Dr. S.

Srinivasaragavan
Professor & Head
Dept. of Library & Information Science
Bharathidasan University, Tiruchirappalli-24
 SYNOPSIS
 Definition
 Management function (or) Process of
Management
 Managerial Skills
 Order of Management
 Efficiency & Effectiveness
 General Principles of Management
 Management as an Essential for any
Organization?
 Run time Example for the Management
 “Management is the process of designing and
maintaining an environment in which individuals working
together in groups, efficiently accomplish selected item”

 “Management is the process of getting things done, through &

with people in organization”
MANAGEMENT FUNCTIONS (OR) PROCESS OF
MANAGEMENT:

There are five types of functions in management. They

are,

 Planning-Defines the goal & establishing strategy.

 Organizing-ncludes determining what task has to be
done, who is to do them.
 Staffing-Includes recruitment of people and training
them towards the project.
 Leading-Includes the motivating the employees and
directing the activities.
 Controlling-It is the process of monitoring the
performance.
 Managerial Skills

There are three types of skills required by a

manager. They are:
 Conceptual Skills-These skills are required
by the employee who are in top level
management.
 Technical skills- These skills are required by
the employee who are in middle level
Management.
 Human Relations Skills-These skills are
required by the employee in the supervisory
level.
 Different Managerial Levels

Top Management
Conceptual
Skills
Middle Management

Human Relations Skills

Supervisory Level

Technical Skills
Order of Management
Top
Manag
ement

Middle
Managers

First-Line Managers

Operatives
(or)
Executive
 Effectiveness: Adequate to accomplish a purpose; producing
the intended or expected result.

 Efficiency: Performing or functioning in the best possible

manner with the least waste of time and effort.
(Or)

 Efficiency is doing something with the least possible

expenditure of resources (such as time, energy, etc.)
General Principles of Management-
Henry Foyal’s
 Henry Fayol’s 14 principles derive from the circumstance that
Fayol’s felt that management was not well defined. In his
striving to change this circumstance he suggested “some
generalized teaching of management” to be a main part of
every curriculum at places of higher education and even
beginning in “primary schools”. Fayol’s dedication to this
idea is demonstrated by the fact that after retirement he went
on to not just write books about management ideas, but more
importantly, he found the Centre for Administrative Studies
(CAS) in 1917 in Paris. The CAS mainly functioned as a
centre of discussion between professionals from a large
variety of professions, in order to further the knowledge and
understanding of management principles.
 Division of work: This is the specialization that economists
consider necessary for efficiency in the use of labor. Fayol’s applies
the principle to all kinds of work, managerial as well as technical.
 Authority & responsibility: Here Fayol finds authority and
responsibility to be related, with the later arising from the former. He
sees authority as a combination of official factors, deriving from the
manager’ position and personal factors.
 Discipline: Seeing discipline as “respect for agreements which are
directed at achieving obedience, application, energy, and the outward
marks of respect. Fayol declares that discipline requires good
superiors at all levels.
 Unity of command: This means that employees should receive
orders from one superior only.
 Unity of direction: According to this principle, each group of
actives with the same objective must have one head and one plan.
• Subordination of individual to general interest: This is self explanatory
when the two are found to differ, management must reconcile them.
• Remuneration and methods: of payment should be fair and afford the
maximum possible satisfaction to employees and employer.
• Centralization: Without using the term “Centralization of
authority.”Fayol's refers to the extent to which authority is concentrated or
dispersed. Individual circumstances will determine the degree that will give
the best overall yield.
• Scalar chain: Fayol thinks of this as a chain of superiors from the highest to
the lowest ranks, which, while not to be departed from need lessly, should
be short circuited when to follow it scrupulously would be detrimental.
• Order: Breaking this into material and social order, Fayol's follows the
simple adage of a place for everything and everything in its place.
• Equity: Loyalty and devotion should be elicited from personnel by a
combination of kindliness and justice on the part of managers when
dealing with subordinators.
• Stability of tenure: Finding unnecessary turnover to be both the cause and
the effect Of bad management, Fayol points out its dangers and costs.
 Initiative: Initiative is conceived of as the thinking out and execution of a
plan. Since it is one of the keenest satisfactions for an intelligent man to
experience.
 Esprit de corps: This is principle that “in union there is strength” as well as
an extension of the principle of unity of command, emphasizing the need for
teamwork and the importance of communication in obtaining it.

Management as an Essential for any Organization?

 Managers are charged with the responsibility of taking actions that will enable
individuals to make their best contributions to group objectives. Management
thus applies to small and large organizations, to profit and not-for profit
enterprises, to manufacturing as well as service industries.
 Infosys

Mr. N.R. Narayana Moorthy- Chairman

Mr. S. Gopalakrishnan- Co-Founder Executive Co-

Chairman
Mr. S. D. Shibulal - Co-Founder
Chief Executive Officer and Managing Director

Mr. V. Balakrishnan Member of the Board

Chief Financial Officer

Mr. Srinath Batni Member of the

Board & Head of Delivery
Excellence Mr. Basab Pradhan Senior Vice President
Head of Global Sales, Marketing and Alliances
Member, Executive Council

Ms. Nandita Gurjar Senior Vice President

Group Head of Human Resources
Member - Executive Council
 From this principles of management which plays an important
role in the organization.

 “In the past the man has been first; in the future the system
must be first.”

-Frederick Winslow Taylor

Thank You
 FUNCTIONS
OF
MANAGEMENT
By- Sweety Gupta
PLANNING
 Planning

 Deciding in advance :
 What to do

 How to do

 When to do

 Who is going to do it

 Bridges a gap between where we are today and

where we want to reach.
 Sets the goal of an organization.
 PLANNING

 It is the basic function of management. It deals with

chalking out a future course of action & deciding in
advance the most appropriate course of actions for
achievement of pre-determined goals.
 It is an exercise in problem solving & decision making.
Planning is determination of courses of action to achieve
desired goals.
 Thus, planning is a systematic thinking about ways &
means for accomplishment of pre-determined goals.
Planning is necessary to ensure proper utilization of
human & non-human resources. It is all pervasive, it is
an intellectual activity and it also helps in avoiding
confusion, uncertainties
ORGANISING
 Organizing

 It is the process of bringing together physical,

financial and human resources and developing
productive relationship amongst them for
achievement of organizational goals.
 According to Henry Fayol, “To organize a business is
to provide it with everything useful or its functioning
i.e. raw material, tools, capital and personnel’s”. To
organize a business involves determining &
providing human and non-human resources to the
organizational structure.
 Establishing the framework of working:
 How many units or sub-units or departments are needed.

 How many posts or designations are needed in each

department.
 How to distribute authority and responsibility among
employees
 Once these decisions are taken, organizational
structure gets set up.
 Organizing as a process involves:
 Identification of activities.
 Classification of grouping of activities.

 Assignment of duties.

 Delegation of authority and creation of

responsibility.
 Coordinating authority and responsibility
relationships.
STAFFING
 Staffing

 Recruiting, selecting, appointing the employees,

assigning duties, maintaining cordial relationship
and taking care of grievances of employees.
 Training and Development of employees, deciding
their remuneration, promotion and increments.
 Evaluting their performance.
 It is the function of manning the organization
structure and keeping it manned. Staffing has
assumed greater importance in the recent years due
to advancement of technology, increase in size of
business, complexity of human behavior etc. The
main purpose o staffing is to put right man on right
job i.e. square pegs in square holes and round pegs in
round holes.
 Staffing involves:
 Manpower Planning (estimating man power in terms of
searching, choose the person and giving the right place).
 Recruitment, selection & placement.

 Training & development.

 Remuneration.

 Performance appraisal.

 Promotions & transfer.

DIRECTING
 Directing

 Giving direction or instruction to employees to get

the job done.
 Leadership qualities are required.
 Motivating employees by providing monatory and
non-monetory incentives.
 Comunicating with them at regular intervals.
 It is that part of managerial function which actuates
the organizational methods to work efficiently for
achievement of organizational purposes. It is
considered life-spark of the enterprise which sets it
in motion the action of people because planning,
organizing and staffing are the mere preparations for
doing the work. Direction is that inert-personnel
aspect of management which deals directly with
influencing, guiding, supervising, motivating sub-
ordinate for the achievement of organizational goals.
 Supervision- implies overseeing the work of subordinates
by their superiors. It is the act of watching & directing work
& workers.
 Motivation- means inspiring, stimulating or encouraging
the sub-ordinates with zeal to work. Positive, negative,
monetary, non-monetary incentives may be used for this
purpose.
 Leadership- may be defined as a process by which
manager guides and influences the work of subordinates in
desired direction.
 Communications- is the process of passing information,
experience, opinion etc from one person to another. It is a
bridge of understanding
CONTROLLING
 Controlling

 Matching actual performance with the planed goal.

 If problem, tries to find out the reasons of deviation.

 Suggesting corrective measures come on the path of

plan
 CONTROLLING:

 It implies measurement of accomplishment against

the standards and correction of deviation if any to
ensure achievement of organizational goals. The
purpose of controlling is to ensure that everything
occurs in conformities with the standards. An
efficient system of control helps to predict deviations
before they actually occur. According to Theo
Haimann, “Controlling is the process of checking
whether or not proper progress is being made
towards the objectives and goals and acting if
necessary, to correct any deviation”.
 Therefore controlling has following steps:
 Establishment of standard performance.

 Measurement of actual performance.

 Comparison of actual performance with the standards and

finding out deviation if any.
 Corrective action.
 MANAGEMENT SKILL
Skill is an ability or proficiency in a specific
area.
Conceptual skills are the ability to formulate
ideas.
Human skills are the ability to interact
effectively with people and concerns
interpersonal relations.
Technical skills are the ability to use process
or technique knowledge. They deal with things.

Contd…
 MANAGEMENT SKILL
In order to perform the functions of management and to assume
multiple roles, managers must be skilled. Robert Katz identified
three managerial skills that are essential to successful
management: technical, human, and conceptual.

Technical skill involves process or technique knowledge and

proficiency. Managers use the processes, techniques and tools of
a specific area.
Human skill involves the ability to interact effectively with people.
Managers interact and cooperate with employees.

Conceptual skill involves the formulation of ideas. Managers

understand abstract relationships, develop ideas, and solve
problems creatively.

Thus, technical skill deals with things, human skill concerns

people, and conceptual skill has to do with ideas.

Contd…
 MANAGEMENT SKILL
A manager's level in the organization determines
the relative importance of possessing technical,
human, and conceptual skills. Top level managers
need conceptual skills in order to view the
organization as a whole. Conceptual skills are
used in planning and dealing with ideas and
abstractions. Supervisors need technical skills to
manage their area of specialty. All levels of
management need human skills in order to interact
and communicate with other people successfully.

Contd…
MANAGEMENT SKILL
 MANAGERIAL LEVELS
• Management hierarchy is the arrangement in
an organization of managers by level or rank.
• Middle management includes managers below
the rank of president but above the supervisory
level.
• Supervisors are managers whose major
activities focus on supervising non-management
employees and the needs of those employees
and the objectives of the organization.
• Top management are managers accountable
for the overall success of the organization.
MANAGERIAL LEVELS
 MANAGERIAL LEVELS
Supervisors are managers whose major functions
emphasize directing and controlling the work of
employees in order to achieve the team goals. They
are the only level of management managing non-
managers. Thus, most of the supervisor's time is
allocated to the functions of directing and
controlling. In contrast, top managers spend most of
their time on the functions of planning and
organizing. The top manager determines the mission
and sets the goals for the organization. His or her
primary function is long-range planning. Top
management is accountable for the overall
management of the organization. Middle
management implements top management goals.
Supervisors direct the actual work of the
organization at the operating level.
MANAGERIAL LEVELS
 MANAGERIAL LEVELS
Keystone in the Organization
The keystone view, identified by Professor Keith
Davis, is many people's ideal of a supervisor's job*.
The comparison between an archway and an
organization is very interesting. Without the
keystone (supervisor), the arch (organization)
collapses. The keystone is the central topmost stone
of an arch. It is an essential part because it takes the
pressure of both sides, exerts pressure of its own
and uses them to strengthen the overall arch. The
keystone supervisor is the main connector joining
management and employees making it possible for
each to perform effectively. Supervisors are the level
of management linking the operations of each
department to the rest of the organization. This view
underscores the critical importance of developing
people at all levels.
MANAGERIAL LEVELS
 MANAGERIAL LEVELS
• Employees need their jobs and want to know what is
expected of them and how their work relates to the
whole process. The supervisor is the point of
contact in the satisfaction of these needs for
employees. By his or her efforts toward productivity
and efficiency, the supervisor helps make the
company successful, which preserves and creates
jobs. By interpreting policies and giving instructions
and information and through normal, everyday
contact with employees, the supervisor serves as
the point of contact with management. The keystone
has determined that he or she will control the job
instead of the job controlling him or her. Thus, It is
the confidence in self that will help determine the
success of the manager.
 MANAGERIAL FUNCTIONS
• A manager's job consists of planning, organizing, directing, and
controlling the resources of the organization. These resources
include people, jobs or positions, technology, facilities and
equipment, materials and supplies, information, and money.
Managers work in a dynamic environment and must anticipate and
adapt to challenges.
• The job of every manager involves what is known as the functions
of management: planning, organizing, directing, and controlling.
These functions are goal-directed, interrelated and interdependent.
Planning involves devising a systematic process for attaining the
goals of the organization. It prepares the organization for the
future. Organizing involves arranging the necessary resources to
carry out the plan. It is the process of creating structure,
establishing relationships, and allocating resources to accomplish
the goals of the organization. Directing involves the guiding,
leading, and overseeing of employees to achieve organizational
goals. Controlling involves verifying that actual performance
matches the plan. If performance results do not match the plan,
corrective action is taken.
 MANAGERIAL ROLES
To meet the many demands of performing their
functions, managers assume multiple roles. A role is an
organized set of behaviors. Henry Mintzberg has
identified ten roles common to the work of all
managers. The ten roles are divided into three groups:
interpersonal, informational, and decisional*. The
informational roles link all managerial work together.
The interpersonal roles ensure that information is
provided. The decisional roles make significant use of
the information. The performance of managerial roles
and the requirements of these roles can be played at
different times by the same manager and to different
degrees depending on the level and function of
management. The ten roles are described individually,
but they form an integrated whole.
 MANAGERIAL ROLES
To meet the many demands of performing their
functions, managers assume multiple roles. A role is an
organized set of behaviors. Henry Mintzberg has
identified ten roles common to the work of all
managers. The ten roles are divided into three groups:
interpersonal, informational, and decisional*. The
informational roles link all managerial work together.
The interpersonal roles ensure that information is
provided. The decisional roles make significant use of
the information. The performance of managerial roles
and the requirements of these roles can be played at
different times by the same manager and to different
degrees depending on the level and function of
management. The ten roles are described individually,
but they form an integrated whole.
 MANAGERIAL ROLES
The three interpersonal roles are primarily
concerned with interpersonal relationships. In the
figurehead role, the manager represents the
organization in all matters of formality. The top level
manager represents the company legally and
socially to those outside of the organization. The
supervisor represents the work group to higher
management and higher management to the work
group. In the liaison role, the manger interacts with
peers and people outside the organization. The top
level manager uses the liaison role to gain favors
and information, while the supervisor uses it to
maintain the routine flow of work. The leader role
defines the relationships between the manger and
employees.
 MANAGERIAL ROLES
The direct relationships with people in the
interpersonal roles place the manager in a unique
position to get information. Thus, the three
informational roles are primarily concerned with the
information aspects of managerial work. In the
monitor role, the manager receives and collects
information. In the role of disseminator, the
manager transmits special information into the
organization. The top level manager receives and
transmits more information from people outside the
organization than the supervisor. In the role of
spokesperson, the manager disseminates the
organization's information into its environment.
Thus, the top level manager is seen as an industry
expert, while the supervisor is seen as a unit or
departmental expert.
 MANAGERIAL ROLES
The unique access to information places the
manager at the center of organizational decision
making. There are four decisional roles. In the
entrepreneur role, the manager initiates change. In
the disturbance handler role, the manger deals with
threats to the organization. In the resource allocator
role, the manager chooses where the organization
will expend its efforts. In the negotiator role, the
manager negotiates on behalf of the organization.
The top level manager makes the decisions about
the organization as a whole, while the supervisor
makes decisions about his or her particular work
unit.
 MANAGERIAL ROLES
The supervisor performs these managerial
roles but with different emphasis than higher
managers. Supervisory management is more
focused and short-term in outlook. Thus, the
figurehead role becomes less significant and
the disturbance handler and negotiator roles
increase in importance for the supervisor.
Since leadership permeates all activities, the
leader role is among the most important of all
roles at all levels of management.
 MANAGERIAL ROLES
The supervisor performs these managerial
roles but with different emphasis than higher
managers. Supervisory management is more
focused and short-term in outlook. Thus, the
figurehead role becomes less significant and
the disturbance handler and negotiator roles
increase in importance for the supervisor.
Since leadership permeates all activities, the
leader role is among the most important of all
roles at all levels of management.
 Forms of organization
Business system :
A system refers to a scientifically established
arrangement of components for the
attainment of specific objectives as per plan.
It can be of four types :
1) Finance systems
2) Production system
3) Marketing system
4) Personnel system
The business organization is to be a business
system what the heart is to a human being.
 Forms of organization
Hence a business organization is the technique
of efficiently conducting industrial &
commercial activities to earn not only profit, but
also the goodwill through a income submit to
the customers and employees in particular and
the society in general.
Business organization is assigned with various
issues pertaining to all types of business
enterprises. It covers each and every problem
starting from the very establishment of a
business unit till its ultimate disappearance
from this world of modern business.
 Forms of organization
Forms of business organization

Private Enterprise Cooperative Enterprise Public Enterprise

1. Sole Trade 1. Individual Cooperatives 1. Govt. Department

2. Partnership firm 2. Consumer’s Coop. Store 2. Govt. Company
3. Private Company 3. Marketing Cooperatives 3. Statutory Coops
4. Public Company 4. Service Cooperatives
 Forms of organization
Proprietorship company :
A business unit owned and managed by an
individual is called a sole trading organization
or individual proprietorship. It is the oldest,
simplest & most natural form of business
organization.
Main features :
1. No separate legal assistance except the proprietor who owns
it.
2. Capital contribution – Made by the proprietor alone.
3. Management & control – Control over all the affairs of the
business
4. Profit sharing – No sharing
5. Liability – The liability of the proprietor is unlimited.
6. Stability – Short life.
 Forms of organization
Advantage :
Ø Easy formation
Ø Simple to won
Ø Retention of business secrets.
Ø Quick decisions.
Ø Managerial motivation
Ø Close business links
Ø Healthy relation with the employees.
Ø Economy in management
Ø Unlimited liability
Ø Soft employment
Disadvantages :
Ø Limited capital & insufficiency of resources.
Ø Limitation of managerial ability
Ø Threat of unlimited liability
Ø Uncertainty of duration
Restricted growth
 Cooperative organization
Usually business organization run primarily with
the profit motive, the cooperative undertakings
are established for rendering services to their
members. A cooperative society is basically an
association of person who join together
voluntarily for common economic interests. The
foundations of cooperative organization are :

a) Service not profit

b) Cooperation not competition
c) Self help – not dependence on profit
d) Moral solidarity not unscrupulous undertaking
 Cooperative organization
Definitions :
1)According to section – 4 of the Indian
Cooperative Societies Act, 1912, a cooperative
society is a society which has its objectives of
promotion of economic interests of its
members in accordance with cooperative
principles.
2)It is defined as an association of person usually
of limited means who have voluntarily joined
together to achieve a common economic and
through the formation of democratically
controlled business organization making
equitable contribution to the capital required.
 Cooperative organization
Features :
 Voluntary association
 Open membership
 Variable nature of members liability
 Democratic control through equality of voting power
 Service motive
 Perfect units
 Limited reward to the capital inverted
 Cash trading
 Cooperative organization
Types of cooperative :
1. Industrial cooperatives – They are the
voluntary association of small produces
formed with the object of eliminating the
capitalists from the system of industrial
production, securing some of the benefits of
large scale production, increasing their
competitive strength against the large
produces and so on.
2. Marketing Cooperatives – They are voluntary
associations of independent producers or
consumers organized for the purpose of
making arrangements for a proper sale or their
output to outsides & their requirements among
themselves respectively.
 Cooperative organization
Types of cooperative :
1. Industrial cooperatives – They are the
voluntary association of small produces
formed with the object of eliminating the
capitalists from the system of industrial
production, securing some of the benefits of
large scale production, increasing their
competitive strength against the large
produces and so on.
2. Marketing Cooperatives – They are voluntary
associations of independent producers or
consumers organized for the purpose of
making arrangements for a proper sale or their
output to outsides & their requirements among
themselves respectively.
 Cooperative organization
Types of cooperative :

Consumers cooperative is one type of marketing

operation which are formed by ordinary people with
the object of supplying the day to day requirements of
good at cheaper prices to their members through the
elimination of middleman.
3. Credit cooperative – They are voluntary associations
of people with moderate means formed with the object
of raising necessary capital to extend short term
financial accommodation to the members.
4. Service cooperatives – They are organized for
rendering various types of services to their members
at a nominal charge.
 Cooperative organization
Planning : It includes forecasting and decision-
making and involves
• Identifying trends
• Crystallizing objectives
• Collecting and synthesizing the available information
• Developing alternative courses of action
• Comparing alternatives in terms of objectives,
feasibility and consequences
• Selecting optimum course of action
• Establishing policies, procedures, methods,
standards, schedules, programs, systems & budgets
• Assigning works
• Implementing controls and preparing exports and find
out possible improvements
 Cooperative organization
Organizing :

· Dividing work into component activities

· Design job structure
· Defining responsibilities
· Delegating adequate authority
· Establish structural relationship to secure co-
ordination
 Cooperative organization
Staffing :
 Anticipating manpower needs
 Developing job descriptions and man specification
 Deciding appropriate source of recruitment
 Arranging selection procedure
 Deciding manpower
 Developing activities
 Determining suitable training programs and techniques
 Appraising performances
Directing :
 Leading
 Motivating
 Communicating
 Supervising
 Controlling :
• Identifying potential problems
• Deciding criteria for measuring results
• Projecting desired results
• Deciding sequence of importance
• Establishing check points, Schedules and time-table
• Appraising performances
• Selecting mode of control
• Finalizing audit measure and evaluating in terms of
planning
• Spotting significant deviations
• Ascertaining causes
• Taking remedial action
• Getting Board / Top managements’ approva
 R.Arun Kumar, AP/Mech, RIT
TYPES OF PLANNING
 R.Arun Kumar, AP/Mech, RIT
PLANNING TYPES:
PLANNING TYPES:

1. Breadth: Based on the range of area.

 Strategic planning

 Operational planning

R.Arun Kumar, AP/Mech, RIT

PLANNING TYPES:
Strategic Plans:
 Apply to the entire organization.
 Establish the organization’s overall goals.
Seek to position the organization in terms of its environment.

R.Arun Kumar, AP/Mech, RIT



 Cover extended periods of time

PLANNING TYPES:
Operational Plans
 Plans that encompasses a particular operational area of
the organization..
Specify the details of how the overall goals are to be achieved

R.Arun Kumar, AP/Mech, RIT



 Cover short time period.

PLANNING TYPES:

2. Time frame: Based on duration for achieving the goal.

 Long term goal

 Short term goal

R.Arun Kumar, AP/Mech, RIT

PLANNING TYPES:
Long term goals:
 Plans with time frames extending beyond three years.

R.Arun Kumar, AP/Mech, RIT

PLANNING TYPES:
Short term goals:
 Plans with time frames on one year or less.
 Any plans between these time duration are called as
intermediate plans.

R.Arun Kumar, AP/Mech, RIT

PLANNING TYPES:

3. Specificity: Based on range of defining.

 Specific plans
 Directional plans

R.Arun Kumar, AP/Mech, RIT

PLANNING TYPES:
Specific Plans
 Plans that are clearly defined and leave no room for
interpretation.
They have clearly defined objectives.

R.Arun Kumar, AP/Mech, RIT



 No uncertainty
PLANNING TYPES:
Directional Plans
 Flexible plans that set out general guidelines, provide focus,
yet allow freedom in implementation.
Directional plans are used when uncertainty is high.

R.Arun Kumar, AP/Mech, RIT



 They provide focus but do not lock managers into specific goals
or courses of action.
PLANNING TYPES:

4. Frequency of use: Based on usage of planning.

 Single-Use Plan
 Standing Plans

R.Arun Kumar, AP/Mech, RIT

PLANNING TYPES:
Single-Use Plan
 A one-time plan specifically designed to meet the need of a
unique situation.

R.Arun Kumar, AP/Mech, RIT

PLANNING TYPES:
Standing Plans
 Ongoing plans that provide guidance for activities performed
repeatedly.

R.Arun Kumar, AP/Mech, RIT

SINGLE USE PLANS VS STANDING PLANS

Single use plans Standard/Repeated use plans

1.Programmes 1.Objectives
2.Budgets 2.Policies

R.Arun Kumar, AP/Mech, RIT

3.Projects 3.Procedures
4.Rules
5.Strategies
Single Use Plans:

1. Programmes

 A specific plan devised to meet a particular situation.

2. Budget

R.Arun Kumar, AP/Mech, RIT

 A financial or quantitative statement prepared prior to a definite
period of time.

3. Project

 Part of general programme.

Standing Use Plans:

1. Objectives

 Specific goals or targets to be accomplished.

 Realistic, flexible.

R.Arun Kumar, AP/Mech, RIT

2. Policies
 Guiding principles established by the company to govern actions
usually under repetitive conditions.

3. Procedures

 Prescribe the manner or method by which the work is to be

performed.
Standing Use Plans:
4. Rules
 A decision made by the management regarding what is to be done
and what is not to be done in a given situation.
5. Strategy

R.Arun Kumar, AP/Mech, RIT

 A special kind of plan formulated in order to meet the challenge
of the polices of competitors.
Tactical Planning:

 Deals with the low level units of an organization.

 Concerned with shorter time frames and narrower scopes.

R.Arun Kumar, AP/Mech, RIT

Contingency Planning:

 Plans that are devised for specific situation.

R.Arun Kumar, AP/Mech, RIT

Advantages of Planning:

 Helps in achieving objectives.

 Better utilization of resources.

 Economy in operation.

R.Arun Kumar, AP/Mech, RIT

 Reduces uncertainty and risk.

 Effective control.

 Improves coordination.

 Guides in decision making.

 Improves output of an organization.

 Provides decentralization.
Disadvantages of Planning:

 Lack of accuracy.

 Time and cost.

 Inflexibility.

R.Arun Kumar, AP/Mech, RIT

 Delay during emergency period.
 Institute of Graduate School

Course Title: Educational Leadership (EM 211)

Topic: Tools and Techniques of Decision Making
Reporter: Maerafe Soyosa Parcero
Professional Lecturer: Prof. Ferdinand C. Gimeno
.
INTRODUCTION
Running a business or school, making
the right decisions can lead to success,
while making the wrongs can result to
failure. While there are a wide variety of
decision-making techniques and tools,
many tend to revolve around the same key
principles of figuring out the decision that
needs to be made, considering and
researching the options and reviewing the
decision once it's been made.
Statement of the Problem

1. What are the tools

and techniques of
decision-making?
III. Presentation/Discussion
Definition of
terms:
tool is any physical item that can be used
to achieve a goal, especially if the item
is not consumed in the process.
Informally the word is use to describe a
procedure or process with a specific
purpose.
technique is a systematic
procedure, formula, or routine by which
a task is accomplished.
 Tools and
techniques of
decision making
1. Nominal group technique
(NGT)
It is eliciting written questions, ideas, and
reactions from group members.
Consists of :
>Silently generating ideas in written.
>Round-robin presentation by group
members of their ideas on a flip chart.
>Discussing each recorded idea and
evaluate.
>Voting individually on priority ideas, with
group solution being derived
mathematically through rank ordering.
2. Delphi technique
is a structured communication
technique, originally developed as
a systematic, interactive
forecasting method which relies
on a panel of experts.
Delphi Technique
communication Structure
3. Brainstorming
The idea generating technique wherein a
Group members meet and generate diverse ideas
about the nature, cause , definition, or solution to
a problem without regard to questions of
feasibility or practicality. Through this technique,
individuals are encouraged to identify a wide
range of ideas. Usually, one individual is assigned
to record the ideas on a chalkboard.
Brainstorming may be used at any stage of the
decision- making process, but it is most effective
at the beginning, once a problem has been stated.
4. Multivoting
A group decision-making
technique used to reduce a
long list of items to a
manageable number by
means of a structured
series of votes.
Benefits of Multivoting

R educes a list
p rioritizes a list

I dentifies important items

5. Pareto Analysis
Is a formal technique useful
where many possible courses of action
are competing for attention. In essence,
the problem-solver estimates the
benefit delivered by each action, then
selects a number of the most effective
actions that deliver a total benefit
reasonably close to the maximal
possible one.
 Pareto Analysis – also known as
the "80/20 Rule" – which is the
idea that 20 percent of causes
generate 80 percent of results.
With this tool, we're trying to find
the 20 percent of work that will
generate 80 percent of the results
that doing all of the work would
deliver.
Pareto Analysis Example
Jack has taken over a failing service
center, with a host of problems that
need resolving. His objective is to
increase overall customer satisfaction.
He decides to score each problem
by the number of complaints that the
center has received for each one.
# Problem (Step 1) Cause (Step 2) Score
(Step 3)

1 Phones aren't answered quickly enough. Too few service center staff. 15

2 Staff seem distracted and under pressure. Too few service center staff. 6

3 Engineers don't appear to be well organized. Poor organization and preparation. 4

They need second visits to bring extra parts.

4 Engineers don't know what time they'll arrive. Poor organization and preparation. 2
This means that customers may have to be in
all day for an engineer to visit.

5 Service center staff don't always seem to know Lack of training. 30

what they're doing.

6 When engineers visit, the customer finds that Lack of training. 21

the problem could have been solved over the
phone.
Jack then groups problems together (steps 4
and 5). He scores each group by the
number of complaints, and orders the list
as follows:
Lack of training (items 5 and 6) – 51
complaints.
Too few service center staff (items 1 and
42) – 21 complaints.
Poor organization and
preparation (items 3 and 4) – 6
complaints.
6. Fishbone diagram (cause and effect)
Is drawn after a brainstorming
session, the central problem is visualized
as the head of the fish, with the skeleton
divided into branches showing
contributing causes of different parts of
the problem.
Fishbone diagram (Cause and effect)
7. PMI ('Plus/Minus/Interesting)
Weighing the Pros and Cons of a Decision.
How to use:
Focused on selecting a course of action from
a range of options and check that it is going to
improve the situation draw up a table headed up
with: 'Plus', 'Minus', In the column underneath
'Plus', write down all the positive results of
taking the action. Underneath 'Minus' write
down all the negative effects. . In the "Interesting"
column, write down all of the "interesting"
implications and possible outcomes of taking the
action.
PLUS MINUS INTERESTING
EXAMPLE (DANIEL’S PMI)
Daniel's boss has unexpectedly
offered him a promotion. Daniel is
excited about the opportunity, but he
knows that there are several
downsides to leaving his current team
and taking on a new role. He decides
to weigh the pros and cons of the
decision using the PMI tool.
Plus Minus Interesting

Higher income (+4) Much more Challenge myself

responsibility (-2) professionally? (+4)

Get to meet new Likely to be more Will be living in a

people (+3) stress (-4) new area (+3)

Self-Confidence Have to sell house

improves (+5) and move (-5)

Must learn how to

manage others (-2)

+12 -13 +7
Daniel scores the table as
12 (Plus) – 13 (Minus) + 7 (Interesting) = +6

For him, the promotion will be

worth the stress and
inconvenience that comes with
the new role.
TOOLS AND TECHNIQUES OF
DECISION MAKING
Nominal Group Technique
(NGT)
Delphi Technique
Brainstorming
Multivoting
Pareto Analysis
Fishbone Diagram
PMI (Plus/Minus/Interesting)
IV. IMPLICATION
When it comes to making decisions,
one should always weigh the positives and
negatives consequences and should favor
the positive outcomes. This avoids the
possible losses to the organization and
keeps the company running with a
sustained growth. However, making the
decisions and accepting its consequences
is the only way to stay in control of your
corporate life and time.
V. References
http://en.wikipedia.org/wiki/
http://www.businessdictionary.com/definition/technique.html
http://www.balancedscorecard.org/portals/0/pdf/descntls.pdf
https://www.google.com.ph/url?sa=t&rct=j&q=&esrc=s&sourc
=web&cd=3&cad=rja&uact=8&sqi=2&ved=0CCcQFjAC&url=h
ttp%3A%2F%2Fwww.siue.edu%2F~marlove%2FPowerpoint3
41%2FDecision_Making.ppt&ei=6NP9U9DXHOa2igKimYDo
BQ&usg=AFQjCNFogTa6WM0zgDQHmCNtWdIE-TxN-A
http://www.mindtools.com/
http://www.businessnewsdaily.com/6154-pareto-analysis.html
MAERAFE S.
PARCERO
 Chapter – 9 DEPARTMENTATION

DEPARTMENTATION
Introduction
Departmentation is a part of the organization process. It involves the
grouping of common activities on the basis of a function of the organization
under a single person’s control.

Meaning
Departmentation means the process by which similar activities of the
business are grouped into units for the purpose of facilitation smooth
administration at all levels.

Definition
Departmentation refers to the classification of activities on operations of an
undertaking into functionalized categories. It is created in product wise,
process-wise or area wise. It ensures proper direction to and control on
them.

Process of Departmentation
1. Identification of work.
2. Analysis of details of each work.
3. Description of the function of the organization.
4. Entrusting the function to a separate person who has specialized in
the respective field.
5. Fixing the scope of authority and responsibility of the departmental
heads.

Need and Importance of Departmentation

1. It increases the operating efficiency of the employees.
2. It makes the executive to be alert and efficient in his duties.
3. It increases the prestige and skill of the departmental heads.
4. It makes the departmental heads efficient.
5. Further expansion of the organization is possible.
6. It gives advantages like facilitating budget preparation, effective
control of expenditure, attaining specialization, better coordination etc.

Factors in Departmentation
1. Specification
2. Control
3. Coordination
4. Securing attention
5. Recognition of local conditions
6. Economy

1
 Chapter – 9 DEPARTMENTATION

Basis of Grouping Diverse Activities

1. Maximum use
2. Interest
3. Competition
4. Policy matter
5. Separation
6. Proper attention
7. Coordination

Basis pattern types of Departmentation

1. Departmentation by Function
2. Departmentation by Product or Service
3. Departmentation by region or area
4. Departmentation by Customers
5. Departmentation by Process
6. Departmentation by Time
7. Departmentation by Numbers
8. Departmentation by Marketing Channels

Departmentation by Function
Anil Starch Ltd.

Production Sales Accounts Purchase Finance

Dep. Dep. Dep. Dept. Department

Advantages:
¾ It is scientific and time tested method.
¾ It follows the principles of specialization and division of labour
¾ Ensures performance control
¾ Preserves the importance of each of activities.
¾ Due weightage and prestige are given to managers and respected
¾ Facilitates coordination activity within departments
¾ Economical, simple and easy to understand
¾ Helps utilization of manpower and other natural resources.

Disadvantages:
¾ It makes management control work more difficult
¾ Increases work load and responsibility of managers
¾ Does not offer scope for training for overall development of managers
¾ Managers may be experts but may not understand the problems of other
departments.

Departmentation by Product or Service

Birla VXL Ltd. – Saurashtra Chemical Division

Manufacturing Sales Purchase Finance

2
 Chapter – 9 DEPARTMENTATION

Advantages:
¾ Maximum utilization of personnel efficiency of workers.
¾ Gaining economy in manufacturing and marketing of products
¾ Better services to customers
¾ Profitability of each product is known.
¾ Proper attention is given
¾ New line of product can be introduced without difficulty.

Disadvantages:
¾ Danger of duplication of work
¾ Increases number of personnel that leads to heavy cost
¾ Additional cost for maintaining a sales force for each product
¾ Control becomes more difficult
¾ Machines and equipments may not be used fully.
¾ Only for large scale diversified groups.

Departmentation by region or area

GM – Marketing

Area Mgr.-North Area Mgr.-East Area Mgr. -West Area Mgr. -South

Advantages:
¾ Effective span of control.
¾ Reduces the cost of operation and gains saving in time.
¾ Intimate knowledge about the taste and preference of customers
¾ Win the confidence of customers and reduce the competition
¾ Profitability of each area can be known.
¾ Gives opportunities to managers to improve their skills
¾ More suitable for large scale business unit
¾ Control process very easy to manager.

Disadvantages:
¾ Increases number of personnel and heavy cost of operation
¾ Control of head office is less effective one
¾ Involves duplication of work
¾ Small business can’t manage the high cost.

Departmentation by Customers

ICICI

Corporate Advances Home Loans Personal Loans Credit Cards

Advantages:
¾ It fulfills the expectations and needs of customers

3
 Chapter – 9 DEPARTMENTATION

¾ It develops specialization among the organizational staff.

¾ Out of fashion products can be dispensed with
¾ Each section of customers gets better services.

Disadvantages:
¾ Duplication of activities.
¾ Achievement of coordination is very difficult
¾ Wastage of available of resources and facilities.
¾ Production activities can’t be done under this method due to heavy cost.

Departmentation by Process

General Manager

Melting Rolling Peeling Metal Drawing Packing Sales

Advantages:
¾ Costlier machines can be used effectively.
¾ Economy of operation
¾ No duplication of activities
¾ Principle of specialization and division of labour is followed
¾ It helps top management to have effective performance control
¾ This is more suitable for a product manufacturing passes through more
processes.

Disadvantages:
¾ Heavy cost of operation
¾ More specialist are essential to each process
¾ Lack of overall development of managerial talents.

Departmentation by Time
The business activities are grouped together on the basis of the time of the
performance.
Departmentation by Numbers
Similar type of duties is performed by small groups and each group is
controlled by a supervisor or an executive. The principles of span of
management span of control or span of supervision is used under this type.
E.g. Squads, battalions, companies, brigades and regiments In Army.

Departmentation by Marketing Channels

This type of departmentation is adopted on the basis of the channel of
distribution chosen by the particular business unit. This method of
departmentation has grown in importance as business has become
increasingly market oriented.

4
 Principles of Span of Control/Supervision

According to this principle, span of control is a span of supervision which depicts the number of
employees that can be handled and controlled effectively by a single manager. According to this
principle, a manager should be able to handle what number of employees under him should be decided.
This decision can be taken by choosing either froma wide or narrow span. There are two types of span of
control:-

a. Wide span of control- It is one in which a manager can supervise and control effectively a large
group of persons at one time. The features of this span are:-
i. Less overhead cost of supervision
ii. Prompt response from the employees
iii. Better communication
iv. Better supervision
v. Better co-ordination
vi. Suitable for repetitive jobs

According to this span, one manager can effectively and efficiently handle a large number of
subordinates at one time.

b. Narrow span of control- According to this span, the work and authority is divided amongst
many subordinates and a manager doesn't supervises and control a very big group of people under
him. The manager according to a narrow span supervises a selected number of employees at one
time. The features are:-
i. Work which requires tight control and supervision, for example, handicrafts, ivory work,
etc. which requires craftsmanship, there narrow span is more helpful.
ii. Co-ordination is difficult to be achieved.
iii. Communication gaps can come.
iv. Messages can be distorted.
v. Specialization work can be achieved.

Factors influencing Span of Control

1. Managerial abilities- In the concerns where managers are capable, qualified and experienced,
wide span of control is always helpful.
2. Competence of subordinates- Where the subordinates are capable and competent and their
understanding levels are proper, the subordinates tend to very frequently visit the superiors for
solving their problems. In such cases, the manager can handle large number of employees. Hence
wide span is suitable.
3. Nature of work- If the work is of repetitive nature, wide span of supervision is more helpful. On
the other hand, if work requires mental skill or craftsmanship, tight control and supervision is
required in which narrow span is more helpful.
4. Delegation of authority- When the work is delegated to lower levels in an efficient and proper
way, confusions are less and congeniality of the environment can be maintained. In such cases,
wide span of control is suitable and the supervisors can manage and control large number of sub-
ordinates at one time.
5. Degree of decentralization- Decentralization is done in order to achieve specialization in which
authority is shared by many people and managers at different levels. In such cases, a tall structure
is helpful. There are certain concerns where decentralization is done in very effective way which
results in direct and personal communication between superiors and sub- ordinates and there the
superiors can manage large number of subordinates very easily. In such cases, wide span again
helps.
Line and staff organization is a modification of line organization and it is more complex than line
organization. According to this administrative organization, specialized and supportive activities
are attached to the line of command by appointing staff supervisors and staff specialists who are
attached to the line authority. The power of command always remains with the line executives
and staff supervisors guide, advice and council the line executives. Personal Secretary to the
Managing Director is a staff official.

MANAGING
DIRECTOR
↓ ↓ ↓
Production Manager Marketing Manager Finance Manager
↓ ↓ ↓
Plant Supervisor Market Supervisor Chief Assisstant
↓ ↓ ↓
Foreman Salesman Accountant

Features of Line and Staff Organization

1. There are two types of staff :

a. Staff Assistants- P.A. to Managing Director, Secretary to Marketing Manager.
b. Staff Supervisor- Operation Control Manager, Quality Controller, PRO
2. Line and Staff Organization is a compromise of line organization. It is more complex
than line concern.
3. Division of work and specialization takes place in line and staff organization.
4. The whole organization is divided into different functional areas to which staff
specialists are attached.
5. Efficiency can be achieved through the features of specialization.
6. There are two lines of authority which flow at one time in a concern :
a. Line Authority
b. Staff Authority
7. Power of command remains with the line executive and staff serves only as counselors.

Merits of Line and Staff Organization

1. Relief to line of executives- In a line and staff organization, the advice and counseling
which is provided to the line executives divides the work between the two. The line
executive can concentrate on the execution of plans and they get relieved of dividing their
attention to many areas.
2. Expert advice- The line and staff organization facilitates expert advice to the line
executive at the time of need. The planning and investigation which is related to different
matters can be done by the staff specialist and line officers can concentrate on execution
of plans.
3. Benefit of Specialization- Line and staff through division of whole concern into two
types of authority divides the enterprise into parts and functional areas. This way every
officer or official can concentrate in its own area.
 4. Better co-ordination- Line and staff organization through specialization is able to
provide better decision making and concentration remains in few hands. This feature
helps in bringing co- ordination in work as every official is concentrating in their own
area.
5. Benefits of Research and Development- Through the advice of specialized staff, the
line executives, the line executives get time to execute plans by taking productive
decisions which are helpful for a concern. This gives a wide scope to the line executive to
bring innovations and go for research work in those areas. This is possible due to the
presence of staff specialists.
6. Training- Due to the presence of staff specialists and their expert advice serves as
ground for training to line officials. Line executives can give due concentration to their
decision making. This in itself is a training ground for them.
7. Balanced decisions- The factor of specialization which is achieved by line staff helps in
bringing co- ordination. This relationship automatically ends up the line official to take
better and balanced decision.
8. Unity of action- Unity of action is a result of unified control. Control and its effectivity
take place when co- ordination is present in the concern. In the line and staff authority all
the officials have got independence to make decisions. This serves as effective control in
the whole enterprise.

Demerits of Line and Staff Organization

1. Lack of understanding- In a line and staff organization, there are two authority flowing
at one time. This results in the confusion between the two. As a result, the workers are
not able to understand as to who is their commanding authority. Hence the problem of
understanding can be a hurdle in effective running.
2. Lack of sound advice- The line official get used to the expertise advice of the staff. At
times the staff specialist also provide wrong decisions which the line executive have to
consider. This can affect the efficient running of the enterprise.
3. Line and staff conflicts- Line and staff are two authorities which are flowing at the same
time. The factors of designations, status influence sentiments which are related to their
relation, can pose a distress on the minds of the employees. This leads to minimizing of
co- ordination which hampers a concern’s working.
4. Costly- In line and staff concern, the concerns have to maintain the high remuneration of
staff specialist. This proves to be costly for a concern with limited finance.
5. Assumption of authority- The power of concern is with the line official but the staff
dislikes it as they are the one more in mental work.
6. Staff steals the show- In a line and staff concern, the higher returns are considered to be
a product of staff advice and counseling. The line officials feel dissatisfied and a feeling
of distress enters a concern. The satisfaction of line officials is very important for
effective results.
Vol. 4, No. 1

Basic Assumptions of Organizational

Behavior
Bhupindra Jung Basnet, MPhil
Lecturer
Nepal Commerce Campus, Faculty of Management, T.U.

