Innovation management has become an urgent need for researchers and firms to survive in the competitive world, where economic environment, market dynamics and emerging technologies are changing rapidly (Drejer, 2002). In my opinion, understanding the process of innovation management from beginning to end might facilitate finding more innovative solutions, as Schilling (2005) argues many innovative ideas may fail to commercialize because of wrong attempts done in the process. In this report, I will start discussing the innovation process by defining the product, process and service innovation and their relationships. After that, I will review sources of innovation to understand where the ideas come from and how they are linked to product, process and service innovation. Then, I will analyze the relationship between innovation and knowledge sharing to reach the sources of innovation. Afterward, I will continue to describe Stage-Gate model to comprehend how companies adopt innovative ideas and discuss team types used widely in innovative processes. Lastly, I will argue the Stage-Gate model in-depth to figure out the innovativeness level of it, because I think commercialization of innovative ideas has the potential to improve our daily lives and environment.
2. Reviewing Innovation Management
2.1. Product, Process, and Service Innovation
The product, process and service innovations have definitions differentiating each from others. Product innovation is about improving the tangible products in different levels, which can be seen as incremental improvements, additional features to product families, future products and inventive products (O'Sullivan and Dooley, 2009). Process innovation is about integrating innovation to key processes of the business, and it has a significant effect on not only decrease in cost and time, but also increase in quality and flexibility (Davenport, 1993). Service innovation is an adoption of novel services to the new or existing clients, or providing existing services to the new client (Damanpour, Walker and Avellaneda, 2009). Despite their distinctive definitions, they have interrelations. I will discuss these relations by comparing product and process innovation, and product and service innovation.
To begin, the product and process innovation might benefit from each other. The process innovation sometimes has an accelerator effect on product innovation of a firm by decreasing the errors and increasing the quality, or vice versa (Schilling, 2005). For example, a new production method is found for curing hair loss by the R&D department of a medical firm, and the new product is created with the help of this process. It means that the new developments in the process innovation can not only speed up the process, but also make the final product innovative in a radical way. Moreover, as Schilling (2005) states in the UPS example, in which more effective distribution system is seen as a product innovation by the firm, but a process innovation by the customers, product and process innovation can be perceived differently from different customer segments.
Moreover, as it was stated in the Lecture 2, product and service innovation have differences in terms of intangibility, simultaneity, and perishability (Dolfsma, 2015). According to O'Sullivan and Dooley (2009), the product innovation is tangible and it finishes after selling the product making the customer involvement less than the service innovation. Also, unlike service innovation, it can be stored in terms of perishability (Dolfsma, 2015). For instance, Samsung smartphones are perceived by the customers as tangible and nonperishable products, and they use these phones to the end of their life cycles without any expectation of development. However, the Android system used in these smartphones is perceived as a service, and they expect continuous development after the purchase. As it can be seen in this example, product and service innovation are linked to each other, and they can be used together in the same concept to benefit from each other.
2.2. Sources of Innovation
Product, process and service innovations require innovative ideas from different sources. In general, innovative ideas come from two sources; internal sources as employees and R&D units of the firms, and external sources as customers, non-profit organizations, suppliers, competitors, other nationalities, and research and development departments of the universities and governments (von Hippel, 1988). I want to discuss the usage of different sources in product, process and service innovation.
For the product innovation, customers can be considered as an important source for the manufacturers. Customers and manufacturers transfer the information to each other with several ways, such as customer surveys prepared by the manufacturers, field surveys done by engineers and scientists, or in-house demonstration surveys, and this knowledge sharing has scientific benefits for the customers and commercial benefits for the manufacturers (Riggs and von Hippel, 1994). To sustain the product innovation, I believe that including customers to idea generation process is essential because they are the ones who will use the product. If manufacturers fail to provide innovative, creative and real solutions, the product will not be commercially successful. For example, home appliances company wants to develop a new tea maker, but they need to understand customers' changing needs and problems related to existing products. If customers have their own solutions to prepare tea, for instance, manufacturers should focus on it, and it will help them to be commercially successful.
