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World’s fifth largest retailer joined forces with Intel and SAP to build a fully working ‘prototype’ supermarket RFID ‘smart-tag technology’ used on all products Shopping trolleys have touch screen computers and scanners

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Box Case 1.1: Metro AG’s ‘Future Store’, Germany


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    1. World’s fifth largest retailer joined forces with Intel and SAP to build a fully working ‘prototype’ supermarket RFID ‘smart-tag technology’ used on all products Shopping trolleys have touch screen computers and scanners Smart tags cost 0.5 Euros each and are currently too expensive for every item in very supermarket Box Case 1.1: Metro AG’s ‘Future Store’, Germany

    2. Box Case 1.2:Gillette • Gillette ‘Mach 3’ razor is a first-to market product • Developed at a very high cost • A UK supermarket chain was quickly able to produce a good copy at a fraction of the original cost • Gillette have been more dependent therefore on expensive television advertising to protect sales of their product • When products are easy to copy, competitors can ‘leapfrog’ original features and Wilkinson Sword Company have now introduced a 4 blade razor Photos taken from www.gillette.com

    3. Box Case 1.3:Tetley’s Teabags • Tetley is a market leader and the originator of the round teabag • Advertising was based around a better cup of tea that would result from bags where the tea could circulate better • Knew that competitors would try and copy • Hired consultants to develop a new manufacturing line for round teabags • When new product was introduced competitors were unable to obtain similar manufacturing equipment and Tetley maintained its lead Photos taken from www.tetley.co.uk

    4. Targets ‘cash rich, time poor’ segment starting in Bangalore Idea is an in-company ‘help desk’ offering executives 4 categories of support: shopping everyday and special tasks entertainment travel Company philosophy is ‘High tech / High touch’ £1m and over 350 staff Box Case 1.4: Les Concierges, India

    5. Voted world’s best airline in surveys by travel magazines First-to-market strategy for many years More modern aircraft offering: larger than average seating first in-flight phones and faxes Led in the introduction of electronic tickets Flexible for flight confirmations by phone, fax or email Staff receive longer and more detailed training Visit senior citizens’ homes Box Case 1.5: Singapore Airlines

    6. How can partnerships and alliances help a company in the service sector achieve its innovation strategy? How can service and product strategies of different companies be aligned to target specific customers segments? How can a service provider make it harder for competitors to copy innovations? Case Study:DoCoMo

    7. Inter-Operability Inter-Operability Platform Vendors Business Opportunity Portal Functionality Co-marketing Co-marketing NTT DoCoMo Handsets Content Handset Vendors Content Providers Volume Opportunity Revenue Collection Content / Handset Integration Figure 1.11: DoCoMo i-Mode Collaboration i-modeCollaborationConceptv2.ppt

    8. Box Case 2.1: Australian Medical Care • Healthcare is a major part of the service sector • ARCHI supports implementation of effective and quality improvements through: • seminars, publishing reports, producing case studies and communicating new ideas to healthcare professionals • Treatment being improved not only by drugs and medical technology but also through suitable use of quality management techniques • Culture of medical profession changing

    9. Box Case 2.2:Dutch Government Policy and R&D • Many governments have used relaxation of taxation as a means to stimulate innovation • In Holland, where companies deduct income tax and social security payments directly, they have been allowed to pay lower tax amounts on behalf of their R&D staff • Proved popular with SMEs, who receive 60% of the budget allocated to the scheme • Nearly 15,000 organizations benefited in 1999 • Research has shown that both R&D expenditures and the number of R&D employees has increased

    10. Box Case 2.3:Repsol YPF, Argentina • Distributes natural gas to over 9 million clients in Spain and Latin America • In partnership with VW, introduced the Polo CHG in 2002 • Now nearly 1 million gas-powered cars on the roads • Over 1000 petrol stations offering gas supplied by Repsol YPF in 205 towns and cities in Argentina • Average annual saving per year = one month’s average salary • Repsol YPF and VW offer a full service (inc. installation and registration)