Abstract
The purpose of this paper is to do in depth analysis of the basic assumptions of
organizational behavior. This paper is based on conceptual base reviewed from
different books and research reports. The objective of the study is to identify the
basic assumptions of organizational behavior. The paper concludes that there
are two types of basic assumptions of organizational behavior. They are nature
of people and nature of organizations. A basic assumption about nature of people
incorporates individual differences, a whole person, motivated behavior, value of
the person, selective perception, and desire for involvement. A basic assumption
about nature of organizations involves social system, mutuality of interest, and
ethical treatment.
Keywords: organizational behavior, the assumption about nature of people, the
assumption about nature of organizations

Introduction
Organizational behavior is concerned with analyzing, understanding, predicting, and managing
human behavior in the organization for improving organizational effectiveness. Organizational behavior
is the study of human behavior, attitudes, and performance in organization (Singh, 2015). Organizational
behavior actually refers to the behavior of people in organization. Organizational behavior focuses on the
behavior, attitudes, and performance of people in organizations (Heath & Sitkin, 2001) Organizational
behavior is a field of study that endeavors to understand, explain, predict, and change human behavior as it
occurs in the organizational context.
Organization is the systematic process two or more people together to achieve common objectives
(Barnard, 1938). Behavior is the activities of the person while doing the job. Behavior refers to what people
do in the organization, how they perform, and what their attitudes are in organization. Organizational
behavior is frequently applied to address workplace issues such as absenteeism, turnover, productivity,
motivation, working in groups, and job satisfaction. Organizational behavior is the study of human behavior
in the organization (Moorhead, Griffin, Irving & Coleman, 2000).
The different theory and concepts of organizational behavior come from psychology, social
psychology, sociology, anthropology, and political science. Organizational behavior is the process of
understanding, predicting and managing of human behavior in organizations (Luthans, 2011). The objective
of study is to identify basic assumption of organizational behavior in organization.

Research Methodology
This research is based on qualitative research design. Descriptive qualitative research is used to
identify the basic assumptions of organizational behavior through the books, journal, and articles. The
basic assumptions of organizational behavior are nature of people (individual differences, a whole person,

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 NCC JOURNAL - 2019
selective perception, motivated behavior, value of the person and desire for involvement) and nature of
organizations (social system, mutuality of interest, and ethical treatment).

Basic Assumptions (Foundations of OB) of Organizational Behavior

Organizational behavior bases on two fundamental assumptions. Nature of people and nature of
organization are used foundations of organizational behavior. Individual differences, a whole person, caused
behavior, and human dignity are practiced in nature of people and social systems, mutuality of interests,
and holistic concept are applied in nature of organization (Aswathappa, 2017). In figure 1, there are two
types basic assumptions of OB. They are the assumptions about nature of people and the assumptions about
nature of organization (Poudyal & Pradhan, 2018; Gautam & Gautam, 2019).

Figure 1: Foundations of OB

Basic Assumptions/ Foundations of OB

Assumptions about Nature of People Assumptions about Nature of

1. Individual differences Organization
2. A whole person 1. Social system
3. Selective perception 2. Mutuality of interest
4. Motivated behavior 3. Ethical treatment (ethical behavior)
5. Value of the person (Human value)
6. Desire for involvement

A. The Assumptions about Nature of People

It is necessary to understand basic assumptions about the nature of people for understanding
organizational behavior. The following are the basic assumptions about nature of people.

1. Individual Differences
Organizational behavior assumes that all the individuals are differences from each other. The
difference in individuals can be in several ways like physical characteristics, intelligence, perception,
personality, attitudes, aptitudes, emotion, learning capability and communicative ability.
2. A Whole Person
Organizational behavior assumes that an individual should be considered as a whole person. We
cannot separate individual’s psychology, beliefs, values, attitude from physical work settings.
3. Selective Perception
Perception is a process by which individuals organize and interpret their sensory impressions in order
to give meaning to the environment (Robbins, 1997). Perception is an individual’s own view. Each
person has a unique way to see, organize and interpret about event, people and things.
4. Motivated Behavior
Motivation is the willingness to do something to achieve organizational goals and, at the same
~ 28 ~
Vol. 4, No. 1
time, to satisfy individual needs (Templer, Cattaneo, DeCenzo & Robbins, 2000). Every employee
expects motivated behavior from manager. Manager need to understand about how employees can
be motivated for better performance.
5. Value of the Person
Organizational behavior assumes that people are more valuable and different than non-living things.
Employees should be treated with respect, dignity and equity by the organizations. Employees should
not be treated only economic tools.
6. Desire for Involvement
Individuals have desire for involvement in work. They want to show their creativity, skills, and
efficiency while doing the work. People have capabilities for task performance, role fulfillment, and
meaningful contribution and to meet challenging situations.

B. The assumptions about Nature of Organizations

The nature of organizations is the area of study of organizational behavior. There are following basic
assumption about nature of organizations.
1. Social System
Organizations are the part of social system. Organizations are operated by social and psychological
laws. Organizational behavior assumes that organizations are open social system. These systems
affect behavior of individual.
2. Mutuality of Interest
Organizational behavior assumes mutuality of individual and organization interests. Interests flow
both ways. Organizations need people and people need organizations. Mutual interest provides a
common goal for all the participants, which results in encouragement of the people to solve problems
of the organization.
3. Ethical Treatment
Ethics involves moral issues and choices. It deals with right or wrong behavior about event, people
and things. Ethical behavior of an individual depends on the moral standard or codes of conduct
determined by society. Managerial ethics is the standard of behavior that guides individuals’
managers in their work. Organizational should establish rules, code of conduct, working procedures
and system.

Conclusions
The basic assumption of organizational behavior is two types. They are nature of people and nature
of organization. A basic assumption about nature of people incorporates individual differences, a whole
person, motivated behavior, value of the person, selective perception, and desire for involvement. A basic
assumption about nature of organizations involves social system, mutuality of interest, and ethical treatment.

References
Aswathappa, K. (2017). Organizational Behavior. 12th ed. Mumbai: Himalaya Publishing House Pvt. Ltd.
Barnard, C. I. (1938). The Functions of the Executive. Cambridge, Mass.: Harvard University Press, p. 73.
Gautam, D. K., & Gautam, P. K. (2019). Organizational Behavior. 2nd ed. Kathmandu: KEC Publication
and Distribution Pvt. Ltd.
Heath, C., & Sitkin, S. B. (2001). Big-B versus Big-O: What Is Organizational about Organizational
Behavior? Journal of Organizational Behavior 22: 43–58.
Luthans, F. (2011). Organızatıonal Behavıor: An Evidence-Based Approach. McGraw-Hill/Irwin.
Moorhead, G., Griffin, R. W., Irving, P. G., & Coleman, D. F. (2000). Organizational Behavior. Boston:
~ 29 ~
 NCC JOURNAL - 2019
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Pvt. Ltd.
Robbins, S. P. (1997). Essentials of Organizational Behavior. New Delhi: Prentice Hall of India.
Robbins, S. P., Judge, T. A., & Vohra, N. (2013). Organizational Behavior. 15th ed. India: Pearson education
Singh, K. (2015). Organizational Behavior. 3rd ed. India: Vikas Publishing House Pvt Ltd.
Templer, A. J., Cattaneo, R. J., DeCenzo, D. A.. & Robbins, S. P. (2000). Human Resource Management.
John Wiley.

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MG8591 PRINCIPLES OF MANAGEMENT

UNIT V - CONTROLLING
System and process of controlling-Budgetary and non-budgetary control techniques-Use of
computers and IT in Management control-Productivity problems and management-Control and
performance-Direct and preventive control-Reporting

1. SYSTEM AND PROCESS OF CONTROLLING

DEFINITION

Control is the process through which managers assure that actual activities conform to planned
activities.

In the words of Koontz and O'Donnell - "Managerial control implies measurement of

accomplishment against the standard and the correction of deviations to assure attainment of
objectives according to plans."

Nature & Purpose of Control

 Control is an essential function of management

 Control is an ongoing process
 Control is forward – working because pas cannot be controlled
 Control involves measurement
 The essence of control is action
 Control is an integrated system

CONTROL PROCESS

The basic control process involves mainly these steps as shown in Figure

a) The Establishment of Standards

Because plans are the yardsticks against which controls must be revised, it follows logically that
the first step in the control process would be to accomplish plans. Plans can be considered as the
criterion or the standards against which we compare the actual performance in order to figure out
the deviations.
Examples for the standards

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o Profitability standards: In general, these standards indicate how much the

company would like to make as profit over a given time period- that is, its return
on investment.

o Market position standards: These standards indicate the share of total sales in a
particular market that the company would like to have relative to its competitors.

o Productivity standards: How much that various segments of the organization

should produce is the focus of these standards.

o Product leadership standards: These indicate what must be done to attain such
a position.

o Employee attitude standards: These standards indicate what types of attitudes

the company managers should strive to indicate in the company’s employees.

o Social responsibility standards: Such as making contribution to the society.

o Standards reflecting the relative balance between short and long range goals.

b) Measurement of Performance

The measurement of performance against standards should be on a forward looking basis so that
deviations may be detected in advance by appropriate actions. The degree of difficulty in
measuring various types of organizational performance, of course, is determined primarily by the
activity being measured. For example, it is far more difficult to measure the performance of
highway maintenance worker than to measure the performance of a student enrolled in a college
level management course.

c) Comparing Measured Performance to Stated Standards

When managers have taken a measure of organizational performance, their next step in
controlling is to compare this measure against some standard. A standard is the level of activity
established to serve as a model for evaluating organizational performance. The performance
evaluated can be for the organization as a whole or for some individuals working within the
organization. In essence, standards are the yardsticks that determine whether organizational
performance is adequate or inadequate.

d) Taking Corrective Actions

After actual performance has been measured compared with established performance standards,
the next step in the controlling process is to take corrective action, if necessary. Corrective action
is managerial activity aimed at bringing organizational performance up to the level of

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performance standards. In other words, corrective action focuses on correcting organizational

mistakes that hinder organizational performance. Before taking any corrective action, however,
managers should make sure that the standards they are using were properly established and that
their measurements of organizational performance are valid and reliable.
At first glance, it seems a fairly simple proposition that managers should take corrective action
to eliminate problems - the factors within an organization that are barriers to organizational goal
attainment. In practice, however, it is often difficult to pinpoint the problem causing some
undesirable organizational effect.

BARRIERS FOR CONTROLLING

There are many barriers, among the most important of them:

 Control activities can create an undesirable overemphasis on short-term production as

opposed to long- term production.

 Control activities can increase employees' frustration with their jobs and thereby reduce
morale. This reaction tends to occur primarily where management exerts too much
control.

 Control activities can encourage the falsification of reports.

 Control activities can cause the perspectives of organization members to be too narrow
for the good of the organization.

 Control activities can be perceived as the goals of the control process rather than the
means by which corrective action is taken.

REQUIREMENTS FOR EFFECTIVE CONTROL

The requirements for effective control are

a) Control should be tailored to plans and positions

This means that, all control techniques and systems should reflect the plans they are designed to
follow. This is because every plan and every kind and phase of an operation has its unique
characteristics.

b) Control must be tailored to individual managers and their responsibilities

This means that controls must be tailored to the personality of individual managers. This
because control systems and information are intended to help individual managers carry out their
function of control. If they are not of a type that a manager can or will understand, they will not
be useful.

c) Control should point up exceptions as critical points

This is because by concentration on exceptions from planned performance, controls based on the
time honored exception principle allow managers to detect those places where their attention is

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required and should be given. However, it is not enough to look at exceptions, because some
deviations from standards have little meaning and others have a great deal of significance.

d) Control should be objective

This is because when controls are subjective, a manager’s personality may influence judgments
of performance inaccuracy. Objective standards can be quantitative such as costs or man hours
per unit or date of job completion. They can also be qualitative in the case of training programs
that have specific characteristics or are designed to accomplish a specific kind of upgrading of
the quality of personnel.

e) Control should be flexible

This means that controls should remain workable in the case of changed plans, unforeseen
circumstances, or outsight failures. Much flexibility in control can be provided by having
alternative plans for various probable situations.

f) Control should be economical

This means that control must worth their cost. Although this requirement is simple, its practice
is often complex. This is because a manager may find it difficult to know what a particular
system is worth, or to know what it costs.

g) Control should lead to corrective actions

This is because a control system will be of little benefit if it does not lead to corrective action,
control is justified only if the indicated or experienced deviations from plans are corrected
through appropriate planning, organizing, directing, and leading.

2. BUDGETARY AND NON BUDGETARY

CONTROL TECHNIQUES

TYPES OF CONTROL SYSTEMS

The control systems can be classified into three types namely feed forward, concurrent and
feedback control systems.

SALIENT FEATURES

Objectives: Determining the objectives to be achieved, over the budget period, and
the policy(ies) that might be adopted for the achievement of these ends.

Activities: Determining the variety of activities that should be undertaken for achievement of the
objectives.

Plans: Drawing up a plan or a scheme of operation in respect of each class of activity,

in physical a well as monetary terms for the full budget period and its parts.

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Performance Evaluation: Laying out a system of comparison of actual performance by

each person section or department with the relevant budget and determination of causes for the
discrepancies, if any.

Control Action: Ensuring that when the plans are not achieved, corrective actions are taken; and
when corrective actions are not possible, ensuring that the plans are revised and objective
achieved

CLASSIFICATION OF BUDGETS

Budgets may be classified on the following bases –

BASED ON TIME PERIOD:

Long Term Budget

Budgets which are prepared for periods longer than a year are called Long Term
Budgets. Such Budgets are helpful in business forecasting and forward planning. Eg:
Capital Expenditure Budget and R&D Budget.

Short Term Budget

Budgets which are prepared for periods less than a year are known as Short Term
Budgets. Such Budgets are prepared in cases where a specific action has to be
immediately taken to bring any variation under control.
Eg: Cash Budget.

BASED ON CONDITION:

Basic Budget

A Budget, which remains unaltered over a long period of time, is called Basic
Budget.

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Current Budget

A Budget, which is established for use over a short period of time and is related to the
current conditions, is called Current Budget.

BASED ON CAPACITY:

Fixed Budget

It is a Budget designed to remain unchanged irrespective of the level of activity

actually attained. It operates on one level of activity and less than one set of
conditions. It assumes that there will be no change in the prevailing conditions, which
is unrealistic.

Flexible Budget

It is a Budget, which by recognizing the difference between fixed, semi variable and
variable costs is designed to change in relation to level of activity attained. It consists
of various budgets for different levels of activity.

BASED ON COVERAGE:

Functional Budget

Budgets, which relate to the individual functions in an organization, are known as

Functional Budgets, e.g. purchase Budget, Sales Budget, Production Budget, plant
Utilization Budget and Cash Budget.

Master Budget

It is a consolidated summary of the various functional budgets. It serves as the basis

upon which budgeted Profit & Loss Account and forecasted Balance Sheet are built
up.

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Feed forward controls:

They are preventive controls that try to anticipate problems and take corrective action before
they occur. Example – a team leader checks the quality, completeness and reliability of their
tools prior to going to the site.

Concurrent controls:
They (sometimes called screening controls) occur while an activity is taking place. Example –
the team leader checks the quality or performance of his members while performing.

Feedback controls:
They measure activities that have already been completed. Thus corrections can take place after
performance is over. Example – feedback from facilities engineers regarding the completed job.

BUDGETARY CONTROL TECHNIQUES

The various types of budgets are as follows

i) Revenue and Expense Budgets

The most common budgets spell out plans for revenues and operating expenses in rupee terms.
The most basic of revenue budget is the sales budget which is a formal and detailed expression
of the sales forecast. The revenue from sales of products or services furnishes the principal
income to pay operating expenses and yield profits. Expense budgets may deal with individual
items of expense, such as travel, data processing, entertainment, advertising, telephone, and
insurance.

ii) Time, Space, Material, and Product Budgets

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Many budgets are better expressed in quantities rather than in monetary terms. e.g. direct-labor-
hours, machine-hours, units of materials, square feet allocated, and units produced. The Rupee
cost would not accurately measure the resources used or the results intended.

iii) Capital Expenditure Budgets

Capital expenditure budgets outline specifically capital expenditures for plant, machinery,
equipment, inventories, and other items. These budgets require care because they give definite
form to plans for spending the funds of an enterprise. Since a business takes a long time to
recover its investment in plant and equipment, (Payback period or gestation period) capital
expenditure budgets should usually be tied in with fairly long-range planning.

iv) Cash Budgets

The cash budget is simply a forecast of cash receipts and disbursements against which
actual cash "experience" is measured. The availability of cash to meet obligations as they fall due
is the first requirement of existence, and handsome business profits do little good when tied up in
inventory, machinery, or other noncash assets.

v) Variable Budget

The variable budget is based on an analysis of expense items to determine how individual costs
should vary with volume of output.

Some costs do not vary with volume, particularly in so short a period as 1 month, 6 months, or a
year. Among these are depreciation, property taxes and insurance, maintenance of plant and
equipment, and costs of keeping a minimum staff of supervisory and other key personnel. Costs
that vary with volume of output range from those that are completely variable to those that are
only slightly variable.

The task of variable budgeting involves selecting some unit of measure that reflects volume;
inspecting the various categories of costs (usually by reference to the chart of accounts); and, by
statistical studies, methods of engineering analyses, and other means, determining how these
costs should vary with volume of output.

vi) Zero Based Budget

The idea behind this technique is to divide enterprise programs into "packages" composed of
goals, activities, and needed resources and then to calculate costs for each package from the
ground up. By starting the budget of each package from base zero, budgeters calculate costs
afresh for each budget period; thus they avoid the common tendency in budgeting of looking
only at changes from a previous period.

Advantages

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There are a number of advantages of budgetary control:

 Compels management to think about the future, which is probably the most important
feature of a budgetary planning and control system. Forces management to look ahead, to
set out detailed plans for achieving the targets for each department, operation and
(ideally) each manager, to anticipate and give the organization purpose and direction.

 Promotes coordination and communication.

 Clearly defines areas of responsibility. Requires managers of budget centre’s to be made

responsible for the achievement of budget targets for the operations under their personal
control.

 Provides a basis for performance appraisal (variance analysis). A budget is basically a

yardstick against which actual performance is measured and assessed. Control is provided
by comparisons of actual results against budget plan. Departures from budget can then be
investigated and the reasons for the differences can be divided into controllable and non-
controllable factors.

 Enables remedial action to be taken as variances emerge.

 Motivates employees by participating in the setting of budgets.

 Improves the allocation of scarce resources.

 Economies management time by using the management by exception principle.

Problems in budgeting

Whilst budgets may be an essential part of any marketing activity they do have a number of
disadvantages, particularly in perception terms.
Budgets can be seen as pressure devices imposed by management, thus resulting in:
 bad labor relations
 inaccurate record-keeping
Departmental conflict arises due to:
 disputes over resource allocation
 departments blaming each other if targets are not attained

It is difficult to reconcile personal/individual and corporate goals.

Waste may arise as managers adopt the view, "we had better spend it or we will lose it". This is
often coupled with "empire building" in order to enhance the prestige of a department.

Responsibility versus controlling, i.e. some costs are under the influence of more than one
person, e.g. power costs.

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Managers may overestimate costs so that they will not be blamed in the future should they
overspend.

NON-BUDGETARY CONTROL TECHNIQUES

There are, of course, many traditional control devices not connected with budgets, although some
may be related to, and used with, budgetary controls. Among the most important of these are:
statistical data, special reports and analysis, analysis of break- even points, the operational audit,
and the personal observation.

i) Statistical data

Statistical analyses of innumerable aspects of a business operation and the clear presentation of
statistical data, whether of a historical or forecast nature are, of course, important to control.
Some managers can readily interpret tabular statistical data, but most managers prefer
presentation of the data on charts.

ii) Break- even point analysis

An interesting control device is the break even chart. This chart depicts the relationship of sales
and expenses in such a way as to show at what volume revenues exactly cover expenses.

iii) Operational audit

Another effective tool of managerial control is the internal audit or, as it is now coming to be
called, the operational audit. Operational auditing, in its broadest sense, is the regular and
independent appraisal, by a staff of internal auditors, of the accounting, financial, and other
operations of a business.

iv) Personal observation

In any preoccupation with the devices of managerial control, one should never overlook the
importance of control through personal observation.

v) PERT

The Program (or Project) Evaluation and Review Technique, commonly abbreviated PERT, is a
is a method to analyze the involved tasks in completing a given project, especially the time
needed to complete each task, and identifying the minimum time needed to complete the total
project.
vi) GANTT Chart

A Gantt chart is a type of bar chart that illustrates a project schedule. Gantt charts illustrate the
start and finish dates of the terminal elements and summary elements of a project. Terminal
elements and summary elements comprise the work breakdown structure of the project. Some
Gantt charts also show the dependency (i.e., precedence network) relationships between
activities.

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3. USE OF COMPUTERS AND IT IN

MANAGEMENT CONTROL

Definition:
MIS can be defined as ― A system of obtaining, abstracting, storing and analyzing data to
produce effective information or use in planning, controlling and decision making process.

Characteristics of Good Management Information System :

• Information must be clear and conciseness.
• The information should be relevant the business organization. Unnecessary
information should be avoided.
• MIS must be simple and easy to understand.
• It must help in the process of decision making and corrective actions.
• MIS should help in solving the complicated problems effectively.

Need of MIS:

1. Internal factors

• Resources: This involves the analysis of available resources in the organization

like money, material, machines and etc.
•Planning and control information: To get required information about
budgets, sales forecasts etc.
• Operational information: The technique evaluates the overall operations of the
business.
• Production function: It is required to increase the production, Product quality
and to reduce wastages etc.
 Marking function: To obtain required information for plan sales forecast, advertising budget
consumer satisfaction, sales value competitors etc.

2. External Information Needs

•Political and Government: This involves information about political fiscal

policies, government policies, procedures, rules and regulations.
•Economic condition: To get required information such as money value, GNP,
Inflation rate interest rate etc.
•Technology: To get information‘s about new advanced machinery, new process
etc.

MIS resources:
It consists of five major resources.

Computer hardware:
It refers to computer system and other associated equipment including the communication link.
Computer, monitors, disk, printers, optical scanners.

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Software :
Programs: Operating system programs, word processing programs and procedures.
Data : It is in the form of symbols, digits, alphabets, graph, pictures etc.
People:
Specialists system analysts programmers and computer operator.

IMPLEMENTATION OF MIS

Management information system is implemented through the following steps.

 Input data
 Information’s stores and retrieval
 Analysis
 Output
 Decision making
 Actions

Input data:
The necessary data can be collected. The object is the development of better Information system
for management.
Information stored and retrieval:
The necessary data can be stored and utilized and when required. The information can be
indexed and classified for quick accessibility of the management.
Analysis:
To utilize the data effectively it is necessary to analyze them. To analyze the problem and
develop alternatives and select the best one.
Output:
Output is in the form of reports, charts ,tables, graph etc.
Decision making:
The output information is used to decision making process.
Action:
After decision is taken, it is converted in to action.

Applications of MIS:

• To provide long term plans

• To find out new opportunities
• To allocate resources
• To provide planning and control
• To provide sales forecasting
• To help management decision about quality, quantity and market price etc
• To provide government policy and regulation
• To provide effective managerial activities

Important Devices for Information System:

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i) Speech Recognition devices

Instead of keyboard input data in to the computer is through speech by normal manner. It can be
used several companies for several uses. Clear communication is also possible some
disadvantage also in this system. Similar sound words like ‗to‘ ‗too‘ and ‗two‘ are complex
problems.

ii) Network
It is one of the most important technologies. Computer is connected by internet and other
communications network. The network serves as share processing, software and database.
Computer networks enable and uses and work groups to communicate and collaborate
electronically and share the use of hardware, software and data resources. The networks have
become the primary information technology that supports the business operations of many
organizations.
Importance of MIS or Role of MIS:
S. No. Major Subsystem Application
1 Marketing Sales planning, Sales Analysis, Sales forecasting
2 Manufacturing Production planning, cost control analysis
3 Logistics Planning and control
4 Finance and Accounting Cost analysis, planning, income measurement.
5 Top Management Strategic planning, policy, resource allocation

Management and MIS:

MIS supports management activity. Information system provides information to managers of
three levels of responsibilities. MIS helps to guide managers to carry out their planning,
organizing, directing, controlling and coordinating the function effectively.
i) Operational control
Operational control provides detailed information and accurate on a daily or weekly basis. A
market manager must know of past and present sales record, consumer‘s behavior, advertising
budget. The MIS must provide him timely and detailed information obtained from daily
operations.
ii) Middle management
Middle levels managers such as department‘s heads are concerned with the current and future
performance. For example information about marketing level problems with customer‘s
reduction in sales, quality of product are needed by middle managers. They required information
from within and outside organization.
iii) Top level-strategic planning
Top management the MIS must provide information to top management for strategic planning
and control. They need the following external source of information.
� Economic condition
� Technological condition
� Government policy
� Actions of Competitors Company
They need the following internal sources of information.
- Sales volume
- Financial analysis

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- Human resources
- Product quality, customer’s satisfaction
MIS should provide information to the managers accurately and correct time.
So MIS should be designed in suitable way depending upon the organization. The top managers
receive overall financial analysis and summarized of department performance.

Decision Support System:

Decision support systems which support the process of making decisions. It is also
operated by people who are not computer specialists who use the DSS to help them
plan and make decisions. The process of development of decision support system is depended by
the end user. DSS helps the managers to solve non-routine problems in the organization.

Role of MIS play at various levels of management:

 Trends in Information Systems

 Expanding roles of IS in business and management
 The expanding participation of end users and managers in Information Systems
 Data Processing: (1950-1960)
 Electronic data processing systems: Transaction processing, record keeping, and
traditional accounting applications
 Management Reporting: 1960-1970s
 Management information system: Management reports of pre-specified
information to support decision making
 Decision support: 1970s 1980s
 Decision support systems: Interactive ad hoc support of the managerial
decision making
 Strategic and End User support: 1980s-1990s
 End user computing systems: Direct computing support for end user
productivity and work group collaboration
 Executive information systems: Critical information for top management
 Expert systems: Knowledge based expert advice for end use
 Strategic information system: Strategic products and services for competitive advent
 Electronic Business and Commerce: 1990
 Internetworked E-business and E-commerce systems: Internetworked enterprise and
global E-business operations and electronic commerce on the internet, intranets,
extranets, and other networks.

4. PRODUCTIVITY

Productivity refers to the ratio between the outputs from production processes to its input.
Productivity may be conceived of as a measure of the technical or engineering efficiency of
production. As such quantitative measures of input and sometimes outputs are emphasized.

Typical Productivity Calculations

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Measures of size and resources may be combined in many different ways. The three common
approaches to defining productivity based on the model are referred to as physical, functional,
and economic productivity. Regardless of the approach selected, adjustments may be needed for
the factors of diseconomy of scale, reuse, requirements churn, and quality at delivery.

a) Physical Productivity

This is a ratio of the amount of product to the resources consumed (usually effort). Product may
be measured in lines of code, classes, screens, or any other unit of product. Typically, effort is
measured in terms of staff hours, days, or months. The physical size also may be used to estimate
software performance factors (e.g., memory utilization as a function of lines of code).

b) Functional Productivity

This is a ratio of the amount of the functionality delivered to the resources consumed (usually
effort). Functionality may be measured in terms of use cases, requirements, features, or function
points (as appropriate to the nature of the software and the development method). Typically,
effort is measured in terms of staff hours, days, or months. Traditional measures of Function
Points work best with information processing systems. The effort involved in embedded and
scientific software is likely to be underestimated with these measures, although several variations
of Function Points have been developed that attempt to deal with this issue.

c) Economic Productivity

This is a ratio of the value of the product produced to the cost of the resources used to produce it.
Economic productivity helps to evaluate the economic efficiency of an organization. Economic
productivity usually is not used to predict project cost because the outcome can be affected by
many factors outside the control of the project, such as sales volume, inflation, interest rates, and
substitutions in resources or materials, as well as all the other factors that affect physical and
functional measures of productivity. However, understanding economic productivity is essential
to making good decisions about outsourcing and subcontracting.

The basic calculation of economic productivity is as follows:

Economic Productivity = Value/Cost

Factors affecting Productivity:

The following are the factors that affect the productivity:

(i) Technology
Technological factors including the degree of mechanization how raw materials, layout and the
method and techniques of work determine the level of technological development in any
industry. New technology developments and R&D development improve the productivity.
(ii) Human resources
Education of the employee's favors the improvement of the productivity.

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Motivation of the employees improves the efficiency of the productivity.

(iii) Government policy
Government can eliminate unnecessary regulations and make productivity effectively.
(iv) Machinery and Equipment design
Whether design of machinery and equipment is modern and in keeping with the limitations and
capacities of the workers will also determine the production efficiently and level of productivity.
Modern machineries and equipment also increase the productivity.
(v) Skill of the workers
Well trained and experienced employees lead to effective productivity.
(vi) Capital
Increased capital investment results in increased productivity. This capital also increases other
factors such as market share, low cost, high profit.
(vii) Research and development
Research and development play a vital role in determining the productivity. The research
includes the reduction of cost and wastage, new techniques etc. All these factors must help the
concern to increase the productivity.

(viii) Trade unions

Some trade unions create some unnecessary problems in the company and start strike and lock
out the company. It decreases the productivity. Efficient top management executives smoothly
handle the trade unions to carry out the positive effect.
(ix) Raw materials & Production processes
Improved quality of raw materials and increased use of power have a favorable effect on
productivity. Advanced production processes involving the use of Modern integrated and
automatic machinery and semi processed material have been known t o help in raising levels of
productivity.
(x) Plant and job layout
Productivity can be increased through modern tools. A proper maintenance of plant and
equipment increases the productivity. The arrangement of machines and position in the plant is
called job layout. The setup of the work-bench of an individual worked will determine how
economically and efficiently production will be ferried out.
(xi) Land and Buildings
Working environment must be suitable for employees. A poor plant layout and construction will
affect the productivity.
(xii) The size of the plant
The size of the plant and the capacity utilization has direct bearing on productivity. Production
below or above t he optimum level will be uneconomical and will tend towards lower level of
productivity.

Problems in Measurement of Productivity of Knowledge Workers:

Productivity implies measurement, which in turn, is an essential step in the control process.
Although there is a general agreement about the need for improving productivity, there is little
consensus about the fundamental causes of the problem and what to do about them. The blame
has been assigned to various factors. Some people place it on the greater proportion of less
skilled workers with respect to the total labor force, but others disagree. There are those who see

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cutback in research and the emphasis on immediate results as the main culprit. Another reason
given for the productivity dilemma is the growing affluence of people, which makes them less
ambitious. Still others cite the breakdown in family structure, the workers’ attitudes, and
government policies and regulations. Another problem is that the measurement of skills work is
relatively easy, but it becomes more difficult for knowledge work. The difference between the
two kinds is the relative use of knowledge and skills.

ADDITIONAL TOPIC RELATED TO CONTROLLING

PURCHASE CONTROL, MAINTENANCE CONTROL AND QUALITY CONTROL
PURCHASE CONTROL

Purchase control is an element of material control. Material procurement is known as the

purchase function. The functional responsibility of purchasing is that of the purchase manager or
the purchaser. Purchasing is an important function of materials management because in purchase
of materials, a substantial portion of the company's finance is committed which affects cash flow
position of the company. Success of a business is to a large extent influenced by the efficiency of
its purchase organization.
The advantages derived from a good and adequate system of the purchase control are as follows:

Continuous availability of materials:

It ensures the continuous flow of materials. so production work may not be held up for want of
materials. A manufacturer can complete schedule of production in time.

Purchasing of right quantity:

Purchase of right quantity of materials avoids locking up of working capital. It minimizes risk of
surplus and obsolete stores. It means there should not be possibility of overstocking and under
stocking.

Purchasing of right quality:

Purchase of materials of proper quality and specification avoids waste of materials and loss in
production. Effective purchase control prevents wastes and losses of materials right from the
purchase till their consumptions. It enables the management to reduce cost of production.

Economy in purchasing:
The purchasing of materials is a highly specialized function. By purchasing materials at
reasonable prices, the efficient purchaser is able to make a valuable contribution to the success of
a business.

Works as information centre:

It serves as a function centre on the materials knowledge relating to prices, sources of supply,
specifications, mode of delivery, etc. By providing continuous information to the management it
is possible to prepare planning for production.

Development of business relationship:

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R.Dayana,AP/CSE Jeppiaar Institute of Technology

Purchasing of materials from the best market and from reliable suppliers develops business
relationships. The result is that there may be smooth supply of materials in time and so it avoids
disputes and financial losses.

Finding of alternative source of supply:

If a particular supplier fails to supply the materials in time, it is possible to develop alternate
sources of supply. The effect of this is that the production work is not disturbed.

Fixing responsibilities:
Effective purchase control fixes the responsibilities of operating units and individuals connected
with the purchase, storage and handling of materials.

In short, the basic objective of the effective purchase control is to ensure continuity of supply of
requisite quantity of material, to avoid held up of production and loss in production and at the
same time reduces the ultimate cost of the finished products.

MAINTENANCE CONTROL

Maintenance department has to exercise effective cost control, to carry out the maintenance
functions in a pre-specified budget, which is possible only through the following measures:

First line supervisors must be apprised of the cost information of the various materials so that the
objective of the management can be met without extra expenditure on maintenance functions

A monthly review of the budget provisions and expenditures actually incurred in respect of each
center/shop will provide guidelines to the departmental head to exercise better cost control.

The total expenditure to be incurred can be uniformly spread over the year for better budgetary
control. However, the same may not be true in all cases particularly where overhauling of
equipment has to be carried out due to unforeseen breakdowns. Some budgetary provisions must
be set aside, to meet out unforeseen exigencies.

The controllable elements of cost such as manpower cost and material cost can be discussed with
the concerned personnel, which may help in reducing the total cost of maintenance. Emphasis
should be given to reduce the overhead expenditures, as other expenditures cannot be
compromised.

It is observed through studies that the manpower cost is normally fixed, but the same way
increase due to overtime cost. However, the material cost, which is the prime factor in
maintenance cost, can be reduced by timely inspections designed, to detect failures. If the
inspection is carried out as per schedule, the total failure of parts may be avoided, which
otherwise would increase the maintenance cost. The proper handling of the equipment by the
operators also reduces the frequency of repair and material requirements. Operators, who check
their equipment regularly and use it within the operating limits, can help avoid many unwanted
repairs. In the same way a good record of equipment failures/ maintenance would indicate the
nature of failures, which can then be corrected even permanently.

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R.Dayana,AP/CSE Jeppiaar Institute of Technology

QUALITY CONTROL

Quality control refers to the technical process that gathers, examines, analyze & report the
progress of the project & conformance with the performance requirements.

The steps involved in quality control process are

 Determine what parameter is to be controlled.

 Establish its criticality and whether you need to control before, during or after results are
produced.

 Establish a specification for the parameter to be controlled which provides limits of

acceptability and units of measure.

 Produce plans for control which specify the means by which the characteristics will be
achieved and variation detected and removed.

 Organize resources to implement the plans for quality control.

 Install a sensor at an appropriate point in the process to sense variance from specification.

 Collect and transmit data to a place for analysis.

 Verify the results and diagnose the cause of variance.

 Propose remedies and decide on the action needed to restore the status quo.

 Take the agreed action and check that the variance has been corrected.

Advantages and disadvantages

Advantages include better products and services ultimately establishing a good reputation for a
company and higher revenue from having more satisfied customers.
Disadvantages include needing more man power/operations to maintain quality control and
adding more time to the initial process.

5. Productivity problems and management , Control and performance

Productivity implies measurement, which in turn, is an essential step in the control process.
Although there is a general agreement about the need for improving productivity, there is little
consensus about the fundamental causes of the problem and what to do about them. The blame has
been assigned to various factors. Some people place it on the greater proportion of less skilled workers
with respect to the total labor force, but others disagree. There are those who see cutback in research

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R.Dayana,AP/CSE Jeppiaar Institute of Technology

and the emphasis on immediate results as the main culprit. Another reason given for the
productivity dilemma is the growing affluence of people, which makes them less ambitious. Still others
cite the breakdown in family structure, the workers’ attitudes, and government policies and
regulations. Another problem is that the measurement of skills work is relatively easy, but it
becomes more difficult for knowledge work. The difference between the two kinds is the relative use of
knowledge and skills.

Cost control is the measure taken by management to assure that the cost objectives set
down in the planning stage are attained and to assure that all segments of the organization
function in a manner consistent with its policies.

Steps involved in designing process of cost control system:

1) Establishing norms: To exercise cost control it is essential to establish norms, targets
or parameters which may serve as yardsticks to achieve the ultimate objective. These
standards, norms or targets may be set on the basis of research, study or past actual.
2) Appraisal: The actual results are compared with the set norms to ascertain the degree of
utilization of men, machines and materials. The deviations are analyzed so as to arrive at
the causes which are controllable and uncontrollable.
3) Corrective measures: The variances are reviewed and remedial measures or revision
of targets, norms, standards etc., as required are taken.

Advantages of cost control

1) Better utilization of resources

1) To prepare for meeting a future competitive position.
2) Reasonable price for the customers
3) Improved methods of production and use of latest manufacturing techniques
which have the effect of rising productivity and minimizing cost.By a
continuous search for improvement creates proper climate for the increase
efficiency.
4) Improves the image of company for long-term benefits.
5) Improve the rate of return on investment.

PurchaseControl
Purchase control is an element of material control. Material procurement is known as
the purchase function. The functional responsibility of purchasing is that of the
purchase manager or the purchaser. Purchasing is an important function of materials
management because in purchase of materials, a substantial portion of the company's
finance is committed which affects cash flow position of the company. Success of a
business is to a large extent influenced by the efficiency of its purchase organization.
The advantages derived from a good and adequate system of the purchase control are
as follows:
Continuous availability of materials: It ensures the continuous flow of materials. So
production work may not be held up for want of materials. A manufacturer can complete
schedule of production in time.
Purchasing of right quantity: Purchase of right quantity of materials avoids locking up

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oworking capital. It minimizes risk of surplus and obsolete stores. It means there should not be
possibility of overstocking and understocking.
Purchasing of right quality: Purchase of materials of proper quality and specification avoids
waste of materials and loss in production. Effective purchase control prevents wastes and
losses of materials right from the purchase till their consumptions. It enables the management to
reduce cost of production.

Economy in purchasing: The purchasing of materials is a highly specialized function. By

purchasing materials at reasonable prices, the efficient purchaser is able to make a valuable
contribution to the success of a business.
Works as information centre: It serves as a function centre on the materials knowledge relating
to prices, sources of supply, specifications, mode of delivery, etc. By providing continuous
information to the management it is possible to prepare planning for production
Development of business relationship: Purchasing of materials from the best market and from
reliable suppliers develops business relationships. The result is that there may be smooth supply
of materials in time and so it avoid disputes and financial losses
) Finding of alternative source of supply: If a particular supplier fails to supply the materials
in time, it is possible to develop alternate sources of supply. the effect of this is that the
production work is not disturbed.
Fixing responsibilities: Effective purchase control fix the responsibilities of operating units and
individuals connected with the purchase, storage and handling of materials
In short, the basic objective of the effective purchase control is to ensure continuity of supply
of requisite quantity of material, to avoid held up of production and loss in production and at
the same time reduces the ultimate cost of the finished products.

MaintenanceControl

Maintenance department has to excercise effective cost control, to carry out the maintenance
functions in a pre-specified budget, which is possible only through the following measures:
First line supervisors must be apprised of the cost information of the various materials so that
the objective of the management can be met without extra expenditure on maintenance functions
A monthly review of the budget provisions and expenditures actually incurred in respect of each
center/shop will provide guidlines to the departmental head to exercise better cost control.
The total expenditure to be incurred can be uniformly spread over the year for better budgetary control.
however, the same may not be true in all cases particularly where overhauling of equipment has to be
carried out due to unforseen breakdowns. some budgetary provisions must be set aside, to meet out
unforeseen exigencies.
The controllable elements of cost such as manpower cost and material cost can be discussed with
the concerned personnel, which may help in reducing the total cost of
maintenance.
Emphasis should be given to reduce the overhead expenditures, as other expenditures
cannot be compromised
It is observed through studies that the manpower cost is normally fixed, but the same
way increase due to overtime cost. however, the material cost, which is the prime factor
in maintenance cost, can be reduced by timely inspections designed, to detect failures. If
the inspection is carried out as per schedule, the total failure of parts may be avoided,

2021-2022 Department of CSE

R.Dayana,AP/CSE Jeppiaar Institute of Technology

which otherwise would increase the maintenance cost. the proper handling of the
equipment by the operators also reduces the frequency of repair and material
requirements. Operators, who check their equipment regularly and use it within the
operating limits, can help avoid many unwanted repairs. In the same way a good record
of equipment failures/ maintenance would indicate the nature of failures, which can then
be corrected even permanently.

QualityControl

Quality control refers to the technical process that gathers, examines, analyze & report the
progress of the project & conformance with the performance requirements

The steps involved in quality control process are

1) Determine what parameter is to be controlled.

2) Establish its criticality and whether you need to control before, during or after
results are produced.
3) Establish a specification for the parameter to be controlled which provides limits
of acceptability and units of measure.
4) Produce plans for control which specify the means by which the characteristics
will be achieved and variation detected and removed.
5) Organize resources to implement the plans for quality control.
6) Install a sensor at an appropriate point in the process to sense variance from
specification.
7) Collect and transmit data to a place for analysis.
8) Verify the results and diagnose the cause of variance.
9) Propose remedies and decide on the action needed to restore the status quo.
10) Take the agreed action and check that the variance has been corrected.
Advantages and disadvantages
 Advantages include better products and services ultimately establishing a good
reputation for a company and higher revenue from having more satisfied customers.
 Disadvantages include needing more man power/operations to maintain quality control
and adding more time to the initial process.

6. Direct and preventive control-Reporting

In this organization some employee's performance is poor. To find out the

employees and then correct their performance and achieve the organization goals. This is called
direct control.
Factors influencing the direct control:
The following factors influence the direct control.
 Uncertainty
 Lack of knowledge experience
 Lack of communication
 Lack of coordination.

