Chapter 3: Product and Service Innovation

Innovation process: Concept generation

All about ideas. R&D, Front-line service providers, customers, suppliers can be valuable in the innovation process

Open innovation can work in two ways:

'Inbound' open innovation = where an organization deliberately promotes external inputs from collaborators 'Outbound' open innovation = where organizations permit unexploited ideas to go outside for others to use

Technology: Generative design advantages (2)

- Speed. Digital simulation and analysis can evaluate potential designs in seconds. - Can generate design options that would not otherwise have been thought of. (explore large range of possible solutions)

Factors that vary depending on if innovation activities are made in-house or outsourced (5)

1. Control of resource 2. Familiarity 3. Accessibility 4. Cost 5. Risk of knowledge leakage

Strategic resourcing issues to consider for a process to operate effectively

1. How much capacity to devote to the innovation 2. How much of the innovation activity to outsource 3. What kinds of technology to use in the innovation process

Factors that can significantly reduce time-to-market (TTM) for innovation (4)

1. Integrating the design of the product-service offerings and the design of the process used to create and deliver them 2. Overlapping the stages in the innovation process 3. An early deployment of strategic decision-making and resolution of design conflict 4. An organizational structure that reflects the nature of the offering

Benefits of open innovation (3)

1. The exposure of an innovation can allow customers and competitors to explore alternative markets or applications for innovations 2. Products and services can be refreshed if partners are able to exploit underlying processes and technology 3. It helps establish an innovation community that can support customer engagement

Reducing TTM: Deploying strategic intervention and resolving conflicts early

A design decision, once made, must not shape the final offering irrevocably. All decisions can be changed, but it is increasingly difficult as the process progress. At the same time: early decisions are most difficult to make because of the high level of uncertainty. --> Debates over characteristics of an offering most heated in early stages. However, later changes will be more disruptive than if made early. Implication: 1. It is worth trying to reach a consensus in the early stages even if it seems to be delaying the process. 2. There is a particular need for strategic intervention into the process by senior management during these early stages. Conclusion: The innovation process requires strategic attention early when there is most potential to affect design decisions.

Project matrix (or heavyweight project manager)

A manager is assigned to oversee the project and is responsible for its completion. Functional managers' involvement is limited to assigning personnel as needed and providing advisory expertise.

Project team (or tiger team)

A manager is given responsibility for a project team composed of a core group of personnel from several functional areas assigned on a full-time basis. The functional managers have no formal involvement.

Innovation

A new idea or knowledge that leads to some new aspect of performance, with a stress on novelty and change. About doing something new. Implies that the novel idea can provide a return for an organization's customers, owners or both.

Balanced matrix

A person is assigned to oversee the project and interacts on an equal basis with functional managers. This person and the functional managers work together to direct innovation activities and approve technical and operational decisions

Functional matrix (or lightweight project manager)

A person is formally designated to oversee the project across different functional areas. This person may have limited authority over the functional staff involved and serves primarily to plan and coordinate the project. Functional managers retain primary responsibility for their specific segments of the project.

Technology: Digital twins (explain + advantages)

A powerful digital 'replica' that can be used instead of the physical reality of a product. Using the digital twin --> Significantly improve operational performance without the expense of working on the real thing. Thus, products live two parallel lives: one in real life, one in digital form. Can monitor and simulate possible future scenarios and predict the need for repairs and other problems before they occur --> Design improvements before the product is used by customers + during its lifespan

Reduce TTM: Overlapping the stages of the innovation process

A sequential approach is time-consuming and costly. Often there is really little need to wait until the absolute finalization of one stage before starting the next. --> Each stage can commence before the previous one has finished --> Simultaneous/current work on the stages. Must be effective communication between each pair of stages!