For the process innovation, customers and competitors can be seen as important sources. Davenport (1993) mentions that firms can develop innovative processes by building customer relationships and benchmarking. However, Davenport (1993) discusses that it is more difficult to get innovative ideas from customers. I agree with this idea since technical knowledge is an important factor for process innovation, but customers may not have this knowledge and be aware of the innovation process. However, firms can get more innovative ideas from competitors or firms in different sectors by collaborating and keeping updated, as seen in the example of improving order management process by benchmarking video conferencing in J.C. Penney fashion stores (Davenport, 1993).
For the service innovation, customers, other firms and employees can be considered as sources (Ordanini and Parasuraman, 2010). According to the findings of Ordanini and Parasuraman (2010), collaborating with business partners and customers has a significant role, and they give the example about how the comments of hotel customers improved the service design, and how this improvement inspired other business partners to improve their services. Moreover, ideas can be generated internally. For example, experiences of the employees can lead to service innovation (Ordanini and Parasuraman, 2010).
2.3. Innovation and Knowledge Sharing
As it is discussed in the previous part, innovative ideas may come from the outside of the firm, and sometimes inside of the firm. As van der Eijk (2015) discussed in the Lecture 6, if ideas are gained from inside and outside, it is called open innovation, whilst if the ideas are developed only inside of the firm, it is called close innovation. As it is discussed in the lecture, open innovation may be seen as a key for successful ideas, because it enables knowledge sharing that uses formal and informal networking to generate new ideas (van der Eijk, 2015). I will discuss advantages and disadvantages of open innovation, and continue with the importance of networking.
Advantages of open innovation are reducing the cost for R&D, accelerating the development processes of the firms, collaborating with customers, targeting true market, creating synergy with ideas from inside and outside, and viral marketing (van der Eijk, 2015). In my opinion, open innovation can help firms to understand the real problems of customers. With knowledge sharing, firms have better ideas about what is the need of the market, and they can use this knowledge to create more sustainable solutions. On the other hand, disadvantages of open innovation are losing competitive advantage by sharing knowledge, revealing confidential knowledge unintentionally, controlling problems because of complexity and adapting external innovation strategies (van der Eijk, 2015). To avoid these problems, firms need to find good solutions so that they can be organized more when collaborating. For example, they can create teams to control the system in an organized way. Also, when they are collaborating they can make detailed contracts with firms not to reveal information.
Although knowledge sharing creates innovative ideas, it is difficult for the firms to collect the ideas from internal and external sources, so, to overcome this problem, firms use formal networking including meetings, reports, team works, training programs, and IT systems (Ipe, 2003). Also, firms use informal networking, consisting of talking, listening and discussing in related activities like conferences or phone calls, to collect the ideas (Kobayashi, 1995). In addition, I think firms might organize other activities to collect the ideas from the employees. For example, they may carry out internal and external competitions, and they can build rewarding systems, such as giving incentives to motivate the employees.
2.4. Adoption of innovation: Stage-Gate Model
After discussing the ways to get the innovative ideas, it is important to move to the next stage for commercialization. As Schilling (2005) discusses, one of the common methods used by researchers and managers to adopt ideas is using the go/kill decision points. Stage-Gate Model by Robert G. Cooper is a common method with these points, which is especially used for new product development (Cooper, 2001). Therefore, I will describe this model in this part.
As it is seen in Figure 1 (Cooper, 2008, p. 215), this model includes five stages with defined plans and activities, and five gates with defined criteria, visible deliverables and outputs for go/kill decision making (Cooper, 2008). Also, each stage includes involvement of a project team or leader to carry the concept to the next stage (Cooper, 1990).
Figure 1: Typical Stage-Gate Model, Robert Cooper, 2008, p. 215, retrieved from http://onlinelibrary.wiley.com/doi/10.1111/j.1540-5885.2008.00296.x/pdf
Cooper (1990) explains the process as following:
Gate 1: The first go/kill decision is made in this gate as an initial screening. The criteria to make go decision are decided by the firms in terms of their strategy, the opportunity cost of the idea, its competitive advantage and so on.
