ZusammenfassungTIM

Technology and Innovation MgmtLecture 1: Introduction

Innovation = ! risky (technology, demand, competition -> copyrights/protection), can be costly, outside daily bus. rout.! --> management of innovation requires specific skills, tools incentives and organization

why Innovate? -> fundamental impulse in capitalism = new consumer goods, methods of production, new markets etc.key aspect of economic development: competitive elimination of old forms of production --> creative destruction

Linking innovation to strategy• how to build & maintain competitive advantage (complementary theories)

• Market-based view = new markets, entry barriers due to technology, 5 forces, innovation competition• Relationship-based view = R&D Joint Ventures, Customers as sources of innovation• Opportunity-based view = opportunities for profitable innovation due to new technologies, new regulatory frames• Resource-based view = know-how related to innovation, IPR

• value of resources determined by various characteristics:• related to value: rare, unique / value-generating?• related to value sustainability: imitable, substitutable / sustainable / dublicable, scalable, mobile?

Definition of Innovation• “A new way of doing things that is commercialised” (Michael Porter)• “The adoption of ideas that are new to the adopting organization” (Afuah)--> Invention (combination of needs and solutions) + market launch (commercialisation) = innovation

Marius Scholinz TUM BWL - SS2011!

! 1

Lecture 2: Who Innovates?

• Cost / Benefit of innovation = dominant drivers (whoever gains most / has lowest cost will innovate)! --> Question: how to measure driver (cost vs. benefit) and innovative activity?

Schumpeter• Schumpeter I (1912): Entrepreneurs and new firms drive innovation -> fragmented markets (typically)• Schumpeter II (1942): Large firms drive innovation -> markets with (some) monopoly power (=can charge above MC)

Arrowʼs model• Explains reservation price of innovator for exclusive right to invention• Assumptions: Linear demand curve, constant MC, radical innovations

reduce MC to cʼ, no spill-overs (innovation stays with inventor)a. Ex-ante perfect competition --> ex-post monopolyb. Ex-ante monopoly --> ex post monopoly (gains least from innov.)c. Ex-ante social planner --> ex-post social planner

• Conclusions:--> PC firm gains more from innovation than monopolist (cannibalisation)--> social planner gains most, as consumer surplus is max at MC-Price--> Assuming fixed cost for innovation, Monopolist would be least likely to innovate (cost vs. benefit)

Market Structure• effeciency + cannibalisation effect = important incentives• innovations come from new entrants, not incumbents (experience = comp advantage of est. firms)• social benefits from innovation exceed private benefits to innovator, independent of market structure -> market failure--> room for public policy intervention


! 2

Why radical innovations come from new entrants• incentives (see Arrow)• incumbentsʼ organization and attitude (routine, not-invented-here, complacency, risk-aversion)• focus on existing customers

Liabilities of newness Advantages of new firms

• increased failure (statistically conf.)• assignment of roles/tasks• lack of reputation / experience• no present exchange relationships, interaction among

“strangers”

Organization-related:• no path-dependance; can create business form

scratch -> open to new approaches• less “inertia” -> more flexibility• open culture

HR-related:• hiring matching staff, no re-training• more flexible employees (younger,

entrepreneurial)

Liabilities of smallness Advantages of smallness

• limited resources (financial, personnel)• low variety of skills, lack of critical skills• no buffer to survive crisis• disadvantage as employer vs. big firms• low market power

• more flexible processes• transparent company structure• direct communication -> faster decision-making• higher job satisfaction

Disruptive Technologies• leading firms manage most innovations well -> overlook simple

innovation• simple innov = technologically straightforward, but do not

satisfy customers in est. market --> niche market• over time, performance in both est. and niche technology grows

faster than market need --> surplants main market ---> disruptive technology (=hard for incumbents --> establish entrepreneurial culture)

--> incumbents better at incremental, new entrants better at disruptive innovation

