19Chapter PowerPoint Presentation by Charlie Cook © Copyright The McGraw-Hill Companies, Inc., 2003. All rights reserved. The Management of Innovation,

1919Chapter

PowerPoint Presentation by Charlie Cook© Copyright The McGraw-Hill Companies, Inc., 2003. All rights reserved.

The Management of Innovation, The Management of Innovation, Product Development, and Product Development, and

EntrepreneurshipEntrepreneurship

© Copyright McGraw-Hill. All rights reserved. 19–2

Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives

• After studying the chapter, you should be able to:After studying the chapter, you should be able to:Explain manager’s role in facilitating product Explain manager’s role in facilitating product

development.development.Identify the factors that shorten the product Identify the factors that shorten the product

life cycle, and explain why reducing product life cycle, and explain why reducing product development time increases the level of development time increases the level of industry competition.industry competition.

Identify the goals of product development, Identify the goals of product development, and explain the relationship among them.and explain the relationship among them.

Explain the principles of product development, Explain the principles of product development, and describe the way in which managers can and describe the way in which managers can encourage and promote innovation.encourage and promote innovation.


Learning Objectives (cont’d)Learning Objectives (cont’d)Learning Objectives (cont’d)Learning Objectives (cont’d)

Describe how managers can encourage and Describe how managers can encourage and promote entrepreneurship to help create a promote entrepreneurship to help create a learning organization.learning organization.


Chapter OutlineChapter OutlineChapter OutlineChapter Outline

• Innovation, Technological Change, and Innovation, Technological Change, and CompetitionCompetitionThe Effects of Technological ChallengeThe Effects of Technological ChallengeProduct Life Cycles and Product DevelopmentProduct Life Cycles and Product Development

• Product DevelopmentProduct DevelopmentGoals of Product DevelopmentGoals of Product DevelopmentPrinciples of Product DevelopmentPrinciples of Product DevelopmentProblems with Product DevelopmentProblems with Product Development

• EntrepreneurshipEntrepreneurshipEntrepreneurship and New VenturesEntrepreneurship and New Ventures Intrapreneurship and Organizational LearningIntrapreneurship and Organizational Learning


Innovation, Technological Change Innovation, Technological Change and Competitionand Competition

Innovation, Technological Change Innovation, Technological Change and Competitionand Competition

• TechnologyTechnologyThe skills, knowledge, experience, body of The skills, knowledge, experience, body of

scientific knowledge, tools, computers, scientific knowledge, tools, computers, machines used in the design and production of machines used in the design and production of goods and services.goods and services.

• Quantum Technological ChangeQuantum Technological ChangeA fundamental shift in technology that results A fundamental shift in technology that results

in innovation of new kinds of goods and in innovation of new kinds of goods and services.services.

• The shifts from vinyl records to tape to CD to MP3 The shifts from vinyl records to tape to CD to MP3 represent quantum technological changes in the represent quantum technological changes in the recording industry.recording industry.


Innovation, Technological Change and Innovation, Technological Change and CompetitionCompetition

Innovation, Technological Change and Innovation, Technological Change and CompetitionCompetition

• Incremental Technological ChangeIncremental Technological ChangeChange that refines existing technology and Change that refines existing technology and

leads to gradual improvements or leads to gradual improvements or refinements of products over time.refinements of products over time.

• Improvements in gas mileage for internal combustion Improvements in gas mileage for internal combustion engines represent incremental technological changes engines represent incremental technological changes in automotive manufacturing.in automotive manufacturing.


Effects of Technological ChangeEffects of Technological ChangeEffects of Technological ChangeEffects of Technological Change

• Technological change can be threatening to Technological change can be threatening to firms that are slow to change while, at the firms that are slow to change while, at the same time, providing benefits to those firms same time, providing benefits to those firms that change and adapt.that change and adapt.Microsoft was quick to embrace graphic user Microsoft was quick to embrace graphic user

interface programs and now is predominant interface programs and now is predominant in the software business.in the software business.

Microsoft failed to recognize the importance Microsoft failed to recognize the importance of the Internet and initially fell behind its of the Internet and initially fell behind its competitors in the development of a web competitors in the development of a web browser for its software customers.browser for its software customers.


