Innovation product management Question

Read 4 readings and answer the following questions in a 2-3 page Word document:

What are the stage gates in innovation product management?
Complete research online and find a company that implemented a new product within the past five years. Note what the product was and how the organization implemented the product. Note how the product aligned with the company's strategy.
MUST be formatted in APA Style 7th edition.
MUST follow the written assignment rubric.
MUST provide 0% of AI detention and plagiarism report.

South African Journal of Industrial Engineering November 2019 Vol 30(3) Special Edition, pp 199-209

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A FRAMEWORK FOR SUCCESSFUL NEW PRODUCT DEVELOPMENT

C. Pienaar1*, E. van der Lingen1 & E. Preis1

ARTICLE INFO

Article details Presented at the 30th annual conference of the Southern African Institute for Industrial Engineering (SAIIE), held from 30 September – 2 October 2019 in Port Elizabeth, South Africa Available online 15 Nov 2019

Contact details * Corresponding author [email protected]

Author affiliations 1 Department of Engineering and

Technology Management, Graduate School of Technology Management, Faculty of Engineering, Built Environment and IT, University of Pretoria, South Africa

DOI http://dx.doi.org/10.7166/30-3-2239

ABSTRACT

To exploit the competitive advantage of a core competency, such as new technology development, an organisation must be capable of developing that technology efficiently and effectively. The purpose of this research was to study the new product development success and failure factors in a chemical company, and recommend improvements to the existing new product development framework. The study is significant in that new product development performance needs to be improved to remain competitive in the current economic and environmental climate. The same new product development model is applied to all projects in the company under investigation. A preliminary investigation suggested that the success rate of these projects fluctuates significantly. Qualitative case study research was conducted through semi- structured face-to-face interviews. A thematic approach was used to organise and interpret the interview data. As the data was coded, several sub-themes emerged, and from these themes critical success factors and critical failure factors were identified. All of these factors were discussed and compared against the literature for relevance. The critical success factors and critical failure factors were divided into three categories: input requirements, stage kick- off guidelines, and continuous prompts. In this format these factors are recommended as potential improvements to the organisation’s existing new product development framework.

OPSOMMING

Om die mededingende voordeel van 'n kernbevoegdheid, soos nuwe tegnologie-ontwikkeling te benut, moet 'n organisasie die tegnologie doeltreffend en effektief kan ontwikkel. Die doel van hierdie navorsing is om die nuwe produkontwikkelingsukses en – faktore in 'n chemiese maatskappy te bestudeer en verbeterings aan te beveel aan die bestaande nuwe produkontwikkelingsraamwerk. Die studie is beduidend deurdat nuwe produkontwikkelingsprestasie verbeter moet word om mededingend te bly in die huidige ekonomiese- en omgewingsklimaat. Dieselfde nuwe produk- ontwikkelingsmodel word toegepas op alle projekte in die maatskappy wat ondersoek word. Voorlopige ondersoek het voorgestel dat die sukseskoers van hierdie projekte aansienlik wissel. Kwalitatiewe gevallestudie-navorsing is uitgevoer deur middel van semi-gestruktureerde aangesig-tot-aangesig onderhoude. 'n Tematiese benadering is gebruik om die onderhouds- gegewens te organiseer en te interpreteer. Namate die data gekodeer is, het verskeie subtemas na vore getree, en uit hierdie temas is kritiese sukses- en kritiese mislukkingsfaktore identifiseer. Al hierdie faktore is bespreek en vergelyk met die literatuur vir relevansie. Die kritiese sukses- en kritiese mislukkingsfaktore is in drie kategorieë verdeel: insetvereistes, fase afskop riglyne, en deurlopende vrae. In hierdie formaat word hierdie faktore aanbeveel as moontlike verbeteringe aan die organisasie se bestaande nuwe produkontwikkelingsraamwerk.

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1 INTRODUCTION

The global economic downturn motivates companies to scrutinise their research and development (R&D) budgets. R&D is always an attractive target for budget cuts during downturns, since it does not produce cash directly. Development groups are mistakenly asked to cut costs across the board, to ‘spread the misery’ in a fair way [1]. Since the collapse of the crude oil price, chemical companies have been under severe pressure. The operating profit of the company studied here fell by 48 per cent in the 2016 financial year (FY16) due to difficult and unpredictable global markets. This company embarked on a strategy to cut costs from 2012, which enabled it to sustainably endure a lower-for-longer oil price environment [2]. Companies should use the challenging economic environment as an opportunity to improve their R&D focus, practice, and management. The aim should not only be to cut costs, but also to increase productivity, speed up time to market, and position the organisation for greater success in future [1]. Cost cutting induces a resource crunch, and this could be crippling to new product development (NPD). It leads to projects taking too long to market, under-performing new products, and portfolios that contain numerous low-value projects. To endure and overcome economically challenging times, NPD resources should rather be managed and allocated strategically, tactically, and via proper portfolio management [3]. NPD is seen as the activities that can convert ideas, market opportunity, and a set of assumptions about a certain technology into a product available for sale [4, 5]. It is vital for organisations to perform NPD effectively and efficiently in order to stay competitive in today’s economic and environmental climate. Initial indications showed that the success rate of NPD in the company under investigation can fluctuate considerably, even though the same NPD management model is applied to all projects. A 2011 US benchmarking study showed that new products launched in 2008 accounted for 27.3 per cent of company sales at the time of this study [6]. A survey of executive opinion also showed that innovation is now the foremost driver of organisational growth and success. Fifteen years ago, the number one driver was cost cutting. This benchmarking study also revealed that only 53.2 per cent of NPD projects meet cost performance targets, and only 44.4 per cent stay on schedule [6]. It has been shown that ‘the best’ firms use NPD tools more often than ‘the rest’; however, their success rate has not increased above 61 per cent in the past 25 years [7]. It seems that there is some disconnect between the use of NPD tools and the success rate of NPD projects [8]. In this study, the aim was to determine whether project success can be linked to certain common elements, and to ensure that these elements are captured in the NPD governing tool that is relevant to the company under investigation. Several critical success factors (CFS) and critical failure factors (CFF) could be identified, which are not explicitly captured by the current NPD process.

2 THEORETICAL BACKGROUND

Product development is the sum of many factors, such as an organisation’s development strategy, the culture of the organisation, the resources available, and the chosen NPD model. NPD models are tools that govern and play a central role in the product development process [9]. Several NPD models — such as stage gate, agile, and lean — exist today, and are at times combined into hybrid versions [10]. When assessing the NPD performance of a company, it is important to understand what NPD models are available and may be employed by the company.

2.1 NPD process

Many scholars have claimed that a formal NPD process is only suitable for incremental product improvements, and is less beneficial for radical innovation. Griffin, Price, Vojak and Hoffman [11] proposed that such statements are made when the impact of the fuzzy front end (FFE) of innovation is disregarded. The FFE is the chaotic, messy up-front stage of innovation, prior to the formal NPD process. With incremental improvements, the FFE is evolutionary or non-existent. Therefore it appears that formal NPD processes are more suited to these types of innovation. For radical innovations, it is important that sufficient time and focus is allocated to the FFE, and that the transition from the FFE to the formal NPD process is managed properly [11].

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The literature shows that following a formal NPD process is one of the main best practices applied by top companies. There are, however, various types of NPD process, and no one type consistently outperforms the rest [5]. Top performing companies ultimately distinguish themselves by learning from others, adapting practices to their own needs, and seeking continuous improvement [10]. An innovation culture is required in which failure is understood, and learning through failing-forward is valued [12]. The question is not whether stage gate, agile, or lean is the best NPD process, but rather what blend of practices suits a company best [10]. The chemical company being studied in this research project already employs a structured NDP process — the stage gate model. Stage gate is a highly disciplined NPD model that follows a sequential process with a strict order of activities. The process starts with idea generation, progresses via formal gate reviews, and is completed when the product is launched [10]. Having a formal NPD process is likely one of the main contributing factors to the company’s success in technology development. Stage gate was introduced in the 1980s to improve new product management in the face of increasing competition, maturing markets, and the increased rate of technological change. It is both a conceptual and an operational model for transferring a new product from idea to launch [13]. When the stage gate model was introduced, it became the second-generation NPD process at that time. The first-generation NPD process was NASA’s phased project planning (PPP) process, commonly referred to as the ‘phased review process’ (PRP) [14]. Over the years, the stage gate model evolved through various successive generations, as innovation evolved from a simple, linear technology push to a more integrated balance between technology push and market pull, with interaction between stakeholders and stages [15]. The second-generation model was updated to include practices of fluidity, adaptability, conditional and situational fuzzy gates, a sharper focus on resources and management of portfolios, and more flexibility. Through these updates, the third-generation NPD process was established [16]. The most recent update to the stage gate model is the collaboration with the agile model, which originates from the information technology industry. The traditional linear stage gate model cannot support the iterative cycles and external collaboration required for today’s evolving NPD processes. A hybrid process, combining elements of agile and stage gate models, offers more flexibility [17]. This update may be the most exciting and noteworthy change to NPD processes since the introduction of gating systems more than 30 years ago [18]. The organisation studied here uses a stage gate model that is most similar to the second-generation NPD model (Figure 1).

Figure 1: The stage gate model, as used by the company under investigation

2.2 NPD best practices

NPD benchmarking studies are often used to identify industry best practices. These are practices that are consistently prevalent in best-performing businesses. They enable more efficient and effective delivery of new products, and may be the distinguishing factor between success and failure [5]. It is therefore vital to know what these practices are, and to establish whether an organisation follows or lacks such practices.

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The following factors for successful NPD are noted in various literature reviews and benchmarking studies [7, 19-26]:

 NPD strategy: This establishes a vision and focus for R&D product development and technology management efforts (aligned to the overall company strategy, vision, and focus).

 Company or innovation culture, people, and project climate: To promote product development thinking and collaboration with external associates, clientele, and suppliers.

 Market research: To understand competitors, customers, and external forces in the marketplace.

 Front end innovation practices: To understand customer needs via formal processes for idea assessment and open innovation.

 Portfolio management: To select projects and to ensure on-going balancing across projects.

 NPD process (stage gate, agile, lean, etc.) and commercialisation: To drive new product development, adopt flexibility, and have management understand and support the new products process.

 Metrics and performance evaluation: To measure, track, and share the product development project and programme performance.

Numerous auditing tools have been developed to assess an organisation’s NPD performance against best practices [5, 25, 27-30]. Some of these tools are deployed by experienced consultants or practitioners, while others are fully available in the open literature for self-assessment. An opportunity and need exists to evaluate the NPD performance of selected projects of the chemical company in question against the literature and industry best practices. NPD auditing tools and best practices are available in the literature to use as a basis for this evaluation.

3 METHODOLOGY

Qualitative case study research was selected to investigate this research problem. This method allowed the researcher to explore the phenomenon within its context, via a variety of data sources. Due to its flexible and rigorous nature, this approach is well-suited to developing theory, evaluating programmes, and developing interventions [31].

3.1 Sampling

The target population of this study is projects from a South African chemical company — particularly projects in the research and technology business unit involved in developing technology offerings via the stage gate process. The targeted sample consists of four projects that have passed through gate D (Figure 1) in the past 10 years. Two of the projects are deemed successful by the organisation, and two unsuccessful. Purposive non-probability sampling was used for this study.

3.2 Compiling interview questions

Interview questions were compiled based on the literature studied, focusing specifically on NPD best practices.

3.3 Gathering case study information

To preserve anonymity, generic identifiers were allocated to the respondents, such as Participant A, B, C informing on Project A, B and C. To engage fully with the respondents, each interview was recorded. After each session, the interview was transcribed and coded before the next interview was conducted.

3.4 Data analysis

A thematic approach was used to organise and interpret the interview data, using qualitative data analysis software (Atlas.ti). The data was cut and arranged into meaningful units of interpretation by inductively looking for key phrases, terms, and practices. This allowed themes to emerge from the data that could be matched to existing themes from the literature [32].

3.5 Validity

Generalisability was established by comparing the research results with relevant literature, and using multiple cases to replicate the results [33]. Respondent validation was also used to afford participants the opportunity to check the results for inconsistencies and to challenge the

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researcher’s assumptions [34]. This was done using a focus group session in which feedback on the interview results was shared.

4 RESULTS AND DISCUSSION

At the start of each interview, the participant was asked to describe why they believed the specific project could be classified as either successful or unsuccessful. This information was used to establish why these projects were classified as they were (Table 1). The successful projects studied here met most of the criteria for success, whereas the less successful projects did not necessarily meet all or most of the criteria. Project D most recently passed through gate D, and is still in the process of being implemented on a commercial scale.

Table 1: Attributes of success of each project studied for this work.

Attribute of success

P ro

je c t

P ro

je c t

P ro

je c t

P ro

je c t

Intended scope implemented    

Implemented/commercialised on time and on budget    

Meeting intended performance targets   1 

Economics, creating/adding value through the project    2

1) Only after resolving many issues on commercial implementation. 2) Not yet commercially implemented.

The interview discussions were guided along six dimensions or themes (Figure 2) that the literature showed to be important to NPD success. The findings from the dimensions of Company Culture and Project Climate were combined into one theme. As the data was coded, sub-themes were identified within these themes along with several CSFs and CFFs (also shown in Figure 2). CSF #1: Resource balancing Projects can struggle despite high prioritisation, sometimes even receiving too many resources. Initial low prioritisation can, on the other hand, be beneficial to a project and enable success. This is achieved by allowing the project team to do sufficient ground work with a low resource spend, which sets the team up for success in later development stages and for rapid commercialisation. CSF #2: Relationship management Good market research and fostering good relationships with all stakeholders (potential customers, joint venture partners, suppliers, and business sponsors) is vital to success. It includes fostering a good relationship, maintaining good communication, and ensuring that customer needs are properly understood. It also includes managing the way contracts are set up and enforced. Having proper contracts in place is essential, but it should not be a substitute for relationship. CSF #3 and 4: Appropriate concept testing and understanding risk Establishing an appropriate scope for concept testing and understanding the project risks enables success. If concept testing is not properly scoped, key scale-up issues may not be identified; this may severely impact cost and schedule later in the project. It is important to follow a structured risk identification process in which all relevant stakeholders are involved, to ensure that all crucial risks are identified and receive the correct priority for risk treatment. CSF #5: Flexible NPD process Flexibility in the NPD process and frequent discussions are enablers of project success. It is beneficial to involve customer inputs, at least to some extent. When targets are updated as development progresses, it is important also to include customers in these decisions. CSF #6: Interim reviews Interim reviews are an important tool to keep stakeholders informed of project progress, so that they receive input to enable the project to stay on course. If customer needs change or were not defined correctly in the first place, the interim review will serve as a platform to identify this discrepancy.

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Figure 2: Themes and sub-themes identified from interview data, coupled with the CSFs and CFFs identified from the data

CSF #7: Minimise commercialisation time Commercialisation time should be minimised as much as possible. The project may become misaligned with company strategy when it is delayed and the company is not deriving value from it. The market conditions may also change and render the project business case less favourable. CSF #8: Team capability Team capability and the attributes and management of the team are vital to project success. Having an engaged team in an organisation that fosters engagement is important to outperforming competitors. CSF #9: Managing development cost Tracking project value-add throughout development is becoming increasingly important. Clear targets should be set on the allowable development spend to ensure that development cost does not outweigh the value it adds to the organisation. Proper portfolio management should be applied in selecting which development projects to pursue. CFF #1: Lack of visionary leadership Continued visionary leadership or business support is required for NPD to succeed through all its development phases. Fostering good relationships with the business sponsor and meeting development targets aids in sustaining business support and remaining aligned with the business strategy. CFF #2: Poor collaboration with external partners External collaboration is required to gain a competitive advantage through leveraging the capabilities of external suppliers and customers via collaboration. A company seldom possesses all the capabilities required in a NPD project. Today, when short commercialisation times are vital to success, it is important to be able to leverage external capabilities rather than developing these capabilities internally. CFF #3: Adjusting unmet targets While flexibility in the NPD process is important, one should take care not to adjust the original targets when they seem to become unattainable as development progresses. This will erode the

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project value-add, and might allow the team to settle for less than what can truly be achieved. On the other hand, adjusting targets through continuous interaction with the customer can ensure that customer needs are still understood, and can be met when the project is complete. The CSFs and CFFs that were identified are summarised in Table 2, showing their links to the four NPD projects studied here.

Table 2: CSFs and CFFs for NPD, derived from the data

Project Attribute

P ro

je c t

P ro

je c t

P ro

je c t

P ro

je c t

CSF #1a: Correct amount of resources at the correct stage  1  

1  CSF #1b: Sufficient front end time, at low resource intensity



CSF #2a: Understanding customer needs   CSF #2b: Good communication and relationship with stakeholders    CSF #2c: Contract management    

CSF #3: Appropriate concept testing   

CSF #4: Correct scope definition and understanding of risk   

CSF #5: Flexibility in execution of the NPD process  2  

CSF #6: Interim reviews to track and discuss progress    

CSF #7: Short commercialisation time   

CSF #8: Capabilities and attributes of team members   CSF #9: Maintain development cost as a function of project value

CFF #1: Lack or loss of visionary leadership  

CFF #2: Poor collaboration with external partners  

CFF #3: Adjusting targets once original targets appear to become unattainable    

1) Received high priority and many resources at first, but resources were reallocated to tend to a commercial crisis.

2) Flexibility helped, but also allowed the team to adjust the target and reduce the value proposition.

To replicate the success that was unlocked by the CSFs identified in this study, and to avoid the failures caused by the CFFs in these projects, improvements to the existing NPD framework are recommended (Figure 3). The recommendations are divided into three categories: input requirements, stage kick-off guidelines, and continuous prompts.

4.1 Input requirements

 CSF #8: Team capability Internal coordination may not necessarily be ensured with the use of a NPD tool. It may, however, be promoted by assigning experienced or well-suited project leaders and providing them with the necessary training in skills, such as breaking down complex problems and integrating numerous tasks to form a coherent whole. It is also advantageous to have at least a few experienced team members on a project to ensure that these skills are transferred to less experienced individuals. It is therefore recommended that the organisation studied take care when selecting project leaders and teams, and provide training where necessary.

4.2 Stage kick-off guidelines

 CSF #1: Resource balancing It is proposed that a recommended resource load per stage, and per project, be given. This resource load should be based on the allowable development cost and complexity of the project. Lower resource intensity and more freedom should be given during front end development phases.

 CSF #3 and 4: Appropriate concept testing and understanding risk Good market research and customer participation are much more beneficial when a team has the ability to absorb the information and transform and assimilate it in order to derive knowledge from it. Assimilating market research and customer requirements is one of the ways in which project risks can be identified, understood, and subsequently fed into the scoping of concept tests so that these risks are addressed. It is important, at least at the start of each phase, to establish what is in scope and what is out of scope.

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Figure 3: Recommended improvements to the NPD framework of the organisation studied in this research project

 CSF #5: Flexible NPD process As new information comes to light when development progresses, the team should be flexible enough to review the new information critically and to decide whether the scope or targets need to be adjusted. It is recommended that the team discuss and agree on an approach to flexibility at the start of each phase.

 CSF #6: Interim reviews Interim reviews are useful platforms to share progress and keep stakeholders informed. It is also a good place to have frank discussions and agree on the next steps when sub-optimal results have been achieved. It is recommended that the frequency of interim reviews be established at the start of each phase.

 CSF #7: Minimise commercialisation time NPD best practice studies showed that overall development times, and especially commercialisation times, are continually being shortened. To remain competitive, it is recommended that this organisation take note of typical development times in comparable industries, and use these as guidelines for each phase of NPD projects. Commercialisation strategies and plans should be devised in parallel with later development stages of the product, so that the commercialisation phase is merely a stage of execution.

 CSF #9: Managing development cost Tracking allowable development cost is shown in grey in Figure 3, since it has already been implemented in this organisation’s NPD framework subsequent to the projects studied in this research. However, it is still shown in Figure 3, as it is seen as an important CSF.

4.3 Continuous prompts

 CSF #2: Relationship management Relationship management with various stakeholders, such as potential customers and business sponsors, stood out as a significant CSF. It is recommended that the NPD project team regularly be prompted to keep their stakeholders up to date on project progress and ensure that the relationship remains a positive one.

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 CFF #1: Lack of visionary leadership or business support One way to foster good relationships with business sponsors is to ensure that the project team continue offering enticing solutions to business problems. Visionary leadership, however, is more challenging to obtain, since it often has more to do with individual characteristics than an outstanding NPD framework.

 CSF #4: Understanding risk CSF #4 has already been listed as a ‘stage kick-off guideline’, but is also deemed necessary to be included as a ‘continuous prompt’. As development progresses, new risks may arise, or may even be introduced by the choices the project team makes. It is recommended that risk identification, analysis, and mitigation discussions be held regularly with the necessary stakeholders.

 CFF #2: Poor collaboration with external partners It seldom happens that an organisation possesses all the skills to complete all their projects. Developing certain skills in-house can take a long time, or bring about hefty carrying costs. It is recommended that the project team be prompted regularly to evaluate whether any of their tasks can be performed more efficiently by an external partner, while taking the cost and schedule impact of this external collaboration into account.

