Groningen, July 2004
Author: M. Groeneweg Student No.: 1062808
First Advisor: Dr. R.T.A.J. Leenders Second Advisor: Prof. Dr. Ir. F.P.J. Kuijpers
Faculty of Management & Organization Rijksuniversiteit Groningen
“An Invention without a plan is a dream”
Business Recommendation Format for Technology Breakthrough Innovations within Calister Innovation
Executive Summary
New product development is a dynamic process ranging from idea generation to product launch. The viability of a new product needs to be evaluated at each stage of its development. Within most companies this new product development process, except for technology breakthrough ideas, is running well.
Development of technology breakthrough ideas, inventions driven by technological insights, involves considerable risks. It typically concerns ill-defined processes, unarticulated technical feasibility and emerging markets in which customer demand is latent.
Calister Innovation, which is the venue for international new product development within Calister, has the target to increase the amount of technical breakthrough innovations in several strategic directions.
To formulate the technically driven ideas into formal development projects, the organisation requires a structure forcing the projects through the first development stage.
The existing new product development (NPD) structure within Calister was not suitable structuring this stage. This thesis describes the development of an extra stage introduced in front of the NPD process to reach the targets of Calister.
New breakthrough product ideas need to generate support from the Management Team of Calister Innovation before they can roll into the existing development process. Next to an extra stage, an extra gate-meeting has been set in front of the normal procedure to recommend the ideas to the Management Team, who are expected to assess on the future of the project; Go, No/Go or Recycle.
To provide the Management Team with the relevant information enabling them to judge the invention, a preliminary investigation stage is required, executed by the R&D employees.
Furthermore this thesis describes the research that has been performed to develop a business recommendation format, including the relevant success factors to indicate the attractiveness of a product to Calister. Given the specification to analyse the attractiveness of a product in a multiform manner, six metrics are identified:
Business Strategic Fit
Product Competitive Advantage Market Attractiveness
Technical Attractiveness Action Plan
Financials
To enable the R&D employees to effectively analyse these factors, a manual has also been created.
This manual provides guidelines and instructions to find and analyse deliverables.
In the business recommendation format it is taken into account that not all innovations are the same.
Difference in types of innovations influences the gathering of deliverables and even the judgement of
its success factors. Research has been done which innovation types, influencing the process, needed
to be differentiated. A distinction between six innovation types tailored to Calister is made based on the combinations of two dimensions: Calister’s familiarity with the technology (divided in three levels) and Calister’s familiarity with the market (separated into two levels). By determining the type of a breakthrough idea, the focus and way of information gathering becomes clear to the R&D employees.
Besides this, the types provide concrete insight to the decision-makers regarding performance measurement and comparison of projects.
To ensure the adaptation within the organisation the format is developed in cooperation with the users.
Three pilots in total are performed with the users during the research exposing the specifications,
preconditions and procedural and structural fit with Calister. These pilots already proved the benefits
of the format and manual, as the inventions of the projects all passed the gate without recycling
requirements.
Contents
Executive Summary ... 2
Executive Summary ... 3
Company Profile... 7
1.1 Calister Organisation... 7
1.2 Calister Innovation ... 8
Research Design ... 11
1.3 Background of the research... 11
1.4 Research area and scope... 13
1.5 Research Methodology ... 16
1.5.1 Research Classification ... 16
1.5.2 Research Method & Program... 17
Evaluation of Pilot 1 ... 21
1.6 The designer's perception... 21
1.7 The decision-maker's perception... 23
1.8 Theoretical insight... 25
1.9 Summary and conclusions... 26
Problem Definition... 28
1.10 Research objectives ... 28
1.11 Conceptual Model... 29
1.12 Specifications and Sub-questions ... 31
1.13 Preconditions ... 33
Nature of Innovation... 34
1.14 Defining Innovation ... 34
1.15 Specifications... 35
1.16 Model differentiating innovation types ... 37
Success Factors... 41
1.17 Specifications & Conditions... 41
1.18 Gates and Gating systems ... 42
1.18.1 Purpose of Stage 1... 42
1.18.2 Purpose of a Gate ... 42
1.19 Success Factors for CI ... 43
1.19.1 Business Strategic Fit... 45
1.19.2 Product Competitive Advantage... 46
1.19.3 Market Attractiveness ... 48
1.19.4 Technical Attractiveness... 51
1.19.5 Action Plan... 52
1.19.6 Financials... 53
1.20 Information Gathering ... 53
1.21 Relevance of Fieldwork ... 56
Evaluation and Assessment ... 58
1.22 Evaluation methods... 58
1.23 Success Factors Assessed ... 59
1.23.1 Assessment Business Strategic Fit ... 60
1.23.2 Assessment Product Competitive Advantage... 60
1.23.3 Assessment Market Attractiveness ... 60
1.23.4 Assessment Technical Attractiveness ... 61
1.23.5 Assessment Action Plan ... 62
1.23.6 Assessment Financials ... 62
1.24 Decision on Continuation... 62
Conclusions... 64
Reflection... 69
References... 72
Company Profile
A short introduction is given about the Calister Organisation to give an overview of the organisation and to show the position of Calister Innovation within the company, followed by a more detailed description of Calister Innovation in where the research is conducted.
1.1 Calister Organisation
Calister is an international company specialising in the development, production, sales and distribution of fast moving consumer products. Calister mainly targets the European market. These products are marketed under the main brands Calister, Lola (Germany) and Cali (Netherlands). Calister is one of the most important fast moving consumer suppliers in the Netherlands, Germany and Belgium.
Mission
The mission of Calister is to “make value of fast moving consumer products”. Harmonisation, efficiency and growth of Calister Company are the overall long-term objectives based on this mission. In 2002 the organisation recorded a total turnover of
€3707 million. Other important figures are given in table 1.1.
2003 Turnover (x € million) 3.825 Investments in tangible fixed assets (x € million) 97
Capital base (x € million) 620
Capital base (% of balance sheet total) 39.7 Average number of employees 6.782
% employees outside the Netherlands 60
Divisions
Calister has organised the activities in 3 divisions:
Calister Netherlands, responsible for consumer products for the Dutch market.
