1. Development of Concepts for R&D Management R&D in an Individual Enterprise

2. The Innovation Business Process in the 4th Generation R&D Management 2

3. The Innovation Business Process Phase I, Step 1 ARCHITECTURE, CAPABILITY, AND ORGANIZATION DEVELOPMENT Phase IIPLATFORM DEVELOPMENT Phase II, Step 2Initial Prototype Development Phase II, Step 3Validation of the Capabilities in the Real World Phase II, Step 4Full-scale External Testing in Actual Customer Environments Phase IIIPRODUCT FAMILY DEVELOPMENT Phase III, Step 5Production and Testing of the Initial Design Phase III, Step 6Completed Design Phase III, Step 7Production Engineering Phase IV, Step 8MARKET DEVELOPMENT FOR THE PRODUCT FAMILIES 3

4. The Innovation Business Process Phase I, Step 1 Architecture, Capability, and Organization Development 4

5. Essence is New Knowledge The innovation business process always starts with gathering new knowledge 5

6. Breadth of Knowledge Concerning Competition Investigating the immediate competition is the basis Intelligence needs to be gathered from invisible competitors, too 6

7. Building the Knowledge Infrastructure Knowledge gathering must constitute a fundamental activity that must be done systematically A new discipline called knowledge infrastructure engineering 7

8. Types of Knowledge Getting a diverse mix of new knowledge Knowledge that fits with the existing models; and knowledge that does not fit with the existing models Knowledge that forces to rethink, to doubt, to rebuild concepts, to test… 8

9. Accessibility of Knowledge All knowledge should be made accessible to everybody in the organization – Substance knowledge – Knowledge concerning the knowledge gathering work – Knowledge on the new models developed in the process One aim is to enhance useful connections between disparate pieces of knowledge 9

10. Sources of New Challenging Knowledge Unexpected success Unexpected failure Unexpected outside event Incongruous economic realities Incongruity between reality and assumptions about it Incongruity between perceived and actual customer values and expectations Incongruity within the rhythm or logic of a process Process need Industry and market structures Demographics Changes in perception New knowledge Drucker, P. (1985) 10

11. Criteria for Knowledge Evaluation Competitive architecture Organizational capability Potential that the knowledge has as the basis for a new dominant design or a new platform 11

12. Informal and Formal Evaluation of Knowledge Evaluation of new knowledge is done continuously Mostly evaluation is done informally – People of various backgrounds For the most promising ideas also formal evaluations are carried out – Based on a comprehensive business framework 12

13. Factors in Formal Inquiry of a New Idea Customer application Market size Competitive architecture Organizational capability and structure Research and business development process Product and service platforms Stakeholder impacts 13

14. Formal Inquiry of a New Idea Questions Concerning Customer Application What is the scenario that describes how customers would use the innovation? How would they feel about the innovation? Would the innovation be perceived by the customers as continuous or discontinuous? How would the innovation be installed, and what infrastructure would be required? What functional changes would be required of customers? What would the emotive factors be? What degree of market development would be required to make the innovation a success? 14

15. Formal Inquiry of a New Idea Categories of Customer Value Maybe 5 – 10 broad categories of value Each category consisting of 10 – 50 or more value attributes In addition, latent needs – number of latent needs can be even greater than number of perceived needs 15

16. Value Matrix in the Auto Industry 16 Perfor- mance PriceSafetySizeComfortStyleDurability LuxuryXXXXXX RecreationXXXXXXX Utility and workXXXXX Family transportation XXXXXX Basic transportation XXXXX Evalutionary development path Sources of customer value

17. Formal Inquiry of a New Idea Questions Concerning Market Size How big is the market? Does the market consist of new market segments that must be hypothesized? OR Does the market consist of existing segments whose behavior is known and can be studied and referenced? 17

18. Customers Have Experienced Same Kinds of Products or Services Market research can be used – to estimate the market size – to assess the investment needed for market development and diffusion 18

19. No Current Experience for Comparison 1 (The product or service is new to the world) Market research is not sufficient to estimate the market potential Discounted cash flow financing can not planned fund the market development Decision making can not rely on conventional rules 19

20. No Current Experience for Comparison 2 Latent customer needs must be invoked and exposed Methods – Direct customer use of prototypes – Simulated prototypes in expeditionary marketing 20

21. Formal Inquiry of a New Idea Questions Concerning Competitive Architecture 1 Does the idea extend the current vector of the market, or does it represent a new vector? Is there a new s-curve or does the innovation extend the existing one? Is the innovation going to happen anyway or does the innovation depend on the company’s unique capabilities and positioning in the market? 21

22. Formal Inquiry of a New Idea Questions Concerning Competitive Architecture 2 Are there other, competing ideas or technologies that might better fulfill the underlying customer needs that this innovation tries to access? Why would we target our efforts in one channel versus another? Do the predilections reflect underlying value to our customers or simply internal biases that have come about based on organizational structure or serendipity of history? 22

