Management of Innovation 301 Digital Multimedia Report Semester 2, 2012 Name: Benjamin Andrew Michael ID: 7d9a6709/14934737 Tutor: Mr. Adriel Sim Total file word count Less direct quotes
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Table of Contents 1.0
Establishing an Environment for Innovation
Managing organization knowledge and innovation strategies..3
Question from CEO………………………………………………………………..7
Implementing Innovation 4.1
Managing innovation and operations management………………8
New Product Development……………………………………………………9
Questions from CEO……………………………………………………………….11
Conclusion and Recommendation…………………………………………………11
Executive Summary This report is based on Meridian Safety Pty Ltd, founded by Leigh Dowie who is the
brains behind the T-Line Safety Systems. The report is based on a presentation done regarding the T-Line and will touch on several different areas to which is crucial to the development of the T-Line. Within this report, focuses will be towards 5 areas: IP Strategies, managing organization knowledge and innovation strategies, collaboration strategies, managing innovation and operations management, and also new product development. Drawing from these topics, recommendations had been made such as Leigh Dowie should proceed with patenting improvements, the opportunity of Joint Venture should be taken, and also that Leigh should undertake pipeline 1 as his main priority.
Company Profile & Background Leigh Dowie had initially begun as a student in Curtin University Perth majoring in Civil
and Construction Engineering. Upon graduating, Leigh pursued his career as Site Engineer in CBI; one of the worldâ€™s leading engineering procurement and construction companies. His career prior to finding of the T-Line Systems took him to several other jobs. The main idea was drawn from his experiences, what he has seen around him and felt the need for improvement. Leigh was amazed to find that a simpler fall arrest system did not exist and was surprised by the lack of technology in available systems. Leigh elaborated on two of the existing product that was available which were Static Line and Retractable Lanyard. The two products clearly did not fit the perspectives that Leigh would have wanted in a safety systems as he claimed both to be lacking in certain areas. This brought upon the T-Line Safety Systems. Within 10 years, Leigh
Dowie had successfully established the company. Currently, Meridian Safety Holdings Pty Ltd, the name of Leigh Dowieâ€™s company, has two direct Shareholders which are Amargi Investments, and UK Safety Company holding a 90% and 10% shares respectively.
Establishing an Environment for Innovation
It is understood that intellectual property has two common attributes; firstly it is a tangible product which can go in many forms such as an invention, an idea, a product, or a process; and secondly, a nationâ€™s laws say that intellectual property can be owned whereby it may not be used by others without the ownerâ€™s permission (Gruben 1992, 20). An IP strategy enables a company to keep fully focused on their IP; what they own, what they use, how do they protect it, and whether or not is being exploited to gain full benefits. There are many different forms of Intellectual Property Strategies available to businesses however Leigh Dowie has chosen to adopt two different strategies to help protect his products. Patents
Leigh Dowie has taken the initiative in patenting his innovations. A patent is a right granted for any device, substance, method or processes that are new, inventive and useful. It is legally enforceable and gives the owner the exclusive right to commercially exploit the invention for the life of the patent. It gives ultimate protection to the owners of innovations that will lead to a product, composition or process with significant long term commercial gain (Small Business Development Corporation n.d.). According to Gruben (1992, 20), amongst the alternatives that are available in protection intellectual property, the patent is the most
powerful whereby it is a temporary right to exclude others from using an invention. The patent protection used by Leigh Dowie protects his innovations thoroughly and shows clear differentiation over existing technologies. Patent has been granted to Core T-Line in Australia, Canada, and New Zealand with pending applications in the United States and in Europe. Trademarks
Secondly, Leigh Dowie has had Trademark Registration in the US for T-Line with the reason being that it is a key form of protection due to product differentiation. Trademark is a word or mark that identifies the source of a good or service (Gruben 1992, 20). In other publications, trademarks are a way of identifying a unique product or service and it can be a business’ most valuable marketing tool. A trademark is a way customers can easily identify a company; to show your customers who you are and also to distinguish a company’s goods and services from someone else’s. A trademark can be a letter, number, word, phrase, sound, smell, shape, logo, picture, or any combination of these (IP Australia 2012). Is he on the right track?
After reviewing the protection strategies that has been used, Leigh Dowie has developed and instigated two of important protection strategies, applying patents and trademarks to the T-Line. As mentioned above in patents, Leigh Dowie applied patents so that it provides clear differentiation over any existing technologies and as such, should provide security and that the same advantages can’t be replicated without infringing upon the patent. So with this being said, yes he is on the right track providing that he has done all the necessary means to properly protect his inventions from being over written.
Managing organizational knowledge and innovation strategies
A competency is the ability of a business to use its assets to perform value-creating activities (Trott, 2008,187).Core competencies are those capabilities which are highly critical to businesses that hope to achieve a competitive advantage (Riley 2012). A core competency is understood to develop in a way that over time, companies may be able to develop key areas of expertise which are distinctive to the company and also its long term growth. Leigh Dowie’s core competencies can be illustrated using the diagram below:Figure 3.2.1: core competencies, imitability, and profits.
The diagram above examines a firm’s ability to generate profits from its technological assets depending on the level of protection it has over these assets and also to the extent which firms are able to imitate these competencies (Trott, 2008, 187). A core and non-core in this case relates to whether the product is an essential or a main product of a company. In this case, the T-Line Safety System is a core product for Meridian Safety. Leigh Dowie has gone about obtaining protection over his innovation as mentioned in the IP Strategies where we have outlined that he has applied patents and trademarks therefore T-Line Safety System has low imitability and it is a core product so it falls into the “Long-term Profits” quadrants.
Building organizational knowledge and knowledge base of the company
Organizational knowledge represents the internal systems, routines, shared understand and practices in a company (Trott 2008). According to Trott (2008, 193), the knowledge base of a company consists of several dimensions;
1. Individual assets – individuals’ skills and knowledge. In this case, Leigh’s knowledge was gained through his years in Curtin University graduating with a bachelor degree in engineering and also from the years of experience in the work force. 2. Technological assets – reproducible capabilities in product, process and support areas. Leigh’s technological assets are in the manner of him being able to reproduce what he has learnt throughout his previous working experiences. He was able to identify the disadvantages that the static line and the retractable lanyard have and improved on those disadvantages to form his own product. 3. Administration assets – resources that enable business to develop and deploy individual and technological assets; In this case, Leigh gained the knowledge needed to fully operate his business and protect his innovation through the process or acquiring patent, documentation of his business ideas and also business management from licensing and logistics. 4. External assets – relationship between the firm and allies, rivals, suppliers, customers, political actors and local communities. Within Meridian Safety and also for Leigh Dowie, he has a strong relationship and allies with important figures such as patent attorneys, accountants, contracted suppliers, customers and also political actors such as certified testing agencies. 5. Projects – technological, organizational and external assets are deployed and transformed. From these theories, it has given him a base knowledge of his own company and also enabled Leigh Dowie to develop organizational knowledge.
According to Beggs (n.d.), absorptive capacity is a limit to the rate or quantity of scientific or technological information that a firm can absorb. In the case where such limits exist, they provide one explanation for firms to develop internal R&D capacities. In other writings, absorptive capacity is cumulative where a firm or individual learns by building on what it already knows which leads to more efficient accumulation in subsequent periods. This is done through prior related knowledge which is used by the firm to recognize valuable new information or knowledge, assimilate it and apply it for commercial gain. Leigh Dowieâ€™s capability in identifying the problem in the fall prevention system prior to him inventing the T-Line system was what made this invention a success. This gave him the main idea and seeing an opening in the market gave him the opportunity to put to practice what he has learnt from his past experiences and the understanding he had about the fall prevention systems and used to develop the idea of T-Line safety systems which he has mentioned to have less fall effect and an improvement of the existing systems.
A strategic alliance is whereby firms combine their assets and capabilities in a cooperative policy in a bid to achieve competitive advantage. It is considered as an essential source of resource-sharing, learning and thereby competitive advantage in the competitive business world (Uddin, Belal, Akhter, 2011, 44). Relating to Meridian safety, the foremost collaboration that was mentioned by Leigh Dowie in his presentation is the partnership that Meridian Safety
has with its distributors. The sole, or main, reason behind this strong partnership being established is so that Meridian Safety along with its distributors could gain local market knowledge. Having an outstanding distributor as an external stakeholder could influence the company in a good manner. This is said in accordance with the possible scenario of Leigh Dowie feeling the need to improve his product to further his competitiveness in the market. According to Trott (2008,) there are 8 different forms of strategic alliance; however the current that is used by Meridian Safety is Supplier Relations. This form of strategic alliance would require much longer and much higher mutual commitments between the two entities that are embodied to work together. As mentioned in his presentation, Leigh Dowie has gone about Licensing as a strategic alliance however the previous collaboration had caused issues wherein the licensee and Meridian had no verbal understanding within themselves in trying to carry this product in the same direction as intended initially. The scope for more collaboration strategies would be for Meridian Safety to go into Joint Venture with another company preferably abroad. This would help them in the areas of funding and possibly gaining higher market share. Leigh Dowie had mentioned before that due to limited funding, further investment in patenting had to be stalled until financially stable.
Questions from the CEO Should Meridian proceed with patenting improvements to the T-Line and the other related technologies ahead of the business activities related to increasing market share etc?
In the section of IP Strategy in his presentation, Leigh Dowie has mentioned that they are considering patenting some improvements to the T-Line that will help extend overall protection period. From what we understand regarding Patents, it provides a company with the most protection which in the long term could help the organization achieve stronger or higher commercial gains. So considering the fact that Leigh has made improvements to his product, it is necessary for him to proceed with improving patents applied on the T-Line ahead of the business activities. This is due to the fact that while exploring business activities and possibilities could lead to a possible increase in market share, patenting improvements to the TLine could also lead to the same outcome.
Implementing Innovation Managing innovation and operations management Figure 3.2 Pearsonâ€™s Uncertainty Map
Meridian Safety in the case of this Uncertainty Map falls within the fourth quadrant â€œCombining Market Opportunities with Technical Capabilities.â€? Now this quadrant represents innovative activities with most certainty such as those improving on existing products or combining market opportunity with technical capability to create new products. Going along with this quadrant, from the figure we can note that both the uncertainty about output and the uncertainty about process of Meridian Safety is relatively low. The Uncertainty about Process is low for Meridian Safety because Leigh Dowie has already known what he wants to make of his company so goals were set based on his future direction. Leigh Dowie has mentioned in his presentation that the future funding of the T-Line system
would depend highly on sales revenue and further capital rising. In laying down the ground rules for the product and for the company, Leigh Dowie is on track in keeping his company in hand. The Uncertainty about Output is low due to the fact that Leigh Dowie had previously already had a fair idea to what a safety system is in experience with working for other engineering firms. He has taken this knowledge and applied them to be able to come up with a product that is of vast improvements to the already available protection systems in the market. So with his knowledge well set and the standing technology knowledge in the organization, they have more than enough to produce a product like T-Line.
New Product Development
New Product development as a strategy for growth
Figure 12.5 Ansoff Matrix The figure above illustrates the Ansoff directional policy matrix. The matrix combines two of the key variables that enable a business to grow. These two key variables are; an increase in market opportunities and an increase in product opportunities (Trott, 2008, 392). It explains that the growth of a business would depend on whether the company introduces new or current products to a new or current market. Amongst the four available strategies, Market Development and Product development are chosen to be the most suitable strategies to be practiced by Meridian Safety towards the T-Line Safety Systems.
Market Development Strategy
Market Development Strategy in this case means that a current product is marketed into a new market segment or market area to try reaching new market share heights. According to Trott (2008, 392), market development strategy would mean that the growth opportunities of a business exist for a businessâ€™ products through making them available to new markets whist maintaining the security of its existing products but still opts to develop and enter a new market. In his presentation when touching on New Product Development, Leigh Dowie has expressed his plans to engage with key industry bodies to try identifying available opportunities in other sectors of the market for instance trucking, transport and even chemical transport. In doing so, Leigh Dowie will be able to widen his market scope and possibly gaining a higher market share for his company, Meridian Safety. Product Development Strategy
Product development strategy means that the company develops and introduces a new product into an existing market. Trott (2008, 393) mentions that virtually all companies eventually figure a way to ensure that their products are on par, if not, well above their competitors in order to gain competitive advantage. This is done by regularly improving their current products by seeking new ways to enhance the already set attributes of a product. In the case of Leigh Dowie relating to the T-Line safety systems, he has expressed his interest in making more specific product offerings for specialized applications available to different segments of the current market. Examples given are for off-shore purposes and also for explosive environments, both events of which the T-Line Safety systems could come in handy.
4.3 Question from CEO Which of the future development pipelines should be prioritized?
Considering what was mentioned by Leigh Dowie regarding issues that his company is facing with such as monetary issues where they do not have the funds available to them to improve on patents. They should refrain from going down pipeline 2 and 3 which are to “provide more specific product offerings” and “engaging with key industry bodies to identify opportunities respectively” until they are stable financially. In regards with pipeline 2, this shouldn’t be undertaken because this could possibly require lots of monetary investments which currently Meridian Safety does not possess. So until they’re financially stable, pipeline 2 should be put aside. As for pipeline 3, it wouldn’t be ideal due to the current situation with the T-Line where it hasn’t achieved maturity in the product life cycle. It takes 3 to 5 years for a product to reach maturity and it has only been 2 years since T-Line has been marketed. Utilizing pipeline 1 could increase market share by offering model variants for each market segment, Meridian would be able to capitalize on the growing situation of the T-Line and hope to gain more market share.
Conclusion and Recommendation
In conclusion, there have been 3 recommendations that have been mentioned. Firstly is to carry on with further investment in patenting due to the fact that this would lead to the same outcome as engaging in business activities; both would bring about higher market share. Secondly is to engage in Joint Venture with another company in the hopes of gaining more market knowledge, new markets and also to gain what they need most, money. Last but not least, Meridian safety should consider and prioritize pipeline one because focusing on their
current market would be the best option for Meridian because the T-Line has yet to reach its peak. Once it has, they Meridian can start considering other options that are available to them.
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T-Line Development Timeline Initial Design/ Plan/ Execute IP Strategy
Establish License, Trial Production Run, Validation Testing
Commence First Distributor Sales/ Cancel Exclusive Rights
Initial Approaches to Licensees and First Prototyping and Promotion
Final Design and Engineering, License Negotiations
Early Commercial Trials/ Standards Certification
Capital Raising/ Commence Establishing Distributor Network and Direct Sales begun
Negligible Long Term Profits Profits 2006
No Profits High
Short term Profits Core 15
Extent of Coreness
Figure 3.2.1: core competencies, imitability, and profits. High
3. Applications Engineering
1. Exploratory Research
Uncertainty about Output
4. Combining market Opportunities With technical Capabilities
2. Development Engineering
Uncertainty about Process
Figure 3.2 Pearsonâ€™s Uncertainty Map
Figure 12.5 Ansoff Matrix
Market Penetration Strategy
Market Development Strategy
New Products 16