might know how to solve this?


What similar problems have been solved, and how?


What other industries face the same problem and what
do they do about it?

Inspirational questions
-

3


How would they think?


What objects and items would they be using?


Where would they be doing it?


How would they see the problem?


What action would they take?


How would they explain the problem?


How would they solve the problem?


What does your situation or your problem remind you of?


What other areas of life/work experience similar
situations?


Who does similar things but not in your area of
expertise?

Inspirational questions
-

4


What would my perfect solution be?


What effect would my ideal solution have?



What if money/morals/laws did not matter
at all?


What would I do if I had unlimited power
and resources?


What would my ideal solution look like?

Source:Wikipedia

CPS (OFPISA)


six stage process, each with a divergent and a
convergent phase.

1.
Objective Finding (or Mess Finding): Sensitise yourself for
issues that need to be tackled.

2.
Fact Finding: Gather information about the problem.

3.
Problem Finding: convert a fuzzy statement of the problem into