COMM 219 STUDY GUIDE FOR YOUR FINAL EXAM Innovation Management Concordia University

COMM 219 STUDY GUIDE FOR YOUR FINAL EXAM Innovation Management Concordia University

Session 1 – Importance of Innovation What is Innovation?

Innovation = turning ideas into value.

It is about CHANGE + VALUE. Different authors define it as: • • • •

“Creative destruction” – replacing old ways with better ones (Schumpeter) “Creating value from ideas” (Tidd & Bessant) “Implementing an idea into a new product/process” (Schilling).

“New ways of doing things to gain competitive advantage” (Porter)

E.g., iPhone replaced flip phones  changed communication + created value.

Why Innovation Matters 1. Main driver of competitive success a. Many firms earn 1/3 of their sales from products launched in the last 5 years.

2. Markets + Technology change quickly: • Short product life cycles • Generative AI • E-commerce

• Customization demand • Sustainability concerns 3. Societal Impact: • Better medicine, transport, and food production.

• BUT negative externalities: pollution, antibiotic resistance, etc.

Examples: • • •

Netflix innovated with streaming  Blockbuster died.

Electric cars (Tesla) changed the auto industry Aritzia’s e-commerce boom changed how young consumers shop.

Product vs Process Innovation • •

Product Innovation: new or improved goods/services o Example: iPhone, electric cars, etc Process Innovation: improving how the product is made.

Innovation Funnel Most ideas fail  only a tiny fraction becomes a real product Funnel Stages 1.

2.

3.

4.

5.

Many ideas Screening Testing Development Launch (1 idea survives)

How to Manage Innovation Most ideals fail  you need: 1. Clear Strategy 2. Internal processes 3. Understanding of innovation dynamics The Innovation Funnel shows that out of 5,000 ideas  only 1 becomes a successful product.

Example: Pharmaceutical companies test thousands of compounds  only 1 drug reaches the market.

Session 2 – Sources of Innovation

LO 1 – Where do great ideas come from? How can firms harness the power of individual creativity?

Where great ideas come from?  Great ideas originate from multiple sources, including: 1. Individual Creativity People generate creative ideas when they have: • • • • •

Intellectual ability  divergent thinking, and articulating ideas.

Knowledge  understanding the field but not stuck in old ways.

Personality traits  openness, curiosity Motivation  genuine interest Supportive environment  encouragement, rewards

Example: an employee notices customers constantly asking for an easier way to try outfits  invents a virtual try-on feature.

2. Observing Problems in Daily Life Creativity often comes from: • • •

Watching your environment Identifying pain points (problem, frustration, inconvenience that people experience) Spotting opportunities

Example: seeing long lines at Aritzia  idea for self-checkout or mobile checkout.

3. Creativity Methods & Tools

Firms use structured tools to spark ideas: • • • • •

Brainstorming 6 Hats Design thinking TRIZ Lateral Thinking

These employees think differently and generate more ideas.

4. Translating Creativity into Innovation Creativity = Idea. Innovation = implementing the idea into a new product or process Innovation requires: • • • •

Creative ideas Resources (time, money) Expertise Processes to test and improve ideas

Roles involved: • Inventors + Users • Firms • Universities • Governments 5. Sources of Innovation Innovation can come from: • • • • • • •

Individuals Users Firms Universities Governments Non-profit organizations Innovation networks

These groups interact and share knowledge, creating more opportunities for innovation.

6. Innovation by Individuals

a) Inventors tend to be: • Curious • Generalists • Problem-focused • Good at challenging assumptions b) Users innovate to solve their own problems Users often create better solutions because they know their pain points deeply.

7. Innovation by Firms Firms innovate using: A. Science-Push Model Discovery  invention  production  marketing B. Demand-Pull Model Customer need  invention  production  marketing C. External + Internal Sources (Innovation Networks) Firms innovate with: • • • • •

Customers Competitors Suppliers Universities Government labs

Innovation networks = spread knowledge faster.

8. Innovation by Universities and Governments Universities • • •

Conduct research Publish findings Can earn royalties (Bayh-Dole Act)

Governments • Fund R&D labs • Create major scientific breakthroughs (NASA, defence labs) 9. Technological Spillovers

What are technological spillovers?

When knowledge from one organization spreads unintentionally and benefits others.  one firm’s innovation “spills over” and helps others innovate.