 CFF #3: Adjusting unmet targets It has been demonstrated in this work that adjusting unmet targets can be detrimental to a project’s success, while evolutionary targets — developed in collaboration with a customer — can work well for a project. It is therefore recommended that the project team be regularly prompted to review their progress towards their targets. If they need to adjust these targets, the team must ensure that they have the business support to make such changes.

5 CONCLUSION

The CSFs and CFFs identified and discussed in this study show that certain elements contribute to project success that are not necessarily explicitly captured in the current NPD framework of the organisation studied. Some of these elements are present in third-generation NPD models (i.e., fluidity and adaptability, conditional and situational fuzzy gates, sharper focus of resources and management of portfolios, more flexibility), and in lean development (i.e., continuous customer interaction). It was suggested that the question is not whether stage gate, agile, or lean is the best NPD process, but rather what blend of practices suits a company best [10]. Therefore updates to the existing NPD framework (to improve NPD success) are proposed, rather than recommending the implementation of an entirely new NPD model. These updates were divided into three categories — input requirements, stage kick-off guidelines, and continuous prompts.

6 RECOMMENDATIONS

It is important to reiterate that the findings of this study are based on the case study research of a very small sample of projects. To establish external validity, the results were compared with various literature sources. At this stage, respondent validation was used to establish reliability. Future research should include a larger sample of projects, and possibly extend the target population to several companies.

ACKNOWLEDGEMENTS

Competing interests The authors declare that they have no financial or personal relationships that may have inappropriately influenced them in writing this article. Author contributions C.P. conducted the research and wrote the article. E.v.d.L. and E.P. supervised the project, and provided inputs to the research approach and interpretation of the data.

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Disclaimer The views expressed in the submitted article are those of the author and are not an official position of the institution or funder.

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Citation: Berényi, László, and László

Soltész. 2022. Evaluation of Product

Development Success: A Student

Perspective. Administrative Sciences

12: 49. https://doi.org/10.3390/

admsci12020049

Received: 18 March 2022

Accepted: 12 April 2022

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administrative sciences

Article

Evaluation of Product Development Success: A Student Perspective László Berényi 1,* and László Soltész 2

1 Institute of Management Science, University of Miskolc, H3515 Miskolc, Hungary 2 Institute of Machine and Product Design, University of Miskolc, H3515 Miskolc, Hungary;

[email protected] * Correspondence: [email protected]; Tel.: +36-4656-5111 (ext. 1773)

Abstract: The time pressure on new product development under unpredictable conditions requires the renewal of the project management approach that suggests the prominent role of project man- agerial competencies in achieving project success. Project management education must be adjusted to understand students’ opinions in the field. The study uses a survey among Hungarian engineer- ing, business, and IT higher education students. The analysis aims to explore opinions about the main barriers to successful product development projects, and the expected ways of regulating the project by ANOVA and principal component analysis. The responses of 126 students confirm the appreciation of management competencies. Gaps in team composition, inadequate communication, common changes in the plans, and the lack of experience in similar development tasks are considered to be the main contributors to product development project failures. Collaboration and competition with external partners were found to be less essential factors. Students believe that regulation of the work is necessary, but the project team should be trusted to establish it. Beyond developing the curricula, the experience of this study can promote the successful execution of collaborative projects between companies and higher education institutions. It can establish expected student competencies to quickly become effective project team members.

Keywords: new product development; project failure; project management competencies; student opinion; ANOVA; principal component analysis

1. Introduction

The traditional methods in project management are increasingly outdated. The mar- ket needs new products faster than ever before, and competition between companies is intensified. The accelerated changes lead to unpredictable product requirements and lead times. Reducing the lead time of a new product can be complicated as much by keeping the quality of deliverables and cost constraints as by the iron triangle of project management (Pollack et al. 2018). Companies with industrial products aim to support their customers to increase their performance (Kärkkäinen et al. 2001), but the time urgency causes uncertainty and difficulties. The new conditions affect the related project management approaches and methods. Integrated product development (Vajna 2020) offers the coordination of the related activities from market analysis to sales. Agile tools allow a better focus on cus- tomer orientation. Agility in project management becomes general, going beyond software development in line with embedding lean principles in operation. Product development models have long shifted from the traditional predictive to an iterative or incremental project approach, however, the development is ongoing.

Although project management methods are widely available and industry-specific procedures, application success significantly depends on the approach and skills. Successful product development projects are available through carefully selected and applied project management methods accepted by all affected stakeholders. The increasing complexity

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Adm. Sci. 2022, 12, 49 2 of 17

of the products is perceptible, and that, together with the characteristics above, raises the need for the collaboration of several professions. Knowledge integration capability (Todorović et al. 2015) and managing the interdisciplinary composition of the project team (Henson et al. 2020) are key factors of sustainable project success. Armenia et al. (2019) offer a framework of sustainable project management based on five key dimensions, including corporate policies and practices, resource management, life cycle orientation, stakeholders’ engagement, and organizational learning. The concept of connected leadership (Hayward 2016) can be applied to the project management challenges:

• purpose and direction: a common understanding of the project goals is worthwhile, • authenticity: a trusting relationship among the project team members and the stake-

holders allows for integrity; • devolved decision-making: authorization of the team members can speed up prob-

lem solutions; • collaborative achievements: project outcome is the result of shared efforts, and effective

performance requires collaboration; • agility: adaptation to the changing requirements is required in line with the purposes.

The duty of a university can be marked as developing human capital; in particular, its purpose is to prepare the students for their future managerial and employee roles (Bejinaru et al. 2018). An exceptional opportunity is opened if higher education students work on real projects. Pilot projects that involve engineering and management students are excellent instruments for testing new solutions and finding the development gaps.

Improving the collaboration of universities and corporations in product development has several benefits (Soh and Subramanian 2014; Un and Asakawa 2015; Apa et al. 2021). Ad- ditional knowledge, laboratory capacity, management skills, and tools can be complemented temporarily or permanently. Flexibility can be achieved by long-term cooperation. Beyond the direct benefits according to the actual deliverables of the projects, the experience can be used to develop the students’ skills through a more practice-oriented curriculum in project management. These students will enter the labor market with ready-to-use knowledge.

The research can contribute to preparing the engineering and management students for project tasks. Exploring the students’ approach to project management is an essential part of this learning process. The goal of the study is to explore the students’ opinions about new product development success factors through a voluntary online survey.

The next sections are organized as follows. Section 2 presents the literature review of the topic, focusing on the key issues related to the survey development. Section 3 shows the research questions and the methodology. Section 4 deals with the discussion of the results, and Section 5 summarizes the conclusions. An appendix includes the main results of the analysis.

2. Literature Review 2.1. Approach to New Product Development

New product development has been in focus for a long time (Karakaya and Kobu 1994; Jones and Stevens 1999; Lewis 2001; Derbyshire and Giovannetti 2017; Iqbal and Suzianti 2021). Based on literature reviews and analysis of product development case studies, the success factors and the process approaches are traceable. Regardless of the technical characteristics of the given era, studies agree that new product development bears a higher risk than other projects. The main characteristics of new product development are high uncertainty and high complexity that can have a negative impact on the product development performance (Ahmad et al. 2013).

There is a significant agreement that a predictive approach to product development is no longer appropriate; adaptive solutions are required. The PMBOK standards (PMI 2017, 2021) distinguish predictive, iterative, incremental, adaptive, or hybrid development approaches. A predictive (also called traditional) approach with a waterfall planning of the tasks is feasible when the project and product requirements can be defined, collected, and analyzed at the start of the project (PMI 2021). Iterative and incremental (also called

Adm. Sci. 2022, 12, 49 3 of 17

adaptive) approaches fit the uncertain conditions better. Iterative work organizing can be preferred if deliverables are not required before finishing the project, while incremental life cycles deliver more often than a single final product. Hybrid approaches aim to change the behavior with the current requirements. Customized models of new product development reflect well the basic approaches above. Integrated Product Development models (Table 1) can give an industry-independent comprehensive framework (Gerwin and Barrowman 2002; Vajna 2020).

Table 1. Integrated Product Development models.

Model Main Focus Conditions Utilization

Olsson (1985)

Project management Review of the economics of all

activities Parallel processing of

equivalent tasks Integration of tasks

Pioneer of the integrated product development

process

Integrative approach Project orientation

Teamwork

Andreasen and Hein (1987)

The parallel design of product versions

Using CAD solution

A stable market environment is needed

Time-saving through parallel tasks

Ehrlenspiel (1991) Integration of personal,

informational, and organizational levels

Flat organizational structure and

management are needed

Exploiting human resources

Improving motivation

Meerkamm (1995) Integration through IT Flexible organization

Design for product life cycle

IT integrated performance of project

tasks

Ottosson (1996) Reduced development time Focus on product specification

Changing conditions during the project

realization

Flexibility through framework thinking

Magdeburg model by Burchardt

(2001)

Holistic approach Human-centered development

Process parallelization available Available

communication

Benefits of human-centered

thinking Network as a dynamic

organizational form

A synthesis of the achievements of product development models is to be found in Autogenetic Design Theory (Vajna 2020), by integrating the benefits:

• Marketing, product, and production task integration with management focus accord- ing to Olsson (1985) and Andreasen and Hein (1987);

• Simultaneous optimization of the product and its production processes, according to Ehrlenspiel (1991);

• Collaboration of human, organization, technology, and methodology, according to Meerkamm (1995);

• Dynamic product development of Ottosson (1996) for reacting quickly to changing conditions.

The enhancement of product development process approaches in recent decades shows that the scope of project management responsibility moved from the narrower engineering issues to considering the changing requirements and environment. However, the essence of product development remained the output of the project; the understanding of success needs a more comprehensive approach.

2.2. Project Success

Project success can be described by the iron triangle model that gives the triple bottom line of success as scope, time, and cost constraints in a simple way, but there has long been a consensus that the contribution to corporate strategy and stakeholders’ satisfaction must be considered (Görög 2019; Verzuh 2021). Moreover, intensity, extension, and predictability of the environment force a change in strategy and strategic management (Deutsch et al. 2017), leading to the need for a continuous rethinking of project success. Exploring the

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project and project management success factors is the focus of interest in general and at the industry level. The success factors can be grouped into three categories by Radujkovića and Sjekavica (2017):

• The elements of project management competency, including behavioral, technical, and contextual competencies of project manager and project team members;

• Organizational culture, structure, competence, atmosphere; • Project management methodologies, software, tools, techniques, risk assessment tools,

and communication support tools.

According to new product development, Cooper (2019) identified 20 drivers of success into three categories:

• Product: the characteristics of the new product project or the product itself; • Business: Drivers of success for the business, including organizational and strategic

factors such as the business’s innovation strategy and how it makes its R&D investment decisions; climate and culture; leadership; and how the firm organizes for NPD;

• Methods: the systems and methods applied for managing new product development.

Organizational factors influencing new products include visionary leadership, struc- ture, key individuals, teamwork, extensive communications, high involvement, customer focus, the creative and innovatory climate, and the learning organization (Jones and Stevens 1999). A learning organization represents the capability of achieving sustainable competi- tive advantage due to generative learning processes (Bratianu et al. 2020), where projects play a dominant role. Shenhar et al. (1997) defined four success dimensions by the impact areas as the fulfillment of the triple bottom line of the project: impact on customers, corpo- rate success, and preparing for the future. According to the recent pandemic, Hallstedt et al. (2020) emphasize that adequate responses to digitalization, sustainability, and servitization influence the success of new product development. A new product development project usually showcases state-of-the-art technology and focuses on the future (Table 2). This confirms the need for managing uncertainty (Szabó and Cserháti 2013).

Table 2. Description of success dimensions for low-tech and high-tech project types, based on Shenhar et al. (2001, p. 719).

Success Dimension Project Type: Level of Technological Uncertainty

Low-Tech High-Tech

Project efficiency Critical Overruns acceptable Impact on customer Standard product Significantly improved capabilities

Business success Reasonable profit High profits, market share Preparing for the future Almost none New product line, new markets

However, literature on product development success (González and Palacios 2002; Cooper 2019) reflect the even more agile approach and highlights the strategic focus, communication, team skills, knowledge management, and other soft factors, and a survey among product development experts (Soltész and Berényi 2021) confirmed that beyond that adherence to stability, setting clear project goals is given a high weight. A clearly written set of project goals, as a specification or scope, was evaluated as the most important success factor, followed by the collaboration of the project team.

2.3. Project Failures

Failures in achieving the project goals cannot be excluded. Understanding the nature and influencing factors of project failures allows for appropriate strategies for managing the related risks. Non-compliance with the requirements derived from the iron triangle, shortcomings in meeting stakeholder expectations, and strategic contribution may come from the task complexity or environmental uncertainty. Pinto and Mantel (1990) emphasize three aspects of evaluating the project’s success or failure:

Adm. Sci. 2022, 12, 49 5 of 17

• the implementation process itself, internal efficiency; • the perceived value, quality of the project deliverables; • client satisfaction with the delivered project, external efficiency.

Project success can describe the areas in which the project manager must perform well, but understanding failures provides the opportunity to learn. Project risk management (Fekete and Szontágh 2020) is for mitigating concerns; lessons learned are essential inputs of the related actions. Exploring the reasons for these failures can suggest prevention and other precautionary measures (Gupta et al. 2019). Several blogs and learning materials deal with the reasons for the project failures, including general and industry-specific focus. Common literature items are in line with the categorization of success and failure factors. Emam and Koru (2008) identified top project cancellation reasons among IT projects:

• Senior management is not sufficiently involved; • Too many requirements and scope changes; • Lack of necessary management skills; • Over budget; • Lack of necessary technical skills; • No more need for the system to be developed; • Over schedule; • Technology is too new; it does not work as expected; • Insufficient staff; • Critical quality problems with software; • End users are not sufficiently involved.

Antony and Gupta (2018) focused on process development in designating the main failure factors:

• Lack of commitment and support from top management; • Poor communication practices; • Incompetent team; • Inadequate training and learning; • Faulty selection of process improvement methodology and its associated tools/ tech-

niques; • Inappropriate rewards and recognition system/culture; • Scope creep; • Sub-optimal team size and composition; • Inconsistent monitoring and control (lack of expert supervision); • Resistance to change (partial cooperation by employees).

Although achieving project goals is a multi-faceted problem, literature agrees that it can be supported by appropriate project management. ‘Soft’ factors such as project management competencies, communication, and team-level collaboration are appreciated. Networking also came into view (Li and Yu 2022). It cannot mean that all ‘hard’ factors, such as plans or regulations, would expire; it suggests that more is needed. Since new product development has a passing-through impact on production technology, organizational challenges, and, in parallel, customer habits and satisfaction, a particular emphasis should be paid to success and failure factors already during the education period.

3. Research Design 3.1. Research Goal

The study deals with the assessment of product development success factors among higher education students. A negative question was formulated, and a set of factors was asked to be rated about the contribution to the failure of a product development project. The goal was to explore the opinions of the students in the field. Regardless of the students’ experience in project management, and especially in product development, the responses can help them understand their attitudes toward the projects. The results can be used

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for curricula development by highlighting the misunderstood factors. Beyond improving education, the information is significant for the companies when hiring new staff.

There were four research questions formulated to cover the investigations:

• RQ1: What level of regulation is considered appropriate by the students? • RQ2: What are the main barriers to product development projects’ success based on

the students’ judgment? • RQ3: Can patterns be explored in the students’ judgment?

3.2. Research Instrument and Analysis Methods

A voluntary online questionnaire was designed for data collection in Microsoft Forms. The questionnaire included twelve factors for assessment, as shown in Table 3. The factors included planning and regulation of the project, competencies of project management and team members, company issues, and external issues. Short names added to Table 3 describe the factors in the results for a simple review of the figures and tables of the paper.

Table 3. Survey items.

Group Question Short Name

Project planning Changes in plans are too common Changing plans Bad estimate of costs or deadlines Time or cost estimate

Gaps in regulations Regulation gaps

Project management Project management knowledge of project managers

Project management knowledge

Improper choice of communication solutions between team members Communication in the team

Lack of cooperation between company management and the project team

Company and team cooperation

Company issues Improper selection of team members Team member selection Lack of corporate management support Management support

Lack of experience in similar development tasks Professional experience

External issues Insufficient market research Market research Competitors move faster

in development Actions of competitors

Improper relationship with external partners External partners

The respondents were asked to evaluate the contribution of the statements to project failures. The questionnaire used a 5-point scale with the endpoints ‘does not contribute at all’ and ‘typical reason’. The questionnaire also included four statements to be ranked about the most effective way for achieving success:

• Keeping the written regulations and plans is the most expedient (Keeping written regulation);

• The project team must define the rules for a given project (Rules defined by the project team);

• The team must consciously adapt to changing situations (Adapting to the changing situations);

• There is no need for overregulation since everyone performs to the best of their ability that leads to the fastest competition in the project (No need for detailed regulations).

The analysis was performed with IBM SPSS 25 software, following the guideline of Pallant (2020) and Babbie (2020). The survey items were described with mean value, stan- dard deviation, skewness, and kurtosis. Beyond the descriptive statistics, the assessment of the students was presented by rank orders calculated based on the mean values and proportion of the high agreement (four or five) answers. The relationship between the sur-

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vey items was checked by Spearman’s correlation method. The impact of grouping factors (profession, gender, study level, and work experience) was tested by the non-parametric Kruskal–Wallis analysis of variance, adjusted to the level of measurement. Based on this, results were considered as significant differences by the grouping factor if the significance level is lower than 0.05.

Since the items of the survey were categorized preliminary according to a researcher’s vision, structure validation was a critical issue at this point in the research. Principal component analysis was selected as a dimension reduction method with Varimax rotation to maximize the variance of the components. The applicability of the analysis was tested by the Kaiser–Meyer–Olkin criteria, Bartlett’s test of sphericity, and the anti-image correlation matrix method.

3.3. Research Sample

The research sample consisted of 126 responses, including 39 business and 47 engineer- ing students at the University of Miskolc and 40 students from the IT field at the University of Miskolc and the Ludovika University of Public Service. The data collection period was the fall semester of the 2020/2021 academic year.

Beyond the profession, the gender, study level (bachelor or master), and work expe- rience (no, internship, yes) were identified as grouping factors for the analysis. Sample characteristics are summarized in Table 4. The reliability analysis showed acceptable results (Cronbach’s Alpha = 0.711).

Table 4. Sample characteristics.

Characteristics Item Frequency Percentage

Gender Female 60 47.6% Male 66 52.4%

Study level Bachelor 81 64.3% Master 45 35.7%

Profession Business 39 31.0% Engineering 47 37.3%

IT 40 31.7%

Work experience No work experience 29 23.0% Internship 24 19.0%

Work experience 73 57.9%

4. Results and Discussion 4.1. Approach to the Regulation of Product Development Projects

Although the predictability of product development is low, and changes are common, the students considered the rules and regulations as necessary. Based on the ranking of the related questions, only a fifth of them ranked in first place that the project will be completed the fastest, and there is no need to complicate it since everyone performs the tasks to the best of their knowledge. At the same time, the students believed that the rules must have been defined by the project team taking the specificities of the given project into account. Opinions on keeping the written regulations were divided. The mean values of the rank orders are presented in Figure 1, and the distributions of the rankings are detailed in Table 5.

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4. Results and Discussion 4.1. Approach to the Regulation of Product Development Projects

Although the predictability of product development is low, and changes are com- mon, the students considered the rules and regulations as necessary. Based on the ranking of the related questions, only a fifth of them ranked in first place that the project will be completed the fastest, and there is no need to complicate it since everyone performs the tasks to the best of their knowledge. At the same time, the students believed that the rules must have been defined by the project team taking the specificities of the given project into account. Opinions on keeping the written regulations were divided. The mean values of the rank orders are presented in Figure 1, and the distributions of the rankings are de- tailed in Table 5.

Figure 1. Mean value of the rankings on the approach to regulating a product development project.

Table 5. Distribution of the rankings on the approach to regulating a product development project.

Rank Keeping Written Regulations

Rules Defined by the Project Team

Adapting to the Changing Situations

No Need for De- tailed Regulations

1. 22.2% 38.1% 17.5% 22.2% 2. 29.4% 20.6% 34.9% 15.1% 3. 23.0% 29.4% 31.0% 16.7% 4. 25.4% 11.9% 16.7% 46.0%

4.2. Factors of Product Development Project Failures Improper communication solutions between team members were the most important

contributors to product development project failure based on the mean values of the stu- dents’ evaluations (Figure 2). It is followed by selecting the team members, changes in the project plan, and the lack of experience in similar development challenges. According to the grouping of the factors investigated, external issues and the lack of regulation were at the end of the list. The descriptive statistics of the results and the correlations are placed in Appendix A.

Figure 1. Mean value of the rankings on the approach to regulating a product development project.

Table 5. Distribution of the rankings on the approach to regulating a product development project.

Rank Keeping Written Regulations

Rules Defined by the Project Team

Adapting to the Changing Situations

No Need for Detailed Regulations

1. 22.2% 38.1% 17.5% 22.2% 2. 29.4% 20.6% 34.9% 15.1% 3. 23.0% 29.4% 31.0% 16.7% 4. 25.4% 11.9% 16.7% 46.0%

4.2. Factors of Product Development Project Failures

Improper communication solutions between team members were the most important contributors to product development project failure based on the mean values of the students’ evaluations (Figure 2). It is followed by selecting the team members, changes in the project plan, and the lack of experience in similar development challenges. According to the grouping of the factors investigated, external issues and the lack of regulation were at the end of the list. The descriptive statistics of the results and the correlations are placed in Appendix A.