Concept generation: Ideas management

A type of enterprise software that can help organizations to collect ideas from employees, assess them, and implement them quickly and efficiently. Can track ideas --> Measure where ideas are generated, how many of the ideas are being implemented, cost savings from submitted ideas, new revenues generated. Focus on specific organizational targets and objectives, claims to improve both the quality and quantity of ideas when compared with 'open' suggestion schemes

Concept generation: 'Lead users'

A useful source of customer-inspired innovation. Users who are ahead of the majority of the market on a major market trend, and have a high incentive to innovate. They have the real-world experience needed to problem solve and provide accurate data. Will be familiar with both positives and negatives of the early version --> Valuable source of potentially innovative ideas

Concept generation: 'Harbingers of failure'

Ability to make bad purchase decisions. The same group of customers has a tendency to purchase all kinds of failed products --> Can sniff out flop-worthy products.

Technology: Generative design

An approach to exploring alternative designs. Designers specify important design goals, parameters and performance requirements --> generative design software explores all the possible permutations of a solution --> generates design alternatives. Can use AI to learn from each iteration. "Exploiting machine learning to mimic nature's evolutionary approach to design"

Preliminary design: Standardization

Attempt to overcome the cost of high variety by formally restricting it. Controlling variety is often built into the design of a product/service.

Reduce TTM: Integrating the design of the offering and design of the process - Simultaneous design (3 Barriers and 3 Solutions)

Barriers: 1. Timescales involved can be very different. Offerings may be modified or redesigned relatively frequently. The processes may be far too expensive to modify every time the offering changes. 2. The people involved with the innovation on the one hand, and the operations process design on the other, are likely to be organizationally separate. 3. Sometimes not possible to design an ongoing process for the creation and delivery of services and products until they are fully defined. Solutions: 1. Although not always possible to change processes over time there is a change to the offering, they can be designed to cope with a range of potential services and products 2. Communication and organizational mechanisms to encourage the two functions to work together 3. Can be sufficient clues emerging from innovation activities for process design staff to consider how they might modify ongoing processes.

Invention

Something that is novel or unique (usually applied to a device or method), but it does not necessarily imply that the novel device or method has the potential to be practical, economic or capable of being developed commercially

Technology: Computer-aided design (CAD)

CAD systems store and categorize component information and allow designs to be built up on screen, often performing basic engineering calculations to test the appropriateness of proposed design solutions. Designs created on screen --> Saved for later use --> Library of standardized parts and components --> Increase productivity & aids the standardization of parts

Strategic resourcing issues: Sufficient innovation capacity?

Capacity management involves deciding on the appropriate level of capacity needed by a process and how it can be adjusted to respond to changes in demand. For innovation, demand = nr of new designs needed by the business. A difficulty that the rate of innovation is not constant --> Product/service design processes are subject to uneven internal 'demand' for designs --> resourcing problem. Many design resource is fixed. Varying demand + relatively fixed design capacity --> difficulties

Preliminary design: Commonality

Common elements are used to simplify design complexity. Easier to deliver products/services if they can draw on common components.

What is the cost of the innovation process? (3 categories + what affects costs)

Cost factors are split up into three categories: 1. Cost of buying the inputs to the process 2. Cost of providing the labor in the process 3. Other general overhead costs of running the process All aspects of performance can affect costs (delays caused by ex. quality, dependability etc) --> More expenditure --> Financial break-even point for new offering delayed

Preliminary design: Mass customization

Customized offerings are produced using high-volume processes --> Costs are minimized. Flexibility in design can allow the ability to offer different things to different customers. (Ex. eyewear retailer + system)

Design for production (DFP)

Decisions taken during the design of a product/service can have a profound effect on how they can be created Also called 'design for manufacture' (DFM) or 'design for manufacture and assembly' (DFMA) Service: How a service is designed and specified can make its execution easy or difficult in practice.

What is the dependability of the innovation process?

