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Journal of International Association of P2M Vol.12 No.1, pp.126-141, 2017 Special Proceeding Faculty of Social Systems Science, Chiba Institute of Technology 126 Innovation Follows Strategy Aiming to realize Super Smart Society – Hiroshi KUBO Companies need to select a strategic approach that suits them and realize innovation that is consistent with them. In this paper, based on the case studies in the apparel industry, the author has revealed that the following combinations are consistent: resource approach and linear model, positioning approach and Kline model, gaming approach and hypothesis testing model, and learning approach and interactive model. Based on the results, to realize the construction of Super Smart Society in the near future, the author suggested innovation models that are consistent with the four aforementioned strategic approaches for each of the six industrial sectors. Furthermore, among these innovation models, it was suggested that the conventional plan-driven project is suitable for linear model and Kline model, and agile type project is effective for interactive model. In addition, hybrid type project with intermediate features between them are considered to be effective for hypothesis testing type model. Additionally, depending on the case, hybrid type project is considered to be effective for Kline model and interactive model. Keywords: Innovation model, Strategic approach, Super Smart Society, Resource approach, Positioning approach, Gaming approach, Learning approach, Linear model, Kline model, Hypothesis testing model, Interactive model, Waterfall project, Agile project, Hybrid project. I. INTRODUCTION In this paper, the author first briefly introduces the purpose and activities of our research activities, which pertains to studying the application of Project & Program Management for conducting research and development (R&D) activities. Subsequently, the author discusses “Innovation that follows strategy” that the current top management is most interested in, and shows its application to Society 5.0 or Super Smart Society (Cabinet Office, Government of Japan, 2016). Finally, as a future research topic, project styles consistent with strategy and innovation are suggested.

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Journal of International Association of P2M Vol.12 No.1, pp.126-141, 2017 Special Proceeding

† Faculty of Social Systems Science, Chiba Institute of Technology 126

Innovation Follows Strategy – Aiming to realize Super Smart Society –

Hiroshi KUBO†

Companies need to select a strategic approach that suits them and realize innovation that is

consistent with them. In this paper, based on the case studies in the apparel industry, the author has

revealed that the following combinations are consistent: resource approach and linear model, positioning

approach and Kline model, gaming approach and hypothesis testing model, and learning approach and

interactive model. Based on the results, to realize the construction of Super Smart Society in the near

future, the author suggested innovation models that are consistent with the four aforementioned strategic

approaches for each of the six industrial sectors. Furthermore, among these innovation models, it was

suggested that the conventional plan-driven project is suitable for linear model and Kline model, and agile

type project is effective for interactive model. In addition, hybrid type project with intermediate features

between them are considered to be effective for hypothesis testing type model. Additionally, depending

on the case, hybrid type project is considered to be effective for Kline model and interactive model.

Keywords: Innovation model, Strategic approach, Super Smart Society, Resource approach, Positioning

approach, Gaming approach, Learning approach, Linear model, Kline model, Hypothesis testing model,

Interactive model, Waterfall project, Agile project, Hybrid project.

I. INTRODUCTION

In this paper, the author first briefly introduces the purpose and activities of our research activities,

which pertains to studying the application of Project & Program Management for conducting research

and development (R&D) activities. Subsequently, the author discusses “Innovation that follows strategy”

that the current top management is most interested in, and shows its application to Society 5.0 or Super

Smart Society (Cabinet Office, Government of Japan, 2016). Finally, as a future research topic, project

styles consistent with strategy and innovation are suggested.

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127 Vol.12 No.1 (Oct., 2017)

A. Aim and activities of the R&D PM study group

The knowledge system for efficiently achieving a project’s original purpose within the target period

is summarized in the Project Management Body of Knowledge (PMBOK), and is widely propagated.

However, the flow of value creation in the enterprise presented in Fig. 1 (Stanford University & Terada,

2013) (modified by the author) shows that the potential value of products and services will be decided at

an earlier stage than the planning of business plan to which PMBOK is applied. In other words, the

concept planning stage to create value does not require much human resources or a large budget.