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Figure 2. Mean values of the evaluation of the failure factors.

The low scattering of the mean values and negative skew of the distributions is a characteristic of the sample. Kurtosis of the evaluations suggested the highest agreement on the opinions about the lack of corporate-level cooperation (K = 0.494) and the lack of experience in similar development tasks (K = 0.405). Based on the distributions of the re- sponses, the proportion of respondents with a four or five (typical reason for the failure) rating is highlighted. The factors by this indicator show a different order in the top five positions (Figure 3). Improper selection of the team members was marked as the most common or typical reason for the failure (76.2% of the respondents). Lack of experience in the development task (75.4% of the respondents) was considered more relevant than based on the mean values, while improper communication (74.6% of the respondents) was only in the third place. Too common changes in project plans were considered the typical reason for failure by 69.9% of the respondents (fifth position), while it was the third by the mean values (Table 6).

Figure 3. Evaluation of the failure factors, the proportion of high (four or five) ratings.

Figure 2. Mean values of the evaluation of the failure factors.

The low scattering of the mean values and negative skew of the distributions is a characteristic of the sample. Kurtosis of the evaluations suggested the highest agreement

Adm. Sci. 2022, 12, 49 9 of 17

on the opinions about the lack of corporate-level cooperation (K = 0.494) and the lack of experience in similar development tasks (K = 0.405). Based on the distributions of the responses, the proportion of respondents with a four or five (typical reason for the failure) rating is highlighted. The factors by this indicator show a different order in the top five positions (Figure 3). Improper selection of the team members was marked as the most common or typical reason for the failure (76.2% of the respondents). Lack of experience in the development task (75.4% of the respondents) was considered more relevant than based on the mean values, while improper communication (74.6% of the respondents) was only in the third place. Too common changes in project plans were considered the typical reason for failure by 69.9% of the respondents (fifth position), while it was the third by the mean values (Table 6).

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Figure 2. Mean values of the evaluation of the failure factors.

Figure 3. Evaluation of the failure factors, the proportion of high (four or five) ratings. Figure 3. Evaluation of the failure factors, the proportion of high (four or five) ratings.

Table 6. Rank orders of the survey item and distribution of the ratings.

Item Rank Order by Mean Values

Rank Order by 4 or 5 Ratings 1. (%) 2. (%) 3. (%) 4. (%) 5. (%)

Team member selection 2. 1. 0.0 6.3 17.5 42.9 33.3 Professional experience 4. 2. 0.8 1.6 22.2 45.2 30.2

Communication in the team 1. 3. 1.6 7.9 15.9 33.3 41.3 Company and team cooperation 5. 4. 1.6 3.2 23 40.5 31.7

Changing plans 3. 5. 1.6 4 24.6 31 38.9 Time or cost estimate 6. 6. 1.6 5.6 23.8 35.7 33.3 Management support 7. 7. 0.8 5.6 25.4 42.9 25.4

Market research 9. 8. 3.2 11.9 31.7 30.2 23 Actions of competitors 8. 9. 3.2 8.7 34.9 31.7 21.4

Project management knowledge 10. 10. 0.8 9.5 38.9 34.9 15.9 Regulation gaps 11. 11. 3.2 19 27.8 34.1 15.9 External partners 12. 12. 2.4 20.6 31.7 31 14.3

4.3. Alternative Factor Structure

The evaluation orders show a scattered picture by grouping the failure factors, ex- cept the external issues. Therefore, a principal component analysis was performed with Varimax rotation to check the factor structure assumed in Table 7. Kaiser–Meyer–Olkin test (KMO = 0.709), Bartlett’s test of sphericity (Chi-square = 243.251, df = 66, p = 0.000), and anti-image correlation matrix method (minimum value in the main diagonal is 0.562) confirmed the applicability of the analysis. The results offer an alternative factor structure.

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Table 7. Rotated component matrix of principal component analysis.

Item 1. 2. 3. 4.

Team member selection 0.822 0.059 0.091 0.132 Communication in the team 0.735 0.175 0.2 0.192

Regulation gaps 0.215 0.725 −0.101 −0.072 External partners 0.087 0.584 0.024 0.105 Market research −0.138 0.733 0.188 0.15 Changing plans 0.467 0.067 0.492 −0.267

Management support 0.043 −0.086 0.791 0.044 Project management knowledge 0.297 0.342 0.343 0.134 Company and team cooperation 0.323 0.335 0.542 0.207

Actions of competitors −0.426 0.244 0.336 0.511 Professional experience 0.159 −0.005 −0.156 0.796

Time or cost estimate 0.181 0.179 0.263 0.568 Notes: In this table, the bold highlight helps to highlight the factor items.

The alternative factor structure suggests a different approach to the project success or failure of product development (Table 8). The first factor includes the question of team-level cooperation by proper selection of them and the communication. The second factor consists of external issues and regulation; these can be considered enablers of a project. While the items of team-level cooperation were the most decisive success factors, enablers were considered at the end of the list.

Table 8. Alternative factor structure.

Item Original Grouping Alternative Structure

Communication in the team Project management Team-level cooperation Team member selection Company issues

Regulation gaps Project planning EnablersMarket research External issues

External partners External issues

Changing plans Project planning Management competencies

Project management knowledge Project management Company and team cooperation Project management

Management support Company issues

Time or cost estimate Project planning Professional competenciesProfessional experience Company issues

Actions of competitors External issues

The third factor collects the items of project and corporate management competencies in framing and controlling the product development project. The fourth factor consists of professional issues, including project planning success, former experience in product development, and the ability to react to competitors’ actions.

4.4. Analysis of Variance

Since different professionals contribute to projects, and the emphasis on product development and project management may be different in study programs, it was expected during the compilation of the research sample that the sub-samples would show distinct opinions on product development failures. Figure 4 shows the mean values by profession.

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Adm. Sci. 2022, 12, x FOR PEER REVIEW 11 of 17

Table 8. Alternative factor structure.

Item Original Grouping Alternative Structure Communication in the team Project management

Team-level cooperation Team member selection Company issues

Regulation gaps Project planning Enablers Market research External issues

External partners External issues Changing plans Project planning

Management competencies Project management knowledge Project management Company and team cooperation Project management

Management support Company issues Time or cost estimate Project planning

Professional competencies Professional experience Company issues Actions of competitors External issues

4.4. Analysis of Variance Since different professionals contribute to projects, and the emphasis on product de-

velopment and project management may be different in study programs, it was expected during the compilation of the research sample that the sub-samples would show distinct opinions on product development failures. Figure 4 shows the mean values by profession.

Figure 4. Comparison of the evaluations by the profession of the students.

IT students rate the ‘too common changes in plans’ as being more harmful to the project than other professions, and engineers are the least worried about it. The evaluation of the external factors, including the relationship with external partners and access to market information, show a similar picture. Engineering students’ evaluations stand out from the others according to team composition, and especially the cooperation between company management and the project team. However, Figure 4 presents remarkable patterns by professions; the analysis of variance could confirm significant differences in only a few cases. Beyond the profession as a grouping factor, the Kruskal–Wallis H test was performed for gender, study level, work experience, and former participation in product development projects. Based on the study level, work experience, and experience in product development projects, the sample is considered homogeneous for each question. The significant results (p < 0.05) are highlighted in Table 9; the analysis results are placed in Appendix A.

Table 9. Significant results of the analysis of variance.

Grouping Factor Item Mean Values H df Sig.

Profession Changing plans Mengineering = 3.77

Mbusiness = 4.05 MIT = 4.27

6.235 2 0.044

Profession Company and team cooperation

Mengineering = 3.85 Mbusiness = 3.82

MIT = 3.93 7.017 2 0.030

Gender Actions of competitors Mfemale = 3.83 Mmale = 3.38 7.120 1 0.008

Gender Regulation gaps Mfemale = 3.68 Mmale = 3.15 7.526 1 0.006

4.5. Evaluation of the Results

Project management learning materials give a high emphasis to establishing the framework of the project including the work breakdown structure, timing plan, cost, and deliverables. The planning covers personal responsibilities as well. Recent experience questions the possibility of this predictive approach. Software development projects put

Adm. Sci. 2022, 12, 49 12 of 17

agile project management in the foreground, and an ever-widening range of sources deals with its applicability in other areas. New product development projects usually must face a less dynamic environment than software engineering, but the technological uncertainty may be higher when delivering before the end of the project is not expected; iterative and incremental approaches fit better to product development, but agile tools and approaches are to be considered. A consequence of the predictability and technological uncertainty is the need for rethinking the way of regulations. RQ1 asked the students about the expected way of regulation. The results confirm that regulated work is important; 46% of the respondents ranked last the option in the questionnaire that project success will be assured by personal skills and competencies while detailed regulation is redundant. Rules defined by the team are the most popular way, followed by a continuous adaption to the changing requirements.

Related to the second research question about the success factors of product develop- ment projects, the survey confirmed appreciation of the ‘soft’ factors. When interpreting the results, it should be taken into account that the respondents are higher education students with limited experience in projects. However, it is encouraging that their opinions and attitudes mirror the challenges of the uncertain environment of the project. All listed factors represent high mean values, but the rankings signal that communication and cooperation are the most relevant success factors. At the same time, there seems to be a sense of trust in the ‘hard’ factors and external issues of the project.

The third research question investigated the clustering opportunities of the sample. Based on the statistical analysis, only a few significant results were found. The sample seems to be homogenous by the grouping factors even by the work experience of the students. Patterns of the opinions could not be determined.

5. Conclusions

The increasing complexity of the projects required adaptive project management approaches. New product development is a special area of projects since it must deliver under high technical uncertainty. The increased pressure on introducing a new product to the market faster than before, while costs and quality are controlled asks for new methods and approaches in project management. Changing the culture and refining the new procedures is time-consuming and risky. Investigating the opinions of higher education students has remarkable benefits. First, the experience of the study supports developing the learning materials in the field. The result can be a more comprehensive understanding of product development challenges, leading to more effective integration of the new workforce. Second, corporations can gain relevant information about the preparedness of the students and to find appropriate work for them. In addition, communication and problem-solving can be supported if the values are known. Third, higher education students are more often involved in real-life projects (Berényi and Vadász-Bognár 2019; Bihari and Tóbis 2019). In these cases, effective project management support is not a future aim but a present task.

The results show that the students’ opinions reflect the key success factors of product development projects in the literature. ‘Soft’ factors of projects such as communication and collaboration are appreciated. A former study among product development experts (Soltész and Berényi 2021) found the importance of teamwork, project manager’s control, and other factors of success that allow flexibility and responses to the uncertainty of the project. However, a well-defined project goal is among the most important success factors next to these. Both the experts’ and students’ surveys give a lower emphasis to the ‘hard’ factors of project management, but it cannot mean that these are not relevant anymore. Experience shows that time and cost planning or assuring the resources of the projects are considered as enablers. In other words, these remained important, but not enough for success. The survey results are encouraging in this sense. The few statistically significant differences by the grouping factors could suggest the homogeneity of the sample and common thinking of the respondents, but this must be questioned.

Adm. Sci. 2022, 12, 49 13 of 17

Despite the thorough planning of the survey, the study has some limitations. The survey included general questions; however, each project is a unique endeavor. The sam- ple composition used a convenient method, and the universities involved were limited. Engineering, business, and IT students were separated, but they cannot cover all responsi- bilities and positions of product development. Another limitation comes from the fact that the results were based on the responses of higher education students. Although a large proportion of them has work experience and some were involved in product development, a general conclusion from the results is not available. The study can be considered as a pilot investigation.

Further work in the research is expanding data collection and involving new grouping factors. Another task is preparing the practical application of the experience. Projects performed in collaboration between corporations and universities offer experience in new management methods. A survey is also planned that measures the opinions of the students before, during, and after the project work. It will let us make more comprehensive conclusions on the topic and develop a framework for targeted education for future product development experts.

Author Contributions: Conceptualization, L.B. and L.S.; methodology, L.B.; validation, L.S.; formal analysis, L.B.; investigation, L.B. and L.S.; writing—original draft preparation, L.B.; writing—review and editing, L.S.; visualization, L.B.; supervision, L.B. All authors have read and agreed to the published version of the manuscript.

Funding: This research received no external funding.

Institutional Review Board Statement: Not applicable.

Informed Consent Statement: Informed consent was obtained from all subjects involved in the study.

Data Availability Statement: Data are available from the corresponding author by request.

Acknowledgments: The study was conducted as part of the OTKA T139225 project entitled “Man- agement readiness level towards Strategic Technology Management Excellence”.

Conflicts of Interest: The authors declare no conflict of interest.

Appendix A

The appendix presents detailed descriptive statistics, Spearman’s correlation coeffi- cients, and Kruskal–Wallis H test results for the survey items.

Table A1. Descriptive statistics of the evaluations.

Item Mean SD Skewness Kurtosis

Statistic Statistic Statistic Std. Err. Statistic Std. Err.

Communication in the team 4.05 1.019 −0.927 0.216 0.163 0.428 Team member selection 4.03 0.876 −0.643 0.216 −0.246 0.428

Changing plans 4.02 0.971 −0.724 0.216 0.008 0.428 Professional experience 4.02 0.815 −0.586 0.216 0.405 0.428

Company and team cooperation 3.98 0.907 −0.736 0.216 0.494 0.428

Time or cost estimate 3.94 0.97 −0.674 0.216 0.004 0.428 Management support 3.87 0.889 −0.495 0.216 −0.07 0.428 Actions of competitors 3.6 1.021 −0.354 0.216 −0.261 0.428

Market research 3.58 1.068 −0.33 0.216 −0.535 0.428 Project management

knowledge 3.56 0.899 −0.068 0.216 −0.426 0.428

Regulation gaps 3.4 1.067 −0.229 0.216 −0.724 0.428 External partners 3.34 1.037 −0.07 0.216 −0.759 0.428

Adm. Sci. 2022, 12, 49 14 of 17

Table A2. Spearman’s correlation analysis results.

Survey Item (1) (2) (3) (4) (5) (6)

Changes in plans are too common Coeff −0.091 −0.031 0.087 0.230 ** 0.154 Sig. 0.31 0.733 0.333 0.01 0.084

Competitors move faster in development (2) Coeff 0.134 0.137 0.113 0.118 Sig. 0.135 0.126 0.21 0.187

Lack of experience in similar development tasks (3) Coeff 0.268 ** 0.074 0.088 Sig. 0.002 0.413 0.327

Bad estimate of costs or deadlines (4) Coeff 0.230 ** 0.187 * Sig. 0.01 0.037

Lack of corporate management support (5) Coeff 0.262 ** Sig. 0.003

Project management knowledge of project managers (6)

Coeff 1 Sig. 0.000

(7) (8) (9) (10) (11) (12)

Changes in plans are too common Coeff 0.094 0.293 ** 0.339 ** 0.245 ** 0.101 0.068 Sig. 0.294 0.001 0 0.006 0.262 0.447

Competitors move faster in development (2) Coeff 0.065 −0.115 0.014 0.214 * 0.077 0.289 ** Sig. 0.471 0.198 0.876 0.016 0.392 0.001

Lack of experience in similar development tasks (3) Coeff 0.053 0.189 * 0.12 0.114 0.190 * 0.149 Sig. 0.557 0.034 0.181 0.204 0.033 0.096

Bad estimate of costs or deadlines (4) Coeff 0.179 * 0.163 0.262 ** 0.258 ** 0.196 * 0.220 * Sig. 0.045 0.069 0.003 0.004 0.028 0.013

Lack of corporate management support (5) Coeff 0.006 0.143 0.066 0.311 ** 0.109 0.083 Sig. 0.947 0.11 0.464 0 0.226 0.357

Project management knowledge of project managers (6)

Coeff 0.179 * 0.285 ** 0.283 ** 0.310 ** 0.247 ** 0.176 * Sig. 0.045 0.001 0.001 0 0.005 0.048

(7) (8) (9) (10) (11) (12)

Gaps in regulations (7) Coeff 0.254 ** 0.185 * 0.188 * 0.240 ** 0.271 ** Sig. 0.004 0.038 0.035 0.007 0.002

Improper selection of team members (8) Coeff 0.514 ** 0.351 ** 0.134 0.023 Sig. 0 0 0.134 0.8

Improper choice of communication solutions between team members (9)

Coeff 0.401 ** 0.091 0.188 * Sig. 0 0.311 0.035

Lack of cooperation between company management and the project team (10)

Coeff 0.270 ** 0.302 ** Sig. 0.002 0.001

Improper relationship with external partners (11) Coeff 0.282 ** Sig. 0.001

Insufficient market research (12) Coeff 1 Sig. 0

* Correlation is significant at the 0.05 level (2-tailed), ** Correlation is significant at the 0.01 level (2-tailed).

Adm. Sci. 2022, 12, 49 15 of 17

Table A3. Kruskal–Wallis H test results by the groping factors.

Gender (df = 1) Profession (df = 2) Study Level (df = 1)

Work Experience (df = 2)

H Sig. H Sig. H Sig. H Sig.

Keeping written regulation 0.399 0.528 0.505 0.777 0.042 0.837 1.359 0.507

Rules defined by the project team 1.008 0.315 0.265 0.876 0.026 0.873 0.654 0.721

Adapt to the changing situations 0.426 0.514 0.514 0.774 0.951 0.329 0.64 0.726

No need for detailed regulations 1.454 0.228 1.361 0.506 0.523 0.47 2.427 0.297

Changes in plans are too common 0.409 0.522 6.235 0.044 1.044 0.307 4.009 0.135

Competitors move faster in development 7.12 0.008 3.858 0.145 1.39 0.238 0.097 0.953

Lack of experience in similar development tasks 0.034 0.854 3.597 0.166 3.685 0.055 0.654 0.721

Bad estimate of costs or deadlines 0.45 0.503 1.628 0.443 0.085 0.77 0.425 0.809

Lack of corporate management support 0.89 0.346 0.249 0.883 0.431 0.512 0.49 0.783

Project management knowledge of project managers 1.292 0.256 0.353 0.838 2.154 0.142 3.925 0.141

Gaps in regulations 7.526 0.006 0.029 0.986 0 0.985 1.669 0.434

Improper selection of team members 0.046 0.831 1.162 0.559 0.506 0.477 1.947 0.378

Improper choice of communication solutions between team members 0.97 0.325 1.279 0.527 1.144 0.285 1.319 0.517

Lack of cooperation between company management and the project team 1.015 0.314 7.017 0.03 0.913 0.339 3.823 0.148

Improper relationship with external partners 0.619 0.432 3.555 0.169 0.2 0.655 0.159 0.923

Insufficient market research 2.348 0.125 3.26 0.196 0.067 0.796 3.822 0.148

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Introduction
Literature Review

Approach to New Product Development
Project Success
Project Failures

Research Design

Research Goal
Research Instrument and Analysis Methods
Research Sample

Results and Discussion

Approach to the Regulation of Product Development Projects
Factors of Product Development Project Failures
Alternative Factor Structure
Analysis of Variance
Evaluation of the Results

Conclusions
Appendix A
References

chApter 6

project management (for innoVation)

The previous chapters, particularly Chapters 4 and 5, have captured the sources of innovation and collaboration with actors of the innovation pro- cess in addition to some of the methods and processes that can be used. However, these chapters have said little about how innovations can be achieved in terms of management and control, which is denoted as the development of new products, services, and processes. For the controlled development of products, services, and processes, project management methods and techniques are used. Project management is often described as the discipline of initiating, planning, executing, and controlling activ- ities that aim at achieving specific goals constrained by specific perfor- mance criteria. Thus, an innovation project is a temporary undertaking designed to generate a unique product, service, or process with a defined beginning and end (usually time-constrained, and often constrained by funding or deliverables), typically to bring about beneficial change or added value. The temporary nature of projects contrasts with recurrent operational processes that are repetitive, permanent, or semi-permanent functional activities to produce products or services. In practice, the man- agement of these two systems is often quite different, and as such, requires distinct technical and managerial skills. The primary challenge of project management is to achieve all of the project goals within given constraints that are defined at the start of a specific project for innovation.

This chapter starts by comparing projects as a modus operandi with two other methods of working in Section 6.1. The contrasting will lead to a better understanding of what project management stands for. This is followed in Section 6.2 by how projects for new product and service development take place in a staged way. Section 6.3 describes how a work breakdown structure can be derived from the deliverables of the project. This work breakdown structure serves as base for the planning

C o p y r i g h t 2 0 1 8 . M o m e n t u m P r e s s .

A l l r i g h t s r e s e r v e d . M a y n o t b e r e p r o d u c e d i n a n y f o r m w i t h o u t p e r m i s s i o n f r o m t h e p u b l i s h e r , e x c e p t f a i r u s e s p e r m i t t e d u n d e r U . S . o r a p p l i c a b l e c o p y r i g h t l a w .