Designs should be delivered dependably. Uncertainty surrounding the innovation process: suppliers who do not deliver solutions in time, customers or markets that change --> Contribute to uncertain and ambiguous design environment. Professional product management can help reduce uncertainty. External disturbances will remain --> Why flexibility within the innovation process can help with dependable delivery of new service/product offerings

The Henderson-Clark Model (How it works and name 4 different innovations)

Dividing the technological knowledge required to develop new services and products into: 1. 'knowledge of the components of knowledge' 2. 'knowledge of how the components of knowledge link together = 'architectural knowledge' Innovation can be classified on two dimensions: - Innovation of components of a design - Innovation of the linkages between them --> Incremental, Radical, Modular and Architectural

Innovation Process: Prototyping and final design

Do whatever one can do to test out the innovation prior to delivery. Ex. clay models, computer simulations, piloting of new service packages, virtually prototype

Explain the 4 different innovations in the Henderson-Clark Model

Incremental innovation is built upon existing components and architectural knowledge Radical innovation changes both components and architectural knowledge Modular innovation builds on existing architectural knowledge, but it requires new knowledge from one or more components Architectural innovation will have a great impact on the linkage of components (or the architecture) but the knowledge of single components is unchanged

Prototyping and final design: Beta testing

Intended to uncover 'bugs' (errors) in the product. Beta: When the product is released for testing by selected customers. External 'pilot-test' that takes place in the real world/near real world, before commercial production. Most of the worst defects should be removed, but might still have minor problems. Often development team not present. Sometimes called: field testing, pre-release testing, customer validation, customer acceptance testing, user acceptance testing

Prototyping and final design: Alpha testing

Intended to uncover 'bugs' (errors) in the product. Alpha: An internal process where the developers/manufacturers examine the product for errors. Generally, not open to the market/potential customers. --> Performed in a virtual/simulated environment (not the real world)

Simultaneous (interactive) design

Merging the design of products and services with the design of the processes that will deliver them. Key benefit: To reduce the elapsed time taken for the whole innovation activity, the time-to-market (TTM) --> Can give an important competitive advantage as it can introduce innovations more frequently

Preliminary design: Modularization

Method of balancing two opposite forces: standardization and customization. Designing standardized 'sub-components' of an offering that can be put together in different ways.

'Best' organizational structure?

No clear winner. However, increasing support for structures towards the project team. Some argue: Heavyweight project manager structures and dedicated project teams are the most efficient forms in driving competitiveness, shorter lead times and technical efficiency. Different structures fit different types of innovation, ex. if simple, complex, uncertain (flexibility needed) or to develop technical knowledge

Radical innovation

Often includes large technological advancements that may require completely new knowledge and/or resources, making existing services/products obsolete and non-competitive. May favor new entrants, since no established position to lose, nor have a vast pool of experience.

Concept screening: 'Innovator's Dilemma'

Organizations are often unwilling to disrupt current modes of working in the face of a barely emerging market, but by the time the threat has emerged more fully it may be too late to respond.

Innovation process: Evaluation and improvement

Purpose to take a preliminary design and see if it can be improved before the offering is tested in the market. Important: creativity and persistence, but also failures can be beneficial and spot potential. Find new areas of Techniques to evaluate and improve the preliminary design. --> Quality Function Deployment (QFD) --> Key purpose: Ensure that the eventual innovation meets the needs of its customers. Tries to capture what the customer needs and how it might be achieved.

The performance of the innovation process can be assessed in much the same way as we would consider the products and services that result from it. Namely in terms of..

Quality, speed, dependability, flexibility, cost and sustainability

Innovation process: Preliminary design

Service-dominant offerings: Involve documentation in the form of job instructions or 'service blueprints' Product-dominant offerings: Involves defining product specifications and the bill of materials (all components needed for a single product) At this stage, there are significant opportunities to reduce cost through design simplification. Reduce design complexity through standardization, commonality, modularization and mass customization

'Open innovation'

Some firms are more likely to widen their scope to include resources from outside in the innovation process. Could include a wide community of individuals, suppliers, customers, research institutes and commercial rivals.

Technology: Knowledge management technologies

Staff in management consulting firms are often away from the office --> risk of 'reinventing the wheel' --> tackle this risk by using knowledge management routines based on their intranet capabilities. --> Allows consultants to put their experience into a common pool, contact each other and identify previously similar assignments --> Information is integrated into the ongoing knowledge innovation process within the company

Technology in the innovation process? (Advantages)

Technology has become increasingly important in innovation activities. --> - Allows developers to make design decisions in advance of the creation of the actual product/service. - Can explore possibilities, gain insights and explore the consequences of their decisions. - Useful when the design task is highly complex - Consolidate information on what is happening in the process --> More comprehensive vision within the organization

What is the flexibility of the innovation process? (when valuable + how to measure)

The ability to cope with external or internal change. Valuable in fast-moving and volatile markets, where customers and markets change, or where competitors' designs dictate a matching move. Increasing complexity. Measure innovation flexibility: Compare the cost of modifying a design in response to such changes against the consequences to profitability if no changes are made. The lower the cost of modifying, the higher the level of flexibility.

