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Summary: Book "Innovation Management and New Product

Development", Technology and Innovation, Chapters
1-12,14-16
Technology and Innovation (Vrije Universiteit Amsterdam)

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T&I samenvatting

Chapter 1
Schumpeter was among the first economists to emphasise the importance of new products
as stimuli to economic growth. The competition posed by new products was far more
important than marginal changes in the prices of existing products.
There was a need to understand how science and technology affected the economic system.
More emphasis must be laid on the firm and its internal activities.
Neo-classical economics as a theory of economic growth that explains how savings,
investments and growth responds to population growth and technological change. The
growth does not influence technological change. Rather, technological change is determined
by chance.
Schumpeterian view sees firms as different it is the way a firm manages its resources over
time and develops capabilities that influences its innovation performance. The emphasis lies
on different disciplines in creating innovation (figure 1.1). (Key) Individuals are key
component in the innovation process.
Sustaining innovation appeals to existing customers, since those are improvements of
existing products.
Disruptive innovation tends to provide improvements greater than those demanded.
Todays innovation is associated with groups of people or companies and is associated with
organizations rather than individuals. Innovation needs to be viewed as a process.
Design vs. Development
Design is an applied activity within research and development and is the main component in
product development. Design is usually more concerned with the process of applying
scientific principles and inventions.
Innovation vs. Invention
Innovation is concerned with the commercial and practical application of ideas or inventions
Invention is the conception of the idea, whereas innovation is the subsequent translation of
the invention into the economy.
Innovation = theoretical conception + technical invention + commercial exploitation
Innovation is not a single action but a total process of interrelated sub processes.
Innovation as a management process
Innovation is the management of all the activities involved in the process of idea generation,
technology development, manufacturing and marketing of a new (or improved) product or
manufacturing process or equipment.
Creativity vs. Innovation
Creativity is the thinking of novel and appropriate ideas
Innovation is the successful implementation of those ideas within an organisation
Innovation is the application of knowledge. This lies at the heart of all types of innovation.

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Types of innovations:
Product innovation
Process innovation
Organisational innovation
Management innovation
Production innovation
Commercial/marketing innovation
Service innovation
Science vs. Technology
Science can be defined as systematic and formulated knowledge.
Technology is the application of science is it knowledge applied to products or production
processes
Social deterministic school: innovations are a combination of external social factors and
influences, such as demographic changes, economic influences and cultural changes
Individualistic school: innovations were the result of unique individual talents
Resource-based view: focuses on the firm and its resource, capabilities and skills. When
firms have resources that are Valuable, Rare, Inimitable and Non-substitutable, they can
achieve a sustainable competitive advantage.
Models of Innovation
1. Linear model: innovation is viewed as a sequence of separable stages or activities
a. Technology push
b. Market pull
2. Simultaneous coupling model: the simultaneous coupling of the knowledge within
all three functions (R&D, manufacturing and marketing) will foster innovation
3. Architectural innovation: technical knowledge is divided along two new dimensions:
knowledge of the components and knowledge of the linkage between them called
architectural knowledge. The result is four possible types of innovation:
a. Incremental
b. Modular new component knowledge
c. Radical
d. Architectural innovation new architectural knowledge
4. Interactive model: links together the technology-push and market-pull model. It
emphasises that innovations occur as the result of the interaction of the
marketplace, the science base and the organisations capabilities.
5. Innovation life cycle and dominant designs: different phases in an innovations life
cycle:
a. Fluid
b. Transitional
c. Specific
6. Network model: emphasis on knowledge accumulation and external linkages
7. Open innovation: further externalisation of the innovation process in terms of
linkages with knowledge inputs and collaboration to exploit knowledge outputs
Discontinuous/disruptive innovation: changes that are very significant. Creative destruction
reframing the way we think about an industry.

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The cyclic innovation model captures the iterative nature of the network processes in
innovation and represents this in the form of an endless innovation circle with
interconnected cycles. This helps to show how the firm gathers information over time, how
it uses technical and societal knowledge and how it develops an attractive proposition. From
linear to non-linear thinking innovations build on innovations. It emphasises the
importance of interaction and communication within and between functions and with the
external environment.

