Innovation Management and New Product Development, Sixth Edition
By Paul Trott
Contents
Preface xix
Acknowledgements xxiii
Plan of the book xxix
Part One Innovation management 1
1 Innovation management: an introduction 2
The importance of innovation 4
The study of innovation 7
Two traditions of innovation studies: Europe and the USA 9
Recent and contemporary studies 10
The need to view innovation in an organisational context 11
Individuals in the innovation process 12
Problems of definition and vocabulary 12
Entrepreneurship 13
Design 13
Innovation and invention 15
Successful and unsuccessful innovations 16
Different types of innovation 17
Technology and science 18
Popular views of innovation 20
Models of innovation 21
Serendipity 21
Linear models 22
Simultaneous coupling model 23
Architectural innovation 24
Interactive model 24
Innovation life cycle and dominant designs 25
Open innovation and the need to share and exchange knowledge
(network models) 26
Doing, using and interacting (DUI) mode of innovation 27
Discontinuous innovation – step changes 28
Innovation as a management process 30
A framework for the management of innovation 30
New skills 33
Innovation and new product development 34
Case study: Has the Apple innovation machine stalled? 35
Chapter summary 41
Discussion questions 42
Key words and phrases 42
References 42
Further reading 46
2 National systems of innovation and entrepreneurship 48
Innovation in its wider context 50
The role of the state and national ‘systems’ of innovation 52
Why firms depend on the state for so much 52
How national states can facilitate innovation 53
National scientific capacity and R&D offshoring 56
The impact of the economic crisis on innovation 56
Fostering innovation in the United States and Japan 56
Triple Helix of university–industry–government relationships
that drives innovation 57
The right business environment is key to innovation 59
Waves of innovation and growth: historical overview 59
Fostering innovation in ‘late-industrialising’ countries 62
Innovation within the 28 European Union states 63
Improving the innovation performance of the EU 65
Entrepreneurship 68
Entrepreneurship and innovation 69
Defining entrepreneurship 71
Technological entrepreneurship: a question of context 73
Science and technology policy 74
Small and medium-sized enterprise 74
Innovation policy 75
Entrepreneurship policy 76
Case study: Pizza delivery with unmanned drones 76
Chapter summary 81
Discussion questions 81
Key words and phrases 82
Websites worth visiting 82
References 82
Further reading 85
3 Market adoption and technology diffusion 86
Time lag between innovation and useable product 88
Innovation and the market 88
Innovation and market vision 89
Analysing internet search data to help adoption and
forecasting sales 89
Innovative new products and consumption patterns 89
Marketing insights to facilitate innovation 91
Lead users 93
Users as innovators in the virtual world 95
Crowdsourcing for new product ideas 95
Frugal innovation and ideas from everywhere 97
Innovation diffusion theories 98
Beacon products 100
Seasonality in innovation diffusion 102
The Bass Diffusion Model 102
Adopting new products and embracing change 102
Market adoption theories 104
Case study: How three students built a business that could affect world trade 104
Chapter summary 110
Discussion questions 111
Key words and phrases 111
References 111
Further reading 113
4 Managing innovation within firms 116
Organisations and innovation 118
The dilemma of innovation management 118
Innovation dilemma in low technology sectors 119
Dynamic capabilities 120
Managing uncertainty 120
Pearson’s uncertainty map 121
Applying the uncertainty map in practice 123
Managing innovation projects 124
Organisational characteristics that facilitate the innovation process 126
Growth orientation 129
Organisational heritage and innovation experience 130
Vigilance and external links 130
Commitment to technology and R&D intensity 130
Acceptance of risks 131
Cross-functional cooperation and coordination within organisational structure 131
Receptivity 131
Space for creativity 131
Strategy towards innovation 132
Diverse range of skills 132
Industrial firms are different: a classification 133
Organisational structures and innovation 135
Formalisation 136
Complexity 136
Centralisation 137
Organisational size 137
The role of the individual in the innovation process 137
IT systems and their impact on innovation 138
Management tools for innovation 141
Innovation management tools and techniques 141
Applying the tools and guidelines 144
Innovation audit 144