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Effective steps for direct control

 Success of direct control in an organization depends upon the following factors.
 Performance can be measured
 Effectively utilizes time
 Errors can be discovered in time
 ParticipationW.VIDYARTIPLUS.COM
 Coordination.
Preventive control
An efficient manager applies the skills in managerial philosophy to eliminate
undesirable activities which are the reasons for poor management. This is called
preventive control.
Effective steps for preventive control,
 Qualified managers
 Management principles to measure performance
 Evaluation
Advantages:
 It is better than direct control.
 This control is fast and quick.
 It gives greater accuracy.
 Prevention is better than cure.
This reduces wastage of cost

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CHAPTER 7
UNDERSTANDING GROUPS AND
MANAGING WORK TEAMS
 What is a Group?
• Group – two or more interacting and
interdependent individuals who come
together to achieve specific goals.
• Formal groups – work groups that are defines
by the organization’s structure and have
designated work assignments and specific
tasks directed at accomplishing organizational
goals.
• Informal groups – social groups.
 Stages of Group Development
• Forming stage
– 1st phase – people join the group.
– 2nd phase – once joined, they start defining
group’s purpose, structure, and leadership. Trial
and error to determine what types of behavior are
acceptable.
• Storming Stage
– Conflict over who will control the group and what
the group needs to be doing. Once complete,
hierarchy of leadership and group’s direction set.
Stages of Group Development (cont…)
• Norming Stage
– Close relationships develop and the group become
cohesive. Show strong sense of camaraderie. Once
completed, group structure will be solid and
everyone agrees on acceptable behavior.
• Performing Stage
– Focus on working on the group’s task. Last stage
of development for permanent work groups.
Stages of Group Development (cont…)
• Adjourning Stage
– Final stage for temporary groups.
– The group prepares to disband.
– Attention is focused on wrapping up activities
instead of task performance.
– Member’s reaction different; some are thrilled
with the accomplishment, but some are sad over
loss of friendships.
 Basic Foundation for Understanding
Group Behavior
• Roles
• Norms and Conformity
• Status System
• Group Size
• Group Cohesiveness
 What are Roles?
• Role – refers to behavior patterns expected of
someone who occupies a give position in a
social unit.
• Individuals play multiple roles, adjusting their
roles to the group to which they belong at the
time.
• Eg: at home as a father, son, son-in-law; at
office as an employee, supervisor, mentor.
 Norms and Conformity
• Norms – standards or expectations that are
accepted and shared by a group’s members.
• Eg: formal dress code. It is acceptable for
corporate to wear casual dress. So if someone
come to work dressed casually, they will be
teased and pressured until their dress
conforms to the group’s standard.
 Status System
• Status – prestige grading, position, or rank
within a group.
• Significant motivator that has behavioral
consequences when individuals see a disparity
between what they perceive their status to be
and what others perceive it to be.
• Eg: higher income vs. lower income, CEO vs.
employee, popular vs. nerd
 Group Size
• Fact – Small groups complete tasks faster than
larger ones.
• Fact – Larger groups consistently get better
marks than smaller groups in problem solving.
• Fact – The larger the groups, the less
contribution made by individual members.
– Because the dispersion of responsibility
encourages individuals to slack off.
 Group Cohesiveness
• Group Cohesiveness – the degree to which
members are attracted to one another and
share the group’s goals.
Work Teams vs. Work Groups
 Work Teams
• Groups whose members work intensely on
specific, common goals using their positive
synergy, individual and mutual accountability,
and complementary skills.
 Types of Work Teams
• Problem-solving Teams
– Teams from the same department or functional
area involved in efforts to improve work activities
or to solve specific problems.
– Members share ideas or offer suggestions on how
work processes and methods can be improved.
– But rarely get authority to implement their
suggestions.
 Types of Work Teams (cont…)
• Self-managed work team
– Group of employees who operate without a
manager and are responsible for getting the work
done and for managing themselves.
– Includes planning and scheduling of work,
assigning tasks to members, collective control
over the pace of work, making operating
decisions, and taking action on problems.
– Eg: Xerox, PepsiCo and Hewlett-Packard.
 Types of Work Teams (cont…)
• Cross-Functional Teams
– Work team composed of individuals from various
specialties.
– For example, Health care. In ICU teams composed
of doctor trained in intensive care medicine, a
pharmacist, a social worker, a nutritionist, chief
ICU nurse, a respiratory therapist, and a chaplain
meet daily with every patient’s bedside nurse to
discuss and debate the best course of treatment.
 Types of Work Teams (cont…)
• Virtual Team
– Uses technology to link physically dispersed
members in order to achieve a common goal.
– Members collaborate online with tools such as
wide area networks, videoconferencing, fax, e-
mail, or web sites where the team can hold online
conferences.
– Still can share information, make decisions, and
complete tasks BUT lack in face to face
communication.
 Team Effectiveness
Context Composition
• Adequate resources • Ability of members
• Leadership and structure • Personality
• Climate of trust • Allocating Roles
• Performance evaluation and reward • Diversity
systems • Size of Members
• Members flexibility and preferences

Work Design Process

• Autonomy • Common purpose
• Skill Variety • Specific goals
• Task Identity • Team efficacy
• Task Significant • Conflict levels
• Social loafing
 Context
• Adequate Resources
– Include timely information, proper equipment,
encouragement, adequate staffing, and administrative
assistance.
• Team Leadership and Structure
– Agreeing on the specifics if work and how all the team
member’s individual skill fit together.
• Trust
– Facilitates cooperation, reduces the need to monitor each
other’s behavior, and bonds members.
• Performance evaluation and Reward System
– Managers should consider group based appraisals, profit-
sharing, and others.
 Composition
• Team member ability
– Need people with technical expertise, problem
solving and decision making skills, and
interpersonal skills.
• Personality
– People with high conscientiousness, openness to
experience and agreeableness are more effective.
Composition (cont…)
 Composition (cont…)
• Diversity
– Diverse teams perform better.
• Size
– The most effective teams have five to nine
members.
• Preferences
– Some people prefer not to work on teams. If
forced, it creates direct threat to the team’s
morale and to individual member satisfaction.
 Work Design
• Important work design elements include
autonomy, using a variety of skills, being able
to complete a whole and identifiable task or
product, and working on a task or project that
has a significant impact on others.
 Team Processes
• Common plan and purpose
– Provides direction, momentum and commitment.
• Specific Goals
– Facilitate clear communication and help teams maintain their focus
on getting results.
• Team efficacy
– When teams believe in themselves and believe they can succeed.
• Managed conflict
– It can be beneficial because they may stimulate discussion, promote
critical assessment of problems and options, and lead better team
decisions.
• Minimal social loafing
– Successful teams make members individually and jointly
accountable for team’s purpose, goals, and approach.
Contemporary Issues in Managing
Teams
 Contemporary Issues in Managing
Teams (cont…)
• Team composition factors affect on managing
global team
– Unique cultural characteristics represented by
members of a global team.
– Need to recognize team member’s abilities, skills,
knowledge, and personality.
– Managers need to be familiar with and clearly
understand the cultural characteristics of the
groups and the group members they manage.
 Contemporary Issues in Managing
Teams (cont…)
• Team structure affect on managing global
team
– Conformity to social norms tends to be higher in
collective cultures but less of a problem because
members are less likely to pressured to ideas,
conclusions, and decisions.
– Managers need to understand who and what
holds status when interacting with people from
different culture.
Contemporary Issues in Managing
Teams (cont…)
– Social loafing is consistent with individualistic
cultures like US and Canada which are dominated
with self-interest.
– Cohesiveness is difficult to achieve because of
higher levels of mistrust, miscommunication, and
stress.
 Contemporary Issues in Managing
Teams (cont…)
• Team processes affect on managing global
team
– Communication problems that lead to
inaccuracies, misunderstandings, and
inefficiencies.
– If it’s virtual teams, conflict can happen with how
information is used by the team.
 Management of Innovations Notes
GATEWAY SCHOOL OF BUSINESS

Gateway School of
Business
MANAGEMENT OF
INNOVATIONS

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UNIT-1

INNOVATIONS

CONCEPT OF INNOVATION

Innovation can be simply defined as a "new idea, creative thoughts, and new imaginations
in form of device or method". However, innovation is often also viewed as the application of
better solutions that meet new requirements, silent needs, or existing market needs. Such
innovation takes place through the provision of more-
effective products, processes, services, technologies, or business models that are made
available to markets, governments and society. The term "innovation" can be defined as
something original and more effective that "breaks into" the market or society. Innovation is
related to, but not the same as, invention, as innovation is more apt to involve the practical
implementation of an invention (i.e. new/improved ability) to make a meaningful impact in
the market or society. All organizations can innovate, including hospitals, universities, and
local governments. Innovation processes usually involve: identifying customer needs, macro
and micro trends, developing competences, and finding financial support for new inventions
and at last practically applying those inventions for better solutions.

Innovation is:

 New stuff
 That adds value
 For various stakeholders
 Can be monetized
 Creates a competitive advantage
 And is sustainable
 Until the advantage deteriorate

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Innovation is the process of turning opportunity into new ideas and of putting these into
widely used practice. It is the management of the entire activities involved in the process of
idea generation, technology development, manufacturing and marketing of a new (or
improved) product. The process of translating an idea or invention into a good or service that
creates value or for which customers will pay. In business, innovation often results when ideas
are applied by the company in order to further satisfy the needs and expectations of the
customers.

For example, Godin (2008) defines 12 concepts of innovation which can be described as
follows: A: innovation as process of doing of something new

 innovation as imitation;
 innovation as invention;
 innovation as discovery;

B: innovation as human abilities to creative activity:

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 innovation as imagination;
 innovation as ingenuity;
 innovation as creativity;

C: innovation as change in all spheres of life:

 innovation as cultural change;

 innovation as social change;
 innovation as organizational change; political change; technological change;

D: innovation as commercialization of new product

IMPORTANCE OF INNOVATION

 Solving problems: Most ideas are actually derived from attempts to solve existing problems.
As such, when you encourage innovation, you are opening doors for solutions to problems both
within and outside your company. If your business provides services, you might realize that
your customer do not have an avenue to share their opinions, complaints, and compliments.
The only avenue available could be the physical office. So, to solve the problem, you could
decide to operate a virtual office where customers’ needs can be attended to within a short time.
The customers will be happy and as a result, your sales will go higher.

 Adapting to change: This is especially evident in the technological world where there are
rapid changes defining the business. Change is inevitable and innovation is the method to not
only keep your business afloat, but also ensure that it remains relevant and profitable. With
the rise in mobile phones, traditional telephone had to find ways to remain relevant. Same case
with your business, when you develop an innovation culture, you remain relevant at all times.

 Maximizing on globalization: With markets all over the world becoming more interlinked,
greater opportunities are emerging in these new markets and with that, new needs and
challenges. For instance, China and India are estimated to be the leading markets, and Africa
is predicted to be the next “hot spot”. Therefore, if your company hopes to tap into this market
share, innovation is a must to enable you to capitalize on the opportunities opening up.

 Facing up the competition: The corporate world is always very competitive, and with many
new companies coming up, the top position in the industry is no longer a reserve of a few. To
retain or establish your company’s cutting edge, you can compete strategically by having a

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dynamic business that is able to make strategic and innovative moves and thus cut above the
rest.

 Evolving workplace dynamics: The demographics in the work place are constantly changing.
With the new generation that has entered the market place; new trends are also coming up.
Innovation is therefore critical to ensure the smooth running of the company.

 Customers’ changing tastes and preferences: The current customer has a great variety of
products and services available to him and is well informed of his choices than before. The
company must therefore keep itself abreast with these evolving tastes and also forge new ways
of satisfying the customer.

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BASIS FOR
INVENTION INNOVATION
COMPARISON

Meaning Invention refers to the occurrence Innovation implies the

of an idea for a product or process implementation of idea for product
that has never been made before. or process for the very first time.

What is it? Creation of a new product. Adding value to something

already existing.

Concept An original idea and its working in Practical implementation of new

theory. idea.

Skills required Scientific skills Set of marketing, technical and

strategic skills.

Occurs when New idea strikes a scientist. A need is felt for a product or
improvement in existing product.

Concerned with Single product or process. Combination of various products

and process.

Activities Limited to R & D department. Spread across the organization.

DIFFERENCE BETWEEN INVENTION AND INNOVATION

INNOVATION MANAGEMENT

Innovation management is a combination of the management of innovation processes,

and change management. It refers both to product, business process,

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and organizational innovation. Innovation management includes a set of tools that allow
managers and engineers to cooperate with a common understanding of processes and goals.
Innovation management allows the organization to respond to external or internal
opportunities, and use its creativity to introduce new ideas, processes or products. It is not
relegated to R&D; it involves workers at every level in contributing creatively to a company's
product development, manufacturing and marketing. By utilizing innovation
management tools, management can trigger and deploy the creative capabilities of the work
force for the continuous development of a company. Innovation management helps an
organization grasp an opportunity and use it to create and introduce new ideas, processes, or
products industriously. Creativity is the basis of innovation management; the end goal is a
change in services or business process. Innovative ideas are the result of two consecutive
steps, imitation and invention. The goal of innovation management within a company is to
cultivate a suitable environment to encourage innovation. The suitable environment would
help the firms get more cooperation projects, even ‘the take-off platform for business
ventures. Senior management's support is crucial to successful innovation; clear direction,
endorsement, and support are essential to innovation pursuits.

HISTORIC RETROSPECTIVE OF INNOVATION

Just as humans evolve, so too does the process of innovation. Humanity is slowly getting better
at it simply because our brainpower keeps growing. It would make sense that the evolutionary
process would express upwards as well as downwards

If we look at humanity’s slow rise from prehistory, there have been three waves or
evolutionary acceleration. The first was the transition from hunting-gathering to the
development of the agricultural age, propelled by man’s ability to fashion basic tools, like
hammers, spears and plows. This happened roughly a few thousand years ago. The second was
the industrial revolution, propelled by the invention of automation, assembly lines and
organized workflow and standardization. This happened a few hundred years ago. And the third
is the information revolution, which is rapidly evolving humanity’s relationship with the tools
it invents, and this started a few decades ago.

Similarly, the methods and tools of innovation have evolved in a similar fashion…

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The processes and technologies that comprise the art and science of innovation have progressed
in three oddly similar phases. In what I call the BC era, “before computers,” innovators
were equivalent to hunter gatherers of ideas.

But in the AD era, "After Digital," the invention of computers changed everything, in much
the same way that hand tools changed cavemen. We are building brain tools now, not hand
tools. The first wave of innovation evolution came with the invention of early innovation
tools – mind mappers (A mind map is an easy way to brainstorm thoughts organically without
worrying about order and structure. It allows you to visually structure your ideas to help with
analysis and recall. A mind map is a diagram for representing tasks, words, concepts, or items
linked to and arranged around a central concept or subject using a non-linear graphical layout
that allows the user to build an intuitive framework around a central concept. A mind map can
turn a long list of monotonous information into a colorful, memorable and highly organized
diagram that works in line with your brain's natural way of doing things.), idea catchers,
eventually we saw BBS forums(A bulletin board system or BBS (also called Computer
Bulletin Board Service, CBBS) is a computer server running software that allows users to
connect to the system using a terminal program. Once logged in, the user can perform functions
such as uploading and downloading software and data, reading news and bulletins, and
exchanging messages with other users through public message boards and sometimes via
direct chatting.) That allowed discussions to be temporally distributed.

The second wave of evolution started with the deployment of innovation pipelines and stage
gate technologies that allow the production of ideas to be “industrialized” and automated.
This was the era of the “idea factory,”

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At long last, a third wave of innovation is now finally beginning. Third wave innovation
seeks not only to simplify and automate the production and processing of ideas, it aims to
enable inventors to create fundamentally better ideas.

Every generation thinks they have the lock on innovation. However, ‘innovate or die’ has been
around at least since the time of the cave people (term for citizens who regularly oppose any
changes in their community, organization or workplace). We should not be disturbed or upset
by innovation – just realize that every generation both creates disruptors and gets
disrupted.

FOR EXAMPLE:

Moving more toward our era, we can track over 100 years of innovation just looking at our
family history. Our grandparents’ generation was born into a time of outdoor plumbing. Our
parents’ generation grew up with the automobile. None of our grandparents learned to drive,
too disruptive, although they purchased automobiles for their children to transport the family

Flipping over to computer technology for the baby boomer generation, we’ve seen the
evolution from the mainframe through to the PC. In particular, the PC defined the difference
between my parents and me like the automobile defined the difference between my parents and
their parents. My parents never really used a PC, yet they had one in the house for us to use. In
terms of what comes next, it’s a bit hard to say

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So the point is simply that it’s been this way for millions of years. Each generation innovates
and disrupts over the previous. Up-and-comers, have a little humility, you aren’t the first.
Veterans, be prepared, you’re going to get disrupted, too.

TYPOLOGY OF INNOVATION

Type of innovation Characteristic

Product or service innovation A product innovation is the introduction of a
product or service that is new or significantly
improved with respect to its characteristics or
intended uses.
Process innovation A process innovation is the implementation
of a new or significantly improved
production or delivery method. Process
innovations can be intended to decrease unit
costs of production or delivery, to increase
quality, or to produce or deliver new or
significantly improved products.
Marketing innovation A marketing innovation is the
implementation of a new marketing method
involving significant changes in product
design or packaging, product placement,
product promotion or pricing. Marketing
innovations are aimed at better addressing
customer needs, opening up new markets, or
newly positioning a firm’s product on the
market, with the objective of increasing the
firm’s sales.
Organizational innovation Organizational innovations can be intended
to increase a firm’s performance by reducing
administrative costs or transaction costs,
improving workplace satisfaction (and thus

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labor productivity), gaining access to no

tradable assets (such as non-codified external
knowledge) or reducing costs of supplies. An
organizational innovation is the
implementation of a new organizational
method in the firm’s business practices,
workplace organization or external relations.

1. Incremental innovation
Incremental innovation seeks to improve the systems that already exist, making them better,
faster cheaper.

2. Process innovation
Process innovation means the implementation of a new or significantly improved production
or delivery method.

3. Red ocean innovation

Red Oceans refer to the known market space, i.e. all the industries in existence today. In red
oceans, industry boundaries are defined and accepted, and the competitive rules of the game
are known. Companies try to outperform their rivals to grab a greater share of existing
demand usually through marginal changes in offering level and price. As the market space
gets crowded, prospects for profits and growth are reduced. Products become commodities,
and cutthroat competition turns the red ocean bloody.

4. Service innovation
Service Innovation can be defined as “a new or considerably changed service concept, client
interaction channel, service delivery system or technological concept that individually, but

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most likely in combination, leads to one or more renewed service functions that are new to
the firm.

5. Business model innovation

Business Model Innovation (BMI) refers to the creation, or reinvention, of a business itself.
Whereas innovation is more typically seen in the form of a new product or service offering,
a business model innovation results in an entirely different type of company that competes
not only on the value proposition of its offerings, but aligns its profit formula, resources and
processes to enhance that value proposition, capture new market segments and alienate
competitors.

6. Sustainable innovation
Eco-innovation is a term used to describe products and processes that contribute
to sustainable development.

7. Frugal innovation
Frugal Innovation is about doing more with less. Entrepreneurs and innovators in emerging
markets have to devise low cost strategies to either tap or circumvent institutional
complexities and resource limitations to innovate, develop and deliver products and services
to low income users with little purchasing power.

8. Blue ocean innovation

Blue Oceans represent the unknown market space, i.e. all the industries not in existence
today. Blue oceans are defined by untapped market space, demand creation, and the
opportunity for highly profitable growth. In blue oceans, competition is irrelevant because
the rules of the game are not set. Blue oceans can be created by expanding existing
industry boundaries or by reconstructing industry boundaries.

10. Disruptive innovation

A disruptive innovation is an innovation that helps create a new market and value network,
and eventually goes on to disrupt an existing market and value network (over a few years or
decades), displacing an earlier technology. . In a nutshell, disruptive innovation is that when
the basis of competition changes, because of technological shifts or other changes in the

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marketplace, companies can find they getting better and better at things people want less and
less. When that happens, innovating your products won’t help — you have to innovate your
business model

11. User led innovations

The user is king. It’s a phrase that’s repeated over and over again as a mantra: Companies
must become user-centric. But there’s a problem: It doesn’t work. Here’s the truth: Great
brands lead users, not the other way around.

12. Supply chain innovation

Supply chain innovation is about applying best practices and technological innovations to
your own supply chain in order to reduce such cycle and wait times and other waste (to
use a Lean term) in your in-house processes.

INNOVATION PROCESS

STEP: 1 IDEA GENERATION

This is the first step in an innovation process. It is where you decide on the concept that you
want to develop and come up with reasons why you want to improve the idea. It is important
for you to involve your employees and customers. Involving many knowledgeable people will
enable you to get a better understanding of the market.

Besides, it will give you an opportunity to look at the idea in different angles. At this stage
also, experts will also provide many viable ideas. There are five places where you can draw
ideas for your innovation:

 CUSTOMER INNOVATION

As you work on an innovation, remember that you should have your customer in mind. Your
customers should be the inspiration for all innovations. Hence, consider the feedback that they
give to come up with an innovative idea.

This is an important source because if you innovate something that does not meet the needs of
the customer, then the innovation is likely to fall. You can get the feedback from the social

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media platforms, customer feedback forms, and your employees can report to you what the
customers say.

 EMPLOYEE INNOVATION

Your employees relate with the customers so closely so they know their needs. Moreover, they
also get first hand compliments, complains, and suggestions from the customers.

When a customer wants a service or a product, they explain to your employees so they can
keep tabs on what customers want. Besides, they are in a position to identify products that are
irrelevant to the customer.

When you innovate a product, your employees will be important so as to explain how a product
is used to the customers. In contrast, if they do not feel as part of the innovation, they might
disregard the product. As a result, they may never speak well of the product.

 PUBLIC INNOVATION

Public innovation depends on information gathered from the public. The amount of feedback
received through public innovation is a lot so you must have the required expertise and
equipment to handle it. Public innovation produces helpful information but you have to be
ready to sieve through the information to pick what is helpful.

As you consider this model, make sure you do not use it before the others: it could probably be
the last model that you employ. If you have the capacity to digest the information, you could
use public innovation.

 PARTNER/SUPPLIER INNOVATION

You can share your thoughts and opinions with your partners and suppliers. Opening up to
them helps them improve on the goods and services they supply.

A good example is wedding planners who outsource companies to provide flowers. The
wedding company may have realized that the flowers wither after a short time and they look
unattractive.

By sharing this information with the flower company, they can brainstorm on ways to keep the
flowers looking fresh for a longer time. This innovation helps your supplier and your business.
On your side, you are able to supply high quality and more improved good and services.

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 COMPITITOR INNOVATION

This is a very challenging but very efficient when it takes place. As a fact, competitors are very
careful with the information they share but with a good strategy, you can learn a lot from your
competitors.

This can only happen when you admit that there are other competent people outside your
company.

However, it does not mean that your employees are not competent enough, they are competent,
but listening from others can give you a different point of view concerning a matter.

STEP: 2 ADVOCACY AND SCREENING

Not every idea that is generated is worth implementing, for that reason; you must screen all the
ideas presented. When screening, ensure you measure the benefits and risks of each idea to
determine its viability.

Any idea that has a futuristic approach should be chosen for the next stage.

Moreover, participants in this stage develop the idea to enhance it. If an idea is not considered
ideal, make sure you communicate the reasons to the person who had suggested the idea.

This is important especially if the person who shared the idea is an employee so that you
encourage them to suggest more ideas even if it is in the future. For a company that wants
to instill an innovation culture, you should take three steps at this stage;

 Ensure the evaluation and screening process takes place in a transparent way

 Create a number of avenues for employees to receive feedback and advocacy

 As an organization, you should understand that evaluating an innovative idea is a difficult

assignment

STEP: 3 EXPERIMENTATION

At this stage, the idea is tested using a pilot test. The test takes place within a targeted market.
As you test your product, remember you want to know if the customers will accept it, if the

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price is acceptable, and if they like the innovation. The aim is to test if the idea is ideal and
suitable for the company at a particular time.

Therefore, if an idea is too complex for the organization or it’s a premature idea, then it
should not be implemented. You should set aside premature ideas in your idea bank for a later
date.

So, even if you realize that your idea has been accepted in the market and the price is affordable,
you might want to hold back until you are sure the time is right to release it in the market. It
is only through the experimentation stage that you can get this information. So, do not assume
your idea is beyond reproach to the extent that the market cannot reject it.

However, note that experimentation can be a continuous process or a one-time activity. In

some instances, the experimentation stage generates new ideas. You can generate new ideas
from this stage by considering the feasibility of the original idea and by analyzing the
information from the results.

Give the participating team enough time to experiment and analyze the results from the
experimentation. It is at this stage where you apply for intellectual rights protection.

STEP: 4 COMMERCIALISATION

When you get to this stage, just know the product is ready for the market. The major work at
this stage is to persuade your target audience that the innovation is good for them.

To do this, explain how the innovation will be of use to them, when it will be used, and
demonstrate the benefits of the innovation using the prototypes. Be very specific about the idea
in regards to any information that could attract customers to your idea.

STEP: 5 DIFFUSION AND IMPLEMENTATION

Diffusion and implementation are two different stages: diffusion is where the company
accepts the innovation and implementation is setting up everything that is needed to
develop and utilize or produce the innovative idea.

Knowledge brokers are used to diffuse the idea in an organization. The knowledge brokers
communicate the specification about the idea and its usability. This information helps your

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employees to understand the idea in a deeper way. After they understand it, then they
implement the idea.

Diffusion and implementation requires access to production files, logistics, and market routes
amongst others. For the idea to succeed, work in collaboration with industries and businesses,
get into partnership and subcontract management to ensure the innovation is fully implemented.
The feedback that you receive at this stage can be used to come up with future ideas.

MACROECONOMIC VIEW OF INNOVATION

Innovation drives economic growth. This is one of the most consistent findings in
macroeconomics, and it’s been true for centuries. Economists have calculated that
approximately 50% of U.S. annual GDP growth is attributed to increases in innovation.
The states and regions that lead the transformation to the knowledge- and technology-based
economy currently have enormous advantages. “Innovation driven enterprises,” which
include a wider universe of entrepreneurial firms whose competitive advantage might be a
process, service, or business model, are also an important piece of the puzzle for states
wanting to foster a more innovative economy. “Technology-based economic development”
is the approach employed by states to help create a business climate and to enable an
environment where an economy based on innovation and technology can thrive. Innovation is
about putting a new idea or approach into action. Innovation is commonly described as 'the
commercially successful exploitation of ideas

We can make a distinction between:

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 Process innovation: This relates to improvements in production processes, the more

efficient use of scarce resources - leading to better productive efficiency and a rise
in productivity
 Product innovation: This is the emergence of new products which satisfy our needs and
wants - leading to improvements in the dynamic efficiency of markets

Innovation is a stimulus to long-run growth because:

1. It is a catalyst(impulse) for investment which helps to shift out the production

possibility frontier (PPF)
2. It is a spur to productivity growth because of its impact on technological progress
3. Innovation also creates a demand for new products from consumers for example in
industries where existing products are nearing the end of their product life-cycle
4. Effective innovation can establish a unique selling proposition (“USP") for a product
– something which the customer is prepared to pay more for. This helps businesses
move up the value chain

The analysis suggests new approaches to innovations in open economies in many ways
including the new monetary growth models. A specific focus is on the role of innovations for
output, employment and exchange rate developments. Innovation driven technology-
intensive businesses are viewed favorably for their potential and disproportionate impact on
competitiveness, future economic growth, and prosperity because they often:

1. create jobs that command above-average salaries;

2. pay a high percentage of their income to their employees, rather than out-of-state
capital equipment or out-of-state raw materials

3. can be located almost anywhere because of the connective power of the Internet and
improved transportation systems, particularly air travel;

4. Create additional quality jobs that are not technology focused, both inside and outside
the companies themselves; and serve markets that are outside the state, thereby bringing
new wealth into the state.

Economic theories emphasize the critical importance of innovation in sustaining long-run

economic growth. That the innovation-intensive industries created highly skilled jobs,

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had higher wages, were more productive, led exports and enhanced competitiveness
during the thick and thin of business cycles is now well established. The link between
innovation and economic growth and the effect of innovation on productivity and income
is examined. The raging debate on the impact of automation on employment is discussed.
Finally, the seemingly waning influence of innovation is analyzed. Innovation is essential
for sustainable growth and economic development. Several core conditions enable
innovation and encourage economic growth. In the modern economy, innovation is crucial
for value creation, growth and employment and innovation processes take place at the
enterprise, regional and national level. Innovation will lead to new businesses as well as
to the increased competitiveness of existing enterprises..

Innovation is an essential driver of economic progress that benefits consumers, businesses

and the economy as a whole. How does it play that role, how does it contribute to economic
growth and what can be done to promote it?

In economic terms, innovation describes the development and application of ideas and
technologies that improve goods and services or make their production more efficient.

New ideas and technologies are developed and applied, generating greater output with the
same input.

One of the major benefits of innovation is its contribution to economic growth. Simply put,
innovation can lead to higher productivity, meaning that the same input generates a greater
output. As productivity rises, more goods and services are produced – in other words, the
economy grows.

Innovation usually starts on a small scale, e.g. when a new technology is first applied in the
company where it has been developed. However, for the full benefits of innovation to be
realized, it is necessary for it to spread across the economy and equally benefit companies in
different sectors and of different sizes. Experts call this process the diffusion of innovation.

APPROACHES TO INNOVATION

Innovation is the only activity that will pull you out of the low-growth recovery we are mired
in at the moment. Existing product portfolios and markets can benefit from innovation, it says,

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but the complexity of pushing the boundaries here makes the whole exercise potentially not
worth the bother. The report divides innovators into four separate streams.

 Low innovators may put in the work to developing a place in the market, but they don't go
very far in peer group comparison. They are limited in the extent to which they learn from
other companies in their own industry.

 Medium innovators make the effort and they are well-versed in their rivals' innovations.
However, they don't bother to look outside their sphere of activity. They don't look at
innovative companies in other industries.

 Good innovators are committed to their own innovation processes, they constantly monitor
innovation in their own industries and they are starting to take leads from other great
innovators across all industries.

 Top innovators do their innovation homework, they keep tabs on what is going on in the rest
of the industry, but they put as much weight on innovation across all industries, taking a
holistic view of where they draw inspiration from.

Whatever level of innovation you think you are on, it's important that you identify your
company's approach. The report breaks the activity out into three separate approaches to
innovation -- ideas, research and analysis-led. These approaches have been embraced in
different proportions within different vertical industries -- consumer goods companies tend
to prefer the ideas-led approach, whereas manufacturers appear to be the most reliant
on analysis. Pharmaceutical companies are the most likely to use the research-driven
approach.

Just because your company is in a particular vertical market doesn't mean the most prevalent
innovation approach is the best one. It's possible to innovate in a way that rivals don't use,
but it may be more useful to compare yourself to companies that are more likely to take a
similar approach, even though they support a completely different market.

So here's a breakdown of the three approaches, the processes that typify them and the industry’s
most likely to adopt them:

1. Ideas-driven innovation: This approach collects and generates a number of ideas which are
filtered until one is selected. Once an idea is selected for development, it is seldom then
discarded. The lead time for this process is one to five years. Organizations that adopt this

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approach are often in volatile markets offering products with short life-cycles, such as fast
moving consumer goods and telecoms services.

2. Research driven ideas: This approach collects a huge number of ideas generated from
research which are filtered even after a number of them is selected for development.
However, many of these promising projects will be rejected at any stage of the
development process, up until completion. Research-driven innovators are the smallest group,
as the development cycle for this approach takes significantly longer -- up to 10 years.
Organizations that take this approach would do best to align themselves with industries such
as pharmaceuticals and oil and gas exploration.

3. Analysis driven innovation: This approach draws ideas in a systematic way from analysis of
the market, competitors and the organization’s internal capabilities. There is a set strategy
controlling which projects will be initiated and when. Once a project is selected for
development, chances are, it won't be discontinued. This process typically takes one to five
years and is favored by organizations that support shifting markets and offer products with
long life-cycles, such as automotive manufacturers and software producers.

ASSUMPTIONS AND BARRIERS TO INNOVATION

The 4 Assumptions of Innovation are:

1. Innovation as it is currently practiced is good enough.

2. Innovation is for executives.
3. Innovation is for practitioners.
4. “Innovation Planning” is an oxymoron.

1. Innovation as it is currently Practiced is good enough

Innovation as it is currently practiced is good enough, is a common assumption and the reality
of the situation is that, “current innovation practices don’t reliably deliver breakthroughs.” I
believe this has to do with the way companies approach the product development process. More
often than not our current processes are designed to provide incremental features to existing
products. Those processes break down when companies attempt to explore innovative solutions
to undefined needs in rapidly changing marketplaces. Due to the ambiguous nature of

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opportunities in emerging marketplaces; existing tools need to be evaluated based on the need
that is trying to be fulfilled. In short, if the only tool you have in your tool belt is a hammer,
everything looks like a nail.

2. Innovation is for Executives

Another assumption is that innovation is for executives. This assumption relates to the
commonly held belief that executives are primarily responsible for the strategy and
direction a company takes therefore they must own innovation initiatives as well. In truth,
the people doing the day-to-day work that often develop innovative ideas with the products
they are developing. However, they need structures and processes to help them plan and define
innovation.” When a team has made the decision to move forward on an innovative initiative,
it must be defined with a well thought out plan on how to bring the product to the market place.

3. Innovation is for Practitioners

While the seed of innovative ideas often resides with the marketers, designers, researchers and
engineers that develop the products for a company; to be successful practitioners must work
with executives.“The designers and technologist developing new offerings must not only
know how to innovate on a tactical level, they must also comprehend the strategic objectives
and wider implications of their work.” For a product to be truly innovative in an emerging
marketplace, practitioners and executives must both have an understanding of the strategic and
tactical business decisions. They must work together to develop a plan.

4. “Innovation Planning” is an Oxymoron (two words used together that have opposite
meanings)

Product development often involves documents detailing the business requirements,

specifications and objectives outlining the scope, measures and criteria of success. The
commonly held belief that innovative products are produced purely out of “out-of-box
thinking” which leads to the final assumption of “innovation planning” is an oxymoron. Very
few companies can afford to invest large amounts of time and money without a measure
of control. For companies to be innovative, they must develop new and structured
approaches.

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Innovation isn’t magic, it’s a discipline. Asking a product team to be innovative without
having the proper tools and processes in place will more than likely result in failure.

The lesson learned is that before you move forward on an innovative initiative have a plan or
you may find yourself in the position of having to hire an expensive expert to clean up the
mess. As the saying goes, “If you fail to plan, you are planning to fail.”

BARRIERS OF INNOVATION

KEY OBSTACLES TO INNOVATION

Obstacles that will need to be addressed if you expect to establish a sustainable culture of
innovation:

1. Lack of a shared vision, purpose and/or strategy

2. Short-term thinking/focus
3. Lack of time, resources or staff
4. Lack of “spec time” to develop new ideas and opportunities
5. Innovation not articulated as a company-wide commitment
6. Lack of ownership by senior leaders
7. Leadership expects payoff sooner than is realistic
8. Lack of a systematic innovation process
9. Management incentives are not structured to reward innovation
10. No reward and recognition programs
11. Constantly shifting priorities
12. Belief that innovation is inherently risky
13. Internal process focus rather than external customer focus
14. Inadequate understanding of customers
15. Focus on successes of the past rather than the challenges of the future
16. Unwillingness to change in the absence of a burning platform
17. Unwillingness to acknowledge and learn from past “failures”
18. Politics – efforts to sustain the status quo to support entrenched interests
19. Rewarding crisis management rather than crisis prevention
20. Hierarchy – over-management and review of new ideas

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21. Micromanagement
22. Under-funding of new ideas in the name of sustaining current efforts
23. Fear that criticizing current practices and commitments is a high-risk activity
24. Risk aversion
25. Addiction to left-brained, analytical thinking
26. Absence of user-friendly idea management processes
27. Innovation not part of the performance review process
28. Lack of skillful brainstorm facilitation
29. No creative thinking training

SOURCES OF INNOVATION (SCIENCE AND R&D, TECHNOLOGY

TRANSFER, PUSH AND PULL APPROACHES)

A. SCIENCE & R&D

Our Nation’s economic growth depends on our capacity to educate, innovate, and build.
Long-term national investments in basic and applied research and development (R&D)
play an important role in the flow of market-based innovations through a complex system
that leverages the combined talents of scientists and engineers, entrepreneurs, business
managers and industrialists. These funds have led to everything from small entrepreneurial
initiatives to growth in high technology industries with the concomitant employment of
millions of workers. The large impact on employment results from innovation impacts not only
in high tech enterprises, but also other industries that benefit from increased capabilities and
productivity. Mutually reinforcing and complementary investments in R&D by both
private and public sectors work in concert to support the development, production, and
commercialization of new products and processes.

Investment in R&D is not the only factor that affects the rate of and capacity for innovation.
Public policies, including monetary policy, tax policy, standards, procurement, regulatory
policy, the availability of a skilled technical workforce, and market access are also important
in establishing an environment that fosters innovation. Given this critical time in our Nation’s
economic trajectory, careful consideration of our portfolio of innovation policies—including
R&D investment practices and public policy—is needed to foster national prosperity and to
increase national access to the global economy.

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How R&D and science fosters innovation?

Innovation has long been recognized as an important driver of economic growth. Empirical
research and surveys of business activities show that innovation leads to new and improved
products and services, higher productivity, and lower prices. As a result, economies that have
consistently high levels of innovation also tend to have high levels of growth.

National investment in basic and applied research and development importantly

contributes to the flow of market-based innovations in ways that can be characterized as
an “innovation ecosystem.” Innovation is defined as the introduction of new or significantly
improved products (goods or services), processes, organizational methods, and marketing
methods in internal business practices or in the open marketplace. R&D and other intangible
investments such as investments in software, higher education, and worker training are
key inputs driving innovation. The term “ecosystem” emphasizes complexity of the
innovation process – one that is highly dynamic, has many interdependencies, and is always
evolving. Transformative innovation is more likely when basic research leads to quantum
steps in expanding knowledge or through synergies when progress in multiple areas of
science or technology complement each other to provide new composite capabilities.
These investments in basic research create the building blocks for innovation by creating
a transformative knowledge base upon which the private sector can draw.

The relationship between R&D and innovation is highly complex. Investment in R&D is
not synonymous with innovation. Many firms introduce new products without R&D. However,
it is possible to demonstrate the relationship between the amount of investment in R&D and
product and process innovation for a broad cross-section of industries.

Businesses, operating in a competitive global market system, have numerous advantages in the
creation and implementation of useful new ideas. With the rise of a technology-based
approach to the production of new goods and services, the organization of high-tech
business has changed globally.

Although pathways of innovation cannot be predicted, government policies have evolved that
support diffusion of knowledge and deployment of new technologies as well as research and
discovery. These strategies include direct and indirect investments in basic and applied
R&D and human capital development, and enacting policies that foster innovation by

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facilitating government/academic/non-profit and industry collaborations, promoting

technology transfer, and creating favorable tax, regulatory, and visa policies.

B. TECHNOLOGY TRANSFER

There are two significant components of innovation process: knowledge and successful
diffusion of that knowledge resulting in new products or services being offered to customers
or in other more common words – invention and successful implementation. Inventions are
very often made in universities and research institutes. To turn those inventions into
successful innovations they must be transferred to organizations with adequate marketing
experience, global presence and real implementation power. This is the responsibility of
technology transfer process.

In general the concept technology transfer covers not only the technology transfer from
academia to industry. It is a broad field that ranges from internal corporate technology
transfer to international technology transfer. Technology transfer can be defined as the
process of sharing of or acquiring/providing/licensing skills, knowledge, technologies,
intellectual property, technology development personnel or entire teams, methods of
manufacturing, samples of manufacturing and facilities among governments, companies,
research institutions and other organizations to enable the accessibility of scientific and
technological developments to a wider range of users who can then further develop and
exploit the technology into new products, processes, applications, materials or services .

The ways of technology transfer depend on the involved parties and the reasons behind
technology transfer. They vary from acquisitions of companies through technology transfer in
order to release a new product or service based on the technology acquired, to collaborations
in technology transfer efforts among companies located in a cluster.

The innovation and technology transfer process tries to overcome these issues by introducing
three roles that act in the field of innovation and technology transfer: technology supplier,
technology receiver, and technology transfer facilitator. Organization can perform more
than one role in innovation and technology transfer process as well as one role can be performed
by more than one organization.

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1. Technology supplier

Technology supplier organizations focus on technology development. Primary candidates for

this role are universities and research institutes. The technology development process can be
defined as a set of few steps: basic research, applied research and other.

2. Technology receiver

Technology receiver organizations are the ones that take new technology and implement it
to improve their products, services, processes or work environment. This process is called
innovation and can be defined as consisting of five activities: maintaining new technology
awareness, selection of new technologies, preparation for infusion (the act of adding one thing
to another to make it stronger or better), infusion of new technologies and innovation
management.

3. Technology transfer facilitator

Technology transfer facilitator organizations are the ones that enable and in many cases drive
technology transfer. These might be technology transfer broker organizations, technology
transfer offices established in research institutions or collaborative university industry,
consulting companies or any organizations that facilitate and support technology transfer
process. The technology transfer support process can be defined as consisting of such activities
as contacts development; market needs identification, search for available technology,
search for industrial application and contractual support. Technology transfer broker
organizations can be defined as a bridge between technology supplier and technology
receiver. Technology transfer broker supports technology transfer process by bringing
together the ones that develop new technology and the ones that need it.

C. PUSH AND PULL APPROACHES

Just what are “push” and “pull” marketing?

Describing push marketing is easy (or at least it should be). Push marketing is the traditional
marketing and advertising seen everywhere. Push marketing starts with the product or service,
identifies the features or benefits that potential customers will find most compelling, and then

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utilizes targeting and segmentation to “push” carefully crafted marketing messages out via a
variety of advertising, sales, and social media channels to the most likely potential customers.
Pull marketing is something else entirely (and should be in order to maximize your investment
in marketing). While push marketing focuses on the most likely potential customers, pull
marketing should be focused on a totally different group of people – non-customers who are
not yet ready to become customers at this time.
An effective pull marketing strategy begins with extensive research into what makes a person
evolve from someone who is disinterested and unaware of a solution area, to seeing how it
might fit into their personal or professional lives and make it better.

This usually involves the creation of content that will raise awareness, interest, inspiration,
and understanding of the whole solution area, and the need for it, not just the features
and benefits of one company’s particular product or service. Pull marketing strategies are very
uncomfortable for most marketers, and as a result most companies have no pull to balance their
push.

So which is better for an organization – push marketing or pull marketing?

Any organization that is interested in sustained revenue and profitability growth over time
should invest in both, but most companies are seduced by the immediate payback of push
marketing and pursue only push marketing strategies. Meanwhile, pull marketing helps
grow new potential customers (or accelerates their purchase readiness timeline), so it is
equally important in the long run. Smart companies, organizations that intend to succeed in the
long run, need to invest in both push and pull marketing strategies in order to keep their sales
pipeline full both for now AND for the future. Push or pull? The answer lies in… the balance.

And what about for marketing an innovation – push or pull?

The more disruptive an innovation is likely to be, the more important it will be for you to craft
and execute an effective pull marketing strategy. The main reason is that in every situation,
despite the popular belief among inventors, a customer already has a solution. It may be the
“do nothing” solution, but they have a solution.

There are 2 processes of innovation:

1. TECHNOLOGY PUSH INNOVATION

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 Technology Push is where the technology is available and the designers make a
product to use it.

 The best example of this is touch screen technology; this was first developed by the
Royal Radar Establishment. In the 80s Hewlett Packard picked up on this technology
and brought out a touch screen computer. Later as the technology became refined and
could recognize hand writing, Apples PDA and the Palm Pilot.Over recent years the
technology has become more and more advanced and is now found in the majority of
mobile phones, laptops and computers. Other examples; cassettes, products with
smaller components.

1. MARKET PULL INNOVATION

Market Pull is where the market is need of a product, so designers make a product to meet that need.
The best example of this is cameras; they have evolved over the years to meet the changing needs of
the user.The market needed to be able to take and store a large number of images and the size of the
camera needed to be reduced. Due to this development in the design in cameras (making them
lightweight, more compact, clearer resolution and so on) the editing software improved alongside. Over
recent years they have developed to get even smaller, and have been put into mobile phones, then as
people wants changed (people wanted to be able to take photos of themselves) the developed to be even
smaller and then moved to the front of the phone. Other examples; hybrid cars, recyclable carrier bags,
low light energy bulbs.

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Other Sources of innovation:

1. The Unexpected

The market place is the number one area to look for opportunities. A good manager should
be constantly studying the market. Is a particular product or service in greater or lesser demand
than anticipated? Why? Is there a way we can exploit this unexpected success? What has to
happen if we want to convert this success into an opportunity?

2. The Incongruity

There is a discrepancy between what is and what should be. This is a key to developing wildly
successful businesses but it’s tricky. Face book is a company that nailed it. Prior to the social
network’s prolific rise MySpace was the dominant player, but it had its downfalls. Facebook
wisely noted what MySpace was vs. what should be and built that platform. The end result? A
company that just had an IPO versus. One that has fallen off considerably. One of the best
places to look for incongruity is in your own customers. Their complaints and unmet wants are
all the hints you need.