Calister Germany, responsible for a broad range of products on the German and Austrian market.
Calister International, responsible for the production and sales of consumer products outside the Netherlands and Germany.
Table 1.1- Calister Company Figures
“Calister Group”
Calister Netherlands
Calister International Calister
Germany
Calister Innovation
Executive board
Calister Innovation focuses on consumer products for Calister Netherlands, Calister Germany and Calister International called “The Calister Group”, which is responsible for fast moving consumer goods (figure 1.1).
1.2 Calister Innovation
Calister recognised that growth is crucial for the development of an international Calister brand.
Innovation is the key driver for that growth. Calister Innovation (CI) is the venue for International New Product Development within Calister. CI started January 2003 at the office of Calister Netherlands.
Objectives
To contribute growth of the Calister Group CI will create:
Synergy; by combining in-house international expertise to increase innovation;
Innovation; by translating consumer needs into products and processes;
Entrepreneurship; by being pro-active, passionate and deliver at the right time.
Ownership
CI is owned by the Calister Groups of Calister International, Germany and the Netherlands. It operates with an international team and carries out innovation projects for the Calister Groups, the group of Strategic Business Group and other groups within Calister (figure 1.2).
The Management Team (MT, no. 2 in figure 1.2) consists of R&D directors from three divisions and the general manager of CI. The MT manages the implementation of the international programs of innovation projects. The Operational Team (OT, no. 4 in figure 1.2) is responsible for the project execution carried out by the multidisciplinary teams. The Strategic Business Group, consisting of marketing people, advises CI about the synergies and the innovation strategy directions from the entire Calister Organisation.
Mission
Meet the consumer needs in the Calister Group, by using advanced technologies, up-to date facilities and an extensive expertise network.
R&D directors 1
2 2 3
4
Innovation Category Board
Executive board members (R&D/M&S)
Group Directors (Germany, NL, International) – Staff Directors (R&D/M&S) Chairman R&D Innovation Group
Calister Innovation (CI)
CI General Manager CI Operational Team (OT)
Strategic Business Group R&D Innovation Group
R&D Director
Figure 1.2- Organisation R&D of the Group Management Team (MT)
Innovation Board
Bring innovative solutions up to product launch.
CI is equipped with a young international team with in-depth expertise.
Strategy
The primary goal of CI is to improve the innovation power and rate of the Calister Group by concentrating and upgrading competencies in a single centre. The local R&D units are kept for transfer and easy short-term line extensions.
Consumers
CI offers her services to:
Groups and Divisions (e.g. R&D directors, Marketing, Product/Process Development and Operation managers);
Strategic Business owners (i.e. International Brand Development teams).
Deliverables
CI delivers new products, processing, packaging and several training and workshops to the Calister Group.
Structure
Opening box no. 4 of figure 1.2, the organisation structure can be seen. CI uses a flat organisation structure. Formally CI is subdivided into 2 departments (figure 1.3). Each employee is member of a department. The heads of the departments report to the CI General Manager in the Operational Team (OT). The CI General Manager is linked to the owners of the centre in the Management Team (MT).
With two departments CI wants to add value to the following areas of the Calister product portfolio of the Group:
Department 1; development of innovative product concepts, building and maintaining a skill base as well as an expert network, academia as well as suppliers.
Manager CI -1
Department 1 8
Department 2 4 Assistance -2
Figure 1.3 - Organisation Structure of CI and number of people
Department 2; focus on design, up-scaling and optimisation of technologies needed to produce new products. Therefore, technology scouting and know-how development of Calister production locations are important activities. Furthermore, the department is responsible for management and operation of the pilot plant facilities of Calister Innovation.
The research in this thesis is conducted for all departments of Calister Innovation and will focus on
technology breakthrough projects.
Research Design
The purpose of this chapter is to introduce and explore the research design. This design includes the background (2.1) and scope (2.2) of the research. The research methodology is discussed in section 2.3, which classifies the research and outlines the program.
1.3 Background of the research
It has been widely observed that the development of new products has become a critical weapon for organisations acting in competitive environments. Changing technology, globalisation, and more demanding customers are some of the factors that are forcing organisations to be innovative [64].
Calister recognised this and the New Product Development Centre, CI has been started to increase the capacity of innovation within Calister.
Projects within CI are for 80% initiated by the ‘business’ (new products, product improvements and cost reductions, see table 2.1). This means that the development takes place with the purpose to fulfil a (known) demand in the market. R&D and Marketing work close together in these projects.
Project/ Activity Types
Technological Breakthrough projects
New Products
Product Improvements
& Maintenance
Cost Reductions
R&D Budget 15-20% 45-55% 10-15% 10-15%
The other 20% of the R&D budget is reserved for technology breakthrough projects. These projects are totally driven by R&D (the so called technology push projects [22]). In this way Calister is able to recognise and work out technology developments which don’t necessarily have to be answered by the business in a short term but are promising for the future. Technology can be developed in advance on the business so that both can be ready to enter the market at a right time.
To illustrate the innovation process, the figures of Gardiner and Rothwell are used [59]. Figure 2.1 shows two traditional views of the process; both follow a linear path. The first is the ‘Technology Push Model’, commencing with basic science, then through applied science and manufacturing to the market. The second view is the ‘Market Pull Model’ beginning with the market need and responding with development and manufacturing, concluding with sales.
Table 2.1- R&D Budget in CI
By contrast, figure 2.2 presents an ‘interactive model’ which recognises that innovative processes in practice mostly take a non-linear route, where need and technology constantly interact.
As Gardiner and Rothwell describe, ‘the innovative process may start with market need or new technological capability but whichever is the case is not critical to the outcome, as long as the innovative company forms an interactive link between the two in its development’.
