1. Dr. Iris Berdrow Bentley College, Harvard Summer School

2. Agenda for Tues July 24th Check In Types of innovations Nature of innovations Challenges to innovation Wrap Up

3. So, what’s new on your mind?

4. Language of innovation Invention (inventing the new) Radical or Breakthrough innovation (new and novel) Optimization (refining the existing) Incremental (improvement of existing) Line extension (variation on existing)

5. Innovation versus innovating The process by which innovations are achieved (whether internal or external). The outcome of innovating efforts (whether product, service or internal innovation).

6. Types of Innovation Product Service Internal

7. Product Innovation Between 2002 and 2005 the percentage of product launches in the US consumer packaged-goods industry that were considered innovative (versus new but not novel) dropped from 8% to 4.4%. Across high-growth categories in this industry breakthrough innovations launched 2000-04 totalled 3. YET – those 3 products represented 25.9% of average sales within their category.

8. Types of products and manufacturing processes Product innovations: Whole new product A component A new use Manufacturing Processes: Batch process Continuous Flow Process Globally integrated product Implications for innovation?

9. PRODUCT Continuous Flow ProcessBatch Process Orange juice Hair brush Motor oil Computer BATCH VERSUS CONTINUOUS PRODUCT Continuous Flow ProcessBatch Process Orange juiceX Hair brushX Motor oilX ComputerX

10. Implications for innovating? Cannot easily stop the line. Cannot easily isolate the part that needs to change. Cannot easily fix a faulty change without losing a whole batch.

11. Globally Dispersed Manufacturing: Airbus A380 Major structural sections of the A380 are built in France, Germany, Spain, and the United Kingdom. Due to their size, they are brought to the assembly hall in Toulouse in France by surface transportation. Components of the A380 are provided by suppliers from around the world; the five largest contributors, by value, are Rolls-Royce, SAFRAN, United Technologies, General Electric, and Goodrich.

12. Airbus A380 2 The Airbus A380 is a double-deck, four-engined airliner manufactured by EADS (Airbus S.A.S.). It is the largest passenger airliner in the world. It first flew on 27 April 2005 from Toulouse, France.

13. The front and rear sections of the fuselage are loaded on an Airbus Roll-on/roll- off (RORO) ship in Hamburg in northern Germany, whence they are shipped to the United Kingdom. The wings, which are manufactured in North Wales, are transported by barge to UK, where the ship adds them to its cargo. In western France, the ship trades the fuselage sections from Hamburg for larger, assembled sections, some of which include the nose. The ship unloads in Bordeaux. Afterwards, the ship picks up the belly and tail sections in southern Spain, and delivers them to Bordeaux. From there, the A380 parts are transported by barge to Langon, and by oversize road convoys to the assembly hall in Toulouse. New wider roads, canal systems and barges were developed to deliver the A380 parts. After assembly, the aircraft are flown to Hamburg to be furnished and painted. It takes 3,600 litres (950 gallons) of paint to cover the 3,100 m² (33,000 ft²) exterior of an A380. Shipping major components

14. Implications for Innovation?

15. Service Innovation Considered by global executives to be very important to achieving revenue targets and to long-term success. Two-thirds expect spending on innovation to increase in the next year. There is no conclusive correlation between R&D spending and performance. Service innovation is difficult to achieve.

16. Challenges to service innovation Expectations of short-term financial success Innovation not a priority in resource allocation decision. Lack of organizational mechanisms to encourage innovation.

17. ?? What are the fundamental differences between a product and a service? Why do these differences present challenges to innovation?

18. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. MANUFACTURERS OF TANGIBLE PRODUCTS SERVICE PROVIDERS OF INTANGIBLE PRODUCTS Nature & consumption of outputs Consumption after production Consumption as being produced Uniformity of inputs Higher control over inputs Inputs vary Uniformity of outputs Automation allows for uniformity Customized outputs Nature of inputs Capital intensive Labor intensive Measurement of Productivity Fairly straightforward More difficult

19. Internal Innovation Organizational: Novel or incremental innovations in structuring business operations. Operational: Novel or incremental innovations in business processes, the ways of making products or providing services. Strategic: Novel or incremental innovations to achieving business performance.

20. Management innovation (G.Hamel) Changes how managers do what they do. Conditions: Based on a novel principle that challenges management orthodoxy. Systemic, encompassing a range of processes and methods. Part of an ongoing program of innovation, where progress compounds over time. Requirement – employee initiative, imagination, and zeal Barrier – organizational bureaucracy

21. What did we learn? Types of innovations Nature of innovations Challenges to innovation