    11. Box Case 2.4:Extricom GmbH, Germany • Small company near Stuttgart • Competing in the ‘twin-screw extruder’ market • Original twin-screw extruder developed in the 1950s • Today, there are over 100 companies worldwide offering twin-screw technology • Technology has largely become a commodity • Margins are relatively narrow • Led to the market leaders to also produce replacement parts for their competitors’ machines • Extricom has developed the latest technology – 12-screw extruders – which allow materials to be processed more efficiently through improved flow dynamics Photos taken from www.extricom.de

    12. QWERTY Dvorak Box Case 2.5:Dvorak versus QWERTY • Are the best innovations always adopted?

    13. Case Study:Richardson • How can successful companies avoid being trapped with one technology or product concept? • How can links between the innovation strategy and new product development be made effective? • How can the product concepts be selected that are most likely to be successful? • Should new technologies be developed parallel to new products?

    14. Figure 2.4: Case Study: Richardson Core business review Mission corporate objectives S.W.O.T analysis Technology push Blue Sky Research Marketing audit Customer pull Objectives Market penetration New product development Market extension Diversification Strategic screen Hold List of potentials Reject Review Development File: Richardson1.ppt

    15. Box Case 3.1:Boeing and Airbus • Boeing and Airbus have been challenged to provide more innovative cabin designs • Within the limitations of costs and space available • Focus is to be on the spatial layout, i.e. more comfortable seating and cabins that give impression of space • Innovation s such as luggage bins that lift out of the way provide extra space • Décor, mirrors, dividing walls and lighting can all give the impression of more space • Size of windows has also been found by psychologists to have a strong influence on passenger well-being Photos taken from www.boeing.com

    16. Box Case 3.2:Dial-a-Flight • Successful European Internet retailer of travel and tourism services • Strategy to improve customer contact and provide customization • Fast search engine, high personal contact for confirmation (‘your representative’) • Employees are skilled, personable and enthusiastic about their products

    17. Box Case 3.3:Malaysia Airlines • One third of the dollar value of all goods shipped globally is air freight, growth rate over 6% for next 20 years • Shipments from Asia include high value electronics and perishables, e.g. seafood • Prompted by the Gap Model Malaysia Airlines management conducted interviews. In-depth discussions with 19 airfreight managers revealed a total of 44 attributes of airfreight • Information gained allowed them to decide on how to enhance service augmentation and how to price it

    18. Box Case 3.4:Innovating in Healthcare • In many healthcare systems, waiting times are long, staff members are overworked and drab décor is not unusual • The role of the augmented service, in particular the servicescape, has been linked directly to the ‘bottom-line’ in recent research in the US • Hospitals that had been decorated in pastel shades and where attractive artwork was hung on the walls were found to have a higher level of well being in their patients • These departments found that dosages of self-administered painkillers were up to 45% lower, subsequently leading to significant savings

    19. Box Case 3.5:Halifax Building Society • Focuses on the fast development of new service products, including new lending packages for house purchasers • Reduced time to develop and introduce new mortgage packages from six months to a few weeks • Four main steps to development process: • Concept development • Trial • Delivery system definition • Introduction

    20. Case Study:AXA Insurance • What sort of ideas lead to the most important innovations? Are they ‘brainwaves’ that lead to radical products or are they more pedestrian? • How can the best ideas be selected? • How can the nature of innovation be effectively communicated within a service organization?