Lecture 3: User Innovations

Innovation along the value chainSources of innovation:• Classical view: innovations form manufacturer through idea generation/ development of

prototypes• New perspective: users innovate, often even supply prototype

Degrees of user activity in innovation:• “Customer active paradigm” (CAP) vs. “manufacturer active paradigm” (MAP)

• change of functional roles = difficult• change from user to manufacturer (vertical integration) may require complementary assets• licensing problematic

Innovation:new combination of need and solution


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Profiting from innovation• Supplier innovator: benefit by creating/ increasing demand for supplied input (raw material etc)• Manufacturer innovator: benefit by manufacturing/ selling• User innovator: benefit by using innovation (new functionality and/or higher prductivity• Complementor innovator: benefit by creating/ increasing demand for own good, which complements innovation

Lead user method

• Senior mgmt: product dev. = steady stream of breakthrough --> growth + high margins & high % of sale from new prod.! --> BUT: most innovation is only incremental...• Products initially thought of and prototyped mostly by users rather than manufacturers• Lead User = comp/organasition/individual ahead of market trends w/ needs beyond average market customer! ! ! --> solution to problem alrdy developed outside company! ! ! --> transformation of breakthrough process from scratch to lead user identification• Classical market research:

• focus on static concept of avg. customer, quantitative methods for comparability• problem: mental focus on existing reality, difficulties in articulating new needs, no pressing need for innovation• information on needs collected outside, ideas however conceived in-house

• Lead user method:• intedisciplinay team is founded, then1. Determine lead users indicators (trends / benefits from innovation)

• Investment in own developments• Dissatisfaction with existing market offers• Speed of adoption of new technology

2. Identify lead user group (cluster analysis)• Cluster analysis• Telephone interviews -> network w/ experts to clim “pyramid of expertise” -> network to fields w/ similar problems

3. Develop product concept with lead users (creativity workshop)• Transfer information from LU to concept• Tailor concepts to business needs

4. Check general acceptance of concept (surveys etc.)• Risks / Downsides:

• niche solutions• problems with IP• secrecy issues• costly and time-consuming• internal acceptance: “not invented here”, lack of mgmt support if major strategical changes required

• Operational difficulties:• identifying trends/ true lead users• problems in lead user workshop / test of acceptance• lead user not necessarily customer -> reluctance to “lead” to innovations

Lecture 4: Competition Analysis

Conditions for profitable innovation• returns to innovation acrue not only to innovator

• customer surplus• supplier / complementor sell larger quantities• imitators benefit by marketing product/ saving R&D cost

Appropriability regime (weak/strong)• “appropriability conditions” denote all factors that influence possibility

of profitable imitation of innovation• availability and strength of legal protection• viability of secrecy• complexity of underlying technology• nature of knowledge: tacit vs. codified (the latter = easier to transfer)

Life cycle phase• “preparadigmatic design phase”: no. of innovations over time increases,

designs are fluid + manufacturing process loosely organised• “paradigmatic design phase”: dominant design is established, product

innovations decrease while process innovations increase --> competition shifts from design to cost

--> !being too early might be risky, too late might prove ! disadvantageous due to lack of learning curve/ patents


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Complementary assets• innovations + complementary assets depend on each other in different ways• complementary assets can be:

• specialised (unilateral dependence of asset on innovation & vice versa, eg. mazda rx7)• co-specialised (bilateral dependence)• generic (e.g. electricity for computer)

Tight appropriability regimes• strong patent/ copyright or effective trade secrets prevent imitation• if complementary assets needed --> outsource if generic (if co-/secialised, parties commit capitol to certain irreversible

investments --> valueless if relationship breaks down --> contractual hazard)• sufficient time to acquire complementary assets• if innovator enters preparadigmatic mkt w/ sound product concept but wrong design --> enough time to adapt

Weak appropriability• Preparadigmatic Phase:

• innovators let design float until dominant design is established• need to focus wholly on needs for design impact• industries w/ high prototyping costs (significant irreversibilities) +ease of innovating prod. concept -> innovator unlikely to succed• relative unimportance of complementary assets -> low production volumes/ rivalry focused on identifying dominant design