The interactive model has been combined with what Wheelwright describes as the Development Funnel [64]. The Development Funnel illustrates the flow in the stages, which starts broad and ends with a specific developed product or process. The funnel illustrates the process firms ideally go through to identify many ideas, select the few most promising for development, and allocates resources to get them into the market. Recognition within Calister arose that the range of inputs into the development funnel generally got filled with ideas originated from new needs in the market, while many technology based ideas with potential were not able to enter the funnel or were bounced off with no clear reason.
Basic Science Applied Science
and Engineering Manufacturing Marketing
Market need Development Manufacturing Sales A. Science discovers, technology produces, company markets
B. Need pulls, technology makes, company markets
Figure 2.1- The traditional view of innovation
New Need
Idea Conception
New Technology
Capability
Development Manufacturing Marketing &
Sales Market
State of art in technology and production techniques Needs of society and the market place
Figure 2.2- Interactive model of innovation
Following Tidd’s idea that organisations develop particular ways of behaving which become ‘the way we do things around here’ as a result of repetitions and reinforcement, the pattern created within Calister has become almost exclusively business or market driven [57].
The real problem that can be identified is that Calister's existing business driven new product development (NPD) process and strategy have no mechanism for systematically addressing internally generated ideas. The NPD process has been set up for a later stage in the product development where already a concrete product idea is developed and a concrete cross-functional team has been formed by the business.
So, a way to capitalise the development of technology driven breakthroughs is required. For that reason several breakthrough areas for future growth have been initiated within CI. Within each area R&D employees are doing purposeful attempts to find ideas derived from technological insights which might have market potential.
A new pattern should be created, which will emerge as a result of repeated experience around what appears to work well. In other words, it has to be learned to work out technological driven ideas to a well-defined concept, able to flow into the NPD process after appraisal on the potential. Practically that will be not possible within an already existing pattern like the NPD process. This latter conclusion already expresses a theoretical assumption: the structure of the stage will have to be created, taken the existing organisational context as given. The assumption is based on the contingency theory. The contingency theory posits the view that there is not necessarily a single best organisational structure (for innovation processes), but rather should the structure be adapted to the activities being performed [58].
Summarising, CI intents to focus for 20% of the R&D budget on technology driven ideas. Current structures in the organisation are not suitable to make this strategy operational. So a new structure will have to be created which adapts to the existing pattern. The idea-development and idea-selection stages in front of the NPD process often are called 'front-end' process, because it typically involves ill- defined processes and ad hoc decisions [41].
Section 2.2 explores in further detail the structure of the innovation process, including the front-end process within CI. By use of this, the scope of this research is defined.
1.4 Research area and scope
The initiated breakthrough areas for future growth, in line with the overall Calister strategy, come up with ideas/projects. After an initial screen which is subjecting the ideas to a handful of key criteria a decision on continuation will be made by the Operational Team, whether or not time will be spend to work out the project potential (see figure 1.2). This stage can be compared with the Signal Processing Phase described by Tidd [57, p.41] or the first phase in the development funnel [64], where idea generation is put central.
The scope of this research is defined by use of the Stage-Gate process [16]; a conceptual and
operational model for moving new product projects from idea to launch. The Stage-Gate process
needed to progress the project to the next gate or decision point. The gates are milestones during the development where information is brought together. Gates serve as hurdles; quality-control checkpoints for appraisal and/or prioritisation. Typically the Stage-Gate only includes NPD process, focussed on the development of ‘business’-driven product ideas. The nature of a Stage-Gate process for technology developments is quite different from the standard oriented process. Technical breakthrough projects cannot be forced in the typical NPD process directly, as the direct deliverable is not a new product or new manufacturing process, but new knowledge or a capability that may spawn to new products after development [19]. To provide direction and focus to technical breakthrough projects, a Technical Development Stage-Gate can be put in front, visualising the front-end process.
The scope of this research is restricted to Stage 1’ and Gate 2’ of the front-end process. It includes a preliminary investigation to determine the potential of the breakthrough project. When the judgement on the potential of a proposed breakthrough project will be positive, the Technical Development will start. This phase can be long including several milestones, dependent on the technical feasibility and complexity of the project. When, during or after technical development the project still shows potential, it will (most probably) flow into Gate 2 of the NPD process. Sometimes a project might flow into Gate 1 or 3, being conditional upon the shape of the project. The judging procedure of NPD-Gate 2 exists within Calister as ‘PP’; Project Proposal (see Appendix 1). Judgement in this gate is dedicated to a cross-functional management team.
The ideation area and front-end Gate 1’ will not be taken into account. The promising ideas where a continuation decision has been formulated on will function as the starting point.
Front-End Stage 1’ : A quick scoping of the project's business, technical and marketplace merits.
It involves desk research or detective work; little or no primary research is done.
Front-End Gate 2’ : Decision on approval of the proposed project, inclusive investment. The project needs to be evaluated on future potential and feasibility.
R&D: Front-End process
Business: NPD process Go/NoGo
on time
Go/NoGo on investment
Figure 2.3- Stage-Gate Process, including the Front-End Process Ideation
Stage 1 Stage 2
Gate 1
Gate
3 Stage 3 Gate Stage 4 4
Gate 5 Stage 5 Gate
2 Ideation
Stage 1’
Gate
1’ Gate
2’
Project enters the NPD process at gates 1,2 or 3
Technical Development
The reason to focus on this phase of the process is twofold:
A project already has been started in CI to develop an overall idea management plan to structure the ideation phase and Gate 1’. In practice, well-promising ideas are passing the first gate, but a follow up does not yet exist. This immediately defines the second reason: the need to structure Stage 1’ and Gate 2’ within CI is high at this moment, to be able to continue the already started technology breakthrough projects. In this research the term 'front-end process' will from now on being used to indicate Stage 1’ and Gate 2’.
In-depth investigation to the selection and prioritisation of proposed projects falls besides the boundaries of this research. A standard performance measurement system would need to be implemented. As already such a system exists in the NPD pattern being used within Calister (TPS), implementing a new (portfolio) system is assumed to be insufficient in this early stage of development.