EBSCO Publishing : eBook Collection (EBSCOhost) – printed on 10/26/2023 4:08 AM via TRINE UNIVERSITY AN: 1881425 ; Rob Dekkers.; Innovation Management and New Product Development for Engineers, Volume I : Basic Concepts Account: s8991307.main.ehost

178 • innovAtion MAnAgeMent And npd for engineers

and budgeting of projects in Section 6.4. Management of uncertainties, inherent to projects, is the topic of Section 6.5. The organization of proj- ect teams appears in Section 6.6, and in this section, these teams are also linked to organizational structures. This is followed by information and communication plans in Section 6.7 and project leadership in Section 6.8.

6.1 Modes of operAtion

Project management is often linked to introducing new products and services, new processes, and change within organizations. However, project management is one of the three archetypes for methods of working (Wijnen et al. 1996, p. 21) to obtain these outcomes and deliverables; this comparison between the three will take place in the first subsection. In addition to comparing project management with two other approaches, the second subsection will discuss the objectives of projects and the related scope. A final subsection discusses the fuzzy front end, which is a specific feature of new product and service development.

6.1.1 comPaRing moDi oPeRanDi

To better understand project management as a modus operandi, it could be compared with another archetype of obtaining results: standardized oper- ations or recurrent processes (you could also just called it operations). The characteristic of standardized operations is that, as soon as a request is placed for a product, service, process, or any other so-called change of state of systems, a predefined set of activities takes place, and these result in the required outcome (Figure 6.1); see Dekkers (2017, pp. 117–24) for an extended description of changes of states of systems and related pro- cesses. Such standardized processes are also called recurrent processes;

Figure 6.1. Standardized operations as modus operandi.

Required change of state

Deliverables

Resources

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project MAnAgeMent (for innovAtion) • 179

typically, these processes are found in logistics, manufacturing, and deliv- ery of services to customers. This indicates that this modus operandi can only yield defined outcomes and deliverables created in a prescribed way; the advantage of such a way of working is that the quality of the outcome of the process is predictable. In addition to the predictability of the out- come, the standardized processes also make the utilization of the required resources predictable; this contributes to a high degree of efficiency during the execution of these processes. Thus, if a request is made to produce a different product or service, then first, a process needs to be designed and tested before its delivery of products and services can take place. That means that the modus operandi of recurrent processes makes the outcome predictable, but that the outcome and deliverables are inflexible.

The second way of obtaining deliverables is an ad-hoc approach. In this mode, the request for a new process, product, or service is solved in a disorganized way: all kinds of resources are working on the problem to be resolved, and there is an absence of coordination; see Figure 6.2. Those that are involved with the problem undertake actions based on their own per- ception of the problem and the state-of-the-art, and sometimes that means taking steps back, rather than necessarily moving forward. For this rea- son, the outcome of the process is unpredictable, but it might also result in novel solutions. Consequently, the allocation of resources is not controlled because the oversight of what is taking place is lacking. However, the search for novel solutions might benefit from this ad-hoc approach to new products and services, new processes, and to changes in organizational structures.

Different from recurrent processes and ad-hoc processes, project management aims at delivering novel deliverables in a staged approach. This staged approach is necessary because, in the beginning of the project, there is uncertainty about how the solution to the problem is going to look like or how the deliverables can be used. This means that, after a phase in a project, there is a review whether the deliverables or part of them are still

Figure 6.2. Ad-hoc as modus operandi.

Resources

Required change of state

Deliverables

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180 • innovAtion MAnAgeMent And npd for engineers

attainable, to what extent the scope of the project in terms of deliverables has to be changed, and whether the available resources are capable of making the required contributions; see Figure 6.3. That also implies that resource allocation may change during the project to reflect changes in deliverables and activities.

Thus, the three approaches differ substantially, which results they achieve and how, see Table 6.1. First, the deliverables are different. In the case of ad-hoc processes, the result might be novel and creative solutions, but at the same time, it may be unpredictable how and when these will be achieved. In recurrent processes, the deliverable is set and unchange- able within the capabilities of the resources. For projects, the deliverable is based on elicited requirements, but needs to be reviewed during suc- cessive stages; during each stage, the information about the feasibility of the solution becomes available, which allows plans to be evaluated. Thus, characteristics for projects are the staged activities and regular reviews of progression. These reviews could result in changes of scope of the proj- ect and its deliverables. Both the modi operandi of ad-hoc and recurrent processes lack these reviews. Furthermore, resource allocation differs across the three different approaches. In the case of an ad-hoc approach, the allocation of resources is dependent on instant decisions by individ- ual actors and activities as they appear on-the-go. Contrastingly, recurrent processes in operations are aiming at achieving efficiency, given a range of products and services to be produced. In projects, the onus of work allocation is directed at effectiveness; within the given constraints of time and budget, the activities in projects should yield predefined output in order for next activities to take place. However, a degree of uncertainty remains whether the outcomes of activities are fully achievable, given the uncertainty about the feasibility of the deliverables. These three different ways of dealing with deliverables, processes, and resource allocation also influence the performance.

Figure 6.3. Projects as modus operandi.

Required change of state

Deliverable(s)

Resources Review

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project MAnAgeMent (for innovAtion) • 181

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182 • innovAtion MAnAgeMent And npd for engineers

6.1.2 oBJecTiveS anD ScoPe of PRoJecTS

Project management suggests that deliverables should be well defined. These deliverables are always used by another actor and sometimes the same actors; the latter occurs when, for example, the product development is done by the same departments that are going to produce it. For this purpose, it is necessary to elicit the requirements for the deliverables from the users or customers. Because projects are based on a degree of uncer- tainty, about markets, technology, or other factors, the requirements can only be clarified during successive stages. This implies that, for projects with a high degree of uncertainty, there will be a prolonged time during which the deliverables cannot be fully defined; in the case of innovation, these projects can be classified as both radical and architectural innova- tion (see Figure 1.2). In the case of incremental and modular innovation, initial specifications of new products, services, and processes are easier to draft and contain fewer uncertainties. Thus, the degree of uncertainty about the deliverables also depends on the novelty of the product and ser- vice (normally expressed in terms of radical, architectural, modular, and incremental innovation).

The specification of the deliverables also implies that these are trans- ferred to receiving actors at the end of the project. These actors could be customers, internal production departments, external suppliers, logistics, and sales, for example. This transfer from new product development to production is called ramp-up, from new product and service development to sales new product or new service introduction, and from design and engineering to customers commissioning. During this transfer, all kinds of unexpected problems might occur due to alignment of the delivera- bles with operational processes of the receiving party. Vandevelde and Van Dierdonck (2003, p. 1343) find that both a formalized approach for this transition and empathy from design to engineering facilitate smoother production start-up and improve the performance of new product develop- ment projects, albeit that their study is limited to the automotive industry. Similarly, Schuh et al. (2005, p. 407) claim that the use of permanent or project-specific launch teams in the automotive industry (often a launch manager position) seems to improve ramp-up time, costs, and quality. Furthermore, in the past, Leonard–Barton (1988) has pointed out that adaptation cycles that assess aberrations during manufacturing on their implications for product and process design and strategy might be a necessity for integrating product design and engineering and manufac- turing; please note that this corresponds to the echelons of feedback in Figure 2.5. In addition, Tyre and Orlikowski (1993) have pointed out that periods of freezing and unfreezing might be an effective mechanism for

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project MAnAgeMent (for innovAtion) • 183

the implementation of changes. This implies that secondary engineering processes are necessary, see Figure 2.5; at the start of a project, it is nec- essary to define whether these are part of the scope of the project or are identified as additional work in the contract with preset arrangements on how to deal with these changes.

The transition of the deliverables to a receiving party also implies that projects can be described in terms of having a narrow scope or broad scope; see Figure 6.4. A project with a narrow scope only focuses on deliv- erables, no matter how they are used by the receiving party or actors. This also means that in the case of a narrow scope that the project ends as soon as the deliverables have been commissioned. A broader scope for a proj- ect involves activities for the start-up and transfer of deliverables, docu- mentation, training, and knowledge to those that are going to work with the deliverables. Within an organization, even if outsourced, this concerns the production or operations department, logistics and distribution depart- ments, and sales departments. The inclusion of these internal stakeholders in the project increases the deliverables of the project, thus making the project more complex, but will be beneficial for the use of the deliver- ables in recurrent processes. Besides, for the external stakeholders, the deliverables could also be extended to documentation and training for use (utilization), maintenance and overhaul, disposal, and recycling; see the reference model in Figure 2.5. This means that somehow the perspective of the customers should be involved; see Section 4.2. It implies that proj- ects with a broad scope have more and diverse activities than those with a narrow scope; however, such a broad scope may be beneficial for use later.

In terms of deliverables, scope creep (aka requirement creep and fea- ture creep) refers to how a project’s requirements tend to increase during a project. For example, what once started out as a single deliverable could

Figure 6.4. Scope of projects.

Problem situation Deliverables

Ad-Hoc Operations

Project with broad scope

Project with narrow scope

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184 • innovAtion MAnAgeMent And npd for engineers

have become three. Or, midway through a project, the views of custom- ers change, prompting a reassessment of the project requirements. Scope creep is typically caused by key project stakeholders changing require- ments or sometimes by differing perspectives resulting from internal miscommunication and disagreements about the objectives and merits of projects. While it might result in delays, hurdles to overcome, or going over budget, scope creep is not necessarily to be avoided. A project is sub- ject to progressive insight, and this may change the views of stakeholders, particularly the customer or (end) user. Because of these changing views, more insight into details of deliverables and more clarity about the impact of deliverables on use, maintenance, and so on, delivering a project that answers their expectations often means altering the scope. Thus, scope creep is a reality that every project plan should cater to.

6.1.3 fuzzy fRonT enD of DeveloPmenT anD innovaTion

In new product and service development, the initial phases of the project are called the fuzzy front end; these initial phases are also sometimes described as the front end, phase 0, stage 0, or pre-project activities. This fuzzy front end is the starting point in which opportunities are iden- tified and concepts are developed prior to entering the formal product or service development process. Innovation on the front end is where exciting breakthroughs are created through a process that allows for creativity and value creation in a systematic manner different from the formal development process. In this front end, idea genesis, opportunity validation, and concept development are dynamic and consist of adap- tive interactions between involved participants with a variety of views and varied skills. These actors create, evaluate, analyze, and iterate many alternatives and external technologies into potential breakthrough opportunities. The final result of the front end is a product concept, including potential external technology partners, conceptual business model, preliminary product specifications, the formation of stakeholders support, a startup action plan, and go/no go milestones for inclusion in to the formal development process.

As can be seen from Figure 6.4, the front end of a project is a more chaotic process (ad-hoc) than the execution of the project itself. This fuzzy front end is not a standard linear process as in formal development that is directed toward turning a concept into reality. The concept validation, also called proof-of-concept, marks the conclusion of the fuzzy front end; after this stage, the formal product, service, or process development process

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project MAnAgeMent (for innovAtion) • 185

starts. Despite it being viewed as critical, many firms also seem to have great difficulties managing the fuzzy front end. The fuzzy front end brings together ill-structured information from different sources, knowledge about technologies, capabilities of resources and markets, and views from departments and stakeholders under considerable uncertainty and equiv- ocality of the outcomes. In addition, this phase is also often ill-defined and characterized by ad-hoc decision making in many firms. The non- sequential activities are due to the nature of discovery and inspiration that come from new input being injected into the analysis process that in turn triggers re-evaluation of prior points of departure and assumptions. The analysis must run its course as all points of assumptions are validated, and if necessary, modified until the relevant participants are jointly satisfied that they have an optimum result that is ready to move forward conceptu- ally or the concept is rejected and no further action is taken.

Although incurring lesser expenses than later phases of product and service development, the fuzzy front end is vital; it is the point where decisions to invest resources for new product and service development are fundamentally made. There are five generic activities taking place during the fuzzy front end:

• Preliminary analysis, which includes aggregated market develop- ments, technological developments, and assessments of industrial sectors. This preliminary analysis is not just market research, as the latter is more focused on investigating market size and (specific) market segments.

• Demand refinement, which covers customer discovery, voice of the customer, and other related research. These activities are aiming at eliciting initial requirements.

• Technology development, which encompasses includes locating emerging and pacing technologies (see Subsection 5.1.3), whether externally or internally being developed, and testing feasible product and service concepts. This step can be achieved via early customer feedback, individually or through focus groups (see Table 4.1 for more detail on involving customers).

• Proof-of-concept, which includes building prototypes and perform- ing continued research in related domains, designed to demonstrate a key aspect of a novel technology.

• Portfolio analysis, which involves examination of each potential innovation against criteria. The purpose of this analysis is to priori- tize potential innovations (see also Section 3.5) and raise questions designed to increase understanding of potential product and service concepts.

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186 • innovAtion MAnAgeMent And npd for engineers

The activities are often not done in any order, which depends on iteration caused by discovery through these steps and evaluation of opportunities for new product and service development.

6.2 stAge-gAte ModeLs

Typically, projects consist of phases and gates; sometimes, gates go by the name of milestones. The review that takes place at a so-called gate serves two purposes. The first purpose is to ascertain what has been accomplished in the past period since a previous review (or start of the project). Princi- pally, the activities preceding the gate should have reduced the uncertainty about the product or service concept, the feasibility of the technology, and the conditions for market acceptance. The second purpose of the review is to review the feasibility of the scope of the project. For projects with a narrow scope, this part of the review is limited to the deliverables. For projects with a broader scope, it includes how the deliverables can be used by the receiving organization and how the transfer will take place. The progressive insight during review in the stages should lead to changes in the activities during the next stage; these stages or phases are bundles of activities that should lead to further reduction of uncertainty, in addition to progression in developing the product or service.

For new product, service, and process development, some stage-gate models have been developed. A model, based on project management and similar to Cooper’s (1994, p. 5) description for new product development, is found in Figure 6.5. The project starts with a feasibility study resulting in a concept that is developed during the next phase. When the development is complete, a pilot or test phase takes place followed by a product or ser- vice launch or commissioning. Finally, the deliverable of the product is taken to manufacturing or deployed. Each of these stages are separated by gates in which the reviews take place. These reviews could result in continuation,

Figure 6.5. Stage-gate model for new product, service, or process development.

Feasibility study

Development phase

Pilot/Test phase

Launch/ commissioning

phase Manufacturing/

deployment phase

Gate

Fuzzy front end

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project MAnAgeMent (for innovAtion) • 187

change of scope or termination of the project; the early gates are directed at the business case, whereas later gates are more directed at the usability of the deliverables. The German guidelines for new product development (VDI 2211, 1993) follow similar phases, though more directed at engineering pro- cesses; see Figure 6.6. It also includes the feedback from next stages and feed- forward from previous stages to depict the iterative nature of development, design, and engineering (see Dekkers [2017, pp. 152–61] for a more detailed description of feedforward and feedback). The life-cycle model of ten Haaf et al. (2002, pp. 166–312) has seven phases, as depicted in Figure 6.7, cover- ing the scanning of market needs and demands to the disposal or renovation of products; it extends the feedback to the use and disposal of the product

Figure 6.6. Stage-gate model for new product, service, or process development (adapted from VDI 2221).

Product planning/ Project scope

Elicitation of requirements and constraints

Specifications

Determining functions and architecture

Searching principle solutions and integration

Product/Service architecture

Conceptual design

Design of modules and interfaces

Detailing of critical modules and components

Pre-design

Detailing of pre-design, components and parts

Detailing for production planning and use

Pre-design

Documentation

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188 • innovAtion MAnAgeMent And npd for engineers

or service. The innovation process within this life-cycle concept consists of phases A through E. The organization has several drivers to perform research and a scan of the environment to find out what the market needs, now and in the future. Input can come from stakeholders (customers, producers and sup- pliers, governments), organizational processes, and characteristics from the system. During the next phase, these market needs and requirements are trans- lated into functional requirements for the system to be developed. The func- tional criteria result in the generation of alternative system concepts followed by an evaluation to find the most suitable concept. Typically, phases A to C are not a linear process, but consist of iterative activities. During the final phase of development, the construction of the product takes place during phase D. The subsequent phases F to G provide information about design requirements with respect to usage, maintenance, and disposal. These three models, few of the available ones, exemplify the stages and gates commonly found in models for new product, service, and process development.

The stages do not have to be positioned subsequent to each other; in what is known as concurrent engineering (aka simultaneous engineering), the different stages for new product, service, and process development overlap (see Subsection 2.4.6 and Figure 2.14). This requires that a team- work approach is used, with all functions involved in the project working at the same time. Thus, concurrent engineering is a method of designing and developing products, in which the different stages run simultaneously, rather than consecutively. Employing this approach to development has advantages in comparison with the traditional sequential method:

• The new product or service is brought to the market much more quickly. This increases the chances that a firm can charge a pre- mium price that will give a better profit margin; this will help recouping costs for development faster.

• There is less likelihood that the product or service will have to be modified later due to unforeseen problems. All functions downstream in the project have the possibility to integrate their knowledge in the development process; this is supposed to reduce problems for fitting the products and services in the recurrent oper- ations, logistics, and sales processes.

• The involvement across business functions improves staff commit- ment to the project.

This approach can, therefore, contribute to competitive advantage (first- mover advantage) for the firm if it can get a reliable new product or service into the market and build brand loyalty before its competitors can.

Another method linked to the staging of processes for new product, service, and process development is the controlled convergence method, aka set-based concurrent engineering. Whereas the models in Figures 6.5 to 6.7

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project MAnAgeMent (for innovAtion) • 189

take one specific design as point of departure, Pugh’s controlled conver- gence method (see Subsection 2.4.4) is based on the subsequent narrowing down of alternatives to a selected design; see Figure 2.13 for its symbolic overview. Different from the stage-gate models in the beginning of this sub- section, at the end of each stage progress of concepts and design are set off against criteria and requirements; with progressive insight, these criteria become more detailed, too. The advantage of this method is that it avoids an early selection of a specific design or concept, which could lead to a lock-in; the focus on only one concept early on leaves no alternative when the feasi- bility is less than expected, and it could cause problems downstream in new product and service development. The disadvantage of the controlled con- vergence method is that, during early stages of product design and engineer- ing, more parallel projects run in parallel, drawing on resources. For part, this can be circumvented by concentrating on essential specific challenges for each concept, rather than trying to do everything for all concepts.

6.3 WorK breAKdoWn structure

In addition to phasing the development of processes, products, and ser- vices, often at the start of a project, a so-called work breakdown structure is created. A work breakdown structure (mostly known by its acronym WBS), in project management and systems engineering, is normally a deliverable-oriented decomposition of a project into smaller components; the term decomposition follows the term from systems theories (Dekkers 2017, p. 50). The Project Management Institute (2000, pp. 57–61) describes the work breakdown structure as a hierarchical decomposition of the total scope of work to be carried to accomplish the project objectives and create the required deliverables. An element of the work breakdown structure element may be a product, data, service, or any combination thereof. For each element of the work breakdown structure a description of the task to be performed is generated. The work breakdown structure can also serve as the necessary framework for detailed cost estimating and control along with providing guidance for schedule development and control. To this pur- pose, a work breakdown structure permits summing of subordinate costs for tasks, materials, and so on, into their successively higher level parent tasks, materials, and so on. In addition to its function in cost accounting, the work breakdown structure also supports mapping requirements from one level of system specification to another, for example, a requirements cross-reference matrix that interrelates functional requirements to high- or low-level design documents. Thus, the work breakdown structure reflects the total scope of a project by decomposing it into smaller components, so that the activities within the project can be controlled and managed.

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190 • innovAtion MAnAgeMent And npd for engineers

Because the work breakdown structure plays a central role in the devel- opment of control and managerial structures for a project, a well- designed structure makes it easy to assign each project activity to one and only one terminal element. The development of the work breakdown structure nor- mally occurs at the start of a project and precedes detailed project and task planning. There are several ways for constructing this structure:

• Based on the deliverables. This structure focuses on a decompo- sition of deliverables into smaller work packages that constitute a lower level of detail. This is the most common method. See Figure 6.8a for a work breakdown structure for a bicycle.

Figure 6.8b. Work breakdown structure for information system based on decomposition of phases.

Shifting syst. 1.5

Frame set 1.1

Wheels 1.3

Braking syst. 1.4

Crank set 1.2

Frame 1.1.1

Handle bar 1.1.2

Front wheel 1.3.1

Rear wheel 1.3.2

Bicycle 1

Preliminary concept 1.6.1

Design structure

1.6.2

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Widget management system 1

Close-out 1.5

Initiation 1.1

Execution 1.3

Control 1.4

Planning 1.2

Evaluation & conclusions

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1.2.2

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User requirements

1.3.2

Project management

1.4.1

Project meetings

1.4.2

Audit procurement

1.5.1

Lessons learned

1.5.2

(a)

(b)

Figure 6.8a. Work breakdown structure for a bicycle based on decomposition of deliverables.

Shifting syst. 1.5

Frame set 1.1

Wheels 1.3

Braking syst. 1.4

Crank set 1.2

Frame 1.1.1

Handle bar 1.1.2

Front wheel 1.3.1

Rear wheel 1.3.2

Bicycle 1

Preliminary concept 1.6.1

Design structure

1.6.2

Integration 1.6

Widget management system 1

Close-out 1.5

Initiation 1.1

Execution 1.3

Control 1.4

Planning 1.2

Evaluation & conclusions

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Project charter 1.1.2

Preliminary scope stat.