3. Process Need

Process need involves identifying your company’s process weak spots and correcting or
redesigning them. This is a task oriented solution meaning that the source of innovation comes
from within your existing capabilities and ways of doing business – not the market. An example

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might be a restaurant that identifies that people wait too long for their entrees and so decides
to hire another chef to speed up creation times. Essentially your company will want to look for
all weak links and eliminate them.

4. Industry and Market Structure Change

Your industry and the market are in continual flux. Regulations change and some product
lines expand while others shrink. Firms should continually be on the watch for this. One
example is deregulation. When a previously regulated industry becomes open there is historical
precedence for companies that enter early to be very successful. Other things to watch out for
are the convergence of multiple technologies and structural problems that occur from time to
time (often immediately following an industry boom).

5. Demographics

We constantly see changes occur in populations, income levels, human capital (education) and
age ranges. Smart firms are constantly paying attention to this. When it comes to the baby
boomers businesses have been following them constantly as they got older. At present they are
one of the largest as well as the most affluent demographic groups with high levels of
disposable income. Combining demographic data with segmentation and targeting is a
powerful method of accurately meeting a target market’s desires.

6. Changes in Perception, Meaning, and Mood

Over time populations and people change. The way they view life changes, where they take
their meaning from, and how they feel about things also is modified over time and smart
companies must pay attention to this in order to capitalize (and avoid becoming forgotten, a
relic of ages past). Here are two really good examples. First is a principle called “downaging”
which refers to people who look at 50 as being 40. Industries have responded to this, most
notably in the cosmetic and personal care industry which provides plenty of solutions to help
these people look younger. Full industries are creeping up that make people feel younger. Have
you spotted any lately? Religion is another example. Across the world we’ve seen Islam and
atheism rise. Companies should adapt as overall meaning changes in culture.

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7. New Knowledge

As the speed of technological revolution increases there will be an ever increasing number of
opportunities that open up. The internet has been the most notable one in the last couple decades
but there have been a plethora of other industries and opportunities pop up as a result of this
technological revolution. New knowledge is about more than just technology though; it’s
about finding better ways of doing things and improving processes. Your company should
look to this new knowledge for ways it can improve incrementally. Intel does this constantly
and it’s a major part of why they’re the leading processor manufacturer today. Constantly
paying attention to the latest in both academic research as well as investing heavily in their
own R&D, the company has managed to find continual sources of innovation, driving its
success.

PROCESSES USED TO EXPLORE INNOVATIONS ALONG THE TECHNOLOGY

The study of technological innovation is a diverse and growing field. Terminology and theories
describing the factors influencing the production and application of new technology differ
among observers and researchers in the field and few studies specific to building technology
have been made. In the most general terms, innovation is the introduction of a new idea (Mish,
1985). This introduction entails the production of new information and the diffusion of that
information to people who can use it to solve problems, to see the world in a new way, or to
enhance their efficiency, effectiveness, or living quality. In a more specific
application, technological innovation refers to the process in which a new idea is embodied
in tools, devices, or procedures that are of practical value to society. Typically thought of
as a new product, technological innovation may also be a new process of production; a
substitution of a cheaper material, newly developed for a given task, in an essentially
unaltered product; or the reorganization of production, internal functions, or
distribution arrangements, leading to increased efficiency, better support for a given
product, or lower costs.

Technological innovations often involve tools and procedures, products and processes,
interacting in new ways. Known drugs may be found to be successful in treating new illnesses,
or changing the production line may yield improved rates of production. Many of the
construction industry's technologies involve such combinations of hardware and software.
Technological innovation can also be an improvement in instruments or methods of making

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or doing innovation. New technology that is not used is not innovation. Paradoxically, even
technology that is well known and widely used in some industries or nations may still be new
and innovative in a different setting. Many years can sometimes be required for new ideas and
information to diffuse from one place or application to another. Such technology is still "new"
to the society that receives its benefits. Although many people have come to regard new
technology solely as the result of increasingly revolutionary discoveries in science and in our
understanding of how things work, adaptations and new applications of older knowledge may
also lead to innovation.

Successful new technology and innovation tend to be inspired by the practical needs of
individual people or enterprises, or the needs of many individuals expressed in market demand
or social policy. Technological innovation may also be initiated by scientific invention—new
discoveries and developments—but "market pull" is widely felt to be more influential than
"technology push" as a force for innovation. The time between invention and innovation may
be long.

The technological innovation process consists of a series of phases necessary to implement

improvements or develop a new production process, product or service.

There are two ideas about the origin of technological innovations. One argues that the
technological push comes from the scientific research and development sectors, with no
commercial purpose and the other (Market Pull), more accepted today, affirms that it’s market
needs that instigate companies to develop new technologies that satisfy the demands of
consumers and businesses.

Now, we’ll analyze the technological innovation process focused on meeting market needs and
how it applies in companies.

The 8 stages of the technological innovation process

1- Basic research

Basic research is that phase of the technological innovation process that only occurs in large
companies, usually in the pharmaceutical, energy and information technology sectors, which
keeps research and development departments continuously abreast of the state of the art
technologies that most impact their organizations.

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2- Applied research

When it detects some specific market needs that may represent an opportunity to develop a
sustainable competitive advantage for the business, the company searches among the
technologies that dominate the way to solve this problem.

At this point, you can integrate existing technologies creatively and innovatively or really
develop something totally new.

3- Development

When reaching a solution to the market need, it’s time to develop the product, service or process
that will be marketed or employed.

For this, a prototype is developed that must be tested, preferably with the help of the public
that will use it.

Two interesting approaches to this stage of the technological innovation process can be used:

 Design thinking, which takes into account how people interact with innovative products
and services
 Scrum, which promotes small iterations, incremental advances in the prototype and the
rest of the innovation process, always based on the needs of those who will use it.

4- Engineering

With the prototype set, you have to turn it into a scalable product or service that can be mass-
produced or meet the specific needs of an industry.

Materials, suppliers, appropriate forms of storage and transportation are searched, such as
connecting parts and benefiting inputs, defining which professionals will need to be hired and
trained, among other measures.

5- Manufacture

This is one of the most important aspects of the technological innovation process.

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It is time to define the best way to deliver the solution created to the final customer, with
efficiency and quality.

6- Marketing

With the product or service ready to be released, it’s time to do concept tests, market
research and market testing to see if any adjustments are still required depending on how their
acceptance and distribution is taking place in test markets.

7- Promotion

Once the market tests are done, the product or service is launched nationally or globally,
depending on the markets the company serves.

8- Continuous improvement

Once launched, both the product or service and the process flows used to produce and deliver
them to end customers are constantly measured and analyzed, with the aim of looking for ways
to improve them even more, adding even more perceived value to the final customers.

MARKET AND STRATEGY DIMENSION OF INNOVATION

STRATEGIC DIMENSIONS OF INNOVATION

Strategy & Innovation is founded on the latest thinking and best practice, bringing our
strength and reputation in the fields of strategy and innovation to help executives navigate
the long journey successfully and realize their strategic organizational and personal
potential.

It helps to:

 Identify and overcome the challenges that companies face when trying to innovate
 Develop new ventures within long- or newly-established organizations
 Adopt new strategic approaches to company direction and decision-making in order to
build successful business models which exploit new opportunities
 Take new approaches to stakeholder management, governance and funding
 Develop robust but flexible plans for strategic execution.

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Innovation Strategy is the essential link between new product development efforts and
your overall Business Strategy. A company’s Business Strategy defines: key objectives,
overall direction, priority initiatives, and the expected pace of growth.

The Innovation Strategy is what enables companies that rely on innovative new products,
technologies, and platforms to advance their Business Strategies to:

 create customer value

 grow market share
 enter new markets
 increase profitability
 Alter market and competitive landscapes.

The 6 Elements of an Effective Innovation Strategy

Top performing companies consistently approach the following 6 elements of an effective

Innovation Strategy as the ideal flow, or thought process, to guide leadership teams in
developing an insightful Innovation Strategy:

1. Objectives and Role

Specify the objectives of the new product development effort and the role product
innovation will play in helping the company achieve its business objectives.

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2. Arenas (place or scene of activity) and Strategic Thrust (push suddenly)

Focus is key to an effective Innovation Strategy. Specify where you will and will not
attack. The concept of strategic arenas is at the heart of Innovation Strategy – the
markets, industry sectors, applications, product types, or technologies where your
business will focus its efforts. Specifying these arenas is fundamental to defining the
strategic thrust of the new product development effort. It is the result of identifying and
assessing new product innovation opportunities at the strategic level.
3. Attack Strategy and Entry Strategy
How do you plan to attack each strategic arena? You may choose to be aggressive and
be the industry innovator (first to market); or a fast follower, waiting and watching, and
rapidly copying and improving upon competitive entries. Other strategies focus on being
low-cost versus a differentiator versus a niche player. The global dimension is also part
of the attack plan: whether to adopt a global, or regional strategic approach to product
development.

4. Deployment – Spending Commitments, Priorities and Strategic Buckets

Strategy becomes real when you start spending money! How much you spend on new
product development and the emphasis you place on each strategic arena naturally leads
to the next key decision to bucket resources for each arena. Assigning buckets of
resources helps to ensure new product development is strategically aligned with your
overall business goals.
5. The Strategic Product Roadmap – Major Initiatives and Platform Developments
A strategic product roadmap is an effective way to communicate a series of major
initiatives in your attack plan. Your strategy should map out your planned major new
product development initiatives (and their timing) required to succeed in a certain
market or sector. It may also specify platform developments required for these new
products.
6. Tactical Portfolio Management Decisions – Project Selection
using a method to monitor Innovation Strategy execution improves the odds that you will
successfully implement it. However, due to the unique and risky nature of innovation,
monitoring progress via a master project implementation schedule is simply not sufficient.
Not every project that is initiated will be worth completing. As new ideas make their

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way through the Stage-Gate process, their initial attractiveness can improve or wane as
new information becomes available.

Marketing Dimensions of innovation

Storytelling plays a huge role in establishing disruptive technology as a market force. Good
storytelling is important when introducing a complex and disruptive offering in the
marketplace whose value is not well understood. But storytelling is only the beginning. It takes
a village to launch and drive adoption.

Each year, new technology emerges and continues to change the way we live, work and play.
Sometimes, it only provides incremental benefits, but on occasion, something new emerges
that is truly innovative and shifts the existing paradigm. Examples of paradigm-shifting
technologies include block chain, the Internet of Things (IoT) and artificial intelligence (AI).

Although the primary focus of any launch is the solution that solves a particular problem, the
technology becomes the enabler -- the how and why of a problem that couldn’t be solved for
before. Some would argue that buyers don’t need to understand the underlying technology;
however, we strongly disagree. Customers are buying into a longer-term vision and need
to understand the viability of the new technology.

Launching a solution with a technology that provides incremental benefits is significantly

more straightforward than introducing a disruptive technology. For incremental technology,
the context within the market already exists to help target audiences easily understand its value,
whereas context needs to be created from scratch for anything that is paradigm-shifting.

So, exactly what do you need to campaign disruptive technology?

1. Captivating Vision

Buyers need a roadmap to understand where the technology is today and where it will be
in two years, in five years and in 10 years. The vision needs to be simple, relatable and
futuristic.

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For example, in the mid-1990s, when the internet was still in the early-adopter phase, we had
a client who was working on the leading edge of voice recognition technology. He would begin
every briefing and speaking opportunity similar to this:

One day, you are going to be able to pick up the phone and just say, ‘I want a pizza at 6 p.m.’
At 6 p.m., your favorite pizza from your favorite restaurant will show up at the door, and it will
already be paid for.”

At the time, this statement was like something from The Jetsons -- no one had articulated a
vision like it. It captivated the audience before he proceeded to talk about his innovation, which
was the first step on the road map to achieving that vision. Twenty years later, with Alexa and
Siri, his long-term vision is beginning to become a reality.

2. Perseverance

Timing is everything. Introducing something new to the market and driving adoption
takes a long time. Technology needs to be stable enough, and the market needs to be ready to
hear your message.

Given the previous example, it has taken more than 20 years for that vision to become a reality.
This is not always the case; however, it is important to realize that campaigning a new
technology can take years, not months.

3. A Value Proposition That Makes Sense

Disruptive technologies typically solve complex business problems or create new business
opportunities that can be hard to understand. You need a value proposition that is simple and
clear, and focuses on outcomes and not on the complexities of how a particular solution
works.

4. The Right Market Category

Market categories provide context for what exists in a market segment. Analysts -- industry
and financial -- who publish market reports play a pivotal role in how your solution and
technology will be viewed in the market. They use market categories to group and report on
solutions and technologies.

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An incremental technology usually falls into an existing category, even if it is on the fringe or
a subset of that category. For example, the cloud is a major category, whereas hybrid cloud and
multi-cloud diversification are applications of the cloud and are categorized as subsets.

Developing a brand-new category for a disruptive technology takes time and money. You need
to work closely with analysts to educate them and convince them that your disruptive
technology is worth following and recommending.

5. A Charismatic Spokesperson

There is nothing worse than listening to someone drone on and on about something that nobody
understands. You need a spokesperson who is an avid storyteller and who can captivate an
audience.

6. Involvement In The Ecosystem

No technology stands on its own. It is critical that you demonstrate involvement in the industry.
This can take the form of driving standards, joining an association, participating in industry
events or collaborating with others in the ecosystem.

7. Incremental Milestones To Drive Adoption

Prospective customers are not going to make big investments or swap out a solution that is
currently working for an unproven technology. However, they are often willing to make
incremental investments as test projects -- as long as the risk is mitigated.

To drive adoption, your road map needs to have incremental milestones as opposed to quantum
leaps.

8. A Content Strategy That Drives The Conversation

Don’t be afraid to create bold and somewhat controversial content. You will need primers,
glossaries, e-books, case studies, solutions briefs, videos, social images and technology papers
with strong and captivating visuals.

9. Public Relations

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Creating an industry narrative for disruptive technology is difficult and often takes senior talent
to be effective. Consider hiring a creative PR team or working with a contractor who
understands technology and has experience with emerging tech. Professional PR efforts can
get your technology into the current media conversation.

10. A Community Of Early Adopters

Stay in touch with early adopters so that you can learn more about what is working and what
is not working. Bring them into your storytelling, and give them the platform so they can tell
their stories as they relate to your solution.

You can do this by creating a customer council, co-speaking at industry events, developing
joint-bylined articles or collaborating on content marketing.

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UNIT-2

ORGANISATIONAL ASPECTS OF INNOVATION

2.1 What is Organizational Innovation

1. Implementation of a new organizational method in the firm's business practices, in the
organization of its workplace or in its external relations, to improve the use of knowledge,
workflows efficiency or quality of goods or services. Learn more in: Challenges for Innovation
Due to Firm Size: The Case of Brazilian Industrial Firms
2. The implementation of a new organizational method in the firms business, workplace
organization and external relations (Oslo Manual). Learn more in: Innovation Policies and
Barriers to Innovation: An Analysis in Extremadura (Spain)
3. Organizational innovation is understood to encompass processes which lead to the
establishment or adoption of new production and management models, not only for production
but also for tangible and intangible resources. The organizational innovation concept is part of
the concept of innovation and development, and accentuates new ideas and the propensity for
change within organizations. This is also called process innovation and includes expenditures
for innovation and development in the calculation of cost. Learn more in: Telework and
Management in Public Organizations
4. The introduction of a new organizational method in business practices, in workplace
organization or in the firm’s organizational relationships. Learn more in: The Effect of R&D
Cooperation on Organizational Innovation: An Empirical Study of Portuguese Enterprises
5. First use of a product, service, process or idea by an organization. Learn more in: Can an
Innovation Oriented Vision Statement Really Trigger Innovation in Small and Medium Sized
Enterprises?
6. The process of translating an idea or invention into a good or service that
creates organizationalvalue. Learn more in: The Roles of Knowledge Management and
Organizational Innovation in Global Business
7. The successful utilization of processes, programs, or products which are new and introduced
as a result of decisions made within the organization Learn more in: Sustaining Organizational
Innovation
8. Also known as non-technological innovation is the implementation of a
new organizational method in the firm business practice, workspace organization or external

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relations. Learn more in: Determinants of Organizational Innovation: The Case of Portuguese
Firms
9. The process of translating an idea or invention into a good or service that
creates organizationalvalue. Learn more in: The Roles of International Entrepreneurship and
Organizational Innovation in SMEs
10. Is the implementation of a new organizational method in the firms business, workplace
organization and external relations. Learn more in: Innovation in Extremadura: Opportunity
for Companies or Obstacle for their Development?
11. It includes the production of knowledge, development and marketing, and the introduction
of a new, redesigned or substantially improvement in the goods and services rendered to the
society. Learn more in: The Mediating Effect of Organizational Culture, Size, and Structure on
the Relationship Between Innovations and Resilience in Selected Nigerian Universities
12. First use of a product, service, process or idea by an organization. Learn more in: An
Examination of the Relationship Between Vision Content and Amount of Innovation in SMEs:
Findings From Turkey
13. Is the implementation of a new organizational method in the firm’s business, workplace
organization and external relations (Oslo Manual). Learn more in: Perceptions of
Extremaduran Firms Towards Innovation: Manufacturing vs. KIBS Comparative Study

8 Ways to Bring Innovation Into Your Organisation

Innovation is essential for the growth of any company. But that’s a very generic way of
describing innovation. To successfully implement innovation, you need to know exactly what
makes an innovative organization as well as how it contributes to its growth.For the majority
of us, innovation is about seeking an approach to blue-sky thinking. But that’s a far too clichéd
definition to go by. What business people don’t know is that creativity is challenging to
achieve. It requires investment of resources to fulfill the needs of innovative management in
an organization.

Truly innovative organizations spend hours developing an approach to imaginative thinking in

their workers so that they can cultivate new ideas. In other words, the secret of their
unprecedented success is associated with their ability to get the best out of the creative tanks
of their employees.

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But that requires an innovative culture where everyone is able to think independently. Business
leaders perceive innovation as something that triggers progress and lacking it can stifle the
growth of an organization. Unfortunately, the majority of the companies still lack a strategy to
create an innovative culture.

For those ambitious business people out there, here are 8 ways to bring innovation into your
organization and to pave the way for more creative ideas:

1. Give your workers a sense of freedom

Employers that impose rules tend to suffocate the creativity of their employees. This limits the
freedom of your most valuable asset and they will feel reluctant to ever think outside the box.

The essence of an innovative organization lies in their employees’ ability to contribute to the
creative process of the organization. As a company, you need to give your workers the
autonomy to practise their novel ideas.

It calls for a sense of freedom that can enable your workers to unshackle themselves from the
clutches of hierarchical imposition so that they can focus on new ideas to execute their day-to-
day tasks.

2. Provide your team with the resources to implement innovative ideas

Make it possible for your workers to convert their ideas into reality. Without the right
resources, even the best ideas tend to fall flat.

The most innovative companies in the world invest in their R & D department to allow their
creative team to execute the innovative concepts for future product development.

Samsung is one of the leading contenders in the list of the most innovative organizations
having invested $12.6 billion in the last twelve months into its R & D department

3. Invest your time in the creative nourishment of your workers

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The essence of innovation is achieved when you are able to demonstrate to your workers a path
that leads to creativity. Don’t just preach to your team the importance of creativity. Rather
demonstrate the specific ways to find creativity so that they can implement innovation in their
work.

For example, you can dedicate a day to motivate your workers to experiment with new ideas.
Similarly, you can conduct weekly workshops to encourage your employees to brainstorm
ideas for an upcoming project.

Google was among the first companies to create a business model based on innovation. The
company allocates 20% of its time to nurture the innovative side of their employees.

4. Don’t focus only on R&D

As an organization, you should not confine innovation to just the R&D department. To
implement an effective innovative culture, it is important that each and every department of
your company is included.

When you implement a holistic innovation strategy, you are able to foster a change in the
mindset of every single member of the team.

5. Allow your employees a chance to fail

Failure is a part the learning process. If you penalize your employees for making mistakes, you
inject in them a fear of failure. Such an approach drastically affects their ability to come up
with creative ideas. Fear cannot cultivate creativity. When you give your employees the scope
to make a mistake, you are allowing them to think independently without any constraints of
fear. So they are able to think beyond the boundaries of their job.

6. Develop an accommodating leadership style

As the leader of a company, it is your responsibility to foster and nurture the attitudes of your
individual team members. Being a leader, you cannot develop a culture of innovation if you
fail to show them the way to innovation through your own attitude and behaviour.

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Expecting your workers to give you more in less time is one such way you kill the desire of
your workers to do something extraordinary. When you prefer short-term results over long-
terms benefits of innovative ideas, you will kill their innovative spirit.

Rather than resorting to a ‘do more’ approach, you need to give your employees the room to
experiment and learn so that they can improve,

Remember that innovation develops from trial and error and it demands an investment of time.
But when you deprive your employees of time, you suffocate the urge of your employees to
learn different perspectives to their work.

7. Don’t look down on your subordinates

Intellectual arrogance is the biggest enemy of implementing innovation into any organization.
When you disregard the ideas of your employees just because they are your subordinates, you
hinder the process of creative thinking in them. Such an organization cannot possibly thrive on
the creative ideas of their workers.

To promote a culture of innovation, you and your leadership team need to shut down any
preconceived notions about your employees and rather allow them to speak their minds. You
need to encourage them to share their opinion and be a part of every creative process in the
business.

8. Acknowledge the contribution of your employees

Employees feel valued when you recognize their efforts. Similarly, if you want to promote a
culture of innovation in your organization, you need to implement an incentive-based policy
that rewards workers on the degree of innovation in their work.

Such a policy will make your employees feel appreciated for their innovative efforts and it will
pave the way to a culture of innovation in your organization.

Innovation provides a culture of creative thinking that enables your workers to think beyond
the regular hurdles of their work and come up with something new and unique.

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However, innovation is not a temporary thing and rather it is a long-term strategy that demands
an investment of your time and efforts. Therefore, if you want to ensure that your organization
continues to benefit from the positive outcomes of innovation, you need to implement the
above-mentioned strategies.

Features of Organisational Aspects of Innovation

It is a problem-solving process

It is process occurring primarily within commercial firms

Role of govt agencies or public lab’s is to a certain extent secondary

Interactive process involving relationships between firms with different actors

Has both Formal and Informal relationships

Helps in positioning firm within commercial networks

It is diversified learning process

Process involving the exchange of codified and tacit knowledge

Involves the establishment of new methods of production, supply and distribution

Includes the introduction of changes in management, work organisation, and the working
conditions and skills of the workforce

ELEMENTS OF ORGANISATIONAL ASPECTS

Identify purpose

Achievable dreams

Build loyalty

Set standards

Inspire enthusiasm

Encourage commitment

Culture and Values

Unique strength

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Core values

SOFT METHODS OF INNOVATION MANAGEMENT

Soft methods are tools, which can help you transform a new idea into a commercial
success.

It is also seen as a range of tools, techniques, and methodologies that help companies to
adapt to circumstances and meet market challenges.

The focus is on improvements, which aim to distinguish a company from its competitors or
to consolidate its presence in the market.

FEATURES OF SOFT METHODS

Ability to cope with co-operation and team work

Ability to take advantage or to be compatible with the internet

Degree of diffusion and generalization in its applicability

Whether copyrighted or patented

Whether designed to address a specific topic or a general concern

Existence of readily accessible information describing best practice

Phase of innovation cycle concerned

ADVANTAGES OF INNOVATION MANAGEMENT

Promote co-operation and team work

Encourage entrepreneurial initiative

Strengthen the Knowledge management within a firm

Integrate science, technology, and market in fluent systems

Emphasize on global-oriented approach

Accelerate and shorten the time-to-market in innovation projects

Increase efficiency using more advanced information technologies

Promote HRM as strategic area within the business.

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SOFT METHODS OF INNOVATION MANAGEMENT

1. Knowledge Management Tools: KM is a discipline that integrates management of people,

Processes and technologies in order to generate, capture and use valuable knowledge in the
organization. is the process of creating, sharing, using and managing the knowledge and
information of an organization. It refers to a multidisciplinary approach to achieving
organizational objectives by making the best use of knowledge.

KM includes courses taught in the fields of business administration, information systems,

management, library, and information sciences. Other fields may contribute to KM research,
including information and media, computer science, public health and public policy. Several
universities offer dedicated master's degrees in knowledge management.

Knowledge management efforts typically focus on organizational objectives such as improved

performance, competitive advantage, innovation, the sharing of lessons learned, integration
and continuous improvement of the organization. These efforts overlap
with organizational and may be distinguished from that by a greater focus on the management
of knowledge as a strategic asset and on encouraging the sharing of knowledge. KM is an
enabler of organizational learning.

2. Knowledge Audits

Analysis of key documents and current information systems

Interviews with representative staff

Knowledge requirements questionnaires

Analysis of information and knowledge flows

Development of knowledge maps

Writing of an action plan.

A knowledge audit is an effort to understand where an organization stands in terms

of knowledge management and its knowledge assets

3. Knowledge Mapping

Knowledge mapping is one of the most powerful knowledge management (KM) approaches.
A knowledge map is a visual representation of the organization's intellectual capital. With it,
stakeholders can pinpoint where critical knowledge is, how it flows, and any barriers or gaps.

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Knowledge Mapping techniques are part of Audit process and generates picture of the
explicit information showing the importance of relationship between knowledge stores and
dynamics.

Knowledge Mapping is worthy practice consisting of survey, audit and synthesis and aims
to track the acquisition and loss of information.

Explores personal and group competencies and proficiencies.

4. IPR Management Are responsible for the management and protection of rights over
products, corporate intellectual capital and commercialized results which are obtained out of a
company’s innovation activity.

5. Technology Watch Is technique to recognize the main technological advances as they

appear on the market, in order to detect opportunities and threats in a timely fashion. Stages
are:

Identifying the internal clients

Determining targets of the watch

Determining the providers of information

Organising the information collected

Organising the use of information

Assuring Co-ordination

6. Patents Analysis Enables the researches and business exectutives to access the competitive
patent landscape prior to engaging in costly R&D, patent execution or M&A activities

7. BIS – Business Intelligence System

Integrates into a structures system all the needed mechanisms to capture, filter, analyse and
distribute BI that is useful for an enterprise.

CREATIVE APPROACHES
Fundamental concepts for all creativity development techniques are:

The suspension of premature judgment and reducing the negative filtering of ideas.

Use of the intermediate possible.

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Creation of analogies and metaphors through symbols, etc., by finding the similarities
between the situations that we wish to understand and another situation which we already
understand.

Build imaginative and ideal situations(invent the ideal vision).

Find ways to make ideal vision happen.

Relate things or ideas which are previously unrelated.

Generate multiple solutions to a problem

CREATIVE THINKING TECHNIQUES

1. Lateral Thinking

 Lateral thinking is specifically concerned with the generation of new perceptions and
new ideas.

 Lateral thinking involves changing perceptions and flexibility. There is an overlap with
creativity since both are concerned with producing something new, but lateral thinking
is a more precise definition of the process of changing perceptions: changing the way
we look at things.

 Lateral thinking is also different from divergent thinking, though again there is some
overlap. Divergent thinking is only part of the process of lateral thinking.

 Lateral thinking is not just concerned with generating alternatives but with changing
patterns, with switching to new and better patterns.

What Are Lateral Thinking Techniques?

Lateral Thinking is a set of processes that provides a deliberate, systematic way of thinking
creatively that results in innovative thinking in a repeatable manner. While critical thinking is
primarily concerned with judging the true value of statements and seeking errors. Lateral
thinking is more concerned with the "movement value" of statements and ideas. A person uses
lateral thinking to move from one known idea to creating new ideas. I define four main
catagories of Lateral thinking tools:

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 Idea-generating tools which break free your current thinking patterns from their usual
pathways.
 Focus tools that open your mind to new possibilities in the search for new ideas.
 Harvest tools that help maximize value is received from the idea generating output
 Treatment tools that ground the creativity process by making the wild ideas and make
them fit the real world constraints, resources, and support.

When To Use Lateral Thinking?

 Problem Solving: Often when you are problem solving or designing something there
may well be an obvious answer. If the matter is important it can be beneficial to a small
amount of time to use lateral thinking to discover alternative ways of defining the
problem and to start thinking about it in a broader sense. You can train your brain to be
more naturally creative and discover better solutions to known problems.

 Finding new ways: It is possible that the way you do everything in your life or business
is the best possible way of doing it, but not likely. Whether you have created a way of
doing things yourself or have been told that 'this is the way to do this', there are likely
other ways to do those things more effectively and efficiently. By using the techniques
from Lateral Thinking to look for new ways to improve yourself and business you can
achieve your goals.

 For Inventions & Innovation: Every Inventor or Creative will at times need to focus
their creativity towards the process of Invention, whether it is a patentable invention or
a mobile application it will some times be thinking from a 'blank page' state, not simply
being about improving what is already there. Lateral Thinking help thinkers be more
proactive and confident in their thinking. When solving a problem that is not yet known
lateral thinking can help you choose your starting point.

Here are some Creativity exercises to improve your lateral thinking skills

1 – Use your 5 senses to inspire yourself with things from around you
Look for objects, analyse their shape, their color, where are they coming from. Use all your
senses, try to listen to sounds in your environment, touch the objects your are looking at, what

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are the odors in the room… Now try to link those elements to your brainstorming session, it
will help you to generate new ideas.
2 – Use a dictionary, book or magazine for random ideation
Take a book, close your eyes, open the book and pick a word that you relate to your issue. If
this word is not giving you a new idea start again.
3 – Analogies and metaphors
Compare your problem to a known natural phenomenon (storm, eco-system, river…), to a
mineral, vegetal or animal. You can also compare your problem with a symbol, legend or story.
4 – Make a list of the top 5 words related to your issue
Now start your brainstorm but you cannot use those words anymore.
5 –Define your Customer journey or product/service life cycle
Divide your issue in small steps. Here is an example: in the morning I take my bike, I cycle to
work, stop for a breakfast, take my bike, cross the park, get into the office … an other exemple:
Customer take his car for shopping, step into the shop, look for a PC, ask for advise, buy the
PC, put it in his car, go back to home, open the PC box…This approach is very useful to collect
new insight and elements related to your goal.
6 – Random search on the internet
go on YouTube and click on video titles that you would normally not click on. Do that for 10
minutes. It always gives fresh and new ideas.
7 – Write a 6 word story of you problem
Make it simple avoid jargon. Your story should include images that will appeal the
imagination.
8 – Brain writing
You should practice this in a group of minimum 5 people. Write your idea or goal on a paper
and you give it to the person sitting on your right. This person should write a solution on your
paper and give it to the person sitting on his/her right and so on.
9 – Create a Mind Map
This is a useful tool to sketch out a lot of ideas. It works like a hierarchical tree but here you
start off with your problem in the center. After that you draw the major topics, continue with
sub-topics…
10 – Start writing, don’t stop until you’ve hit 500 words
This is a free flow exercise. Don’t think just write.
11 – Rolestorming
What would you do if you were someone else? Think like

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 Buddha
 Barack Obama
 Steve Jobs
 The opposite gender.
 Your father or mother.
 Your girlfriend / wife or boyfriend / husband.
 A customer.
 A colleague.
 Your enemy.
 …
12 – Reverse Thinking
Think about what everyone will typically do, then do the opposite.
13 – Meet people you don’t know
This is a special exercise. Go outside, in the street, and ask people for solutions to your problem.
14 – Six hats of Edward de Bono
Adopt successively various attitudes (roles), through 6 hat colors.
 White hat: neutrality. Your share facts
 Red hat: emotions. Your information tinged with emotions, feelings, intuitions and
premonitions.
 Black hat: negative criticism. You don’t agree, state dangers and risks. It ’s the devil’s
advocate.
 Yellow hat: positive criticism. You acknowledge crazy dreams and ideas.
 Green hat: creativity. Your are very creative lots of crazy dreams and ideas
 Blue hat: organisation. You focus on the processes, the actions and the planning

2. What is TRIZ?

TRIZ is the Russian acronym for the "Theory of Inventive Problem Solving," an international
system of creativity developed in the U.S.S.R. between 1946 and 1985, by engineer and
scientist Genrich S. Altshuller and his colleagues.

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According to TRIZ, universal principles of creativity form the basis of innovation. TRIZ
identifies and codifies these principles, and uses them to make the creative process more
predictable.

TRIZ is most useful in roles such as product development, design engineering, and process
management. For example, Six Sigma quality improvement processes often make use of
TRIZ.

What does Triz mean?

In the 1980s the Russian engineer Genrich Altshuller developed the TRIZ theory which is an
acronym for Teorya Resheniya Izobreatatelskikh Zadatch. The literal translation is: “theory
of inventive problem solving”. The most important result of the research was, that the evolution
of technological progress follows a number of predictable patterns. It is an innovative way of
looking at problems and solutions.

Universally applicable

TRIZ starts from a number of principles and processes of innovation that are universally
applicable. Large multinationals such as Hewlett-Packard, Boeing and Samsung have used the
TRIZ method to develop new products, optimize processes and gaining a better understanding
of developments and trends in the market for decades. TRIZ has become an umbrella that
covers a host of inventive concepts, tools and processes that are often used to solve difficult
problems.

TRIZ basic principles

To arrive at improvement, TRIZ uses 5 basic principles and 40 inventive principles. TRIZ
forces us to look at problems differently.

1. The ideal end result

Thinking out of the box is a good principle to achieve an ideal end result. TRIZ encourages
people not to be satisfied too quickly with the solutions to a problem, but to be always open to
even better ideas.

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2. Less is more

There is not always a need to invest a lot of money to arrive at the best idea. Innovation can be
realized with existing materials and sometimes the solution is close at hand.

3. Solutions already exist

TRIZ helps people define problems in terms of frequently used and general principles, which
enables searching for solutions outside their primary field of expertise.

4. Search for fundamental contradictions

Innovating equals problem solving, which mostly exist of contradictions. When these
contradictions are defined, the solution is often imminent.

5. Lines of evolution

Systems do not evolve randomly. There are fixed patterns that make the evolution of
technology predictable.

3. SCAMPER

SCAMPER was first introduced by Bob Eberle to address targeted questions that help solve
problems or ignite creativity during brainstorming meetings. The name SCAMPER is acronym
for seven techniques; (S) substitute, (C) combine, (A) adapt, (M) modify, (P) put to another
use, (E) eliminate and (R) reverse. These keywords represent the necessary questions addressed
during the creative thinking meeting.

How do SCAMPER technique work?

During the need for critical thinking either alone or inside a group, forcing the mind to think in
a specific flow can help emerging innovative ideas that won’t be possible to reach using a
regular thinking flow. The SCAMPER technique aims to provide seven different thinking
approaches to find innovative ideas and solutions.
There are two main concepts to keep in mind before starting the brainstorming using the
SCAMPER technique; yet there is no sequential flow to follow while moving from each of the

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seven thinking techniques. Unlike Disney’s creative strategy method, SCAMPER facilitators
can move between different techniques without restricted to a specific flow. Secondly, the
principle of force fitting should be adapted during the thinking sessions. For example, any
response to the SCAMPER technique is welcomed no matter how non-logical is it. The seven
SCAMPER techniques include the following:

1. Substitute
The substitute technique focuses on the parts in the product, service or solution that can be
replaced with another. During this part of the discussion the meeting attendees focus on making
decisions to substitute part of the process with another. Questions asked during this part are:

 What part of the process can be substituted without affecting the whole project?
 Who or what can be substituted without affecting the process?
 What part in the process can be replaced with better alternatives?
 Can the project time or place be replaced?
 What will happen when we replace part of the project with another?
 Where else could you sell the product?
 Could we use another alternative of X?
 Can we substitute the current device with another better one?
 Can we replace the process with simpler one?
The substitute technique tends to provide alternative solutions for decision makers to evaluate
different solutions in order to reach the final action.
2. Combine
The combine technique tends to analyze the possibility of merging two ideas, stages of the
process or product in one single more efficient output. In some cases, combining two
innovative ideas can lead to a new product or technology which leads to market strength. For
example, merging phone technology with digital camera produced a new revolutionary product
in the telecommunications industry. The combine technique discussion can include the
following questions:

 Can we merge two steps of the process?

 Can we apply two processes at the same time?
 Can our company combine resources with another partner in the market?
 Can we mix two or more components together?
 Can we combine X and Y technologies?

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3. Adapt
Adapt refers to a brainstorming discussion that aims to adjust or tweak product or service for a
better output. This adjustment can range between minor changes to radical changes in the whole
project. Adaption is one of the efficient techniques to solve problems through enhancing the
existing system. The adapt technique brainstorming session can include the following
questions:

 What would we need to change to reach better results?

 What else could be done in this specific task?
 How can we improve the existing process?
 How can we adjust the existing product?
 How can we make the process more flexible?
4. Modify, minify or magnify
The modify technique refers to changing the process in a way that unleashes more innovative
capabilities or solves problems. This change is more that just adjustment as it focuses on the
overall process. For example, it can target reducing the project’s process or change our
perspective of how to look at the problem. The questions asked under this rubric include:

 How will modifying the process improve results?

 What if we had a double consumer base?
 If the market was different, what would the process look like?
 Can we change the process to work more efficiently?
 What if the product is double the current size?
5. Put to another use
This technique concerns how to put the current product or process in another purpose or how
to use the existing product to solve problems. For example, this technique can be used to learn
how to shift an existing product to another market segment or user type. The questions in this
technique can include the following:
 What other parts in the company can use the product?
 What are the benefits for the product if used elsewhere?
 What if we target another market segmentation for the current product?
 Can we add a specific step into the process to replace another?
 What are other ways can we use it?
 Can we recycle the waste for another use?

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6. Eliminate or elaborate
As the name implies, this technique aims to identify the parts of the process that can be
eliminated to improve the process product or service. It also helps to explore the unnecessary
parts of the project. Questions related to this part includes:

 What would happened if we removed this part?

 How can we achieve the same output without specific part of the project?
 Do we need this specific part?
 What would we do if we had to work with half the resources?
In some situations, the unnecessary resources or steps in the process provide extra load for the
project to achieve innovation and creativity. Eliminating these resources extends the ability to
innovate and allocate more resources for creativity within the organizations.

7. Reverse
Finally, the reverse or rearrange technique aims to explore the innovative potential when
changing the order of the process in the production line. Reversing the process or part of it can
help solving problems or produce more innovative output. The questions in this part include:

 What would happened if we reverse the process?

 How can we rearrange the current status for better output?
 What if we consider it backwards?
 Can we interchange elements?

Conclusion

The SCAMPER technique is one of the easiest and direct methods for creative thinking and
problem-solving through a number of techniques or question types; (S) substitute, (C) combine,
(A) adapt, (M) modify, (P) put to another use, (E) eliminate and (R) reverse. These types can
be used to explore problems from seven perspectives. This holistic technique of study helps
reaching the best decision which fuels innovation and creativity.

SYSTEMATIC AND ANALYTICAL METHODS AND TECHNIQUES OF

INNOVATION

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1. 3C Analysis

The 3 C’s of marketing, a strategic marketing concept, is a very popular concept for marketers.
This concept takes into consideration 3 variables to explain a complete marketing strategy.
These 3 variables are dynamic in nature and fully depend on each other. In case of any variable
changes, it affects the other variables as well.

The 3 C’s of marketing strategy are

 The Customer
 The Company
 The Competitors
The strategic 3 C’s of Marketing is a strategic triangle when integrated, a sustainable
competitive advantage can be achieved. Customers have different wants and needs. The
company find out these wants and offer products and services. To fulfill their customer wants
and needs the company offers low cost and differentiated products from their competitors.
Similarly, competitors also try to offer a differentiated product to have a competitive advantage.

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his concept of marketing strategy focuses on the dynamic and interrelated relationship of 3 Cs
Here I will explain these 3 variables with examples.

 The Customers
Customers are the important part of any business. If your company customers are loyal it will
be difficult for your competitors to penetrate. In case you don’t have loyal customers, it will be
difficult for you to penetrate. When do a customer analysis keeping the mind the following
question?

 Who are your customers? what are their demographics? They are men or women, what is
their disposable income?
 Why do they buy? Are they looking for value, economy or prestige?
 How many customers do we have in present and future?
 They are satisfied customers and are looking for improvements
 What is their decision-making process?
 What are the different segments in the market?
 Who are the most valuable customers for our brand?
Use detailed interviews and questionnaires to collect the relevant data. We can create charts,
diagrams variety for reports using the Business Analytical Data. By this way, you can reach to
the most appropriate customers and sever them for a longer time.

 The Competitors
Customer has always a choice to buy from your company or your competitors. you should
always create a unique value proposition than your competitors’ UPS, for example, Lululemon,
Nike and Under Armour.

Ask the questions when conducting a competitors’ analysis.

 Do the customers buy for us or from competitors as well.

 Who are those competitors?
 What value proposition the offer we don’t?
 What are the competitor goals and accomplishments?
 What are the strengths and weaknesses in terms of competitive advantages?
You can collect competitor analysis data by conducting research, gather competitive
information then analyze competitive information and determine what is your own competitive

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position. You can use their website, newsletters and annual reports and utilize your sales force
to access competitive information.

 The Company
You can stand out of crowd and reach your target customer if you have a completive advantage.
Your company can achieve it by cost leadership strategies and product differentiation
strategies.

 How is the market where the company competes? Do products are commodities or can
they be differentiated?
 Estimate the full product cost. This cost gives you a lower bound for pricing.
 Estimate the value of the product to the potential buyers. This value gives you an upper
bound for pricing.
 Investigate your competitors’ pricing strategies. How do their products and prices compare
to your company?
 Set prices and take into account all these inputs.
The 3 C’s of marketing strategy is focused on certain grounds i.e. if you are unable to capture
the audience, someone else will capture it. According to 3 Cs model, strategists should focus
on customers, competitors and company or corporation for a competitive edge.

2. PEST analysis

Closely linked to the SWOT approach (Strengths, Weaknesses, Opportunities and Threats) this
is a simple way of developing a map of the factors and forces in the environment which affect
the strategic challenges and opportunities facing an organization. The idea is to consider these
elements under four headings:

 Political – changes in legislation, regulation, popular opinion, etc. which might have an
effect on the rate and direction of innovation

 Economic – shifts in the economic landscape – for example the rapid growth of emerging
markets in the Far East, Latin America and Africa represent opportunities whereas the
current slowdown in Europe poses challenges.

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 Social – trends and patterns in the underlying social structure and behaviour. For example
the ageing population, the rise of social networking and the growing concern for the
environment would all be relevant social trends

 Technological – emergence of new technologies, changes in the rate and direction of

progress along existing trajectories, competence enhancing and destroying technologies,
etc.

PEST analysis is used as part of a wider review of strategy and the main aim is to stimulate
discussion and exploration. The results can be simply listed or arranged into a matrix or
sometimes represented as a rich picture.

3. SWOT ANALYSIS
The organization can form the strategy based on the different factors as following:

 Strength-Opportunity (S-O) – strategies target the opportunities that fit well with the
innovative product strength.
 Weakness-Opportunities (W-O) – strategies targets overcoming the weakness to build
opportunities for the new product or service.
 Strength-Threats (S-T) – strategies aim to identify the methods to use the product’s strengths
to reduce the threats and market risk.
 Weakness-Threads (W-T) – strategies which builds a plan that prevent the product’s
weakness from being influenced by external threats. 
Using the SWOT Analysis tool

The SWOT analysis tool can be used on two different approaches. The first approach is an
icebreaker tool used during strategic planning meetings. The second approach is as a tool for
building strategy or exploring innovation.
The SWOT analysis depends on asking questions and finding answers related to each factor;
strengths, weakness, opportunity and threats.

Strengths
 What are the advantages of the new product or service?
 What are the product advantages over similar competitors in market?
 What strength points do people see in the product or service?
 What are the product’s unique selling factors?

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Weakness
 What weakness could be improved in the design?
 What issues should be avoided?
 What are the factors that reduce your sales?
 Does the production process have limited resources?
Opportunities
 What are the opportunities for the new product?
 What are the trends to take advantage of?
 How can we turn strengths into opportunities?
 Are there any changes in the market or government which can lead to opportunities?
Threats
 Who are the existing or potential competitors?
 What are the factors that can put business into risk?
 What issues can threaten the product on the market?
 Will there be any shifts in consumer behavior, government or market that can affect the product
success?
SWOT Analysis Example
As mentioned earlier the SWOT analysis is initially used to evaluate and build organizational
structure. But it can be applied in evaluating the success of new innovative products. In order
to understand how to use the SWOT analysis tool, below is an example that shows the SWOT
analysis for a new product development.