The information is of preliminary nature, what will make the system too precarious and time consuming. An additional portfolio system may even lead to more confusion and separation of the existing system, than that it adds value. Besides this, the aim of CI is to come up with 12 technical breakthrough projects a year, the amount of assessed projects can be overseen. At this moment it would reach too far to develop a selection and prioritisation system for the front-end process. When the amount of technical breakthrough projects will increase, another approach of structuring the front- end stage might be needed. Chapter 7 of this research opens some more thoughts about this.
In conclusion, the findings suggest the need to create and implement a process that leverages CI's intellectual capital by facilitating idea development, and enabling systematic idea evaluation for market viability. For CI, developing and implementing a standardised front-end idea-development and evaluation process, fitting in the organisational context, would be a solution.
In order to establish this, a mechanism for the preliminary investigation is required. A business recommendation is such a mechanism. A format of this mechanism serves as assistance for describing the goals of any proposed project and it's potential [52]. This has advantages for different parties:
A Business Recommendation Format can characterise a project and provides a guideline for the R&D employees to analyse performance indicators, together defining the potential;
A filled in Business Recommendation Format can convince the decision-makers (investors) about the viability of the project;
A filled in Business Recommendation Format forms a vehicle to other disciplines; it informs them, creates a common image about the proposed project and enables planning;
A Business Recommendation Format supports improvement by gathering information that helps to identify problems and by planning and tracking development.
Also alternative mechanisms have been identified, like using cross-functional teams to develop and
evaluate every idea directly in the front-end process. This would be extremely cost-intensive for CI in
terms of time commitment and opportunity cost of pulling individuals away from their jobs. Such teams
make sense once a project is funded and development is underway. But in the front-end, where ideas
are plentiful and often very vague notions, cross-functional teams are at this moment considered to be
an inefficient approach. As technical breakthrough innovations are new as a strategic approach to the
R&D employees of CI, the ability to co-operate in this stage with other disciplines is low. Additionally it has been found that other disciplines are not always open to new technical solutions, as good imagination of the final value is hardly possible for non-experts. Potential projects might be dropped by co-operation problems in this way. A business recommendation format can help the R&D employees to visualise the attractiveness of their ideas better in a common language. This can be an interim step to final cross-functional teams in the future. Likewise, employing an expert in marketing and business helping to estimate the overall potential of a proposed breakthrough project is estimated to be a too cost intensive alternative for the moment.
To be able to develop a mechanism to structure the front-end process, which will fit in the current organisational context of CI, one of the running projects was taken as a pilot to start with. The knowledge gained in this pilot, would provide better insight in the exact design definition, including specifications and preconditions. The evaluation of the pilot will be outlined in chapter 3, followed by the revised research objective in chapter 4.
1.5 Research Methodology
The way a methodology is chosen affects the validity of any conclusion that will be drawn from the research. In this section, the research methodology employed in this research is discussed. The section is divided in the Research Classification (2.3.1) and the Research Method & Program (2.3.2).
1.5.1 Research Classification
There are many different classifications of research methodology in literature. Three important classifications relevant to this research are briefly discussed below.
Based on the type of knowledge that is generated, design knowledge or conventional theories, a research project can be classified as design research or theoretical research [2]. Design knowledge is different from conventional theories. The former describes how things ought to be while the latter argues how things are.
A second classification is given by Verschuren en Doorewaard [60]. They identified two different types of research projects based on their research objectives. One is more theoretically-oriented by focusing on solving a problem encountered in the theory building process. The other is applied-oriented in order to change an existing practical situation.
Saunders, Lewis and Thornhill [51] provide a third approach of classifying research. They introduce
‘The research process onion’ and classify a deductive and an inductive approach. The deductive
approach develops a theory including hypotheses and designs a research strategy to test the
hypotheses. In the inductive approach, the researcher will collect data and develop a theory as a result
of the data analysis.
The research described in this thesis can be classified as design-oriented applied research since this research project aims at designing a mechanism to be able to improve the preliminary investigation of technical breakthrough ideas. The research results will be presented in the form of design knowledge.
According to Aken, design knowledge consists of design models and heuristic statements [2]:
Design models are defined as operational guidelines that are applicable for a specific application domain. The specific application domain in this research is the preliminary investigation stage of technical breakthrough ideas in CI.
Heuristic statements define guidelines and principles by which to operate.
The instruments and tools, which create structure in the front-end process, are seen as the heuristic statements in this research.
Together they describe what should be done in order to attain the desired situation.
Referring back to the approach of Saunders et. al, this research can be classified as mainly inductive;
the purpose is to get a feel of what is going on and to understand better the nature of the research area. Therefore first information of the situation has to be obtained to build a theory. Deliberately the construction ‘mainly inductive’ was used, as approaching this research as fully inductive would be too simplistic. The theory being built from analysing the situation will be assisted with theories gained out of literature which further will indicate insights to build and use the theory.
1.5.2 Research Method & Program
This research project will go through a regulative cycle: problem identification, diagnosis, design and evaluation [2]. The method is derived from Action Research [46]. Action Research divides itself from all other research methods by its relationship with the field of research. Additional to theoretical knowledge, field knowledge contributes the research. Action Research implies a frequent interaction with people involved, which in practice implies a cyclical approach.
Within design-oriented research the research field can not be displayed as a steady situation. A design process is per definition dynamic. Besides this, stakeholders (MT, R&D employees, representatives of other departments) in the field of research will have to interact to apply the outcome as much as possible within the structures of CI. This indicates the cyclical character the research incorporates;
constant review of theory with practice in order to shape the purposed outcomes for CI.
The content of the stages in the regulative cycle is outlined in figure 2.4, including the corresponding
research methods.
Problem identification stage
This stage is further broken down into four sub stages:
Identifying objectives of CI in this research;
Studying the organisational context where the results of the research have to be implemented in real life;
Obtaining insight in the needs to structure the front-end process of technical breakthrough ideas;
Identifying problem definition, including research objectives.