How spillovers happen: • • • • • •

Employee mobility Academic publications Conferences & industry networks Suppliers working with multiple firms Reverse engineering Government-funded research

Why they matter: • • • • •

Spread innovation faster Raise industry performance Encourage collaboration Create positive externalities But can reduce a firm’s incentive to invest unless it uses IP protection (patents, trade secrets)

10.

Entrepreneurship & its Relationship to Innovation

Tina Seelig’s Model: 1.

2.

3.

4.

Imagination  seeing what doesn’t exist Creativity  solving problems using imagination Innovation  turning creative ideas into real solutions Entrepreneurship  turning innovations into businesses

What is an entrepreneur?

An entrepreneur is an individual or group who sees an opportunity and takes the risk to exploit it. They turn ideas into real businesses or solutions.

Types of Entrepreneurs 1. Lone genius • Works independently • Pushes a personal vision • Battles alone to bring an idea to life.

2. Start-up Teams • Small groups building something new • Collaborative creativity helps shape innovation • Most modern tech start-ups fall into this category 3. Social Entrepreneurs • Focus on solving social issues • Use innovative ideas to create social change 4. Intrapreneurs • Employees inside established firms • Propose new products, services, or processes • Help big companies stay innovative

Session 3 – Types and Patterns of Innovation 1. Product vs Process Innovation Product Innovation (WHAT is sold) • • •

New or improved goods/services Often visible to consumers Drives demand and differentiation

Impact on Industry • • •

Intensifies competition Can create new markets Forces rivals to copy or respond quickly

Process Innovation (HOW it’s made/delivered) • •

Improves manufacturing, logistics, or operations Usually behind-the-scenes

Impact on Industry: • • • •

Lower costs Raises efficiency Can widen the gap between efficient vs outdated firms Early adopters gain a competitive edge.

2. Radical vs Incremental Innovation Radical Innovation • • •

Major breakthroughs Requires new knowledge Can create or destroy industries

Impact on Industry • • •

Disrupts incumbents Creates new leaders Destroys old competencies (Kodak, Blockbuster)

Incremental Innovation • • •

Small improvements Builds on existing knowledge Low risk

Impact on Industry • • •

Keeps competition alive Helps firms maintain margins Easy for competitors to copy

3. Competence-Enhancing vs Competence-Destroying Compete-Enhancing • •

Builds on what the firm already knows Fits existing capabilities

Examples: Toyota is improving hybrid engines

Impact on industry: • • •

Benefits existing leaders Strengthens dominant firms Requires less retraining

Competence-Destroying • •

Makes old skills/resources obsolete Requires new knowledge

Examples: EVs destroying gas-engine expertise, digital cameras are destroying film processing Impact on Industry • • •

Hurts incumbents Gives new entrants a chance Leads to massive industry restructuring

4. Component vs Architectural Innovation Component Innovation • •

Improves one part of a system Leaves overall design the same

Examples: Better smartphone batteries, new AirPods microphone Impact on Industry: • •

Favour firms strong in component-level R&D Allows incremental upgrades

Architectural Innovation •

Changes the overall design of the system of the system or how components interact

Examples: Gas cars  EV architecture •

Desktop  laptop computers

Impact on Industry: • • •

Requires new skills, suppliers, layouts Can threaten established leaders Often leads to industry restructuring

Technology Trajectories & Diffusion Patterns 1. Technology Trajectories A technology trajectory = the direction and speed of a technology’s improvement over time.

Example from slides: Electric Vehicles trajectory • • • •

Batteries improving Charging networks expanding Costs decreasing Adoption rising

Why trajectories matter: Firms must decide: • • • •

When to invest Whether old tech is plateauing Whether the new tech will dominate What skills/resources do they need next

2. Diffusion Patterns Diffusion = how fast a technology spreads What affects diffusion?

• • • •

Cost of the technology Network effects (more users  more value) Complementary products (chargers, apps, games) Regulation

• •

Installed base of old technology Performance improvements over time.

Example: Smartphones diffused fast because: • • •

Huge improvements (radical) The app ecosystem grew Carriers subsidized phones

EVs diffused more slowly because: • •

Needed charging infrastructure Batteries were initially expensive

3. S-Curves (Implied in trajectory discussion) A technology’s performance typically follows an S-curve: • • •

Slow early improvement Rapid improvement Plateau

Industries must track where a technology is on the S-curve to avoid falling behind.