Product Life Cycles and Product Life Cycles and Product DevelopmentProduct Development


• Product Life CycleProduct Life CycleChanges in product demand from its Changes in product demand from its

introduction through its growth and maturity introduction through its growth and maturity to its decline.to its decline.

• Embryonic stage: product is not widely accepted and Embryonic stage: product is not widely accepted and has minimal demand.has minimal demand.

• Growth stage: many consumers seek out the product Growth stage: many consumers seek out the product and buy it for the first time. and buy it for the first time.

• Mature stage: demand peaks since most buyers Mature stage: demand peaks since most buyers already have the product and only buy replacements.already have the product and only buy replacements.

• Decline stage: demand falls off as the product Decline stage: demand falls off as the product becomes obsolete.becomes obsolete.


A Product Life CycleA Product Life CycleA Product Life CycleA Product Life Cycle

Figure19.1


The Relationship Between Technological The Relationship Between Technological Change and Length of the Product Life Change and Length of the Product Life

CycleCycle

The Relationship Between Technological The Relationship Between Technological Change and Length of the Product Life Change and Length of the Product Life

CycleCycle

Figure 19.2




• The Rate of Technological ChangeThe Rate of Technological ChangeThe rate of change determines the length of The rate of change determines the length of

the product life cycle demand curve.the product life cycle demand curve.• In the computer industry, life cycle is about 18 In the computer industry, life cycle is about 18

months; in the steel industry, it is many years.months; in the steel industry, it is many years.




• Fads and fashions also impact the life cycle Fads and fashions also impact the life cycle duration.duration.Style changes can alter the demand for Style changes can alter the demand for

goods.goods.Goods subject to fads and fashion changes Goods subject to fads and fashion changes

will experience shorter life cycles.will experience shorter life cycles.In general, life cycles are getting In general, life cycles are getting

shorter, forcing managers shorter, forcing managers to be more responsive to be more responsive to customers.to customers.


Moore’s Law: Intel’s Evolving Moore’s Law: Intel’s Evolving MicroprocessorsMicroprocessors

Moore’s Law: Intel’s Evolving Moore’s Law: Intel’s Evolving MicroprocessorsMicroprocessors

Figure 19.3


Four Goals of New Product DevelopmentFour Goals of New Product DevelopmentFour Goals of New Product DevelopmentFour Goals of New Product Development

Figure 19.4


Goals of New Product DevelopmentGoals of New Product DevelopmentGoals of New Product DevelopmentGoals of New Product Development

• Reducing Development TimeReducing Development TimeAdvantages of reduced product development Advantages of reduced product development

timetime• First-to-market products with new features can First-to-market products with new features can

command premium prices and will have a longer life command premium prices and will have a longer life cycle.cycle.

• Products can be upgraded quickly to incorporate new Products can be upgraded quickly to incorporate new technology as it becomes available.technology as it becomes available.

• Easier to experiment with new products and replace Easier to experiment with new products and replace them if they fail in the market.them if they fail in the market.


Goals of New Product Development Goals of New Product Development (cont’d)(cont’d)


• Maximizing the Fit with Customer NeedsMaximizing the Fit with Customer NeedsMost products fail because they were not Most products fail because they were not

designed to fit customer needs.designed to fit customer needs.• Ensure that customers actually want the product Ensure that customers actually want the product

features before adding them to the product.features before adding them to the product.

• Maximizing Product QualityMaximizing Product QualityNew products must be of superior quality.New products must be of superior quality.

• Poor quality in a new product can doom its Poor quality in a new product can doom its acceptance even if quality problem is fixed later on.acceptance even if quality problem is fixed later on.

• Quality problems are often result from rushing Quality problems are often result from rushing products to market.products to market.




• Maximizing Manufacturability and EfficiencyMaximizing Manufacturability and EfficiencyThe efficiency with which the product is built The efficiency with which the product is built

impacts the time it takes to get a product to impacts the time it takes to get a product to market.market.

• Designing a product from the beginning for ease of Designing a product from the beginning for ease of production can shorten development time.production can shorten development time.

• Designing a product for efficient production also Designing a product for efficient production also avoids production problems, reduces product costs, avoids production problems, reduces product costs, and improves product quality.and improves product quality.