Pilot 1
For the problem identification stage a pilot study has been conducted. In general pilot studies are often preferred when researchers have little control over the event [45] and when the focus is on a contemporary phenomenon in a real-life context [66]. In addition pilots offer a possibility to gain an overall picture of a research. This research project intends to structure the preliminary investigation stage of a technical breakthrough idea in CI. Initially little knowledge was available of the expectations of the stakeholders (the R&D employees and the MT of CI) and the way to operate to reach that expectation. The inductive approach dominated in this stage.
Diagnosis stage
Evaluation of the pilot study indicate the objectives and specifications the business recommendation should have. Literature study has been used to create knowledge which concepts have influence on the construction of a business recommendation format.
Evaluation of Pilot 1
By designing the Business Recommendation CALIF understanding was gained in the research context. As researcher I was part of the process to design the pioneer business recommendation. In
Final Business Recommendation Format, Manual and Assessment
Figure 2.4- Research Method Pilot 1
Literature study Evaluation &
Problem Definition
Applied Business Recommendation
Format
Problem identification stage
Diagnosis stage
Design stage &
Evaluation stage Business Recommendation
Manual
Business Recommendation Assessment
Field Research - Pilot 2+3
Output
this way I got a feel of the situational context, and I could understand better the nature of the requirements, and what might be factors which can cause or effect possible solutions. For one part, the evaluation will be based on my own experience and learning points.
Also a result was produced; the Business Recommendation CALIF. The feedback of the users (the MT) of the business recommendation itself forms the second input for the evaluation.
Information collection started without the formation of an initial theoretical framework. To get an indication of completeness of the created business recommendation, it is evaluated by comparison of additional literature concerning outlines of business plans.
Literature Study
The purpose of a critical review of the literature is to help develop a good understanding and insight into relevant previous research and the trends that have emerged [51]. Further the critical review of literature will be used for finding and comparing different types of innovation that need other information processing. Literature will be used as well to review different business plans to be able to derive knowledge about how an applied business recommendation format for CI will have to be designed (see evaluation). As many innovative products have been created recently, the process of these innovations is also interesting to review.
For both the pilot research and the literature study, primary, secondary and tertiary literature sources are used. Primary literature sources can be defined as ‘the fist occurrence of a piece of work’, in this research this includes the internal reports of CI. Especially information drawn from the pilot study will rely on interviews. These interviews will be in-depth and unstructured, to explore in general the needs and criteria. Secondary literature sources that are useful for this research are journals (R&D Management, Journal of Product Innovation Management), books and Internet. Finally tertiary literature sources, also called search tools, are going to be used for locating the primary and secondary literature.
The research strategy in the diagnosis stage can be qualified as a grounded theory [25]. Insight in the situation is developed from the information generated by interacting in the process. The evaluation of the pilot forms the first data input from where learning and conclusions can be derived from (induction). Theories based on literature study provide additional insight to create the intended business recommendation which will be refined in the design & evaluation stage (deduction).
Design stage & Evaluation stage
As stated above the research will go through a 'regulative cycle'. All steps are directed to design an
effective format. After deduction, design and evaluation have to be performed. This is done in the
design and evaluation stage within this research. Learning points from the first pilot together with
literature study will provide the input to create an applied business recommendation format. The
process of designing is iterative while the format continuously will be refined to make it adaptive to CI,
without loosing consideration of the theory.
Pilot 2 & 3
This refinement is done by the use of two other pilot studies of the department Process and Technology (see figure 1.3). By using the designed format, its effectiveness and applicability is tested and evaluated in practice. The deductive approach is used here to enable triangulation: the use of different research methods to ensure that data is telling you what you think they are telling you [51, p.
99]. The MT will evaluate the progress being made, and support the design by comments and suggestions to enable the format being adapted to the environment in which is should function.
Output
The final output will be created by the best practice out of the design & evaluation phase, and will include:
Business Recommendation Format;
Business Recommendation Manual;
Assessment Recommendation.
These outputs will be implemented in CI.
Evaluation of Pilot 1
In May 2003 a proposal has been made by members of the Department 1 to develop functional products incorporating natural/nature-identical active ingredients. The proposal has been approved as one of the important Breakthrough Technology areas within CI.
The project has been split op into 3 phases:
1. First screening; desk top research;
2. Second screening; in depth desk research on most promising alternatives, lab scale experiments and visits to suppliers;
3. Preparation of the final presentation.
The third phase was crucial to convince the MT of CI, the decision-makers on continuation of the projects, of the potential of the proposal. To indicate the potential and recommend the project, the need to create a business recommendation appeared. The process of creating the business recommendation is used as a pilot, with the following target: to determine whether and how a business recommendation format can structure the front-end process, and how this mechanism will fit in the organisational context.
Some terms of the specified target demand for operationalisation:
The degree towards which the R&D employees of CI are able to find, create and present knowledge asked by the by the format indicates the fit with the organisational context. This is indicated by real life experiences of R&D employees in the pilot, which form learning points to optimise a final format (section 3.1).
The question ‘whether and how’ a business recommendation format can structure the front-end process will depend on the degree towards which the MT can properly judge a proposed project on potential at Gate 2’. This is measured by the subjective appraisal of the recommendation by the MT (section 3.2), together with theoretical insights (section 3.3). Literature is focussed on which criteria are influencing potential evaluation of new to be developed products.
Additionally, the pilot might come up with unforeseen insights and conclusions important to take into account when designing the format.
1.6 The designer's perception
The Business Recommendation CALIF was created by a project team of four members of the
department 1, where I as a researcher belonged to. The experience of developing a business
recommendation within CI is reviewed in this section. The target is to come to a 'reperception' of the
business recommendation process, to be able to indicate how a business recommendation will fit in
the organisational structures.
As the only known criterion of the MT was to show the potential of the proposed idea, the process to develop a business recommendation model started with finding a way to indicate the potential with.
The MAR-document (Marketing Activity Recommendation), used by marketing to indicate the potential of marketing initiatives, was taken as an example to be filled in. This document already is used within Calister and serves as a good model; a common language would be maintained of existing structures.
As this planning format only is used within the department of marketing, 'The Book on Business Planning', by Berry was taken as a second reference [8].