1.2.1

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1.2.2

Kick-off meeting

1.3.1

User requirements

1.3.2

Project management

1.4.1

Project meetings

1.4.2

Audit procurement

1.5.1

Lessons learned

1.5.2

(a)

(b)

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project MAnAgeMent (for innovAtion) • 191

• Based on the processes for new product and service development. This type of structure follows mainly the phases of development, design, and engineering as discussed in the previous section of this chapter. See Figure 6.8b for the work breakdown structure aiming development of an information system.

• Based on functions in an organization. Such a structure of the work breakdown structure can be used when the disciplines for a product or service are relatively independent and the processes for design and engineering have been standardized.

These work breakdown structures are consisting of several levels, each providing more detail than the next higher one; normally, these work breakdown structures are numbered so that these levels are easily distinguished.

Despite the work breakdown structure being a key element of project management, it does not solve all issues for controlling and managing projects; the main reasons for this are:

• It is not an exhaustive list of work and activities in a project. It is instead only a comprehensive classification of the scope of a project.

• It is neither a project plan nor a schedule nor a chronological listing. It only specifies what will be done, not how or when.

• It is not an organizational hierarchy, although it may be used when assigning responsibilities.

Thus, the construction of an appropriate work breakdown structure plays a central role in the planning of a project, but is only one of the steps for its control and management.

6.4 pLAnning And scheduLing of projects

The need for control of any project, including those for new process, product, and service development, arises from ensuring the scope of the project, assuring the quality of the deliverables so that they can be used, and meeting the constraints in time (deadline) and costing (budget). The deadline of a project and the constraint by a budget are related to the scope of a project. This means that the scope and deliverables deter- mine which activities and related resources are necessary to accomplish the project; these activities and the availability of resources determine the planning of activities, the use of resources, and the budget for the project. Thus, when constraints restrict the execution of a project, the

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only way is to reduce the scope of a project. Conversely, when the scope is defined, the resources must be available to achieve the deliv- erables, which may imply that the constraints need to be relaxed. These so-called trade-offs are depicted in Figure 6.9; in reality, these trade- offs are difficult to make. Sometimes, it may be an option to stage the deliverables, meaning not all deliverables are available at the same time. Although this means relaxing the constraint of time, it allows the receiving party of the deliverables already to generate revenues before other deliverables are realized. Furthermore, to meet the constraints, often, it is suggested that the quality of the deliverables may be traded off against time and cost; however, this will reduce the viability of a project. Take for example the development of a car. If the quality is less than required, this would reduce the competitiveness of the car, increase the cost of production, and increase the cost of warranties. In this sense, often the quality of the deliverables should be assured to avoid problems downstream, which make the project less feasible. In a similar vein, the use of resources with reduced capabilities may also result in similar problems. Thus, the realistic trade-offs for projects concern the scope against the constraints of deadline and budget, in which resources with their capabilities play a central role to achieve the purpose of the deliverables.

6.4.1 eSTimaTing

To make a realistic planning for a project and compile a budget, the esti- mation of how many resources are needed is key. This estimating of how much time is needed can be based on the components of the work break- down structure. There are several methods for estimating:

Figure 6.9. Trade-off for projects, between scope, time, and cost.

Scope

CostTime

Resources

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project MAnAgeMent (for innovAtion) • 193

• Standard times. These times are based on time and motion stud- ies, which set out how long each task will take in detail. Although originally based on production techniques (notably by Frederick Taylor for scientific management and Frank and Lillian Gilbreth for motion studies), this approach to determining standard times applies to process, product, and service development, too. For example, the time it takes for an engineer to fill out forms or to write specific documentation, such as for maintenance.

• Parameterization. In this technique, the deliverables are described in parameters; these parameters serve as the base for estimating the workload. For instance, the number of code lines that have to be written determines the budget for programming of code.

• Use of historical data. In the case of this technique, the data used for a new project is derived from data of previous projects. This implies that an accurate record is kept not only about the budgets, but also the actual expenditures and hours that were needed to com- plete preceding projects. Note the parallel with case-based reason- ing for its potential drawbacks (see Subsection 2.4.3).

• Three-point estimation. This method uses three estimations for a weighted average. The first estimate is an optimistic one, the sec- ond one a realistic one, and the third one a pessimistic one; these three are weighted for an average, with usually the realistic one receiving a weight of four.

• Expert judgment. In this case, the estimation of hours and workload is put forward by experts. It depends heavily on their experience and the description of the activities put in front of them; the lesser the accuracy of these descriptions, the more erratic the judgment by experts might be.

• Guessing. Not least, guessing is used also. Certainly, when the activities have a high degree of novelty, this may be the only resort for estimating the hours and the duration of activities in projects.

These methods for estimation were presented in order of decreasing accuracy and reliability. Within a project, these may be used in combi- nation. This could be for the purpose of so-called tri-angulation; by using different methods for estimating the efforts for activities, the reliability can be increased. Or, it could be that, for some activities, accurate data is available, whereas for others, the degree of novelty limits the use of available data and experience. In any case, estimates are necessary to find out how much of each resource is needed to for a project and what the approximate duration of activities will be.

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6.4.2 PRoJecT Planning

Based on the estimates of hours for resources and duration of activities, the project can be scheduled. Traditional project planning and execution has been marked by the definition of objectives and milestones based on activities to achieve them. Thus, these goals are met through a progression of networked activities, some of which must be performed sequentially, others of which may be conducted in parallel. Planning techniques, such as the program evaluation and review technique (PERT), graphical evalu- ation and review technique (GERT), and critical path method (CPM), are used to support this sequencing of tasks and activities in a project; note that these methods are mostly known by their abbreviations. The first two are instances of so-called activity-in-node diagrams, and the third one an activity-on-arrow diagram. There are different versions of these planning techniques, but their purpose and use is similar.

The critical path method, an activity-on-arrow planning method, is taken as an example. To use this method, in fact, any method, first, a dependency table needs to be created, see Table 6.2. This table lists which activities are preceded by other activities and which activities follow a specific activity. For example, activity D is preceded by Start and suc- ceeded by activities E and J; the duration of activity D is five units. Next, a diagram can be drawn, see Figure 6.10. Because this method is a so-called activity-on-arrow, the label of the activities is found above the arrow and between parentheses the duration (alternatively, the duration can be put below the arrow). A node represents a milestone in which at least one activity precedes it and one succeeds it; except the node for the start and the finish of the project, of course. As a next step, first, the earliest start

Activity Preceded by Succeeded by Duration A Start B 7 B A C 5 C B H 3 D Start E, J 5 E D G 8 G E H 6 H C, G Finish 3 J D K 4 K J Finish 3

Table 6.2. Precedence table for planning

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dates are calculated for each activity. For instance, activity C can start earliest at 12 units of time. In nodes where several paths of activities come together, the longest path is taken as the start for the activity after the node. After calculating all earliest start dates and the finish of the project by calculating forward, the latest start date is calculated. This is done in the reverse way, starting with the activities at the Finish first; this is also backward pass calculating. Taking activity C again, the latest start date is 16 units. The difference between the earliest and latest start date is called slack or float; for activity C, the slack is four units. All these calculations are made to find the critical path; the critical path is defined as the activ- ities that have no slack. In other words, the critical path defines those activities that, if they are delayed, will also cause delays for the deadline of the deliverables. Therefore, the critical path method and other planning techniques aim at identifying those activities that have no slack and may cause delays for the project.

This means that the focus of monitoring the schedule of a project aims at keeping an eye on these critical activities in the first place; however, limiting the monitoring to the critical path is not sufficient to adhere to schedules and deadlines. First, it should be noted that, whereas the critical path reflects the activities that might cause delay for the completion of the project, neglecting the other activities may also results in not making the deadline. If the activities that are not on the critical path are not monitored, eventually, they may become part of the critical path. Second, these meth- ods for network planning do not account for the availability and capacity of the resources. Therefore, network planning needs to be complemented with resource allocation to verify the availability of resources and their utilization; if this utilization exceeds 100 percent, then the project needs to be rescheduled to fit with the capacity of the resources; this could mean delaying activities to level the resource utilization. Third, a project needs a detailed structure for managing activities. This means that, when activ- ities are delayed or when resource utilization exceeds the availability,

Figure 6.10. Simplified example of critical path method.

S 0 0

I 7 11

A (7)

II 5 5 V 9

IV 13 13

III 12 16

VI 19 19

F 22 22

B (5) C (3)

D (5)

E (8)

G (6)

J (4)

K (8)

H (3)

VI 19 19Node Earliest start date

Latest start date

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interventions should be at hand and be considered. These interventions could range from rescheduling to allocating additional resources to rede- signing activities. Thus, monitoring and controlling the schedule relies on balancing the monitoring of activities on the critical path and the other activities, feasible resource allocation, and appropriate control and inter- vention in activities.

Figure 6.11 presents such an approach to monitoring and intervening (taken from the steady-state model in Dekkers [2017, p. 188]); this model details the activities that are necessary to ensure that an activity is on track. The core of this model is the transformation process (the activity in a proj- ect). For this process, coding and encoding is necessary; this means that information for an activity should be presented in such a way that it can be used by the resources undertaking this activity. Examples are providing an adequate, coherent description what is needed, such as a specification, and clear statements about what the output is, drawings, and user documen- tation, and so on. When the activity does not yield the expected quality of the output, the deficiencies need to be addressed or it needs to be done again (e.g., a test). The feedforward control mechanism on the left ensures that, in case of deviations in the input, the resources are adjusted or the process is changed to fit with the input. The feedback mechanism monitors progress and intervenes when completion dates are not going to be made (overtime, additional resources, etc.). There is also feedback as evaluation for the total project planning. If for some reason the original planning is not realistic anymore, a new project schedule needs to be issued (the ini- tiating process). In the case that the project will not be on track anymore, the stakeholders need to be informed (capability of process). It may also be that the information from the stakeholders is received that the deadline for the project has changed; for example, the deadline is pulled forward, which will result in a new overall project planning and the use of addi- tional resources. Thus, the monitoring of a project depends not only on controlling the critical activities, but also on not neglecting the non-crit- ical activities, and having a structure for monitoring and intervention in place, as demonstrated by the steady-state model.

6.4.3 BuDgeTing

Using the estimates for resource allocation and planning, a budget for a project can be prepared. Such budgets are also related to the scope of a project (see Subsection 6.1.2). In the case of a narrow scope, the inter- actions with the receiving party of the deliverables—in most cases to be seen as a customer, whether external or internal—are restricted to the

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project MAnAgeMent (for innovAtion) • 197

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198 • innovAtion MAnAgeMent And npd for engineers

specifications of the process, product, or service that is developed and the progression against planning; the latter could be time and cost. It may involve the development of manuals and training for operators in recurrent processes. In the case of a broader scope, stakeholder management is part of the project and also management of interfaces with functions or other projects. For instance, the conversion of a production machine in a paper mill to deliver smaller batches of specialized paper requires interaction with the logistics department for the supply of materials and distribution of orders to customers. An example of the interaction with other projects is the case of a clean room facility in a new plant for pharmaceuticals; cleanroom facilities are often supplied by specialized suppliers, but have to be integrated in the design and construction of the plant. Thus, insight is needed beyond the deliverables about the expectations of a project for the development of processes, products, and services to adequately plan all necessary activities.

In addition to identifying all necessary activities, because there is some degree of uncertainty and possibly there are iterations, the basic activities need to be complemented with milestones and foreseen deci- sions. This is necessary because these milestones have implications for activities and resource allocations. Take for example, a company using the controlled convergence method (see Subsection 2.4.4) for a product devel- opment project; this company is developing two alternative concepts. In the spirit of this method, only when the design of both concepts has been completed, a decision will be taken how to go ahead. However, whether the company decides for one concept or the other, the implications for activities, resource allocation, and budgeting are known beforehand. For this reason, the budget (and also the planning preferably) should account for the differences between the most expensive option and least expen- sive option. Once an option is chosen with lesser impact on planning and budget, the budget allocation for the project can be reduced to reflect the decision taken. This means that budgets and planning are dynamic during the execution of a project, and these decisions can be foreseen and planned.

Furthermore, risks and contingencies need to be incorporated into a budget. First, each estimation for resource allocation to specific activi- ties has a degree of uncertainty. This also covers the impact of interfaces, though such also depends on the contractual arrangements. Second, each project has risks (see Section 6.5); not all risks can be foreseen, but a budget needs to allow some degree of flexibility to cater for these. Third, each project encounters unforeseen circumstances. These three aspects of risks and contingencies—variability due to estimation, countermeasures for risks, and unforeseen circumstances—lead to posts in a budget that may have to be used or may not; such depends on the monitoring.

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Based on the resource allocation, the impact of milestones and foreseen decisions, and identification of the risks (see Section 6.5) and contingencies, the budget for a project can be prepared. How from these components a budget for a project is built is shown in Table 6.3 for an example; this example is for the extension of a house by building a conser- vatory. In this case, the budget is drafted by the home owners in advance of allocating the contract to a builder, though they have asked two build- ers to submit a proposal and cost estimate. As can be seen, two types of contingencies have been included in the budget. The first is that, depend- ing on the ground conditions, a foundation wall may be needed; during the early stages of the project, these conditions can be investigated, and depending on the outcome, this wall may be necessary. The second contin- gency is a generic one, catering for all costs being estimates. This example shows that contingencies may constitute a substantial portion of a budget; therefore, these milestones and foreseen decisions, the identification of the risks, and the inclusion contingencies should be identified as soon as possible in the budget of a project.

Akin the points for monitoring planning, the managing and monitor- ing of budgets is particularly focused on those items in the budget that have considerable impact caused by progressive insight and iterative steps inherent to projects. The monitoring can be based on the same processes as for planning, see Figure 6.11. However, interventions in the budget

Post Expenditures Labor (hrs.)

Materials (£)

Costs (£)

Concrete footing and dwarf wall 75 2,000 3,000 Edwardian luxury conservatory (5 × 2 meters)

150 4,000 10,000

One radiator supplied and fitted 6 250 490 10 m2 of Roman roof blinds 12 1,500 1,980 12 m of Venetian window blinds 16 1,200 2,040 Suite of cane furniture 1,000 Plants and pots 450 Contingencies Foundation wall (ground conditions) 80 1,000 4,200 Generic contingency 2,000 Total 339 10,450 25,160

Table 6.3. Budget for Edwardian conservatory (extension of house)

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may also have an impact on the planning and scheduling. For example, if the owners in the example decide to use second-hand bricks for the dwarf wall, these might have to be delivered by a supplier further afield, thus affecting the planning (and possibly the hours for masonry). Similar to scheduling, there is the need for balancing critical expenditures (those expenditures that can easily impact the budget), feasible allocation and utilization of resources, and the impact of intervention in activities when they need to be adjusted to attain the deliverables.

6.4.4 STePS foR Planning anD ScheDuling conSTRainTS

So far, the development of a project plan has not looked at constraints in time and costs, which is inherent to projects. Thus, it is often the case that the ideal planning and budgeting are subject to modifications for meet- ing these constraints for deadlines and budgets. Figure 6.9 shows these trade-offs to be made during the preparation of a project plan. However, such decisions only become possible when there is insight derived from a first, coarse estimation, or there is experience and learning from pre- vious projects; the latter could be based on case-based reasoning (see Subsection 2.4.3). Common options for meeting constraints are (i) relax- ing the budget if the deadline is more important, (ii) extending the dead- line, (iii) reducing the scope, which implies somehow that the deliverables are changed, and (iv) phasing the deliverables so that the implications of the budget are spread over a longer time span. The latter is illustrated in Box 6.1 for the Edinburgh Tram project. However, such phasing of deliv- erables also may lead to the initial stages being less feasible on their own. Looking at the Edinburgh Tram project, the delivery of just one phase did result in less passengers using the tram, even though numbers for this specific traject were slightly higher than expected. This means that any of these four decisions to meet constraints results in a trade-off between scope, time, and cost always, which consequently leads to less optimal solutions being delivered by the project.

A particular place technique for meeting deadlines is the so-called crashing of a project. This approach is put into action when the deadline is so tight that only through using the shortest timeline the project can be realized. In this case, the activities are re-organized so that, principally, all activities are on a critical path. Looking at Figure 6.10, this means that not only the paths D, G, E, G, and H are critical, but also these activities need to redesigned and re-allocated to reduce their lead time. This rethinking

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of activities causes more activities in the project to be on a critical path. In this case, the lead-time of D is reduced by 1 unit, E by 2 units, and G by 1 unit; consequently, not only the overall lead-time of the project is shorter, but also activities A, B, and C are now on the critical path. However, this approach has implications for budget, is sensitive to per- turbations, and may lead to poor quality. Looking at the reworked exam- ple in Figure 6.12, the shortening of the activities can only be possible when the activities A, B, and C use different resources than the activities D, E, G, and H. Furthermore, it should be possible to allocate additional resources to activities D, E, G, and H; this could be achieved through overtime or hiring additional resources. Assuming that the original allo- cation was optimal from a cost perspective, the options for shortening the

Figure 6.12. Crashing of project using example of Figure 6.10.

S 0 0

I 7 7

A (7)

II 4 4

V 8 10

IV 10 10

III 12 12

VI 15 15

F 18 18

B (5) C (3)

D (4)

E (6)

G (5)

J (4)

K (8)

H (3)

The project for the Edinburg Tram is an example of the trade-offs to be made when preparing a plan for a project. Initially, the project costs spiraled out of hand as widely reported in the media. To counter these effects, Phase 1a was only implemented. Currently (at the time of this writing), the Council of Edinburgh is considering to extend the tramline with Phase 1b.

Box 6.1. Edinburgh Tram

Source: https://upload.wikimedia.org/wikipedia/commons/thumb/2/21/ Edinburgh_tramway_map.svg/800px-Edinburgh_tramway_map.svg.png. [Downloaded: April 23, 2017]

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activities will lead to an increase in the budget. Moreover, there are now two critical paths. Any disturbance on any of these pathways will lead to a delay of the project. This also means that a project manager has to monitor two paths more intensely for repercussions when delays happen; therefore, implicitly, the crashing of a project also increases the workload of a project manager. Because of the increased workload and the pressure to be in-time, the chances of poor quality for the deliverable of one activity that is the input for another activity increase, too. Again, this increases the chances of deviations from the planned work and requires additional monitoring by the project manager. In addition to these points of attention for monitoring, note that crashing a project requires a totally different style of managing a project. Although possible trade-offs should highlight areas of concern, crashing projects can be both beneficial in terms of realizing the earliest possible date for completing a project, it may also have det- rimental effects because of the pressure to complete, rather than passing on deliverables that are appropriate for the next activity (or activities) in addition to the impact on budget and monitoring.

The constraints in budgets are generally more difficult to resolve than those of planning. For instance, resources have often unique capa- bilities, and therefore, comparisons rely on tacit knowledge. A case in point was the sourcing of suppliers for the Boeing 787 Dreamliner (see Dekkers et al. 2013, pp. 325–6). Though sparsely mentioned in news about this airplane, its delivery was delayed by the selection of suppli- ers mainly through a web application; this resulted in suppliers being awarded contracts that they were not capable of delivering, though being far less expensive than competing suppliers. The integral cost of the delay exceeded by far the cost savings in addition to damaging the reputation of Boeing. This example shows that simply having a technical approach to projects not really works. In addition to that, the cheapest may not be the best solution, because the life-cycle costing should be accounted for (see Subsections 3.1.3 and 3.1.4). An example of this is the well-known sub- way system of Singapore. In the 2010s, rolling stock and the infrastructure started to breakdown. These failures could be traced back to decisions related to the initial investment. Constraints in the budget at the time led to the buying of less-optimal equipment, which caused disruptions later for train services. Ultimately, such cost for maintenance and cost caused by disruptions during operations may exceed those of the initial expendi- tures; however, sometimes, the constraints in available budgets leave little choice. This also leads to the conclusion that resolving budgetary issues in projects need not only to consider the here-and-now, but also to include a vision of the future; if budgets do not permit to be extended, then it is

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better to make the impact of future risks visible so that stakeholders can review how they contribute to the project.

6.5 MAnAgeMent of uncertAinties And risKs in projects

In addition to managing the measures caused by the temporal and budget- ary constraints, uncertainties, which are inherent to projects, need to be assessed, too. Going back to what defines a project in Subsection 6.1.2, it is the unique element(s) that make every project different from a previous one; otherwise, a request for an artifact can be managed merely as a recur- rent process. These unique elements of a project could be decision points along the way or uncertainties that need to be resolved. In the case of inno- vation, the emphasis is on managing uncertainties. These uncertainties are most likely technological in nature or market-related. An example of the first is the integration of web services into artifacts (Internet of Things), and an example of the latter was the uncertainty whether the market was ready for smartphones (this was the opposite for the Apple iPhone: the underestimation of its initial demand could be observed through the well-reported shortages for phones and their components). Furthermore, the incorporation of these uncertainties in a project plan leads to decision points and pre-set responses. However, this also depends on whether a project has a narrow scope or a broad scope; in the case of a broader scope, this also extends to the stakeholders and interfaces of the project. These uncertainties should be monitored, and their effect on the project execu- tion assessed as insight progresses.