Stage 1: It is considered as a low-cost stage. Some preliminary and secondary researches are done, such as user focus groups and library research to understand the feasibility of the project, the market need and the product potential.
Gate 2: Evaluation is done by using the information collected in Stage 1. Firms again assess their criteria including basic financial calculations to make go/kill decision.
Stage 2: The concept development finishes, and a detailed and technical analysis is done in this stage. It includes analyzing the requirements related to the operational process, like manufacturing, marketing and financial analysis.
Gate 3: This gate is used to understand whether the concept is worth to invest heavy money. The assessment is done according to the data collected in Stage 2.
Stage 3: It includes finalization of the concept in a very detailed way, where a new business plan, financial analysis and operational plan are done.
Gate 4: This gate is used to reassess the concept in terms of the degree of attractiveness and new financial analysis.
Stage 4: The whole concept is tested in terms of operational, commercial and financial ways. The idea is prototyped and tested, and the financial analysis is revised again before the launch.
Gate 5: After this gate, the process cannot be killed. For the decision-making, the financial analysis has a significant role, and also other data collected in Stage 4 is used for the assessment.
Stage 5: It is the implementation phase in terms of marketing, launch and operational plans.
Post implementation review: After commercialization, the concept is reviewed, and the data is created to use for the future projects.
Although this model is good to gain ideas, it has some controversial aspects. I will discuss the Stage-Gate model more in the in-depth research.
2.5. Team types
As I discussed in previous parts, collaboration is one of the keys for innovation. Teams, used for different purposes such as cross-functional teams in Stage-gate model, can be used to manage collaboration and innovation. Also, during idea adoption process, companies may need to use teams. Therefore, team types are another important topic to be discussed. I will discuss four team types, functional team, lightweight team, heavyweight team, and autonomous team, one by one, as we discussed in the Innovation Management lectures and tutors.
In the functional teams, each department of the firm works separately, where there is neither strong connection between departments, nor project manager (Schilling, 2005). As Schilling (2005) argues functional teams can be used for derivative work. I agree with this as derivative work do not require many creativity and risks on it. Also, they are really beneficial for the works with technical expertise for their department, which means tasks done by these teams are independent from other departments and this may harm unification of the company (Clark & Wheelwright, 1992). However,
In the lightweight teams, similar to functional teams, members are still from the same department, and junior or middle manager leads them, in which members give importance to their regular work more (Schilling, 2005). Although these teams are more organized than functional teams, there is a still problem of misconnection between departments (Clark & Wheelwright, 1992). These type of teams may help project manager or leader to show themselves, if they achieve a good work they can be appreciated from the firm. Still, there is chance that these leaders may be ignored (Clark & Wheelwright, 1992), because employees may not see the team task priority.
Heavyweight teams are senior project manager and members from different departments gather together to work full-time (Schilling, 2005). Because these teams are temporary, there may not be long-term development for members in terms of their career (Clark & Wheelwright, 1992). Still, these teams has communication between departments and are more organized than previous ones (Schilling, 2005). In my opinion, because of cross-relations between departments, it is more easy to share knowledge and it is something that improving the culture of companies.
In the autonomous teams, senior project manager and members from different departments are assigned to work together with the power of using resources from all departments, and they almost work independently from the firm (Schilling, 2005). Although they are really effective for the radical innovations, it may be difficult to adapt new product developments to the culture of the company (Clark & Wheelwright, 1992).
I think this functional and lightweight teams do not really facilitate to generate innovativeness, because exchange of knowledge is so difficult between departments.However, heavyweight and autonomous teams helps teams to innovate. Autonomous teams have a chance to generate something really creative and novel, so they may be better option for radical innovations. However, heavyweight teams can be seen as more consistent teams than autonomous one, therefore, they can work really well for incremental innovation.
3. Innovation and(Innovativeness of) Stage-Gate Model
So far, I discussed five main issues related to innovation and its relations to different topics, and my main aim was to understand how to manage innovation in a practical way. When I reviewed Stage-gate model, which may be seen as one of the effective tools to implement innovation, the question occurred in my mind about level of innovativeness of the model. I will argue this topic in this chapter.
