paul trott

Innovation Management andNew Product DevelopmentFifth Edition

Paul TrottPortsmouth Business School

Financial TimesPrentice Hallis an imprint of

Harlow, England • London • New York • Boston • San Francisco • Toronto • Sydney • Singapore • Hong KongTokyo • Seoul • Taipei • New Delhi • Cape Town • Madrid • Mexico City • Amsterdam • Munich • Paris • Milan

Contents

Preface ~ xixForeword by Professor Guus Berkhout xxiiiAcknowledgements xxivPlan of the book xxviii

Part One Innovation management 1

Innovation management: an introduction 2

The importance of innovation 4The study of innovation 6

Recent and contemporary studies 9The need to view innovation in an organisational context 10

Individuals in the innovation process 11Problems of definition and vocabulary ' 12

Entrepreneurship 12Design 13Innovation and invention 15Successful and unsuccessful innovations 16Different types of innovation , 16Technology and science . " 18

Popular views of innovation 20Models of innovation - 20

Serendipity 21Linear models 21Simultaneous coupling model 23Architectural innovation 23Interactive model 24Innovation life cycle and dominant designs 25Open innovation and the need to share and exchange knowledge

(network models) ' 25Discontinuous innovation - step changes 27Innovation as a management process 28

A framework for the management of innovation 29New skills . 31Innovation and new product development 32

Case study: The success of the iPod and iPhone raises the licensing questionfor Apple . . . again 33

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Contents

Chapter summary 40Discussion questions 40Key words and phrases 41References 41Further reading 44

Economics and market adopt ion 46

Innovation in its wider context - 48The role of the state and national 'systems' of innovation . 50

How national states can facilitate innovation 51Fostering innovation in the United States and Japan 52The right business environment is key to innovation 54

Waves of innovation and growth: historical overview 54Fostering innovation in 'late-industrialising' countries 57Innovation within the 25 EU states 58

Improving the innovation performance of the EU 60The times they are a changing: how frugal innovation is providing a future

path for firms in emerging markets 61Innovation and the market 61

Innovation and market vision 62Innovative new products and consumption patterns 62Marketing insights to facilitate innovation 64Lead users 66

Innovation diffusion theories 67Adopting new products and embracing change 69Market adoption theories 71

Case study: How three students built a business that could affectworld trade 71

Chapter summary 77Discussion questions 78Key words and phrases 78References ' 78Further reading 80

Managing innovation within firms 82

Organisations and innovation 84The dilemma of innovation management 84Managing uncertainty 85

Pearson's uncertainty map 86Applying the uncertainty map in practice 88

Managing innovation projects 89Organisational characteristics that facilitate the innovation process 91

Growth orientation 93

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Contents

Organisational heritage and innovation experience 94Vigilance and external links 95Commitment to technology and R&D intensity . 95Acceptance of risks 95Cross-functional cooperation and coordination within organisational structure 95

'.. Receptivity 96;: Space for creativity 96* Strategy towards innovation 96• Diverse range of skills 97| : Industrial firms are different: a classification 99

Organisational structures and innovation 101Formalisation 101Complexity 102Centralisation 102Organisational size 103

The role of the individual in the innovation process 103IT systems and their impact on innovation 104Management tools for innovation 107Innovation management tools and techniques 107

Applying the tools arid guidelines 109

' Case study: Gore-Tex® and W.L. Gore & Associates: An innovative company/ and a contemporary culture 110

;- Chapter summary , 114"• Discussion questions 114I Key words and phrases 115JT, References 115h Further reading 117

Innovation and operations management 118Richard Noble, University of Portsmouth

Operations management 120The nature of design and innovation in the context of operations 121

Design requirements 122Design and volumes 124Craft-based products 126Design simplification • 127

Process design and innovation 128Innovation in the management of the pperations process 129

Triggers for innovation 130Design of the organisation and its suppliers - supply chain management 135

Business process re-engineering (BPR) 138Operations and technology 139Innovation as an operations process itself 144

Case study: Novels, new products and Harry Potter 145

Chapter summary 151

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Contents

Discussion questions 151Key words and phrases 151References 152Further reading 153

Managing intellectual property 154

Intellectual propertyTrade secretsAn introduction to patents

NoveltyInventive stepIndustrial applications

Exclusions from patentsThe patenting of lifeHuman genetic patentingThe configuration of a patentPatent harmonisation: first to file and first to inventSome famous patent casesPatents in practiceExpiry of a patent and patent extensions

Patent extensionsThe use of patents in innovation managementDo patents hinder or encourage innovation?Alternatives to patentingTrademarks

Should satisfy the requirements of section 1(1)DistinctiveNon-deceptiveNot confusing