Creativity

The ability to move beyond conventional ideas, rules, or assumptions, in order to generate significant new ideas. The use of imagination or original ideas.

Product and service design innovation as a process (explain)

The aim of the innovation process is.. 1. Create offerings that exceeds customers' expectations in terms of quality, speed, dependability, flexibility, cost and sustainability 2. Ensure that competitors find these offering hard to imitate, substitute or gain access to Companies that master the process of innovation may gain a significant competitive advantage (Can be put in the input-transformation-output model)

Design for distribution

The design of a product can be influenced by how it is distributed (ex. 'flat pack' IKEA) Same with service. Ex. the design of online services can be influenced by how the service could be presented through its web page.

What is the quality of the innovation process?

The design's ability to meet market requirements. A distinction between the 'specification quality' and the 'conformance quality' of designs Conformance: Designs that are relatively basic but free from errors (överensstämmelse) Specification: Degree of functionality, or experience, or aesthetics, or whatever the product/service is primarily competing on

Innovation process: Concept screening

The first stage of implementation where potential innovations are considered for further development. Organizations must be selective. Take initial concepts and evaluate them for their feasibility, acceptability, and vulnerability. Key issue: How big the innovation should be and where it should focus. DuPont: Ratio of concepts to marketable offerings is around 250:1

What is the sustainability of the innovation process? (explained + examples)

The innovation process is important in ultimately impacting the ethical, environmental and economic well-being of stakeholders. Ex. new sustainable offerings, ethical trading, changing materials, how products and services are used, making products easier to recycle

Functional organization

The innovation project is divided into segments and assigned to relevant functional areas and/or groups within functional areas. The project is co-coordinated by functional and senior management

Crowdsourcing

The process of getting work, funding, or ideas (usually online) from a crowd of people. --> Become a valuable source of ideas. (Closely related to open sourcing)

Design

The process that transforms innovative ideas into something more concrete. Makes the innovation work in practice. To conceive the looks, arrangements, and workings of something Can be approached at different levels of detail

What is the speed of the innovation process? (+ advantages of speed)

The speed of innovation matters more to some industries than others. Rapid innovation or 'time-based competition' has become the norm for an increasing nr of industries Fast design brings a number of advantages: 1. Early market launch - earlier marketing of new offerings that may command price premiums and generate revenues for longer 2. Starting design late - where the nature of demand/availability of technology is uncertain --> fast design allows design decisions to be made closer to the time when the offerings are introduced to the market 3. Frequent market stimulation - rapid innovations allow frequent new or updated offerings to be introduced

Reducing TTM: Organizing innovation processes in a way that reflects the nature of the offering (purely functional/purely project)

There is a range of possible organizational structures. Purely functional organization: All staff associated with the innovation project are based unambiguously in their functional groups. No project-based group at all. Pure project form: All the individual members of staff A from each function involved in an innovation project could be moved out of their functions and perhaps even co-located in a task force dedicated solely to the project. A substantial core seeing the project from start to finish

Incremental innovation

Usually less dramatic and more 'continuous' innovation. Likely to involve relatively modest technological changes, building up existing knowledge and/or resources May favor established companies. Have built up a pool of knowledge, and more likely to have a mindset that emphasizes continuity.

The innovation S-curve

Usually, performance follows an S-shaped progress: 1. Early stages of the introduction of new ideas: large amounts of resources, time and effort needed to introduce the idea. However relatively small performance improvements. 2. With time --> Experience and knowledge about the new idea grow --> Performance increases 3. As the idea becomes established, extending its performance further becomes increasingly difficult --> Reaches its mature, 'leveling-off' period --> it is vulnerable to a new idea being introduced