Therefore, this stage is extremely important for creating customer value and establishing competitive

advantage. Prior to this stage, various methods for environmental analysis, such as Product Portfolio

Management (PPM) and five forces analysis (Porter, 1980), are established. Following the establishment

of these methods, Discount Cash Flow (DCF) and PMBOK are established at the stage of business

planning

and development; Supply Chain Management (SCM) and six sigma are established at the production

stage; Product, Price, Place, Promotion (4P ) and Customer Relationship Management (CRM) are

established at the sales and support stage . However, a powerful knowledge system is yet to be established

at the concept planning stage.

Therefore, volunteers from industry, government, and academia interested in this problem gathered,

and in 2012 the “R&D PM study group” (represented by Hiroshi Kubo) was established.

Fig.1 Relationship between value chain based on corporate innovation and potential profit/resource

(Stanford Univ. ME317 & Terada, 2013) (modified by the author)

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Vol.12 No.1 (Oct., 2017) 128

The goal of this group is the “establishment of R&D PM Body of Knowledge.” Currently, there are

approximately 70 members in the group. The results of this group have been published to a total of 56 in

academic societies such as the International Association of Project & Program Management (IAP2M)

(Proceedings of the 4th R&D PM Symposium in 2017, February). These manuscripts comprise 15 full

reviewed papers, 14 international conference proceedings, and 27 domestic conference presentations.

Fig. 2 is a conceptual diagram of R&D PM evolution, based on my personal opinion. If “R&D PM

1.0” is applied to improve productivity by applying Project Management to R&D, strategy planning by

application of Program Management is “R&D PM 2.0,” improvement of consistency with business

strategy by adopting portfolio is “R&D PM 3.0” can be said. And the next era of co-creation is the image

“R&D PM 4.0.”

Fig.2 Conceptual diagram of R&D PM evolution.

II. INNOVATION FOLLOWS STRATEGY

Schumpeter (1926) said, “Innovation is not caused only by technical discoveries or inventions.”

However, there is no doubt that R&D is the source of innovation. Meanwhile, the top concern of the

current top management is said to be "innovation that follows the strategy" (KPMG International

Cooperative, 2013). Therefore, the author surveyed the past literature on strategy and innovation and

clarified the combinations which both are consistent based on the case study. The results of the research

are described below.

A. Four strategic approaches

Until date, various management strategy theories have been advocated. According to Aoshima and

Kato (2012), these strategic theories are classified into four approaches by a combination of “source of

profit” and “focus of strategy.”. The former is the point of asking whether “the source of profits” is to be

found in the relationship with the outside of the company itself or inside the company. The latter is a

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viewpoint of whether the “focus of strategy” is to be applied to factors or processes. The four strategic

approaches based on the aforementioned combination are shown in Figure 3.

P (Positioning approach) : Focuses on external factors (Porter, 1980, 1985)

R (Resource approach) : Focuses on internal factors (Barney, 2010)

G (Gaming approach) : Focuses on external processes (Nalebuff & Brandenburger,1997)

L (Learning approach) : Focuses on internal processes (Hamel & Prahalad, 1991)

In general, companies do not select a single combination, but combine these approaches to form

their own strategy. However, an emphasis on any combination makes a company’s strategy clear and

effective.

.

Fig. 3 Four strategic approaches. (Aoshima and Kato, 2012)

B. Evolution of innovation model

The innovation model has also undergone evolution, as shown in Fig. 4 below (Kameoka, 2003).

Fig.4 Evolution of innovation model. (Kameoka, 2003)

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Generation 1 Linear model

“Linear model” is an early model of innovation that progresses in a sequence from research and

development, through production to marketing. This model has been successful in many manufacturing

industries and is still considered the mainstream system.