A company is specialized in designing mobile applications and would like to evaluate the idea
of creating a new mobile application called Y App. The application is designed to create a
social network for over-weight people to help them to succeed in their diet and build a
challenging environment between them to help achieve their goals.

In order to evaluate the project idea, the company used a SWOT analysis template as in the
following. You can download the SWOT Analysis template at the end of this article:

Strengths:
 Knowledge and experience: Our team has the skills and experience to build a professional
application at responsible cost and high quality. 
 Creativity and innovation: We have a talented design team that can create an eye-catching user
interface (UI)

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 Reputation: Along with our experience in the market, we have built a good reputation in the
mobile app development business
Weakness:
 Experience: although we have experience with the mobile app business, we did not build a
similar project before
 Brand: The new application needs to compete with powerful brands in the same niche of the
market
 Budget: Since this is a new application, the budget allocations are very limited
Opportunities:
 The project idea is unique and innovative which can lead the market
 There is an increasing number of people who seek this type of application
 The government is encouraging people to do more activities, which can be an opportunity to
increase sales
Threats:
 Many competitors are presenting their application at a very low price due to their long standing
in the market
 Many people think that all diet mobile application are the same, which may be challenge the
application to stand out in the crowd of competition

Based on the above SWOT analysis, the team has a clearer observation of the strengths,
weakness, opportunities and threats that can face the new product development (NPD). The
company may try to overcome the weakness and threats in order to turn the project into a
successful product.

4. Gap Analysis

It can be understood as a strategic tool used for analyzing the gap between the target and
anticipated results, by assessing the extent of the task and the ways, in which gap might be
bridged. It involves making a comparison of the present performance level of the entity or
business unit with that of standard established previously.

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 Gap Analysis

Gap Analysis is a process of diagnosing the gap between optimized distribution and integration
of resources and the current level of allocation. In this, the firm’s strengths, weakness,
opportunities, and threats are analyzed, and possible moves are examined. Alternative
strategies are selected on the basis of:

 Width of the gap

 Importance

 Chances of reduction

If the gap is narrow, stability strategy is the best alternative. However, when the gap is wide,
and the reason is environment opportunities, expansion strategy is appropriate, and if it is due
to the past and proposed bad performance, retrenchment strategies are the perfect option.

 Types ofGap

The term ‘strategy gap’ implies the variance between actual performance and the desired one,
as mentioned in the company’s mission, objectives, and strategy for reaching them. It is a threat
to the firm’s future performance, growth, and survival, which is likely to influence the
efficiency and effectiveness of the company. There are four types of Gap:

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1. Performance Gap: The difference between expected performance and the actual performance.
2. Product/Market Gap: The gap between budgeted sales and actual sales is termed as
product/market gap.
3. Profit Gap: The variance between a targeted and actual profit of the company.
4. Manpower Gap: When there is a lag between required number and quality of workforce and
actual strength in the organization, it is known as manpower gap.

For different types of gaps, various types of strategies are opted by the firm to get over it.

 Alternative Courses of Action

In case, gaps are discovered the company’s management has three alternatives:

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 Redefine the objectives: If there is any difference between objectives and forecast, first
and foremost the company’s top executives need to check whether the objectives are
realistic and achievable or not. If the objectives are intentionally set at a high level, the
company should redefine them.

 Do nothing: This is the least employed action, but it can be considered.

 Change the strategy: Lastly, to bridge the gap between the company’s objectives and
forecast, the entity can go for changing strategy, if the other two alternatives are considered
and rejected.

Before making any change in the strategy, one must consider that the gap exists between the
present and proposed state of affairs. It is too wide to be noticed, and the organization is
encouraged to reduce it. The company’s management is of the opinion that something can be
done to reduce it.

 Stages in Gap Analysis

1. Ascertain the present strategy: On what assumptions the existing strategy is based?
2. Predict the future environment: Is there any discrepancy in the assumption?
3. Determine the importance of gap between current and future environment: Are changes
in objectives or strategy required?

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Whether it is anticipated sales, profit, capacity or overall performance, they are always based
on the past, and present figures and some amount of guess are also involved in it. So, the
occurrence of the gap is quite natural, but if the gap is large, then it is a point to ponder because
it might have an adverse affect on the company’s future.

5. PORTER FIVE FORCES EVALUATION

Five external industry forces affecting an organization.

Definition

Porter’s five forces model

is an analysis tool that uses five industry forces to determine the intensity of competition in an
industry and its profitability level.

Understanding the tool

Five forces model was created by M. Porter in 1979 to understand how five key competitive
forces are affecting an industry. The five forces identified are:

These forces determine an industry structure and the level of competition in that industry. The
stronger competitive forces in the industry are the less profitable it is. An industry with low

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barriers to enter, having few buyers and suppliers but many substitute products and competitors
will be seen as very competitive and thus, not so attractive due to its low profitability.

It is every strategist’s job to evaluate company’s competitive position in the industry and to
identify what strengths or weakness can be exploited to strengthen that position. The tool is
very useful in formulating firm’s strategy as it reveals how powerful each of the five key forces
is in a particular industry.

Threat of new entrants. This force determines how easy (or not) it is to enter a particular
industry. If an industry is profitable and there are few barriers to enter, rivalry soon intensifies.
When more organizations compete for the same market share, profits start to fall. It is essential
for existing organizations to create high barriers to enter to deter new entrants. Threat of new
entrants is high when:

 Low amount of capital is required to enter a market;

 Existing companies can do little to retaliate;
 Existing firms do not possess patents, trademarks or do not have established brand
reputation;
 There is no government regulation;

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 Customer switching costs are low (it doesn’t cost a lot of money for a firm to switch to
other industries);
 There is low customer loyalty;
 Products are nearly identical;
 Economies of scale can be easily achieved.

Bargaining power of suppliers. Strong bargaining power allows suppliers to sell higher
priced or low quality raw materials to their buyers. This directly affects the buying firms’
profits because it has to pay more for materials. Suppliers have strong bargaining power when:

 There are few suppliers but many buyers;

 Suppliers are large and threaten to forward integrate;
 Few substitute raw materials exist;
 Suppliers hold scarce resources;
 Cost of switching raw materials is especially high.

Bargaining power of buyers. Buyers have the power to demand lower price or higher product
quality from industry producers when their bargaining power is strong. Lower price means
lower revenues for the producer, while higher quality products usually raise production costs.
Both scenarios result in lower profits for producers. Buyers exert strong bargaining power
when:

 Buying in large quantities or control many access points to the final customer;
 Only few buyers exist;
 Switching costs to other supplier are low;
 They threaten to backward integrate;
 There are many substitutes;
 Buyers are price sensitive.

Threat of substitutes. This force is especially threatening when buyers can easily find
substitute products with attractive prices or better quality and when buyers can switch from
one product or service to another with little cost. For example, to switch from coffee to tea
doesn’t cost anything, unlike switching from car to bicycle.

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Rivalry among existing competitors. This force is the major determinant on how competitive
and profitable an industry is. In competitive industry, firms have to compete aggressively for a
market share, which results in low profits. Rivalry among competitors is intense when:

 There are many competitors;

 Exit barriers are high;
 Industry of growth is slow or negative;
 Products are not differentiated and can be easily substituted;
 Competitors are of equal size;
 Low customer loyalty.

Although, Porter originally introduced five forces affecting an industry, scholars have
suggested including the sixth force: complements. Complements increase the demand of the
primary product with which they are used, thus, increasing firm’s and industry’s profit
potential. For example, iTunes was created to complement iPod and added value for both
products. As a result, both iTunes and iPod sales increased, increasing Apple’s profits.

Using the tool

We now understand that Porter’s five forces framework is used to analyze industry’s
competitive forces and to shape organization’s strategy according to the results of the analysis.
But how to use this tool? We have identified the following steps:

 Step 1. Gather the information on each of the five forces

 Step 2. Analyze the results and display them on a diagram
 Step 3. Formulate strategies based on the conclusions

Step 1. Gather the information on each of the five forces. What managers should do during
this step is to gather information about their industry and to check it against each of the factors
(such as “number of competitors in the industry”) influencing the force. We have already
identified the most important factors in the table below.

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Porter's Five Forces Factors

Threat of new entry

Amount of capital required

Retaliation by existing companies
Legal barriers (patents, copyrights, etc.)
Brand reputation
Product differentiation
Access to suppliers and distributors
Economies of scale
Sunk costs
Government regulation

Supplier power

Number of suppliers
Suppliers’ size
Ability to find substitute materials
Materials scarcity
Cost of switching to alternative materials
Threat of integrating forward

Buyer power

Number of buyers
Size of buyers
Size of each order

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Buyers’ cost of switching suppliers

There are many substitutes
Price sensitivity
Threat of integrating backward

Threat of substitutes

Number of substitutes
Performance of substitutes
Cost of changing

Rivalry among existing competitors

Number of competitors
Cost of leaving an industry
Industry growth rate and size
Product differentiation
Competitors’ size
Customer loyalty
Threat of horizontal integration
Level of advertising expense

Step 2. Analyze the results and display them on a diagram. After gathering all the
information, you should analyze it and determine how each force is affecting an industry. For
example, if there are many companies of equal size operating in the slow growth industry, it
means that rivalry between existing companies is strong. Remember that five forces affect
different industries differently so don’t use the same results of analysis for even similar
industries!

Step 3. Formulate strategies based on the conclusions. At this stage, managers should
formulate firm’s strategies using the results of the analysis For example, if it is hard to
achieve economies of scale in the market, the company should pursue cost leadership
strategy. Product development strategy should be used if the current market growth is slow
and the market is saturated.

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Although, Porter’s five forces is a great tool to analyze industry’s structure and use the results
to formulate firm’s strategy, it has its limitations and requires further analysis to be done,
such as SWOT, PEST or Value Chain analysis.

Example
This is Porter’s five forces analysis example for an automotive industry.

Porter's Five Forces Evaluation

Threat of new entry (very weak)

Large amount of capital required

High retaliation possible from existing companies, if new entrants would bring innovative products and
ideas to the industry
Few legal barriers protect existing companies from new entrants

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All automotive companies have established brand image and reputation

Products are mainly differentiated by design and engineering quality
New entrant could easily access suppliers and distributors
A firm has to produce at least 5 million (by some estimations) vehicles to be cost competitive, therefore it
is very hard to achieve economies of scale
Governments often protect their home markets by introducing high import taxes

Supplier power (weak)

Large number of suppliers

Some suppliers are large but the most of them are pretty small
Companies use another type of material (use one metal instead of another) but only to some extent
(plastic instead of metal)
Materials widely accessible
Suppliers do not pose any threat of forward integration

Buyer power (strong)

There are many buyers

Most of the buyers are individuals that buy one car, but corporates or governments usually buy large
fleets and can bargain for lower prices
It doesn’t cost much for buyers to switch to another brand of vehicle or to start using other type of
transportation
Buyers can easily choose alternative car brand
Buyers are price sensitive and their decision is often based on how much does a vehicle cost
Buyers do not threaten backward integration

Threat of substitutes (weak)

There are many alternative types of transportation, such as bicycles, motorcycles, trains, buses or planes
Substitutes can rarely offer the same convenience
Alternative types of transportation almost always cost less and sometimes are more environment
friendly

Competitive rivalry (very strong)

Moderate number of competitors

If a firm would decide to leave an industry it would incur huge losses, so most of the time it either
bankrupts or stays in automotive industry for the lifetime
Industry is very large but matured
Size of competing firm’s vary but they usually compete for different consumer segments
Customers are loyal to their brands

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There is moderate threat of being acquired by a competitor

6. What is the BCG Matrix?

The Boston Consulting group’s product portfolio matrix (BCG matrix) is designed to help with
long-term strategic planning, to help a business consider growth opportunities by reviewing its
portfolio of products to decide where to invest, to discontinue or develop products. It's also
known as the Growth/Share Matrix.

The Matrix is divided into 4 quadrants based on an analysis of market growth and relative
market share, as shown in the diagram below.

 1. Dogs: These are products with low growth or market share.

 2. Question marks or Problem Child: Products in high growth markets with low market
share.

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 3. Stars: Products in high growth markets with high market share.

 4. Cash cows: Products in low growth markets with high market share

Members can use our guide exploring classical marketing models to learn more about how to
apply them to real-world challenges. We also have a free guide for more recent digital
marketing models including our Smart Insights RACE digital marketing planning framework.

How to use the BCG Matrix?

To apply the BCG Matrix you can think of it as showing a portfolio of products or services, so
it tends to be more relevant to larger businesses with multiple services and markets. However,
marketers in smaller businesses can use similar portfolio thinking to their products or services
to boost leads and sales as we'll show at the end of this article.

Considering each of these quadrants, here are some recommendations on actions for each:

 Dog products: The usual marketing advice here is to aim to remove any dogs from your
product portfolio as they are a drain on resources.
However, this can be an over-simplification since it's possible to generate ongoing revenue with
little cost.

For example, in the automotive sector, when a car line ends, there is still a need for spare
parts. As SAAB ceased trading and producing new cars, a whole business emerged
providing SAAB parts.

 Question mark products: As the name suggests, it’s not known if they will become a star
or drop into the dog quadrant. These products often require significant investment to push
them into the star quadrant. The challenge is that a lot of investment may be required to get
a return. For example, Rovio, creators of the very successful Angry Birds game has
developed many other games you may not have heard of. Computer games companies often
develop hundreds of games before gaining one successful game. It’s not always easy to spot
the future star and this can result in potentially wasted funds.

 Star products: Can be the market leader though require ongoing investment to sustain.
They generate more ROI than other product categories.

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 Cash cow products: The simple rule here is to ‘Milk these products as much as possible
without killing the cow! Often mature, well-established products. The company Procter &
Gamble which manufactures Pampers nappies to Lynx deodorants has often been described
as a ‘cash cow company’.

Use the model as an overview of your products, rather than detailed analysis. If market share
is small, use the 'relevant market share' axis is based on your competitors rather than entire
market.

BCG Matrix Example: How it can be applied to digital marketing strategies?

The BCG Model is based on products rather than services, however, it does apply to both. You
could use this if reviewing a range of products, especially before starting to develop new
products.

Looking at the British retailer, Marks & Spencer, they have a wide range of products and many
different lines. We can identify every element of the BCG matrix across their ranges:

 Stars

Example: Lingerie. M&S was known as the place for ladies underwear at a time when choice
was limited. In a multi-channel environment, M&S lingerie is still the UK’s market leader with
high growth and high market share.

 Question Marks/Problem Child

Example: Food. For years M&S refused to consider food and today has over 400 Simply Food
stores across the UK. Whilst not a major supermarket, M&S Simply Food has a following
which demonstrates high growth and low market share.

 Cash Cows

Example: Classic range. Low growth and high market share, the M&S Classic range has
strong supporters.

 Dogs

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Example: Autograph range. A premium-priced range of men’s and women’s clothing, with
low market share and low growth. Although placed in the dog category, the premium pricing
means that it makes a financial contribution to the company.

You can also apply the BCG model to areas other than your product strategy.

For example, we developed this matrix as an example of how a brand might evaluate its
investment in various marketing channels. The medium is different, but the strategy remains
the same- milk the cows, don't waste money on the dogs, invest in the stars and give the
question marks some experimental funds to see if they can become stars.

Other more tactical uses of matrixes to support your digital marketing strategy development
include the Smart Insights :

 Content marketing matrix - Use to review your portfolio of content assets against
competitors

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 Content optimization matrix - Assess the value of your webs pages in generating leads and
sales

 Content distribution matrix - Review your options for building traffic for a website using
different channels - similar to the chart above

Using the BCG matrix to strategize

Now that you know where each business unit or product stands, you can evaluate them
objectively. Build. Increase investment in a product to increase its market share. For example,
you can push a question mark into a star and, finally, a cash cow.
1. Hold. If you can't invest more into a product, hold it in the same quadrant and leave it be.
2. Harvest. Reduce your investment and try to take out the maximum cash flow from the
product, which increases its overall profitability (best for cash cows).
3. Divest. Release the amount of money already stuck in the business (best for dogs).

You need products in every quadrant in order to keep a healthy cash flow and have products
that can secure your future.

7. PRODUCT LIFE CYCLE ANALYSIS

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As consumers, we buy millions of products every year. And just like us, these products have a
life cycle. Older, long-established products eventually become less popular, while in contrast,
the demand for new, more modern goods usually increases quite rapidly after they are
launched.

Because most companies understand the different product life cycle stages, and that the
products they sell all have a limited lifespan, the majority of them will invest heavily in new
product development in order to make sure that their businesses continue to grow.

Product Life Cycle Stages Explained

The product life cycle has 4 very clearly defined stages, each with its own characteristics that
mean different things for business that are trying to manage the life cycle of their particular
products.

Introduction Stage – This stage of the cycle could be the most expensive for a company
launching a new product. The size of the market for the product is small, which means sales
are low, although they will be increasing. On the other hand, the cost of things like research
and development, consumer testing, and the marketing needed to launch the product can be
very high, especially if it’s a competitive sector.

Growth Stage – The growth stage is typically characterized by a strong growth in sales and
profits, and because the company can start to benefit from economies of scale in production,
the profit margins, as well as the overall amount of profit, will increase. This makes it possible
for businesses to invest more money in the promotional activity to maximize the potential of
this growth stage.

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Maturity Stage – During the maturity stage, the product is established and the aim for the
manufacturer is now to maintain the market share they have built up. This is probably the most
competitive time for most products and businesses need to invest wisely in any marketing they
undertake. They also need to consider any product modifications or improvements to the
production process which might give them a competitive advantage.

Decline Stage – Eventually, the market for a product will start to shrink, and this is what’s
known as the decline stage. This shrinkage could be due to the market becoming saturated (i.e.
all the customers who will buy the product have already purchased it), or because the
consumers are switching to a different type of product. While this decline may be inevitable, it
may still be possible for companies to make some profit by switching to less-expensive
production methods and cheaper markets.

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8. Value Analysis:
1. Meaning of Value Analysis
2. Types of Value Analysis
3. Procedure
4. Advantages.
Meaning of Value Analysis:
 Value analysis is one of the newer scientific aids to managerial decision-making. It
comprises a group of techniques aimed at the systematic identification of unnecessary
costs in a product or service and efficiently eliminating them without impairing its
quality and efficiency.

 It can also be defined as a systematic analysis and evaluation of techniques and

functions in the various areas of a concern with a view to exploring channels of
performance improvement so that the value attached to a particular product or service
may be improved.

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 It endeavors to achieve the maximum possible value for a given cost by a continuous
process of planned action and aims at cost reduction from the point of view of value.

 Although initially the group of techniques, aimed at the systematic identification of

unnecessary costs and exploring channels of performance improvement, was used
mostly in the engineering field which gave it the name of value engineering, it is now
used in the various areas of a concern such as marketing, purchasing, financing etc.

 Keeping in view the wide applicability of this technique, value analysis is now used
instead of value engineering.

 Value analysis involves a creative approach for finding out unnecessary costs. Such
costs are those costs which though incurred on a product or service, are unnecessary
and do not improve its quality or efficiency, give it a better appearance, prolong its life,
nor provide any additional satisfaction to the customer.

 By eliminating these costs; the cost of the product or service can be reduced, and the
sales and the resulting profit proportionately increased.

 Value analysis is an effective tool for cost reduction. Cost reduction may be achieved
by economizing expenditure and increasing productivity whereas value analysis probes
into the economic attributes of value. In value analysis it is possible to improve
performance, increase the value of a product and thus reduce costs by a continuous
process of planned action.

 Value analysis lays emphasis on searching out new ideas while cost reduction is usually
confined to already known facts. Hence, value analysis is not a substitution for cost
reduction methods but it is a completely different procedure for accomplishment of
greater results leading to the elimination of unnecessary costs and value improvement
of a product or service.

 Value analysis is sometimes taken as value engineering. There is no doubt that value
engineering is an important aspect of value analysis and is concerned with production
technology, product designing, fabrication and quality control.

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 Broadly speaking value engineering is mainly concerned with production while value
analysis goes up to the marketing stage for the systematic identification of unnecessary
costs and efficiently eliminating them. The scope of value analysis thus is broad and
extends to all operations of an organisation where cost is incurred.

Types of Value Analysis:

The term, value is used in a broader sense and it has different meanings for different persons.
For example, for a designer, value means quality of the product designed and efficiency of the
product produced; for a salesman, it would be the price of the product at which it can be sold
in the market; and for the management, value would be the return on capital employed.
An industrial product may have the following types of value:
a. Use Value:
There are certain characteristics of a product which make it useful for certain purposes. For
example, a book of Cost Accountancy if written for ICWA—Inter students, has a use value
provided it serves the purpose of such category of students. It measures the quality of
performance of a product. Use value may be primary use value, secondary use value and
auxiliary use value.

Primary use value indicates the attributes of a product which are essential for its performance
as engine, steering wheel and axle in a motor car without which car cannot run. Secondary use
value refers to such devices as bonnet or the mudguard or the windscreen without which motor
car can be driven but these are necessary for the protection of engine and other parts.

Auxiliary use value is essential for better control and operation as speed meter, electric horn
etc in motor car.

b. Esteem Value:
Certain properties of a product do not increase its utility or performance but they make it
esteemable which would induce customers to purchase the product. For example, a watch with
gold cover has esteem value. A rich customer may prefer a watch with gold cover although a
watch with a steel cover may serve the same purpose of keeping time.

Some products may have both use as well as esteem value and yet both may be important. For
example, a fountain pen with a gold plated body will have both use and esteem value as it will
not only look better but will also last longer.

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c. Cost Value:
This value is measured in terms of cost involved. In case of a manufacturing concern it refers
to the cost of production of the product produced and if some part of the product is purchased
from outside, it means cost of purchase of that part.

d. Exchange Value:
Certain characteristics of a product facilitate its exchange for something else and what we get
is the exchange value of that product. It is equivalent to its sale value. All these values play an
important part in our personal lives, but in value analysis, we are mainly concerned with use
value and to some extent to the esteem value.

All other valued should be subordinated to use value in varying degrees. Value of a product
manufactured for sale is the least amount spent in manufacturing it to create appropriate use
and esteem values. Thus, value analysis seeks to provide the different values required in a
product or service at the least cost without impairing its quality, efficiency and attractiveness.

Procedure of Value Analysis:

Following points should be considered for putting a scheme of value analysis in operation:
a. Identification and definition of the problem, i.e. ascertaining whether the customer is being
given the full use value and esteem value for the product he purchases and if not, what is
required to be done. In case of raw materials and components performance, satisfaction in
subsequent production or processes is to be seen.

b. The feasibility of the alternatives and exploring the best method of performing the work at
the minimum cost. For this purpose all relevant facts like drawing and design, material
specifications, material, labour, overhead and other costs, market competition etc. are
considered before proceeding farther with the job of value analysis.

c. The investment, if any, required for the alternative.

d. Percentage of the return on new investment. This return should be equal to or more than the
expected return on investment.

e. Costs resulting indirectly out of a decision to change to alternative like costs of items
becoming obsolete cost of training, etc.

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f. The benefits from the alternative like reduction in costs and increased revenue.

g. Recommendation of the final proposal for implementation after considering the above points
which will increase use value and or esteem value.

Value analysis requires a broad organisational framework, active involvement of various

departments and a combination of initiative, creative approach, knowledge and mature
personality in the person heading the value analysis team which generally includes a design
engineer, a production engineer, cost accountant, system expert, market analyst and experts
from other functional areas.

Advantages of Value Analysis:

Following are the main advantages of value analysis:
a. It is a powerful tool for cost reduction because its basic objective is the identification of
unnecessary costs in a product or service and efficiently eliminating them without impairing
its quality and efficiency. Reduction in cost will make available more profit to a firm.

b. It is a scientific tool for increasing the productivity of a concern because it aims at exploring
various alternatives for efficient use of all types of resources in employment and making
available goods and services of the kind and quality most wanted by customers at lower and
lower costs.

In this way, the manufacture of most suitable production is facilitated because value analysis
aims at giving highest use value and esteem value to customers.

c. It helps to keep management abreast of the latest technology and other developments because
value analysis aims at examining new methods and techniques of doing things with a view to
reducing the cost and increasing the value of the items.

d. It ensures the fullest possible use of resources because it aims at eliminating all unnecessary
costs.

e. It promotes innovation and creativity. It induces the creative ability of the staff because it
involves a creative approach for finding out unnecessary costs. Creativity develops new ideas
which, in turn, make available the least expensive alternative to do the same function.

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f. It creates proper atmosphere for increased efficiency because it aims at a continuing search
for improvement in efficiency.

g. It is helpful in any drive for import substitution because it explores new methods and
techniques of manufacturing indigenous goods which may serve the same purpose which
imported goods serve. Thus, it is helpful in saving precious foreign exchange.

h. It can be applied at all stages from the initial design stage of an item right up to the final
stage of its packing and despatch because it aims at identifying unnecessary costs at all levels
with a view to eliminating them systematically.

i. Customers’ needs are best served with the help of value analysis because it aims at production
of the most suitable products.

j. Value analysis helps in the implementation of the marketing concept because it lays emphasis
on the constant linking of production function with the marketing function.

k. Management effectiveness can be measured with the help of value analysis because any
saving in cost is treated as increased efficiency.

Financing Innovation
Why is finance important for innovation?

Finance plays a critical role in innovation as it allows organizations to conduct research, adopt
technologies necessary for inventions as well as develop and commercialize innovations.
Accessing external finance for innovation is an important challenge for firms . Firms can fund
innovation activities using a variety of funding instruments provided by different types of
financial intermediaries and investors. Access to external sources of finance is often
particularly challenging at the seed and early stages of business development as at this stage
companies face high barriers for accessing finance notably as they lack a track record.

What is the role of finance for innovation?

Both funding needs and funding availability are closely related to the stage of development of
the firm and its innovation projects.

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 In the initial phase when inventions are developed and research conducted, there is still
much uncertainty about what innovations will emerge, if any. This makes it very difficult
to obtain funding. These financial constraints are one of the reasons why policy typically
plays an important role at funding the early stages of technological development.

 At more advanced stages, with the development of prototypes and the commercialisation of
inventions, specialized investors who are skilled in assessing new technologies and can
handle risk, such as venture capitalists and business angels, become more willing to provide
funding.

 In the final stages, at the level of technology diffusion and adoption, once both technological
and market uncertainty have all but disappeared, more traditional suppliers can provide the
required funding to scale up operations as well as to finance purchasers interested in
adopting new innovations.

It is worth noting that even if the innovation process may involve the same stages in small start-
up and a large multinational, the sources of finance that they have available vary
significantly. Large firms can more easily finance their R&D activities, whether using internal
resources, getting a loan from a bank (using their tangible assets as collateral if required),
issuing bonds, or raising equity finance in the stock markets. Start-ups do not have as many
assets to use as collateral and their innovation investment is less diversified, and may also
represent a much larger share of their activities for really innovative firms. As a result, their
funding options are much more limited, and often need to rely on friends and family before
being able to access other sources of capital.
What are the sources of finance for innovation?

Firms can use either internal or external sources of finance to fund their innovation activities.

 The main internal source of finance is retained earnings, the profits accumulated over time
which have not been returned to shareholders. Firms typically prefer to use internal
financing rather than external financing as the latter can be very costly. As a result, there
are projects that firms would choose to undertake if they had sufficient internal resources

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available, but which will not be taken forward if firms need to access external finance to
develop them. In many cases firms do not have the option to access external financing.

 In contrast, external sources of financing includes debt and equity (as well as some hybrid
forms), which can be provided by individual investors (such as business angels), venture
capital funds, banks and capital markets (among others). Conditional on having to resort to
external funds, debt is generally preferred to equity, since if available debt is typically a
cheaper source of finance (even if still more expensive than internal funds).

What is the framework for financing innovation?

Markets require a set of well-functioning institutions in order to work, so institutional failures

can severely damage access to finance for innovators. This includes the following conditions:

 Intellectual property rights can facilitate access to finance for innovative firms, since they
turn knowledge into a commodity that, among others, can be used as collateral to obtain
funding, and also as an asset that can be salvaged by equity investors if the firm fails
(see Intellectual Property Rights - FI).

 The design of the bankruptcy code has an important influence on financiers’ decisions to
provide the funds to make it happen (see Bankruptcy regulation).

 Developed financial institutions (see Financial market development) are crucial for firms
that need external funding to invest in innovation. Financial market regulation
(see Financial market regulation) can shape how financial intermediaries evolve, and the
resulting structure of financial institutions in a country, which in turn may impact on the
types and sources of innovation activity.

External sources for financing innovation

External sources of finance are critical for firms’ innovation as firms typically lack internal
sources (e.g. retained earnings and profits) for financing their innovation projects. They
critically depend on how financial markets operate and on the rewards they provide to
innovators (see Markets and rewards for innovation).

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External sources for financing innovation include:

 Debt financing, which refers to opportunities for firms to secure public and private credit to
start and develop their businesses (i.e. loans from banks and public institutions), is used as
one of the most common tools for access to finance.

 Stock market financing, which refers to raising capital by issuing shares or common stock
in stock markets can also be used to obtain financing. Yet, it may be of limited relevance
for financing innovation whose outcome is uncertain and for innovative new venture, which
often have, at least initially, negative cash flows, untried business models and uncertain
prospects of success.

 Business angels: wealthy individual investors, typically with business experience, who act
as a source of equity and provide start-up capital (as well as expertise and access to
networks) to smaller firms in exchange for either convertible debt or equity. In recent times,
business angels are establishing networks in order to better link firms with investors.
Business angels attempt to identify firms which seem promising but lack the necessary
funds to implement innovative strategies. As a result, angel investors play a key role in
providing finance to younger firms.

 Venture capital: venture capital funds can be defined as pool of capital which is managed
professionally and is invested in private ventures using preferred stock or similar
instruments. Venture capital funds have developed significant expertise on how to undertake
due diligence for high-risk innovative firms as well as how to structure the contracts and
stage the funding provided in order to reduce the impact of informational asymmetries.

 Other types of finance, such as subsidies and grants from governments and international
organizations can also be critical given innovative businesses’ limited access to financial
markets.

Internal sources for financing innovation

Internal sources of finance are critical for firms’ innovation activities. This includes notably
retained earnings, the profits accumulated over time which have not been returned to
shareholders. Firms often use internal financing rather than external financing.

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Several factors shape firms’ decisions to allocate their own resources to financing innovation:

 Sources as diverse as money and capital provided by family and friends to start a business
as well as entrepreneurs’ personal financial resources can be important resources for
innovative entrepreneurs (see Private sources of funding). Private sources of funding are
often essential for start-ups since information asymmetries often render access to finance
on markets difficult. They can help entrepreneurs obtain debt financing, along with funding
from venture capital and business angels. Public policy can play a role by
establishing bankruptcy regulations so that innovative entrepreneurs will be more willing to
invest in innovative businesses.

 Large firms with multiple divisions can fund their innovation investments in one division,
even if a new one, with retained earnings from other divisions. In this case, corporate
headquarters allocate scarce funding across different divisions in an internal capital market,
using a variety of mechanisms to select what competing projects to fund. The importance
given to innovation activities will be particularly critical in this context (see Resource
allocation mechanisms within firms).

 The separation of ownership and control can also lead firms to display short-terminist
behaviour. This is a concern in particular for companies that are listed in the stock market
and have a diversified shareholder base. For a variety of reasons stock market prices may
fail to accurately reflect firms’ investments in innovation (among others) and the returns
that they are expected to generate in the long term. As a result, myopic behaviour by
financial intermediaries can sometimes punish management teams that heavily invest in
innovation activities, since investors observe lower profits today but fail to appreciate the
higher long-term profitability that is expected. There is an on-going debate on whether
private equity is a good alternative to focus managers’ attention on long-term profitability.
While it might insulate managers from having to satisfy market expectations, it might lead
to prioritize medium-term profitability (see Long-term and short-term profit objectives).

 Moreover, the competitive environment can impact how many internal resources are
available for innovation. Firms can recoup the fixed cost of investing in innovation by

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selling the resulting product at a price that is higher than the marginal cost of producing it.
Firms use a variety of strategies to sustain this mark-up, such as using intellectual property
(e.g., patent the invention), first-mover advantage (e.g., build a large consumer base) or
secrecy. However, these strategies are not always successful in practice, so if markets are
very competitive it can be difficult to sustain a mark-up to cover the costs of the innovation
process. This is why there is some research suggesting that there is an inverse-U-shaped
relationship between competition and innovation. Without competition there is very little
pressure to innovate, but with too much competition investors may be reluctant to fund
innovative activity if they fear that even if successful it will be difficult to capture the
benefits of this success (see Competitive environment and resources for innovation).

Finally, while having access to internal resources facilitates investment in innovation by

avoiding many of the challenges that arise for firms as they seek external sources of finance, it
also makes it easier to undertake potentially unproductive investments. Not being required to
convince external providers of finance gives managers the freedom to use their firms’ retained
earning with high discretionality. This can be good if it leads to profitable investment that
would not happen otherwise, but bad if CEOs spend these funds on activities that are beneficial
to them rather than to maximize long-term shareholder value.

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UNIT-3

Innovation marketing

It essentially comes from two important business terms which are innovation and marketing. In order to
understand innovation marketing it is essential to understand the meaning of the two words:

 Innovation – This is the process of coming up with new ideas that will be able to bring positive impact to the
business such as new products or services.

 Marketing – In a nutshell, this is the process where the producers communicate to the consumers about their
products and services. Marketing is essential for informing the customers and prospective customers about the
product, its features and why they should buy it.
A combination of both terms yields innovation marketing which is simply the implementation of a new
marketing method which has not been used earlier and normally involves a big change in the product design,
pricing, promotion and even packaging.

Other ways of innovation marketing may be such as launching the product in unconventional places, pricing
the product uniquely or promoting the product in a unique way.

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Why Innovation Marketing is used?

The main purpose of innovation marketing is to open up new markets and ultimately lead to an increase in the
business’ sales. Innovation marketing also aims at newly positioning the business’ products as well as
addressing the customers’ needs. As the dynamics of business keep changing on a daily basis, so are the
marketing strategies.

However, the old conventional marketing strategies are no longer effective due advancement of the business
world more so propelled by advancement in technology.

One of the main features that distinguishes innovation marketing is the fact that it signifies the company’s or
business departure from the old marketing strategies. Thus, innovation marketing should be able to highlight
the progress in business by using new marketing methods that have not been used before.

These new methods can be adopted from other businesses, basically by learning the market trends and
adapting to change, or, it can be a totally new marketing idea brought in by the business. These new
marketing methods can also be implemented on both new and existing products and services.

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Examples of Innovative Marketing strategies used by big businesses

In this digital era, competition in business has been taken a notch higher. Below are examples of some of the
innovation marketing strategies used by some world renowned companies to great success.

 Virgin America – This is an American airline that has been operation since 2007. The air travel industry is
considered one of the most challenging and demanding industries in business. One important aspect that keeps
airlines going is customer service and brand loyalty. However, this is not enough anymore and that is why
Virgin America went ahead and introduced a focus group program comprising of 30 frequent flyers and
customers who give feedbacks and generate ideas on how the airline can improve its services. The focus
group is in turn given discounts and rewards. One direct impact of the customers’ feedback was the
development of an in-flight social network which enables customers to connect during flights. The company

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again went ahead and released a six-hour video detailing an in-flight experience. This video won the award
for being the longest ad but it surely had an impact in propelling the name of the company.

 L’Oréal – This is a French cosmetics company with a strong foothold in the cosmetics industry all over the
world. One way in which cosmetic companies market their products is by having exhibitions where people get
to sample makeup as well as other cosmetics for free. In order to reach a wider customer base in this digital
world, L’Oréal developed an App called the L’Oréal makeup genius. This app allowed users to do a digital
makeover and by doing so they were able to sample the best makeups that suited their skin tones. The app was
a huge success, being downloaded more than seven millions times.

 Netflix – Currently Netflix is a household name. Within a very short period of time Netflix has transformed to
one of the largest companies in the world. It is no longer a video streaming channel only as they have been
able to produce some of the best movies in the recent past. Before growing and becoming one of the most
influential companies in the entertainment industry, Netflix embarked on a strategy they called “reverse
engineering Hollywood.” This involved collecting a large stockpile of data on the emerging trends and
marketing directly to satisfy customer needs as well as building a brand of their own.

Strategic considerations on innovation

Innovating corporate strategies could include the following considerations: what services or products need to
be reinvented or developed; what markets to compete in; what business models to develop; how to
optimize business processes; how to expand the customer base; how to position the company's brand in
relation to target customers; how to make the supply chain and value chain more efficient; and go-to-market
strategy. Strategic innovation is an organization's process of reinventing or redesigning its
corporate strategy to drive business growth, generate value for the company and its customers, and
create competitive advantage. This type of innovation is essential for organizations to adapt to the speed of
technology change.

Companies employing strategic innovation do not necessarily need to make changes to the goods and services
they sell to their customers, nor to the technologies that support these products, to be successful.
Strategic innovation often refers to innovation projects that occur at the executive level.

Strategic Innovation is the creation of growth strategies, new product categories, services or business models

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that change the game and generate significant new value for consumers, customers and the corporation.

Strategic innovation takes the road less travelled- it challenges an organization to look beyond its established
business boundaries and mental models and to participate in an open-minded, creative exploration of the
realm of the possibilities.

Strategic innovation calls for a holistic approach that operates on multiple levels. First, it blends on non-
traditional and traditional approaches to business strategy, deploying the practice of “Industry Foresight”,
“Consumer/customer Insight” and “Strategic Alignment” as a foundation, and supplementing them with more
conventional approaches and models.

Second, it combines two seemingly paradoxical mindsets: expensive, visionary thinking that imaginatively
explores long term possibilities; and pragmatic, down-to-earth implementation activities that lead to short-
term, measurable business impact.
The Seven Dimensions of StrategicInnovation

The Strategic Innovation framework weaves together seven dimensions to produce a portfolio of
outcomes that drive growth. These dimensions are:

AManagedInnovationProcess–CombiningNon--‐TraditionalandTraditional Approaches to
BusinessStrategy
Strategic Alignment – BuildingSupport
Industry Foresight – Understanding EmergingTrends
Consumer/CustomerInsight–UnderstandingArticulatedandUnarticulated Needs
CoreTechnologiesandCompetencies–LeveragingandExtendingCorporate Assets
Organizational Readiness – The Ability to TakeAction
DisciplinedImplementation–ManagingthePathFromInspirationToBusiness Impact
A Managed Innovation Process lies at the creative core of the approach. By facilitating the interplay
between external perspectives and an organization’s internal capabilities/practices – and by looking
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beyond the obvious – it is possible to inspire the corporate imagination to explore a diverse array of
newpossibilities.
The process is designed and managed to create Strategic Alignment – the enthusiastic internal support
among key stakeholders required to galvanize an organization around shared visions, goals and actions.
IndustryForesightprovidesa“top--‐down”perspectivethatseekstounderstandthe complex forces driving
change, including emerging and converging trends, new technologies, competitive dynamics, potential
dislocations and alternativescenarios.
Consumer/CustomerInsightprovidesa“bottom-­‐up”perspective,adeepunderstandingof both the articulated
(explicitly stated) and unarticulated (latent or unrecognized) needs of existing and potential
consumers/customers.
Core Technologies and Competencies is the set of internal capabilities, organizational competencies
and assets that could potentially be leveraged to deliver value to customers, including technologies,
intellectual property, brand equity and strategic relationships.
A company’s Organizational Readiness may drive or inhibit its ability to act upon and implement new
ideas and strategies, and to successfully manage the operational, political, cultural and financial demands
that will follow.
Lastly, success will be enabled or limited by an organization’s capacity for effective.

INNOVATION PLATFORM THAT INCORPORATE NEW PRODUCT

DEVELOPMENT
The future of your company is dependent upon it staying relevant. In this day and age, that means that new,
innovative products must keep pace with the marketplace. Product development lifecycle times are becoming
shorter and shorter to keep up with customer’s expectations and needs. While perhaps daunting, a short
lifecycle can optimize your company’s strengths by tightening processes and cutting out extra steps.
WHAT IS NEW PRODUCT DEVELOPMENT?
New Product Development (NPD) is the total process that takes a service or a product from conception to
market. New or rebranded products and services are meant to fill a consumer demand or an opportunity in the
marketplace. The steps in product development include drafting the concept, creating the design, developing

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the product or service, and defining the marketing.

A new product opens a whole new market: It can completely replace a current product, take over an existing
product, or simply broaden the market for something that already exists. Sometimes existing products are
introduced to new markets, repackaged, or marketed differently. New products can improve the use of a
company’s resources, launch a company into a new market or segment of the market, improve the relationship
a company has with its distributors, or increase or defend a company’s market share.
What is ‘platform innovation’?
Platform innovation is like a spring board. Once you have found and established your platform, you can use it
to propel new business concept to market easier, cheaper and faster, entering new markets and increasing the
frequency of sales transactions.
Take Amazon for example. From the innovative distribution of books, now, the question is not what they can
sell, but what they don’t yet sell. Recently Amazon added the super successful online shoe retailer, Zappo’s to
their stable. Books, shoes… why not anything that can be packaged and delivered to the endless “matrix” of
customers who know and trust the “platform’s” capabilities?
Platform Innovation is about taking a set of two to three strongest elements of your Competitive Advantage
and making it one, stand-alone, salable market offer – building the Brand as soon as the foundations emerge
to prevent early competition. NOTE that, just like with product innovation, to succeed, platform-based
business needs to lead with marketing excellence. Without marketing, the best product or concept will not
reach the market fast or consistently enough.
What makes them “platforms”?
Amazon: the mother of all modern day platforms. It found a niche that could be filled with technology and
logistics’ innovation. Add marketing and voila – a platform that can accommodate trains going in many
directions.
EBay: Like Amazon, it is capable of distributing almost any product or service. The difference is Product
creation and Distribution model on the Platform. Unlike Amazon, who sources and sells the products on its
platform (one-to-many), EBay has created platform for multiple users to create their own ‘shops’, fill them
with products and do their own ‘marketing’ (many-to-many). The strength of EBay, now supported by the
global Brand recognition, is in having a large network of users who depend on and therefor support the

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platform. In this way it is very much like Facebook, which has inseparably tied ‘lives’ of millions of users to
its platform.
Microsoft: Although there are now other alternatives and a lot of alienation towards this sometimes
‘unfriendly’ product, businesses are tied to it through sheer cost and convenience of change.
Dior / Chanel: Both brands can be described as an oldie but a goodie! The platform the Brand Name
associated with a specific market segment (world-wide) for personal luxury. This unwavering focus enables
them to consistently ‘spring-board’ into adjacencies: in both, the range of product categories and in new
market segments (age and geography) within the personal luxury market.
InfusionSoft: It’s one of the fastest growing CRM systems for Small-Medium business. There are dozens of
CRM systems out there, so why do I think InfusionSoft is a platform? Apart from a very good product
initially offered to SMEs – a fully integrated sales and marketing solution for building a sales pipeline – the
company is truly marketing-led. It managed to create an ecosystem of satellite businesses that derive their
livelihood from assisting InfusionSoft’s customers with using this great but complex software. These
businesses became the Brand’s evangelists, ensuring that customers would stick to the platform.
Jim’s Mowing: The ultimate franchise specialist. The platform here is a system that allows them to “Jim”
every mobile residential consumer service.
Teespring: Watch this space. Already showing signs of great commercial success and the leaders are fully
conscious of the platform they have created. Even the name says it all – presumably playing on words
referring to a winning movement.