Besides these references, it was realised that the recommendation should have a connection with the existing structures. The PP was the first procedure which was recognised to be important, as the project after technical development will flow in NPD Gate 2, where the PP is used. The portfolio- system of Calister, TPS, is recognised as another important element in Calister’s NPD structure to take into account. TPS is the software application to support Calister with its project portfolio management. TPS provides a structured manner to compare and to select projects to improve the allocation of capacity to the best future profits given the strategic goals.
The following learning points appeared designing the Business Recommendation CALIF:
•
Both references mentioned were quite specific to be filled in for a technical breakthrough project and besides that did not contain all elements to be described to show the potential of this specific breakthrough idea. The MAR-document has been of great help to outline market related factors, but went too specific into detail about exact marketing issues like pricing strategy, promotion activities etc., while technological feasibility was not included. Berry’s approach is company based, ensuring a good enterprise plan to external investors, with specific issues like company and management information, strategic direction and industry analysis, while a roadmap to outline further development was not mentioned.
•
The MAR-document was based on marketing performance indicators. This method appeared to function well. For the Business Recommendation CALIF, the Critical Success Factor method was chosen, as this method provides variables, which objectively measure the potential, alignment of a technology breakthrough project and indicates knowledge gaps. According to the total project team, this method was very effective, as it formed a guideline to gain relevant information. In addition to that, the method encouraged to summarise the important information into a nice lay-out which forms a complete picture of the intended idea.
•
Four proposed products were on the list to be recommended. By working on the project, it was realised that the to be provided information about the products was too divers to create one business recommendation for all. Learning out of this is that the question can be raised whether it will be possible to create only one business recommendation format. Types of innovation can vary in such a way that other information is needed to present the potential (this is further investigated in chapter 5).
•
As a technical breakthrough idea officially is not incorporated in an initiated NPD project team (will
be next stage, see figure 2.3), it appeared to be very important that the project team, creating the
recommendation, proactive probes her ideas with other relevant people in the organisation. Useful
feedback, help and acceptance were experienced to increase while working this way. Connection with the NPD process is important here.
•
Based on what Berry calls “shoe leather research: find some similar business and find out as much as you can about them” [8], it was possible to find products within Calister with similarities.
These products could serve as a base of fact to rely the estimates on. Communication with marketing appeared to be extremely important to get information. Learning out of this was that other disciplines will be needed to gather the needed information. Sharing the information in a common language is a base for creating familiarity with the concept and acceptance, needed to get help where needed.
•
As technology breakthrough projects are naturally new and can be intangible for imagination, creating an image of the proposed idea has been very important. Visualisation, concept statements or prototypes can create imagination.
•
When using TPS directly, the system would be overloaded with ideas of a too early state of development. The checklists used are mostly too detailed to fill in. The system is meant for a later stage of development. Nevertheless it is useful to position the recommendations next to each other and find a way to link it with TPS-terms where possible.
1.7 The decision-maker's perception
The decision-makers are the persons to impress and persuade with the recommendation. Schilit points that the key-difference what separates an A-plan for a B-plan, is that an A-plan is written from the perspective of the decision-maker or investor. So it is crucial to understand how the plan is read and evaluated by the MT [52]. In the pioneer Business Recommendation CALIF (pilot) this understanding still was unclear and vague, as the approach was new. To be able to improve the pilot recommendation to an ‘A-plan’, a feedback-form has been created to be filled in by the MT (Appendix 2). Out of the evaluation of the perception of the MT (via comments during the presentation of the Business Recommendation CALIF and the feedback form), their expectations and objectives of a business recommendation are obtained. Next to this demanded information there are some qualities in plans that make it more likely to create results according to the model of Berry [9].
A business recommendation will be hard to create, judge and implement unless it is simple, specific, realistic and complete. There are elements that will make a recommendation more likely to be successfully adopted:
1. Is the recommendation simple?
Is it easy to act on?
Does it communicate the right contents easily and practically?
2. Is the recommendation specific?
Are its objectives concrete and measurable? Is the depth of detail sufficient?
3. Is the recommendation realistic?
4. Is the recommendation complete?
Does it include all the necessary elements?
These elements are noticed that they do not to provide an objective evaluation of the contents of the Business Recommendation CALIF. Despite this, the elements are used to create relevant feedback questions and also to evaluate the feedback of the MT. Subjective ideas of the users are considered as important here, as these ideas support the applicability of the final format.
Results of the feedback of the MT
The expectations and objectives the MT postulated were corresponding, and the overall the perception of the produced business recommendation was very positive. The way in which it was presented contributed to the overall insight and picture of the proposed project. The most important conclusions are described below.
Simplicity
-
The recommendation was evaluated to be easy to understand and provided the right information to be able to make a decision on approval using the provided contents.
Specific
-
The success factors chosen in the Business Recommendation CALIF are based on assumptions.
So they are based on subjectivity and mainly gained out of qualitative data. Nevertheless this has not been seen as a shortcoming in the MT. The objectives were outlined in such a way the MT could judge de potential of the proposed project efficiently.
-
The depth of detail was evaluated positive;
-
The designed business recommendation made use of the ‘TPS reward’, a known measurement tool within Calister. This was appreciated as it made the recommendation fit in the existing structure and maintains and strengthens the common language.
Realism
As it is the preliminary investigation of a breakthrough idea, it is and always will be hard to come up with concrete, specific and reliable information. To be able to judge a project, it will be necessary to provide the MT with an indication of the realism. The degree to which a project leverages the core competencies of the company would be an indicator. This was missed in the report and is a point for improvement within a next recommendation.
Complete
An estimation of the probability of the technical and market success was missed in the recommendation.
Additional to these results, it has been recognised that the action plan (roadmap) was one of the most
important parts within the business recommendation. Not only because this formed a concrete insight
to the decision-makers how much time would be involved to a next milestone and which investment
would be coupled to that, but also because this roadmap visualises the planning part of the business
recommendation. A business recommendation is not only a calling card, but also a plan to take action
on; enabling follow up. This means that the MT of CI is not the only target group, but that the
commercial business (teams) have to be taken into account as well.