Moreover, it also possible to conduct a risk analysis at the level of a project; the ultimate goal of risk analysis to devise countermeasures. The two basic techniques for risk analysis are fault tree analysis (see Subsec- tion 2.3.4) and failure mode and effect analysis (see Subsection 2.3.5.); in the context of project management, these techniques are not only applied to the deliverables, but also the processes of the project. Often, the con- straints can be taken as a starting point. An example of fault tree anal- ysis applied to project management is the analysis of the availability of resources on meeting the deadline for a project; if the analysis is under- taken by using a project schedule and the chances that specific resources are not available is incorporated in the analysis, then resources that are potential bottlenecks can be identified. Applying the failure mode and effect analysis to the same purpose would mean using the availability of a specific source as starting point for the analysis; this could lead to the over- sight that other resources, which might cause delays, are overlooked. After

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analyzing the risks, countermeasures should be introduced and monitoring put into place. Note that countermeasures most likely never mitigate a risk fully. Thus, risk management is not only about identifying risks, but also about risk mitigation and swift response once risks manifest themselves.

6.6 orgAnizAtion of project teAMs

With all activities, the project planning, budget, and risks mitigation deter- mined, the organizational structure of the project can be set up. When structuring projects, keep in mind that they are often embedded in existing organizational structures and working methods in organizations; however, there are pros and cons how this is organized. This means that the forma- tion of a project should be looked at from an internal perspective (project team) and external perspective (embedding of project in existing organi- zational structures).

6.6.1 STRucTuRing PRoJecT TeamS

For the structure of the project organization, advantage should be taken of the existing processes and routines in organization. This thinking goes back to Subsection 6.1.1 about the different modi operandi; although project management is effective, recurrent processes are more efficient (based on feedback that leads to optimization of processes and resources). This means that the structure of a project team can build on the strengths and capabilities of an organization. However, a project has unique features that should be facilitated by multidisciplinary working groups (or teams); these working groups vary for each project. An example is the develop- ment of a pregnancy test; see Figure 6.13. In this case, the project team consisted of the representatives of eight departments. However, two topics posed a challenge for the project, for which the regular processes for new product development were insufficient. The first one was the specifica- tions for the paper on which the urine sample would be tested; this strip would contain the reagents for detecting the pregnancy hormone (human chorionic gonadotropin) in urine. Early on in the project, it appeared that sample material was no longer available and also the specifications for the material were unknown. The second issue was assuring the quality of the reagents for detecting human chorionic gonadotropin. This reagent appeared to be of varying quality, but was critical to the performance of the diagnostic test. For both challenges, working groups were formed con- sisting of experts from relevant departments; care was taken that different

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project MAnAgeMent (for innovAtion) • 205

representatives from each department were part of these multidisciplinary teams to stimulate independent action plans. This means that a project normally consists of representatives of departments in an organization supplemented by working groups that focus on challenges or unique features for the project execution.

6.6.2 emBeDDing PRoJecT TeamS in oRganizaTional STRucTuReS

How the project team is embedded in an organizational structure can take four forms; the first form of project organization is called departmental project management (see Figure 6.14). In this case, each department has its own project manager. This only works when each department has sep- arate projects or each project’s activities are similar to other project. The latter is the case when a project follows a standardized process. This orga- nizational structure of a project means that each department determines the what, how, and when of a project, without necessarily considering implications for other departments or the completion of the project. The company that served as example for Figure 6.13 followed this structure. This complicated new product development, because individual project leaders in departments thought they were empowered to make decisions, even with implications for other departments. A project charter at the

Figure 6.13. Project team structure for development of hCG diagnostic consumer device.

Process engineering and testing

Quality assurance

Design and engineering

Production

Laboratory hCG diagnostics

Marketing

Packaging and labeling

Purchasing

Project administration

Working group paper • Junior project manager • Lab. hCG diagnostics • Quality assurance

Working group QA antibody • Junior project manager • Experiments • Lab. hCG diagnostics • Quality assurance

Project hCG diagnostic consumer device

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206 • innovAtion MAnAgeMent And npd for engineers

beginning of the project countered this uncoordinated decision making; this charter described how decisions were taken and how they had to be approved by project management before being implemented.

The second form for a project organization is the so-called line-staff structure; see Figure 6.15. In this case, the project manager is centrally located, but has no direct authority with regard to activities within depart- ments. This means that the project manager coordinates the project exe- cution with the heads of departments, but that the factual decisions about the what, how, and when are taking by these heads. This also requires from the project manager a certain degree of tact to align the activities in each department with the overall project plan and schedule. Again, a project charter that is agreed before a project starts can overcome such disadvantages.

The third form for a project organization is the matrix organization; see Figure 6.16. Typically, project managers are responsible for the what and when, whereas line managers have the responsibility of how activities are conducted. In some organizations, the line managers are responsible for the when. In either of these two variants, the project manager has more

Figure 6.14. Departmental project management

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Figure 6.15. Line-staff structure for projects.

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project MAnAgeMent (for innovAtion) • 207

influence on the execution of the project. However, in practice, it is more difficult to delineate the what from the how and when.

The fourth form is the pure project organization, in which projects are the core of the organizational structure; see Figure 6.17. Members of staff are allocated to specific projects. In this structure, it is often difficult for experts to identify themselves; other experts in the same domain are working in different projects, and there may be limited contact. Some companies have circumvented this by creating special interest groups or communities of practice; these groups serve as platform for experts to exchange ideas and support each other (perhaps one could also call this virtual departments). It could also be that the internal organization of a firm does not have the capabilities to deal with the project. This is the case for the Capital Programme for Amsterdam Airport Schiphol; this includes the building of a new pier and terminal to be completed by 2023. Although management and organization of Schiphol have been dealing with refurbishment and extensions, the last terminal was built 20 years before. This means that people with skills to manage such a transition have left Schiphol or retired. In combination with the scale and

Figure 6.16. Matrix structure for projects.

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208 • innovAtion MAnAgeMent And npd for engineers

complexity of this extension, this has led to the conclusion that the only viable option is to execute the program by setting up an external entity; it is expected that this will lead to a smoother execution of the project. This means that the pure project organization can be an effective means for managing a large and complex project, though experts may need addi- tional attention.

Within project management, multidisciplinary teams have become the norm. These teams can consist of representatives from the engineering disciplines involved, marketing department, manufacturing department, logistics department, and so on. The advantages of these teams are that all relevant functions are brought together, and hence that information is shared, particularly for decision making; these multidisciplinary teams are often associated with concurrent engineering (see Subsection 2.4.6). These multidisciplinary teams are especially helpful for the unique points of a project and can complement standardized working processes.

6.7 inforMAtion And coMMunicAtion pLAns

For project teams and multidisciplinary teams, but also for departments and stakeholders that are involved in the project, sharing of information is crucial to progress. The first instance of information sharing in a proj- ect relates to technical information. This sharing of technical and product information is mostly done by using a knowledge repository in IT sys- tems. Keeping this up to date is often associated with systems engineering (Subsection 3.1.4) and can be linked to the work breakdown structure (see Section 6.3). In addition to technical information, also information about the progress of a project is shared within the project teams and multi- disciplinary teams, but also commonly with departments involved in the project. This facilitates keeping information about the scope of the project, the allocation of resources, and the actual planning and budgeting with the purpose of informing decisions in the project team and departments. Third, also with stakeholders information needs to be communicated. This differs depending on the scope of a project (Subsection 6.1.2). Projects with nar- row scope tend to focus on the customer and technical specifications. Proj- ects with a broader scope involve more relevant actors. A fourth reason for an information and communication plan can be the creation of legacy and regulatory requirements. The legacy can enable learning from proj- ects. The regulatory requirements are often specific to certain industries, such as aerospace and pharmaceuticals. Thus, information sharing and documentation concern both technical information and information about the status of the project so that the project team members can contribute

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project MAnAgeMent (for innovAtion) • 209

to the project more effectively and efficiently, stakeholders can be better involved, learning across projects can take place, and legacy is assured.

For communicating with team members, departments, and stakehold- ers (including customers), a method that is called the RACI matrix is often used; RACI is an acronym that means responsible, accountable, consulted, and informed. It uses a matrix to align the level of responsibility with the activities to be accomplished and the roles participants play in a project or as stakeholder. The left column of the matrix lists the project deliverables that must be completed for the project to be successful; see Figure 6.18. The top row lists the functional roles that the team members have in a project. For each activity, only one of the roles, or team members, can be held accountable (A) for the completion of a deliverable and particular decisions made on the project. Multiple team members can be responsi- ble (R) to perform the work and make decisions necessary to complete a deliverable, be consulted (C) for inputs while the work is being done, and decisions are being contemplated, or be informed (I) when a deliverable is completed and a decision is made. To build the RACI matrix, it requires the team to collaborate on the overall deliverables of the project plan.

Also, for managing the stakeholders and interfaces within an organi- zation, a similar method can be used; see Figure 6.19 for the stakeholder matrix. However, this matrix aims at identifying and managing how the project contributes to the activities of a particular stakeholder; this means that the use or implementation of a deliverable has some effect and con- tributes to achieving objectives. An example is the commissioning of

Figure 6.18. RACI matrix for a project (only part of this matrix).

Functional requirements

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210 • innovAtion MAnAgeMent And npd for engineers

manufacturing equipment. This may lead more efficient operations, which can be measured. Then, the objective of increasing efficiency will become a key priority for the manufacturing manager as stakeholder of the project, but also for the project itself. This applies particularly to projects with a broader scope. These objectives may need further support or might pose risks in which case mitigation is needed.

6.8 MAnAging projects

For new product, service, and process development projects to be successful, adequate or, some say, strong leadership is necessary. This section goes only briefly into more detail about what adequate leadership for project is and how project teams should be managed.

6.8.1 PRoJecT leaDeRShiP

From the descriptions of a project so far, it has become obvious that proj- ects require working together with team members, heads of departments, management of firms, suppliers, stakeholders, and so on; in this respect, a distinction can be made between project management and project lead- ership. Project management can often be associated with an emphasis on processes and methodologies. These managers wield authority (depend- ing on how a project is embedded in an organization; see Section 6.6.2), assign responsibility for activities to team members, and focus on (set) deliverables. Project leadership adds to project management working with team members and interacting with stakeholders. This puts the emphasis on motivating team members, shaping the project in communication with team members and stakeholders, and ensuring that the deliverables are defined in such a way that they are of benefit to all involved. To this purpose of defining the leadership style, many methods and tools are available. One is the project leadership matrix (Madsen 2016), which breaks down lead- ership into four quadrants: reactive people-leadership, reactive task man- agement, proactive people-leadership, and proactive task management. In this matrix, reactive people-leadership and proactive people-leadership are representing leaders who inspire, engage their teams, and provide a great deal of autonomy. Leadership through task management is a more authoritative, directive method and fits better with projects with a narrow scope (see Subsection 6.1.2). Proactive project leaders focus on the contri- bution and benefits of the project for stakeholders (projects with a broader scope, see Subsection 6.1.2). Project leadership that is more reactive deals with the immediate issues as they emerge during project execution. This

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project MAnAgeMent (for innovAtion) • 211

characterization shows that possibly different leadership styles lead to different outcomes of projects, too.

6.8.2 managemenT of PRoJecT TeamS

No matter the project leadership style, team management is seen as crucial to projects. Acquiring the project team is often complicated by the fact that the project management team will not usually have direct control over whom they would like to have involved in the project. They may need to negotiate with department managers and others who are in a position to provide the right number of personnel with the appropriate level of knowledge skills and experience. This situation is very common in projects that cut across departmental boundaries. Failure to secure the necessary human resources can affect project schedules, budgets, customer satisfaction, and quality, as well as increasing the risk that the project will simply fail to deliver on time and within budget. The impact of any unavailability of required human resources needs to be considered in the planning stages of the project.

Once the project team membership is set, team roles become important; there are different approaches to this with different purposes. A well-known one is roles based on lateral thinking (de Bono 1967); his method for creativity is based on using six hats, each representing a perspective on the problem and solutions, which are often associated with participants:

• White hat: neutral information. This perspective focuses on collect- ing facts and information needed.

• Red hat: emotions and hunches. This hat entails the perspective of uncovering emotions and feelings and sharing fears, likes, dislikes, loves, and hates.

• Black hat: judging and evaluating. This angle focuses on being the devil’s advocate or why something may not work. It spots the difficulties, challenges, and failures.

• Yellow hat: optimism and positive views. This viewpoint explores the positives and probes for value and benefit.

• Green hat: ideas and creativity. This role provides possibilities, alternatives, and new ideas as an opportunity to express new concepts and new perceptions.

• Blue hat: big picture and control. This position manages the think- ing process, the generation of ideas, and their evaluation.

Another famous method for team roles has been devised by Belbin (1981); it distinguishes nine roles that contribute to a project team in a different manner:

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212 • innovAtion MAnAgeMent And npd for engineers

• Resource investigator. These team members use their inquisitive nature to find ideas to bring back to the team.

• Teamworker. These participants help the team to gel, using their versatility to identify the work required and complete it on behalf of the team.

• Co-ordinator. These are needed to focus on the project’s objec- tives and deliverables, draw out team members and delegate work appropriately.

• Plants. These members of a team tend to be highly creative and good at solving problems in unconventional ways.

• Evaluator. These persons contribute by providing a logical perspec- tive, making impartial judgments where required, and weigh up the team’s options in a dispassionate way.

• Specialist. These team members bring in-depth knowledge of a key area to the team.

• Shaper. These participants ensure that the team keeps moving and does not lose focus or momentum.

• Implementer. These are needed to plan a workable strategy and carry it out as efficiently as possible.

• Completer. These members of a team are most effective at the end of tasks to polish and scrutinize the work for errors, subjecting it to the highest standards of quality control.

Some team members may fit with multiple roles in this approach. A third method is known as profile dynamics. It is based on the level of existence theory of Graves (1970). He recognized there were seven distinct value systems that determine the way people think and behave; each of these types has been assigned a color. These three methods seek to balance a team by having all archetypes present so that decision making covers all grounds and does not become unbalanced; this means also that, when one or more of the archetypes are not represented, teams can become focused on specific issues and neglect others. This notion of finding balance is characteristic for team management.

6.9 Key points

• A project is an effective way of fulfilling a need, though it is less efficient than recurrent processes, which are often optimized, and for this reason, more efficient. The unique features of a project are exceeding the capability of organization; thus, this staged approach with reviews aims at fulfilling the need for unique deliverables. The project approach is aiming at avoiding the trap of the ad-hoc

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project MAnAgeMent (for innovAtion) • 213

approach, which often leads to uncontrollable use of resources while not ensuring that deliverables will become available in time.

• Characteristic for a project is a stage-wise approach to solve a problem or fulfill a need. This stage-wise approach incorporates milestones as points for decision making on predefined outcomes of activities. These milestones lead to looking at what progress has been made and looking forward to the next stages and activities.

• Figure 6.20 shows an overview of how a project can be structured starting with the project definition (new product, service, and process development) to the organization of a team and its related information and communication plan; the overview follows the con- cepts presented in this chapter. The figure does not include iterative cycles that exist; for example, that risk assessment and mitigation may lead to a new schedule for the project has not been depicted.

• Essential for many aspects of projects is whether it concerns a project just focusing on the deliverable(s) (project with narrow scope) or it pertains to a project that includes how deliverable(s) will be used by stakeholders (project with a broader scope); the latter may also include interfaces with other projects.

• The capabilities of team members, suppliers, and others involved in the project have a strong bearing on its outcomes, timeline, budget, and risks.

• Scheduling and budgeting will point to critical activities that should be monitored more intensely than other activities. If constraints in deadline and budget cannot be met, trade-offs should be made with the scope of the project; in practice, this means redefining the deliv- erable(s) or less deliverables. Alternatively, deliverable(s) can be staged to relax these constraints.

• Risk assessment and mitigation can be performed on the project definition, deliverables, activities, scheduling, and budget of the project. For projects with a broader scope, this can extend to the interaction with stakeholders and their benefits from the project.

• The design of monitoring and control can be informed by the steady-state model and breakthrough model for interventions; the latter can be found in Subsection 10.1.1. The steady-state model applies better to activities within the project, and the breakthrough model with its innovation impact points to scope and changes in the project (including the interaction with stakeholders).

• Information and communication plans are a prerequisite for ade- quate project management and should be set up at the beginning of a project. Adequate processes and procedures for information management underpin these plans.

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214 • innovAtion MAnAgeMent And npd for engineers

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• For project execution, actual project leadership is determined by how the project leader interacts with team members and stakeholders. The project leadership style may also depend on the type of project.

• Methods for team management focus on a balanced representation of team roles to ensure that decisions and collaboration are focus- ing on all relevant aspects.

6.10 references

Belbin, M. 1981. Management Teams. London: Heinemann. Cooper, R.G. 1994. “Third-Generation New Product Processes.” Journal of

Product Innovation Management 11, no. 1, pp. 3–14. de Bono, E. 1967. New Think: The Use of Lateral Thinking in the Generation of

New Ideas. New York, NY: Basic Books. Dekkers, R. 2017. Applied Systems Theory, 2nd ed. Cham: Springer. Dekkers, R., C.M. Chang, and J. Kreutzfeldt. 2013. “The Interface Between

‘ Product Design and Engineering’ and Manufacturing: A Review of the Literature and Empirical Evidence.” International Journal of Production Economics 144, no. 1, 316–33. doi:10.1016/j.ijpe.2013.02.020

Graves, C.W. 1970. “Levels of Existence: an Open System Theory of Values.” Journal of Humanistic Psychology 10, no. 2, 131–55. doi:10.1177/0022167 87001000205

Leonard-Barton, D. 1988. “Implementation as Mutual Adaptation of Technology and Organization.” Research Policy 17, no. 5, 251–67. doi:10.1016/0048- 7333(88)90006-6

Madsen, S. 2016. The Power of Project Leadership. London: Kogan Page. Project Management Institute. 2000. A Guide to the Project Management Body of

Knowledge. Retrieved from Newton Square, PA. Schuh, G., A. Kampker, and B. Franzkoch. 2005. “Anlaufmanagement, Kosten

senken–Anlaufzeit verkürzen–Qualität Sichern.” wt Werkstattstechnik online 95, no. 5, pp. 405–09.

ten Haaf, W., H. Bikker, and D.J. Adriaanse. 2002. Fundamentals of Business Engineering and Management. Delft: DUP Science.

Tyre, M.J., and W.J. Orlikowski. 1993. “Exploiting Opportunities for Technologi- cal Improvement.” Sloan Management Review 35, no. 1, pp. 13–26.

Vandevelde, A., and R. Van Dierdonck. 2003. “Managing the Design-Manufactur- ing Interface.” International Journal of Operations & Production Manage- ment 23, no. 11, 1326–48. doi:10.1108/01443570310501871

VDI (Verein Deutscher Ingenieure). 1993. Methodik zum Entwickeln und Konstru- ieren technischer Systeme und Produkte (Systematic Approach to the Devel- opment and Design of Technical Systems and Products). Berlin: Beuth Verlag.

Wijnen, G., W. Renes, and P. Storm. 1996. Projectmatig Werken. Utrecht: Het Spectrum/Marka.

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chApter 1

Why innoVation management and Why is it important

for engineers?

Technology and innovation have played a central role in social-economic development of societies for a long time, at the level of nations, commer- cial organizations, and individuals. A few examples are the development of agricultural methods and steam-powered engines during the 19th century; these are often associated with what is called the First Industrial Revolu- tion. The use of electric power and more advanced production techniques, such as the production line, among other inventions characterized the Second Industrial Revolution. The Third Industrial Revolution manifested itself through the expansion of mobile (technology) for communication and information systems at the end of the 20th century and beginning of the 21st century; all three revolutions have shaped the society, as we know it now. These changes came along with new methods, products, and services, during later eras propagated by companies1. Nowadays, compa- nies and governments have put technology and innovation high on their social-economic agenda. Bringing about technological developments and innovations is not restricted to governmental agencies, institutions (such as universities and research institutes), and companies, but also includes individual inventors. Think about Leonardo da Vinci (official name: Leon- ardo di ser Piero da Vinci, 1452–1519), who was an inventor and artist at the same time (his creations still have a resounding influence today). This brief introduction can only touch on the importance of inventions, new processes, new products, and new services and how their inventors

1 Companies as legal entities appeared only during the 19th century; see Bakan (2004) for a description of the emergence of companies as legal construct.

C o p y r i g h t 2 0 1 8 . M o m e n t u m P r e s s .

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and companies have contributed to the socio-economic development of society over the course of centuries.