Definitions of Innovation Platform

An innovation platform is a space for learning and change. It is a group of individuals (who often represent
organizations) with different backgrounds and interests: farmers, traders, food processors, researchers,
government officials etc. The members come together to diagnose problems, identify opportunities and find
ways to achieve their goals. They may design and implement activities as a platform, or coordinate activities
by individual members.
Who uses innovation platforms?
Various types of organizations use innovation platforms:

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• Agricultural research organizations use innovation platforms to help make their research more relevant and
to facilitate the adaptation and dissemination of findings. They force researchers to look beyond their own
disciplinary or commodity boundaries and consider the whole picture
• Development agencies and NGOs find them useful to identify areas for interventions, to ensure that the
interventions are appropriate for particular situations, and to enable stakeholders to influence policy making
and development activities
• Local and national governments use them to improve policy making, links with clients, and their outreach
services for citizens
• Donors regard innovation platforms as a way to improve the targeting and effectiveness of development
interventions. While they may sponsor innovation platforms, they are not normally members themselves.
Some stakeholders are crucial members of innovation platforms:
• Farmers and other rural people use innovation groups to express their interests and guide activities that are
intended to benefit them.
• The private sector, including traders, input suppliers, service providers, processors, wholesalers and retailers,
can benefit from innovation platforms that aim to boost economic activities and make value chains more
profitable.

 How innovation platforms work

Innovation platforms generally follow several steps.
• Initiate. Any stakeholder group can initiate innovation platforms, but it is usually a research or development
organization, a government agency or an NGO that does so. This organization identifies the broad focus area
of the innovation platform, identifies the various stakeholders, brings them together, and convenes the first
few meetings. It identifies someone to facilitate the innovation platform: perhaps one of its own staff, or
someone else from outside.
• Decide on focus. The platform members discuss the focus area and identify bottlenecks, problems and
opportunities. They may refine the focus further, expand it, or shift it to a different set of issues. They gather
information from various sources, including research findings, current practices, local knowledge and policy
guidelines.
• Identify options. The platform members decide what they want to do to solve the problems or take

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advantage of the opportunities that they have identified. The range of options may be wide. For example, they
may decide to test new varieties of a crop, explore ways to improve supplies of inputs, promote the marketing
of a product, or press for a change in government policy
 Test and refine solutions. Solutions must be tested and adapted to make sure they work. Farmers may
test new farming methods; traders may try offering more for higher grades of produce; an input
supplier may market-test a new type of product. The innovation may be a new technology (a new type
of seed or farming technique), or an institutional change (a policy adjustment or a new way to manage
marketing). The innovation platform coordinates these experiments and monitors whether they are
successful
• Develop capacity. In most cases, it is necessary to develop the capacity of different actors in order for the
solutions to succeed. Farmers may need training in a new technique; cooperatives may need help with
organization and bookkeeping; new ways may be needed to multiply and distribute seed or to manage the
marketing of produce. The innovation platform identifies these needs and finds ways to develop the capacity
required.
• Implement and scale up. If the innovation is successful, the innovation platform works with its member
groups to get it adopted widely. That may mean documenting and publicizing the innovation, arranging
training and study visits, persuading other groups to adopt it etc.
Benefits of innovation platforms
Strengths of innovation platforms include:
• They facilitate dialogue and understanding among stakeholders and provide a space for them to create a
common vision and mutual trust. They offer a neutral space to air disagreements and conflicts, and for
members to state their needs and requirements.
• They enable partners to identify the bottlenecks hindering innovation, and develop solutions beyond what
individual actors can achieve alone, for example, in infrastructure, institutional change and policy
development.
• They create motivation and a feeling of ownership of the solutions that they develop: People readily buy
into solutions they have been involved in developing.
• They facilitate upward communication. They enable weaker actors (such as small-scale farmers) to express

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their views on an equal basiswith powerful actors (such as processors or the government). They empower
communities to demand and negotiate for services from the government and support organizations.
• They lead to better-informed decisions. Innovation platforms enable joint learning and cooperation among
diverse actors to solve problems and reduce uncertainties. Farmers can learn how to sell their products;
policymakers gain evidence to use in creating a more enabling environment where innovations can happen.
• They contribute to capacity development. By improving communication, learning and exposure to new
people and ideas, innovation platforms help members to clarify their roles, organize themselves, and adapt to
unforeseen changes and new opportunities
• They make innovative research possible. Innovation platforms create opportunities for research to be
demand-driven, to find critical issues for investigation, and to disseminate research outputs. Platform
members are involved in the research process, and are more likely to be convinced by the findings.
• They enhance impact. Farmers can improve their agricultural productivity and profitability and improve
how they manage natural resources. Value chain actors can engage more effectively in the market. Policy
making can be more participatory and appropriate for solving issues on the ground.

Idea Generation

The first stage of the New Product Development is the idea generation. Ideas come from everywhere, can be
of any form, and can be numerous. This stage involves creating a large pool of ideas from various sources,
which include

 Internal sources – many companies give incentives to their employees to come up with workable ideas.
 SWOT analysis – Company may review its strength, weakness, opportunities and threats and come up
with a good feasible idea.
 Market research – Companies constantly reviews the changing needs, wants, and trends in the market.
 Customers – Sometimes reviews and feedbacks from the customers or even their ideas can help
companies generate new product ideas.

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 Competition – Competitors SWOT analysis can help the company generate ideas.
Idea Screening

Ideas can be many, but good ideas are few. This second step of new product development involves finding
those good and feasible ideas and discarding those which aren’t. Many factors play a part here, these include –

 Company’s strength,
 Company’s weakness,
 Customer needs,
 Ongoing trends,
 Expected ROI,
 Affordability, etc.
Concept Development & Testing

The third step of the new product development includes concept development and testing. A concept is a
detailed strategy or blueprint version of the idea. Basically, when an idea is developed in every aspect so as to
make it presentable, it is called a concept.
All the ideas that pass the screening stage are turned into concepts for testing purpose. You wouldn’t want to
launch a product without its concept being tested.

The concept is now brought to the target market. Some selected customers from the target group are chosen to
test the concept. Information is provided to them to help them visualize the product. It is followed by
questions from both sides. Business tries to know what the customer feels about the concept. Does the product
fulfil customer’s need or want? Will they buy it when it’s actually launched?
Their feedback helps the business to develop the concept further.

Business Strategy Analysis & Development

The testing results help the business in coming up with the final concept to be developed into a product.

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Now that the business has a finalized concept, it’s time for it to analyse and decide the marketing, branding,
and other business strategies that will be used. Estimated product profitability, marketing mix, and other
product strategies are decided for the product.
Other important analytics includes

 Competition of the product

 Costs involved
 Pricing strategies
 Breakeven point, etc.
Product Development

Once all the strategies are approved, the product concept is transformed into an actual tangible product. This
development stage of new product development results in building up of a prototype or a limited production
model. All the branding and other strategies decided previously are tested and applied in this stage.

WHAT IS THE PRODUCT DEVELOPMENT LIFECYCLE?

All of the previous processes outlined had aspects of new product development in them. However, the Product
Development Lifecycle (PDLC) encompasses every phase of a product, from the idea to retirement. You should
approach product planning with an organized, thoughtful process, so that you don’t have poorly implemented
products that are either unnecessary, unwanted, or overly expensive.

Many different PDLCs have been produced for product and service development, including separate ones for new
software development. However, experts recommend that your cycle reflects your company’s unique processes and
needs. Some example follow.

You can view PDLC at a high-level, including the four stages of the fuzzy front end, messy back end,
commercialization, and retirement.

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You can also look at PDLC in a quite detailed way, such as the following cycle:

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There are many methodologies that have been incorporated into product development. Many of these are familiar to
business professionals, as they have roots in Business Process Management concepts. These include:
 Lean Product Development (LPD): Lean product development uses the lean principles of innovation,
shortening development time, and redevelopment cycles, and employs low development costs, low production
cycles, and low production costs to develop new products. Allen Ward, who wrote Lean Product and Process
Development states that Lean principles increase innovation by a factor of ten, and increase the introduction of
new products by 400 to 500 percent. Lean divides new product development into what customers wish for,
want, and need.
 Design for Six Sigma (DFSS): DFSS is a process management technique that is related to the traditional Six
Sigma (SS) methodology. However, it differs from the traditional methodology in that DFSS does not focus on
improvement of an existing process or processes, but on preventing process problems at the beginning. DFSS,
like SS, focuses on measurement. Implement DFSS by performing these steps: define, measure, analyze,
design, verify (DMADV). By contrast, the steps in SS are define, measure, analyze, improve, control
(DMAIC).

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 Flexible Product Development: This methodology for product development is counter to many popular
development methodologies such as LPD and DFSS. This method encourages the company to continually
make changes, even late into development, by remaining agile. The techniques used to produce this agility
(which keeps the cost of change low) include modular architectures, experimentation and using an iterative
approach to design, set-based design, and allowing new processes to develop as the product develops.
In Flexible Product Development: Building Agility for Changing Markets, Preston Smith says that innovation
only declines when using processes like Six Sigma and Lean because they are much too rigid for breakthroughs
to happen.
 Quality Function Deployment (QFD): This methodology is a concurrent engineering approach where quality
is designed into products, not discovered as missing or present later. Quality is defined as when a product meets
the needs of the customer while providing value. QFD pays special attention to the “voice of the customer”
through interviews, surveys, focus groups, reports, and observation. This data is then put into a matrix for
product planning and designed from their inputs. QFD includes the whole company in product development,
including departments such as marketing, quality, engineering, and finance, which makes the approach more
balanced and realistic.
 User-Centered Design (UCD): Also known as user-driven development (UDD), this methodology places
usability at the core of each design step. You must validate each usability assumption in real world testing. The
biggest difference between UCD and everything else is that UCD optimizes how people already do things.
There is no movement toward changing their experience.
 Design for Manufacturing (DFM) and Design for Assembly (DFA): The manufacturing industry uses both
DFM and DFA, and are examples of concurrent engineering design. DFM designs with the idea that
manufacturing is easier to achieve, while DFA designs intentionally for the ease of assembly. Both have
specified rules to accomplish them.

WHAT IS PRODUCT DEVELOPMENT IN MARKETING?

Your product development marketing strategy helps you generate interest around your new or revamped product.
Your product marketing strategy incorporates your new product introduction process (NPI), which comes into effect
after completing the design and testing. This is the stage where manufacturing takes over. In other words, this is
where the prototype goes to full production and into a sale. NPI takes over where NPD leaves off.

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A product marketing strategy should include your customer analysis, product development, pricing, branding, and
sales and distribution plan. The following are a list of things you should do to be effective in your product marketing:

 Get Your Strategy Ready Early: Your customers should be able to understand what your product does, how
it compares to the competition, and what distinguishes it. You should be working on your marketing plan
before your product leaves the FFE, and firm it up through development.
 Use Social Media: Your should build your product’s landing page as soon as it is out of development and
vetted by your consumer test groups. Use your site’s available features to collect even more consumer
information for your launch. Continue to keep your product momentum going by building a Facebook page and
opening a Twitter account for your product.
 Get Internal Buy-in: Everyone in your company should be a cheerleader for the newest product. Further,
anyone in your company can have an idea about its promotion, so listen to all of them - gems can turn up in the
most unexpected places.
 Designate Your Goals and Budget: As your product is making its way, you will want to designate a team
responsible for its launch. Your team can put together a comprehensive marketing project and budget.
 Develop Your Marketing Materials: It's time to put together your product marketing support with content,
and your advertisement package. Internally, you will need to determine the product needs for customer support,
warranty, and repairs.

"Process innovation”

 It means the implementation of a new or significantly improved production or delivery method

(including significant changes in techniques, equipment and/or software). Minor changes or
improvements, an increase in production or service capabilities through the addition of manufacturing
or logistical systems which are very similar to those already in use, ceasing to use a process, simple
capital replacement or extension, changes resulting purely from changes in factor prices,
customisation, regular seasonal and other cyclical changes, trading of new or significantly improved
products are not considered innovations."
 Process innovation is the application or introduction of a new technology or method for doing
something that helps an organization remain competitive and meet customer demands.
 Process innovation happens when an organization solves an existing problem or performs an
existing business process in a radically different way that generates something highly beneficial to
those who perform the process, those who rely on the process or both. For example, the introduction of

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a completely new sequence to an existing production process that speeds production by 100%, thereby
saving the organization money and time, could be considered a process innovation.
 Organizations today often bring in new information technology systems or find ways to use older in
new ways at the forefront of their process innovation efforts.
 Process innovation is different from incremental innovation in both scope and size. Whereas
incremental or continuous improvements generate limited value, innovation generates improvements
that increase value by upward of 50%, 100% or even more. Some describe process innovation as
creating radical or game-changing shifts. In addition to the introduction of a radically new approach or
technology, process innovation generally requires a longer planning time and support from high-level
management. It’s also riskier than incremental improvements and requires a higher level
of cultural and structural change. Process innovation also typically impacts a broader portion of an
organization than do incremental improvements.
 Process innovation can generate value to either internal customers, including employees or the actual
organization itself, or it can create value to external customers, including business partners, end
users or actual consumers. Values stemming from process innovation include reducing the time it
takes to produce a product or perform a service; increasing the number of products produced or
services provided within a time frame; and reducing the costs per product produced or service
provided.
 Additionally, process innovation can generate significant gains in product quality and service levels.
Overall, an individual organization needs to see a significant increase in some of its key performance
indicators (KPIs) to be a true process innovation.

What process innovation is not

Process innovation should not be confused with process excellence or process improvement, both of
which refer to using the existing processes to achieve high performance. Here, continuous or incremental
innovations do not count as process innovation involves almost always a total change.

 Customization
 Minor improvements or changes in existing processes

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 A rise in service or production capabilities by adding logistical or manufacturing systems that are
similar to the ones in use
 Simple capital extension or replacement
 Changes that result only from the changes in factor prices, regular seasonal changes, or other
recurring changes
 Trading of new or considerably enhanced products
 Terminating the use of an existing process

Stages of process innovation

What you see below is a methodology for process innovation/ improvement efforts. These are the basic
steps for any kind of process innovation across sectors and geographies. The steps include deciding the
focus area of innovations and the use of tech tools, creating a multifunctional team, doing a pilot run,
addressing feedback, and rolling out the innovation for commercial use.

There are different stages of process innovation. While identifying and understanding opportunities,
exchanging and selecting ideas, and developing innovation are the usual steps, these are often restrictive
when it comes to process innovation. The most effective approaches to implement process innovation in
your business are using disruptive methodologies and design thinking.

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Source: Oceanit

Design thinking for process innovation

There are four stages of design thinking for making process innovation:

There are four stages of design thinking for making process innovation:

1. Inventing the future

This involves analyzing the situation in your industry and finding a solution based on what people really
need but don’t have yet. The focus of the process innovation for your organization can be either on your
internal customers or external customers.

2. Developing a prototype
Create a sample of the product or service idea you’ve come up with to test the waters.

3. Testing
Put your prototype to use and collect feedback from your end users to adapt your product or service to
their actual needs.

4. Implementing
Once you’ve defined the attributes of the new process, replicate it in your organization to bring about
real change.

Disruptive methodologies for innovating processes

It is hard to differentiate between these two methodologies as they have quite a lot in common. How you
can create disruptive innovation in your organization’s processes is by asking what task s your customers
need you, or anyone for that matter, to do for them—something that currently no one’s doing. The
approach to finding the answer to this question is similar to the steps in design thinking.

A few examples of process innovation

Simplify, automate, and eliminate was the mantra before the digital revolution. But now, organizations
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world over “rethink the way work gets done,” says Chris Brahm, who leads Bain’s global Advanced
Analytics practice. Think new digital technologies and what companies such as Uber or Amazon Web
Services offer.

For example, KLM Catering Services Schiphol employs the LEAN manufacturing approach. The Dutch
company even identifies the drink requirements to reduce waste and weight, which in turn results in
savings and sustainable production. At Genpact, a global professional services firm that drives digital-
led innovation and digitally-enabled intelligent operations for clients, process innovation initiatives are
of three kinds: generation of innovative insights, driving disruptive process improvements, and creation
of new analytical solutions. The company follows a structure idea management life cycle and nurtures an
ecosystem of partners, collaboration networks, innovation labs, and industry associations as enablers of
innovation. For instance, in one of its process innovation projects, Genpact’s innovation lab used
advanced analytics and domain expertise to help one of its client minimize loss from credit card
collection by USD175 million annually on a portfolio of 25 billion dollars. LEGO, a company that
continues to be one of the most innovative in the world, improved its core production processes with
four pilot projects—the LEGO Ideas project (remember Mindstorms?) would be considered a successful
outcome by anyone!

Conclusion
Along with product and business model innovation, process innovation is the foundation for superior
performance in any industry. Digitization throws new challenges at many organizations today. The only
way to react to those challenges and solve them effectively and efficiently is by implementing new
changes and quickly reinventing processes across verticals and geographies. New customer needs and
new technologies ensure that innovation is an everyday activity.

Relevant reads:
https://www.e-education.psu.edu/ba850/node/719

Service innovation
It means changing the way you serve your customers to create greater value for them and deliver more
revenue for your organization. Service Innovation is about providing better customer service, enhanced
products and customer experiences that are better than the previous. Delivering superior customer interactions
without compromising on financial gain and profits – is the kind of innovation that is important for business
success. Getting better at what you do, also leads to cutting down on the time spent on doing it and creating a
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culture of constant improvement.

To truly understand and anticipate the customer’s needs, a progressive outlook is necessary. Business success
cannot be guaranteed only by solving the problems at hand. Serving old wine in new bottles does not always
work either – customers can see through it. Understanding and keeping updated on customer needs and trends
should be the starting point to ultimately lead you to innovate. Innovation involves taking risks, doing what’s
not been done before, a willingness to fail and continuously try to get you to business success.
Service Innovation is a tougher prospect than those aimed at improving a product. Customer Service is
complex and subjective – what is good service for one customer is probably the worst experience for another.
Service Innovation must be focused on bringing about positive changes for the maximum number of
customers in your customer base. The arduousness being felt to bring about service innovation is because
hitherto service organizations have lasted with little or no innovation. So effectively there is innovation
benchmark or history to fall back on. With customers now becoming increasingly aware of their rights and
also the fact that competition is cut throat, even customer service now is expected to be innovative. For
example, banks earlier knew they had complete control over the procedures and processes and faced little or
no risk from customers having an impact on their business. However, now with easier rules and the vast
number of players within this industry alone, customers will not think twice before taking their money
elsewhere. Innovative products, increased number of branches, better trained and more competent staff and
round the clock customer service centres are some of the innovations now seen in this industry. Service
Innovation is now priority and is important for business success.
As discussed, customer expectations and increased awareness is the raison d’etre for this crazy scramble
towards service innovation. Companies now realize that unless they push the envelope on efficiency and
effectiveness of customer service they will be unable to survive. It would be almost impossible to survive if
they don’t keep working towards lowering costs and improving efficiency both in service and offerings.
Innovating in all areas ensures that they get better results since the margin for error will reduce and they will
be able to service their customers better in the first interaction. Customers can now clearly see that they are
the driving force behind any company and that companies are bending backwards to please them. The
innovation drive will therefore continue unabated since customers will not settle for anything less than the
best. They are investing in you and so will not stop expecting you to service them innovatively so that their

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lives are simpler and they get the best value for their money. They are shunning inferior quality service like
the plague and know they have many others they can go to. Tough call eh!?

Innovating in a service business works best if the innovations are: 1) aligned with your core purpose, 2) meet
a future consumer need and 3) can be executed by your organization.
https://www.forbes.com/sites/georgebradt/2013/02/20/three-imperatives-for-service-
innovation/#7d0ab08d3471

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What is service innovation?

A new service idea is an innovation if it:
• Is an intentional change in the service provided

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• Provides a new or substantially improved benefit to the customer

• Significantly improves the service firm’s profitability
• Can be duplicated from customer to customer Service firms innovate in three ways:
a) Changes to the service itself, or what is being offered. Innovative services are ones that did not exist
before, or that have been substantially redesigned to meet customers’ needs more effectively. These
innovations are the most obvious to your customer.
b) Changes to the service delivery process, or how the service is being provided. Innovative service processes
include new or improved production, delivery, or distribution methods often involving the incorporation of
new information technologies. The process innovation may involve significant changes in the roles of staff,
strategic partners, and/or customers. The most typical forms of innovation include increased accessibility and
changes in the degree of self-service.
c) Changes to the organisational and managerial structure, or how service provision is supported.
Organisational innovations include new or improved managerial techniques (e.g., total quality management,
quality assurance system), significantly revised organisational structures, and/or the implementation of new or
substantially changed corporate strategies. These innovations are the least obviousobvious to your customer.

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-
SERVICE DESIGN INNOVATION

History of Service Design

The term “service design” was coined by Lynn Shostack in 1982. Shostack proposed that
organizations develop an understanding of how behind-the-scenes processes interact with each
other because “leaving services to individual talent and managing the pieces rather than the whole
make a company more vulnerable and creates a service that reacts slowly to market needs and
opportunities.”
This is still true today, but the responsibility does not fall on only operations and management, as it
did twenty years ago. Practicing service design is the responsibility of the organization as a whole

Service Design Innovation is based on the idea that an effective service is built by gaining a deep
understanding of the interaction between service providers and the end user, including their wants, needs and
potential for co-creation. Students use a specific set of methods and processes based on design thinking. In
particular this course will require you to develop the ability to design user research, to facilitate stakeholder
workshops, and to project manage a service design process.
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Definition of service design

Service design is the practical and creative application of design tools and methods with the goal to develop or
improve services. It is the activity of orchestrating people, infrastructure, communication and material
components of a service in order to create value for all stakeholders involved, build a distinctive brand
experience and maximize business potential.

As the definition already states, service design is applied to develop or improve services. Service designers
have a service-oriented view of the world, where all interactions between a brand and a user are regarded as
services. E.g. looking at a drill: people don’t want a drill, they want the service of making a hole in the wall,
or even more: they want to keep the memory of their grandmother alive by hanging a frame to the wall. The
drill is just a material component to deliver the service.

Components of ‘Service Design’

In user experience design multiple components must be designed: visuals, features and commands,
copywriting, information architecture, and more. Not only should each component must be designed
correctly, but they also be integrated to create a total user experience. Service design follows the
same basic idea. There are several components, each one should be designed correctly, and all of
them should be integrated.
The three main components of service design are:
People. This component includes anyone who creates or uses the service, as well as individuals
who may be indirectly affected by the service.
Examples include:
 Employees
 Customers
 Fellow customers encountered throughout the service
 Partners
Props. This component refers to the physical or digital artifacts (including products) that are needed
to perform the service successfully.
Examples include:
 Physical space: storefront, teller window, conference room
 Digital environment through which the service is delivered
o Webpages
o Blogs
o Social Media
 Objects and collateral
o Digital files
o Physical products

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Processes. These are any workflows, procedures, or rituals performed by either the employee or
the user throughout a service.
Examples include:
 Withdrawing money from an ATM
 Getting an issue resolved over support
 Interviewing a new employee
 Sharing a file
Returning to the restaurant example, people would be farmers growing the produce, restaurant
managers, chefs, hosts, and servers. Props would include (amongst others): the kitchen,
ingredients, POS software, and uniforms. Processes would include: employees clocking in, servers
entering orders, cleaning dishes, and storing food.

Organizational Design Principles for Service Design

People are the key to service delivery and some basic principles for organizations can help them realize their
full potential:

 Work groups are to be organized so that they match the processes and the competencies required
 Individual workers will be given sufficient autonomy to make useful decisions.
 Work will take place in a location where it is done with the most efficiency.

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General Principles of Service Design

The general principles of service design are to focus the designer’s attention on generic requirements of all
services. They are complemented by principles that relate to process design, organizational design,
information design and technology design – we will come to these complementary principles in a few
moments.

The general principles of service design are:

 Services should be designed based on a genuine comprehension of the purpose of the service, the demand
for the service and the ability of the service provider to deliver that service.
 Services should be designed based on customer needs rather than the internal needs of the business.

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 Services should be designed to deliver a unified and efficient system rather than component-by-component
which can lead to poor overall service performance.
 Services should be designed based on creating value for users and customers and to be as efficient as
possible.
 Services should be designed on the understanding that special events (those that cause variation in general
processes) will be treated as common events (and processes designed to accommodate them)
 Services should always be designed with input from the users of the service
 Services can and should be prototyped before being developed in full
 Services must be designed in conjunction with a clear business case and model
 Services should be developed as a minimum viable service (MVS) and then deployed. They can then be
iterated and improved to add additional value based on user/customer feedback.
 Services should be designed and delivered in collaboration with all relevant stakeholders (both external and
internal)

EVALUATION OF INNOVATION

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How to Evaluate Ideas

Many organizations make mistakes in their idea review processes that result in rejecting the most potentially
innovative ideas in favor of less innovative ones, warns Jeffrey Baumgartner. Here are some ways to avoid
this unfortunate fate.
Organizational innovation is not just about generating creative business ideas. It is also about reviewing ideas
in order to identify those which are most likely to become successful innovations. Unfortunately, many
organizations make mistakes in their idea review processes that result in rejecting the most potentially
innovative ideas in favor of less innovative ones. In some instances, the idea review process is a simple matter
of a manager reading through a batch of ideas and selecting those she believes will work best for her firm.
This is most often the case in smaller firms run by a single owner and manager. In most medium to large
businesses, however, a structured evaluation process is necessary in order to:

 Identify the ideas that are most likely to succeed as innovations for the company.

 Ensure that complex ideas are reviewed by people with the appropriate expertise necessary to understand
what would be necessary to implement the idea – and what might go wrong.

 Enable a middle manager to defend the idea to senior management, stakeholders, and financial officers who
may need to grant budgetary approval of the idea.

 Make it possible to review a large number of ideas in a resource efficient manner.

 Improve the idea by identifying potential implementation problems and preparing suitable actions to
overcome those problems. Sadly, this last aspect is often lost in formal idea review procedures.

Methods

There are all kinds of idea review methods. We will look at three methods that we use, pass-fail evaluation,
evaluation matrices and SWOT analysis.

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Pass-fail evaluation

If there are a large number of ideas that need to be reviewed — for instance, you have run a company-wide
ideas campaign on a popular issue and have generated hundreds of ideas – a simple pass-fail evaluation is
often essential to bring the idea pool down to manageable levels. It is best to start with a simple criterion for
determining whether an idea will go on to a more in-depth evaluation. This criterion might be related to
budget, time-frames, fit with company culture or just practical viability. Whatever the criterion, it should be
made clear. If a colleague later asks what happened to her idea, you can explain why it did not pass this initial
stage. Knowing that her idea did not get implemented for a pragmatic reason – such as being too expensive to
implement – is more reassuring than having the idea rejected for no apparent reason. It is also important to be
careful that you are not too quick to reject ideas which, with modification, might meet the pass-fail criterion.
For example: a very creative idea that does not meet your budget criterion ought nevertheless to pass. You
may be able to determine a means of implementing the idea at lower cost. If there are few ideas, the pass-fail
evaluation is often not necessary. It is easier to move on to the more sophisticated evaluation matrix.

Evaluation matrix

The evaluation matrix is a simple array in which experts compare an idea with a set of criteria. In our
experience, five criteria is best as it allows for a rounded review without bogging the evaluators down in
unnecessary detail. The evaluator ranks how well the idea meets each criterion (we use a scale of 0-5 points
for each criterion). Evaluators are also encouraged to provide comments elaborating on their ratings and, in
particular, suggesting how the idea might be improved to overcome weaknesses. The evaluation matrix
provides a criterion by criterion score as well as an overall score for each idea. Assuming several ideas,
focusing on a particular problem or business issue, are being evaluated at the same time, these scores can be
compared and the highest scoring ideas can be selected for further review. However, it is important to look at
the evaluators’ comments. An idea with a low score might be vastly improved following minor changes. We
favor the evaluation matrix as the primary idea review approach because it is simple to set up, requires a
minimum amount of time for review enables comparative idea review and makes it easy to identify the most
promising ideas in a large collection of ideas. That said, the evaluation matrix in itself is not usually sufficient

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for making a final decision on an idea that may cost millions of Euro to implement. But it helps you select
ideas for more detailed review, thus making the review process more efficient.

SWOT analysis

An analysis of Strengths, Weaknesses, Opportunities and Threats (SWOT) is an old marketing stand-by and
as such is a useful follow up to an evaluation matrix. In the unlikely event you are unfamiliar with SWOT
analysis; it is a simple form in which reviewers indicate the potential strengths, weaknesses, opportunities and
threats of an idea. Because the SWOT analysis looks at an idea from different perspectives, it provides a more
rounded review of an idea than some methods. Our SWOT analysis approach includes a scoring system in
which reviewers give 0 to 5 points each for strengths and opportunities and takes away 0 to 5 points each for
weaknesses and threats. This provides a SWOT metric which can be handy for comparing large numbers of
ideas. We also ask evaluators to suggest methods to overcome weaknesses and threats.

Idea development

Once an idea passes these initial hurdles, it may be ready for implementation or it may require more detailed
testing. We call this phase of idea review: “idea development” as it is no longer a process of evaluating an
idea so much as a method to develop it for implementation. Idea development may include business case
preparation, prototype development, project management initiation or test marketing. There is not room
enough in this issue of Report 103 to go into idea development in detail – so we’ll save it for another issue.
Moreover, how a firm develops an idea depends on the nature of the idea, the nature of the firm and existing
processes for implementing ideas.

Criticism versus improvement

Over the years, I have noticed that business analysts tend to be overly critical of new ideas. This is
understandable; they are tasked with managing and minimizing risk. And creative ideas tend to be the riskiest.
As a result, many evaluators stress weaknesses and threats. On one hand, this is understandable. Your
company should not be implementing ideas that will prove to be costly failures. But, many weaknesses can

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readily be improved. An idea that would be very expensive to implement May, with minor changes, is
implemented at far lower cost. And by improving a creative idea’s weaknesses, you may be turning a costly
failure into a profitable success!

Evaluation teams

Evaluations should be performed by a team of people with relevant expertise. Ideally, that expertise should be
varied. For instance, if you are evaluating new product ideas for an electronic gadget, your experts might
include engineers, marketing people, retailers (who would sell the product) and one or more people
representative of the consumers expected to buy the new products.

Evaluator agendas and prejudices

A particular benefit to having teams review ideas is that while individual evaluators are prejudiced, a varied
team is likely to cancel such prejudices out. For example: an engineer trained in an older technology may well
be reluctant to give a high evaluation score to an idea that uses a new technology with which she is not
familiar. The success of such an idea might well threaten her job! A jealous manager might not like the fact
that her subordinates are more creative than her and so might give poor evaluation scores to creative ideas. At
the other end of the spectrum, creativity and innovation people like you and I are often too enthusiastic about
the most creative ideas and so give overly high scores for creativity. Sometimes, a less creative idea might
prove to be the more innovative (in terms of being profitable). By Jeffrey Baumgartner

People every day, whether in business or not, have bright ideas and make initial discoveries about new or
improved products, services or processes. Generating ideas and being innovative are important contributors to
success in business.

Any original concept, new or improved device, product, material, business model, process or service can be
considered an innovation. The true test of whether an innovation can become a business success is when:

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 a new device, product or service becomes accepted by the marketplace

 a new business model or process improvement delivers cost savings, efficiency gains or productivity
improvement that translates into a competitive advantage.

Very few innovations end up making money for their creators. Many factors can contribute to this low success
rate, such as:

 the innovation is not technically feasible

 there is little demand for it

 its development has been poorly planned

 it cannot be produced at competitive prices

 inadequate knowledge of the marketplace and competitors

 inadequate management skill to commercialize the innovation.

Before you invest scarce and valuable resources as well as time and energy in the quest to have your
innovation reach the marketplace, you can take some important steps to determine whether the innovation is,
or can become, commercially feasible.

This is also the least costly aspect of taking a new innovation to market. Evaluating your innovation’s
potential can save you that second mortgage on the family home, or give you the confidence to pursue further
development.

This guide explains the steps that will help you to evaluate your innovation and determine its viability in the
market and your next steps.

Is your innovation new?

The ability to fully exploit the potential of your new idea will depend on the intellectual property
(IP) underpinning the innovation (i.e. are you the first to conceptualize this new innovation?). A common
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starting point is to find out if anyone else has already created the idea and protected it through IP registration,
like patents, designs and trademark registrations.

You can search free online databases containing millions of registered IP records (e.g. patent databases,
design and trademark registers). Start with Australian databases, then progress through various international
databases in countries where you think your innovation would be successful.

If your search reveals that someone else has already created the innovation and has protected it, this may be
the end for your idea, unless you can cleverly differentiate or distinguish your innovation from the one you
have found. Beware: If you press ahead with the innovation and someone else has already protected it through
IP registration, you carry the real risk of infringing another's IP rights. This carries financial and civil
penalties. Seeking professional advice from an IP attorney is critical at this point.

If you find no prior innovation, then you have a good chance of taking your innovation further by seeking
formal registration.

Keeping records

To support your application, it will be useful to clearly prove ownership and/or commercialization rights of
the IP, such as laboratory notes/working papers and employment contracts that show when and how the IP
was developed, or an assignment agreement, licensing agreement etc.

Assess the commercial feasibility

The real test for whether your innovation will succeed is assessing its commercial feasibility. This will help
you decide whether your idea should be developed further. You should consider the factors and elements
commonly required for a business to profitably sell the innovation to a group of customers over a reasonable
timeframe to justify the venture. If a business can’t achieve sustainable profit from the new idea, or from
selling the innovation to customers, then it is generally unlikely to be commercially feasible.

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Assessing commercial feasibility needs to be distinguished from evaluating technical feasibility. A new idea
or innovation may be considered fit for its intended purpose, but that does not automatically mean it will be a
commercial success. Evaluating the commercial feasibility of your idea should be completed very early.

Demonstrate technical viability

Consumers buy products for the benefits they provide, not for the technology underlying the product. You
probably have a mental picture of your idea or innovation expressed as a product or process of some kind.
You have in mind how that final product or process looks, feels, provides benefit and, ultimately, will be used.
The end point of this feasibility exercise is to determine how you will make a sustainable profit from your
idea.

If you can show that your idea has commercial feasibility, the next step is to explore how to turn it into a
product or process. Ask yourself whether you have:

 developed a working model of the product or process

 evaluated the safety factors of the model

 evaluated the environmental factors

 evaluated the feasibility of producing the product or implementing the process

 measured how the product or process will perform

 developed a design for the product or process

 developed a design for the production process.

Prove that your idea works

How do you convert an idea into a product, or process, which:

 functions the way you intend

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 is reproducible in sufficient quantities

 is effectively delivered to the end user by the method you planned

 has the expected or intended benefits for the customer?

Before you consider mass product development or manufacturing activities based on a raw idea or concept
which hasn't been tested or validated, you should evaluate the technical feasibility.

This step will confirm whether the product will perform, and ensure there are no production barriers and the
final prepared product is of practical benefit. You have to prove that your idea and its product or service
actually works.

Undertake a proof of concept process

By undertaking a proof of concept (POC) process you are gathering sufficient evidence of the technical
viability of your product or service. Some commercial feasibility assumptions or conclusions may need to be
adjusted as new knowledge of the product emerges.

The POC stage generates knowledge about the product’s design, performance, production requirements, and
preliminary production costs. The end result is a working model known as a prototype.

Ideas are turned into operational form (not necessarily the final form). The core functionality of the idea is
tested, basic prototypes may be developed and IP registration can be established. It is essential that the results
of a POC are reproducible, and, if relevant, the quality expectations of the relevant regulatory community are
satisfied. The table below provides further clarification and detail of the typical activities that could be
involved in a POC. Some activities will involve:

 initial production of a new product prototype and testing that it can actually be used as planned

 running a new process for the first time and testing that it performs the desired transformation of
inputs to outputs

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 Delivering a service for the first time, testing that the expected benefits to recipients are realized and
that the delivery method is effective.

Typical activities involved before, during and after POC activities for certain product classes:

Biotechnology Engineering and Information technology

manufacturing and telecommunications

Research and  Research  Research  Research solutions

development solutions solutions  Requirements
 Identification of  Research analysis
lead compound components  System design
for trials  Establish  Functional
 Develop pre- specifications specification
clinical solutions  Process flow  Software
 Toxicity testing diagram requirements
 Optimisation  Process and documentation
instrumentation  Modelling
diagram  Build of first
 Modelling prototype (core
 Simulation innovation)
 Develop
solutions for
core innovations

Proof of concept  Animal testing  Build and test  Build first version
 Clinical trials full prototype of product
(phases I, II &  Integrate  Alpha, pilot testing

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Biotechnology Engineering and Information technology

manufacturing and telecommunications

III) components  System, load,

 Purification  Laboratory tests interoperability
 Small-scale field  Optimization testing
or greenhouse  Refine design  Platform support
testing  Integration  Integration
 Build and test  Optimization
full prototype  Implementation
and Quality
Assurance
documentation

Early stage  Some (but not  Field trials  Beta testing

commercialisatio all) clinical trials  Design  Field trials
n phase IV production  Test procedures
 Field trials process documentation
 Test procedures  Tool-up for trial
documentation production
 Trial production
 Test procedures
documentation

Some essential, yet generic, activities in the POC:

 examine the operational requirements of the product or process

 identify potential safety and environmental hazards

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 conduct a preliminary production assessment

 conduct a preliminary manufacturing assessment

 estimate engineering prototype costs.

Idea assessment worksheet

It's not all about how wonderful your new product or service is.

What matters is - will customers buy it?

This worksheet will help you to assess the practicality of turning your idea into a product or service which
customers will buy. The questions below cover important topics you should think about. You will not know
all the answers now but you should use these questions as a guide. When you have worked through them all,
you should have a good understanding of:

 your market

 your competitive advantage

 the laws, regulations and constraints relevant to your product or service

 your business model

 an intellectual property protection strategy

 your marketing strategy

 the business financial and investment requirements.

Assess your idea by typing your responses into this idea assessment chart.

Your idea and your target market

1. Briefly describe your idea or invention.

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2. Can you prove that your idea works? For example, have you built a working prototype?

3. Describe your target market (the sorts of customers who would buy your invention). How would your
product or service help them in their daily lives? For example, would it make doing a particular task quicker
and easier (like online shopping), or more convenient (like online banking)?

Your competitive advantage

4. What products or services do you think are your key competitors?

5. What is your competitive advantage?

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6. What makes your product or service much better value to the customer than what they already use or do?

Laws and regulations and constraints

7. What Australian or international regulations or laws apply to your idea? For example, regulations on
product safety or industry standards.

8. What other constraints apply to your idea? For example, regulations size, weight, packaging or power
source?

Your business model

9. What is your business model? How will your idea generate revenue?

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10. What would the supply chain for this product or service look like? Where would you fit in?

11. Have you developed relationships with the people or companies you need to work with to take your idea
to your customers?

Your intellectual property protection strategy

12. Have you protected your idea by obtaining a trademark, design right, patent, domain name for your
website, or other formal process?

13. Have you identified what would stop a competitor from producing something similar to your idea? For
example, you may have specialized equipment, a strong brand reputation, or access to particular suppliers.

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14. Have you checked that you are not accidentally copying another person’s idea or invention? If their idea is
legally protected (e.g. by a patent), you might be at risk of infringing their intellectual property.

Your marketing strategy

15. How are you going to find your customers?

16. How will they find out about your product or service?

17. What are some of the features or benefits of your product or service? How would you describe these to
potential customers?

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Your business financial and investment requirements

18. How much sales revenue will you need for your idea to be profitable after costs?

19. How much capital do you require from investors and how will you use it?

20. How much return on investment will your investors make? What’s in it for them?

EFFECTIVENESS EVALUATION OF INNOVATION

1. How do you measure innovation results and outcomes and motivate the organization to deliver

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across all stages of the process?

Innovation is a process that is best managed with a long term perspective, not necessarily measured in long
time increments (e.g., months, years) but rather in completion of targeted goals. This requires separating the
innovation process into three implementable stages: 1) identification of goals and exploration activities, 2)
short term deliverables and 3) near term development.

The first stage, identification of goals and exploration activities, defines the course of action and establishes
the motivational inspiration for the entire innovation process. Setting forth a vision for the innovation goal
and providing opportunities to explore various solutions enables innovator buy-in to the goal. Once the goal
has been identified, the steps that need to be accomplished for success can be prioritized, assigned to stage 2
or stage 3, and executed accordingly. It is important to realize that stage 2 and stage 3 are not static, and
should be routinely reviewed and updated. As goals in stage 2 are completed, some of those in stage 3 move
into stage 2 to provide the basis for a new set of measurable results and outcomes. It is management’s
responsibility to assess performance to goals in each stage and to determine when a goal has been completed
or moved into a different stage.

By splitting the execution phase into 2 stages, the innovation process is positioned to yield a continuous flow
of near term successes, which maintains innovator motivation. Furthermore, if corrections to the initial
strategy need to be implemented, they can be done in a timely fashion and at relatively low cost.

– Marc Chason, Motorola Labs

It is important to understand that a clear definition of what constitutes innovation is critical to the success of
measurement. If we define innovation as “people creating new value and capturing value in a new way ,”
there are basically three focal points to measure it:

 Past / current innovation performance

 The demonstrated ability to create and capture sustainable and profitable value from innovation

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 Future/expected innovation potential

 Effective/efficient innovation capacity

 The activated capacity to realize the firm’s full growth and innovation potential

Critical also to have a balanced group of metrics around all innovation management dimensions — innovation
strategy , innovation partnerships, innovation platforms, innovation portfolios, innovation process and
systems, innovation and entrepreneurship culture.

– Victor Fernandes, Natura

There are many key performance indicators (KPIs) that are talked about for measuring innovation
performance. One that is used by many companies is the “Innovation Sales Rate” (ISR). The ISR can be
variously defined, but usually is a measure of the percentage of sales that is sales of “new” products. No
doubt, this leaves room for a variety of interpretations, but still is a good measure.

Often, the average margin rates of new products are measured as a key innovation metric. The challenge in
large diversified companies comes from having an enterprise-wide description that is consistent and fair.
Some business units within a large corporation may be in a mature phase, while others may be like startups.
Different expectations have to be applied to these businesses. For motivation, the incentives have to be
skewed towards new product and innovative product sales and margin performance. I advocate well designed,
persistent incentives, such as based on sales results that are measured over a period of time, like moving
averages, so that employees reap long term benefits for longer term planning and performance. This also
deflects focus from the next quarter and rewards intrapreneurs for the longevity of their contributions.

– Dr. Makarand “Chips” Chipalkotti, Osram Sylvania

This is a particularly challenging question. Inherent in innovation is exploring the unknown and that brings
with it a higher rate of failure than many are accustomed to. Accordingly, it’s important to measure things as a
whole, with a portfolio mentality. Each individual effort cannot and should not be measured at the innovation

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state. To do so will stifle innovation. Portfolio thinking comes in two flavors: across many projects during a
single period, and over time. So the performance of an individual or group can be measured, but only by
looking at their portfolio. If you’re evaluating a manager with many projects, that’s straightforward. For
individual contributors working on one project at a time, you need to look at their efforts over a period of time
across many projects.

– David Silverstein, Breakthrough Management Group

a. How to measure innovation?

In Japan, innovation and creativity are not exclusive to a select group of design engineers. Innovation and
creativity can come from any employee. At Toyota during the 1980’s, the average employee gave 70
implemented ideas and just a year ago Subaru was getting 108 written implemented ideas per employee and
saving over $4,000 per year per employee. Sure, most of the ideas were very small, not like the new
spectacular new iPhone, but it was the accumulation of these small ideas from all employees that represented
the real success of Japanese companies. And one of these small ideas might become the next “Post-it-Notes,”
or “Q-Tip.”
So, one important key measure of innovation and creativity is how many ideas per month are you’re getting
from all of your employees. According to a recent article in the New Yorker magazine the average Japanese
company receives 100 times more written ideas then the average American company.

b. How to motivate the organization to deliver across all stages of the process?
Simply evaluate every supervisor and manager on the number of written implemented ideas that they are
receiving from their employees. You reverse the process. When a worker comes up with an idea, it is the job
of the manager to listen and help the worker implement it. Case in point: one worker in one of my recent
classes said, “When I move the windows along the factory floor, I have to go over bumps on the floor and
sometimes the windows crack. I go to my supervisor and tell him her about the problem and he only tells me
to be more careful.” The supervisor won’t tell his manager about the problem because his manager will only
tell him to tell the worker to be more careful.

