INNOVATION MANAGEMENT

Jiri Vacekvacekj@kip.zcu.cz

Department of Management, Innovationsand Projects

UWB, Faculty of EconomicsSummer semester 2007/8

Lesson 1

IntroductionBasic concepts

Importance of innovations

CHARACTERISTICS OF SUCCESSFUL INNOVATING COMPANIES - 1

• Systematic collection of all impulses that could lead to innovation

• Creativity of employees• Ability to evaluate the possibility of the

innovation idea• Good team work• Project-based approach and ability to

manage projects

CHARACTERISTICS OF SUCCESSFUL INNOVATING COMPANIES - 2

• Cooperation with external experts (universities, research laboratories…)

• Proper rate of risk-taking• Employees’ motivation (the employees are

willing to improve the product and the operation of the whole company)

• Continued education of employees • Ability to finance the innovation activities

Definition of innovation - 1

• “Technological innovations are defined as new products and processes and major technological modifications to products and processes. An innovation is considered performed if it is introduced to the market (product innovation) or implemented in the production process (process innovation). Innovation includes many research, technological, organizational, financial and commercial activities.

Definition of innovation - 2

• R&D represents only one of these activities and can take place during various stages of the innovation process. It can play not only the role of the original source of the innovation ideas but also the role of problem solution framework, which can be turned to at any stage of the implementation.„

OECD, Frascati Manual 1992

• Technological innovations – based on specific technology, invention, discovery,

• Social innovations – in critical historicperiods more important than technologicalones (mail, educational systém, socialsystém, health care, …)

DEGREE OF NOVELTY

• Incremental innovations• Radical innovations• Systemic innovations

INNOVATION PROCESS

• Research and development (R&D)• Production• MarketingInnovation is an opportunity for something

new, different. It is always based on change.

Innovators do not view any change as a threat but as an opportunity

FOCUS

• Use the limited resources in the most effective manner; focus on one of thefollowing:– Operational output– Top-quality products– Perfect knowledge of customers

RECOMMENDATIONS

• Solve the correct problem correctly – beeffective and efficient

• Manage innovation as a project• Analyze risks• Use models, scenarios, computer

simulation• Study examples of succesful and

unsuccesful innovation projects

WHAT TO DO1. Start with analysis and study of opportunities.2. Go among people, ask questions, listen 3. Effective innovations are surprisingly simple.

They must be focused on specific needs and on specific final products.

4. Effective innovation start on a small scale.5. A successful innovation always tries to win a

leading position, otherwise you create opportunities for your competitors.

WHAT TO AVOID1. Don’t try to be too “clever”. All that is too

sophisticated will almost certainly go wrong.

2. Don’t try to do too many things at once. Focus on the core of the problem.

3. Don’t try to make innovations for the future but for today. An innovation can have a long-term impact but there must be an immediate need for it.

Three conditions for innovations

1. Innovation means work, hard, concentrated and thorough work. If these qualities are lacking then there is no use for the big talent, cleverness or knowledge.

2. Successful innovations must build on yourstrong points. The innovation must be important to the innovator.

3. Innovation must focus on a market, must be controlled by the market (market-pull).

Lesson 2

Disruptive and openinnovations

Innovation categories

• sustaining – better products that can besold with higher margin to demandingcustomers; incumbents win

• disruptive – commercialization of simpler, more user-friendly products, which are chepaer and targeted to new or lessdemanding customers; new entrants win

Key elements of disruption

• Customers at each market has limited absorption capacity

• Technological progress usually is fasterthat the ability of the market to employ it. Companies focus on better products to be sold with higher margin to unsatisfiedcustomers.

Sustaining vs. disruptive• Sustaining: focused on demanding customers;

both incremetal and radical. Incumbents haveresources and motivation.

• Disruptive: introduce products and services not as advanced as existing ones, but offering otheradvantages (simpler, chepaer, more userfriendly, ...) and focus on new or less demandingcustomers.

Clayton M. Christensen: The Innovator´s Solution, Harvard Business Press, 2003

• Due to technological progess the trajectoryof the disruptive innovation after sometime crosses the trajectory of demands ofmore demanding customers and starts to replace incumbents who are not principallyready to react adequatelly, as they are motivated to suceed at „better“ markets, not to defend themselves on „inferior“ones.

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Conditions of success - 1

• Disruption is successful, as it is easier to defeat competition that tries to escapethan the competition who fights

• Innovace must be disruptive for allcompanies in the industry

• Ex. Internet – for Dell sustaining, theysold computers formerly by mail, phone, etc.

Conditions of success - 2• Following the trajectory upwards to market tiers

where it is possible to attain higher margins iswhat good manager is expected to do.

• Each company therefore prepares its owndisruption. This is the innovator´s dilemma, butalso the start of innovator´s solution.

• The advice to new, growing firms: focus on products and markets ignored or neglected ba incumbents.