    21. Figure 3.5: AXA Innovation Quadrant Create new customer- focused opportunities (10%) Improve existing products, services and processes (40%) Eliminate non-value adding activities (40%) Re-use AXA global success stories (10%)

    22. Box Case 4.1:Allianz Versicherung • Hauspannenversicherung – House 24 hour ‘breakdown service’ • Covers most important house emergencies for 4,86 EUR a month • Covers up to 300,- EUR per callout • Single call and qualified tradesmen will be sent out • Allianz organizes the payments • Developed by cross-functional, dual company team

    23. Box Case 4.2:Formule 1 Hotels, France • Launched in 1985, new concept for low-cost hotels • Customers just wanted a good nights’ sleep • Just provide basic facilities – no traditional features, e.g. lounges, eating facilities, receptionist, spacious rooms, etc • Market leader in the sector • Within 10 years market share exceeded that of its 5 nearest rivals combined

    24. Box Case 4.3:Fiat IVECO • Mass-customization has influenced many companies • Fiat have designed a matrix for engineers to analyze the trade-offs between cost and customization of components in car design • Compares cost of variety against the importance to the customer of variety of car components • Variety that has low value is eliminated where possible • Components whose variety can add high perceived value are given high priority

    25. Box Case 4.4:Betamax and VHS • Sony launched Betamax, the first video recorder designed for the home market, in 1975 JVC followed with the VHS a year later • Sony was first-to-market but their 1-hour recording length was felt to be too short • VHS offered 2 hours from the start and many major companies decided to wait for it • Sony launched a 2-hour machine only 5 months after the launch of the VHS • The market for VCRs grew dramatically – from around 20,000 units a year in 1975 to nearly 20M in 1983 and 40M in 1987 • Sony’s sales grew until 1984 but dropped when VHS arrived • JVC gave greater emphasis to signing up partners and distributors • The better range of pre-recorded films in turn made VHS more popular with buyers

    26. Box Case 4.5:Hewlett-Packard • When it first emerged, inkjet could not rival the quality of laser printing • But it was low cost, low noise and low power consumption • HP set up a separate division tasked with exploiting inkjet in whatever applications it could find • Strategy paid off when the quality of inkjet printing eventually rose high enough to displace laser from much of the desktop market • However, HP would still have had a profitable, if modest business, without this improvement

    27. Case Study: Domino Printing Sciences • How can companies recognize that their technological basis is facing a technical limit? • Do such technological limits necessarily matter? • What issues face a company adopting a new technology that fully replaces their current one? • What issues face a company adopting a new technology that overcomes deficiencies of their current one but does not fully replace it? • What problems may a single-technology company expect to face when it adopts new, overlapping products?

    28. Box Case 5.1:PA Consulting Group, UK • Around 200 engineers, scientists and technicians • Technical Director perceives his role as tending his ‘garden’ in which creativity can flourish • ‘Creativity is a free spirit… it is an elusive subject to harness effectively into the delivery of business benefits’ • Division has been responsible for a number of hugely successful product innovations for well-known companies

    29. Box Case 5.2: Equant • Major data network provider • Used repertory grid interviews to spot emerging customer needs • Found that customers’ perceptions are not just based on technical measures

    30. Box Case 5.3: Clarks • Company planned to enter the walking boots segment • Conducted ethnographic market research into both the usage of walking boots and the buying decision: “I needed to understand the buying habits, end use and expectations of our new customer” (Product Manager) • Identified that potential buyers will try on only about 2-3 pairs of boots • Designed the tongue of the boot so that potential buyers perceived the boots to be particularly comfortable

    31. Box Case 5.4: Micro Scooters • The urban scooter was smash hit and continues to be popular today. • Wim Obouter recognized that when he wanted to go out for a drink or a meal in the evening, it was often too far to walk but not far enough to warrant getting his bicycle out of the cellar, or to drive. • He found a partner company to fund the tooling and a Japanese retail partner —with an opening order of 20,000 scooters. These sold immediately and the market grew quickly to sales of 75,000 units per week—almost an instant success. • ‘the product was great but it… [needed] a strong brand to maintain a market leadership position’. • With hindsight, Wim sees two issues with patents: the time required before cover is achieved and the investment needed to enforce them.

    32. Case Study:Texas Instruments • How does the chosen innovation strategy impact the management of ideas? • If end users do not understand the technology, how can they generate useful inputs for product designers? • How can managers match market trends to technological advances? • How can customers be encouraged to give ideas that are not simply based on improving current functionality?