Chapter 2
Schumpeterian theory emphasises that innovation comes from new consumers goods, new
methods of production or transportation, new markets and new forces of industrial
organisations.
However, the potential to create these things is dependent on the nation.
Short-termism = businesses focus on high-return opportunities in the short term, and ignore
long-term implications of this behaviour.
The right business environment is key to innovation
Schumpeter technology is the engine of growth, but to invest in technology there have to
be spare resources and long time-horizons.
Not only does macroeconomic stability play a significant role but also the availability of quick
(short-term) returns and opportunistic trends needs to be suppressed so that the money can
flow into basic research and R&D.
Kondratieff waves the capitalist economy grew on the basis of major innovations in
product, process and organisation with accompanying shifts in the social arena. Kuhns
theory on the nature of scientific revolutions has been justified: each wave comes to an end
due to its major shortcomings and the successive wave fundamentally restructures and
improves those weaknesses.
The nature of the change involved with respect to the interaction with a new product can
play a significant role in product evaluation and adoption.
Three aspects that need to be considered by the firm developing innovative products:
1. Technical capability
2. Product capability
3. Pattern of consumption
Beyond consumer concerns, one needs to consider the following aspects that can affect
adoption:
Substitution
Product complementarity
Adoption vs. Diffusion
Adoption = the process through which individuals pass from awareness to the final decision
to adopt or not to adopt
Diffusion = the communication over time within a wider social system

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Chapter 3
Fundamental enterprises long-run survival dilemma: efficiency vs. creativity
Managing uncertainty is a central feature of managing the innovation process. Different
environments require different management styles.
Pearsons uncertainty map provides a framework for analysing and understanding
uncertainty in the innovation process and the way in which it changes over time. The map
conveys the message that the management of product and process innovations is very
different.
Technology development could be a radical innovation if it revolutionises both component
and architectural knowledge.
Innovation stimulus innovation capacity innovation performance
Competitive success is dependent upon a firms management of the innovation process.
Organisational characteristics that facilitate the innovation process:
1. Growth orientation
2. Organisational heritage and innovation expertise
3. Vigilance and external links
4. Commitment to technology and R&D intensity
5. Acceptance of risk
6. Cross-functional cooperation and coordination within organisational structure
7. Receptivity
8. Space for creativity
9. Strategy towards innovation
10. Diverse range of skills
Mechanic organisations tend to offer a less suitable environment for managing creativity
and the innovation process.
Innovation process is a people process and the individual is important in this process.
Key individual roles within the innovation process:
Technical innovator
Technical/commercial scanner
Gatekeeper
Product champion
Project leader
Sponsor
Being successful at managing innovation is rather a way of thinking and finding creative
solutions within the company. With this in mind, innovation management can benefit from
well-established management principles to help the leaders of an organisation sustain
innovativeness and even recover from a period of stagnation, if applied correctly and
vigorously.
By following a common formalised model so that projects pass through a series of phases an
organisation will improve its level of product development.

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Structured development models contribute to NPD

They were seen as guide fro action
Models need to be applied pragmatically
They provided a common language

Chapter 4
Operations management is about the control of a conversion process from input to output.
Extra dimensions of the operations managers role (figure 4.1):
1. Customer who becomes part of the process
2. Information from customers, market research and government agencies
3. The physical and business environment
The objective of design is to meet the needs and expectations of customers. Marketing
gathers information from customers and potential customers to identify those needs and
expectations.
All products and services can be considered as having three aspects:
1. A concept the expected benefits a customer is buying
2. A package of component products that provides those benefits
3. The process defines the relationship between the component products and
services by which the design fulfils its concept
By changing the core, or adding or subtracting supporting services, organisations can
provide different packages and therefore design very different products and services.
Design spectrum ranges from the concept designer whose primary concern is ensuring
technical excellence to the focus of the industrial designer on manufacturability and the ease
of use of the product.
Design and volumes
AS the required volume increases, the most appropriate method of manufacture changes.
Furthermore, assembly skills required to produce he product have become embedded in the
process machinery and the workers involved have become machine minders. Thus, it
requires investments in a very different processing technology when demand rises (design
simplification).
Craft-based products
The flexibility and speeds of the response of the operation is critical to the success of the
organization
Design simplification
By making the design such that the product is easy to produce, the designer enables the
operation to consistently deliver these features.
Concurrent engineering = where research, design and development work closely or in
parallel rather than in sequence
Considerations of designers 4 Vs of operations:
1. Volume how much output is required
2. Visibility of the product to the customer
3. Variation the number of items on a restaurant menu