Brand namesUsing brands to protect intellectual property

Exploiting new opportunitiesBrands, trademarks and the internet

Duration of registration, infringement and passing offRegistered designsCopyrightRemedy against infringement

DamagesInjunctionAccounts

Counterfeit goods and IP

Case study: Pricing, patents and profits in the pharmaceutical industry

Chapter summaryDiscussion questionsKey words and phrasesReferencesFurther reading

156159160161162162162163163164165166167167169170170172173175175175175176177178179179180181183183184184184

185

189189189189191

Contents

Part Two Turning technology into business 193

Managing organisational knowledge 194

The battle of Trafalgar 196Technology trajectories 197

The acquisition of firm-specific knowledge 198The resource-based perspective 198Dynamic competence-based theory of the firm 199Developing firm-specific competencies 200Competencies and profits 202Technology development and effort required 203

The knowledge base of an organisation 203The whole can be more than the sum of the parts 204Organisational heritage 205When the performance of the organisation is greater than the abilities

of individuals 205Japanese organisations and the role of organisational knowledge 206Characterising the knowledge base of the organisation 207

The learning organisation 209Innovation, competition and further innovation 209

Dominant design 211How firms cope with radical and incremental innovation 212

Developing innovation strategies 216Leader/offensive 216Fast follower/defensive 217Cost minimisation/imitative 218Market segmentation specialist/traditional 218

A technology strategy provides a link between innovation strategy andbusiness strategy / 218

Case study: The cork industry, the wine industry and the need for closure 219


Strategic alliances and networks 232

Defining strategic alliances 234The fall of the go-it-alone strategy and the rise of the octopus strategy 236Complementary capabilities and embedded technologies 237

Interfirm knowledge-sharing routines 238Forms of strategic alliance 239

Licensing 239Supplier relations 240Outsourcing 240Joint venture 241

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Contents

Collaboration (non-joint ventures) 241R&D consortia 241Industry clusters 242Innovation networks 243The 'virtual company' 245

Motives for establishing an alliance 246The process of forming a successful strategic alliance 247Negotiating a licensing deal 248

Terms for the agreement ; 248Rights granted 249Licence restrictions 249Improvements 249Consideration (monetary value) 249Reports and auditing of accounts 249Representations/warranties 250Infringement 250Confidentiality 250Arbitration .. 250Termination 250

Risks and limitations with strategic alliances 250The role of trust in strategic alliances 253

The concept of trust 253Innovation risks in strategic outsourcing 255Eating you alive from the toes up 257

The use of game theory to analyse strategic alliances 258Game theory and the prisoner's dilemma 259Use of alliances in implementing technology strategy 260

Case study: And the winner is Sony's Blu-ray - the high-definition DVD format war 261

Chapter summary 267Discussion questions •' 268Key words and phrases 268References 268Further reading 271

Management of research and development 272

What is research and development? 274The traditional view of R&D • 275

R&D management and the industrial context 275R&D investment and company success 278Classifying R&D 281

The operations that make up R&D 283R&D management and its link with business strategy 285

Integration of R&D 286Strategic pressures on R&D 288

The technology portfolio 289The difficulty of managing capital-intensive production plants in a dynamic

environment 290

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Contents

Which business to support and how? 291Technology leverage and R&D strategies 293Strengths and limitations of this approach 294

Allocation of funds to R&D , 295Setting the R&D budget 296

Level of R&D expenditure v 298

Case study: The long and difficult 13-year journey to the marketplace forPfizer's Viagra 299


Managing R&D projects 310

Successful technology management . 312The changing nature of R&D management 314

Organising industrial R&D 317The acquisition of external technology 318

Level of control of technology required 319Forms of external R&D 320

Effective R&D management 323Managing scientific freedom 324Skunk works 327

The link with the product innovation process 328The effect of R&D investment on products 329

Evaluating R&D projects 330Evaluation criteria 330

Case study: CSI and genetic fingerprinting 334

Chapter summary 340Discussion questions 340Key words and phrases 340References . 341Further reading 343

Open innovation and technology transfer 344

Background 346The dominant economic perspective 347

Open innovation 348Introduction to technology transfer 350

Information transfer and knowledge transfer 350p Models of technology transfer 351|J Licensing 352| | ; Science park model 352

Intermediary agency model 353

;' xiii '

~* Contents

Directory model 353Knowledge Transfer Partnership model 353Ferret model 353Hiring skilled employees 355Technology transfer units 355Research clubs 355European Space Agency (ESA) 356Consultancy 356

Limitations and barriers to technology transfer 356NIH syndrome 357

Internal organisational factors and inward technology transfer 358Absorbtive capacity: developing a receptive environment for technology transfer 359Identifying external technology: the importance of scanning and networking 361

Linking external technology to internal capabilities 362Managing the inward transfer of technology 362

Technology transfer and organisational learning 363

Case study: Sony-Ericsson mobile phone joint venture dependent ontechnology transfer 365

Chapter summary , 373Discussion questions 373Key words and phrases 373References 373Further reading - 376

Part Three New product development 377

Product and brand strategy 378

Capabilities, networks and platformsProduct platforms.