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Now, if you recognize that the worker has the ability to solve the problem on his or her own, when the worker
comes to you with a problem, you say to the worker, “What can you do to solve the problem?” The worker
says, “We need to re-cement the floor. I don’t know how to do it.” The boss, then says, “Learn how to do it.
Go ask Mike to teach you how to do it.” You simply reverse the process. It is called “bottom up”
management. You ask the worker. You continually ask the worker; you don’t tell them how to do it. You just
ask. Then watch the innovation and creativity work. Look, if the Japanese can does it so can we.

– Norman Bodek, PCS Inc.

In my experience, the most important thing is to keep the measures simple and focused on what is important
to measure — not what is easy to measure. We did a major survey with Rice and Stanford several years ago,
and the major finding was that companies were measuring what was easy to measure instead of what was
important, and most were measuring far too many things.

The next most important thing is to link these measures and metrics with reward and recognition systems —
both are equally important. In that spirit I would recommend that the following three types of measures be
incorporated into a balanced innovation scorecard and linked to performance evaluation and reward and
recognition systems.

a. Leading Innovation Measures:

 Richness and robustness of growth and innovation platforms and clusters of ideas or opportunities selected
and developed

 Strength of strategic and leadership commitment to growth through innovation as expressed in strategic
initiatives, targets and leadership metrics

b. In-process Innovation Measures:

 The risk-adjusted net present value of the innovation pipeline and the return on investment in that pipeline
Innovation capacity and capability building (including partnerships and networks) relative to targets and
competition

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c. Lagging Innovation Measures:

 Amount of earnings or revenue growth achieved through innovation relative to targets and industry
competitors and overall competitive position

 Success of individual innovation projects (from concept to customer) and overall platform or new business
development programs

I also believe it is important to track a company’s progress in capturing key innovation outcomes or premiums
relative to the rest of their industry:

 Shareholder value premiums in terms of superior shareholder returns, company value and price-to-earnings
ratios that reflect growth prospects

 Customer and market premiums in terms of market share, brand equity and customer loyalty

 Value chain premiums in terms of partnership preferences, networks, and positioning

 Workplace premiums in terms of employee retention, attraction and motivation.

– Ron Jonash, Monitor Group

The “Type A” answer is that the best measure of innovation results is ultimate financial success in the
marketplace. While that is definitely a reasonable expectation, I’m hopeful that results are also measured by
the learning gained throughout the discovery and commercialization process of innovation. Financial success
is ultimately imperative to feed the innovation engine, but hopefully, there is enough patience and “lifeline”
allowed for products and/or projects to fail along the way. It may sound trite, but you’ll learn more through
the difficult times than you will through smooth-sailing success. In fact, there’s a high probability that the
successes are built on the backs of many failures. So I’d measure the results of innovation in terms of learning
gained, patience developed and wisdom refined as much as eventual financial success. If you keep these

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measures at the forefront of your innovation practice, you’ll have no difficulty managing the motivation level
of the organization throughout the process.

– Troy Geesaman, brandimage

Our Analysis

Innovation results are difficult to measure because they include results from (a) completion of ideas and
projects in the innovation pipeline and (b) the expansion of innovation capacity at the firm. Dr. Chips
Chipalkatti leans towards the latter by using the Innovation Sales Rate (percentage of sales of new products)
as a measure, while Normon Bodek focuses on capacity expansion by using the measure of number of ideas
per person. Troy Geesaman and others would like to include both including measurements for learning
through failures.

David Silverstein reminds us that innovation projects across a portfolio and innovation projects executed in
series by any individual will inherently have higher than average failure rate than other types of
projects. Marc Chason provides further insight by writing that innovation should be managed with long-term
perspectives with short-term deliverables and goals. The long-term perspective allows for experimentation
and learning while the short-term deliverables communicate quick wins and momentum to carry through the
long term.

Victor Fernandes has a more holistic view of innovation results and provides a broader list of elements to
measure. Ronald Jonash organizes this list and links it to a reward-recognition system through an “Innovation
Balanced Scorecard” (I-BSC). The I-BSC organizes the key measures into leading, in-process and lagging
indicators. It measures the (a) risk adjusted value and size, shape and speed of innovation projects pipeline,
(b) investment in new platforms, partners, and competences, (c) new earnings and revenue contributed by the
pipeline.

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It is clear that innovation results are not easy to measure. Far too many companies measure what is easy to
measure but not what is important to measure and get it wrong. Innovation management is a system and the
innovation breakthroughs require the whole organization to work as a team. Innovation measures should be
similarly encompass the organization. Senior leaders should be rewarded for harvesting a pipeline (real sales)
and for building a pipeline (future sales). Their scorecards should be designed to milking the pipeline and
also replenishing it, even during a financial crisis or a focus on Six Sigma.

– Chuck Frey/Hitendra Patel

2. What are the best metrics for measuring innovation performance?

There is no best metric, since single measurement processes can sometimes negatively impact the innovation
processes they are attempting to measure. Preferably, a suite of metrics should be used to measure the
innovation process. In order to mitigate this negative impact and increase the value of the innovation
measurement process, management should use these reviews as “teachable moments” to reward, correct or
guide innovator performance appropriately. To this end, there are objective and subjective metrics.

Objective metrics might include:

 Deliverables to goals (e.g., preapproved innovator performance targets, meeting corporate initiatives, etc.)

 Completing activities that enhance the brand image (e.g., publications, conference presentations, interviews,
etc.)

 Production of intellectual property (e.g., patents, trade secrets, etc.)

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Subjective metrics include attaining reach-out goals and roadmap targets. For example, a goal such as
“Develop two new processes that increase office productivity” enables the innovator(s) to identify bottom-up
opportunities with significant opportunities for self-motivation.

– Marc Chason, Motorola Labs

Most companies produce products or services; if they want to compete, they need new products or services.
Since many companies I have dealt with tend to “metric” themselves into a paralysis, there are two
measurements that I think are simple.

1. Speed to market

2. Number of new product (services) launches.

Speed to market is valuable because it ties in all of a company’s operations. Everyone understands the need
to get something out before the competitor launches a competing product.

I like the “number of new products” metric as because it leaves open the possibility that some of the new
products may fail. That is what innovation is about. Sometimes you flop. The fast food industry is great with
this metric. This industry has new offerings all the time, as well as some offerings that fade away. Wendy’s
had a buffet style salad bar (gone), but it just launched a whole line of new Frosty products. McDonald’s had
the McLean (gone) but also launched the snack wraps. Pizza Hut reinvents pizza every few months.

The other reason I like these metrics that it takes away the “find a way to do it cheaper” mantra. Some believe
that finding a way to do something for lower cost is innovative and needs to be captured on an innovation
scorecard.

Frequently, though, the reason for doing something cheaper is to free up resources to develop new products
and services or bring them to market faster. Therefore, metrics indicating lowering operation costs are
subordinate to speed to market and new products.

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– Jonathan Rowe, Gene Express

In the end, one must examine the theory of why innovation is so important. Competitive differentiation,
market leadership and higher profitability and sales are the key drivers. When looking at metrics, there are
two groups to consider: The innovation creators and managers, and the executors. The interface between these
two groups is typically a troubled one. The success of the enterprise relies heavily on a successful hand-off at
the interface. So while metrics for ideation and idea management are important for one group, and sales and
margin performance for the latter, I believe the most critical metric is one that measures the hand-off between
the two groups.

– Dr. Makarand “Chips” Chipalkotti, Osram Sylvania

There are a lot of new metrics being used today. Most are garbage. Things that need to be looked at include
overall portfolio performance and the “funnel.” The top of the funnel — new ideas — should be getting
bigger. The quality of what comes out of the funnel should be improving. And most importantly, companies
need to get much better at learning to kill projects when it’s clear they’re not going to deliver value. All too
often we only measure the final result. In innovation, the intermediate steps must be measured, too.

– David Silverstein, Breakthrough Management Group

At the front door of Stu Leonard’s, one the of the largest grocery stores in America is a large rock with the
words:

“Our Policy:

Rule 1 – The customer is always right!

Rule 2 – If the customer is ever wrong reread rule 1.”

The best metrics is to reread my first few paragraphs and get everyone implementing their small ideas. And I
recommend you just get up from your desk and learn about Quick and Easy Kaizen and do it. Yes, be brave
and do it! Stop looking for excuses not to do. “Just do it!”

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– Norman Bodek, PCS Inc.

Metrics: a necessary evil? Well, maybe not quite evil, but metrics can seem like a sterile, incompetent way to
measure some of the beneficial, intangible measures of innovation. Yes, financial, volume and time metrics
are critical to the discipline of innovation. If you’re part of a successful enterprise, they will naturally be
embedded into the process. What’s often missing, however, is a means of capturing, measuring and highly
valuing the intangibles of learning gained, patience developed and wisdom refined. How to measure and
document these intangibles should be totally contextual to the corporate environment and existing reporting
systems. What should be absolute is the inclusion of these measures in personal and project performance, and
not just measure innovation performance on financial, volume and time metrics alone.

– Troy Geesaman, brandimage

Our Analysis

Our experts are quick to point out that there is no one best metric for measuring innovation. However, they
all had their own favorite metric that they felt should be included. We have compiled this list below:

 Increase in value of ideas at top of funnel

 Number of new ideas implemented

 Risk adjusted net present value of pipeline

 Number of projects killed

 Number of successful handoffs

 Speed to market

 Number of new offerings launched

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 Lessons learned from failures (and successes)

David Silverstein believes a focus on bigger ideas should deliver bigger innovation results. Norm Bodek
advocates that ultimately it is the implementation of new ideas that drives overall innovation.

Ronald Jonash is an advocate on the Risk Adjusted Net Present Value (RANPV) of the pipeline and using this
process to provide guidance for adding new projects, slowing or speeding projects or killing bad
projects. David’s focus on killing bad projects supports that since it removes negative value projects out of
the portfolio and increases the RANPV of the pipeline. Similarly, Jonathan Rowe’s emphasis on speed makes
sense as it increases the net present value of the project and creates a competitive advantage in the market.

Jonathan explains in detail about the benefit of having a metric that measures number of new offerings versu s
successful offerings. He embeds the notion of failures and learning in this metric and its importance for future
innovations. Troy Geesaman requires that organizations should require formal mechanisms for capturing
these learning.

The above list could be a good starting point for many companies wanting to start their innovation journey
and metrics. Innovation is a system and requires more than one metric. Measure what is important and not
what is easy.

– Chuck Frey/Hitendra Patel

INTEGRATION OF RISKS

Now it is time to look on the other side of innovation. Yes, there are not only benefits; in the case that your
organization starts to focus on innovation you should have in mind to face some disadvantages. You can also
refer them as risks when entering an unknown field (of business). I won’t argue that you should not use
innovation. But it will helpful to anticipate and to understand these risks in order to prepare you.
Innovations always involve particular risks for the organization. A company that searches for new ways,

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processes and types of organization is confronted frequently with the risk to land in a dead end. Another
disadvantages of a “we are innovators”-approach is the need to review strategy more often; hence structural
adaptations which are linked to strategy can take place more often, too. An organization has to consider
further five typical disadvantages:
It is possible that a new business model (in order to add value) does not create a competitive advantage (e.g.
due to bad timing). Eventually the new business model has to be abandoned after the testing phase.
An economically strong follower copies the innovation and turns it into the industry standard. Therefore the
innovation become the “standard solution” for every company within the industry and loses its innovation
status. This will destroy the competitive advantage for the innovator. (Note: It is also possible that a
competitor has another innovation and transfers it to the industry standard. Example for this is the format war
between Blu-ray and HD-DVD, that was won by Sony)
A follower is able to learn more quickly (e.g. to fix starting errors) and to achieve the readiness for marketing
quicker than the innovator.
The innovator overestimates his innovation power and his organizational capabilities (e.g. change
management, financial resources) to bring an innovation to the market place.
Misinterpretation of the market. The new product is excellent in terms of technical specifications. Despite
these features no customer is willing to pay for them, since their costs are higher than their expected benefits
(e.g. over engineered product). Another option is that customers have a minor different behavior then
expected (e.g. do not accept your pricing policy, are less loyal).
All these risks represent the thread of a loss of resources for the innovator. In addition half-baked products can
cause reputation damages.
In the next couple of weeks we will present a paper that summarizes different aspects of innovations and their
links to strategic planning. Within this paper we will highlight three case studies, one of them represents a
good examples for innovation risks and the way how the organization did address these risks.

Innovation and Risk Management

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Risk management—coupled with program and project management—is a critical element of the innovation
life cycle and helps address ambiguity and uncertainty. Ambiguity refers to the likelihood that the objectives
of an initiative will change over time. Uncertainty refers to the inability to predict outcomes, based on the
objectives of the initiative. Thiry, in Program Management (2010, p. 16), describes ambiguity and uncertainty
on a continuum from:

 Ambiguity—pre-existing (low, typical operational change) to developing (medium, typical of business

solutions) to emergent (high, typical of organizational or societal change)

 Uncertainty—known (low, typical of operations) to knowable (medium, typical of projects) and unknown
(high, typical of breakthrough research or [author's note] breakthrough innovation)

Project management can address uncertainty, to some degree, through effective risk management but is less
effective at addressing ambiguity; the objectives of a project typically must be well-understood before it is
undertaken. Program management is especially useful in addressing both ambiguity and uncertainty, a
hallmark of innovation initiatives. As Thiry (2010, p. 17) states:

“Program management has emerged as a methodology that enables organizations to deal with increased
ambiguity and complexity and is well suited to reduce ambiguity, an essential preliminary course of action for
project management to be effective.”

Thiry explains that in high ambiguity, high uncertainty situations, decisions must be based more on
experience and intuition than data, which “requires a process where results of decisions are continually
measured and objectives are adjusted accordingly” (2010, p 60). The experience and intuition required are
gained through a learning process, applying the knowledge, skills, and competencies of the program team, as
well as the lessons learned during the innovation process.

During the innovation process, a number of decisions have to be made, some based on intuition and some
based on hard evidence. Risk management principles can be applied at both the program and component
project levels to reduce the uncertainty. Hillson (2004, p 6) provides an important distinction between
uncertainty and risk to illustrate this concept:

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“Risk is measureable uncertainty; uncertainty is immeasurable risk.”

From this statement we can see the importance of consistently identifying and analyzing risk events (both
threats and opportunities) in an attempt to reduce uncertainty. Structuring the innovation initiative as a
program provides the benefit of risk management on several fronts: at the component project and activity
levels and at the program level, which includes both program-level risks and the component project-level risks
that, in aggregate, may impact the overall program; project-level risks (both threats and opportunities) in
aggregate can become program-level risks. Despite our best efforts we will never completely eliminate
uncertainty, which further emphasizes the need for a learning process.

We have acknowledged that there are several dimensions and categories of innovation (on which there is no
universal agreement). It must also be acknowledged that innovation can occur at any time during the
execution of a program or project; innovation does not explicitly require an “innovation” initiative. This type
of innovation is more closely associated with the positive side of risk management, the continuous
identification and exploitation of opportunities. The proactive identification of opportunities, managed with
the same rigor and attention as potential threats, often results in process efficiencies, shortened project life
cycles, an improved solution, and/or enhanced benefits.

Hillson, in Effective Opportunity Management for Projects: Exploiting Positive Risk (2004), recommends that
threat-based project risk management be extended to include opportunities and provides a framework to do so.
The opportunity side of risk management, which is so commonly ignored, is critical to innovation initiatives
and the “discovery” process that is so often required. Effective risk management can also help answer the
most critical question: What if we don't pursue this innovation initiative?

We have identified three pillars of innovation risk management:

1. Innovation Risk Appetite

Risk managers should work with senior management to codify an explicit statement of risk appetite in relation to
innovation. This should address the important questions: Which risks are negotiable and where do we need to
draw red lines? Where are we a first mover in our industry and where a follower? Where we do take on risk,

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what forms of payback are acceptable, and how are these tracked? Is the cost of risk management for a particular
product reflected in its business case?

Some answers are clear: Financial crime should be on the other side of the red line against which no pay-back is
acceptable. But in many other areas risks have to be weighed against potential returns. Where firms create a new
market for a poorly served segment (think payroll services for the gig economy as a recent example), would a
certain level of fraud be acceptable initially, while the market is being developed?

In other cases, firms might need to follow the competition just to defend an existing customer base. Many banks
at first held off introducing mobile wallets such as Apple Pay, as the additional risk seemed to outweigh the
likely benefits. But they launched them after a critical number of competitors moved ahead, demonstrating a
differentiated if maybe not explicit approach to weighing risks and benefits.

2. New Controls For New Risks

Digital propositions will fundamentally change the risk profile of a firm. Technology-related risks, from
resilience to cyber risks, may increase as heavy reliance is placed on technical infrastructure and previous
manual alternatives are disbanded. Fraud may increase if not carefully controlled, as has been observed in the
initial stages of many digital propositions. At the same time, less human interaction – both internally and with
customers – may reduce risks related to poor behavior, such as embezzlement or miss-selling. Some risks may
morph into new forms. To address the risk of a customer ending up with an unsuitable product, their journey
needs to be assessed in its entirety, including exit gates for when there is no suitable product for a particular
customer. This forms part of the emerging discipline of digital conduct.

3. Continuous engagement

Risk managers should contribute to innovative development through risk identification, analysis, and control
recommendations. To ensure that risk controls are fully integrated into the resulting propositions, They should
engage at the stages of development, testing, independent validation, and implementation, as well as regular
review.

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There are several drivers which make continuous engagement a necessity:

Today’s innovation labs and technology start-ups operate through cycles of design sprints. For risk management
to be effective, it needs to be deeply embedded in the design throughout the development process, ideally right
from the start.

As business processes are digitized, manual intervention becomes less desirable and risk controls increasingly
must become an integral part of product design.

Regulators and law-makers are increasingly echoing these demands. The European Union’s General Data
Protection Regulation (GDPR), for example, enshrines Privacy by Design as one of its foundational principles.

Once digital propositions have been launched, there will likely remain exceptions to the usual corporate
standards. For instance, a start-up firm supplying customer analytics may not have the required cyber-risk
certifications. The role of risk management will need to extend beyond the approval stage to ensure that
exceptions are eventually closed out to protect the firm’s critical infrastructure and its customers’ data. Firms
must be able to rapidly launch propositions without ultimately sacrificing the corporate standards that are the
foundations of their customers’ trust.

FACTORS INFLUENCING ECONOMIC EFFECTIVENESS

POST IMPLEMENTATION ANALYSIS OF INNOVATION PROJECTS

In short, a post-implementation review is a process to evaluate whether the objectives of the project were met.
You can also use it to see how effective the project was managed. This helps to avoid making similar mistakes
with future projects and learning how to run the project better.

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Post-implementation review is the last step in your project cycle and usually involves an independent party,
which can act more objectively in making their determinations about how the project was run. This provides
the stakeholders of the project the confidence to know that the objectives of the project were met successfully.

What Is Post-Implementation Review?

What are you going to do when the project’s over? Have a little celebration and move on to the next one,
right? The project might be over, but the process continues.

That means that if you delivered a product or a service, the project might be completed, but you still need to
check on the viability of the product or service. You might have achieved the goals you set out for the project,
but what about the business needs that product or service was responding to?

Think of it as an ongoing step in your project closure process. It’s a post-project review or post-
implementation review, which is part of your project management responsibilities. It’s also a great way to
identify project successes, deliverables, achievements and learn lessons from those parts of the project that
didn’t work out as planned.

How do you practically apply a post-implementation review? How can you be sure that the project solved the
problems it was created to address? Are there more benefits that can be unpacked from the project? What are
the lessoned learned? To answer those and more questions, you need to follow a process.

What Is the Post-Implementation Review Process?

To get the most out of your project, you want to employ a post-implementation review process. While this can
start at any time after the initial project has been complete, starting it sooner than later makes sure that the
project details are still fresh in the team’s mind.

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While go get the most from the process, you’ll want to wait a while, after the project’s product or service has
had time to exist in the real world. But at least start the process by beginning to list ideas and observations.
You don’t want to wait until the participants are distracted by other projects.

How to Conduct a Post-Implementation Review

After the project’s deliverables have gone through at least one successful business cycle, you can get started
on the review. There are project closure checklists that help frame the process. Here are some of the best
practices for conducting the review include the following.

 Trust. To get the information you need, you want honesty from your participants. Therefore, tell them
you want openness, without fear of retribution. The more critical and truthful their observations about the
project are, the more successful the review.

 Objectivity. While you want honesty, you don’t want sour grapes or interpersonal issues clouding
observations with bad feelings or to settle old scores. Seek objectivity, or as close to an impartial critique
as can be expected.

 Documentation. Like all project management, you want to create a paper trail that illustrates how you
went from Point A to Point B. By documenting the practices and procedures that created the successes in
the project, you’ll be able to follow them again in future projects.

 Hindsight. As you develop a narrative as to what worked and what didn’t, what surprises arose during
the project and how you dealt with them, understand that this hindsight vision can also help as you look
forward towards new projects.

 Improvement. The point of this review process is not to blame individuals or teams for mistakes, but to
learn from experience and then apply that knowledge to future projects. Stay focused on what’s next,
rather than looking back as a means of applying guilt.

Post-Implementation Review Methods

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There are many ways to gather the information you want to determine what worked and what didn’t in your
project. Here are some examples.

 Gap Analysis. This method of assessing how a plan differed from the actual application is always a
powerful tool to see what benchmarks you met, and which you didn’t. You can start with your project
charter and see how closely you adhered to your objectives. Look at your deliverables. Are they at a
quality level you expected? When there are gaps discovered, figure out how they can be closed.

 Project Goals. Simply put, did you achieve the goals of your project? Are your deliverables functioning
as planned? What was the error rate of the project? Can the deliverables adjust to changes in the market?
How well-trained and supported are end-users? What controls and systems are in place and are they
working? Are problems being addressed? Did you planned goal align with your result?

 Stakeholders. How satisfied are your stakeholders? Were users needs met? What effect did the project
have on them? If there is dissatisfaction, why is that and what can you do to resolve it?

 Cost. How much did the project end up costing? What are the costs involved in operating the project’s
result? Are the costs aligned to the benefits of the project? If this isn’t the case, how can you improve the
cost next time?

 Benefits. Did the project achieve the benefits projected, and if not why and how can that be improved?
What opportunities are there to further the results? Are there other changes you could apply to help
maximize the project’s results?

 Lessons. Did the project’s deliverable, schedule and budget all meet expectations, and if not why? What
were some of the issues that arose during the running of the project and how could they be avoided for
the next project? What went well, and what can you learn from that experience?

 Report. Document what you learned from the review, whether there is actions needed to get the
beneficial results you want and list the lessons you’ve learned, noting how the project can impact future
projects, so you can build on success and avoid problems.

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Final Thoughts on Post-Implementation Review

There are many ways to close a project, but too often the post-implementation review is neglected. It’s
understandable, as a critical review can open some old wounds.

When you’re dealing with a lot of people and asking them for criticism of the project, there’s the potential to
step on someone’s toes and create hurt feelings that can creates some unpleasant political issues within your
team or organization. Therefore, be clear that what you’re interested in is not a personal attack, but a systemic
overview of process and how everyone together can work towards improving it. That’s why it often helps to
hire an independent party to collect the post-project data.

Don’t forget to review all the project documentation. It’ll help you better assess what worked and what didn’t,
and provide you with an overview of the project and where there might have been unforeseen holes that you
can then fill in with upcoming projects.

When you’re done with the review is completely transparent. Share your findings in a report and make sure
everyone has access to these documents. If you want to, it can help if you present the information to the
organization. Your goal is to create better projects, and that information isn’t proprietary. Everyone has a need
to know.

When you’re conducting a post-implementation review, you’re working with a lot of data. That information
touches all aspects of the project. If you’ve been managing that project with project management software,

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the data you need is already collected, and the review process can be aided by the communications and
connections that the tool has already established

Innovation and Intellectual Property

Innovation means doing something new that improves a product, process or service. Many
innovations can be protected through intellectual property (IP) rights. Innovation is generally
understood as the process of bringing valuable new products (and services) to market, and has
been highlighted as one of the key factors that determine the future success of an
organization. Intellectual property (IP) and the management of the IP throughout the new
product development process is a critical factor in successfully commercializing products and
services, for example by providing a monopoly to the IP owner, and barriers to entry for
competition. The purpose of this article is to briefly outline what forms of IP protection may be
required at each stage of the product development process, and how overall management of the
IP may lead to overall improved revenues and profitability.

Inventions and patents

Inventions are the bedrock of innovation. An invention is a new solution to a technical problem and
can be protected through patents. Patents protect the interests of inventors whose technologies
are truly groundbreaking and commercially successful, by ensuring that an inventor can control the
commercial use of their invention.

An individual or company that holds a patent has the right to prevent others from making, selling, retailing, or
importing that technology. This creates opportunities for inventors to sell, trade or license their patented
technologies with others who may want to use them.
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The criteria that need to be satisfied to obtain a patent are set out in national IP laws and may differ from one
country to another. But generally, to obtain a patent an inventor needs to demonstrate that their technology
is new (novel), useful and not obvious to someone working in the related field. To do this, they are required
to describe how their technology works and what it can do.
A patent can last up to 20 years, but the patent holder usually has to pay certain fees periodically throughout
that 20-year period for the patent to remain valid. In practice, this means that if a technology has limited
commercial value, the patent holder may decide to abandon the patent, at which point the technology falls into
the public domain and may be freely used.

Patent information

In addition to recognizing and rewarding inventors for their commercially successful technologies, patents
also tell the world about inventions. In order to gain patent protection for their invention, the inventor must
provide a detailed explanation of how it works. In fact, every time a patent is granted, the amount
of technological information that is freely available to the general public expands (see Using and Exploiting
Patent Information tutorial).
WIPO is making this and other IP-related information freely available to the public through its global
databases. The largest of these – it is also one of the largest in the world – is PATENTSCOPE. It contains
over 50 million patent applications that can be searched free of charge. The aim in making this information
widely available is to spark new ideas and promote more innovation, and also to help narrow the knowledge
gap which exists in developing and least developed countries.

PCT – The International Patent System

A patent is a private right that is granted by a government authority. It only has a legal effect in the country
(or region) in which it is granted. So inventors or companies that want to protect their technology in foreign
markets need to seek patent protection for their new technologies in those countries.

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WIPO’s Patent Cooperation Treaty (PCT) is designed to make the process of obtaining patent protection in up
to 152 different countries easier and less costly.
Within a year of filing for patent protection in their own country, inventors can set in motion the process of
obtaining patent protection in each of the markets in which they wish to sell their technology by filing a single
international application via the PCT. This offers many potential advantages:
 Any rights granted using the PCT flow from the initial filing date of the national patent application.
 Users benefit from a common set of rules and regulations which have been agreed upon and are followed
by all 152 members of the Treaty. This means there is a high level of legal certainty and no nasty
surprises.
 The full cost of obtaining patents in multiple countries – which can be quite high – are deferred by up to
18 months. This means that applicants have an opportunity to test the market or to attract new business
partners.
 Users of the PCT automatically benefit from an assessment which gives informal (non-binding) feedback
on the patentability of their technology. This can be very helpful in shaping a company’s patenting strategy.

How patents can support inventors and improve lives

1. Patents recognize and reward inventors for their commercially-successful inventions. As such they
serve as an incentive for inventors to invent. With a patent, an inventor or small business knows there is a
good chance that they will get a return on the time, effort and money they invested in developing a
technology. In sum, it means they can earn a living from their work.
2. When a new technology comes onto the market, society as a whole stands to benefit – both directly,
because it may enable us to do something that was previously not possible, and indirectly in terms of the
economic opportunities (business development and employment) that can flow from it.
3. The revenues generated from commercially successful patent-protected technologies make it possible
to finance further technological research and development (R&D), thereby improving the chances of
even better technology becoming available in the future.
4. A patent effectively turns an inventor’s know-how into a commercially tradable asset, opening up
opportunities for business growth and job creation through licensing and joint ventures, for example.

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5. Holding a patent also makes a small business more attractive to investors who play a key role in
enabling the commercialization of a technology.
6. The technical information and business intelligence generated by the patenting process can spark new
ideas and promote new inventions from which we can all benefit and which may, in turn, qualify for
patent protection.
7. Patent information can be mapped, offering policy makers useful insights about where technology R&D
is taking place and by whom. This information can be useful in shaping policy and regulatory
environment that allows innovation to thrive.
8. A patent can help stop unscrupulous third parties from free riding on the efforts of the inventor.

Other intellectual property rights

Other IP rights can also be used to protect a new technology, product or service. For example:

Copyright protects artistic expressions like music, films, plays, photos, artwork, works of architecture and
other creative works. The term “creative works” is defined very broadly for copyright purposes, such that
copyright may be used to protect functional texts such as user guides and product packaging as well as works
of art.

Design rights protect the shape and form of a product, i.e., what it looks like (whereas the functionality of a
product – how it works – is protected by a patent). Companies invest a great deal of time and money in
coming up with new and attractive designs that seduce consumers into buying their products. Design is now
widely recognized as a key determinant of commercial success.

Trademarks are signs that are capable of distinguishing the goods or services of one enterprise from those of
others. Trademarks are indispensable tools in today’s business world. They help companies expand their
market share and they help consumers identify the products they want to buy in a crowded market place.
Trade secrets can be used to protect the “know-how” of a business. Essentially, laws relating to trade secrets
mean that some people (e.g., a company’s employees) may have a legal duty to keep certain information
confidential.
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An invention can be protected as a trade secret or through a patent. Many businesses use trade secrets to
protect their know-how, but there are downsides in doing this. From the company’s point of view it may be
risky because once information is disclosed legitimately (e.g., if someone else works out how an invention
works), it will no longer be protected. And from a public interest viewpoint, trade secrets are less beneficial
than patents because they do not involve any sharing of technical information.

LEGAL ASPECTS OF INNOVATION

The Legal Aspects of Protecting Ideas and Creativity

Creativity is the emotional lifeblood of entrepreneurship. Without creativity, thousands of companies would
not have been launched. However, it is an element of entrepreneurial life that isn't easy to safeguard under the
law.
As a general rule, a mere idea or creative concept does not qualify for patent, copyright, trade secret, or
trademark protection. The right to the exclusive use of an idea is lost by voluntary disclosure unless the
following three elements are present: the idea is in a concrete form; the idea is original and useful; and the
idea is disclosed in a situation in which compensation is contemplated. If this test is satisfied, the idea may
qualify as a "property right" and may be protected under theories of implied contract, unjust enrichment,
misappropriation, breach of a fiduciary relationship, or passing off. Recovery under these circumstances
usually depends upon the relationship between the submitter and the receiver of the idea, as well as the facts
surrounding the disclosure.

However, as a general rule, the law of intellectual property seeks to protect and reward the creative firm,
innovator, or entrepreneur for effort by prohibiting misappropriation or infringement by competitors. It is
crucial, therefore, that the legal considerations to protect these "crown jewels" are incorporated into the
strategic marketing plan of any emerging business. If proper steps are not taken to protect new products,
services, and operational techniques, then it will be extremely difficult to maintain and expand the company's
share of the market because others will be free to copy these ideas as if they were their own.

The Role of Show-How and Know-How

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The proper protection and, where possible, registration of intellectual property is essential to building and
sustaining a company's growth. The procedures and expenses necessary to protect these valuable intangible
assets are crucial to the continued well-being of an entrepreneurial company and its ability to continue to
survive in a competitive marketplace.
Certain types of intellectual property are treated as such primarily because a third party is willing to buy or
license it from a company or individual that possesses a particular expertise. In such cases, show-how consists
of training, technical support and related educational services, whereas know-how usually takes the form of
information that has been reduced to written rather than spoken form. Know-how and show-how often arise in
the context of a licensing agreement where the licensee is requesting support services in addition to the
tangible technology or patent which is the central subject matter of the agreement. To the extent that the
know-how or show-how is confidential and proprietary, the law of trade secrets will generally govern it,
unless otherwise covered by a patent. To the extent that the know-how or show-how is non-proprietary and
constitutes common knowledge, it will be governed by the term and conditions of an agreement between the
parties.

Trade Secrets as a Protective Device

The best way to protect creative ideas and concepts is for them to be developed into a trade secret. Under the
law, a trade secret consists of any type of information, including a formula, pattern, compilation, program,
device, method, technique, or process that derives independent economic value from not being generally
known to other persons who can obtain economic value from its disclosure or use. The information does not
need to be unique or even invented by its owner to be protected, as long as the data is kept confidential and
provides value to the company. A company uses its trade secrets to provide it with an advantage over
competitors. Therefore, the corporate owner must treat the trade secret as confidential and proprietary. The
scope of protection available for trade secrets may be defined by a particular contract or fiduciary relationship,
as well as by state statutes and court decisions. Unlike other forms of intellectual property protection, there are
no federal civil statutes providing for the registration of trade secrets. State law typically protects trade
secrets.

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Many entrepreneurs owe their success in part to the competitive advantage they enjoy by virtue of some
confidential formula, method, design or other type of proprietary know-how, and generally understand the
importance of protecting trade secrets against unauthorized disclosure or use by a current or former employee,
licensee, supplier, or competitor. Disclosure can cause severe and irreparable damage, especially to a smaller
company where trade secrets may be the company's single most valuable asset.

Qualifying as a Trade Secret

Courts have generally set forth three requirements for information to qualify for trade secret protection: the
information must have some commercial value; the information must not be generally known or readily
ascertainable by others; and the owner of the information must take all reasonable steps under the
circumstances to maintain its confidentiality and secrecy. Examples of trade secrets include business and
strategic plans, research and testing data, customer lists, manufacturing processes, pricing methods, and
marketing and distribution techniques. In order to maintain the status as a trade secret, a company must follow
a reasonable and consistent program for ensuring that the confidentiality of the information is maintained.

However, in addition to those discussed above, the courts have considered many other factors when deciding
the extent to which protection should be afforded for trade secrets. Among the most often cited factors are the
following:
 The extent to which the information is known by others outside the company, including the efforts by the
company to keep the information guarded from disclosure.

 The value of the information, including the resources expended to develop the information and whether
the information truly provides a competitive advantage.

 The amount of effort that would be required by others to duplicate the effort or to reverse-engineer the
technology.

 The nature of the relationship between an alleged infringer and the owner of the trade secret.

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Unlike many large corporations, smaller companies cannot generally afford a complicated security system to
protect their trade secrets. With the mobile nature of today's work force, turnover caused by promotion within,
and the chaotic nature of most growing businesses, it is practically impossible to prevent a determined
employee from gaining relatively easy access to the company's proprietary information. Unfortunately, it is
therefore easier to simply ignore the problem and do nothing at all about it. However, there are some
fundamental, affordable and practical measures that the company can readily adopt to protect the data that is
the core of its competitive advantage. The entrepreneurial company is urged to review all such options
thoroughly with its legal counsel in an effort to safeguard the critical intangible called creativity.

UNIT-4
INTELLECTUAL PROPERTY RIGHTS & Legal Aspects of Innovation

Intellectual property (IP) is a term referring to creation of the intellect (the term used in
studies of the human mind) for which a monopoly (from greek word monos means single
polein to sell) is assigned to designated owners by law. Some common types of
intellectual property rights (IPR), in some foreign countries intellectual property rights is
referred to as industrial property, copyright, patent and trademarks, trade secrets all these
cover music, literature and other artistic works, discoveries and inventions and words,
phrases, symbols and designs. Intellectual Property Rights are themselves a form of
property called intangible property.

Although many of the legal principles governing IP and IPR have evolved over
centuries, it was not until the 19th century that the term intellectual property began to be
used and not until the late 20th century that it became commonplace in the majority of the
world.

IP is divided into two categories for ease of understanding:

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1. Industrial Property
2. Copyright

Industrial property, which includes inventions (patents), trademarks, industrial

designs, and geographic indications of source; and
Copyright, which includes literary and artistic works such as novels, poems and
plays, films, musical works, artistic works such as drawings, paintings, photographs and
sculptures, and architectural designs. Rights related to copyright include those of
performing artists in their performances, producers of phonograms in their recordings, and
those of broadcasters in their radio and television programs.

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Intellectual property shall include the right relating to:

i. Literary, artistic and scientific works;
ii. Performance of performing artists;
iii. Inventions in all fields of human endeavour;
iv. Scientific discoveries;
v. Industrial designs;
vi. Trademarks, service marks and etc;
vii. Protection against unfair competition.

What is a property?
Property designates those things that are commonly recognized as being the
possessions of An individual or a group. A right of ownership is associated with
property that establishes the good as being "one's own thing" in relation to other
individuals or groups, assuring the owner the right to dispense with the property in
a manner he or she deems fit, whether to use or not use, exclude others from
using, or to transfer ownership.
Properties are of two types - tangible property and intangible property i.e.
one that is physically present and the other which is not in any physical form.
Building, land, house, cash, jewellery are few examples of tangible properties
which can be seen and felt physically.
On the other hand there is a kind of valuable property that cannot be felt
physically as it does not have a physical form. Intellectual property is one of the
forms of intangible property which commands a material value which can also be
higher than the value of a tangible asset or property

Rights protected under Intellectual Property

The different types of Intellectual Property Rights are:
i. Patents
ii. Copyrights
iii. Trademarks
iv. Industrial designs
v. Protection of Integrated Circuits layout design
vi. Geographical indications of goods
vii. Biological diversity
viii. Plant varieties and farmers rights
ix. Undisclosed information

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a. Intellectual Property
1. Inventions
2. Trademarks
3. Industrial design
4. Geographical indications

b. Copyright
1. Writings
2. Paintings
3. Musical works
4. Dramatics works
5. Audiovisual works
6. Sound recordings
7. Photographic works
8. Broadcast
9. Sculpture
10. Drawings
11. Architectural works etc.

The term intellectual property is usually thought of as comprising four

separate legal fields:

1. Trademarks
2. Copyrights
3. Patents
4. Trade secrets

1. Trademarks and Service Marks: A trademark or service mark is a

word, name, symbol, or device used to indicate the source, quality and ownership
of a product or service. A trademark is used in the marketing is recognizable
sign, design or expression which identifies products or service of a particular
source from those of others. The trademark owner can be an individual, business
organization, or any legal entity. A trademark may be located on a package, a
label, a voucher or on the product itself. For the sake of corporate identity
trademarks are also being.

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General Logos:

The Trademark Registration Logo

In addition to words, trademarks can also consist of slogans, design, or

sounds. Trademark provides guarantee of quality
and consistency of the product or service they
identify. Companies expend a great deal of time,
effort and money/ in establishing consumer
recognition of and confidence in their marks.

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Federal Registration of trademarks:

Interstate use of trademarks is governed by federal law, namely, the United
States Trademark Act (also called the Lanham Act), found at 15 U.S.C 1051et seq.
In the United States, trademarks are generally protected from their date of first
public use. Registration of a mark is not required to secure protection for a mark,
although it offers numerous advantages, such as allowing the registrant to bring an
action in federal court for infringement of the mark.

Applications for federal registration of trademarks are made with the PTO.
Registration is a fairly lengthy process, generally taking anywhere from twelve to
twenty-four months or even longer. The filing fee is $335 per mark (Present $225
per class) per class of goods or services covered by the mark.

A trademark registration is valid for 10 years and may be renewed for

additional ten year periods thereafter as long as the mark is in used in interstate
commerce. To maintain a mark the registrant is required to file an affidavit with
the PTO between the fifth and sixth year after registration and every ten years to
verify the mark is in continued use. Marks not in use are then available to others.

A properly selected, registered and protected mark can be of great value to

a company or individual desiring to establish and expand market share and better
way to maintain a strong position in the marketplace.

2. Copyrights: Copyright is a form of protection provided by U.S. law (17 U.S.C

101 et seq) to the authors of "original works of authorship" fixed in any tangible
medium of expression. The manner and medium of fixation are virtually
unlimited. Creative expression may be captured in words, numbers, notes, sounds,
pictures, or any other graphic or symbolic media. The subject matter of copyright is
extremely broad, including literary, dramatic, musical, artistic, audiovisual, and
architectural works. Copyright protection is available to both published and
unpublished works.

Copyright protection is available for more than merely serious works of

fiction or art. Marketing materials, advertising copy and cartoons are also
protectable. Copyright is available for original working protectable by copyright,

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such as titles, names, short phrases, or lists of ingredients. Similarly, ideas

methods and processes are not protectable by copyright, although the expression of
those ideas is.

Copyright protection exists automatically from the time a work is created in

fixed form. The owner of a copyright has the right to reproduce the work, prepare
derivative works based on the original work (such as a sequel to the original),
distribute copies of the work, and to perform and display the work. Violations of
such rights are protectable by infringement actions. Nevertheless, some uses of
copyrighted works are considered “fair use” and do not constitute infringement,
such as use of an insignificant portion of a work for noncommercial purposes or
parody of a copyrighted work.

Definition:
General Definition of copyright “Copyright owner”, with respect to any one
of the exclusive rights comprised in a copyright, refers to the owner of that
particular right.

Federal Registration of Copyrights: The works are protected under federal

copyright law from the time of their creation in a fixed form. Registration,
however, is inexpensive, requiring only a $30 (present $85) filing fee, and the
process is expeditious. In most cases, the Copyright Office processes applications
within four to five months.

Copyrighted works are automatically protected from the moment of

their creation for a term generally enduring for the author’s life plus an additional
seventy years after the author’s death. The policy underlying the long period of
copyright protection is that it may take several year for a painting, book, or opera
to achieve its true value, and thus, authors should receive a length of protection that
will enable the work to appreciate to its greatest extent.

3. Patents: A patent for an invention is the grant of a property right to the

inventor, issued by the United States Patent and Trademark Office. Generally, the
term of a new patent is 20 years from the date on which the application for the
patent was filed in the United States or, in special cases, from the date an earlier
related application was filed, subject to the payment of maintenance fees. U.S.
patent grants are effective only within the United States, U.S. territories, and U.S.
possessions. Under certain circumstances, patent term extensions or adjustments

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may be available.The right conferred by the patent grant is, in the language of the
statute and of the grant itself, “the right to exclude others from making, using,
offering for sale, or selling” the invention in the United States or Importing the
invention into the United States. What is granted is not the right to make,
use,offer,forsale, sell or import, but the right to exclude others from making,
using, offering for sale, selling or importing the invention. Once a patent is
issued, the patentee must enforce the patent without aid of the USPTO.

There are three types of patents:

Utility patents may be granted to anyone who invents or discovers any new and
useful process, machine, article of manufacture, or composition of matter, or any
new and useful improvement thereof;

Design patents may be granted to anyone who invents a new, original, and
ornamental design for an article of manufacture; and

Plant patents may be granted to anyone who invents or discovers and asexually
reproduces any distinct and new variety of plant.

Federal Registration of Copyrights: Patents are governed exclusively by

federal law (35 U.S.C100 et seq). To obtain a patent, an inventor must file an
application with the PTO (the same agency that issues trademark registration) that
fully describes the invention. Patent prosecution is expensive, time consuming
and complex. Costs can run into the thousands of dollars, and it generally takes
over two year for the PTO to issue a patent.
Patent protection exists for twenty years from the date of filing of an
application for utility and patents and fourteen years from the date of grant for
design patents. After this period of time, the invention fall into the public domain
and may be used by any person without permission.

The inventor is granted an exclusive but limited period of time

within which to exploit the invention. After the patent expires, any member of
the public is free to use, manufacture, or sell the invention. Thus, patent law
strikes a balance between the need to protect inventors and the need to allow public
access to important discoveries.

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4. Trade Secrets: A trade secret consists of any valuable business

information. The business secrets are not to be known by the competitor. There is
no limit to the type of information that can be protected as trade secrets; For
Example: Recipes, Marketing plans, financial projections, and methods of
conducting business can all constitute trade secrets. There is no requirement that a
trade secret be unique or complex; thus, even something as simple and nontechnical
as a list of customers can qualify as a trade secret as long as it affords its owner a
competitive advantage and is not common knowledge.

If trade secrets were not protectable, companies would no incentive to

invest time, money and effort in research and development that ultimately benefits
the public. Trade secret law thus promotes the development of new methods and
processes for doing business in the marketplace.