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4. Variability how many meals are required at one time (capacity of the process)
The process design is based on the technology being used within the process. One of the
important elements of operations is that of the design and layout of the facility providing
the goods or service (figure 4.3). Minimizing flow of information, especially important in the
service sector.
New innovative ways of working within the operations process to gain competitive
advantage is part of every operations managers duties.
Triggers for innovation
1. Gap analysis: a technique used to aid understanding of the differences between the
customer and producer view or experience of a product or service
2. Quality circles and process improvement teams: a quality circle is a small group of
voluntary workers who meet regularly to discuss problems and determine possible
solutions exploit advantages of human resource theories
3. Total quality management (TQM): an effective system for integrating the quality
development, quality maintenance and quality improvements efforts of the various
groups in an organisation to enable production and service at the most economical
levels which allows for full customer satisfaction
a. Meeting the needs and expectations of customers
b. Covering all the parts of the organisation
c. Everyone in the organisation is included
d. Investigating all costs related to quality (internal and external)
e. Getting things right by designing in quality
f. Developing systems and procedures which support quality improvements
g. Developing a continuous process of improvement
4. Quality function deployment (QFD) is a structured approach that relates the voice
of the customer to every stage of the design and delivering process
a. Promotes better understanding of customer demands
b. Promotes better understanding of design interactions
c. Involves operations in the process at the earliest possible moment
d. Removes the traditional barriers between the departments
e. Focuses the design effort
5. ISO 9000 approach: a set of standards governing documentation of a quality
programme
a. Quality management should be customer focused
b. Quality management should be measured
c. Quality management should be improvement driven
d. Top management must demonstrate their commitment to maintaining and
continually improving management systems
6. The EFQM excellence model: reflects the increased understanding and emphasis on
customer (and market) focus and is results oriented. The underlying idea is that
results (people, customer, society and key performance) are achieved through a
number of enablers in managing and controlling the input/output transformation
processes involved. It embeds innovation and learning in the performance of the
organisation.
Supply chain management describes the system of managing all the activities across
company boundaries in order to drive the whole chain network towards the shared
objective of satisfying the customers.

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Just-In-Time aims to meet demand instantaneously with perfect quality and no waste.
Business Process re-engineering (BPR) = the fundamental rethinking and radical redesign of
business processes to achieve dramatic improvements in critical, contemporary measures of
performance, such as cost, quality, service and speed.
Incrementalism is an enemy of innovation
A useful approach is to appreciate that managers control processes, which may be viewed as
having inputs, processes of conversion and outputs from these processes. To be effective
and efficient all management activities must include some form of measure or
measurement, but the appropriate measure depends on the organisation and its business
environment.
Innovation measures:
1. Number of ideas
2. Number of personnel involved in innovation
3. Information Technology
4. Percentage of sales on process innovation
5. Percentage of sales on R&D spend

Chapter 5
Main types of intellectual property:
1. Patents 20 year monopoly (annual fees & patent agents)
2. Copyright whole life + 70 years after authors death
3. Registered designs up to 15 years
4. Registered trademarks period of 10 years, but can be filed endlessly it is an item
of personal property
Patents have to meet the criteria of:
Novelty
Inventive step non-obviousness
Industrial application
Two sources of information related to a patent:
Patent specification detailed description of the invention
Patent abstract short statement on front page of the patent specification which
identifies the technical subject of the invention and the advance that it represents
Purpose of any patent system is to strike a balance between the interests of the inventor
and the wider public.
It is argued that only large multinational corporations benefit from patents, since they have
the finances to defend and protect any patents granted to them. One possible way to
encourage innovation is by extending coverage and broadening legal protection to cover
new product ideas for a short period. Small companies and entrepreneurs will benefit from
this broader but shorter protection.
Patent extensions take effect at the instant of patent expiry, then lasts for the length of
time by which regulatory approval exceeded five years. Each SPC has its own fixed duration,
but, to protect the public, the maximum duration is five years.

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Submarine patents = patents that surface only after the technologies they protect have
come into wide use.
Patent deter innovation by:
Denying follow-on innovators access to necessary technology (EULA)
Increasing entry barriers
The expense required to avoid patent infringement
The issuance of questionable patents
Benefits of patents:
1. Freedom to operate
2. Provides a strong negotiation position
3. Used as an indicator of value to an external party
Trademark = any sign capable of being represented graphically which is capable of
distinguishing goods or services of one undertaking from those of other undertakings
Requirements trademark:
Should satisfy the requirements of section 1
Distinctive
Non-deceptive Orwoola
Not confusing must not sound like other trademarks
Brand name vs. Trademark
Brand name in sphere of marketing
Trademark in sphere of law
Brand equity = value of a brand name. Different definitions:
Total value of a brand as a separable asset
Measure of the strength of consumers attachment to a brand
Description of the associations and beliefs the consumer has about the brand
Brand equity creates value for both customer and the firm.
Benefits of a brand:
Reduce the time required to purchase a product
Symbolises a certain quality level
Exploiting opportunities and developing brands:
New technology
New positioning
New distribution
Design right is the protection of the outward appearance of an article.
Requirements copyright:
It must be in a tangible form so that it can be communicated or reproduced
It must be the authors own work and thus the product of his skill or judgment
Infringements:
Damages