• Paradigmatic Phase:• terms of competition change --> rivalry on price• core technology increasingly simple to imitate --> complementary assets (esp. specialised/ co-specialised) = critical

Strategy Channel Issues

Comp. Assets Advantages Drawbacks

Contract • lower capital needs• reputational gain for “smaller” partner

• difficult for specialised complementary assets• incomplete contracts• hold-up (no large invstmt by supplier) esp. if

designs are still “floating” (preparadigm. phase)• dependence on contractor• imitation becomes easier• might create imitator w/ better position and

posession of possibly unique complem. asset

Intergration • makes imitation more difficult• possibility of capturing spillover benefits

from increased demand for specialised complem. asset --> critical w/ weak approp. regime (“bottleneck” situation)

• time-consuming• capital-intensive• difficult to reverse

• in weak approp. reg. innovators nee d to rank complementary assets as to importance w/ regards to cash position and competitors moves

-->Implications for R&D:• focus on innovations that are easily protectable (appr. reg.) --> market/ comp. analysis crucial• complementary assets in which innovator has strong position


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Lecture 5: Market analysis and diffusion

Determinants of successful innovation• Success consists of more than just technology:! customer (problem)! solution! ! ability to deliver! --> market! --> technology ! --> resources• Market Pull vs. Technology Push

• most successful products designed to fulfill perceived need rather than driven by availability of new technologies.! --> failure as result of “marketing myopia”

Demand analysis• How strong is demand?• Relevant product characteristics /

trade-offs between characteristics?• How to segment target group?• Which technologies required?

Delphi analysis• Various applications in IM• Prediction of long-term development of

• needs• competition• technology

• e.g. development/use of fuel cell technology

Advantages:• suitable for long-term predictions in complex situations with

little structure• avoids group pressure• convergence of expert opinions• holistic approach

Disadvantages:• time-consuming• participants may drop out• no sound theoretical basis• no direct discussion between experts• results depending on choice of experts• need to justify opinions may lead to overly conservative estimates

Conjoint analysis• denotes methods of preference analysis

➡ preference for individual characteristics/ realisations from holistic judgements

Advantages:• natural decision situation• respondents are not overstrained• importance of characteristics (e.g. horsepower) and realisations

(100/150/200) is defined• K.O. criteria and trade-offs are identified

Disadvantages:• only limited no. of characteristics/ realisations possible• correct choice of relevant characteristics required

Diffusion of innovations• Diffusion = attributes of Innovation (as perceived by pot. adopters), Communication channels, Adopters, social syst.• Relative advantage = degree to which innovation is perceived as better than idea it supersedes• Compatibility = degree to which innov. is perceived as being consistent w/ existing values, past experiences,

customer needs, network effects• Complexity = difficulty of understanding and using technology• Trialability = degree to which innovation may be experimented on limited basis• Observability = degree to which results of innov. (adoption) are visible to others

Adopter categories• Innovators (2.5%) are “venturesome”, active information seekers, able to with high degree of uncertainty• Early Adopters (13.5%) are often opinion leaders, sought by change agents as “local missionary”• Early Majority (34%) interact frequently with peers, seldom hold positions of opinion leadership• Late Majority (34%) adopt out of economic necessity/ result of peer pressure, system norms must favor innovation• Laggards (16%) very localite, limited resources, past = point of reference, suspicious of innovations/ change agents


! 6

Question MethodHow will the mkt/ technology develop? --> Delphi analysisAre there attractive niches? --> PositioningHow should ideal product look? --> Conjoint analysisWhat are the risks of innovation? --> Risk analysis

Lecture 6: IP Protection

• Patents help appropriate profits from innovation -> increases incentive to innovate• Competitors patents may hinder innovation/ contain valuable information• Patent = exclusion right granted by state (= national) for technical invention that is