Principles of Product DevelopmentPrinciples of Product DevelopmentPrinciples of Product DevelopmentPrinciples of Product Development

• Principle 1: Use a Stage-Gate Development Principle 1: Use a Stage-Gate Development Funnel Funnel Forces managers to make choices among Forces managers to make choices among

competing projects to avoid spreading competing projects to avoid spreading organizational resources too thin.organizational resources too thin.

• Stage 1 considers all new ideas that are feasible and Stage 1 considers all new ideas that are feasible and meet the strategic goals of the firm.meet the strategic goals of the firm.

• Stage 2 focuses on reviewing product development Stage 2 focuses on reviewing product development plans; with the best continuing on.plans; with the best continuing on.

• Stage 3 issues a contract book and focuses on Stage 3 issues a contract book and focuses on responsibilities, budgets, and resources in a symbolic responsibilities, budgets, and resources in a symbolic launch of the formal development.launch of the formal development.


A Stage-Gate Development FunnelA Stage-Gate Development FunnelA Stage-Gate Development FunnelA Stage-Gate Development Funnel

Figure 19.5


Principles of Product Development Principles of Product Development (cont’d)(cont’d)


• Principle 2: Establish Cross-Functional TeamsPrinciple 2: Establish Cross-Functional TeamsCross functional teams are a crucial part of Cross functional teams are a crucial part of

effective product development.effective product development.• Core members of the team are the people primarily Core members of the team are the people primarily

responsible for the development effort.responsible for the development effort.

• Management must ensure there is coordination and Management must ensure there is coordination and communications between team members.communications between team members.

• Teams are often located physically together.Teams are often located physically together.

• Successful teams will develop a clear sense of their Successful teams will develop a clear sense of their objectives and share a common mission.objectives and share a common mission.


Members of a Members of a Cross-Functional Cross-Functional

Product Product Development Development

TeamTeam

Members of a Members of a Cross-Functional Cross-Functional

Product Product Development Development

TeamTeam

Figure 19.6




• Principle 3: Concurrent EngineeringPrinciple 3: Concurrent EngineeringThe traditional engineering approach follows The traditional engineering approach follows

a sequential flow resulting in long a sequential flow resulting in long development times and poor quality if development times and poor quality if managers do not communicate between managers do not communicate between departments.departments.

• By working concurrently, design and production By working concurrently, design and production issues are considered together. issues are considered together.

• Production concerns are addressed while the product Production concerns are addressed while the product is designed and can still be changed.is designed and can still be changed.


Sequential vs. Sequential vs. Parallel Development Parallel Development

ProcessesProcesses

Sequential vs. Sequential vs. Parallel Development Parallel Development

ProcessesProcesses

Figure 19.7




• Principle 4: Involve Both Customers and Principle 4: Involve Both Customers and SuppliersSuppliersProducts fail because their design does not Products fail because their design does not

meet the needs of customers.meet the needs of customers.• Customer ideas and needs should be included in the Customer ideas and needs should be included in the

design process.design process.

• Solicit customer input from many sources.Solicit customer input from many sources.

Suppliers are also critical to the success of a Suppliers are also critical to the success of a product.product.

• Include them during concurrent engineering.Include them during concurrent engineering.

• Seek out their ideas and input early in the process.Seek out their ideas and input early in the process.


Problems with Product DevelopmentProblems with Product DevelopmentProblems with Product DevelopmentProblems with Product Development

• Successful product development is major Successful product development is major source of competitive advantage.source of competitive advantage.While most managers know this, it can be While most managers know this, it can be

difficult to actually carry out good difficult to actually carry out good development strategies.development strategies.

Revolutionizing product development Revolutionizing product development requires a break with the traditional ways of requires a break with the traditional ways of thinking and managing.thinking and managing.

• Many managers have difficulty in releasing control of Many managers have difficulty in releasing control of their part of the process and allowing groups and their part of the process and allowing groups and teams to function in the development process.teams to function in the development process.


EntrepreneurshipEntrepreneurshipEntrepreneurshipEntrepreneurship

• EntrepreneursEntrepreneursIndividuals who notice opportunities and take Individuals who notice opportunities and take

the responsibility for mobilizing the resources the responsibility for mobilizing the resources necessary to produce new and improved necessary to produce new and improved goods and services.goods and services.