23. Formal Inquiry of a New Idea Questions Concerning Organizational Capabilities and Structure ? 23

24. Do the needed capabilities presently exist? OR Must there be an investment in the development of new capabilities? Are the new capabilities attainable? Would the innovation be worth the required investments? Will the innovation be a sustained source of value for the organization over the long term? Can this product or service be marketed, sold, and delivered using the existing organizational structures? OR Are managerial innovations required in the form of new departments, new divisions, new business units, or fully autonomous spin-off companies? Can all the costs be earned back? 24

25. Formal Inquiry of a New Idea Questions Concerning Research and Business Development Process ? 25

26. What new research and business development activities must be undertaken to realize the idea? How long is this likely to take, and how much is it likely to cost? What are the incremental steps that can be taken in the research process that can be funded as options? What external research will be required to fully develop the idea? How well can the success of that research be assured? How great is the downside risk of failure if the research shows that the idea cannot be accomplished? 26

27. Formal Inquiry of a New Idea Questions Concerning Product and Service Platforms ? 27

28. Can the new product or service be developed on existing platforms, OR must new ones be developed? In either case, what would the range of development costs be? How will the changes impact on existing platform configurations? Will the changes complement the existing platforms, or render them obsolete? 28

29. Formal Inquiry of a New Idea Questions Concerning Stakeholder Impacts ? 29

30. How would the idea impact the various stakeholders, including vendors, employees, investors, and the communities in which the company operates? Would implementations of the idea put the company into competition with key suppliers? Would the idea put the company into competition with investors or business partners? If competition would occur, how would the competitors respond? Would the possible competition lead to significant changes in the workforce requirements? Could the people in the company learn the required new skills, or would it be necessary to displace them? 30

31. How would the possible changes in the workforce impact on labor relations and existing labor agreements? How would the changes be perceived in the community in which the company operates? Would people welcome the changes as worthwhile activity, or condemn the changes as wasteful, destructive, or immoral? Would the company need to deal with significant environmental concerns or problems? Over the long term, what impact would all the changes have on public relations? 31

32. Application and Development Scenarios Stories of what the world would be like if the possibilities inherent in the idea would be realized Based on the answers to the questions in the formal enquiry of a new idea In addition, all other available information is taken into consideration 32

33. Use of Scenarios Scenarios can be presented to R&D partners, lead customers, and early adopters Obtaining outsider views Getting partners to participate in the develop- ment project What if the outsiders are not willing to participate in the development project? 33

34. Other Systematic Analysis Tools Technology road maps Technology portfolios Analysis of functional components of each technology Competitive analyses Life-cycle analyses 34

35. Synthesis of the Formal Enquiry 35

36. Synthesis of the Formal Enquiry Reasonable assessment of the value that the innovation could offer to customers and other stakeholders Decision to go further or to terminate the project 36

37. Focused Concept Development Next step after the possibilities are identified Assessing and developing the potential of the possibilities anticipated 37

38. Creative Tension Contrast between what already exists and the vision of a possible new future Creative tension makes the compulsion to transform a seed into its full potential which will change the world - or part of it 38

39. 39 The vision The current condition

40. Creative Tension and Knowledge Creative tension puts forward a need for finding new knowledge Knowledge about the difference between – what is and – what should be 40

41. Initiation of Innovation Projects 1 The company’s strategic intent and new discoveries intersect and suggest new possibilities The possibilities can be new dominant designs or they can be technology, product, or service platforms 41

42. Initiation of Innovation Projects 2 Existing customer needs and tacit customer needs are taken into consideration 42

43. 43 New discoveries New dominant designs or new platforms Strategic intent

44. Formal Enquiry and Managerial Intent All on-going innovation projects have been evaluated focusing on competitive architecture Company’s view of the competitive architecture is both explicit and widely understood in the organization  Evolution of the company becomes a matter of managerial intent, not the happen-stance of events 44

45. Reality Check of Assumptions Explicit competitive architecture includes the expression of its underlying assumptions Anyone can raise questions concerning discrepancies between assumptions and reality  Fit of strategic intent and marketplace reality are constantly checked 45

46. Terminating a Project If at any stage, evaluation gives the reason to terminate the project, wasting resources should be stopped at once Note! Most projects end up being terminated There must be a large number of alternative projects in the pipeline 46

47. Wrap-up Activity of Terminated Projects Complete documentation of the project and its results Can be useful in evaluating future projects Changes in the marketplace can return the project to relevance 47

48. Terminated Projects and Learning Asking and answering the questions in the formal enquiry is a tremendous source of learning Enhancing learning: afterwards calibrating the findings in each case with the sub-sequent out- comes 48