Case study: Gore-Tex® and W.L. Gore & Associates:
an innovative company and a contemporary culture 145
Chapter summary 149
Discussion questions 150
Key words and phrases 150
References 150
Further reading 153
5 Operations and process innovation 154
Operations management 156
The nature of design and innovation in the context of operations 157
Design requirements 158
Design and volumes 160
Craft-based products 162
Design simplification 163
Reverse engineering 163
Process design 164
Process design and innovation 166
The relationship between product and process innovation 168
Managing the manufacturing: R&D interface in process industries 168
Stretch: how innovation continues once investment is made 168
Innovation in the management of the operations process 169
Triggers for innovation 170
Design of the organisation and its suppliers: supply chain management 175
Business process re-engineering (BPR) 178
Lean innovation 179
Case study: Innovation on the production line 180
Chapter summary 184
Discussion questions 184
Key words and phrases 185
References 185
Further reading 186
6 Managing intellectual property 188
Intellectual property 190
Trade secrets 193
An introduction to patents 193
Novelty 195
Inventive step 195
Industrial applications 195
Exclusions from patents 196
The patenting of life 196
The configuration of a patent 198
Patent harmonisation: first to file and first to invent 198
Some famous patent cases 199
Patents in practice 200
Expiry of a patent and patent extensions 201
Patent extensions 202
The use of patents in innovation management 203
Patent trolls 203
Do patents hinder or encourage innovation? 204
Alternatives to patenting 205
Trademarks 207
Satisfy the requirements of section 1(1) 208
Be distinctive 209
Not be deceptive 209
Not cause confusion 210
Brand names 210
Using brands to protect intellectual property 210
Exploiting new opportunities 211
Brands, trademarks and the internet 212
Duration of registration, infringement and passing off 212
Registered designs 213
Copyright 214
Remedy against infringement 216
Damages 216
Injunction 216
Accounts 216
Counterfeit goods and IP 216
Case study: Pricing, patents and profits in the pharmaceutical industry 218
Chapter summary 221
Discussion questions 222
Key words and phrases 222
References 222
Further reading 224
Part Two Turning technology into business 225
7 Managing organisational knowledge 226
The Battle of Trafalgar 228
Technology trajectories 229
The acquisition of firm-specific knowledge 230
The resource-based perspective 230
Dynamic competence-based theory of the firm 231
Developing firm-specific competencies 233
Competencies and profits 234
Technology development and effort required 235
The knowledge base of an organisation 236
The whole can be more than the sum of the parts 237
Organisational heritage 237
When the performance of the organisation is greater than the abilities
of individuals 238
Characterising the knowledge base of the organisation 239
The learning organisation 241
Innovation, competition and further innovation 242
Dominant design 244
How firms cope with radical and incremental innovation 244
Developing innovation strategies 248
Leader/offensive 249
Fast follower/defensive 250
Cost minimisation/imitative 250
Market segmentation specialist/traditional 250
A technology strategy provides a link between innovation strategy
and business strategy 251
Case study: The cork industry, the wine industry and the need for closure 251
Chapter summary 260
Discussion questions 260
Key words and phrases 260
References 261
Further reading 262
8 Strategic alliances and networks 264
Defining strategic alliances 266
The fall of the go-it-alone strategy and the rise of the octopus strategy 268
Complementary capabilities and embedded technologies 269
Interfirm knowledge-sharing routines 270
Forms of strategic alliance 271
Licensing 271
Supplier relations 272
Outsourcing 272
Joint venture 273
Collaboration (non-joint ventures) 273
R&D consortia 273
Industry clusters 274
Low technology industry rely on networks for innovation 275
Innovation networks 275
The ‘virtual company’ 278
Motives for establishing an alliance 279
The process of forming a successful strategic alliance 279
Negotiating a licensing deal 280
Terms for the agreement 281
Rights granted 281
Licence restrictions 281
Improvements 281
Consideration (monetary value) 281
Reports and auditing of accounts 282
Representations/warranties 282
Infringement 282
Confidentiality 282
Arbitration 282
Termination 282
Risks and limitations with strategic alliances 283
The role of trust in strategic alliances 284
The concept of trust 285
Innovation risks in strategic outsourcing 286
Eating you alive from the toes up 289
The use of game theory to analyse strategic alliances 289
Game theory and the prisoner’s dilemma 290
Use of alliances in implementing technology strategy 292
Case study: And the winner is Sony’s Blu-ray – the high-definition
DVD format war 292
Chapter summary 299
Discussion questions 299
Key words and phrases 299
References 300
Further reading 302
9 Management of research and development 304
What is research and development? 306
The traditional view of R&D 307
R&D management and the industrial context 307
R&D investment and company success 310
Classifying R&D 313
The operations that make up R&D 315
R&D management and its link with business strategy 317
Integration of R&D 318
Strategic pressures on R&D 319
The technology portfolio 320
The difficulty of managing capital-intensive production plants
in a dynamic environment 322
Which business to support and how? 322
Technology leverage and R&D strategies 324
Strengths and limitations of this approach 326
Allocation of funds to R&D 326
Setting the R&D budget 327
Level of R&D expenditure 329
Case study: The long and difficult 13-year journey to the
marketplace for Pfizer’s Viagra 330
Chapter summary 337
Discussion questions 337
Key words and phrases 338
References 338
Further reading 339
10 Managing R&D projects 342
Successful technology management 344
The changing nature of R&D management 346
Organising industrial R&D 349
The acquisition of external technology 350
Level of control of technology required 351
Forms of external R&D 352
Effective R&D management 355
Managing scientific freedom 355
Skunk works 359
Technology roadmapping 360
The link with the product innovation process 360
The effect of R&D investment on products 362
Evaluating R&D projects 363
Evaluation criteria 363
Case study: CSI and genetic fingerprinting 368
Chapter summary 374
Discussion questions 374
Key words and phrases 375
References 375
Further reading 376
11 Open innovation and technology transfer 378
Background 380
The dominant economic perspective 381
Open innovation 382
The paradox of openness 384
Introduction to technology transfer 384
Information transfer and knowledge transfer 385
Models of technology transfer 386
Licensing 386
Science park model 387
Intermediary agency model 388
Directory model 388
Knowledge Transfer Partnership model 388
Ferret model 388
Hiring skilled employees 390
Technology transfer units 390
Research clubs 390
European Space Agency (ESA) 390
Consultancy 391
Limitations and barriers to technology transfer 391
NIH syndrome 392
Absorptive capacity: developing a receptive environment for technology transfer 393
Linking external technology to internal capabilities 395
Managing the inward transfer of technology 396
Technology transfer and organisational learning 397
Case study: How developments in electronic sensors create
destruction in the disposable nappy industry 398
Chapter summary 403
Discussion questions 403
Key words and phrases 404
References 404
Further reading 406
Part Three New product development 409
12 Business models 410
What is a business model? 413
The business model and the business plan 415
The range of business models 416
The sixteen business model archetypes 417
Revenue models 420
Enterprise models 421
Industry models 422
The parts of the business model 422
The offering 423
The customer side 423
The infrastructure 424
The finances 424
The business model dilemma of technology shifts 426
Considerations in designing a business model 428
Switching costs 428
Scalability 428
Recurring revenues 428
Cashflow 429
Getting others to do the work 429
Protecting the business from competitors 429
Changing the cost structure 429
Intellectual property is an asset 430
The technology licence and business relationships 430
Continual adaptation of the business model 431
The licensing business model 431
Income from licensing 432
Marketing issues related to the licensing model 432
Financial and strategic implications 433
Costs and benefits of the licensing model 433
Other strategic uses of licensing 434
Case study: Developing a new product for the teeth whitening market 435
Chapter summary 441
Discussion questions 442
Key words and phrases 442
References 442
Further reading 443
13 Product and brand strategy 446
Capabilities, networks and platforms 448
Product platforms 449
Product planning 451
Product strategy 454
Competitive strategy 454
Product portfolios 455
The competitive environment 456
Differentiation and positioning 457
Differentiation 457
Product positioning 458
Competing with other products 460
Managing brands 462
Brands and blind product tests 462
Brand strategy 464
Brand extensions 465
Market entry 468
Launch and continuing improvement 470
Withdrawing products 471
Managing mature products 472
Case study: Umbrella wars: GustBuster® and senz° 473
Chapter summary 477
Discussion questions 477
Key words and phrases 478
References 478
Further reading 479
14 New product development 480
Innovation management and NPD 482
Product development as a series of decisions 484
New products and prosperity 484
Considerations when developing an NPD strategy 485
Ongoing corporate planning 485
Ongoing market planning 486
Ongoing technology management 486
Opportunity analysis/serendipity 486
NPD as a strategy for growth 486
Market penetration 487
Market development 487
Product development 487
Diversification 488
A range of product development opportunities 488
What is a new product? 490
Defining a new product 492
Classification of new products 494
Repositioning and brand extensions 496
New product development as an industry innovation cycle 497
Overview of NPD theories 498
The fuzzy front end 499
Customer cocreation of new products 501
Time to market 502
Agile NPD 502
Models of new product development 503
Departmental-stage models 503
Activity-stage models and concurrent engineering 505
Cross-functional models (teams) 505
Decision-stage models 506
Conversion-process models 507
Response models 507
Network models 507
Case study: Launching innocent into the growing fruit smoothie market 508
Chapter summary 516
Discussion questions 516
Key words and phrases 516
References 517
Further reading 519
15 New service innovation 522
The growth in services 524
Growth in knowledge-intensive business services (KIBS) 524
Outsourcing and service growth 525
Different types of services 528
Technology and new service development 530
New services and new business models 530
Characteristics of services and how they differ from products 531
Classification of service innovations 532
The new service development process 533
New service development models 535
Sequential service development models or Stage-Gate® models 535
Concurrent service development models 536
Service innovation and the consumer 538
Consumer user toolkits 538
Consumer testing of services 540
Case study: Developing new services at eBay 541
Chapter summary 548
Discussion questions 548
Key words and phrases 548
References 548
Further reading 551
16 Market research and its influence on new
product development 552
Market research and new product development 554
The purpose of new product testing 555
Testing new products 556
Techniques used in consumer testing of new products 557
Concept tests 557
Test centres 558
Hall tests/mobile shops 558
Product-use tests 558
Trade shows 558
Monadic tests 559
Paired comparisons 559
In-home placement tests 559
Test panels 559
When market research has too much influence 559
Discontinuous new products 562
Market research and discontinuous new products 563
Circumstances when market research may hinder the development
of discontinuous new products 564
Technology-intensive products 565
Breaking with convention and winning new markets 566
When it may be correct to ignore your customers 570
Striking the balance between new technology and market research 571
Using suppliers and lead users to improve product variety 572
The challenge for senior management 573
Case study: Dyson, Hoover and the bagless vacuum cleaner 573
Chapter summary 582
Discussion questions 582
Key words and phrases 583
References 583
Further reading 58417 Managing the new product development process 586
New products as projects 588
The Valley of Death 589
The key activities that need to be managed 590
Assembling knowledge 592
The generation of business opportunities 593
Developing product concepts: turning business opportunities into
product concepts 594
The screening of business opportunities 595
New technology product blogs 597
Development of product prototypes 597
Technical testing 599
Market testing and consumer research 599
How virtual worlds can help real-world innovations 600
Market introduction 601
NPD across different industries 603
Organisational structures and cross-functional teams 603
Teams and project management 604
Functional structures 604
Matrix structures 605
Corporate venturing 607
Project management 607
Reducing product development times through computer-aided design 608
The marketing/R&D interface 608
High attrition rate of new products 609
Case study: An analysis of 3M, the innovation company 612
Chapter summary 617
Discussion questions 617
Key words and phrases 618
References 618
Further reading 619
Index 621