Two types of disruption

• New markets: compete with non-consumption: simpler, more user frindly, can be used by less sophisticatedcustomers (PC, transistor radio, deskcopiers).

• Low-end: focus on lower tiers of mainmarkets (minimills, discount stores, Korean auto-makers); motivateincumbents to leave the market

OPEN INNOVATION• Chesbrough, H., “Open Innovation”, Harvard

Business School Publishing, Boston MA, 2003• Closed innovation - requires control • Open innovation

– companies use external as well as internal ideas and both external and internal ways to market

– internal ideas can be taken to the market through external channels to generate additional value

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We must be able to profit from others using our intellectual property and we must license the intellectual property if it supports our business model.

We must have our intellectual property under control so that our competitors can make advantage of it.

We will win if we make best use of internal and external ideas.

We will win if we develop most of the ideas (an the best of them).

To develop better business model is more important than to be the first in the market.

Winner is who gets the innovation to the market first.

R&D can create profit even if we do not initialize and perform it ourselves.

If we develop the product ourselves, we will be the first on the market.

External R&D can create remarkable value; to employ it, we need absorption capacity, often as internal R&D.

R&D creates profit only when we invent, develop and market everything ourselves.

Not all the best people are working for us . We must work with clever people within and outside our company.

All the best people are working for us

Open innovationClosed innovation

Open innovationClosed innovation

Universities are not important as the sources of ideas and people

Universities are not important as the sources of ideas

Many new businessesFew new businesses, weak ones

Active venture capitalLow role of the venture capital

High workforce mobilityLow workforce mobility

Many external ideasMostly internal ideas

Examples : PC, moviesExamples: nuclear industry, mainframe computers

Business model• Formulate value proposition, i.e. the value delivered

to the customer by the product based on specific technology.

• Identify market segment, ie. users to whom the technology brings value and performs the job to be done.

• Define structure of the value chain, required for the product creation and distribution. Value creation is necessary, however not sufficient condition of profitability; value creation is conditioned by:

– balance of forces among our business, suppliers and competitors

– presence of complementary assets (e.g. in production, distribution, etc.) necessary for supporting the company position in the value chain.

Business model– cont´d• Specify the mechanism of profit creation and

evaluate product cost structure and target margin

• Describe the company position in the value network that connects suppliers and customers, including identification of potential alternative producers and competitors.

• Formulate competitive strategy enabling to the innovative company to gain and keep competitive advantage.

Product architecture

Hierarchy of connections between disparate functions within a

system

Interdependent Architecture

System

ComponentA

ComponentB

ComponentC

Interdependent Architecture

• changing one component requires changes in all other parts of the system, because the relationships between the parts are not clearly understood

• can be best managed through internal processes

Modular ArchitectureSystem

ComponentA

ComponentB

ComponentC

Modular Architecture• components could change without causing any

change in other components• modular design enables to assemble system

more easily, from “plug and play” components whose interfaces are well understood

• modular architecture makes it easy for many companies to innovate components without worrying about possible impact on other parts of the system

IMPLICATIONS FOR NPD• extended circle of company stakeholders -

customers, NGOs, local and regional governments

• not only superior quality, but also environmentally friendly, aesthetically appealing new products

• designed for X, where X can be quite large and multi-faceted set

• after-sale service plays an increasing role –and brings increased turnover and profit

Lesson 3

Assessment of companyinnovation potential

COMPANY INNOVATION POTENTIAL

A company with high innovation potentialscores high in the following areas: • Strategy and planning • Marketing• Technological process• Quality management• Logistics• Human resources

INNOVATION POTENTIAL ASSESSMENT

• For a company, it is important to know itsinnovation potential. It can use thequestionnaire

• For every of the six areas, there are sixquestion, each with four possible answers. The answers are formulated so that they reflect the existing situation in the company.

A. STRATEGY AND PLANNING

1. Idea about the company future2. Vision and employees3. Company innovation programs4. Plan modifications5. Financial indicators of the plan6. Project management

B. MARKETING

1. Monitoring of current market trends2. Evaluation of the market competition

position3. Customer-orientation4. Monitoring of customers’ attitudes to

the company product5. Market information flow inside the

company6. Marketing and financial control

C. TECHNOLOGICAL PROCESS

1. Future company’s competitiveness in the industry

2. Changes of technologies3. Collection of impulses for implementation

of technology changes4. Evaluation of the return on investment5. Calculation of production costs and their

monitoring6. Creation of resources for development

D. QUALITY, ENVIRONMENT

1. Monitoring of changes conditioning the quality management in the company

2. Employees’ personal contribution to the quality system

3. External quality audit in the company4. Monitoring of the environmental impact5. Impact of quality monitoring on the company

processes6. Covering of costs resulting from modifications of

standards, regulations and legislation in the sphere of quality and environment

E. LOGISTICS

1. Organization of purchase and distribution channels in the company

2. Optimization of the company logistics3. Information and communication flows between

the company and its partners4. Flexibility of logistics processes 5. Introduction of innovations in logistics6. Logistics and financial control