Generation 2 Kline model

Kline (1992) argued that the linear model may provide inaccurate suggestions. Thus, he proposed a

non-linear innovation model, known as the “Kline model” or “chain-linked model,” which corresponds

to Generation-2 (Gen-2). This model’s objective is to make a careful observation of customers and the

market to discover their needs; in this model, the innovation evolves from these observations. Feedback

from the market, accumulation of knowledge, and creation through research are continually incorporated

into the processes from marketing to planning, research, development, evaluation, manufacturing, and

sales. The “linear model” is a “product out” model, whereas the “Kline model” is a “market in” model.

Generation 3 Hypothesis testing model

“Hypothesis testing model” is a Gen-3 model (Study group of management strategy, 2008) that

emphasizes “experiments in the market.” This model is believed to be promising. It is characterized by

innovation that is based on information and expertise acquired through actual experiments that are

conducted within the market, on the premise that true needs cannot be discovered simply through market

observation. This thought process is similar to the “exploratory marketing” advocated by Hamel and

Prahalad (1991).

Generation 4 Interactive model

The latest Gen-4 interactive models (Study group of management strategy, 2008) have been attracting

attention as next generation innovation models. This co-creation process of users and companies is vague,

so communication between them is important. However, by using this model, users and companies can

collaborate, find potential needs that were unidentified by users earlier, and can create products and

services.

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C. A case study on the consistency between strategy and innovation in the apparel industry

The optimal relationship between strategic approach and innovation model described above is clarified

through case studies in the apparel industry. The apparel industry is an industry with an old history, but

it is expected that demand will increase more and more as the population increases. With various emerging

business models and innovations, it is an industrial field suitable for this analysis.

a) Resource approach and linear model

The first case that is considered is “Gore-Tex,” manufactured by W. L. Gore & Associates (Homepage,

2017) (Fig. 5). This company manufactures durable weather protection gear. Additionally, the company

uses ingenious technologies and has excellent research and development capabilities. The company

believes that if it can develop fibers that have excellent waterproofing and breathability, then there

would be clarity concerning the commercialization of extreme cold-weather protection gear. Utilizing its

core competence in specialty fiber research and development and employing the linear model, the

company achieved Gore-Tex's research and development and commercialization objectives.

b) Positioning approach and Kline model

The second case is about UNIQLO’s thin and warm underwear “Heat Tech” (Saito, 2014) (Fig. 6).

Fig.5 Case of GORE-TEX's resource approach and linear model.

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Fig.6 Case of UNIQLO Heat Tech’s positioning approach and Kline model.

c) Gaming approach and hypothesis testing model

The third case is on ZARA’s Fast Fashion (Saito, 2014). This company prioritized “experiments in the

market,” and created advantageous innovations based on knowledge and expertise gained from these

experiments. This innovation model is closely related to the gaming approach, in which a company

quickly creates and improves products and changes sales methods while observing the market and

competitors’ reactions. ZARA’s information on stores’ sales conditions is fed back to production, and

products that are selling well can be produced in large quantities within two weeks (Saito, 2014).

Therefore, the Gen-3 hypothesis testing model is consistent with the gaming approach.

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Fig.7 Case of ZARA’s gaming approach and hypothesis testing model.

d) Learning approach and interactive model

Fig.8 Case of GUNZE and NEC’s learning approach and interactive model.

The fourth case is on a wearable underwear that measures and communicates biological information; it is

jointly developed by the apparel company GUNZE and the Internet of Things (IoT) company NEC

(GUNZE, 2016). In addition to being a joint development, this case is also an example of the co-creation

model. These companies are collaborating with a transport company that wishes to use this product for

the health management of long-distance truck drivers. Potential needs are discovered, and products

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created from the co-creation between users and companies. In this process, differentiation would be

possible not only when both the parties learn and acquire new knowledge but also when they effectively

utilize this knowledge. The Gen-4 interactive model is consistent with the learning approach.

e) Summary of case studies on the apparel industry

Table 1 summarizes the four cases of the innovation model that are consistent with the aforementioned

strategic approaches in the apparel industry. It is considered that the consistency relationship on the

combination of the strategic approach and the innovation model in this apparel industry can be generalized

to other industrial fields for the reason of Table 2.