1.8 Theoretical insight
Theoretical insights are used next to the subjective insights of the MT to come to a judgement about the applicability of the business recommendation format. After evaluating literature on business recommendation preparation 5 requirements were found, that make a business recommendation successful [7, 9, 14, 30, 37, 52].
1. A business recommendation presents a well thought out idea;
2. A business recommendation contains clear and concise writing;
3. A business recommendation has a logical structure;
4. A business recommendation illustrates ability to make the recommendation a success;
5. A business recommendation shows profitability.
Having these requirements in mind, the written business recommendation is evaluated in order to come to additional insights for improvement.
Ad 1. A business recommendation presents a well thought out idea
It was concluded that the idea in the Business Recommendation was though out well, and it appeared so as the MT made an approval. Nevertheless the proposals were found quite near to the NPD process, as they will require little technological development. Thinking more generic, a future format will have to be designed in such a way that also innovations with a long and uncertain development time to go, will be worked out well.
Ad 2. A business recommendation contains clear and concise writing
There has been made use of known plans within Calister, although meant for another stage in the new product development process to maintain the common language as much as possible. To be able to provide information needed and maintain the common language to ensure a good follow up, writings and documents of the next stage can form input. This is not done in the CALIF recommendation.
The NPD process will be the next stage after approval (and technical development) of the proposed technical breakthrough idea. The document used to go from idea to orientation phase, is the ‘Proposal’
(PP – See Appendix 1). To improve the clear writing, not only to the MT, but also to the follow up stakeholders, elements of this document should be used to integrate the business plan.
Ad 3. A business recommendation has a logical structure
Providing the information in a cause-effect manner can create logical structure. All conclusions and recommendations thus, have to be grounded in the report. In the Business Recommendation CALIF this was done, but it must be mentioned that the proposed ideas were no radical innovations.
Information was for hand quite easily, so cause-effect statements could be made grounded. A problem
in this could appear when an innovation is more uncertain. Referring back to the ultimate goal why this
pilot was set up, the pioneer business recommendation to form a format for future use, this latter
problem indicates that a format like Breakthrough CALIF would not fit all different types of innovation.
Ad 4. A business recommendation illustrates ability to make the recommendation a success
Here feasibility is very important. Especially because there has to be dealt with technical innovations which will have to facilitate other disciplines like market, production and distribution? The ability to create a success depends on the estimation of the feasibility. The development of an idea is in a very early stage when writing the business recommendation. So it should be communicated well whether Calister internally is capable to develop the idea and how that should be done.
Ad 5. A business recommendation shows profitability
The success of an innovation always will depend on the money Calister can gain with it. The financials were estimated well in the Recommendation CALIF, but it has to be argued that his project was situated in a well-shaped stage. Projects with a longer development time and including more uncertainty should also be evaluated on profitability, but it might be less based on financials, and more focus on strategic importance.
1.9 Summary and conclusions
This section summarises the conclusions out of the evaluation. The conclusions initiate aspects, which need to be explored in further detail and show requirements for designing a format. Chapter 4 explores in further detail the implications of the conclusions for this research.
A business recommendation format has to be designed specifically for the front-end stage, as other existing procedures are not suitable;
Success Factors appeared to function effectively to analyse and outline information in the Business Recommendation;
More extended research needs to be done, to investigate whether and how different innovation types influence a business recommendation format and the evaluation process;
Information sharing was experienced as very important. This (and effective project follow up) aims for a common language;
It is crucial to create an clear image about the idea, so project and product definition are important to describe extensively;
Already existing procedures and structures within Calister (TPS, PP) will have to form input integrate the business recommendation format in the organisational context;
Research has to be done which exact success factors should be outlined in a business recommendation format;
The synergy a project incorporates concerning the core competencies of Calister, might form an
An Action Plan was recognised as very important;
The internal ability to develop the idea was concerned as very important for judgement on approval.
Taken all the separate conclusions together, it can be stated that a business recommendation format can structure the front-end process. It provided guidelines for the R&D employees how to work, and provided, following the perception of the MT, a satisfying overview of the proposed project where an effective judgement could be made on.
The conclusions form input for the specifications of a business recommendation format, outlined in
next chapter.
Problem Definition
As defined in section 2.3, this research is classified as design-oriented applied research. In this chapter the problem definition will be worked out in further detail, based on the research classification.
In 4.1 the refined research objective is outlined. An initial thought about the objective existed before starting the pilot (see section 2.2). With the experiences gathered out of the pilot, the final objective has been constructed. In order to reach the research objective in an adequate and structured way, different relating concepts have to be analysed. The concepts and their relations can be found in the conceptual model (4.2). The concepts visualise the reasoning behind the research design, from which specifications are created, leading to specifications and sub-questions (4.3). Subsequently the preconditions for the design of a format are given in section 4.4.
1.10 Research objectives
Referring back to the background and the results of the pilot, the real problem was that Calister’s existing NPD process and strategy had no mechanism for systematically assessing internally generated (technological) ideas. To successfully position itself in the emerging competitive market, Calister needs to anticipate new market opportunities and capitalise on emerging technological capabilities.
The finding suggests the need to create and implement a process that leverages CI’s intellectual capital by facilitating idea development, and enabling systematic idea evaluation for market viability.
For CI, developing and implementing a standardised technological breakthrough idea-development and evaluation process will help to push promising technological driven product developments into the
‘business’.
The objective of this research is:
To develop a business recommendation format, structuring the front-end development process of Calister Innovation, which:
1. assists idea generators (R&D employees) to translate their technological driven ideas into well defined concepts ready to be appraised for continuation (Stage 1’);
2. assists decision makers (MT of CI) to evaluate concepts for investment purposes (Gate 2’).