F. ORGANIZATION AND HUMAN RESOURCES

1. Employees satisfaction2. Employees motivation3. Management and communication4. Conflict resolution5. Company information system6. Company culture

Innovation potential assessment

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Lesson 4

Company innovation system

COMPANY INNOVATION SYSTEM

• Company strategy• Collection of innovation impulses• Setting of priorities• Looking for innovation ideas and their

discussion• Feasibility study • Decision about project preparation• Project preparation• Project implementation• Monitoring of innovation performance

Strategydevelopment

Strategydevelopment

Productdevelopment

Productdevelopment

Designmodificationaccording +customer‘s

requirements

Designmodificationaccording +customer‘s

requirements

ProductdeliveryProductdelivery

Development of production capacities

Communication with customer

Idea

Production

Development

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REGULAR „INNOVATION“ MEETINGS

• Sort collected impulses according to their topics• Select the technique for development of innovation

proposals • Present generated innovation proposals and prepare

their preliminary evaluation• Submit results to the management for the decision

about the feasibility study performance for selected proposals

• Report the feasibility study results to the management for the decision about the project development

• Report on – the state of the projects under development– the state of the currently implemented projects– the monitoring of already implemented projects

Lesson 5

Innovation impulses

SOURCES OF INNOVATION IMPULSESInternal environment

• Own R&D• Technical divisions – design, technology• Production divisions (production, provision of

services)• Marketing and sales• Logistics (purchase and supplies)• Guarantee and post-guarantee service• Owners

SOURCES OF INNOVATION IMPULSESExternal environment

• Customers• Suppliers• Competitors• Consultants, R&D

institutions• Schools, universities• Professional publications,

Internet• Exhibitions, fairs,

specialized seminars and conferences

• Advertising agencies• Investors• Media• Authorized testing

laboratories, certification agencies

• State institutions, public sector

• Legislation• Globalization

MARKET PULL - R&D PUSH• Market pull

– looking for the best way of satisfying a newly emerging customer demand

– improvement of the existing products, extension of the existing offer or decrease of price

– impulses for continuous, incremental innovations or for process innovations

• Research and development push– looking for commercial use of new impulses resulting

from the R&D results– generating of new markets for conceptually different

products

7 SOURCES OF INNOVATION IMPULSES(Drucker)

INTERNAL1. unexpected event2. contradiction3. change of work process4. change in the structure of industry or market

EXTERNAL5. Demographic changes6. Changes in the world view7. New knowledge

1. Unexpected event

• Unexpected success• 1. What will the use of the offered opportunity mean to us?• 2. Where will its introduction take us?• 3. What do we need to do for its implementation?• 4. How can we achieve that?

• Unexpected failure• Unexpected external event

2. Contradiction

• Non-compliance with economic reality• Contradiction between reality and

anticipations about it• Contradiction between the anticipated and

real behavior of customers and their values

3. Change of process

• realize the necessity of change, identifythe weak point of the chain

• be convinced that if something does not work the way it should, then it is necessaryto attempt a change

• the solution must be convenient for thosewho will implement it. It must placemoderate and feasible requirements

4. Change in the structure of industry and market

• Rapid growth of the industry• Identification of new market segments• Convergence of technologies (e.g. use of

computers in telecommunications)• Rapid change of the industry and resulting

need of a structural change

5. Demography

• easiest to describe and to predict• influence what will be bought, who and in

which amounts will purchase

6. Change of attitudes

• change in the approach to health: health-care, food, spending the leisure time

• “upper-middle class”: a chance to offer non-standard services at non-standard prices

• increasing migration, feminism, regionalism etc

• Timing is essential - to be the first

7. New knowledge

• Based on convergence or synergy of various kinds of knowledge, their success requires, high rate of risk – Thorough analysis of all factors. identify the “missing

elements” of the chain and possibilities of their supplementing or substitution;

– Focus on winning the strategic position at the market. the second chance usually does not come;

– Entrepreneurial management style. Quality is not what is technically perfect but what adds the product its value for the end user

IMPULSES FROM THE MARKET ENVIRONMENT

• Customersproduct presentation– realistic– simple, demonstrative and precise– moderate– representative sample of customers

• Suppliers• Competitors

INNOVATION IMPULSES OF THE R&D

• identification research: to monitor the scientific, technical and economic information and identify innovation impulses applicable in the company

• basic research • applied research: acquire knowledge and means

applicable for the meeting of specific, beforehand-defined goals

• development: systemic use of knowledge and means acquired in the applied research for the creation of a new or improvement of the existing product or for the creation or modification of processes

INTERNAL IMPULSES

• usually combined with external sources• supported by

– creative techniques – innovation tools

• REGISTER OF IMPULSES

Lesson 6

Innovation management tools

INNOMAThttp://iris.fst.zcu.cz/innomat/inncdr/imts.htm

(unless otherwise mentioned)

General Innovation Tools

BENCHMARKING

BRAINSTORMING

REENGINEERING

CHANGE MANAGEMENT

Specific techniques useful at the different changemanagement process steps.