• Entrepreneurs start new businesses and carry out all Entrepreneurs start new businesses and carry out all of the management functions.of the management functions.

• Entrepreneurs assume all of the risks for losses and Entrepreneurs assume all of the risks for losses and receive all of the returns (profits) from their ventures.receive all of the returns (profits) from their ventures.


Entrepreneurship (cont’d)Entrepreneurship (cont’d)Entrepreneurship (cont’d)Entrepreneurship (cont’d)

• IntrapreneursIntrapreneursIndividuals (managers, scientists, or Individuals (managers, scientists, or

researchers) who work inside an existing researchers) who work inside an existing organization and notice an opportunity for organization and notice an opportunity for product improvements and are responsible product improvements and are responsible for managing the product development for managing the product development process.process.

• Intrapreneurs frustrated with the lack of support or Intrapreneurs frustrated with the lack of support or opportunity at their firm often leave and form their opportunity at their firm often leave and form their own new ventures.own new ventures.


Entrepreneurship and New VenturesEntrepreneurship and New VenturesEntrepreneurship and New VenturesEntrepreneurship and New Ventures

• Characteristics of entrepreneursCharacteristics of entrepreneurs——most share most share these common traits:these common traits:Open to experience: they are original Open to experience: they are original

thinkers and take risks.thinkers and take risks.Internal locus of control: they take Internal locus of control: they take

responsibility for their own actions.responsibility for their own actions.High self-esteem: they feel competent and High self-esteem: they feel competent and

capable.capable.High need for achievement: they set high High need for achievement: they set high

goals and enjoy working toward them.goals and enjoy working toward them.


Entrepreneurship and ManagementEntrepreneurship and ManagementEntrepreneurship and ManagementEntrepreneurship and Management

• To become involved in an entrepreneurial firm:To become involved in an entrepreneurial firm:Start your own business as an entrepreneur.Start your own business as an entrepreneur.Work for a growing entrepreneur in their Work for a growing entrepreneur in their

firm.firm.Develop a plan for the new businessDevelop a plan for the new business

• Designing a plan to guide the business is similar to a Designing a plan to guide the business is similar to a product development plan.product development plan.

• Firms without plan usually failFirms without plan usually fail

Franchising allows you to purchase a plan Franchising allows you to purchase a plan and the experience of existing firm to reduce and the experience of existing firm to reduce risk.risk.


Developing a Plan for a New BusinessDeveloping a Plan for a New BusinessDeveloping a Plan for a New BusinessDeveloping a Plan for a New Business

Step 1Step 1

Step 2Step 2

Step 3Step 3

Step 4Step 4

Notice product opportunity and develop a basic Notice product opportunity and develop a basic business idea: What goods/services to produce and business idea: What goods/services to produce and who are the customers/markets?who are the customers/markets?

Conduct strategic analysis (SWOT) to identify: Conduct strategic analysis (SWOT) to identify: Strengths, Weakness, Opportunities, Threats.Strengths, Weakness, Opportunities, Threats.

Is the business opportunity feasible?Is the business opportunity feasible?

Prepare a detailed business plan including mission, Prepare a detailed business plan including mission, goals, strategic and financial objectives, resources goals, strategic and financial objectives, resources required, and a timeline of events.required, and a timeline of events.

Table 19.1


Intrapreneurship and Intrapreneurship and Organizational LearningOrganizational LearningIntrapreneurship and Intrapreneurship and

Organizational LearningOrganizational Learning

• Learning organizations encourage their Learning organizations encourage their employees to act as intrapreneurs: employees to act as intrapreneurs: Product champions: taking ownership of a Product champions: taking ownership of a

product from concept to market.product from concept to market.Skunkworks: keeping a group of Skunkworks: keeping a group of

intrapreneurs separate from the rest of the intrapreneurs separate from the rest of the firm.firm.

New venture division: allowing a division to New venture division: allowing a division to act as its own smaller company.act as its own smaller company.

Rewards for innovation: linking innovation by Rewards for innovation: linking innovation by workers to valued rewards. workers to valued rewards.

19Chapter PowerPoint Presentation by Charlie Cook © Copyright The McGraw-Hill Companies, Inc., 2003. All rights reserved. The Management of Innovation,

Documents

product demand

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