Table 1. The four cases of the innovation model that are consistent

with the strategic approach in the apparel industry.

Case Company Product Feature Strategicapproach

Innovation Model

1W.L. Gore &

AssociatesGore-Tex Breathable

waterproof fiberR

Resource

Gen-1Linear

2Fast Retailing

(UNIQLO)Heat Tech Thin and warm

underwearP

Positioning

Gen-2Kline

3 ZARA Fast FashionVery short cycle

from production toshop front

GGaming

Gen-3Hypothesis-

Testing

4 GUNZE & NECWearable &

biologicalunderwear

Underwearwith biological

information

LLearning

Gen-4Interactive

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Table 2. Reasons behind the consistent combination

between the four pairs of strategic approaches and innovation models.

III. INNOVATION REQUIRED IN SUPER SMART SOCIETY

The innovation model that is consistent with each strategic approach was revealed in the previous

chapter. Based on this result, I will describe the strategic approach, the innovation model, and the project

style suitable for them in various industrial fields of the Super Smart Society (SSS) to be constructed in

the near future.

A. Necessity of innovation for constructing Society 5.0

Fig. 9 presents the evolution process of human society. As conceived by the Japanese government,

Society 1.0, Society 2.0, Society 3.0, Society 4.0, and Society 5.0 depict the hunting society, agricultural

society, industrial society, information society, and near future SSS, respectively.

Fig. 10 shows a system image of service platform for SSS. This figure indicates that SSS consists of

a hierarchical structure in which real space and cyberspace are both connected by the Internet. Various

sensors and actuators are arranged in the lowest level of the physical system in real space. This real space

connects to cyberspace via the Internet and data move in both directions. A substantial amount of big data

accumulates in this system and evolves in various ways from artificial intelligence’s (AI’s) learning

function. This affects a wide range of industries, and these effects are enormous. In order to realize such

a complex society, various innovation models are required; this is because the huge hybrid space is an

online space that human beings have not previously experienced, and it has accumulated an enormous

amount of information and knowledge. Moreover, this is a space that incorporates the AI’s autonomy.

CaseStrategicapproach

InnovationModel

Reason for the Relationship

1 RResource

Gen-1Linear

If the product’s market and needs are clear, the requirements for the necessary technologies will also be clear. Therefore, acompany can effectively utilize its core competencies. The main stage for this will be research and development.

2 PPositioning

Gen-2Kline

This is a “chain-linked” innovation model starting from the point of “market discovery.” The analysis is conducted byobserving customers and markets at each of the planning, design, manufacturing, and sales stages; this enables a company todiscover an advantageous position in the market.

3 GGaming

Gen-3Hypothesis-

Testing

This prioritizes “experiments in the market,” and a company creates advantageous innovations based on the knowledge andexpertise gained from these experiments. This is highly affiliated with the gaming approach, as a company quickly createsand improves products and changes sales methods while observing the reactions of the market and competitors.

4 LLearning

Gen-4Interactive

Potential needs are discovered and products created from the co-creation between users and companies. Differentiation ispossible in this process from both parties learning, acquiring, and effectively utilizing new knowledge.

Note: The relationship between the innovation model and strategy is not determined definitively. It is necessary to be aware that different shades will exist from thecombination of strategies.

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Fig. 9 The evolution process of human society (Government of Japan, 2016).

Fig. 10 System image of service platform for Super Smart Society

(Government of Japan, 2016) (modified by the author).

B. Combination of strategic approach and innovation model in various industries

The previous section mentioned that SSS is a complex system spreading from real space to cyber space.

This suggests that in various industrial fields that make up SSS, each company must realize an innovation

model that matches its strategy. Therefore, we looked at six industrial fields that seem to be important in

SSS, and compiled examples of innovation models that are consistent with strategic approaches, as shown

in Table 3. This table suggests that the relationship of innovation models that are consistent with each of

the four strategic approaches does not change in SSS.