• new• based on inventive activity• is commercially viable

• Patent protection excluded for discoviers, species of animals, methods of thinking, e.g. math / ideas..• Application Process:

• Application includes description of technical invention + desired area of protection• Submitted to patent office• Examination by patent office -> approval / rejection (avg. time = 4 yrs)• Application publicised after 18 months• Granted patents can be renewed up to 20 yrs (pharma = 25)

Patent family = bundle of patents filed in different locationsBesides IPR (often overestimated) other protection mechanisms often prove more effective:• secrecy, complexity of design• lead-time, learning-curve advantages• complementary assets (production facilities, skilled workers, sales channels...)

Patents as sources of Information• Patent applications contain title, abstract, IPC class, date of priority/ publication, applicant / invontor, designated states,

citations and renewal information• Information can be used for:

• Patent value estimation -> important indicator = forward citations (which later patent cited patent X?)• Technology analysis -> potential of tech field? change over time? focus of competitors? inter-entity comparisons?

Cost of Patenting

Benefits

• Profits from use in own production without risk that competitor receives patent, licensing, cross-licensing

• Creates costs for rivals (invent-around) + entry barriers• Image, signaling (esp. for venture capital)

Costs

• Process cost, e.g. attorney, research, application fees, renewal fees, translation cost

• Opportunity cost to secrecy (application publicised!)• Detection of infringement• Exercise of rights in case of infringement

--> costs to society = static inefficiency (exclusion rights -> inefficiently low use of existing technology)--> quality problems

Patent infringements

• Must be detected by patent holder• If court rules in favor of patentee --> injunction (immediate stop of using patented techn.) + damage compensations• Injuction = powerful tool --> irreversible investments in complementary assets took place• Damages: different calculations-methods

• lost profits of patentee• infringers profits due to use of patented technology• “reasonable royalty”

• Protection works fine if patent strong + infringement obvious BUT in general difficult to handle for small firms (particularly difficult if small firm sued by large company)

Lecture 7: Technology Analysis

Purpose = acquire + interpret infos about technology related to innovations faster than competition! --> assessmt of pos/neg. effects, potential for future growth / limits of existing tech, discontinuities, substitions-> thorough tech analysis helps to avoid products that are outdated/ exhibit technical deficiencies/ development canceled

Monitoring• current state of scientific + technological evolution?• impact on company + technological competencies?• who advances technological progress at what expense?


! 7

Sources of Information• Research institutions (e.g. Fraunhofer, Max-Planck)• Suppliers (e.g. car industry - Bosch)• Trade• Customers (e.g. lead users, customer satisfaction survey)• Competitors (JV, alliances, analysis of patents)• Other companies (e.g. companies from unrelated fields)

Types of information• Activities in academic R&D (e.g. new tech programs, results from basic research)• Characteristics / applications of new technologies (e.g. data on performance, cost, new products incorp. technology)• Technology-related information on institutions / companies (key people, structure of R&D depts. / R&D budgets)• Trends related to business and mkt aspects (development of production capacity, import/export data, demand trends)• Industry news (start-ups, new product introduction, strategic decisions)• Public policy / legal framework (standards, regulation, public support programs)

Forecasting Methods• Qualitative Methods:

• Expert interviews• Delphi Analysis, Scenario Analysis, Cross-Impact Analysis

• Consumer interviews• Conventional Interviews, Panel Surveys, Mkt. Experiments

• Conclusion by analogy• Consumer Group Analysis, Lead Row Method

• Quantitative Methods:• Univariate Time Series Analysis

• Moving averages, exponential smoothing, ARMA models• Casual Methods

• Input-Output-Analysis, Multiple Regression, econometric model

Comparative evaluation• How will potential of tech X / Y evolve?• Should developmt of tech X be pursued or should tech Y be investigated instead?• Where / how can needed competencies to deploy tech Y be obtained? (e.g. JV, uni, R&D)