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Injunctions
Accounts

Chapter 6
Technology trajectories
The choices available to a firm in terms of future direction are dependent on dynamic
capabilities, that is the firms level of technology, skills, intellectual property, managerial
processes and routines.
How firms know what knowledge to acquire and when they know they have acquired it,
depends on the firms prior knowledge and absorptive capacity.
Resource-based perspective (RBP) aligns the firm to the external environment by
conducting an external analysis and aligns the firms resources to the external environment
by conducting an internal analysis. Based on two principles:
There are differences between firms based upon the way they manage resources and
how they exploit them
These differences are relatively stable
Firms differ in strengths and thus differ in success. Strengths are resources, capabilities and
competences. Strategic choice is emphasised in explaining success and management
responsibility is to identify, develop en deploy resources to maximise returns (VRIN).
Dynamic competence-based theory sees both the external and internal environment as
dynamic. Thus both internal processes and the external environment are analysed.
Firms are seen as different and compete on the basis of competencies and capabilities.
These capabilities tend to be dependent on the organisations incremental and cumulative
historical activities. An organisations ability to evaluate and utilise external knowledge is
related to its prior knowledge and expertise and that his prior knowledge is in turn driven by
prior R&D investments. The practised routines that are built into the organisation define a
set of competencies that the organisation is capable of doing confidently. These routines are
referred to as organisations core capabilities and these are developed by learning-by-doing.
External linkages form another distinctive competitive capability.
The ability of firms to identify technological opportunities and exploit them is one of the most
fundamental features that distinguish successful from unsuccessful firms. It is the ability to
use its assets to perform value-creating activities.
The firms ability to generate profits from its technology assets depends on the level of
protection it has over these assets and the extent to which firms are able to imitate these
competencies.
The rate of technological advance is dependent on the amount of effort put into the
development of the technology S-curve.
Firm-specific competencies take time to develop and are costly to initiate. Key features of
these competencies are the ability to convert technical competencies into effective
innovation and the generation of effective organisational learning.

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The organisation itself, rather than the individuals who pass it, retains and generates
innovative capacity, even though individuals may be identified who propagate learning.
Thus, an organisation itself can seem to have knowledge.
Organisational heritage = organisational knowledge that is distinctive to the firm and is not
widely available to other firms. It is the individual ways in which the technology is applied
that lead to organisation-specific knowledge.
Organisational knowledge represents internal systems, routines, shared understanding and
practices.
Knowledge base = the accumulation of the knowledge bases of all the individuals within an
organization and the social knowledge embedded in relationships between those
individuals.
Advantages knowledge base:
It combines individual knowledge bases into a larger body of knowledge
It enables individual knowledge bases to be accessed by the organisation
Dimensions of an organisations knowledge base:
1. Individual assets
2. Technological assets
3. Administrative assets
4. External assets
5. Projects
Learning organisation = acquires knowledge and skills and apply these effectively, in much
the same way as human beings learn.
Double loop learning reinforces understanding.
Phases of innovation and technology development:
1. Fluid: large experimental game, where technological and market uncertainties
prevail
a. Explosion of different design
b. Era of radical product innovation
2. Transitional: acceptance of the innovation, market starts growing
a. Standardisation of design
b. Emergence of process innovation
3. Specific: competition shifts from differentiation to product performance and costs
a. Contraction of competitors
b. Era of incremental innovation
Between the fluid and the transitional phase lies the dominant design.
There are two dimensions that separate incremental from radical innovation:
1. Internal dimension: an incremental innovation will be based upon existing
knowledge and resources whereas radical innovation requires new knowledge and
resources
2. External dimension: an incremental innovation will involve modest technological
changes and the existing products will remain competitive whereas radical

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innovation will involve large technological advancements, rendering the existing

products uncompetitive and eventually obsolete.
Any firms ability to survive is dependent on its capability to adapt to the changing
environment. There are several strategies and the best strategy for a firm depends on their
resources, heritage, capabilities and aspirations:
1. Leader/offensive strategy monopoly of the technology
2. Fast follower/defensive strategy improved versions of the original products in
terms of lower cost, different design, additional features, etc. It requires a
substantial technology base.
3. Cost minimisation/imitative strategy achieving economies of scale
4. Market segmentation specialist/traditional strategy meeting the precise
requirements of a particular market or niche.
Many decisions regarding the choice of innovation strategy will depend on the technology
position of the firm with respect to its competitors. This will be largely based on the heritage
of the organisation.