    33. Box Case 6.1:The World Bank • Aim is to alleviate poverty. Used to avoid funding anything with a high risk, decision process was slow • Now project selections projects in the way venture capitalists make funding decisions • Spread risks , not ‘just going for the big one’ • Initial funding is now available for the first stages • Subsequent financing is dependent on defined results being achieved in a set timeframe • Experimenting more and running pilot programmes to test radical ideas • Range of ‘products’ being considered and the selection process is transparent – ‘Innovation Fair’ • Decisions made by panel of judges drawn from industry and a variety of non-profit organizations Source: Chapman Wood and Hamel, 2002.

    34. Box Case 6.2:Zara • Spanish fashion retailer - major part of the Inditex Group • 90% of goods made in own factories in northern Spain and Portugal transported to over 600 stores in 30 countries • 15% return on sales – 5 times the typical level in the sector – and still growing strongly • Described as “possibly the most innovative and devastating retailer in the world” • Key to Zara’s success is the speed with which it can get new designs to market – 2-3 weeks, the norm in the sector being 5-10 months

    35. Box Case 6.3:Laserco • A manufacturer of laser systems based in the US and Germany • It was clear that managers in the two parts of the company had different tolerances of risk. The two teams also tended to emphasize different aspects of the market, the Americans being more used to seeking high volume opportunities while the Germans tended to pursue applications with lower volume but higher margins. • we discussed the facts of each project and then scored them individually.Then we discussed the scores. • At the end we recorded the range of each score as well as the mean. People felt much more comfortable not trying to force a consensus’.

    36. Box Case 6.4:Agilent Technologies • Financial controlling took wider role: champions and drives the portfolio for maximum return • Became a ‘business partner’ • Developed portfolio tools and techniques (e.g. scoring for attractiveness/risk diagrams) with top management • “The value is in the discussion and less in the absolute value of the scores” • Senior managers all measured on the performance of the whole portfolio (not just, for example, R&D progress) • “Team learnt to have the courage to say ‘no’”

    37. Product Line / Process Spinning High Weaving Return Cutting Sewing Packaging Low Incremental Radical Fundamental Risk Box Case 6.5: Fruit of the Loom • Used a bubble diagram to summarize all of the process innovation projects within the company • Process innovation portfolio management has been very successful for Fruit of the Loom

    38. Case Study:Britannia Building Society • What difficulties face a company trying to create an innovation culture? • Can innovation be imported into an organization from outside or must it grow from within? • How does innovation management differ in service and manufacturing enterprises? • What criteria are appropriate for evaluating projects in the service sector?

    39. Figure 6.15: Britannia’s Project Scoring System

    40. Box Case 7.1:NZ DoC, New Zealand • Invasions of rats from overseas on many south Pacific islands killing indigenous birds • NZ DoC looked at eliminating rodents entirely (‘impossible…’) - the ‘Pest Eradication Programme: Restoring the Dawn Chorus’ • Development of new poisons and experiments on small islands to eliminate a single rodent • Moved to larger and more complex islands and multiple species • 13 species of rodent had been eradicated from 60 islands by 1990 ; 20 by 2001 • Other countries are now copying the DoC’s success • Key success factors?

    41. Box Case 7.2:Pizza Hut • 7-stage NPD process called the FRPP – the ‘Field Ready Product Process’ • Defines the steps that are necessary to develop the recipe, select suppliers, test ‘manufacturability’ and ensure positive customer reactions • Ensures that employees are adequately trained on the new product before its release • Essential to have a reliable but flexible NPD process • Key success factors?