49. The Innovation Business Process Phase II, Steps 2, 3, and 4 Platform Development 49

50. Concept Development and Platform Development When something new is found to be the correct means to achieve strategic objectives, – then concept development ends and – then platform development begins The new can be a new question, problem, idea, discovery, vision, etc 50

51. Objectives of Phase II Defining exactly what tacit knowledge is needed for continuous and discontinuous innovation and discovering this knowledge 51

52. Essence of Phase II Identifying questions and answering these questions Using real experimentation to discover tacit knowledge of stakeholders 52

53. Inputs to Phase II First hand observations Video recording Unconscious behavior by users Unnoticed interactions between people 53

54. Sequence of the Three Steps of Phase II Each step can have many iterations Each step is completed before the beginning of the next step 54

55. The Three Steps of Phase II Step 2: Developing and testing initial prototypes by researchers and customers in research laboratories Step 3: Validating the capabilities in the real world Step 4: Full-scale external testing in actual customer environments with all the necessary infrastructure elements in place 55

56. The Innovation Business Process Phase II, Step 2 Initial Prototype Development 56

57. Working methods of Phase II Step 2 Utilizing laboratory tests and prototypes Multiple iterations Approaching the customers whose tacit knowledge will be the key to the ultimate success 57

58. Objectives of Phase II Step 2 Checking the feasibility Allowing stakeholders to experiment real use Finding key performance attributes Estimating the potential value of the innovation Assessing the necessary infrastructure Estimating costs of full implementation 58

59. Decision Making in Phase II Step 2 In each successive step, deciding that the project is worth continuing or terminating the project Taking both test results and the development of the environment into consideration Same results may be interpreted in opposite ways 59

60. The Innovation Business Process Phase II, Step 3 Validation of the Capabilities in the Real World 60

61. Working methods of Phase II Step 3 Transferring testing and prototyping from the laboratory environment to the real world environment Knowledge development in three over-lapping communities – vendors – manufacturers – customers 61

62. Objectives of Phase II Step 3 Proving that the product or service is worthwhile and effective wherever it is to be used 62

63. The Innovation Business Process Phase II, Step 4 Full-scale External Testing in Actual Customer Environments 63

64. Working methods of Phase II Step 4 Comprehensive platforms, not just modular components or individual capabilities, are tested Customers who have not participated in the development work are involved Members of the innovation team are joined with members of the operations personnel Customer support, technical support, and customer communications are also tested 64

65. Objectives of Phase II Step 4 Securing that every project which is alive after Phase II Step 4 is of significant value to customers and other stakeholders Providing input to the product family and to the product development of Phase III and to the market development of Phase IV 65

66. ”Wall of Invention” After the end of Phase II – No fundamental research is conducted and no significant concept development is done – Only the managed process of commercialization – Execution of ideas which have been proven through many iterations If, however, new ideas emerge, they are explored in Phase I and Phase II, not in Phase III or Phase IV 66

67. The Innovation Business Process Phase III, Steps 5, 6, and 7 Product Family Development 67

68. Working methods of Phase III Rapidly developing more refined prototypes of product families and products Testing and prototyping iterations can be shorter and simpler than in Phase II, because platforms have already been fully validated 68

69. Objectives of Phase III Developing specific design attributes, not anymore developing the platforms 69

70. The Three Steps of Phase III Step 5: Production and testing of the initial design Step 6: Completed design Step 7: Production engineering, including tooling and preparation for distribution 70

71. Sequence of Phase III and Phase IV Since the concepts were tested in Phase II, Phase III and Phase IV can be conducted concurrently Concurrency supports a faster learning process and a faster path to the market 71

72. The Innovation Business Process Phase III, Step 5 Production and Testing of the Initial Design 72

73. The Innovation Business Process Phase III, Step 6 Completed Design 73

74. The Innovation Business Process Phase III, Step 7 Production Engineering, Including Tooling and Preparation for Distribution 74

75. The Innovation Business Process Phase IV, Step 8 Market Development for the Product Families 75

76. Three Sets of Activities in Phase IV Development of a revised competitive architecture framework Establishment of full-scale operations Initiation of the knowledge channel with respect to this particular product family 76

77. Development of a Revised Competitive Architecture Framework New product families derived from the new platforms are implemented In case of new dominant designs, competitive architecture is significantly impacted 77

78. Establishment of Full-scale Operations Full-scale operations in design, production, distribution, sales, and support are established 78

79. Initiation of the Knowledge Channel Two-way communication with customers is established Emphasis is on sharing knowledge with the customers: This enables the customers to understand the philosophy behind the product Feedback from the customers helps to further develop the architecture, capabilities, platforms, product families, and the company itself 79

80. Thank you! Acknowledgements Main source: Miller, W. L. & Morris, L. (1999) 4th Generation R&D: Managing Knowledge, Technology, and Innovation, New York, New York, USA, John Wiley & Sons Inc, 347 pages. 80