Chapter 7
A strategic alliance = an agreement between two or more partners to share knowledge or
resources, which could be beneficial to all parties involved.
The formation of strategic alliances means that strategic power often resides in sets of firms
together. Alliances not only allow for exchange of technology but also for the exchange of
skills and know-how often referred to as competencies. In this way, firms can build
knowledge sharing routines.
Forms of alliances:
Licensing
Supplier relations
Outsourcing delegation of non-core operations
Joint venture
Collaboration (non-joint ventures)
R&D consortia firms come together to undertake a large-scale activity
Industry clusters Silicon Valley
Innovation networks
See advantages and disadvantages (p.239).
Virtual company = where every aspect of the business is outsourced and run by unknown
suppliers.
Strategic business alliances will only achieve a sustainable competitive advantage if they
involve learning and knowledge transfer. Furthermore, the success depends on the
existence of mutual need and the ability to work together despite differences in
organisational culture.
The formation of a strategic alliance:
1. Selection of the right partner
2. Negotiations
3. Management towards collaboration

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Negotiating a licensing deal:

Terms for the agreement
Rights granted intellectual property rights that are granted
License restrictions
Improvements
Consideration (monetary value)
Reports and auditing of accounts
Representations/warranties
Infringement
Confidentiality
Arbitration
Termination
Risks of strategic alliances:
1. Competition rather than cooperation
2. Loss of competitive knowledge
3. Conflicts resulting from incompatible cultures and objective
4. Reduces management control
5. (Harms the firms ability to innovate)
The level and nature of the integration of the firms appears to be a crucial factor. Ensuring
competition remains is a major implication of strategic alliances.
The leakage of sensitive information to competitors is the most concern to firms. However,
all forms of collaboration involve an element of risk and require substantial amounts of trust
and control. Trust is exercised between individuals, even if they represent an organisation.
Types of trust:
Process
Personal
Institutional
Competence trust
Contractual trust
Goodwill trust
Strategic outsourcing goes beyond traditional outsourcing in the sense that competitive
advantages are being sought through opening up all business functions, including the core
competencies which should provide competitive advantage to whoever can provide the
perceived best solution, internal or external.
Main risks outsourcing:
1. Dependence on the supplier
2. Hidden costs
3. Loss of competencies
4. Service providers lack of necessary capabilities
5. Social risk
6. Inefficient management
7. Information leakage

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The risk of outsourcing in terms of innovations is that the outsourcing firm will set up its own
brand because the firm already does all the work.

Chapter 8
R&D = developing new knowledge and apply scientific or engineering knowledge to connect
the knowledge in one field to that in others.
R&D needs to be managed according to the specific heritage and resources of the company
in its competitive industry.
R&D expenditure and long-term growth are positively related. R&D should thus be viewed as
a long-term investment, even though it may reduce short-term profitability.
Industrial research has focused on a variety of research activities performed within the
organisation. The expectations of the industry expanded to include the development of
knowledge into products.
Main activities of industrial R&D:
Discovering and developing new technologies
Improving understanding of the technology in existing products
Improving and strengthening understanding of technologies used in manufacturing
Understanding research results from universities and other research institutions
Basic/fundamental research = discovery of new knowledge and scientific principles. It
involves work of a general nature intended to apply to a broad range of uses or to new
knowledge about an area.
Applied research = the activity of transforming scientific principles into technologies that
can be applied to products. This activity involves the use of existing scientific principle for
the solution of a particular problem.
Product development = development of products for commercial gain. This activity is similar
to applied research in that it involves the use of know scientific principles, but differs in that
the activities centre on products.
Technical service focuses on providing a service to existing products and processes. This
frequently involves cost and performance improvement to existing products, processes or
systems.
The planning process:
1. Environmental forecasts
2. Comparative technological cost-effectiveness
3. Risk
4. Capability analysis
The management of R&D needs to be fully integrated with the strategic management
process of the business.
The strategic roles of R&D:
1. Defend, support and expand existing business

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2. Drive new businesses

3. Broaden and deepen technological capability
There is a trade-off between using R&D for building knowledge for the entire business and
using R&D for gaining depth of knowledge for particular businesses. The need for strategic
positioning forces the decision to focus resources and build strategic knowledge
competencies, represented by the downward curve.
Categories of the technology base:
Core technologies central to all or most of the companys products
Complementary technologies additional technology that is essential in product
development
Peripheral technologies technology that is not necessarily incorporated into the
product but whose application contributes to the business (e.g. software)
Emerging technologies technology that is new to the company but that may have
a long-term significance for its products.
The flow diagram in figure 8.6 highlights the need for integration of corporate and R&D
strategy. Technology leverage is the extent of influence that a businesss technology and
technology base have on its competitive position.
The state of a business in terms of its markets, products and capabilities will largely
determine the amount of research effort to be undertaken.
Two forms of R&D activities:
1. Growth:
a. Break the mould
b. Technology mastery
2. Maintenance
a. Competitiveness
b. Survival
Key factors to be considered when setting the R&D budget:
Expenditure by competitors
Companys long-term growth objectives
The need for stability
Distortions introduced by large projects

Chapter 9
There are two key technology risks:
1. Appropriability risk reflects the ease with which competitors can imitate
innovations
2. Competence destruction reflects the volatility and uncertainty of technical
development that vary greatly between technologies, both in terms of the technical
trajectories being followed and market acceptance.
However, investments in developing highly uncertain technologies are usually undertaken
when appropriability risks are limited, while firms developing innovations that are more
open to such risks tend to focus on more cumulative and predictable technologies.

