19-1 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Innovation, Technological Change and Competition Technology  The skills, knowledge, experience, body of scientific knowledge, tools, computers, machines used in the design and production of goods and services.

19-2 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Innovation, Technological Change and Competition Quantum Technological Change  A fundamental shift in technology that results in innovation of new kinds of goods and services. The shifts from vinyl records to tape to CD to MP3 represent quantum technological changes in the recording industry.

19-3 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Innovation, Technological Change and Competition Incremental Technological Change  Change that refines existing technology and leads to gradual improvements or refinements of products over time. Improvements in gas mileage for internal combustion engines represent incremental technological changes in automotive manufacturing.

19-4 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Product Life Cycles and Product Development Product Life Cycle  Changes in product demand from its introduction through its growth and maturity to its decline. Embryonic stage: product is not widely accepted and has minimal demand. Growth stage: many consumers seek out the product and buy it for the first time.

19-5 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin A Product Life Cycle Figure19.1

19-6 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin The Relationship Between Technological Change and Length of the Product Life Cycle Figure 19.2

19-7 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Four Goals of New Product Development Figure 19.4

19-8 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Principles of Product Development Principle 1: Use a Stage-Gate Development Funnel  Forces managers to make choices among competing projects to avoid spreading organizational resources too thin.

19-9 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Principles of Product Development Principle 1: Use a Stage-Gate Development Funnel Stage 1 considers all new ideas that are feasible and meet the strategic goals of the firm. Stage 2 focuses on reviewing product development plans; with the best continuing on. Stage 3 issues a contract book and focuses on responsibilities, budgets, and resources in a symbolic launch of the formal development.

19-10 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Principles of Product Development Principle 2: Establish Cross-Functional Teams  Cross functional teams are a crucial part of effective product development.

19-11 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Principles of Product Development Principle 2: Establish Cross-Functional Teams Core members of the team are the people primarily responsible for the development effort. Management must ensure there is coordination and communications between team members. Teams are often located physically together. Successful teams will develop a clear sense of their objectives and share a common mission.

19-12 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Principles of Product Development Principle 3: Concurrent Engineering  The traditional engineering approach follows a sequential flow resulting in long development times and poor quality if managers do not communicate between departments.

19-13 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Principles of Product Development Principle 3: Concurrent Engineering By working concurrently, design and production issues are considered together. Production concerns are addressed while the product is designed and can still be changed.

19-14 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Principles of Product Development Principle 4: Involve Both Customers and Suppliers  Products fail because their design does not meet the needs of customers. Customer ideas and needs should be included in the design process. Solicit customer input from many sources.

19-15 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Principles of Product Development Principle 4: Involve Both Customers and Suppliers  Suppliers are also critical to the success of a product. Include them during concurrent engineering. Seek out their ideas and input early in the process.

19-16 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Entrepreneurship Entrepreneurs  Individuals who notice opportunities and take the responsibility for mobilizing the resources necessary to produce new and improved goods and services. Entrepreneurs start new businesses and carry out all of the management functions. Entrepreneurs assume all of the risks for losses and receive all of the returns (profits) from their ventures.

19-17 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Entrepreneurship Intrapreneurs  Individuals (managers, scientists, or researchers) who work inside an existing organization and notice an opportunity for product improvements and are responsible for managing the product development process. Intrapreneurs frustrated with the lack of support or opportunity at their firm often leave and form their own new ventures.

19-18 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Entrepreneurship and New Ventures Characteristics of entrepreneurs—most share these common traits:  Open to experience: they are original thinkers and take risks.  Internal locus of control: they take responsibility for their own actions.  High self-esteem: they feel competent and capable.  High need for achievement: they set high goals and enjoy working toward them.

19-19 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Intrapreneurship and Organizational Learning Learning organizations encourage their employees to act as intrapreneurs:  Product champions: taking ownership of a product from concept to market.  Skunkworks: keeping a group of intrapreneurs separate from the rest of the firm.  New venture division: allowing a division to act as its own smaller company.  Rewards for innovation: linking innovation by workers to valued rewards.