In this (historical) context, engineers have played an important role for inventions and technological advances that resulted in innovations (Section 1.1 will provide more detail on the difference between inventions and innovation). Among those engineers who are famed for their innova- tions is Jan Leeghwater (1575–1650), a hydraulic engineer, mill builder, and architect in the Netherlands. He was involved in the reclamation of the first polder in the world from a lake by using windmills; the name of this lake is now Beemster Polder, and the extraction of water took from 1609 to 1612. Another well-known British engineer is Isambard Kingdom Brunel (1806–1859), builder of dockyards, the Great Western Railway, the first propeller-driven transatlantic steamship, and numerous important bridges and tunnels in the United Kingdom; each of these often contained inno- vative solutions to long-standing engineering problems. Nicolas Grollier de Servière (1596–1689) was a French inventor and ornamental turner who became well known for creating a series of fantastic machines. As an engineer, he specialized in deploying movable bridges in the field for the military. After he retired to his home in Lyon, he worked on ornamental lathe work and built a series of fantastic models. He displayed his work in a cabinet that he opened to the public once a week and which became famous enough to attract politicians, scholars, artisans, and other inven- tors. This cabinet featured model water pumps and Archimedes’ screws, siege engines, designs of floating bridges, and clocks regulated by balls traveling down inclined planes or along spiral tracks, machines to trace landscapes, and to convert plan images into perspective, odometers with reducing gears, wheelchairs, many intricate pieces of lathe work in ivory and wood, and an improved version of Agostino Ramelli’s reading wheel that allowed many books to be read by means of a rotating wheel. Nikola Tesla (1856–1943) was a Serbian–American inventor, electrical engineer, mechanical engineer, physicist, and futurist best known for his contribu- tions to the design of the modern alternating current electricity supply system. This non-exhaustive list of engineers and inventors demonstrates the contribution that engineers have made to society by creating solutions to its infrastructure, equipment for processing materials, machines for pro- duction, novel products, and artifacts.

Building on this contribution to society and the role of engineers, this introductory chapter starts by looking at what innovations are and how they differ from technology in Section 1.1. Then, it moves on to look at the innovation funnel in Section 1.2 before it discusses the role of so-called business models in Section 1.3; these business models play an important

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Why innovAtion MAnAgeMent • 3

role in the commercialization of new products and services, and some- times depend on innovation for their processes. After presenting the basic concepts for innovation, the role of engineers in the context of innovation management is discussed in Section 1.4. This is followed by Section 1.5, which presents the content and outline of the book, and Section 1.6, which describes how to use this text.

1.1 WhAt Are innovAtions?

Returning to the importance of innovation and technology management, it is almost impossible that a day goes by without talking about innova- tion or without being confronted with announcements by companies about new products and services. These announcements by firms might be about breakthroughs for new products and services, improvements of exist- ing products and services, and new ways of their delivery, among other changes. This makes one wonder whether these are really new products and services, just simply revamps or just rebranding. Sometimes these announcements by companies mention technology that is being used for those products and services. This makes it necessary to first look at what technology and innovation are all about.

1.1.1 Defining Technology

The first key concept—technology—can be seen as the know-why and know-how in the form of techniques, methods, or processes used in the creation and production of goods or services. For example, the technology for information and communication systems constitutes all the equipment, infrastructure, software, interfaces, and auxiliary devices to exchange data and information between computers, storage devices, and humans (note that this is not a formal definition, but merely a description for the purpose of this book). The methods and processes for information and communication technologies extend from design to use in operations and to maintenance, which might even include the transition to new informa- tion systems. This instance also shows that an important characteristic of technology is that it can be embedded in machines, computers, devices, factories, and infrastructure; these objects can be operated by individuals who might not necessarily have detailed knowledge of the working of such artifacts and contraptions. In this particular case, it also means that quite a number of (scientific) disciplines are working together to realize

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those information systems. The processing power of microchips depends on advances in physics and electronics, among others, and the integration of the relevant knowledge in these disciplines to create these electronic circuits. However, a software architect, working on software tools and platforms, will be limitedly aware of all the knowledge from physics and electronics, but still make a major contribution to the proper functioning of information systems. Hence, technology is not confined to a narrow domain of knowledge, but in general, covers a wide range of techniques, methods, and processes from several disciplines to make product, services, artifacts, and other contraptions work.

In a more formal sense, there are many definitions about what tech- nology constitutes, see Box 1.1; however, hardly any of these brings about a better understanding of the processes for generating technologi- cal knowledge and applying technologies in products and services. In this sense, Ramanathan (1994, pp. 224–28) recognizes four perspectives on technology embedded in definitions:

• Technology from a transforming and enabling perspective. This means that technology is seen as the application of scientific knowl- edge, sometimes in terms of fitness of purpose and suitability for economic transactions. The definition of Galbraith (1967, p. 12), see Box 1.1, fits with this perspective.

• Technology from a tool perspective. In this point of view, technol- ogy is seen in a more limited view as being an apparatus, machine, piece of equipment, or anything similar. Schön’s (1967, p. 1) definition in Box 1.1 fits in this category.

• Technology from a perspective on knowledge, which places the emphasis on know-how (the capability to use knowledge in action).

• Technology is the systematic application of scientific or other organized knowledge to practical tasks (Galbraith 1967, p. 12).

• Technology is any tool or technique, any product or process, any physical equipment or method of doing or making by which human capability is extended (Schön 1967, p. 1).

• “… a system that uses knowledge and organization to produce objects and techniques for the attainment of specific goals” (Volti 2006, p. 6).

• Technology is scientific, engineering, and managerial knowledge, which makes possible the conception, design, development, pro- duction, and distribution of goods and services (Gibson 1976).

Box 1.1. Definitions of technology

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Why innovAtion MAnAgeMent • 5

The definition of Volti (2006, p. 6) is an example of this perspective on technology (see Box 1.1).

• Technology as embodiment, which could be considered a synthe- sis of the three previous perspectives. That blending together also implies that each of the three preceding definitions has limitations. How Gibson (1976) describes technology is a case in point for this encompassing point of view; see Box 1.1.

These distinctive perspectives also mean that, when reading literature on technology management and technology cycles, it is imperative to pay attention to how authors view technology, even if they do so implic- itly. In this book, the fourth perspective, the broadest interpretation will be followed.

1.1.2 Defining innovaTion

This latter, broad definition of technology is very close to what one could call innovation: the successful commercialization of technological advances and inventions. Looking at the definitions in Box 1.2, innovation adds to technology that a product or service is new. These definitions are just a few of many; for example, Baregheh, Rowley, and Sambrook (2009)

• Innovation is conceived as a means of changing an organization, either as a response to changes in the external environment or as a pre-emptive action to influence the environment. Hence, innovation is here broadly defined to encompass a range of types, including new product or service, new process technology, new organizational structure or administrative systems, or new plans or program pertaining to organization members (Damanpour 1996, p. 694).

• Industrial innovation includes technical, design, manufacturing, management, and commercial activities in the marketing of a new (or improved) product or the first commercial use of new (or improved) process or equipment (Freeman 1982, p. 7).

• Innovation is not a single action, but a total process of inter- related sub-processes. It is not just the conception of a new idea, nor the invention of a new device, nor the development of a market. The process is all these things in an integrated fashion (Myers and Marquis 1969, p. 1).

Box 1.2. Definitions of innovation

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have examined 60 definitions that all differ substantially. However, what comes to the fore is that innovation is about something new, either to an organization or industrial sector. It can be new because of the product or service, the technology with which they are produced, the application (and market) or even the organizational system; this broad definition is often associated with management guru Peter Drucker (1985), though his role has been limited to advocating the discipline of innovation rather than advancing its practice. For an example of an organizational system, you can think of the Toyota Production System, that is now called lean pro- duction (see Holweg 2007); this way of producing consists of (i) tools, for example, statistical process control; (ii) methods, such as single-minute exchange dies; (iii) production planning and control, just-in-time deliv- eries are a case in point; and (iv) management approaches, for instance, total quality management. Whereas it was developed under the leader- ship of Taiichi Ohno during several decades, its exposure in the 1970s and 1980s explained how Japanese companies could produce cars more efficiently and of more consistent quality. Western companies saw this way of producing as an innovation for manufacturing systems, which was adopted quickly to compete with Japanese companies. Ironically, much of the practices of the Toyota Production System originated in the West; an example is the so-called plan–do–check–act (PDCA) cycle used for statistical process control, which was championed by W. Edwards Deming (an American statistician)2. This cycle was invented by Walter A. Shewart in the 1930s and was based on the scientific method described by Francis Bacon. This long history has led to the so-called PDCA cycle being a cor- nerstone of lean production, as a contemporary approach. This extensive description of this cycle was done to show that innovations often build on previous work, and, therefore, it takes long before they come to fruition. This case of lean production shows that innovation could also concern

2 See Moen and Norman (2006) for tracing back the history of the PDCA cycle.

• “… the process whereby new and improved products, processes, materials, and services are developed and transferred to a plant and/or market where they are appropriate” (Rubenstein 1989).

• “… the processes by which firms master and get to practice product designs and manufacturing processes that are new to them, if not to the universe or even to the nation” (Nelson and Rosenberg 1993, p. 4).

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Why innovAtion MAnAgeMent • 7

organizational innovation besides product and process innovation; thus, this emphasizes that innovation should be viewed from a broad interpre- tation (even though that this book focuses mainly on product, service, and process innovation).

1.1.2.1 Radical and incremental innovation

As one archetype of innovation, radical innovation is the exploration of new technologies and inventions that are substantially different from the existing knowledge, product, and services. An example of radical innovation is digital imaging. Not so long ago, during the beginning of the 1990s, almost all pictures were taken by using traditional film. At the end of the 1980s and the beginning of 1990s, digital cameras appeared, which did not rely on the traditional films anymore, and paved the way for different ways of storing and sharing pictures. After this transition, the so-called smartphones integrated miniaturized cameras, which moved the taking of images away from the traditional camera (film and digital). Nowadays, these shifts have been followed by all kinds of applications that allow sharing of images by users of websites and the cloud (as sharing of services and storage across multiple locations on the Internet). Currently, cameras, traditional or digital, are sold less and confined to a specialist market. This example shows that digital imaging has changed the way of taking pictures and the ways of sharing them. However, not all radical innovations are successful. An instance of the latter is Zap Mail, which was offered by Federal Express in 1984, using fax transmission. Soon after its launch, another standard for faxes was introduced, incompatible with Zap Mail, and smaller devices became available to small enterprises and homes. Hence, all initial lower costs and advantages for fast delivery were overtaken by a different use of fax technology. Other examples of failed radical innovations are Apple’s Newton, quadrophonic audio equipment, and videodisc players (with gramophone-size discs). Thus, such revolutionary steps by new technol- ogy are called radical innovation, but some of the examples show that they are not necessarily always successful.

On the opposite side of this dichotomous scale is incremental inno- vation. This is the case when an existing technology for products and ser- vices is improved, and these improvements result only in relatively small steps forward. Google’s development and commercialization of Gmail is an example of such dedication to incremental innovation. When Gmail was launched in 2004, it had a limited set of features in addition to its

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core function, delivering e-mails. Unlike its competitors, it was easy to use with no distracting flash advertisements and an adequate user inter- face. Over the course of time, Google released more features and made the service better, faster, and easier to use. Five years later, Gmail was taken out of its beta status, and finally listed as being complete, though, to this day, improvements continue to happen. The company has used the same approach for the development of other applications, such as the Maps ser- vice and the browser Chrome. Incremental innovation often is less risky than radical innovation; however, the first generation of a product might have to be stemming from a radical innovation.

1.1.2.2 Role of PRoDucT configuRaTion

When designing and engineering products and services, the integration of technologies and inventions in such a product or service plays a key role. Such changes in technologies and ideas have to be integrated in a so-called product architecture or service architecture; some called this the product structure or the product configuration (see Dekkers 2006, p. 4012). In terms of logistics and production planning, this is known as the bill of materials (BOM). Figure 1.1 shows the example of a ballpoint pen, with, on the left, a picture of such a pen, and on the right, the related product configuration (or BOM, for that matter). For more complex products, a product configuration can consist out of many more levels, as each high- er-level component might consists of other lower-level components and parts. An example of a complex product is an engine (for a car or a ship). The top of the engine, the cylinder head, contains a cylinder head block

Figure 1.1b. Bill of materials for a ballpoint pen.Figure 1.1a. Parts of a ballpoint pen.

Twist mechanism

Pusher button

Spring

Cartridge

Centre band

Sheath

Barrel

Clip

Ballpoint pen

(a) (b)

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Why innovAtion MAnAgeMent • 9

(often casted), cylinder head cover, camshafts, valves, rubber seals, and many other parts to fit this together; and this is only one subassembly of an engine. This complexity can also be found in information systems. However, a product configuration does not give information about how these components and parts of a system work together. To this purpose, the product configuration needs to be complemented with functional sche- mata and other similar documentation to understand how it works. Thus, a product or service configuration informs about the basic (geometrical) relationships between assemblies, components, and parts of a system.

Based on how technologies and inventions affect the product configu- ration, a distinction is made between architectural innovation and modular innovation in addition to the concepts of radical and incremental innova- tion; see Figure 1.2 (based on Henderson and Clark 1990, p. 12). Incre- mental innovation means mostly that small advances in technologies do not affect the product or service configuration. Modular innovation means again small advances that might lead to the complete substitution of an entire assembly or component without any effects on the product configu- ration. This is more or less the case when one engine type is replaced with a new one, for example, the diesel engine being offered in cars that had only petrol engines before; almost all other assemblies and components can remain the same. Very differently, architectural innovation affects the product configuration. Look at the introduction of the transistor as replace- ment of the thermionic triode (or more popular, the vacuum tube) in the 1940s and 1950s; ultimately, this innovation made it possible to create so-called integrated circuits, the predecessor of the current micro-chips. Besides making products and electronics components smaller, these inte- grated circuits have led to very different structures in electronic devices,

Figure 1.2. Typification of innovation.

Core technologies and concepts

Incremental innovation

Modular innovation

Architectural innovation

Radical innovation

Reinforced Overturned

U nc

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including how software is embedded in these products. The challenge of architectural innovation is to identify when changes in product configura- tion are beneficial to products, a capability that firms often master poorly. Because for radical innovation, principally no architecture exists and no preceding technology or concepts are available, it implies that radical innovation always yields a new product architecture. These four types of innovation related to the product configuration are a returning theme in managing innovation.

1.2 innovAtion funneL

Although it is recognized that these types of innovations have played a large role in the social-economic development of the world as it is today, the thinking about innovations as a continuous process came to the fore by the thoughts of Joseph Alois Schumpeter (see Box 1.3). The thoughts of Schumpeter about innovation were embedded in the so-called German Historical School of Economics, a school of thought in economics that studied reality, rather than devising mathematical models during the 19th and 20th century. Within this context, his texts did describe the so-called business cycles that lead to creative destruction. Note that, according to more modern views, the concept of creative destruction in an economic sense should be attributed to Werner Sombart (Reinert and Reinert 2006, p. 77); see Box 1.4. After Schumpeter’s publications, innovation got more

Joseph Alois Schumpeter (1883–1950) has become mostly known through the popularization of the term creative destruction in the con- text of destructive business cycles; this is now called innovation. His career included academia, banking, and minister of finance (albeit the latter briefly). He started writing about the dynamics of econo- mies before the First World War. Over the course of time, his thoughts changed, and, hence, these are divided into Early Schumpeter and Late Schumpeter.

eaRly SchumPeTeR

In his early writings, Schumpeter (1911; 1934) saw entrepreneurs at the heart of the business cycles caused by creative destruction. In this view, entrepreneurs avoid competition with similar products and

Box 1.3. Joseph Alois Schumpeter

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Why innovAtion MAnAgeMent • 11

services, including pricing. Therefore, these entrepreneurs seek to dif- ferentiate their offering of product and services by the creation of new products and services, the creation of new methods for operations, the entry into new markets, the introduction of new materials and sources, and the development of new forms of organization. These advantages hold until other entrepreneurs and firms catch up by copying these creations or alternately offering products and services that differ; the latter triggers further dynamic interactions between competing firms in market segments.

laTe SchumPeTeR

In his later thoughts, though published in 1954 (Schumpeter) beyond his death in 1950, he distinguishes between innovators and managers. According to this view, larger firms have the resources at their dis- posal to fund and to exploit research and development; therefore, R&D departments and managers replace the entrepreneur, though the burden for funding R&D and internal bureaucracy reduce the effectiveness of innovative efforts. Also, firm size and market powers are the drivers rather than the entrepreneurs tipping the equilibrium out of balance.

noTe

It should be noted that now many (e.g., Reinert and Reinert 2006, p. 73) view Schumpeter’s thoughts as a rewrite of a debate in Germany decades before; in this discourse he did not attribute some of his thoughts to those of Werner Sombart (see Box 1.4).

Sources: Dekkers et al. (2014); Reinert and Reinert (2006).

Although Joseph Alois Schumpeter (see Box 1.3) has become associated with the concept of innovation, it was Werner Sombart (1863–1941) who laid the foundation by introducing the term creative destruction for the domain of economics in his work of 1913 (see Reinert and Reinert 2006, p. 77). Sombart was an economist and sociologist, and he did preside the Youngest Historical School in Germany.

Box 1.4. Werner Sombart

Sources: Reinert and Reinert (2006).

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attention and has now become part of the strategies of companies and the policies of governments. The (continuous) destructive business cycles induced by companies to gain advantages over other companies compet- ing in the same markets by introducing new products and services, and entry into new markets relates to the so-called innovation funnel; both will be discussed in the next subsections.

1.2.1 DeSTRucTive BuSineSS cycleS

First, a description follows about the thoughts of Schumpeter put forward for creative destruction and related business cycles. Creative destruction and the related business cycles are evoked by entrepreneurs seeking dif- ferentiation of their offering of product and services by the creation of new products and services, the creation of new methods for operations, the entry into new markets, the introduction of new materials and sources, and the development of new forms of organization. While initially these advantages hold, it is later that other entrepreneurs and firms catch up by copying these creations, or alternatively, by creating new offerings them- selves. Thus, the initial advantage is marginalized until again an inno- vation reaches the market place and starts a new cycle. This means that markets (and new markets) are continuously in motion, driven by compet- itive forces with the purpose of gaining advantages through innovation. In addition, Schumpeter’s later thoughts—see Box 1.3—put the emphasis on larger firms, which have more resources at their disposal and also possess structures that facilitate the generation of innovation. At the same time, these larger firms reduce the effectiveness of innovation by the difficulties of getting R&D funded and the related bureaucracy for managing proj- ects. Even though the debate about the contributions of entrepreneurs and larger firms to innovation has not been fully settled, yet, the continuous dynamics by business cycles compel companies to look continuously for new technology and possible innovations.

A case in point for the troubles with funding and administrative bur- den in larger firms is the Philips Physics Laboratory (in Dutch: Philips Natuurkundig Laboratorium), first located in Eindhoven, then moved to Waalre, and later back to Eindhoven, all in the Netherlands. The labo- ratory was founded in 1914 by the two brothers who build the founda- tions for the once electronics giant Philips (Koninklijke Philips, aka Royal Philips). At its heydays in the 1960s and 1970s, the laboratory employed about 2,000 people, including ca. 600 researchers with masters and doc- toral degrees. In this period, it generated many inventions, the compact disc being an example, and patents. During the second half end of the

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Why innovAtion MAnAgeMent • 13

1980s, top management of Philips became concerned with the costs of funding R&D and started the implementation of a policy that research projects should be linked to applications in strategic business units3 of the corporation. Ultimately, this policy of requesting greater returns to business units, and, thus, a greater orientation toward applications away from basic research resulted in the disbandment of the laboratory in 2001. What remains now at the High Tech Campus Eindhoven is but a frac- tion of what it was. Consequently, Philips has lost its leading position as developer of new technologies and one of the largest generator of patents; this shows that, even for larger firms, there are challenges with regard to creating innovations.

Another approach for dominating innovation by larger firms is acqui-hiring, according to Coyle and Polsky (2013). In this practice, larger companies, such as Google, acquire smaller innovative, entrepreneurial firms and hire their leaders. However, some have argued that this practice smothers innovation, as the new knowledge is suppressed in favor of the larger firm’s knowledge base. This must be seen as more of a defensive move to reduce competition than as a mechanism to create larger variety of innovative products and serves the interest of larger firms. It should be noted that buying up promising small startups already existed in the pharmaceutical industry in the 1980s. What acqui-hiring adds is that the inventors of such companies, which are often their CEOs, are successively employed by the larger firm, refraining them from further innovative activ- ities. Such trends, such as acqui-hiring, reinforce the dominance of larger corporations, while not necessarily improving the effectiveness of innova- tion processes in the context of Schumpeter’s destructive business cycles.

1.2.2 STageS foR innovaTion

The search for new products and services, and how they are offered to customers, leads to many attempts by firms to create differences in their offerings; this raises the questions how effective these offerings are. But before looking into business models, it might be helpful to look at the generic process of creating new products and services. A well-known model to this purpose was generated by Herbig (1994, p. 4); see Figure 1.3.

3 A strategic business unit focuses on a specific product offering and market seg- ment. Such a unit typically has a discrete marketing plan and competes with differ- ent firms than those in other product–market combinations, even though they may be part of the same, larger corporation.

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This model, called the path of innovation, describes the steps from the generation of scientific knowledge to the commercialization and diffusion of products and services. According the path of innovation, fundamental science forms the input for the discovery or development of new theory. The next stage is the observation of potential applications based on the developed discoveries and theories, followed by a stage of feasibility; this can be an invention or a proof of concept (based on teleological experi- mentation). Once the feasibility has been proven, the invention of concept can be developed into a product or service. During development a decision will be taken to commercialize the new product or service; once commer- cialized, the diffusion into the market(s) follows. What is characteristic for this model is that the starting point for innovation is defined as funda- mental science, and the creation of products and services as technological development. Moreover, in this model, the feasibility of this knowledge constitutes an invention; hence, inventions are a consequence of scientific and technological knowledge. Only after a new product or service has been created and commercialized, it becomes an innovation that can be placed on the typification in Subsection 1.1.2; note that whether this com- mercialization is successful or not is not part of the conceptualization of the path of innovation. This model of Herbig also implies that innovations are a result of a staged process, in which decisions are taken at the end of each phase.