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Ingredients for successful technology management:

The capacity to integrate functional and specialist groups for the implementation of
innovations
Continuous questioning of the appropriateness of existing divisional markets,
missions and skills for the exploitation of technological opportunities
A willingness to take a long-term view of technological accumulation within the firm
The effect of the macro-effects (technology explosion, shortening of the technology life
cycle, globalisation) is a shift in emphasis within industrial R&D from an internal to an
external focus. The focus of new areas of work is on external knowledge acquisition and
assimilation. This is forcing many companies to reassess the way they manage R&D.
Types of internal R&D:
1. Centralized laboratories - advantage of critical mass
2. Decentralized laboratories reinforce the link with the business, its products and its
markets, fosters communication and product development
3. Internal R&D market essentially involves establishing a functional cost centre,
where each business pays for any R&D services required
Externally developed technology vs. External R&D
Externally developed technology requires no prior knowledge of the technology.
External R&D requires a high level of prior knowledge of the technology.
Technology transfer = the process of promoting technical innovation through the transfer of
ideas, knowledge, devices and artefacts from leading edge companies, R&D organisations
and academic research to more general and effective application in industry and commerce.
Types of external R&D:
1. Contract R&D when the firm has a low level of understanding of the technology
2. R&D strategic alliance share expertise and reduce inevitable costs and risks
3. R&D consortia consists of 20-50 companies usually centred around a trading
company and involving component suppliers, distributors and final product
producers, all interwoven through shareholding and trading arrangements. It
reduces competition cartel
4. Open source R&D customers are co-producers of the products and services
R&D and new product development are interlinked extended product life cycle. The R&D
function will be continually consulted on virtually all aspects of the product.
R&Ds role is to extend the life of the product by continually searching for product
improvements. The most common approaches are capturing a larger market share and
improving profit margins through lowering production costs.
Screening methods R&D projects:
Benefit measurement models
Economic models
Portfolio selection models: ideas that fit with the business strategy. There needs to
be a balance of projects in:
o Newness
o Time of introduction
o Markets

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Chapter 10
Knowledge, transformed into know-how or technology has become a major asset within
companies. Technology is vital for a business to remain competitive.
The economic theory (technology that already had been produced could be used and
exploited by other companies to generate revenue and thereby growth for the economy)
was the instigator for the encouragement of technology transfer (= the application of
technology to a new use or user).
Open innovation
The need for external linkages and connectivity is a major factor influencing the
management of innovation. The process of accessing and transferring technology is
becoming increasingly crucial within innovation and new product development.
Openness seems to manifest itself in:
1. Inbound processes
a. Sourcing technology
b. Acquiring technology
2. Outbound processes
a. Revealing technology
b. Selling technology
Models of technology transfer:
Licensing
Science park model
Intermediary agency model
Directory model
Knowledge Transfer Partnership model
Ferret model
Hiring skilled employees
Technology transfer units
Research clubs
European Space Agency (ESA)
Consultancy
While much effort appears to be directed at providing access to technology, little effort is
aimed at understanding the needs of organisations acquiring technology developed outside
the organisation.
Elements that play a role in technology transfer and inward technology transfer:
Accessibility
Mobility
Receptivity
o Awareness
o Association
o Assimilation
o Application
It is important to view technology development as a combination of knowledge, skills and
organisations (organisational know-how) rather than the economists view of technology as
an artefact to be bought and sold.

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Not-Invented-Here (NIH) syndrome = the tendency of a project group of stable composition

to believe that is possesses the monopoly of knowledge in its field, leading it to reject new
ideas from outsiders to the likely detriment of its performance.
Types of companies:
Innovators
Initiators
Fabians
Drones
Firms differ in their ability and willingness to adopt a new technology. The process of inward
technology transfer is concerned with creating or raising the capability for innovation. This
requires an organisation and the individuals within it to have the capability for awareness,
association, assimilation and application.
External scanning for technologies that will match its business opportunities requires a full
understanding of the organisations capabilities. It is also necessary to match technology
with a market need.
In order for the organisation to learn, the organisation must be assimilated into the core
routines of the organisation. That is, the knowledge becomes embedded in skills and knowhow. Double-loop learning the individual and organisational cycles are interrelated and
interdependent. Knowledge is transferred from the individual into the group.