The front-end process Stage 1’ is seen as the visualisation and realisation of new ideas [42]. It refers to the creative process in which information is transformed into useful products
*. This process is carried out by R&D employees of CI. Their capacity to make use of information and mobilise resources to outline their visions is limited due to their background. An ongoing interaction with the environment is required in this stage, which is at the moment not embedded in their daily pattern. The early phase of development is characterised with open-mindness, intuition and the creation of visions. But the
*By purpose only products are mentioned here as result. Processes are not taken into account. Refer to section 4.3
withholding of judgements while unfolding the idea should be translated into more convergent thinking about the potential of the idea for Calister in this stage. The process requires multiformity in analysis to communicate results and convince the decision-makers and create enthusiasm with other disciplines.
Multiformity in analysis asks for the creation of a broad picture of the proposed idea. Not only the technological advantages. Indicators which can affect the outcome must be investigated. These indicators are also called ‘success factors’. Other methods of structuring and evaluating performances of new proposed products, like the Balanced Score Card, the Performance Pyramid or the Vertical or Horizontal Approach, are too quantitative orientated for this early development stage or, fixed in a pre- formulised situation [4, 34].
Gate 2’ is characterised by the judgement of the proposed concepts. Judgements are dependent on evaluation methods of the decision-makers. To assist the MT of CI a recommendation on the approaches that can be used to actually assign a value to the proposal is appreciated.
In some publications the two aspects specified in the objective seem to be considered as intertwined concepts [34], in this research is chosen to separate them since, for many success factors the recommendation drafter can choose from several methods to gain information that express the value of the metrics. For example market size for potential product can be analysed by facts and experiences given by the Marketing department of Calister. Or, when this information is not available, estimates will have to be made on as much as solid figures that can be gained by detective search in trade magazines or internet. The way how to describe a success factor will be influenced by the availability of information. It seems useful to explore the uncertainty degrees which can occur with innovation proposals, relating to different types of innovations. Dependent on this, the metrics can be found, as well as the focus how to gather and present the information.
Only with knowledge of these issues this thesis can recommend how to assist the MT in evaluation on assessment on approval of a concept.
Derived from the above insights together with the conclusions out of the evaluation of the pilot, a business recommendation format, based on success factors appeared to be an effective and demand fulfilling mechanism giving aid to the R&D employees as well as to the MT of CI. In the next section the relating concepts are outlined in a conceptual model; the argumentation of the research. Insights are transformed into 4 specifications to be met while developing a format. The specifications form input for the sub-questions. Both are specified in chapter 4.3.
1.11 Conceptual Model
To be able to design a business recommendation format, first the reasoning behind the design of this format needs to be outlined. Going back to the basics, the format is a tool to drive technical inventions to the normal NPD process. Because the invention is situated in the very early stage of development, the coupled risk is unforeseen and might be high as this risk stands in direct relation with uncertainty.
By providing relevant information out of analysis and preliminary investigations the uncertainty will
decrease, as well as the risk-level. Known from the project management literature, a good method to
The distribution in periods of a project in time is illustrated by figure 4.1. At t
onothing is known according to the future of the project, so the risk level is high. By the gathering of relevant information the risk level is reducing. At certain points in time the information gathered about the project needs to be collected and assessed whether or not to continue; the milestones like t
1, t
2, t
3etc. The scope of this research has pointed to the space in between t
oand t
1, where the intervening period functions as Stage 1’, and t
1as Gate 2’. Stage 1’ enables to reach Gate 2’ with a business recommendation. The conceptual model depicted in figure 4.2 portrays the steps to be taken.
Starting backwards from Gate 2’, the business recommendation is presented to the MT in order to get an decision on continuation of the proposed technical breakthrough idea. The MT can only make this decision by having a sound insight in the potential of the project. Potential is here defined as possibility to success of a technical breakthrough idea, depending on issues like market attractiveness, technical feasibility and strategic fit. The total range of indicators to show the possibility of success has to be investigated in this research, being the criteria to judge the project on. The format needs to assist in the activities to be done to represent the criteria, being the deliverables which the R&D employees need to produce. These deliverables depend on the type of innovation which is dealt with. This latter statement is descended from the identification that the project Breakthrough CALIF was already in an advanced state of the technological development, and thus quite close to the normal NPD procedure (see conclusions of pilot 1). As a result of this, it can be argued that not every breakthrough project can fit in a same kind of business recommendation format. Innovative ideas differ in degree of novelty [57, 47]. The newer a proposed idea is, the more uncertain the estimation of the potential will be, as
Risk level
Time Gate 2’
.
Figure 4.1- Risk Level versus Time to
t1 t2 t3 Stage 1’
Technical Breakthrough
Ideas
Innovation Type
Deliverables Criteria Potential Business
Recommendation
Stage 1’ Gate 2’
Figure 4.2- Conceptual Model
hard facts are not available yet (the time to market is long). Based on the degree of novelty and the related uncertainty different innovation types can be distinguished. Different types of innovation need a different approach of development, and also different appraisal. The technical breakthrough idea will have to be classified in a suitable innovation type ensuring the right investigation and assessment approach.
Summarising, Gate 2’ is the finish, but to reach the finish Stage 1’ is necessary to be performed. In this thesis research will be done on the described concepts to provide CI with a method structuring the preliminary investigation. This means that the assessment-values stay in hands of the organisation.
No assertions will be made on that in this thesis.
1.12 Specifications and Sub-questions
A design process starts with formulating a set of requirements [48]. Such requirements are performance specifications in the form of a list of criteria towards which the validity of the format design can be met and assessed. The following specifications are a direct descended from the objective.
Specification 1: The business recommendation format should be applicable for all different types of
technology breakthrough innovations which can occur in CI.
Attention will have to be paid to several types of innovation, distinguishing dimensions of novelty, which influence the design of a business recommendation format, resulting in this first specification.
A format is defined as applicable to all types of innovation when it can indicate the potential of projects with different degrees of uncertainty. To make this specification testable, first research needs to be done which innovation types can occur in CI. The following sub-question has been formulated to investigate this:
Sub-question 1: Which types of innovation have to be defined differentiating the breakthrough projects relevant for CI?
The different types of innovation existing have to be analysed in order to come to a variety of types, adapted to the breakthrough areas, which might need another approach to use a business recommendation format.
Specification 2 : The design of the Business Recommendation Format must define the potential of