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Table 3. Examples of combinations of strategic approaches and innovation models in SSS

1) Gen-3: Anderson (2012), Seeed(2017); 2) Gen-2: Nikkei-BP(2012); Gen-3: Taguchi(2009); 2) Gen-4: Toshiba (2012); 6) Kato (2016)

Ⅳ. PROJECT STYLE CONSISTENT WITH INNOVATION MODEL

No matter how good strategy and innovation models are formulated, it will be meaningless unless it

can be implemented. Therefore, finally, the author examines what kind of project style will fit the

combination of each strategic approach and innovation model.

A. Trend of project style

In order to realize Society 5.0 mentioned in the previous section, various projects are required in terms

of industrial field, system scale, hierarchy, software ratio, among others. Here, the author describes the

trend of the project style.

Project styles are roughly divided into plan-driven (waterfall type, hereafter referred to as PD) and

agile (hereafter referred to as AG) types. PD is a conventional style, and AG is a method whose adoption

is rapidly increasing mainly in the software field (Hiranabe and Nonaka, 2013; Suzuki, 2016; Imani, 2017).

In PD, the request is defined at the beginning of the project, and the project manager freezes it before the

commencement of the latter implementation phases. On the other hand, in AG, reprogramming is

performed iteratively. Although the outline request of AG is defined at the beginning of the project,

prioritization of detailed requests and development judgment are repeated by collaboration between the

requester and developer.

PD and AG each have advantages and disadvantages. The advantage of PD is that it is easy to grasp

the schedule and progress; this is because more functions are implemented after completing the overall

function design, and more people become acquainted with the development method. However, it takes

R  (Resource) P(Positioning) G  (Gaming) L  (Learning)Gen-1 Gen-2 Gen-3 Gen-4

Model→ (Linear) (Kline) (Hypothesis-Testing) (Interactivel)1) Manufacturing Improvement of QCD Mass customization Maker Movement

(ex. Seeed in Shenzhen)IoT Maintenance services of jet

engine (GE)

2) LED Device Blue LED by GaN Various lighting instrumentsusing White LED

White LED with yellowphosphor & blue LED (Nichia

Corporation)

Cooperation betweenArchitectural Light Designer &

LED Equipment maker (Louvremuseum & Toshiba)

3) ComputerImproved function &

performance by OS & MPU(Microsoft & Intel)

MPU suitable for mobileapplications (ARM)

Various software based on API(Apple)

Free and open source softwareLINUX

4) Automobile Electric Vehicle without CO2emission

Hybrid Vehicle with high fuelconsumption, high speed filling,

low CO2 Emission

Common social implementationof automatic driving by arious

experts

Car sharing combined with userevaluation (Uber)

5) Electric Energy High EfficiencyPhotovoltaic Module

Ulra High Efficiency Multi-junction solar cell for space

Smart Grid Aggregator Demand Response& Nega Watt Deal

6) Finance Block chainwith scarcity & full history

FinTech Venture aimsfor customer benefits

FinTech Venture challengessubstitute for deposits, loans,

currency exchange

User participationin Cloud Funding

Strategic approach→

Innovation

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time to start development because the function is implemented after completing the whole function design

in advance. Furthermore, in PD, if a problem is detected in the test, since the reworking number increases,

as it becomes later, it becomes difficult to change specifications and additions during development.

On the other hand, since AG repeats “implementation -> test execution” in small units, even if a

problem is detected, the number of reworking man-hours can be minimized. Moreover, it can respond

flexibly to specification change and addition. However, its disadvantage includes its difficulty to grasp

the whole schedule and progress, and controlling the management. Therefore, in addition to excellent

technical skills, AG must have the ability to respond to specification change and communication skills to

be successful.

Recently, a hybrid type (hereafter referred to as HB) complementing the drawbacks of PD and AG

has been studied (Imani, 2017; Nakato, 2017). Imani (2017) notes that there are three types of HB, which

are as follows:

1) Use PD or AG separately for each process.