    42. Box Case 7.3:Organon • Organon creates, produces and markets prescription drugs mainly for reproductive medicine, psychiatry and anaesthesia. • The main risks related to the uncertain demand for pharmaceuticals are over- capacity and lost sales. • Organon product launch plans include different sales scenarios: best, expected, and worst cases. • Based on these sales scenarios, a number of supply chain design options are prepared. • Each supply chain design option is quantitatively evaluated on 5 criteria: finance, risk, available resources, flexibility to scale production up and down, and the confidence in the assumptions. • It is important not only to have an excellent product but also to match it with the best supply chain design.

    43. Box Case 7.4:Bank of America • Bank of America realized that testing new services and delivery mechanisms is just as important as physical prototypes for tangible products. • 20 test branches were equipped with new systems and the staff received training on the test services that would be offered. • Staff members are normally paid on a commission basis and so they found that their incomes were dropping significantly because of the time that they spent on new services. This was solved by putting the staff on a fixed salary • It shows that the motivation of employees can be a key consideration in the design of new service products.

    44. Box Case 7.5:Fiat Iveco • Iveco is the arm of Fiat responsible for manufacturing and marketing commercial and industrial vehicles, buses and diesel engines. • Truck drivers live in their vehicles on long journeys and so part of developing a vehicle is designing a living space. • To really understand truck drivers needs, Fumarola moved his whole marketing team for two weeks to a motorway truck stop just south of the Alps. • Many manufacturers design the next generation product by focusing on what the users’ needs will be at the time of the product introduction. • ‘We have learnt to look further into the future, as our product life cycles are long – that can mean thinking 20 years ahead’

    45. Box Case 7.6:Cruise Liners • World cruise business is 8 million guests per year, approx 150 cruise liners sailing the world’s oceans • Typical guest spends $2,500 for 7 nights • New concepts often encounter problems (e.g. Cunard) • Safety deposit boxes missing • Lack of drawer space in staterooms • Lack of drinks stations in “Food Court” slowed the service • Waste outlets and air inlets • Blueprints discussed

    46. Case Study:Wipro Technologies • What are the issues when new product development is conducted at multiple sites? How can these issues be addressed? • How can the product development process be optimized through learning from each project? • What should companies do to stimulate learning that is not just related to specific new product development projects?

    47. Box Case 8.1:United Parcel Service – Culture and Innovation • One of 16 Fortune 100 companies from 1900, 350,000 employees • Culture perceived as ‘myths, rituals, language, ideas, goals and values • Policy Book and Code of Business Conduct documentation • First logistics company to experiment with air freight (in 1925) • Focus on cost-effective package shipping led them to trail Fedex • Now offer choice of services (options on delivery and price)

    48. Box Case 8.2:Texas Instruments • There can be a downside to inventiveness if it becomes the strongest component of R&D culture - it can lead to the proverbial reinvention of the wheel. • R&D engineers do not always need to start from scratch. Unfortunately the not invented here (NIH) syndrome, where researchers do not adopt or adapt existing ideas, instead insisting on developing their own original solutions, wastes resources. • Texas Instruments (TI), the developer and manufacturer of integrated circuits, has taken steps to avoid NIH as part of their ‘Vision 2005’ initiative. • This includes an annual ‘NIHBWDIA prize’ for the R&D employee who takes an idea from somewhere else and makes a significant contribution to product or process innovation

    49. Box Case 8.3:QB Shell, Japan • Hairdressing chain in Asia • Addressed ‘time poor’ segment • ‘Process flow’ analysis conductedand service augmentation optimized: • Ergonomic shells • No payments • Waiting lights • Locations • Major success

    50. Box Case 8.4:3M • There are three levels at which 3M has taken steps to stimulate more innovation: at the company, team and individual level. • At the company level these goals were 30 per cent of revenues must be from products less than four years old and ten per cent from products less than one year. • ‘Action Teams’ were introduced for NPD. 3M found that not only the Action Teams needed training but also top management needed coaching to ‘back off’ and really empower the team. • At the individual level, 3M have taken steps to promote and reward innovation. The rule that development people can spend up to 15 per cent of their time on investigating their personal ideas is almost as famous as the Post-it.