Protection of Trade Secrets: Although trademarks, copyrights and

patents are all subject to extensive statuory scheme for their protection,
application and registration, there is no federal law relating to trade secrets and
no formalities are required to obtain rights to trade secrets. Trade secrets
are protectable under various state statutes and cases and by contractual
agreements between parties. For Example: Employers often require employees to
sign confidentiality agreements in which employees agree not to disclose
proprietary information owned by the employer.

If properly protected, trade secrets may last forever. On the other hand, if
companies fail to take reasonable measures to maintain the secrecy of the
information, trade secret protection may be lost. Thus, disclosure of the
information should be limited to those with a “need to know” it so as to perform
their duties, confidential information should be kept in secure or restricted areas,
and employees with access to proprietary information should sign nondisclosure
agreements. If such measures are taken, a trade secret can be protected in
perpetuity.

Another method by which companies protect valuable information is by

requiring employee to sign agreements promising not to compete with the
employer after leaving the job. Such covenants are strictly scrutinized by courts,
but generally, if they are reasonable in regard to time, scope and subject matter,
they are enforceable.

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AGENCIES RESPONSIBLE FOR

INTELLECTUAL PROPERTY
REGISTRATION
United States Patents and Trademark Office:
The agency charged with granting patents and registering trademarks is the
United States Patent and Trademark Office (PTO), one of fourteen bureaus within
the U.S. Department of Commerce. The PTO, founded more than two hundred
years ago, employs nearly 700 (present 1000 employs) are working. At present it
is located in 18 building in Arlington, Virginia. Its official mailing address is
Commissioner of Patents and Trademarks, Washington, DC 20231.

The PTO is physically located at 2900 Crystal Drive in Arlington,

Virginia. Its web site is http://www.uspto.gov and offers a wealth of
information, including basic information about trademarks and patents, fee
schedules, forms, and the ability to search for trademarks and patents. Since 1991,
under the Omnibus Budget Reconciliation Act, the PTO has operated in much the
same way as a private business, providing valued products and services to
customers in exchange for fees that are used to fully fund PTO operations.

It uses no taxpayer funds. The PTO plans to move all of its operations to
Alexandria, Virginia, by mid-2005. The PTO is one of the busiest of all
government agencies, and as individuals and companies begin to understand the
value of intellectual property, greater demands are being made on the PTO.

Legislation passed in 1997 established the PTO as a performance-

based organization that is managed by professionals, resulting in the creation of a
new political position, deputy secretary of commerce for intellectual property. In
brief, the PTO operates more like a business with greater autonomy over its
budget, hiring, and procurement. U.S patents issued its first patent in 1790.
Since 1976 the text and images of more than three million are pending for
registration. The PTO is continuing its transition filing for both trademarks and
from paper to electronic filing for both trademarks and patents.

The PTO is led by the Under Secretary of Commerce for Intellectual

Property and Director of the United States Patent and Trademark Office (the
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“Director”), who is appointed by the President. The Secretary of Commerce

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appoints a Commissioner for Patents and a Commissioner for Trademarks.

Citations to many cases in this text will be to “U.S.P.Q”., a reference to United
States Patent Quarterly, a reporter of cases decided by the Trademark Trial
and Appeal Board (TTAB) as well as patent and copyright cases.

INTERNATIONAL ORGANIZATIONS,
AGENCIES AND TREATIES
There are a number of International organizations and agencies that
promote the use and protection of intellectual property. Although these
organizations are discussed in more detail in the chapters to follow, a brief
introduction may be helpful:

International Trademark Association (INTA) is a not-for-profit

international association composed chiefly of trademark owners and practitioners.
It is a global association. Trademark owners and professionals dedicated in
supporting trademarks and related IP in order to protect consumers and to
promote fair and effective commerce. More than 4000 (Present 6500 member)
companies and law firms more than 150 (Present 190 countries) countries
belong to INTA, together with others interested in promoting trademarks.
INTA offers a wide variety of educational seminars and publications, including
many worthwhile materials available at no cost on the Internet (see INTA’s home
page at http://www.inta.org). INTA members have collectively contributes almost
US $ 12 trillion to global GDP annually. INTA undertakes advocacy [active
support] work throughout the world to advance trademarks and offers educational
programs and informational and legal resources of global interest.
Its head quarter in New York City, INTA also has offices in Brussels, Shanghai
and Washington DC and representative in Geneva and Mumbai. This association
was founded in 1878 by 17 merchants and manufacturers who saw a need for an
organization. The INTA is formed to protect and promote the rights of trademark
owners, to secure useful legislation (the process of making laws), and to give aid
and encouragement to all efforts for the advancement and observance of trademark
rights.

World Intellectual Property Organization (WIPO) was founded in

1883 and is specialized agency of the United Nations whose purposes are to
promote intellectual property throughout the world and to administer 23 treaties

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(Present 26 treaties) dealing with intellectual property. WIPO is one of the 17

specialized agencies of the United Nations. It was created in 1967, to encourage
creative activity, to promote the protection of Intellectual Property throughout the
world. More than 175 (Present 188) nations are members of WIPO. Its
headquarters in Geneva, Switzerland, current Director General of WIPO is
Francis Gurry took charge on October 1, 2008. The predecessor to WIPO was the
BIRPI [Bureaux for the Protection of Intellectual Property] it was established
in 1893. WIPO was formally created by the convention (meeting)
establishing the world intellectual Property organization which entered into force
on April261970.

Berne Convention for the Protection of Literary and Artistic

Works (the Berne Convention) An International copyright treaty called the
convention for the protection of Literary and Artistic works signed at Berne,
Switzerland in 1886 under the leadership of Victor Hugo to protect literary and
artistic works. It has more than 145 member nations. The United States became a
party to the Berne Convention in 1989. The Berne Convention is administered by
WIPO and is based on the precept that each member nation must treat nation must
treat nationals of other member countries like its own nationals for purposes of
copyright (the principle of “nation treatment”). In addition to establishing a system
of equal treatment that internationalized copyright amongst signatories, the
agreement also required member states to provide strong minimum standards for
copyrights law. It was influenced by the French “right of the author”.

Madrid Protocol It is a legal basis is the multilateral treaties Madrid (it is a

city situated in Spain) Agreement concerning the International Registration of
Marks of 1891, as well as the protocol relating to the Madrid Agreement 1989.
The Madrid system provides a centrally administered system of obtaining a bundle
of trademark registration in separate jurisdiction. The protocol is a filing
treaties and not substantive harmonization treaty. It provides a cost-effective and
efficient way for trademark holder. It came into existence in 1996. It allows
trademark protection for more than sixty countries, including all 25 countries of the
European Union.

Paris Convention The Paris convention for the protection of Industrial

Property, signed in Paris, France, on 20th March 1883, was one of the first

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Intellectual Property treaties, after a diplomatic conference in Paris, France, on 20

March 1883 by Eleven (11) countries. According to Articles 2 and 3 of this treaty,
juristic (one who has through knowledge and experience of law) and natural
persons who are either national of or domiciled in a state party to the convention.
The convention is currently still force. The substantive provisions of the
convention fall into three main categories: National Treatment, Priority right and
Common Rules.
An applicant for a trademark has six months after filing an application in
any of the more than 160 member nations to file a corresponding application in
any of the other member countries of the Paris Convention and obtain the
benefits of the first filing date. Similar priority is afforded for utility patent
applications, although the priority period is one year rather than six months. The
Paris Convention is administered by WIPO.

North American Free Trade Agreement (NAFTA) came into effect on

January 1, 1994, and is adhered to by the United States, Canada, and Mexico.
The NAFTA resulted in some changes to U.S. trademark law, primarily with
regard to marks that include geographical terms. The NAFTA was built on the
success of the Canada-U.S Free Trade Agreement and provided a compliment to
Canada’s efforts through the WTO agreements by making deeper commitments in
some key areas. This agreement has brought economic growth and rising
standards of living for people in all three countries.

General Agreement on Tariffs and Trade (GATT) was concluded in

1994 and is adhered to by most of the major industrialized nations in the world.
The most significant changes to U.S intellectual property law GATT are that
nonuse of a trademark for three years creates a presumption the mark has
been abandoned and that the duration of utility patent is now twenty years
from the filing date of the application (rather than seventeen years from the date
the patent issued, as was previously the case).

THE INCREASING IMPORTANCE OF INTELLECTAL

PROPERTY RIGHTS
a. Protecting Intellectual Property Rights
b. Technology has led to increase awareness about the IP

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c. Some individuals and companies offer only knowledge. Thus, computer

consultant, advertising agencies, Internet companies, and software
implementers sell only brainpower.
d. Domain names and moving images are also be protected
e. More than fifty percent of U.S. exports now depend on some form
of intellectual property protection.
f. The rapidity with which information can be communicated through
the Internet has led to increasing challenges in the field of intellectual
property.
g. The most valuable assets a company owns are its Intellectual property
assets
h. Companies must act aggressively to protect these valuable assets from
infringement (breaching, violation of law) or misuse by others
i. The field of intellectual property law aims to protect the value of such
investments

HISTORY OF IPR IN INDIA

George Alfred DePenning is supposed to have made the first application for a
patent in India in the year 1856. On February 28, 1856, the Government of India
promulgated legislation to grant what was then termed as "exclusive privileges
for the encouragement of inventions of new manufactures" i.e the Patents Act.
On March 3, 1856, a civil engineer, George Alfred DePenning of 7, Grant’s
Lane, Calcutta petitioned the Government of India for grant of exclusive
privileges for his invention - "An Efficient Punkah Pulling Machine". On
September 2, DePenning, submitted the Specifications for his invention along
with drawings to illustrate its working. These were accepted and the invention
was granted the first ever Intellectual Property protection in India.

Intellectual property legislations in India

India is a member of almost all international conventions. The obligation of
the member state arising out of the conventions can be enforced on the basis of
reciprocity only. No right or obligation is enforceable unilaterally. Therefore
to pass own laws on Intellectual property is in the interest of every country. In
1999, a considerate passage of major legislations with regard to protection of

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Intellectual property rights in harmony with international practices and in

compliance with India’s obligations under TRIPS. These include,

1. The Patents (Amendment) Act, 1999 to amend the patents act of 1970
that provides for establishment of a mailbox system to file patents and
accords exclusive marketing rights for five years.
2. The Trade marks Act, 1999 which repealed the Trade and Merchandise
Act, 1958
3. The Copyrights (Amendment) Act, 1999.
4.A sui generis legislation for the protection of geographical indications
called the Geographical Indications of Goods (Registration and
protection) Act, 1999.
5. The Industrial Designs Act, 2000 which replaced the Designs act, 1911.
6. The patents (Second Amendment), 1999 further to amend the Patents Act,
1970.

This was a beginning of a new era in the field of Intellectual property. To

streamline and strengthen the Intellectual property administration system in
the country the government has taken several measures. Projects relating to
the modernization of patent information services and trademarks registry
have been implemented with the help from WIPO/UNDP. The government
has implemented projects for upgrading of patent office’s incorporating
several components such as human resource development, recruiting
additional examiners, infrastructure support and strengthening by the way of
computerization and re-engineering work practices and eliminating backlog
of patent applications, an amendment to the patent rules also was notified to
simplify the procedural aspects. The first Indian patent laws were first
promulgated in 1856. From time to time these were modified. New patent
laws Indian Patent Act 1970 were made after the independence. The Act has
now been radically amended to become fully compliant with the provisions
of TRIPS. The most recent amendment was made in 2005 which were
preceded by the amendments in 2000 and 2003.

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 .

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 1

Five Guiding Principles of Culture Management: A Synthesis of Best

Practice

Donna McAleese and Owen Hargie

Donna McAleese
is Researcher in Communication in the School of Communication at the
University of Ulster.

Owen Hargie
is Professor of Communication at the University of Ulster, and Adjunct
Professor at the Norwegian University of Science and Technology

Donna McAleese
Researcher
School of Communication
University of Ulster
Newtownabbey
Northern Ireland
BT37 0QB
Tel: (+44) 028 9036 8652
E-mail: donna_mcaleese@yahoo.co.uk

Professor Owen Hargie*

School of Communication
University of Ulster
Newtownabbey
Northern Ireland
BT37 0QB
Tel: (+44) 028 9036 6230
Fax: (+44) 028 9036 8251
E-mail: odw.hargie@ulster.ac.uk

*address for correspondence

Journal of Communication Management, (2004) 9, 155-170.

 2

Five Guiding Principles Of Culture Management: A Synthesis Of Best

Practice

Abstract

This paper offers a synthesis of best practice on how to build, maintain or

modify an organisation’s culture. The image of a company in which all

employees strive towards common goals is now a well-established theme of

management rhetoric. Teamwork has always been considered an adorned

virtue of an organisation, where staff endeavour to work collectively as one

body and stick together – whatever the outcome. However, this idealistic view

is a far cry from the real world. This paper provides a set of general guiding

principles for culture management in organisations. Leaders and managers

are advised to formulate an overall strategy, develop cultural leaders, share

the culture by communicating effectively with staff, measure performance and

communicate culture in all dealings with customers. These five distinct, yet

related elements are essential, if culture management is to be successful, and

so this paper argues that for organisational success, all five must ultimately

merge to form one unified whole.

KEYWORDS: Organisational culture, leadership, strategy, internal

communications.

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 3

INTRODUCTION

Organisations are complex social systems of co-ordinated behaviour, which

affect all members at some time or another.1 In fact, according to Mitchell and

Larson, "organizations are behavior," as they are comprised of systems of

rules, regulations and procedures that are developed primarily to facilitate

goal attainment within the workplace.2 Thus, it may be said that behaviour

itself is the epitome of any organisation.

In the process of organising, the behaviour of employees needs to be co-

ordinated and directed to maximise results.3 This involves a certain amount

of trade-off by organisation members on all levels, as people must willingly

surrender much of their individual flexibility and independence in order to

attain both personal and organisational goals.4 In addition to guiding

behaviour, goals motivate people to join and remain in organisations,

stimulate effort and provide a benchmark for evaluation.5

However, in the great quest to meet formalised goals and objectives, it is all

too easy for managers to forget the less rational social elements, such as the

concept of organisational culture, which not only associate goals with deeper

meanings6 but also determine individual and collective behaviour, ways of

perceiving, thought patterns and values.7 As Maund claimed, ‘People are not

machines that can be programmed to meet organisational objectives

Journal of Communication Management, (2004) 9, 155-170.

 4

unquestioningly.’8 Individuals carry their own personal needs, skills and

aspirations with them to the workplace and many of these may be

independent of (or even conflict with) the structure and beliefs of the

organisation. So can the two be meshed? Can managers successfully obtain

the company culture they want as well as maintaining a satisfied workforce

that is productive, efficient and creative? Over the decades a variety of

authors maintained that, not only is this a realistic objective, but also leaders

who have the foresight to plan ahead in cultural terms will gain a competitive

advantage.9-12 Indeed, Brown purported that the strategic objective of many

organisations is to achieve a “sustainable competitive advantage,” which can

only be attained by striking an effective balance between company assets and

cultural factors.13

Despite the fact that the materialisation of culture and its application in an

organisational setting has spawned much debate over the decades,14 it is

widely agreed that the concept can serve organisations in many positive

ways.15 According to Lovelace and Rosen, when the values of the individual

and the values of the organisation are working in tandem, levels of job

satisfaction increase.16 However, additional factors such as international

competition, greater cultural diversity in the workplace and the broadening of

consumer choice make this idyllic inner balance ever more hard to strike, as

cultures need to adapt and change continually in order to survive.17

This paper proposes a set of universal considerations, which leaders and

managers should weigh up in building, maintaining or fine-tuning

Journal of Communication Management, (2004) 9, 155-170.

 5

organisational culture. The discussion begins with a review of the general

background and history of culture and is followed by an overview of definitions

of the concept. An examination of culture as a strategic management tool is

offered next, leading into a discussion of five guiding principles, which should

be borne in mind for the effective management of culture.

THE STUDY OF CULTURE: AN HISTORICAL OVERVIEW

It is widely agreed that organisational culture is not a new-fangled notion18 –

so what is its aetiology? According to Morgan, the word “culture” is originally

derived from the agricultural metaphor of cultivation: of growing and

nurturing.19 However, in considering the term from a modern-day,

organisational perspective, he maintained that culture refers mainly to the

"pattern of development reflected in a society’s system of knowledge,

ideology, values, laws, and day-to-day ritual.”

The first methodical attempt to examine organisations in cultural terms dates

as far back as the 1930s during the last phase of the famous Hawthorne

studies in Chicago. Although research continued sporadically thereafter, it

was not until the late 1970s/early 1980s that the notion of organisational

culture began to create sustained interest. Two publications were mainly held

accountable for this revival: Ouchi’s Theory Z20 and Peters and Waterman’s In

Search of Excellence,21 both of which boldly pronounced the importance of

organisational culture for levels of efficiency and productivity. 22,23 Barley et

al.,24 highlighted the influence of Deal and Kennedy’s Corporate Cultures,25

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 6

maintaining that it facilitated the spread of culture in organisations beyond the

interest of academics and consultants to managers and the public at large.

Trice & Beyer illustrated how many business and trade magazines also

focused on the topic, with as many as five major conferences being held on

corporate culture between March 1983 and October 1984. 15 But was this

enough on its own to spark such widespread attention?

According to Rowlinson and Procter, another major factor that added allure to

the culture phenomenon was the state of the world economy at that time. 27

Until the 1970s the US had dominated the world market. American managers

were held in high esteem, renowned for their leadership qualities that set

them apart from others in the field. However US firms soon began to suffer

economically as their main rivals stepped up the competition for financial

control of the world. The Japanese, for example, began to investigate

organisational culture in the early 1950s. According to Maund the political

philosophy at this time was that of collectivism, defined as: “A cultural

orientation in which individuals belong to tightly knit social frameworks, and

depend strongly on large extended families or class.”8 This theory, Maund

claimed, influenced the work system of Japan ever since, as much emphasis

was placed on encouraging united and supportive working environments.

The methods of competitors such as Japan, made managers elsewhere

question their own techniques and before long there was a growing

awareness that some crucial aspects of how organisations functioned needed

to be reworked. Research and writing on culture therefore burgeoned, quickly

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 7

becoming a staple in the broad vocabulary of organisational literature. Schein

stated that those interested in organisational phenomena suddenly found

themselves in the position where they had no choice but to investigate culture

further, as they needed the concept to explain:

(a) variations in patterns of organizational behaviour, and

(b) levels of stability in group and organizational behaviour that had not

previously been highlighted.29

Schein also maintained that as research developed, the scales moved, so that

the ‘normative thrust’ has been stabilised by more explanatory and scientific

research. This, he postulated, was vital, as "We need to find out what is going

on in organizations before we rush in to tell managers what to do about their

culture."

But this raises the issue as to what exactly we mean by the term ‘culture’. It is

therefore important to examine how and in what ways this concept can be

delineated.

DEFINITION

As with many concepts within the sphere of organisational literature, the

definition of organisational culture remains a constant topic for debate.

Indeed, as far back as 1952, Kroeber and Kluckhohn 30 teased out 164

different meanings of the term – a number that has continued to rise since

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 8

then. Researchers and theorists have approached this conceptual uncertainty

in a variety of ways: some refuse to define the term at all; 31 others agree to

accept it, but offer rudimentary definitions;25 and still others focus on specific

aspects of culture, ignoring the multi-dimensional nature of the concept.33

However, despite the vast array of definitions, the list continues to grow.

According to Anderson and Kyprianou,1 this is relatively understandable, as

every organisation has its own unique way of portraying the values and goals

that its members embrace. All have their own atmosphere and character,

which affect the responses of both employees and customers alike.

The focus of definitions of organisational culture has changed over the years

and, consequently, researchers have presented a multitude of different

perspectives. Some concentrated on basic definitions of culture, such as:

“The way we do things around here,”25 or the explanation offered by Schwartz

in which he maintained that the concept simply gives people a sense of how

to behave and what they ought to be doing. 36 Others emphasised the shared

nature of culture and the fact that it possesses unique or exclusive

characteristics, which are relevant in certain contexts.37-39 On this point, some

authors, whilst recognising the fact that culture is shared, also considered the

array of elements or manifestations through which the concept is apparent in

organisations. One such example is evident in the lengthy definition provided

by Sergiovanni and Corbally:

“A standard definition of culture would include the system of

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values, symbols, and shared meanings of a group including the

embodiment of these values, symbols, and meanings into

material objects and ritualised practices . . . The ‘stuff’ of culture

includes customs and traditions, historical accounts . . . tacit

understandings, habits, norms and expectations, common meanings

associated with fixed objects and established rites, shared

assumptions, and intersubjective meanings.”40

However, this multi-faceted approach to explaining the manifestations of

culture is not widely agreed. According to Martin, narrow definitions (referred

to as specialist studies) assume that a small number of expressions can

effectively represent an entire culture.41 Davis adopted this stance, explaining

the symptoms of culture simply in terms of beliefs and values.42 Similarly

Schall defined culture as an activity that should be governed merely by

“articulating communication rules.”43 Researchers have further highlighted the

importance of the fundamental relationship between communication and

culture. Boorman, for example, acknowledged communication as a necessity

in any discussion of culture, but also stressed that two additional factors must

be considered.44 Firstly, communication, on its own, is not enough for the

formation of organisational culture. Instead, other factors deserve merit, such

as material goods, artefacts, tools and technology. Secondly, the above

factors alone without communication to bind them together are insufficient for

culture development. Thus, communication is a vital link in the chain.

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Another perspective on defining culture approached the concept from the

employees’ point of view. According to Rollinson and Broadfield, culture is a

‘soft’ aspect of an organisation, which is constantly in the minds of its

members and which they use subconsciously to make sense of their

surroundings.45 This view is shared by Bate, who claimed that thinking

culturally is to think of organisations as either “social” or “constructed” worlds.

Thus, the social angle focuses on the human-ness of companies, regarding

them as:

“Social rather than physical entities, made up of people

talking, acting, interacting and transacting with each other.

Hence the idea that culture exists not so much ‘inside’

or ‘outside’ people as ‘between’ people.”46

Viewing organisations as constructed worlds, then, Bate maintained that they

are man-made, fictional worlds that emerge when people get together and

invent their actualités. In highlighting the point that cultures may be found at

every hierarchical level and arise when people share a common occupational

core, Bate drew attention to another vital stance on definitions – that is, to

view culture in plural terms. He believed that culture could not be regarded as

a sole entity as it is not standardised or homogenous, and the view that only

one culture exists in each organisation has had the adverse effect of

“Concealing the pluralism that is so characteristic of organization cultures.”

According to Trice & Beyer, most organisations have multiple cultures – or

subcultures, which can “Differ noticeably from the overall organizational

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culture in which they are embedded, either intensifying its understandings and

practices or diverging from them.”15 This point is further reinforced by Gundry

and Rousseau, who purported that culture is not an entity but a complex

social process whose content varies from tangible artefacts and noticeable

patterns of behaviour, to implicit values and oblivious assumptions that are

difficult even for members to decipher.48 As such, these features can vary

across departments and organisational units, leading to the development of

mini- or subcultures.

Still another angle on culture differentiated between defining the concept as

something an organisation has and something the organisation is.49

Pacanowsky and O’Donnell-Trujillo supported this notion, claiming that all

organisational characteristics are elements of its cultural life therefore it is fair

to say that an organisation in its entirety is literally a culture.50 However

Brown highlighted that it is almost impossible to differentiate between the

suggestion that organisations are cultures13 and the view that culture should

be interpreted as a metaphor for understanding organisations, as suggested

by Morgan.19

Morgan asserted that culture was simply the latest in a long line of metaphors,

which were adopted as a way of comprehending and expressing the internal

functioning of organisations. He examined organisations and formulated

comparisons using a wide range of metaphors such as machines, organisms,

brains, political systems, psychic prisons, as flux and transformation,

instruments of domination and, finally, as cultures. His work relied on the

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fundamental belief that: “ . . . all theories of organization and management are

based on implicit images or metaphors that lead us to see, understand, and

manage organizations in distinctive, yet partial ways.” Thus, metaphor is very

often regarded generally as a tool for enriching discourse, and its application

is very important as it implies a way of thinking and a way of seeing that

permeates through individual interpretations of the world in general.

This discussion merely skimmed the surface of the plethora of definitions that

abound on organisational culture. However, it remains to be seen that despite

the variety of opinions on how the concept should be explained, the term

remains so convoluted as to present a problem for researchers. Brown

claimed that how we choose to define culture has sizeable implications for

how the concept is analysed and measured.13 Therefore, as any serious work

must be empirically determined rather than presumed from noting superficial

phenomena,29 it would appear that the only seemingly ‘fair’ way to view the

problem of defining culture is to accept that it is a term with a selection of

interpretations, each of which may be derived from its author’s perspective. 8

Following this discussion of the innumerable meanings of culture, it should

come as no surprise that the application of the concept within organisations is

also widely debated. The next section considers key issues found in the

literature surrounding culture management, namely, the links between culture

and performance, what the concept means in the corporate setting and the

positive and negative benefits of its application.

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STRATEGY AND PERFORMANCE – CULTURE AS A MANAGEMENT

TOOL

It is every leader’s dream to build a strong culture – a cohesive workforce,

who will focus collectively as one body in pursuit of organisational goals.

However, in considering the number of factors (both internal and external),

that managers need to contend with on an ongoing basis to keep afloat, this is

no easy task. So, can culture help? Can the culture of a company be actively

manipulated in order to produce the ‘ideal’ organisation?

Dennison purported that if an organisation possesses a strong culture, it will

perform at a higher level of productivity and will therefore be more effective

(strong culture hypothesis).56 This view was shared by other scholars, who

believed that culture could be a powerful driving force behind business

success.57 The implications of this assumption cannot be ignored, particularly

as authors such as Deal & Kennedy25 and Ouchi20 postulated that managers

can, to some extent, control or manipulate cultural variables. However,

Saffold highlighted five main weaknesses inherent in Dennison’s strong

culture hypothesis:10

1. The assumption of unitary culture. Strong culture studies tend to focus

on a single overall company culture, often ignoring the presence of

subcultures, which are generally the norm.

2. The ambiguity of strength as a measure of culture. Saffold claimed

that the meaning of culture strength is very difficult to isolate.

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Definitions are so open to individual interpretation that it may be unwise

to base any theory or research of culture on this foundation.

3. Dependence upon composite culture profiles. According to Saffold,

“Culture trait studies commonly develop broad-brush cultural profiles

that are considered typical of high-performing organizations.” This

results in generalisations about cultural concepts, which fail to take

more complex phenomena, such as individual personalities of

employees and differences in organisational processes, into account.

4. Insufficient attention to culture-performance links. Often, the

relationship between culture and performance is over-simplified.

Scaffold claimed that as cultural values become more complex, a

larger number of organisational behaviours are brought under cultural

control. The effect may be positive at the outset, however, should

cultural values increase too much, resistance can develop and

performance may subsequently decrease. Additionally, not all cultural

features have the same effects on performance across the board. For

example, whilst the development of shared values and meanings may

facilitate the attainment of organisational goals, they may also restrict

the organisation’s ability to be innovative and move into other areas.

5. The use of inadequate methodologies. The fact that researchers and

managers often ‘select’ what they deem to be the most important

features of their company’s culture for analysis means that many vital

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concepts are omitted and bias creeps in. Indeed, Gregory remarked

that it is sometimes possible to learn “more about the culture of the

researchers than the researched,” by merely observing what aspects of

the organisation’s culture were most appealing to investigators.61

In considering these weaknesses, it is apparent that trait-strength models of

the link between culture and performance are too simplistic. Often, other

important factors such as the nature of the industry, environmental issues and

the size of the organisation are omitted. Kilmann et al pointed to the need to

incorporate additional features, such as the direction and pervasiveness of

culture when predicting its impact on outcomes. 62 However, Saffold

maintained that even with these amendments, there are still too many

shortfalls, and he suggested three correctives that can enhance the validity of

culture and performance studies.10

The first is to utilize more specific categories of culture, namely, measures of

cultural dispersion and measures of cultural potency, rather than employing

generalisations and assumptions of culture strength. The second concerns

the use of contextual as opposed to modal analysis. In other words, it is not

enough to point to culture as a single entity and claim that it magically

improves performance, without examining how specific culturally conditioned

processes contribute to outcomes. The third, and final corrective, encourages

researchers to pay attention to multiple, mutually causal interactions.

According to Saffold “Cultural features are dispersed across an organization

in varying degrees of artefactual, sociological, psychological, and historical

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penetration.” Not only did he recognise that culture can shape organisational

process (and vice versa), he also pointed out that culture’s relationship to

performance is much less clear-cut than first assumed. A multitude of

concepts, from the dynamics of organisational life, to the company’s

successes and failures, must all be given attention in order to accurately

investigate the link between culture and performance. Until then,

management strategies designed to increase an organisation’s performance

through understanding and manipulating aspects of its culture will continue to

be poorly focused and difficult to implement and evaluate.

It is quite clear that culture means different things to different people and, as

such, a variety of assumptions are reflected in the literature. Isaac highlighted

a number of examples (and their alternates), such as:

 Organisations generate culture, as opposed to reflecting the collective

backgrounds of their members.

 Organisations change their culture to accommodate operational

requirement, rather than adjusting their procedures to minimise the

effects of inflexible cultures.

 The manifestations of culture create and maintain a knowledge and

awareness of culture, contrasted with the view that culture exists below

the conscious awareness.

 Organisations with strong cultures perform more efficiently than those

with weak cultures, in contrast to the view that culture strength either

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promotes or hinders organisational performance depending on

situational factors.64

Isaac claimed that whilst this diversity adds allure to the topic, it also serves to

restrict understanding and limit clarification. This paper considers what

general rules companies could follow in order to obtain optimum performance.

However, with the existence of such a wide variety of perspectives on the

topic of organisational culture, prescribing a set of universal guidelines may

not be as easy as it sounds.

Morgan warned against the manipulation of values and beliefs by managers

to develop effective organisational strategies. Indeed, he claimed:

“There is a certain ideological blindness in much of the

writing about corporate culture . . . The fact that such

manipulation may well be accompanied by resistance,

resentment, and mistrust and that employees may react

against being manipulated in this way receives scant attention.”19

Similarly, some researchers believe that the functions of culture are not

always constructive in nature. Sathe, for example, argued that it is best to err

on the side of caution when considering the benefits of the concept, as it can

prove to be a company liability when the beliefs, values and assumptions that

employees share, collide with organisational objectives. 66 As internal and

external environments are ever-changing, companies need to tweak or fine-

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tune internal strategies and procedures from time to time in order to survive

and evolve in the business world. Thus, organisational culture constantly has

to constantly evolve in tandem with changes in the environment.

However, generally, negative views on the benefits of culture are the

exception rather than the rule. According to Brown, the majority of theorists

stress that organisational culture is a very important asset. 13 As such, a

number of positive outcomes have been identified, all of which are attributed

to culture and its functions: management of collective uncertainties; the

creation of social order and continuity; the creation of a communal identity and

commitment; encouragement of ethnocentrism and the generation of dual

consequences.15 Indeed, Hampden-Turner maintained that:

“The culture of an organisation defines appropriate behaviour,

bonds and motivates individuals and asserts solutions where

there is ambiguity. It governs the way a company processes

information, its internal relations and its values.”69

Additionally, a large body of evidence exists highlighting the positive link

between culture, employee satisfaction and organisational performance. 70, 10,

72, 73
In fact, research has indicated that job satisfaction is directly related to

important work-related outcomes such as commitment and loyalty to one’s

employer,74 According to Testa et al., such associations are too important to

dismiss and must be considered central in the competitiveness and

performance of organisations.15 However, given the sheer magnitude of the

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diversity of organisations, the variations in organisational structure, the

medley of products and services produced, the global marketplace, and so

on, is it actually possible to prescribe a course of action for obtaining the

culture you want?

The next section offers a synthesis of best practice on how to build, maintain

or modify an organisation’s culture. The process is fragmented into five

distinct, yet unified sections: formulate an overall strategy, develop cultural

leaders, share the culture by communicating effectively with staff, measure

performance and communicate culture in all dealings with customers.

THE FIVE GUIDING PRINCIPLES OF CULTURE

Fineman and Gabriel discussed winners and losers in organisations. 76 The

image of a company in which all employees strive towards common goals is

now a well-established theme of management rhetoric. Teamwork has

always been considered an adorned virtue of an organisation, where staff

endeavour to work collectively as one body and stick together – whatever the

outcome. However, this idealistic view is a far cry from the real world. As a

result, what follows is a set of general guiding principles for culture

management in organisations. A common course of action, which will steer

leaders and managers towards best practice on how to build, maintain or

modify their organisation’s culture, is recommended. This is based upon a

synthesis of existing findings in the field. Figure 1 illustrates the distinct, yet

inter-connected nature of the principles. It should be stressed at this point

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that although individual attention is a necessity, it is also vital that they

eventually merge to form a cohesive whole.

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Figure 1

Formulate an Overall
‘Culture Strategy’

Balance company assets and

cultural factors
Define direction of company
Clarify shared values

Communicate Culture in all Develop ‘Cultural Leaders’

Episodes With Customers
Articulate a vision
Cover all bases Guide direction
Create awareness of policies Set expectations
and procedures Encourage excellence
Insist on professional manner Act as role models
Overall commitment to UNIFIED Motivate
customer satisfaction CULTURE Communicate

Measure Cultural Performance Sharing the Culture:

Communicating Effectively With Staff
Integrate organisational strategies
Consider job design Empower
Set realistic targets Motivate
Staff competencies Energise
Staff development Promote two-way communication
Offer rewards and incentives Feedback
Job satisfaction Utilise information flow and channels

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Principle 1: Formulate an overall ‘culture strategy’

The concept of strategy has received much attention in recent years. Brown

(1995: 167) pointed out that the array of definitions of strategy, performance,

culture, and the link between them, are a source of both “difficulty and

inspiration for us.”13 On one hand, the blurred boundaries of meanings and

relationships reflect a lack of knowledge within the area. On the other hand,

scholars and managers are still free to interpret and investigate these

concepts from a variety of angles, as no universal agreement has been

reached on exact meanings or associations.

The main strategic objective of many organisations is to achieve prolonged

success with a view to outperforming its competitors. One main way of

achieving this is by striking an effective balance between company assets and

cultural factors. In attempting to maintain or modify organisational culture, it is

therefore vital that management arrive at a decision on how the company

should be defined and the future overall direction or path that it must follow.

In cases where major changes are inevitable, the existing culture should be

measured before a target culture is defined.

This is a complex process, which involves analysis on several layers in order

to encapsulate all levels of culture. Schein suggested that organisational

culture exists at three main levels - all interconnected and ultimately unified.

He claimed these levels range from the “Very visible to the very tacit and

invisible,” making them hard for even established employees to decode. 78

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The most important parts of culture are therefore virtually imperceptible, and

require deep analysis, as they incorporate thoughts, feelings and perceptions

that are visible only to those living the culture daily. Very often, although the

tried and trusted ways of performing tasks have proved reliable, providing a

sense of security and continuity, they can also stand in the way of creativity

and innovation. A firm assessment of what procedures need to stay and what

could be revised is therefore recommended.

In order to thrive, businesses must have clarification on the shared values that

cement the organisation. Moorehead and Griffin maintained that culture is

comprised of strategic and cultural values.79 Strategic values link the

company with its surroundings, as they consist of the fundamental beliefs held

by management about the organisation’s environment. These values

subsequently mould or direct company strategy. Cultural values are the

codes of behaviour that staff need to employ in order that strategic values are

actually carried out. Another perspective distinguished between espoused80

and inferred values.81 An employee’s verbal statements reflect the principles

to which they espouse. However, it is often the case that what they do in

practice contradicts what they say. Values exist in a hierarchy in people’s

minds therefore individuals are likely to rank them very differently in line with

their own personal views. In formulating a strategy, managers must create,

define and build a shared understanding of the company’s mission, vision and

values. Without explicit statements of values, employees will not know what

is expected of them. It is therefore vital that a succinct explanation

accompanies each value.

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Principle 2: Develop ‘cultural leaders’

A superior manager will have the ability to create and maintain a working

environment that is conducive to achieving both personal and work-related

goals. This is achieved through effective organisation and planning,

controlling and decision-making, co-ordinating and guiding, and

communicating. Also closely connected with matters of leadership are those

of motivation. To facilitate task accomplishment and meet targets, leaders

must be tuned in to the needs and wants of employees. 82 According to Hargie

and Dickson, research has failed to establish the exact traits that effective

leaders should possess.83 Instead, the context in which leaders operate has

emerged as a central theme on management behaviour and organisational

performance. Consequently what may be successful for one leader may be

unsuccessful for another.

Leadership from senior management filters through to employees and, as a

result, staff often focus on the values and behaviours they observe in their

leaders. This can have a major influence on creating and maintaining the

desired culture. In essence, leaders must: articulate a compelling vision and

guide the direction; set high expectations and encourage excellence; and

model consistent behaviours. According to Trice and Beyer, “Persons early in

their careers are especially likely to adopt role models as a way of being sure

they will meet expectations and not violate crucial norms.” 15 Thus, following

the behaviours or adopting the same values as an organisational leader,

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provides a kind of ‘insurance policy’ for newer employees, who feel that by

striving to emulate their successful role model, they themselves cannot fail.

This means that managers must be role models for the organizational culture.

However, whilst the function of leaders and others in senior positions is crucial

in the transmission of culture, it is also vital that the role of middle

management is not underestimated. Middle managers can have a huge

bearing on how work is structured, the implementation of formal reward

systems, and the decision-making approach – all of which impact on culture.

Indeed, it is often at this level that conflict and friction become apparent as a

result of emerging inconsistencies between the values that leaders espouse,

and the reality of what actually goes on in the workplace.

Principle 3: Share the culture by communicating effectively with staff

In many instances, the misunderstanding of a few words can literally mean

the difference between life and death.85 Within the context of an organisation,

although the consequences may be considerably less dramatic,

communication is nonetheless an essential component in the success and

effectiveness of any unit.

Smythe purported that the role of internal communications is no longer limited

to merely providing information to employees.86 Rather it has a major role to

play in defining and improving the relationship between employers and their

staff and it can facilitate the management of strategic, structural, technological

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and process changes. Moreover, internal communications can also act as the

cultural conscience of an organisation, the communication planner, the

communicator of decisions, the facilitator of real-time listening, the integrator

of the internal culture and external brand, and the medium of consultation

involvement and empowerment.87 The impact of internal communication as a

process and its relationship to culture is therefore crucial.

According to Hargie and Tourish, one of an organisation’s most important

assets are its staff, and employee loyalty is often more important than

securing profitable growth than market share, scale or cost position. 88

However, such relationships are only possible if people feel valued – and they

only feel valued if they are well informed. What is most important is that an

effective balance must be struck between what managers think employees

should know and what staff themselves believe they should be told. To win

employee loyalty as well as eliminating the possibility of information overload,

staff should be kept abreast of the most important facts concerning

organisational issues that could impinge on their working environment, such

as alterations to strategies or changes in structure or procedures.

In essence, leaders and managers can act as catalysts through which staff

can feel empowered, motivated and energised. The need for people to retain

their individuality must not be underestimated. Each and every member of

staff should be viewed as a potential source of ideas, rather than simply a

number on the payroll. The role of internal communication in building,

maintaining (or modifying) culture essentially requires an infrastructure that

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facilitates continuous two-way communication from leaders and management

to staff on lower echelons. Feedback is vital in this process and all sections

and departments of the firm should have an input into the decision-making

process. Effective communication involves utilising information flow

(downward, upward and lateral) to the full, to relay essential company matters

through as many channels as are available.

Principle 4: Measure the cultural performance

Another vital component in the maintenance of culture is to constantly review

and obtain feedback on current strategies and performance. Whilst

innovation and diversification (within reason) are encouraged, control over the

implementation of new incentives and how they are financed requires close

monitoring. Businesses need to be driven towards goal attainment and this is

impossible without measuring and reporting on all company matters. Two-

way communication between managers and employees is essential in this

process.

Brierly suggested that managing and measuring performance should not

merely be an annual toil. Rather, it should be:

“A dynamic process integrating that various aspects of

organizational and human resource management, including

staff appraisal and development, as well as quality, standards,

targets and outcomes.”89

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Performance measures need to reflect the values to which organisations

espouse and the objectives they are striving to meet. Additionally companies

must allow for individual goals and ambitions of employees. After all, without

people, there would be no organisational success. It therefore follows that

targets, which are formulated by management to meet organisational

objectives, should be devised in consultation with members of the workforce

who will actually see projects through to completion. When deadlines are

met, it is important that leaders should then offer rewards or incentive

schemes to high performers.90 In this way, staff are recognised for their

efforts (either psychologically or in monetary terms) and are encouraged to

maintain high standards.

However, the process of measuring performance is much more than simply

offering payment for services rendered. It involves the integration of

organisational strategies, which ties in with job design, competencies, staff

development and job satisfaction. Essentially, measuring performance

effectively necessitates a firm commitment by the organisation to employee

development.

Principle 5: Communicate the culture in all dealings with customers

In relating communication to culture, Grof maintained that the internal and

external communication of an organisation is based on the interaction and

realisation of values – a process similar to the value systems of societies. 91

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Opposing factions in organisations will result in conflict and unrest, which,

unless carefully managed, will filter out to external bodies. Companies must

strengthen their ‘oneness’ internally, before transmitting their values

outwardly. According to Harvey and Lusch, functions such as public relations,

marketing and lobbying are vital components of corporate communication and

are powerful in their own right.92 Waddock and Smith reinforced this view,

claiming that these sectors have an important role to play in manipulating and

managing the relationship between a company and its environment.93

There is no doubt that paying close attention to customers is a key to

organisational success. A reputable image can foster long-lasting

relationships based on trust between an organisation and its customers.

Hargie and Tourish claimed: “Like money, trust is hard to acquire but is easily

squandered,” therefore in considering the power of ‘word of mouth,’ as a

marketing tool, companies must adopt a more proactive stance in placing

customer communication higher on their list of priorities.88

According to Aaker, leaders should insist on, “Brilliant execution,” of

communication.95 But how? – especially when, as Stock stated:

“However careful companies are in their communications . . .

employees can sometimes be a wildcard.”96

Many companies put communications policies in place when it is too late.

Even with the best of intentions, employees need to be aware that even

accurate information released informally can have ruinous long-term costs for
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the company – both financially and in terms of damage to reputation. One

logical solution to this problem is to cover all bases. Businesses should

inform staff on company policy regarding external communication with other

publics, and employees who have direct contact with customers must act

professionally, with commitment to customer satisfaction being of paramount

importance.

CONCLUSIONS

Despite the fact that the materialisation of culture and its application in an

organisational setting has spawned much debate, it is widely agreed that

culture can serve organisations in many positive ways, such as: facilitating

management of collective uncertainties; creating social order, continuity, and

collective commitment of identity; encouraging ethnocentrism; and, generating

dual consequences. It is thought that when the values of the individual and

the values of the organisation are working in tandem, levels of job satisfaction

increase. However, additional factors such as international competition,

greater cultural diversity in the workplace and the broadening of consumer

choice make this idyllic inner balance difficult to strike, as cultures need to

adapt and change continually in order to survive.

This paper has offered a synthesis of best practice on how to build, maintain

or modify an organisation’s culture. Five universal guiding principles were

proposed, which could be applied to all organisations, regardless of the type

of product or service provided. Leaders and managers are advised that

although the principles require individual consideration, they must be applied

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with a broader perspective in mind. A note of caution is also recommended

against rushing culture development or change. Time and effort are required

to achieve the right mix. Sudano claimed that the fact that change is a very

slow process means that years often pass before any appreciable financial

benefits are obtained. This, he claimed presents, “Near-term challenges to

management attempting to balance short-term financial results with longer-

term initiatives. As a result, corporate leadership must commit itself to

innovation as a long-term success platform.”97

It is important to remember that however difficult the culture management

process can be, victory is possible. The view that all successful companies

have adopted the same single ‘correct’ culture has long since been

abandoned. Rather, the most suitable culture for any organisation will depend

partly on environmental constraints and the preferences of senior

management.98

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