This stage-wise thinking and the related decision-making indicate that not all possible applications and inventions make it to the market. Stevens and Burley (1997) have looked at how many ideas are successfully com- mercialized; see Figure 1.4. Their study shows that it takes 3,000 ideas to have one successful product launch in the market for the pharmaceutical industry. Industry experts even indicate that this ratio might be increasing

Figure 1.3. Generic path of innovation.

Fundamental science

Discovery or development of new theory

Observation of possible application(s)

Feasibility (Invention)

Development of product/service

Decision to implement

Innovation (Commercialization)

Diffusion

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Why innovAtion MAnAgeMent • 15

in any type of industry4. This means that companies and inventors need to generate many ideas and need to make sure that the selection of projects that go the next stage is done properly; if not, they might be betting on the wrong horse, so to say. For this reason, some companies, such as Siemens (Schepers et al. 1999), stimulate the generation of ideas by employees. Not generating potential innovations might be a safer bet from a more conservative perspective, but this means that a company taking this stance might be outmaneuvered by competitors that are more successful in gener- ating innovations; akin Schumpeter’s thoughts about creative destruction and business cycles. Anyhow, the figure also indicates that what is called innovation management is extremely important for companies, particu- larly because they need to generate money from inventions, patents, and new (technological) solutions by generating more ideas and inventions than are successfully commercialized.

1.2.3 innovaTion funnel

This process from generating ideas and inventing to commercialization is often denoted with the term innovation funnel; see Figure 1.5. In most of the representations of the innovation funnel, there is a phase of ideation, development, and commercialization. Sometimes these three phases are substituted by more phases. For example, four phases are distinguished: idea generation, conceptualization, development, and commercialization.

4 Based on a discussion between academics and industry experts during the 4th European Conference on Management of Technology (Glasgow, September 06 to 08, 2009).

Figure 1.4. Survival rates for industrial innovation ideas.

3,000 Raw ideas (Unwritten)

300 Submitted ideas (Inventions)

125 Small projects for feasibility

4 Major developments

2 Launches of products and services

1 Successful new product or service

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16 • innovAtion MAnAgeMent And npd for engineers

Or even seven: idea generation, idea screening, concept development and testing, market strategy and business analysis, feasibility study, product design and engineering, test marketing, and market entry. No matter how many phases, the innovation funnel suggests that the processes are linear. In reality, for design and engineering, these processes are not all sequen- tial, as this book will show throughout, and rather are constituted of many interrelated activities. In practice, this depiction of the innovation funnel can be used by firms to map ongoing projects for new products and ser- vices to the phases they are in; thus, this would create an overview of the portfolio of projects, the idea being that a continuous flux of new products and services is created.

1.3 business ModeLs

The monetization of new products and services is also expressed in the link between innovation and business models as part of the phase of commercialization. The concept of business models emerged during the 1990s and is partly related to advances in information and communication technologies and partly to companies wanting to generate revenues from inventions, patents, and so on. The first reason is probably associated with software companies starting to sell through different channels, initially sending software by e-mail and later from websites. The selling through different channels of inventions, patents, and so on, the second reason, is best expressed with the example of 3M, known for its innovations. Back in 1996, the Regional R&D Manager Europe gave a presentation during the

Figure 1.5. Symbolic representation of innovation funnel.

Market(s)

Ideas and inventions

Ideation Development Commercialization

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Why innovAtion MAnAgeMent • 17

6th International Forum on Technology Management (Amsterdam, Octo- ber 15–18, 1996) about how they conducted research and development. He stated that the R&D output had risen to such a volume that the manu- facturing and sales of 3M were unable to absorb those new products and bring them to the market. Hence, they had started to contract other firms for manufacturing, sales, and distribution of newly developed products. In this category fall also product and services that cannot be sold effectively and efficiently through the distribution and sales channels of the parent company. Hence, considering, selecting, and setting up business models for the commercialization of inventions, scientific knowledge, and tech- nological developments is paramount to the success of new products and services.

1.3.1 aSPecTS of BuSineSS moDelS

This raises the question of what aspects should be found in a business model. According to one of the first papers (Forge 1993) on this facet of conducting business combined with a more recent popular one (Johnson et al. 2008), a business model consists of:

• A customer value proposition. This means that a product or service should offer a solution to a problem of the customer; the thought is that the more a product or service differs positively from offerings by competitors, the higher the customer satisfaction. Keep in mind that such a competitive advantage of a firm is a result of creative destruction by the firm itself and also subject to creative destruction by competitors, in terms of business cycles (see Subsection 1.2.1). In terms of marketing, this means also defining market segments for products and services, that is, specific consumer groups with specific needs.

• A revenue model. This model tells how customers are acquiring the goods or services and completing the (financial) transaction. Customers might go to retail locations to buy goods, such as shops, or might visit websites. Such revenue models also include how the customers and buyers are going to pay for the goods and ser- vices (cash, credit cards, lease, loans, and so on); sometimes, these payments require the involvement of another party, such as credit card companies.

• The key processes and related resources. These key processes are needed for the interaction with the customers so that they are will- ing to purchase goods and services. In addition, processes need to

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18 • innovAtion MAnAgeMent And npd for engineers

be in place for the delivery after the purchase, particularly in those cases where customers do not carry goods from a point-of-sale to where they intend to use them. Processes for after-sales services should not be forgotten.

Although others have published about business models, too, for example, Chesbrough and Rosenbloom (2002) and Margretta (2002), these have been defined in terms of strategic management and less in terms of operationalization.

1.3.2 oveRview of BuSineSS moDelS

Traditionally, business models for consumer products were mostly based on retail outlets, including franchises, and in a few cases, post order companies. These traditional business models are called: bricks and mortar, direct sales franchise, and subscription; see Table 1.1. With the advent of the information and communication technologies, partic- ularly the Internet, the interaction with consumers has changed drasti- cally since the 1990s; it results in more possible ways for companies to interact with customers and attract them to purchase goods and ser- vices. Newer business models include: freemium, online brokerage, and (professional) open source; see also Table 1.1. The overview shows the wide variety of business models, but it also pinpoints that these methods have implications for the commercialization of new products and ser- vices, and sometimes require adaptations in the products and services to enable successful marketing and sales. The business model should be complemented with how the financial transactions take place, for exam- ple, paying by cash, by credit card, or in installments. This overview indicates that innovations should be directed at market channels through appropriate business models, which may cover differing approaches for specific segments of markets (think about the sales of luxury items ver- sus fast moving goods).

1.3.3 PoSiTioning SeRviTizaTion in innovaTion

Particularly for products, so-called servitization has become a way to enhance the value proposition by manufacturing firms for the customer. This concept was brought to light by Vandermerwe and Jada (1988) as a reaction to decreasing profits on regular sales of goods. They men- tion the example of photocopiers with built-in artificial intelligence that allows firms to repair photocopiers even before users have become aware

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Why innovAtion MAnAgeMent • 19

Business model Characteristics Bricks and clicks • Both offline (bricks) and online (clicks)

presence. • Examples: warehouses (John Lewis) [United

Kingdom] and Sears [United States] and supermarkets (Tesco) [United Kingdom] and Wal-Mart [United States].

Bricks and mortar • Direct sales to customers or business-to- business (B2B*) with presence through only retail locations.

• Often local or regional. • Note: This business model seems to disap-

pear, because most companies have some online presence nowadays.

• Example: IKEA (mostly, though changing slowly), Staples (B2B*, office supplies; changing, too).

(Online) brokerage • Brokers connecting buyers and sellers, and facilitating transactions.

• Sales might involve competitive bidding (conducted online).

• Might expand to B2B*. • Example: eBay, ICAP Patent Brokerage.

Collective business • Business organization or association typically composed of relatively large number of companies, traders, or professionals in same or related fields of endeavor.

• Pooling of resources, sharing of information, or other benefits to members.

• Example: Virtuelle Fabrik (Switzerland). Cutting out the middlemen

• Removal of intermediaries in supply chains. Instead of traditional distribution channels (such as distributors, wholesalers, brokers, and agents), companies deal with every customer directly, for example, through the Internet.

• Example: LEGO (online, shops) Direct sales • Marketing and selling products direct to

consumers away from fixed retail location: typically made through party plan, one-to-one demonstrations, and other personal contact arrangements.

Table 1.1. Overview of business models

(Continued )

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20 • innovAtion MAnAgeMent And npd for engineers

Business model Characteristics • Example: Avon (cosmetics and personal care,

United States), Tupperware (home products, United States)

Distribution • Organization or set of organizations (go- betweens) involved in the process of making a product or service available for use or con- sumption by consumer or business user. Other three parts of the marketing mix are product, pricing and promotion.

• Example: Intelsius (pharmaceuticals, United Kingdom)

Fee in, free out • Charging first client fee for service, while offering that service free of charge to subsequent clients.

• Example: digitization services. Franchise • Alternative to building chain stores to distrib-

ute goods and avoid investment and liability over chain. Franchisor’s success is success of franchisees. Greater incentive than direct employee because of direct stake.

• Example: Curves (women’s fitness, United Kingdom)

Freemium • Offering basic Web services, or basic down- loadable digital product, for free, while charging premium for advanced or special features.

• Example: Dropbox (United States), Skype (United States).

Industrialization of services

• Service provision as industrial process. • Mostly abandoned because of negative

effects. • Example: McDonalds (fast food, United

States), Starbucks (coffee shops, United States).

Premium • Offering high-end products and services appealing to discriminating consumers.

• Brand image important factor as quality is subjective.

• Example: luxury and fashion goods.

Table 1.1. (Continued)

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Why innovAtion MAnAgeMent • 21

of (potential) failings. Even software has undergone servitization; many upgrades are for revisions that resulted from errors that most users have not been aware of. This shows that servitization allows companies to pro- vide a better product or a better service, without necessarily the customer being aware of all processes operating in the background.

The concept of servitization should not be confused with the comple- mentary products and services that are needed to make an artifact or con- traption work. Take the instance of a car. Fuel stations and garage facilities are needed to keep the car in a condition that it can transport passengers and goods. These are the complementary goods (fuel as example of sup- plies) and the services (maintenance and repair). In such a case, serviti- zation would mean that garages would receive advance warnings from a vehicle about its state and possible failures; such can also be established by

Business model Characteristics Professional open source

• Open-source software vendor generates reve- nue from paid professional services partnered with software.

• Example: Blender (3D creation suite, the Netherlands), Sakai (Virtual Learning Environment, United States).

Razor and blades • One item sold at low price (or free) in order to increase sales of complementary goods.

• Example: Gillette (razor blades, United States).

Service or servitiza- tion of products

• Sales of goods with complementary services. • Example: goods with extended warranty,

printers with ink cartridges. Subscription • Payment for access to product or service.

• Examples: newspapers, magazines, software.

User model • Based on offsetting measured use. Oppo- site of subscription business model to some extent.

• Examples: gas utilities, electricity utility. Yield management • Price of service varies and adapts to demand

and the available supply of temporary available good or service.

• Example: flight, hotels.

* B2B stands for business-to-business. The acronym B2C means business-to-customers.

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22 • innovAtion MAnAgeMent And npd for engineers

performing an (electronic) diagnosis when the vehicle is brought into the garage for servicing. Hence, there is a thin line between complementary services and servitization, mostly defined by the capability to diagnose the state of the asset, equipment, software, and so on, without necessarily the intervention of the user.

1.4 Why is innovAtion MAnAgeMent iMportAnt for engineers?

Knowing all the information so far about the paramount role of innova- tion in the development of companies and society, the business cycles and creative destruction, and appropriate business models for commer- cialization, the prominent role of designers and engineers comes to the fore. Designers and engineers by trade engage with new ideas and inven- tions for new product and service development and for process devel- opment. To this purpose, they generate ideas by teleological and staged approaches, matching requirements of (potential) customers with techno- logically feasible designs and manufacturing processes. Over the course of time in their career, they may get more involved with managerial tasks (see Lannes III 2001); they might even become managers that direct new product and service development, including roles as project manager. No matter the exact job description, the role of engineers includes aspects of innovation, unless an engineering graduate seeks a position outside the domain of design and engineering, but even then, innovation management could be part of the scope of a job.

This change in role, and even other jobs engineers take on, might include wider aspects of commercialization beyond matching require- ments of customers with feasible designs and operational processes (see Chapter 2 for these processes). Hence, engineers need to appreciate the role of marketing, manufacturing, service processes, and recycling; this extends to incorporating these aspects into design and engineering pro- cesses, so-called life-cycle management (see Chapter 3). The inclusion of all these aspects also leads to further innovations, for example, through servitization. Moreover, the consideration of all these aspects is not possi- ble without any engagement with other functions, even beyond the bound- ary of the firm (see Chapters 4 and 5). Adequate structures for project management (see Chapter 6) complement the inclusion of these aspects in new product and service development. Thus, the role of engineers, whether in earlier or later stages of their careers, covers a wide variety of aspects and also requires the interaction with many that are involved in innovation management.

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Why innovAtion MAnAgeMent • 23

More recently, the monetization of inventions and technologies has captured more attention. This trend emerged during the 1990s. Companies and inventors are enticed to make money out of their inventions and tech- nologies through patents and other mechanisms (see Chapter 7). Some- times, these approaches lead to lawsuits about infringement. However, these efforts should also be placed in the context of national economies (see Chapter 8) and again stress the engagement with a variety of actors. This means that engineering students need to have some appreciation in which socio-economic context innovations are taking place.

1.5 outLine of the booK

Thus, this book is directed at engineering students and engineers, as designers and engineers in organizations, as inventors, as managers, and as so-called techno-entrepreneurs. In the first role, designers and engineers in organizations contribute to new products and services, new methods for operations, and possibly new organizational structures. As inventors, engineers might seek the application of scientific and technological to new products and services or to new applications. As manager they may lead engineering groups, departments, and R&D. As techno-entrepreneurs, engineers might see opportunities to commercialize these new or improved products and services. By combining engineering views with economic insight and managerial practices, this book aims at providing the necessary background to make innovations more successful for all these roles.

Some of the text and figures in this book make use of applied systems theory (Dekkers 2017), particularly the process models. Despite systems theories playing an essential role in design and engineering, the book will not go into detail about systems theories. Systems theories and systems engineering are seen as essential tools for engineering education. They allow engineers to work methodically on the design of products and ser- vices while keeping an overview at the same time. Therefore, this book builds on systems theories and systems engineering as much as appro- priate; however, readers might have to consult readings on this matter to complement the text.

This book also concentrates on processes, methods, and tools for design and engineering with long-standing application. It only addresses fashionable trends, such as lean product development (Salgado and Dekkers 2018), in Chapter 9. However, the rest of the book concentrates on principles and methods for product design and engineering. This means that, for some concepts, it falls back on those writings and terminology that was used by the originators of those conceptualizations.

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24 • innovAtion MAnAgeMent And npd for engineers

Chapter 2 starts with introducing some further basic concepts for product design and engineering and innovation. Particularly, it introduces a generic model for product design and engineering, from technology and research to new product and service development to manufacturing and logistics. This chapter also expand further on the configuration of products and services. Furthermore, it presents a wide range of methods and tools that can be used during product design and engineering.

Chapter 3 builds on the design and configuration of products and ser- vices by looking at their lifecycle related to business models. This includes the commercialization of new product and services, which also covers the acceptance by customers and users of new technologies. This is linked to technology cycles and generations of innovation processes. Also, methods for strategic planning of technology are presented in this chapter.

Chapter 4 looks at how ideas and inventions can be sourced. These sources include inventors, customers and users, suppliers and commer- cial research organizations, universities, employees, and competitors. This chapter also expands in what phases and how to get these actors involved.

Chapter 5 focuses on collaboration with the same actors. This work- ing together can be necessary for new product and service development to achieve successful commercialization, or it could be initiated after sourc- ing of ideas and inventions happened. The topics discussed also extend to the networks that result from external sourcing.

Chapter 6 introduces some basic principles for project management in the context of new product and service development. It also pays attention to stakeholders for projects and how to embed a project in an organization. However, leadership and management of projects are limitedly covered.

Chapter 7 presents intellectual property rights related to innovation, and new product and service development. Particularly, patents are dis- cussed, because this is the most common form of intellectual property rights for new products and services. The chapter also contains a section about entities that are seeking extra-ordinary returns from patents by suing companies or inventors that infringe their stock of patents.

Chapter 8 pays attention to national innovation systems. The wider social-economic context also determines how innovation and new product and service development takes place; particularly, this context concerns the collaboration between universities and firms, and the stimuli that gov- ernments may provide for innovation. Also, some points about clusters of companies can be found in this chapter.

Chapter 9 addresses a few contemporary approaches. These include lean product development, open innovation, living labs, crowdsourcing, and sustainability. For some of these concepts, such as lean product

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Why innovAtion MAnAgeMent • 25

development and open innovation, the origins are traced back to con- cepts that appeared in the chapters before. For the other concepts, such as crowdsourcing and the relevance of sustainability, brief explanations are provided.

Chapter 10 creates an overview of all previous chapters by relating them to each other and by providing a link between strategy and innova- tion management. To this purpose, it introduces another model and also incorporates some recent insight. Thus, the further integration of mod- els, methods, and tools allows readers to form a more complete overview, rather than relying on fragmented concepts spread throughout a book.

1.6 hoW to use this booK

Thus, this book can be used as guide for teaching engineering students innovation management complementary to the methods and for design and engineering of products and services; it is particularly written for post- graduate students and undergraduate students during later years of their study. To this purpose, it pays attention to idea generation and invention, to commercialization of new product and new services, and patenting. In addition, it covers the processes for design and engineering from eliciting customers’ requirements and using technological knowledge to commer- cialization, including the use and recycling of products. Some of the tools and methods are mentioned, and examples are given, but the tools and methods are not explained in full detail; more detail should be found in specialized books that focus on these methods. At the end of the book, students should have an overview of all aspects of innovation relevant for engineers in a variety of roles.

This book can also be used by practicing engineers, in both engineering and managerial roles. Particularly for these, the text provides some guid- ance toward commercialization of ideas and inventions, and management of product and services design and engineering. The latter is expressed in the reference model for product and services design and engineering (Chapter 2), the role of product architectures (Chapter 3), the modes for sourcing and collaboration (Chapters 4 and 5), an unique approach to project management (Chapter 6), the protection of intellectual property rights (Chapter 7), the national context for innovation management and the integration of methods and tools in an overview (Chapter 10). Also, there is attention for connecting strategy formation to innovation manage- ment in Chapter 10. Moreover, Chapter 9 pays attention to newer concep- tualizations, such as open innovation and lean product development. This

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26 • innovAtion MAnAgeMent And npd for engineers

means that practicing engineers can find approaches to enhance their roles in the context of innovation management, and new product and service development.

This book can also be used as a point of reference for management of product design and engineering. Some of the models that are used have not been used anywhere else, but there are also methods and tools pre- sented that have existed in engineering practice for a while. To facilitate this use as much as possible relevant references have been used; some of these references include the original sources. This enables those that use this textbook as point of departure also to find who introduced specific methods and tools (and when, of course).

1.7 Key points

• Essentially, the term innovation refers to an outcome of a process of invention, idea generation, and new product (and service) devel- opment. This means that innovation encompasses applying tech- nological knowledge with the purpose of bringing an invention or idea to the market.

• The concept of innovation includes the commercialization of inventions and technologies. It does not cover whether innovative products and services are considered successful in the markets they are introduced in.

• The archetypes of innovation are radical innovation, incremental innovation, modular innovation, and architectural innovation. Rad- ical innovation is the creation of new products and services that have little in common with existing products. Incremental innova- tion is the improvement of existing products and services through technological advances. When assemblies or components of exist- ing products and services are replaced with ones that are based on new technologies, this is called modular innovation. Might mod- ular and incremental innovations lead to redesign of the product configuration, then this is called architectural innovation.

• The product or service configuration shows out of which assem- blies, components and parts a product or service is consisting. Such a product or service may have levels of hierarchy; this is definitely the case for more complex products. In logistics this is commonly denoted with the bill of materials.

• The innovation funnel describes how inventions, ideas, and scien- tific and technological knowledge are converted into products and

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Why innovAtion MAnAgeMent • 27

services. It consists of steps and decision-making which projects for the creation of new products and services, new methods for operations, entry on new markets, new materials and sources, and new forms of organization best to take forward.

• Business models describe how the interaction with the customer takes place. They consist of a value proposition, a revenue model, and the key processes with related resources for the delivery of goods and services to customers. Note that this applies to consumers as well as to firms buying from other firms (B2B).

• One particular business model to generate more revenue is servi- tization. In this concept, the diagnosis of the state of assets, equip- ment, software, and so on, without the intervention of the user offers the possibility to offer additional paid for services or to better manage the assets, equipment, software, and so on.

• The phenomenon of creative destruction in business cycles describes how the creation of new products and services, the cre- ation of new methods for operations, the entry into new markets, the introduction of new materials and sources, and the develop- ment of new forms of organization delivers a firm higher returns on its investments and triggers competitive pressures in search of a new equilibrium; this also put pressure on firms to be continuously innovative.

1.8 references

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