Session 4 – Creating and Capturing Value in Innovation Increasing Returns to Adoption Increasing returns to adoption = a technology becomes more valuable the more people use it.

This happens because of: 1. Learning Effects: As firms produce more of a technology, they become more efficient, costs decrease, and quality improves Examples: Tesla batteries get cheaper as more cars are produced  more adoption  more learning 2. Network Externalities A product is more valuable when other people also use it.

Examples: • •

Instagram  valuable because your friends use it PlayStation  valuable because many gamers + developers use it

•

Windows OS  more users  more developers  more apps  more users

3. Complementary Goods Complements make a product more valuable, such as: • • • •

Apps Chargers Games Accessories

More users  more complements  even more users = SELF-REINFORCING LOOP Strategic Implications (what it means for companies) Increasing returns to adoption make markets: A. “Winner-takes-most” The first big platform to take off usually dominates: • iPhone • PlayStation • Windows B. Hard to enter once the installed base grows New technology must be 3x better to beat an entrenched system.

C. Huge incentives to move early and scale fast Firms invest heavily to build a user base, app ecosystem, partnership, complements

Dominant Design A dominant design = the product architecture that becomes the industry standard.

Not always the best technology – just the one the market unifies around.

Examples: •

Touchscreen smartphone slab design (iPhone shape)

• • •

QWERTY keyboard USB port PlayStation-style controller

Why dominant designs emerge Because of: • • • • • •

Market convergence Learning effects Network effects Complementary goods Installed base momentum Customer familiarity

Once a dominant design emerges  ALL competitors must follow it.

Role in industry competition Dominant designs: • • • • • •

Lock in suppliers Lock in customers Become the default expectation Make it harder for new entrants to succeed Increase compatibility and reduce confusion Shift competition from “design wars” to “price, features, branding”

Innovation Value from Multiple Perspectives A technology’s value is NOT only about performance.

1. Standalone Value Value from the product itself: • • •

Quality Battery life Camera

• •

Design Speed

Example: iPhone feels premium  high standalone value.

2. Network Value Value from: • • • •

Number of users App ecosystem Accessories Combability

Example: PlayStation has a huge gaming ecosystem  network value 3. Complementary Value Complements increase usefulness: • • • •

Apps on App Store Games for PS5 Chargers, cases Streaming services for smart TVs

More complements = more value 4. Perceived Value Customers often choose based on perception, not technical performance.

Example: People believe Apple = high quality  increased willingness to pay.

5. Installed Base Value More people using a product = more: • • •

Developers Accessories Support o More value Session 5 – Innovation Strategy & Competitive Advantage

Assess a Firm’s Current Position (Internal & External Analysis)

Before a company decides what innovation projects to pursue, it must understand its current situation.

There are two sides to this analysis: A. Internal Analysis – Look Inside the Firm This includes understanding: 1. Strengths & Weaknesses Where does the firm excel? Where is it struggling?

This can be identified using the value chain: • • • • • • •

R&D Operation Supply chain Marketing Customer service Branding Technology systems

Examples from the slide: • • • •

Toyota’s strength  lean manufacturing Apple’s strength  design + innovation Amazon’s strength  low-cost logistics Nike’s strength  brand & customer loyalty

A weakness might be: High labour costs, slow processes, weak digital capabilities, poor customer service.

2. Capabilities & Resources Internal analysis also evaluates: • • • • • •

Technology & data Supply chain strength Financial resources Employee capabilities Store network Digital infrastructure

Understanding capabilities helps firms know what they CAN innovate and where they need help.

B. External Analysis – Look Outside the Firm Companies must understand: • • • • • •

Market trends Consumer behaviour changes Competitors Economic conditions Regulations Technological shifts

Example from the Starbucks case Starbucks faced: • • • •

Competition Market change Labour union pressures Shifts in customer behaviour

This external pressure shapes innovation decisions

Identify Core Competencies & Capabilities That Drive Competitive Advantage A core competency = something the company does uniquely well that competitors cannot easily copy.

A. Characteristics of Core Competencies A core competency: • • •

Provides VALUE to customers Is hard for competitors to imitate Can be used across multiple products/services

B. Examples from the slide

Apple: Design + innovation, seamless ecosystem Amazon: Logistics & cost efficiency, fast delivery at a massive scale Toyota: Lean manufacturing, high quality at low cost Nike: Strong brand identity, deep understanding of customers C. Why Core Competencies Matter for Innovation Core Competencies: • • •

A guide which projects a firm should invest in Determine where the firm has an advantage Influence the ability to sustain competitive advantage

Example: Apple should not try to compete in low-cost phones because that is not aligned with its core competencies.

Understand Strategic Intent (Long-Term Innovation Goals) Strategic intent = the company’s long-term vision.

It answers:  “Where do we want to be in 10 years?”

This shapes: • What innovation areas to focus on • Which capabilities to develop • How the company competes over time.

A. Why Strategic Intent Matters 1. Aligns the entire organization Everyone understands the long-term innovation direction.

2. Guides resource allocation Funding goes to the innovations that support the long-term vision.

3. Provides direction during industry change When competitive pressure increases, strategic intent prevents reactive decision-making.

4. Helps firms anticipate future needs Companies prepare now for the capabilities they will need later.

B. Examples Starbucks strategic intent  enhance digital convenience + customer experience Leads to innovation in: • • • •

Mobile app Drive-thru formats Supply chain upgrades Automation Session 6 – Evaluating Innovation Projects

Why Firms Need Project Evaluation Methods Companies usually have: • • • •

Many potential innovation ideas Limited time Limited money Limited resources

So they need tools to decide:  Which innovation projects are worth investing in?  Which ones should be killed early?

Methods for Evaluating Innovation Projects Your professor covers four major decision-making approaches: 1. Quantitative Methods (Financial Tools) These tools use numbers, costs, and financial projections.

A. Net Present Value (NPV) • Calculates expected future cash flows • Discounts them to today’s value • Positive NPV  project adds value • Negative NPV  reject Simple example: You invest $1M  expect $1.5M in future profits. If the discounted value is $1.2M  NPV = +200k  good project

B. Internal Rate of Return (IRR) • The % return the project generates • Compare IRR to your required rate (e.g., 10%) • If IRR > required return  accept • If IRR < required return  reject C. Payback Period • How long does it take to recover from the initial investment?

• Good for liquidity-focused firms.

• Ignores long-term returns  simplistic but common D. Real Options Approach • Views innovation like a financial “option” • Useful when future conditions are uncertain.

• Values flexibility (e.g., the option to scale up later) Example: testing a prototype now gives you the option to expand production later.

2. Qualitative Methods Used when financial data is incomplete or when early-stage projects lack numbers.

Method examples: Strategic fit (does it match our goals?), customer need, technical feasibility, competitive advantage potential, alignment with core competencies, risk assessment (technical + market), impact on brand, longterm positioning

Example: A prototype with no financial data may still be pursued because it: • •

Builds future capabilities Fits 10-year strategic intent

3. Scoring Models & Multi-Criteria Decision Methods Firms use weighted scoring models to evaluate projects across many dimensions Steps: 1. Choose criteria (e.g., risk, cost, strategic fit, NPV) 2. Weight each criterion (out of 100%) 3. Rate each project (1-5 or 1-10 scale)

4. Multiply weights x scores 5. Sum the totals Top-scoring projects get funded.

Example Criteria: • • • • • •

Strategic alignment Market attractiveness Technical difficulty Competitive advantage Resource requirements Time to market

These models provide structure + transparency 4. Portfolio Management Techniques Instead of evaluating projects one by one, firms evaluate their entire portfolio.

Goal  balance risk, return, timing, and strategic goals.

Portfolio categories include: • • • •

Breakthrough innovations Platform projects Derivative/incremental projects R&D exploration

Firms aim for a healthy mix, not all high-risk or all low risk

Additional Tools Introduced in Session 6 A. Q-Sort Method Used when many decision-makers need to prioritize projects Steps: 1. Each person ranks projects from most  least promising 2. Rankings are combined 3. Projects are organized into clusters (high, medium, low priority) Useful for large groups and subjective decisions.

B. Financial vs Strategic Fit Matrix

Projects are plotted on a matrix comparing: • •

Financial attractiveness Strategic importance

Examples: • • •

High strategy + high financial return = top priority Low strategy + low return = kill High strategy + low return = selectively fund (long-term value)

How Companies Use These Methods Together Firms rarely use just one method They combine: • • • •

Quantitative tools (NPV, IRR, payback) Qualitative judgment (strategic fit, brand impact) Scoring models (to organize decisions) Portfolio thinking (to balance risk & investment)

Session 7 – Collaboration Decision Strategies When Should Firms Partner vs. Go Solo?

Whether a firm should collaborate or innovate independently depends on four key questions: 1. Does the firm have the needed capabilities in-house?

If yes  going solo may be better If no  partnering helps fill capability gaps.

Examples: • •

Apple Silicon: Apple went solo because it had strong internal technical capabilities.

Nintendo Switch: Nintendo designs internally

•

AWS: Amazon had the resources to build alone.

2. How important is protecting proprietary technology?

If tech is core/secret/competitive  go solo.

If tech is not highly sensitive  collaboration is safer.

Example: Tesla battery technology  internal = high control 3. How important is control over development & use?

If the firm needs full control over timing, direction, or quality  solo.

If flexibility is fine  partner.

4. Is the project key to renewing capabilities?

If a firm wants to build or renew core competencies, it may choose to go solo to develop expertise internally.

When Collaboration Is Better Firms collaborate to gain: Rapid access to capabilities & resources • • •

Faster development Shared technology Access to specialized knowledge

Increased Flexibility •

Useful in fast-changing tech markets

Risk & Cost sharing •

Especially important for expensive or uncertain projects

Shared Standards •

Helpful for industry-wide coordination (e.g., matter smart home standard)

Knowledge acquisition •

Companies learn from each other.

Different Types of Collaboration Structures & Their Benefits 1. Strategic Alliances A temporary or long-term agreement between firms to combine capabilities or share resources: Benefits: • • • •

Flexible Faster access to technology Lower cost than acquisition Knowledge sharing

Examples • •

Google & NASA Apple & IBM (enterprise apps)

2. Joint Ventures Two firms create a new, jointly owned organization Benefits: Shared cost, Shared risk, Strong alignment through shared ownership, Good when entering new markets or developing major technology.

Examples: Sony + Honda EV partnership 3. Licensing One company allows another to use its technology in exchange for payment.

Benefits: Low cost, Fast market expansion, More revenue streams Example: Universities licensing patents to startups.

4. Outsourcing Hiring another firm to perform certain activities.

Benefits: Lower cost, Access to specialized expertise, Frees the focal firm to focus on its strengths Example: Apple is outsourcing manufacturing to Foxconn 5. Collective Research Organizations Groups that share research efforts, often including: • • •

Universities Government labs Industry associations

Benefits: Shared R&D costs, Faster basic research, Access to cutting-edge academic work.

Examples: Trade associations, University-based research centers, Private R&D consortia Criteria for Selecting and Monitoring Partners To choose the right partner, firms evaluate: 1. Resource Fit  do the partner’s resources complement what we lack?

Ask: • • •

Do they bring technology we don’t have?

Are their skills and assets complementary?

Can our teams integrate effectively?

Example: BMW + Toyota collaborated on hydrogen vehicles because each brought different tech strengths.

2. Strategic Fit  Are our objectives compatible?

Consider: • • •

Do both firms have the same timeline?

Do they want similar outcomes?

Do they have similar work cultures?

If strategic fit is poor  collaboration often fails.

3. External Environment Impact Evaluate how the partnership affects: • • • • •

Customer power Supplier power Rivalry Threat of substitutes Threat of new entrants

4. Internal Impact Does collaboration: • • •

Strengthen our capabilities?

Solve weaknesses?

Create a competitive advantage?

Monitoring and Governance  to ensure a collaboration works, firms use: A. Alliance Contracts • Legally binding • Clarify rights & responsibilities • Provide remedies for violations B. Shared Equity Ownership • Both firms invest capital • Creates strong alignment through shared ownership • Reduces the incentive to defect C. Relational Governance • Based on trust • Self-enforcing • Enables deeper collaboration

•

Builds over time

Long-term suppliers in the automotive industry (Toyota-Denso) Session 8 – Intellectual Property (IP) Protection Strategies 1. What is Appropriability?

Appropriability = how well a firm can capture the value of its innovation.

A firm asks: “Can we keep others from copying us and stealing the value?”

What influences appropriability?

• • •

Ease of imitation (can competitors copy quickly?)

Inherent protection (is knowledge tacit or complicated?)

Legal tools available (patents, trademarks, copyrights, trade secrets)

2. Intellectual Property Protection Tools A. Patents  Patents give a company exclusive rights to an invention for up to 20 years.

Patentable things: Products, Processes, Machines, Chemical compositions Benefits: Strong legal protection, Blocks competitors, Helps capture returns on R&D Limits: Requires full public disclosure, Competitors may “design around” it, Patent thickets & lawsuits B. Trademarks Protect: Names, Logos, Symbols, Slogans Trademarks help: Build brand identity, prevent confusion in the marketplace, and maintain customer trust C. Copyrights Protect: Artistic works, Writing, Music, Software code, Videos, Photographs Lasts: life of author + 70 years. Allows fair use for education, news, and research.

D. Trade Secrets Protects information a firm keeps secret, such as: •

Recipes

• • • •

Algorithms Manufacturing processes Customer data Formulas (e.g., Coca-Cola)

Requirements: Must be secret, must be valuable, the firm must take reasonable protection measures (NDAs, secure storage) Benefit: lasts forever Risk: if leaked or reverse engineered  no protection.

3. When to Protect vs. when to share Innovation A. When to Protect (proprietary strategy) Use patents/ secrecy when: 1.

2.

3.

4.

Innovation is easy to copy  you need legal protection Competitive advantage depends on exclusivity  e.g., pharmaceuticals High development costs  firm must recover investment Technology defines the brand  protection maintains uniqueness (e.g., Dyson) 5. Control over compatibility is critical  firm wants control of complements, strict quality, brand identity Benefits of Protection: capture more rent, faster reinvestment, more control over technology & standards.

B. When to Share (Open Strategy/ Partial Open Strategy) Sometimes sharing creates MORE value than protecting 1. When rapid adoption is needed If the goal is industry-wide adoption: open standards, open APIs, licensing (help accelerate growth) 2. When complements matter Open tech  attracts developers, suppliers, partners Example: Android  open  massive app ecosystem 3. When a company lacks production or marketing capabilities If you can’t scale alone: let others build on your tech.

4. When technology requires industry coordination Example: UBS standard, matter smart home standard 5. When the strategic goal is ecosystem dominance More people using your system = long-term power.

Benefits of Sharing • • •

Faster diffusion More complements Collaborative development at low costs.

4. Factors that Help Firms Decide Between Protecting or Sharing Production and marketing capabilities: if you’re weak  sharing helps adoption.

Industry Opposition: if industry rejects proprietary tech  open it.

Resources for internal development: low resources  license or collaborate Need for standardization: open strategy helps avoid fragmentation Need for architectural control: if complements depend on your design  protect

5. Patent Battles & Why They Matter (CRISPR Case) CRISPR Illustrates: • • • •

Difficulty of assigning patent ownership Different rules across countries How patents can slow down innovation Importance of coordination (patent pooling)

This example helps justify when sharing patents can accelerate progress (e.g., medical breakthroughs)

Session 9 – Managing the New Product Development (NDP) Process

Aligning Innovation With Customer Needs Why this matters: Most new products fail because they don’t match what customers actually want. Over 95% of NDP projects don’t achieve economic returns.

Goal #1 of NDP: Maximize Fit With Customer Needs Firms must understand: What customers value, what problems they have, what frustrations they face, and how much they are willing to pay.

How to align innovations with customer needs: 1. Customer Involvement Ways to involve customers: • • • •

Beta testing (windows) App testing (chrono app) User co-creation (LEGO AFOL community) Gathering feedback early.

Benefits: • • • •

Better product/user fit Fewer redesigns later Reduces uncertainty Improves customer loyalty

2. Lead Users Lead users’ experience needs to be earlier than the market.

Examples: 3M Post-it Notes were created by a lead user inside the company.

Lead users = “market of the future.”

3. Tools for Understanding Customer Needs Tools like QFD help teams translate customer wants  engineering requirements.

Parallel Development & Faster Time-to-Market Goal #2 of NDP: Minimize Development Cycle Time Speed = competitive advantage

 faster sales  prevent competitors from catching up  reduce product cost Sequential vs Partly Parallel Development A. Sequential Process (Old Method) • One stage must finish before the next starts • Slow • Often results in redesigns later • Used heavily before the mid-1990s B. Partly Parallel Process (Modern Method) • Multiple departments work simultaneously • Reduces total development time • Allows earlier feedback • Makes problems visible sooner BUT: If later stages start too early,  can cause rework How Parallel Development Speeds Up Launches • • • • •

Shortens total development time Allows earlier validation with customers & suppliers Detects issues earlier Increases market responsiveness Critical in fast-moving industries (tech, electronics, gaming, consumer products)

Managing Development Costs Through Early Stakeholder Involvement Goal #3 of NDP: Control Development Costs  early involvement of stakeholders avoids expensive late-stage redesigns.

Stakeholders include: customers, suppliers, engineers, marketing, manufacturing, and product partners.

1. Involving Customers Early Reduces cost by: • • •

Catching misalignments early Avoiding unnecessary features Improving product-market fit

•

Reducing late-stage changes (which are very expensive)

2. Involving Suppliers Early Suppliers contribute • • • •

Technical expertise Alternative materials Cost-saving design input Timing and logistics advice

Benefits: lower costs, higher quality, faster development, and access to new technology.

3. Project Champions Champions: advocate for the project, secure resources, improve crossfunctional communication.

Risk: over-commitment or bias  firms should also assign anti-champions (devil’s advocates).

Session 10 – Advanced NPD Tools & Market Entry Timing Apply Key NDP Tools to Improve Efficiency These tools help firms: reduce time-to-market, cut development costs, improve product quality, and minimize failures.

1. Stage-Gate Process A structured process where development is broken into stages, each ending in a “gate” decision: Stages: 1. Idea generation 2. Scoping 3. Business case

4. Development 5. Testing 6. Launch Gate decisions: • • • •

Go Kill Hold Redirect

Why does it improve efficiency?

• • •

Catches failures early Prevents wasting resources Aligns cross-functional teams

2. Quality Function Deployment (QFD) Used to translate customer needs  engineering requirements.

Tool: House of Quality Includes: customer needs, importance ratings, engineering attributes, competitors’ comparisons, and design targets.

Why it improves efficiency: reduces misalignment, minimizes costly latestage changes, and ensures the final product satisfies customer needs.

3. Design for Manufacturing (DFM) Guidelines to design products that are easy & cheap to manufacture.

Examples of design rules: • • • • •

Minimize number of parts Use common parts Eliminate adjustments Avoid unnecessary fasteners Simplify assembly

Why does it improve efficiency? lower production cost, fewer errors, faster assembly, higher quality 4. Failure Modes & Effects Analysis (FMEA)

Structured method to identify: • • • •

potential failures their severity likelihood detectability

Calculates Risk Priority Number (RPN) = severity × likelihood × detection difficulty.

Why does it improve efficiency? prevents dangerous failures, prioritizes engineering effort, and reduces warranty/recall costs 5. CAD & CAM (Computer-Aided Design & Manufacturing) CAD = digital design CAM = automated manufacturing Benefits: rapid prototyping, lower cost iteration, faster redesign, extreme precision, mass customization possible

Market Entry Timing: First Mover vs Early Follower vs Late Entrant Understanding Market Entry Timing Companies must decide: should we enter the market early (first) or wait and follow?

There are 3 categories of entrants 1. First Movers (pioneers) Advantages: brand loyalty, technological leadership, ability to set standards, control over complements, access to scarce resources, can lock in customers early

Disadvantages: very high risk, uncertain customer preferences, expensive education/marketing, inferior technology (early versions often flawed), and high R&D cost 2. Early Followers Companies that enter soon after the first movers Advantages: avoid early mistakes, use first mover’s market education, enter with improved version, lower cost R&D, moderate risk 3. Late Entrants Enter when the market is already mature.

Advantages: learn from all others, low risk, use proven technologies, and compete on price or niche Disadvantages: hard to overcome network effects, fewer resources left, and little differentiation

Factors That Influence Optimal Market Entry Timing A firm should enter early if: • • • • • • •

customer preferences are clear Complementary goods are available Enabling technologies are mature The threat of competition is high The installed base is easy to build The firm can withstand early losses The firm has a strong reputation (reduces uncertainty)

A firm should wait if:

• • • •

Market uncertainty is high complements/enabling tech not ready First movers face big risks The firm needs more capability first