S-Curve• used when determining to switch to new technology --> avoid typical problems of est. companies e.g. over-estimation

of current tech, R&D budgets linked to revenue, lack of flexibility

• helpful as tool for explorative analysis• BUT several problems with

• Input variable• Performance variable• Curve itself

• Sailing Ship Phenomenon:• appearance of steamships -> bigger / better sailing

ships, outperforming early steamships➡ rejuvenation of S-Curve that ex-ante met its

performance maximum possible➡more reliable for historic data

Roadmapping• technology strategy should account for both product & technology space • method of forecasting / visualising interdependent developments• product and technology roadmaps are linked to analyse use of / need for other technologies

Advantages of Roadmapping:• Establishment of a shared product-technology strategy• Interlinked approach for long-range product and technology-planning• Stimulation of learning and improvement of cross-functional

communication• Improvement of time-to-market and time-to-money

Analysis Tools - Wrap-Up• TIM has to include technological state of the art, customers needs +

competitors actions• numerous ways of forecast, each has own drawbacks --> choose method tailored to analysis need

5TIM Introduction - M7: Technology Analysis - Prof. Henkel - ST 2011

Monitoring: Steps

Check/inventory of current

knowledge

Planning of monitoring activities

Data collection Reports

Users of information

Decision

Deficits in information Information

needs

Informationtransfer

Source: Following Ashton/Kinzey/Gunn (1991), p. 3.

Methods of data collection


Monitoring: Methods of data collection

• Field observationTest of new products, reverse engineering, visits to factories

• Direct contact to expertsLong-standing cooperation, interviews

• Indirect contact to expertsConsultants, contacts within JVs and licensing agreements

• PublicationsTechnical/academic, company publications, industry news, conference proceedings, patent reports

• Data basesPatents, business data (possibly panel data)

• OrganizationsIndustry associations, networks

Source: Ashton/Kinzey/Gunn (1991), p. 5.


Tech

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gy p

erfo

rman

ce

Aggregate R&D spending

statustoday

Limit of new technology

statustoday

Potential of new technology

Potential of old technology

Limit of old technology

Note: It is not clear where the blue curve should start. Logically, if “aggregate R&D spending” is on the x-axis, it should start where the red curve starts (at zero). However, it is common to plot it this way. The problem does not arise when “time” is on the x-axis.

S-Curve


Analysis Tools – Wrap-Up

Management of Technology and Innovation has to include the technological state of the art, customer needs, and competitors’actions: Formulating an Innovation Strategy consequently impliesTechnology, Competition, and Market and Demand Analysis

Technology Analysis

CompetitionAnalysis

Market andDemand Analysis


! 8

Lecture 8: Appropriation and Strategy

Appropriating rents from innovations• Use in own products / services (most important) • Excluding others from the use• Direct profits (licensing) from use by others• Indirect profits from use by others (e.g. incr. demand for complement)

Use in own products:• Requires complementary assets (e.g. production, sales, branding)• Potential benefits due to: (provided cannibalisation is not imminent)

• improved product quality• product differentiation• lower cost• entry into new markets

• Does not require patent protection BUT if kept secretly and then patented by other innovator -> possibly exlcuded• Potential solution = defensive publishing (invention becomes “prior art” and cannot be patented anymore)

➡ competitive advantage might be lost

Excluding others from the use• Requires strong patent protection

• In conjunction with own use: exclusive use by innovator• Without own use: blocking patents to keep competitors from inventing-around other patents of patentee

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Benefits

• Competitors cannot attain benefits linked to invention• Monopolistic control prevented• Freedom to operate (Deterrent e.g. counter-sue)

Costs

• Establishing / maintaining intellectual property rights• Monitoring / prosecution of infringements

Appropriation by licensing• Requires strong patent protection• Can be profitable, but often difficult for small firmsBenefits

• Licensing fees• Potentially: advantages from controlled diffusion

Costs

• Establishing / maintaining intellectual property rights• Monitoring / prosecution of infringements• Finding licensee• Closing / monitoring licensing contracts = costly/time-cons.

