ABSTRACT
New product development (NPD) projects are typically managed through a series of screens, or gates, where ideas compete for resources. Ideas are carved into projects, and these projects are reviewed, and approved or terminated through the screening process so that only the best performing projects continue to subsequent stages of design, development and testing, are released into the market place (Krishnan and Ulrich 2001; Terwiesch and Ulrich 2009). Most large innovative organizations deal with more than one NPD project at a time and typically engage in product pipeline management (PPM), where a set of active projects are evaluated together while they traverse through a sequence of such screens. Key decisions in a R&D pipeline are: screen thresholds, complexity of projects, resource allocation and capacity adjustment biases. We explore the impact of structural and behavioral aspects of these decisions through a simulation based analysis of a implication creative data set. Results establish concave relationships between value created at the end of implication creative and the resource allocation and complexity allocation biases, indicating optimizability and a limit for front loading practices.
INTRODUCTION
Innovation is a crucial process for the well-being of an organization. IN the pursuit of it, organizations face strategic choices on the focus of resources. One method of categorizing the strategic option is on the basis of product-market analysis (Ansoff and McDonnell, 1987). The alternative directions of development comprise: market penetration; product development; market development; and diversification. The latter three directions each require a degree of innovation, the extent of which is bounded by the scale of the development plans.
The portfolio approach to strategic analysis is criticised by Porter (1986) for leading to unwarranted diversification. He proposes a competitive model as an alternative that gives specific attention to the current and potential environment of an organization. In this context, the basis on which an innovation would compete long-term can be selected from three generic strategies: cost leadership, differentiation and focus - cost leadership, in which it aims to be the lowest cost supplier in the market; differentiation, in which a unique dimension is determined; focus, in which the service is aimed at a particular buyer group or geographical area to the exclusion of others.
Few competitive advantages are long lasting, according to Hamel and Prahalad (1989), who advocate a policy of 'strategic intent' in which the ends are clear but the means of achieving them are flexible. They consider that an organization's capacity to improve existing skills and learn new ones is the most defensible competitive advantage of all.
Furthermore, in order to create new competitive advantages, top management needs to: create a sense of urgency; develop a customer focus at every level; provide employees with the skills they need to work effectively; allow the organization to absorb one challenge at a time; and establish clear milestones and review alternatives. In their view, the goal for smart companies is not competitive imitation but competitive innovation and four approaches to this are evident from the global expansion of Japanese companies: building layers of advantage; 'searching for loose bricks' - that is searching for the base to attack competitors just outside the market territory that the industry leaders currently occupy; changing the terms of engagement; and competing through collaboration.
Another insight into a Japanese perspective on strategy is provided by Ohmae (1987), who argues that much Japanese strategy was due to creativity, customer care, intuition and innovation. He reports that at the heart of a business there is often a single, talented and forceful strategist with a way of thinking in which company, customers and competition merge. In his writings he cites four ways to achieve an effective strategy:
1.a clear focus on the critical success factors;
2.build superiority by employing technology not currently exploited by rivals;
3.pursue aggressive initiatives that challenge normal rules;
4.use strategic degrees of freedom to focus on areas where competitors are not involved.
Kay (1993) considers that innovation can be competitive advantage and the key to sustained innovation, rather than one-off, arises from the architecture of the organization. Informal structures, speed of response and free sharing of information form part of these foundations. Managers should be able to protect, exploit and appropriate innovation and create time for individuals and groups to consider change and fund the staff resources, familiarization and training needed to turn ideas into implementation. He believes that reputation is also important for the commercial success of innovations, since new ideas by highly reputed companies are more likely to succeed.
Clutterbuck (1994) deals with issues of strategic innovation and how technologies, and the companies that support them, are displaced by newer technologies and new companies. He provides histories of various product developments and how organizations have dealt with declining markets. The relationship between product innovation and industry life-cycles underpins much of his thinking. He asserts that existing organizations must consistently abandon past successes and embrace innovation, even when it undermines their traditional strengths. However, he considers core competencies important in designing new products to meet changing demands and advises managers to increase the quality and robustness of the product architectures that are the foundation of their product families.
The importance of innovation to organizational performance has led to a growing interest in the topic by the European Commission (Commission of the European Communities, 1995) and the UK government (DTI and CBI, 1994). The DTI state that in nine out of ten 'winning' UK companies studied, the characteristics of innovation best practice are: leadership by visionary, enthusiastic champions of change; knowing their customers; constantly introducing new, differentiated products and services; delivering products and services that exceeded customer expectations; and unlocking the potential of people by good communications, team work and training, flattening organizational pyramid and creating a customer focused culture. The relevance of innovation to business success led the UK government in 1993 to support the development of modules for the teaching of innovation on continuing education and Master's programmes in business schools. The resulting curriculum analysis and design led to a framework for innovation management training, comprising five core areas: product innovation; process innovation; technology and strategy; creative problem solving; and implementing technological innovation.
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