Chapter 11
Product development, and the competitive rivalry of which it is usually a part, can
sometimes be better understood as undertaken by networks of partnerships and alliances
rather than by individual, isolated producers.
Emphasis upon continuity in the development of capabilities is consistent with the idea of an
evolving product platform that a product family shares.
Benefits from using product platforms:
Reduced cost of production
Shared components between models
Reduced R&D lead times
Reduced systemic complexity
Better learning across projects
Improved ability to update products
Product planning considers the range of projects that a firm might pursue and over what
time frame. It requires input from R&D and is regularly updated to reflect the changing
competitive environment.
Types of product development opportunities:
1. New product platforms new family of products based on a new, common platform
2. Derivatives of existing platforms develop an existing platform to ensure existing
products are updated
3. Incremental improvements to existing products adding or modifying features of
existing products to keep the product line current and competitive

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4. Fundamentally new products radically different product or production

technologies which may help to take the firm into new and unfamiliar markets
Product strategy
Competitive strategy may drive new product planning on a short-term (defensive) or
long-term basis (contributions from new products).
New products can perform as a learning function for the organisation
Strategic decisions regarding the overall portfolio of products
The competitive environment
The external environment constrains what can be done, for example within the bound of
current understanding of a technology. Close analysis of the present situation in the market
is fundamental along with speculations on how it might progress and because of the
potential importance of external events and conditions some type of environmental
monitoring in a strategic sense, has become a key exercise in strategy search.
Speculations might deal with:
The way technology will change
How the industry competitive structure may alter
How any regulatory framework may evolve
What customers needs are
Product differentiation can be based on:
Cost
Value-for-money
Superior quality
Better service
A useful approach on product differentiation is product augmentation. Products can be
considered on four levels:
1. The core product the essential basics needed to compete in a product market
2. The expected product what customers have accustomed to as normal in the
product market
3. The augmented product offers features, services or benefits that go beyond
normal expectations
4. The potential product would include all the features and services that could be
envisaged as beneficial to customers
Implication: the position is dynamic because customer expectations change.
Product positioning refers to the perceptions customers have about the product relative to
rival products. Selecting an appropriate positioning can make the difference between
success and failure. It determines what the organisation tells the market about the product,
whom it tells and how it tells it.
Types of product strategies:
1. Product profileration
2. Value
3. Design (outward appearance)
4. Innovation
5. Service

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Managing brands
A successful brand combines an effective product, distinctive identity and added values as
perceived by customers.
Brand strategy
Brand strategy is the spearhead of the organisations competitive intentions. It carries the
company or product name into the market and shows how it is positioning itself to compete
A brand can represent the sum of what people know about the product and its usefulness,
quality and availability.
A brand extension is the use of an established brand name on a new product in the same
product field or in a related field. The brand name might also be stretched to an unrelated
product field. The rationale behind brand extension strategy is to take advantage of
potential carry-over effects from the original brand.
Three kinds of carry-over effects:
1. Expertise high level competence
2. Prestige status
3. Access access to best suppliers and distributors
Product decisions on:
Market entry (entry timing)
Positioning
Scale of entry
Considerations on evolution of the product after the launch:
Product platform evolution and brand extensions
Market evolution
Competitive evolution

Chapter 12
New product development is the process of transforming business opportunities into
tangible products. New product development concerns the management of disciplines
involved in the development of new products:
Production management
R&D
Design and engineering
Economics
Marketing
Decisions regarding product development:
1. Concept development
2. Supply chain design
3. Product design
4. Production ramp-up/launch
Considerations when developing an NPD strategy:
Ongoing corporate planning
Ongoing market planning

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Ongoing technology management

NPD as a strategy for growth

Ansoffs matrix on identifying the variety of growth options:
1. Market penetration increase volume of sales
2. Market development existing products in new markets
3. Product development new products in existing markets
4. Diversification new products in new markets
Additional opportunities for growth are forward, backward and horizontal diversification.
A product is a multidimensional concept, so it is possible to label a product as new by
merely altering one of these dimensions:
Technology
Features
Packaging
Price
Quality specifications
Brand name
Level of service
Classification of new products:
1. New-to-the-world products
2. New product lines (new to the firm)
3. Additions to existing lines (line additions)
4. Improvements and revisions to existing products
5. Cost reductions
6. Repositioning
Brand extension means using a brand name successfully established for one segment or
channel to enter another one in the same broad market
The continuity spectrum illustrates the extent of marketing effort required for each of the
options open to firms considering new product development.
NPD theories
The organisational activities undertaken by the company as it embarks on the actual process
of new product development have been represented by different models, such as:
Eight-stage linear model
a. Idea generation
b. Idea screening
c. Concept testing
d. Business analysis
e. Product development
f. Test marketing
g. Commercialisation
h. Monitoring and evaluation
Customer roles in NPD:
Customer as resource
Customer as co-creator