Cross-Licensing• Industries w/ cumulative technologies need multitude of patents for single product (e.g. semiconductors)

➡ licensing single invention creates enormous transaction cost➡ instead, firms cross-license bundles of patents (->who brings fewer qty to table pays for difference

• useful, but can exclude smaller firms from the market

Benefitting from diffusion• Increased demand for

• Inputs (supplier innovation; Alcoa - aluminum)• Complements (e.g. Intel -> giving away specifications for compatibility)

• Standard setting• Establishing prior art • Marketing (embedded Linux, comp. give away free stuff as mktg strat.)• External development support (OSS)

Benefitting from diffusion: Free Revealing• Diffusion = advantageous + licensing difficult• favorable curcumstances:

• licensing difficult• low level of competition with respect to invention (“we donʼt compete on this”)• restricted means to protect invention• protection by complementary assets• competition between standards --> standard setting• culture in which others will develop invention further and reveal improvements in turn (e.g. OSS)

• Open source software (OSS)• Companies benefit in various ways from contributing to OSS development

• External development support• Increased demand for complements (e.g. Hardware)• Standard setting• Marketing (visibility)


! 9

• Central question for IP mgmt = what should be made public / what should be protected• OSS dev. beneficial for generic software that does not differentiate a firmʼs market offering / software somewhat specific to firm

needs, but not important dimension of competition

Protection vs. appropriation• concepts of protection mechanism/ appropriation mechanism must be kept apart• Patent is not an appropriation mechanism! - it is protective and facilitates various protection mechanisms (own use,

licensing, exclusion)• other control mechanisms enable certain ways of appropriation, e.g. comp asset control = appropriation by own use

and excluding others, but not by licensing

• effectiveness of patents rather limited, no. 1 protection = “know how advantages”• no. of patents strongly increasing --> “patent paradox”• more effective mechanisms = superior sales and services efforts / lead time (“time-to-market”)

“Technology Push” vs. “Market Pull”• only one possible dimension of innovation strategy!• Problems w/ technology push: scientists look for tech with good commercialisation potential

• focus on what can most easily be researched• scientists too focused on particular solution• possible mismatch between innovation ideas + corporate interest

• Problems w/ market pull: marketing-oriented managers direct scientists into seemingly exciting/ profitable mkts• focus on most easily identified needs (w/ minor potential --> e.g. no lead user method)• once lead design found, focus too strong on particular application of technology• mkt locked into present products -> only incremental improvements

Lecture 9: Functions and roles in the innovation process

Obstacles of innovation• Innovation as “creative destruction”:

• Schumpeter analyzed implementation of new combinations of factors of production: entrepreneurs implement innovations in expectation of monopoly profits --> “Side-effect”: creative destruction

• Phases: strong growth, imitation and deceleration of growth, depression• Obstacles:

• Lack of experience / information about innovation• Habitual, routine ways of thinking• Counter pressure from social environment

• Dilemma of Innovation:• innovation = precondition for economic growth BUT destroys existing structures / positions (-> losers from innovation)

Forms of resistance against innovation• Rational-technological arguments

• Doubts about operability• Objections against timing of innovation (sometimes good argument - e.g. mannesmann bros production shut down)• Objections because of missing/limited fit

• Rational-economic arguments• Objections against destruction of valuable assets/competences (cannibalisation etc)• Objection against risk• Doubt about necessity (reversed burden of proof)

• Ecological arguments

Causes of resistance• Barriers due to lack of knowledge

• Innovation may require intensive learning and intellectual delibartion / adaption -> leads to resistance where ppl, feel incapable• Individual effects can be amplified in groups, e.g. departments

• Barriers due to lack of willingness• Constitutional or learned mechanisms of regulation / governance• Reasons related to power distribution, high risk aversion• “Group think”, ideological world-views, conservative attitude

Resistance from administration• Administration for routine tasks can hinder innovation:

• Responsibility: nobody feels responsible / competent• Rejection by way of passing innovation up in hierarchy• Problems w/ coordination• Filtering effect when innovation critises existing organisation


! 10

• Resistance from accounting• Acc does not treat innovations as intangible assets but expenses• However, recent changes in IAS: Development must be amortised• P&L accounting oriented towards short-term results reduces incentive for innovation

The “Promotor Model”• Correspondence theorem: specific types of resistance to innovation require specific sources of power to overcome

• Barriers due to lack of knowledge must be overcome by technical knowledge (technical promotor)• Barriers due to lack of willingness must be overcome by hierarchical power (power promotor)

• Division of labor theorem• More effective when different individuals take on roles rather than one person taking on all

• Interaction theorem• promotors need to cooperate to succeed

Technical Promotor Process Promotor (“champion”) Power Promotor

• has idea for new product, process or technology

• contributes creative effort that allows to initiate innovation project

• recognizes value of idea for company• identifies relevant resources• involves power promotor and other key

individuals• organisational know-how + dipl. skills

• allocates resources to innov. project• overcomes resistance, possibly using

hierarchical potential

--> PP needed when facing barriers of non-sponsibility / indifference (organisational / administrative resistance, mostly in complex org.)--> “Troika” makes highest contribution to effectiveness of innov. mgmt + high lvls of commercial success--> Structures exist only temporarily, then dissolve

• Management implications• Technical promotor usually originator of initiatives• Deficits of TP must be identified and compensated by PP (e.g. where to get $ from)• In case of “large distances” in discipline/ language -> process promotor should facilitate• Preference to self-organisation: teams self-select (helps fostering intrinsic motivation)

The “Gatekeeper”/ Roberts&Fusfeld Role model• Difference from promotor model:

• Promotor model focus on individuals / no. of promotor types low -> R&F focus on roles, no. rel. high, individual has more than 1• Gatekeeper:

• Features• Centreal Person• Good knowledge of information from external sources

• Functions• information collector / producer• information catalyst• unlike promotors, not linked to specific project

• Characteristics• high technical / professional competence• many publications and presentations• high formal level of education• long-term employee• lower leadership level in hierarchy

Positive effects• Adapts information specifically to respective R&D subsystem• Prevents other R&D staff rom being overwhelmed with too much informationNegative effects• Might filter / modify information in undesired manner• May reduce other efforts to acquire information

--> Organisation into roles occurs naturally, thus cannot be assigned!

Lecture 10: Quality Function Deployment and Stage-Gate Processes

Quality Function Deployment (QFD)• Systematic method to link customers quality reqʼs to technical product features• Aims at developing products / services that fulfill customer needs• Uses tables / graphs• Concerns both internal / external interfaces of the company• Extends responsibility for product quality to all departments of the company

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! 11

House of QualitySpecific product alrdy in mind when conducted

1. Determine relevant cust. attributes (CAs)• survey / observation of customers • identification of CAs, then aggregated into

bundles by project teams• Phrasing in the customers own words

2. Determine relative importance-weights of CAs3. Customer evaluation of competitive product

(“perception mapping”)4. Technical realization of customer attributes

• Customer “what?” -> Engineer “how?”• Top of the House of Quality = Engineering

Characteristics (ECs) that affect CAs5. Relationship matrix: how engineering decisions

affect customer perceptions 6. Measures to evaluate competitive products7. Roof matrix to show interactions between ECs8. Estimates of cost and technical difficulty to

complete House of Quality

--> HOQ advantage = tool to get Mktg and Engineers together

HoQ does not have fixed rules -> should be adapted to respective needs! (can be costly / time-consuming)

Stage-gate Process• Based on key goals and critical success factors for NPD• Stages/Gates break innov. process into defined stages,

consisting of parallel & cross-functional activities• Gates: Pass-versus-kill and Go-versus-hold decisions• Process used as guideline rather than “rule-book”