Product planningProduct strategy

Competitive strategyProduct portfolios

The competitive environmentDifferentiation and positioning

DifferentiationProduct positioning

Competing with other productsManaging brands

Brands and blind product testsBrand strategy

Brand extensionsMarket entryLaunch and continuing improvementWithdrawing productsManaging mature products

xiv '

Contents

Case study: Developing a new product for the tooth whitening market 407


New product development 416

Innovation management and NPD 418Product development as a series of decisions 419New products and prosperity 420

Considerations when developing an NPD strategy 420Ongoing corporate planning 420Ongoing market planning 421Ongoing technology management 421Opportunity analysis/serendipity 421

NPD as a strategy for growth 422Market penetration 422Market development 423Product development 423Diversification 423A range of product development opportunities 423

What is a new product? 426Defining a new product 427Classification of new products 429Repositioning and brand extensions 431New product development as an industry innovation cycle 432

Overview of NPD theories 433The fuzzy front end 434Time to market 436Agile NPD 437

Models of new product development 437Departmental-stage models 438Activity-stage models and concurrent engineering 439Cross-functional models (teams) 441Decision-stage models 441Conversion-process models 441Response models 441Network models 442

Case study: Launching innocent into the growing fruit smoothie market 443


xv

Contents

O

Packaging and product development 456

Wrapping and packaging products 458

The basic principles of packaging 461

Protection 461

Containment 462

Identification 463

Labelling 463

Characteristics of packaging 465

Dispensing 465

Storage 465

Stability 466

Handling 466

Opening/resealing 466

After use and secondary use 468

Disposal v 468

Product rejuvenation 468

New product opportunities through packaging 470

Product and pack size variation 471

Packaging systems 473

Retailer acceptance . 475

Revitalising mature packaged goods 476

Case study: Halfords Motor Oil - redesign and rebranding of an

existing product 477

Chapter summary 482

Discussion questions 482

Key words and phrases 482

References 483

Further reading 483

New service innovat ion 486

The growth in services 488Growth in knowledge-intensive business services (KIBS) 488Outsourcing and service growth 489

Different types of services 493Technology and new service development 495New services and new business models 495

Characteristics of services and how they differ from products 496Intangibility 497Heterogeneity 498Simultaneous production and consumption 498Perishability 498

Classification of service innovations - 499The new service development process 499

New service development models 501Sequential service development models or stage-gate models 502Concurrent service development models 504

• xv i

Service innovation and the consumerConsumer user toolkitsConsumer testing of services

Case study: Developing new services at the world's most successfulinternet-based company, eBay

Chapter summaryDiscussion questionsKey words and phrasesReferencesFurther reading

Contents

505506507

508

516516516517520

o Market research and its influence on new productdevelopment 522

Market research and new product development 524The purpose of,new product testing 525Testing new products 526Techniques used in consumer testing of new products 527

Concept tests 528Test centres , 528Hall tests/mobile shops 528Product-use tests 528Trade shows - 529Monadic tests 529Paired comparisons 529In-home placement tests 529Test panels 529

When market research has too much influence 529Discontinuous new products 532Market research and discontinuous new products : 533Circumstances when market research may hinder the development of *

discontinuous new products 533Technology-intensive products 534Breaking with convention and winning new markets 536When it may be correct to ignore your customers 539Striking the balance between new technology and market research 540The challenge for senior management • 542

Case study: Dyson, Hoover and the bagless vacuum cleaner 543


Managing the new product development process 554

New products as projects 556The Valley of Death 557

xvii :

Contents

The key activities that need to be managed 558Assembling knowledge 560The generation of business opportunities 560Developing product concepts: turning business opportunities into

product concepts 564The screening of business opportunities 564New technology product blogs 567Development of product prototypes 567Technical testing 569Market testing and consumer research 569How virtual worlds can help real-world innovations 570Market introduction 571

NPD across different industries 572Organisational structures and cross-functional teams 572

Teams and project management 573Functional structures 573Matrix structures 574Corporate venturing 576Project management 576Reducing product development times through computer-aided design 577

The marketing/R&D interface 577High attrition rate of new products 578

Case study: An analysis of 3M, the innovation company 581


Appendix: Guinness patent . 590Index . 606

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paul trott

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