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Customers as user

Models of new product development:

1. Departmental-stage models
2. Activity-stage models and concurrent engineering
3. Cross-functional models (teams)
4. Decision-stage models (stage-gate model)
5. Conversion-process models
6. Response models
7. Network models
8. Outsourced

Chapter 14
Knowledge-intensive business services (KIBS) are the key behind the development of the
service side of the economy.
Benefits of outsourcing:
The reduction of operational costs
The ability to transform fixed costs into variable costs
The ability to focus on core competencies
Access to the industry-leading external competencies and expertise
Four main types of service processes:
1. Commodity
2. Capability
3. Simplicity
4. Complexity
New services can deliver new business models.
Services as a process:
1. Intangibility
2. Heterogeneity
3. Simultaneous production and consumption
4. Perishability
The service product is the core of the new service offering consisting of the essential
functional benefit(s) conveyed by the service. Service process innovation, on the other hand,
is a new service delivery system and can involve integration of an existing core service
offering and innovative service process.
New service development can be defined as the overall process of developing new service
offerings from idea generation to market launch.
Offer development is a combination of the development of core product/service attributes
and the processes by which consumers evaluate, purchase and consume the service.
New service development models:
1. Sequential service development models or stage-gate models
a. Idea generation
b. Evaluation
c. Realisation

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2. Concurrent service development models: enables parallelisation of the activities

Quality Function Deployment (QFD) is a system that is capable of linking customer
requirements to design characteristics of the products or service through certain market
research methods.

Chapter 15
The main objective of new product testing is to estimate the markets reaction to the new
products under consideration. To achieve this it is necessary to consider other factors:
1. The market
2. Purchase intention
3. Improvements to the new product
These factors are linked and are usually covered in consumer new product testing and are
referred to as customer needs and preferences. There are different types of needs:
Basic needs
Articulated needs
Exciting needs
Marketing research techniques:
Concept tests
Test centres
Hall tests/mobile shops
Product-use tests
Trade shows
Monadic tests
Paired comparisons
In-home placement tests
Test panels
The effect of marketing research can be that discontinuous innovations are rejected based
on consumer research.
Much of the problem of the layered view of a product is due to the way we view the
product. We often view it in isolation from:
Its context
The way it is used
The role of the customer-supplier relationship
The tripartite product concept highlights that one needs to recognize that a product will be
viewed differently by channel member than by end-users.
Dilemma facing firms: market research may reveal genuine limitations with the new product
but it may also produce negative feedback on a truly innovative product that may create a
completely new market. The uncertainty centres on two key variables:
1. Information symmetry about the core technology between producer and buyer
2. The installed base effect (inertial effect from existing technology) and switching costs
Probing and learning can be helpful when firms have a discontinuous innovation but still
want to do some market research.

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Market vision is fundamental for firms that wish to engage in (discontinuous) innovation.

Chapter 16
Valley of death describes a discrete segment of development between research and
development. It is associated with a relative lack of resources and expertise in the front end
of product innovation. If an idea makes it through the valley of death to NPD, there is
adequate resource availability to take the idea to the market.
NPD can be seen as a series of interlinked activities. This process involves extensive
interaction and iteration.
The NPD process:
1. Assembling knowledge
2. The generation of business opportunities
a. Existing products
b. Competitors products and reverse engineering
c. Technology
d. Unexploited patents
e. Customers
f. Salesforce
g. Senior and top management
h. Brainstorming and synetics
i. Individuals
3. Developing product concepts: three inputs required for a product idea to become a
new product concept:
a. Form
b. Technology
c. Need
4. Screening business opportunities
a. Distinguishing between dreams and reality
b. Initial screen, entry screen or preliminary screen
c. Customer screen, concept testing
d. Technical screen, technical testing
e. Final screen
f. Business analysis
5. Development of product prototypes
a. Rapid prototyping
6. Technical testing
7. Market testing and consumer research
8. Market introduction
a. Launch
The management of the process is dependent on the type of product developed.
Organisational structures and cross-functional teams
The nature of the industry in general and the product being developed in particular will
significantly influence the choice of structure:
Teams and project management
Functional structures
Matrix structures
Corporate venturing

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Project management

The extent or integration required between marketing and R&D depends on the
environment within which product development occurs.
Product ideas are rejected throughout the new product development process. Figure 16.10
shows the traditional view of the rising cost of new product development as it moves closer
to launch.

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