➡ can become tedious/ time-consuming/ cost-ineffect.• Incentives critical --> if NPD does not yield viable

results, stop project at early gate• Integrates project, portfolio and strategy levels

Portfolio Management scope• Limited resources --> allocate to projects that meet min

return threshold to pick out highest potentials• May discover synergies / links between individual prod.• Higher-generation NPD-processes are fluid (overlapping stages), have fuzzy gates, are focused on whole portfolio and

flexible (each project has own route through stage-gate process)

Lecture 11: Management of internal interfacesQuality Function Deployment (QFD)• Division of labor = difficulty to IM -> lack of cooperation among functions, resource misallocted, information hold-up

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TIM Introduction - M10: Quality Function Deployment and Stage-Gate Processes - Prof. Henkel - ST 2011 14

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! 12

The R&D/ Production interface• Symptoms: Development cycles too long/ expensive + late / unplanned changes in product design• Reasons:

• Rigid sequential development process w/ little overlapping• high uncertainty when defining cost / time targets• Too little flow of information between functions• Strategic obejctives of top mgmt not clear

• Solutions:• Overlapping development phases• Matrix Organisation = Products / projects plotted vs. Functions

• Might cause Product managers to block R&D efforts if revenue might vary• Cross-functional teams• Proximity of relevant actors (premises, architecture)• Use of suitable communication technologies

The R&D/ Marketing interface• High importance of R&D/Mktg interface for innovation• However, lack of harmony = common phenomenon

➡Differences in language and culture (technical vs. bus. ppl)➡Different objectives➡ Lack of trust in info from other functions➡ Lack of credibility of info sources

➡ Harmony and Success are correlated➡However, no clear causality: - success might cause harmony - budget (extraneous variable) might affect both - anticipation of success might cause harmony

• Recommendations for IM:• Split large projects into sub-projects• Open discussion abt conflicts / interface problems• Early integration of both functions in innovation process• Support contacts between individuals• Integrating task force of MGMT• Clear definition of competencies• Stage-setting elements / enablers = indirect effect on team perform.

! --> affects team behavior

Architecture and Communication• Effect of spatial distance on communication / cooperation of employees

in a firm• Effect of proximity on communication = only takes place with

colleagues which are closest ➡ neg. correlation btwn distance and communication could be

caused by function/ proj. membership rather than distance• “augmented variable bias” leads to following findings:

• Effect of group membership on communication = intra-group communication exhibits significantly higher lvls than inter-group

➡ needs to be considered in office architecture• Spatial proximity effects

• Avoid isolation through corridor architecture• Position walks alongside outside walls, put common rooms and GM offices in centre of buildig, possibly w/ inside opening• Vertical separation more negative effect on communication / cooperation than horizontal separation

TIM Introduction - M11: Management of internal interfaces - Prof. Henkel - ST 2011 5

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Planned use of resources in classical development process:

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True use of resources in classical development process:

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Project success is strongly correlated with harmony in interaction. Please discuss what implications this has.

Source: Souder (1988), Table 3

Communication vs. SuccessPercentage of Projects in Each State Exhibiting Each Outcome

OUTCOMESTATE Success Partial Success Failure

Harmony 52% 35% 13%Mild Disharmony 32% 45% 23%Severe Disharmony 11% 21% 68%TOTAL 32% 32% 36%


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Stage-setting elements and enablers have an indirect effect on team performance because they influence thebehavior of the team members1(+2&"1&((&. 3-+4'&.5 6&+#"7&8+9,$.5 :&./$.#+-0&

- Project Goals- Empowerment- Human Resources- Working Climate

- Team Leaders- Senior Management- Champions

- Cooperation- Commitment- Ownership- Respect/Trust

Cross-functionalteam success


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Separation distance (Sa) after correction for indirect routes

Source: adapted from Allen, T., Managing the flow of technology, 1977, p. 237

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Allen (1997) examined the effect of spatial distance on the communication and cooperation of employees in a firm


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ZusammenfassungTIM