B2B Marketing Managing Innovation PGDM–B2B–RS–12 Amarnath Krishnaswamy

Plan for this Session (1) Managing Innovation Management of Innovation Innovation & Technology Innovation & the Development of New Products Not from the view point of the economist!

Managing Innovation In the session on “Strategies for Going Global” the need for “innovation” (Product, Production, Marketing, People) to gain a competitive advantage was emphasized. This is more evident when you look at competitiveness over a longer period; much easier to see. Lack of innovation has sounded the death knell for Hind Motors, Premier Motors, textile mills etc. It’s even evident in games – test cricket giving way to instant cricket etc. Innovation – absolute necessity when: 1. Competition is vibrant, catalyzing changes in technology and product 2. Product life cycles are becoming shorter Innovation is looked at in these sessions from the perspective of: 1. Managing innovation itself 2. Innovation’s relationship with strategy adopted for technological change 3. Innovation and new product development

Management of Innovation … (1) Innovation is either” Planned or strategic Deliberate A lucky break, chaotic Emergent (Euphemism!) Botox, Viagra, Equal (aspartame), Vulcanization, Penicillin, Dynamite

Management of Innovation … (2) Strategic innovation falls into 2 categories Induced Deliberately brought about (manipulated) through inducement etc Innovation occurs along a projected path Autonomous Driven by the individual himself / herself Often the outcome of a ‘questioning’ mind Induced – thro reward system. Example: Market effort on certain products Autonomous – Individual champions the effort. Organization approves only when someone takes responsibility.

Management of Innovation … (3) Characteristics – Strategic Innovation Induced Autonomous Initiative By the individual, but In line with organization’s . By the individual, and could differ from orgn.’s Screening Formal, as per the organization’s ways Informal network Type Usually incremental Could be radical Communication In line with organization’s Is different, especially in the early stages Major Players Prescribed by the organization Decisions Authority clearly defined Poorly defined Strategy Formulation Alternatives considered before commitment In the early stages, the proposer ‘s call

Management of Innovation … (4) Guidelines for Autonomous Strategic Innovation Nurture, encourage Avoid shackling the initiative through budgets, rationing resources Encourage information exchange

Technology & Innovation … (1) Technology and innovation are closely interconnected! HMT Caustic soda – mercury cells Cellular telephony Technological innovation can be: Product oriented Process oriented Both R&D - a necessity for all !

Technology & Innovation … (2) Technology development projects fall into 4 categories Derivative projects Platform projects Breakthrough projects R & D Projects Derivative Incremental product improvements. Incremental cost reduction – could also be through changes in RM, wastage reduction, etc Platform Changes in product / process technology that would apply across a set of products (Product family) Examples: 1) Changing the type of fuel injection – from a carburetor to electronic fuel injection. 2) Catalytic convertor for lower CO emission Breakthrough Radical changes Examples: 1) Mechanical movement to electronic watches 2) TiO2 – From to technology 3) Valves to Solid State Devices R & D Basic, Applied Example: Stem cell research

Technology & Innovation … (3) Relating Technology to Products Technology developed for one product could provide the platform for another Honda: Engines from 2/4 wheelers to generators Canon: From copiers/fax machines to printers Yields “Product Families” – share a common platform but are targeted for different markets / uses. Important for an organization to focus on developing product families – it will distribute risk.

Technology & Innovation … (4) Commercializing Technology Ability to commercialize / take advantage of technological innovations characterizes a “winner” Has 4 dimensions: Time to Market Market Spread Number of Products Breadth of Technologies

Technology & Innovation … (5) Commercializing Technology – Time to Market Impact of shorter product life cycles : Minimize time from development of product to market exploitation Market forecasts are more accurate

Technology & Innovation … (6) Commercializing Technology – Market Spread Make the product available to diverse market segments – in geographic and user terms Use JVs, licensing if necessary

Technology & Innovation … (7) Commercializing Technology – Number of Products Develop ‘variants’ of products – to cater to niche markets Higher customer satisfaction – better ‘fit’ of product with his needs

Technology & Innovation … (8) Commercializing Technology – Breadth of Technologies Integrate technologies – should not have too many. Increases costs and the risk of losing out in any one of them

Innovation & New Products … (1) To sustain a competitive advantage Top management backing necessary Perseverance necessary as product failure rates are high 16

Innovation & New Products … (2) Sources of New Ideas Internal Those close to the customer (sales people, distribution channel members) Those close to technology development (R & D) Top management (organization’s SWOT) External Customers 17

Innovation & New Products … (3) Forming Teams Multidisciplinary Concurrent engineering Team structure – 4 types Functional Lightweight Heavyweight Autonomous Team: (1) Complementary skills (2) Commitment to a common purpose (3) 18

Functional Teams Functional areas work on clear, pre-defined goals that have been agreed to. Could be difficult to compartmentalize work in this fashion Functional areas could work sequentially, and pass on work when completed to next functional area. Could result in delays.

Lightweight Teams Similar to Functional Teams Formation of a project coordination committee Each functional area is represented by a “liaison manager” on this committee. Committee headed by a “project manager” who coordinates the work Drawbacks Project manager does not control the resources

Heavyweight Teams Similar to Lightweight Teams “Project manager” takes control and responsibility. Functional area members are under his control. However, functional members revert back to functional area when project is over. Work is formalized – plans, time schedules etc.

Autonomous Teams Works better for “Breakthrough” projects. Project manager is in control of all the resources. Can draw his team members from the functional areas Latitude for: Team structure Reward structure Accountable for result.

Choice of Team Structure Situation Functional Incremental changes, stable competitive & tech. environment Lightweight Rapid changes in customer requirements, tech., competition Heavyweight When speed is required Autonomous Significant competitive challenges

Quality Function Deployment (QFD) QFD – for identifying: The attributes the customer wants in the product Establish link between these attributes and the product design Process involves understanding, and then marrying: The Voice of the Customer The Voice of the Engineer Planning approach for QFD termed House of Quality!

Voice of the Customer Identify customer needs The benefits the product should deliver Necessary to identify, and focus, on the main ones Relatively easy to do if the market is homogenous Weight each attribute: enables QFD to balance it with cost

Voice of the Engineer Translate customer needs into product design Put onto a matrix against what the customer wants, and compared with competition

QFD Matrix Weight Prod. Attr. 1 2 Rating 3 4 5 Cust. Attr. 1

New Product Success / Failure - Factors Product Uniqueness / Superiority Market Knowledge Marketing Proficiency Technical & Production Proficiency Failure Price, with no economic benefit Obsolete in terms of what’s available Customers satisfied with existing product

Can’t forget the law! Woods’s First Law Of Procrastination NOW is the time to do things later! Woods’s Second Law Of Procrastination Procrastinate today! (Tomorrow may be too late.) Woods’s Third Law Of Procrastination Never put off till tomorrow what you can do the day after tomorrow!

Moving Forward Next Session: PGDM-RS-13 Date: Tuesday, Mar 02, 2010 Subject: Managing Services - Role & Importance - Buying Services - Marketing Mix - New Services

Thank you !