2) Use PD or AG separately for each system unit.

3) Use multiple AG methods, such as Scrum and XP, selectively.

HB is expected to complement the disadvantages of PD and AG but, in some cases, there is a possibility

that each merit will be diminished.

The system configuration of SSS is diverse and complicated (Fig. 10). The need for collaboration

between researchers and engineers in the R&D and IT departments also increases (Porter and Heppelmann,

2014, 2015). Under these circumstances, companies need to adopt a project style that matches their

innovation model and strategic approach. Therefore, it is important to clarify the selection criteria;

however, no research report regarding this has been found. The selection criteria depends on the setting

range of the project, scale, and criticality, among other factors; it is difficult to quantitatively clarify this

selection criteria. Therefore, in this paper, the author suggests that a qualitative selection criterion for

project style is suitable for innovation. This leads to an ideal combination of strategic approach,

innovation model, and project style.

B. Consistency of project style with innovation model

In the upper half of Figure 11, the optimal relationship between strategic approaches and innovation

models described in Chapter Ⅲ are depicted through straight lines. Organizations aiming to

realize an innovation model based on each strategic approach will inevitably become a project style

because they need to achieve goals under their own objectives and limited deadlines and management

resources. As mentioned in the survey result, in previous section, there are three project

styles—plan-driven (PD), agile (AG), and hybrid (HB). Therefore, as these project styles are

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Fig.11 Consistency among strategies, innovation models and project styles.

consistent with the combination of the four strategic approaches and the four innovation models, it is

necessary to consider a combination with these three. The three types of HB shown in the previous section

are included in this section. The consistent combinations between each innovation model and each project

style are shown in the middle of Fig. 11 after considering the characteristics of each innovation model

and the merits and demerits of each project style; in other words, the consistent combinations are PD for

linear model, PD or HB for Kline model, HB or AG for hypothesis testing model, and AG or HB for

interactive model. According to the results of the mathematical studies on the three project styles by Imani

(2017), PD involves less total manpower when the criticality is high and the project scale is bigger, and

the reverse stands true for AG. Additionally, HB is in an intermediate position, between the two other

styles. At the bottom of Fig. 11, the features of each project style are shown.

V. SUMMARY

Companies need to select a strategic approach that suits them and realize innovation that is consistent

with them. In this paper, based on the case studies in the apparel industry, the author has revealed that the

following combinations between strategic approach and innovation model are consistent: resource

approach and linear model, positioning approach and Kline model, gaming approach and hypothesis

testing model, learning approach and interactive model.

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Vol.12 No.1 (Oct., 2017) 140

Based on the results, in order to realize the construction of Super Smart Society in the near future, the

author suggested innovation models that are consistent with the four strategic approaches described above

for each of the six industrial sectors.

Furthermore, among these innovation models, it was suggested that conventional plan-driven project

will be suitable for linear model and Kline model, and agile type project will be effective for interactive

model. In addition, hybrid type projects with intermediate features between them are considered to be

effective for hypothesis testing models. Additionally, depending on the case, hybrid type is considered to

be effective for Kline model and interactive model.

Since the combination of project styles suitable for each innovation model is only a logical

consideration in this research, validation of its effectiveness is a future task.

ACKNOWLEDGMENT

The author expresses deep appreciation to sponsors and all the conference organizing committee

members. I am especially thankful to Chair Dr. Kunio Yoshida, Co-Chair Dr. Shigenobu Ohara, and Co-

Chair Dr. Elvia Zamora. At the same time, I am grateful to Chair Att. Liza D. Corro (Chancellor), and Dr.

Tyfanny Tan (Dean), Dr. Lanndon Ocampo, Prof. Rhenozo Barte, Prof. Aileen Vicente of the local

organizing committee (University of the Philippines Cebu).

This work was supported by JSPS KAKENHI Grant Number JP16K00657.

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