Before discussing the arguable issues of this model, I want to point out some of its advantages. Stage-gate model allows companies not only to save time, but also to analyze the same process in different aspects with cross-functional teams in the same time (Cooper, 1990). Also, it is a simple and visible process, which is easy to adapt for companies (Cooper, 1990). Therefore, in my opinion, this model allows companies to implement innovation in a more organized way, and this model decreases the risk of failure as gates provide companies to question the concept in several times, where they have a five chance, or gates to kill the concept. However, as a designer, inflexibility of this model makes me think that to what extent this model allows companies to find creative and innovative ideas, especially in radical innovations.
To begin, first question came to my mind is who should be in charge or decision makers in this model. Although the system use certain rules and regulations defined by the companies, gate-keepers, leaders, and teams worked in this model decide whether they kill the concept in gates, in which they may misread the concept (Cooper, 2009). In general, senior managers having access the company sources with the cross-functional teams and project leaders are gatekeepers (Cooper, 2009). Gatekeepers generally have a limited time that may lead to not giving importance to gate meetings, and sometimes their decisions may be subjective because of their personal mindsets , in other words they do not give enough consideration (Cooper, 2008). Similarly, I think another issue may be derived from the fact that many of the senior managers may come from the business background, little from engineer background. Still, it is disputable that whether they have the creative and innovative mindset to make the judgment. As van der Eijk (2015) argued in the lecture 4, innovation is bringing invention into commercialized way, where inventions require creative thinking (Becker and Whisler, 1967). Therefore, I think it is important that gatekeeper teams have a creative or design mindset. This may be done by giving them some design thinking trainings, before they start to work as gatekeepers. Another way may include having members with more charge in teams with these skills, in which they may reflect their thinking on decision-making process in gates.
Moreover, companies may construct a very bureacratic Stage-gate models, where deliverables prepared in stages may be too wide and too much for gatekeepers, trying to adapting every activity to each stage (Cooper, 2008). These kind of attitudes may complicate the process. I think, to find innovative ideas, companies should give really importance to have a clear model. Maybe it may take time for them to prepare the model, still it will reduce the errors and because gatekeepers do not need to worry about bureacratic problems, they can easily focus on the developing the concept.
Furthermore, whether this model create innovative solutions only in product innovation or it has an innovative effect on process and service innovation are one of the contested issues. In my opinion, it may be hard to adapt five-phase Stage-Gate model to all types of innovations. However, as Cooper (2009) argues, there is no more one model anymore, and there are modified Stage-gate models applied by companies work for research, process and platform developments. As it is seen in Figure 2 (Cooper, 2008, p. 223), there are next generation stage gate models: Stage-Gate Xpress model can be used for more moderate projects abd Stage-Gate Line can be used for small projects, which makes the process more flexible and adaptable than before. Therefore, it can be said that with this modified models, companies can generate innovative ideas for different innovation types. For example, according to results of research done by Ettlie and Elsenbach (2007), they found that some companies use modified Stage-Gate models for the process developments. Also, in service innovation, this modified models can be seen as a good method to generate new service designs for companies, in which companies can work in a more organized way and it decreases the error during development (de Brentani, 2001). As a result, it can be assumed that different types of Stage-Gate models can be used for different developments, but still companies need to be really careful about which model they need to adopt. For example, if it is used for process innovation, companies may need to focus on other things in stages rather than market needs, or it may not need to be five stage for them, where they can save time. For the service innovation, maybe post-implementation stage may need to have more importance as service design might have incremental developments after launching them. Besides, for incremental developments on the same service, companies may not need to start over in Stage-gate process.
Figure 2: Next Generation Stage-Gate Model, Robert Cooper, 2008, p. 223, retrieved from http://onlinelibrary.wiley.com/doi/10.1111/j.1540-5885.2008.00296.x/pdf
All in all, Stage-Gate model can be used for generating innovative ideas. However, companies need to be really careful about their decisions about choosing gatekeepers, preparing good deliverables to avoid bureacracy, and selecting the appropriate model for them.
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