INNOVATION MANAGEMENT IN DESIGN PROCESS Jiří Vacek Department of management, innovations and projects UWB, Faculty of Economics MOPP 2005 February 10, 2005, Pilsen

MOPP Jiří Vacek, KIP FEK UWB 2 Importance of innovation innovation is critical to success innovation is critical to success product life cycle is getting shorter and shorter product life cycle is getting shorter and shorter new products must me introduced ever more frequently new products must me introduced ever more frequently design-push approach must be changed to market-pull design-push approach must be changed to market-pull

MOPP Jiří Vacek, KIP FEK UWB 3 Problems encountered most new products are overengineered most new products are overengineered majority of businesses commercialize less than 20% of promising ideas majority of businesses commercialize less than 20% of promising ideas the biggest barrier is a lack of people with adequate skills the biggest barrier is a lack of people with adequate skills

MOPP Jiří Vacek, KIP FEK UWB 4 Possible solutions technological excellence is necessary, however often not sufficient for the innovation’s success technological excellence is necessary, however often not sufficient for the innovation’s success technical skills must be combined with business and managerial ones technical skills must be combined with business and managerial ones information and communication technologies, can support design process innovation information and communication technologies, can support design process innovation

MOPP Jiří Vacek, KIP FEK UWB 5 Change of the design paradigm Design process must incorporate such disciplines as Design process must incorporate such disciplines as innovation managementinnovation management team workteam work creativitycreativity knowledge managementknowledge management

MOPP Jiří Vacek, KIP FEK UWB 6 Design-driven cost reduction Four cornerstones of the design-driven cost reduction: Four cornerstones of the design-driven cost reduction: Process discipline imposed at every stageProcess discipline imposed at every stage Target setting and transparent monitoringTarget setting and transparent monitoring Cross-functional organization removing organizational barriers and fostering collaboration and creativityCross-functional organization removing organizational barriers and fostering collaboration and creativity Management commitment, empowering design teams to make and implement difficult decisionsManagement commitment, empowering design teams to make and implement difficult decisions

MOPP Jiří Vacek, KIP FEK UWB 7 Stage-Gate process Kill unsuccessful projects in early stages, before they waste significant resources

MOPP Jiří Vacek, KIP FEK UWB 8 DISRUPTIVE INNOVATION Christensen, C.M., “The Innovator’s Dilemma”, Harvard Business School Publishing, Boston MA, 1997 Christensen, C.M., “The Innovator’s Dilemma”, Harvard Business School Publishing, Boston MA, 1997 Christensen, C.M., Raynor, M., “The Innovator’s Solution”, Harvard Business School Publishing, Boston MA, 2003 Christensen, C.M., Raynor, M., “The Innovator’s Solution”, Harvard Business School Publishing, Boston MA, 2003 Even the best managed companies, focused on their best customers and most profitable markets, often fail in competition with far less technologically sophisticated products.

MOPP Jiří Vacek, KIP FEK UWB 9 Sustaining vs.disruptive innovation sustaining: focus on better product that can be sold with greater margin sustaining: focus on better product that can be sold with greater margin disruptive: brings to the market simpler, more convenient, cheaper product that at the beginning appeals to new or unattractive customers disruptive: brings to the market simpler, more convenient, cheaper product that at the beginning appeals to new or unattractive customers

MOPP Jiří Vacek, KIP FEK UWB 10 The disruptive innovation model Christensen 2003, p.33

MOPP Jiří Vacek, KIP FEK UWB 11 The Up-market Migration of Steel Minimills Christensen 2003, p.37

MOPP Jiří Vacek, KIP FEK UWB 12 Innovator's dilemma and solution moving up the trajectory into successively higher-margin tiers of the market and shedding less-profitable products at the low end is something that all good managers must do moving up the trajectory into successively higher-margin tiers of the market and shedding less-profitable products at the low end is something that all good managers must do innovator’s dilemma – each company prepares its own disruption innovator’s dilemma – each company prepares its own disruption start of the innovator’s solution: the company has to be prepared to disrupt itself, before anybody else does it start of the innovator’s solution: the company has to be prepared to disrupt itself, before anybody else does it

MOPP Jiří Vacek, KIP FEK UWB 13 New market disruption products compete with non-consumption. products compete with non-consumption. more affordable and simpler to use by new users (PC, transistor radio, desk copiers)more affordable and simpler to use by new users (PC, transistor radio, desk copiers) as their performance improves, they become good enough for the mainstream market with all the consequencesas their performance improves, they become good enough for the mainstream market with all the consequences there has to be sufficient number of less skilled or less affluent people who can own and use the technology that was formerly available only to more skilled or more affluent people, possibly only in centralized, inconvenient location. there has to be sufficient number of less skilled or less affluent people who can own and use the technology that was formerly available only to more skilled or more affluent people, possibly only in centralized, inconvenient location.

MOPP Jiří Vacek, KIP FEK UWB 14 Low-end disruption focuses on the low end of the mainstream market (minimills, discount retail stores, Korean car makers) focuses on the low end of the mainstream market (minimills, discount retail stores, Korean car makers) there are customers happy to purchase a cheaper product with less (but good enough) performance there are customers happy to purchase a cheaper product with less (but good enough) performance it is possible to create a business model making money at lower price per unit sold. it is possible to create a business model making money at lower price per unit sold.

MOPP Jiří Vacek, KIP FEK UWB 15 OPEN INNOVATION Chesbrough, H., “Open Innovation”, Harvard Business School Publishing, Boston MA, 2003 Chesbrough, H., “Open Innovation”, Harvard Business School Publishing, Boston MA, 2003 Closed innovation - requires control Closed innovation - requires control Open innovation Open innovation companies use external as well as internal ideas and both external and internal ways to marketcompanies use external as well as internal ideas and both external and internal ways to market internal ideas can be taken to the market through external channels to generate additional valueinternal ideas can be taken to the market through external channels to generate additional value

MOPP Jiří Vacek, KIP FEK UWB 16 Product architecture Hierarchy of connections between disparate functions within a system

MOPP Jiří Vacek, KIP FEK UWB 17 Interdependent Architecture System Component A Component B Component C

MOPP Jiří Vacek, KIP FEK UWB 18 Interdependent Architecture changing one component requires changes in all other parts of the system, because the relationships between the parts are not clearly understood changing one component requires changes in all other parts of the system, because the relationships between the parts are not clearly understood can be best managed through internal processes can be best managed through internal processes

MOPP Jiří Vacek, KIP FEK UWB 19 Modular Architecture System Component A Component B Component C

MOPP Jiří Vacek, KIP FEK UWB 20 Modular Architecture components could change without causing any change in other components components could change without causing any change in other components modular design enables to assemble system more easily, from “plug and play” components whose interfaces are well understood modular design enables to assemble system more easily, from “plug and play” components whose interfaces are well understood modular architecture makes it easy for many companies to innovate components without worrying about possible impact on other parts of the system modular architecture makes it easy for many companies to innovate components without worrying about possible impact on other parts of the system

MOPP Jiří Vacek, KIP FEK UWB 21 IMPLICATIONS FOR NPD extended circle of company stakeholders - customers, NGOs, local and regional governments extended circle of company stakeholders - customers, NGOs, local and regional governments not only superior quality, but also environmentally friendly, aesthetically appealing new products not only superior quality, but also environmentally friendly, aesthetically appealing new products designed for X, where X can be quite large and multi-faceted set designed for X, where X can be quite large and multi-faceted set after-sale service plays an increasing role – and brings increased turnover and profit after-sale service plays an increasing role – and brings increased turnover and profit

MOPP Jiří Vacek, KIP FEK UWB 22 Life-long learning The engineers of tomorrow must be able to solve problems that have not been even formulated during their studies The engineers of tomorrow must be able to solve problems that have not been even formulated during their studies life-long learning becomes necessary life-long learning becomes necessary

MOPP Jiří Vacek, KIP FEK UWB 23 What to do look for unsatisfied needs, new ways of delivering value to their customers look for unsatisfied needs, new ways of delivering value to their customers create new business models for new products create new business models for new products technological and business intelligence technological and business intelligence competently work with intellectual property competently work with intellectual property

MOPP Jiří Vacek, KIP FEK UWB 24 Acknowledgement The work summarized in the paper was performed with financial support of the Czech Ministry of Education, Youth and Sports Research project The work summarized in the paper was performed with financial support of the Czech Ministry of Education, Youth and Sports Research project MSM “Research and Development of Innovations, Design, Technology and Material Engineering of Machinery Products”. MSM “Research and Development of Innovations, Design, Technology and Material Engineering of Machinery Products”.

MOPP Jiří Vacek, KIP FEK UWB 25 Contacts Jiří Vacek Jiří Vacek University of West Bohemia, Faculty of Economics, Department of management, innovations and projects University of West Bohemia, Faculty of Economics, Department of management, innovations and projects Husova 11, Plzeň, , Czech Republic Husova 11, Plzeň, , Czech Republic Tel.: , fax: Tel.: , fax: web: web:

MOPP Jiří Vacek, KIP FEK UWB 26 THANK YOU FOR YOUR ATTENTION ?