L6: Organizing NPD Flashcards
How do firms organization NPD?
- Within the firm - Intra-organizational mode
- With other firms - Inter-organizational mode
Types of Intra-organizational mode
[1] Sequential model
[2] Rugby model
[3] Multiple convergent approach
[4] Black-box model
Why do we need intra-organizational mode (functional cooperation)? (Olson et al., 2001)
The problem of distance between functions + Greater environmental uncertainty > The need for integration of functional specialization. Ex:
- RnD: technological issues of product’s design and performance.
- MKT and sales: customer preferences, levels of demand, or high competitor reactions.
- Operations: process technology or the firm’s ability to meet production schedules, cost parameters, or desired quality levels.
[1] Sequential / Departmental approach as intra-organizational mode
Definition: Each stage or specialized function is responsible for certain tasks. The flow of developing products is sequential.
> Pros: More managerial control.
Criticism of [1] Sequential / Departmental approach as intra-organizational mode
1) Slow, costly and inflexible: each stage must be completed before moving to the next stage.
2) Functions work to own goals and interests
3) Lack of accountability: if there’s a fault in the later stages, it’s difficult to find who is responsible.
4) Cumbersome system of sign-off approvals and audit trails: who’s responsible for the final result? The decision-making belongs to senior managers or CEO.
[2] Rugby approach as intra-organizational mode
- Definition: several teams work together for a short of time. All teams are engaged in a concurrent development.
- Emphasis on training for personal and communication skill, especially for interaction and interfacing skills.
- Ex: a group of engineers start to design the product (phase 3) before the results of feasibility tests (phase 2).
Pros and cons of [2] Rugby approach
Pros:
1) Rapid, flexible NPD and less costly.
2) Early identification of problems / misinterpretation and resolution of conflicts.
3) Stimulate function learning.
Cons: Some resistance by functions to be involved.
[3] Multiple convergent approach as intra-organizational mode
- Definition: all key departments are involved in the convergent point. It includes external collaboration with customers and suppliers in the process.
- Ex: RnD, Suppliers, MKT, Customers, Manufacturing work together in the idea generation
Pros and cons of [3] Multiple convergent approach (Hart et al., 2003)
1/ Pros:
- Allow iterative communication and evaluation within the functional groups.
- Can accommodate third parties easily.
2/ Cons:
- It converges for cross-functional decision, but then separate into functions to carry out the tasks. Horizontal communication happens only at evaluation point.
- Require more MGT effort to keep the process on track.
[4] Conversion Process Model (Black box model) as intra-organizational mode
It views NPD as numerous inputs into a ‘black box’ where they are converted into the outputs.
Patterns of functional dependence and cooperation across project stages (Olson et al., 2001)
- Each function plays a more crucial role in reducing uncertainty surrounding its particular expertise during some stages of project.
+ Early stage (Product conceptualization and evaluation): MKT and RnD
+ Later stage (Production and commercialization): MKT and operation, RnD and operation - The cross-functional cooperation increases when moving to later stages.
Benefits of cross-functional cooperation (Olson et al., 2001; Di Benedetto, 2011)
- Stronger new product performance.
- New solutions can be identified when critical questions are raised internally.
Criticism of cross-functional cooperation (Olson et al., 2001; Di Benedetto, 2011; Blackburn, 2011)
- Conflicting measures of success.
- Personal conflict between individuals.
- Different expectations in terms of completion time.
- Team manager does not have direct authority over team members like Functional managers, so his power and access to resources may be limited.
What managers should do to overcome functional cooperation limitation? (Di Benedetto, 2011)
- Identify and manage the frictions in the interface area.
- Try to reach an acceptable compromise or collaborative problem solving
Organizational innovation (Blackburn, 2011)
- “the successful implementation of creative ideas within an organization” (Amabile, 1988, p. 126).
- Nature: uncertain, knowledge intensive, controversial and cross-functional.
- What top management do: Choose the innovation goal (where, when, who), Implement strategy and Manage people
Types of Inter-organization mode
[1] Outsourcing innovation and innomediaries
[2] Collaboration / Acquisition with modes based TLC
[1] Innovation outsourcing as an inter-organizational mode
Involve customers, suppliers, horizontal communities of practice and outside experts in solving the firm’s problems.
Innomediaries in Innovation outsourcing
The third-party mediators who help companies fill ‘structural gaps’ in knowledge.
Ex: InnoCentive - an open innovation and outsourcing company puts the problem of firm to the crowd for solution (crowdsourcing).
[2] Alliance or acquisition as an inter-organizational mode (Roberts and Liu, 2001)
- The need to choose between alliance and acquisition in the quest to develop profitable products.
- Executives who understand where their product fits within the TLC are more likely to make the right call.
Technology Life cycle (TLC) and organizational forms over the life cycle (Roberts and Liu, 2001)
[a] Fluid phase [b] Transitional phase [c] Mature phase [d] Discontinuities phase => Each stage is shaped by changes in the character and frequency of innovations in technology-based products and processes, and by market dynamics.
[a] Fluid phase in TLC (Roberts and Liu, 2001)
Conditions: high level of product and market uncertainty.
=> High growth rate in market demand, Low entry barriers, Little brand loyalty, Low direct competition, Low bargaining power of suppliers.
Choices in [a] Fluid phase in TLC (Roberts and Liu, 2001)
- Collaboration: licensing to protect technology, form MKT alliances with key players in supply chain to establish standards.
- Acquisition: acquire start-up to get access to more resources, gain critical CA technology, or make equity investment before acquisition.
[b] Transitional phase in TLC (Roberts and Liu, 2001)
Conditions: The emergence of dominant design and improving dominant technology.
=> Industry demand grows rapidly. Customers require quality products and timely delivery. Barriers to entry become even lower if design is easily accessible.
Choices in [b] Transitional phase in TLC (Roberts and Liu, 2001)
- Collaboration: To develop new technology extensions, features, applications through joint RnD. or Licensing (collect royalties or acquire the technology)
- Acquisition: Mature firms acquire businesses that possess dominant design. or Dominant design owners acquire for access to complementary technologies or new markets.