Monitoring effectiveness

Learning

strategic planning techniquesDeveloping a plan

internal marketing techniquesSelling the change

force field analysisIdentify what factors will hinderchange

SWOT analysisPreparing a vision statement

time management techniquesMaking time

SPECIFIC TECHNIQUECHANGE MANAGEMENT STEP

INNOVATION MANAGEMENT TOOLShttp://www.wiley.co.uk/innovate/website/pages/atoz/atoz.htm

TECHNOLOGY AUDIT

TECHNOLOGY FORECAST

VALUE ANALYSIS

Product Innovation Tools

DESIGN FOR X

<>

„X“ - examples

Design for Disassembly (DFD)

Design for Electromagnetic Compatibility

Design for Reliability (DFR) Design for Storability

Design for InspectabilityDesign for Dimensional Control (DDC)

Design for Environment (DFE)

Design for Manufacturing and Assembly (DFMA)

QUALITY FUNCTION DEPLOYMENT

House of Quality

InterrelationshipsTechnical Features

Relationship between Customer Desired Traits and Technical Features

Importance of Technical Features

Importance of Traits to Customer

Assessment of Competition

Voice of the Customer

House of Quality:Steps for Generation

1. Identify Customer Attributes2. Identify Supporting Technical Characteristics3. Correlate Customer Attributes with Supporting Technical

Features4. Assign Priorities to Customer Requirements and Technical

Features5. Evaluate Competitors’ Stances and Products6. Identify Technical Characteristics to Deploy in the Final

Product Design

Managerial Innovation Tools

FAILURE MODE AND EFFECT ANALYSIS (FMEA)

INNOVATION MANAGEMENT TOOLShttp://www.wiley.co.uk/innovate/website/pages/atoz/atoz.htm

INNOVATION MANAGEMENT TOOLShttp://www.wiley.co.uk/innovate/website/pages/atoz/atoz.htm

PEER EVALUATION

TEAM BUILDING

ISO 9000

ISO14000refers to procedures for ensuring sustainable and

environmentally friendly operationsEIA – Environmental Impact Assessment

TOTAL PRODUCTIVE MAINTENANCE

Process Innovation Tools

DESIGN FOR MANUFACTURING AND ASSEMBLY (DFMA)

LEAN THINKING

CONTINUOUS IMPROVEMENT

CONCURRENT ENGINEERING

JUST IN TIME (JIT)

Lesson 7

CREATIVITYBASICS & TECHNIQUES

Innovation and creativity

• creativity is manifested in the production of a creative work (for example, a new work of art or a scientific hypothesis) that is both original and useful

• innovation begins with creative ideas,– creativity by individuals and teams is a

starting point for innovation; the first is a necessary but not sufficient condition for the second

• creativity results:– in producing or bringing about something

partly or wholly new; – in investing an existing object with new

properties or characteristics; – in imagining new possibilities that were not

conceived of before; – and in seeing or performing something in a

manner different from what was thought possible or normal previously.

• Many creative ideas are generated when somebody discards preconceived assumptions and decides on a new approach or method that might seem to others unthinkable

• Serendipity - effect by which one accidentally discovers something fortunate, especially while looking for something else entirely

Quotations on serendipity• "In the field of observation, chance favors only the prepared mind." Louis

Pasteur• "Serendipity. Look for something, find something else, and realize that what

you've found is more suited to your needs than what you thought you were looking for." Lawrence Block

• "The most exciting phrase to hear in science, the one that heralds new discoveries, is not 'Eureka!', but 'That's funny …'" Isaac Asimov

• "In reality, serendipity accounts for one percent of the blessings we receive in life, work and love. The other 99 percent is due to our efforts." Peter McWilliams

• "Serendipity is looking in a haystack for a needle and discovering a farmer's daughter." Julius Comroe Jr.

• "Serendipity is putting a quarter in the gumball machine and having three pieces come rattling out instead of one—all red." Peter H. Reynolds

• "--- you don't reach Serendib by plotting a course for it. You have to set out in good faith for elsewhere and lose your bearings ... serendipitously." John Barth, The Last Voyage of Somebody the Sailor

• "Serendipity is the art of making an unsought finding." Pek van Andel (1994) source: wikipedia

BASIC CONCEPTS• Creative thinking represents a combination

of logic and intuitive approaches• Being creative means dealing with the aspects

and possibilities of today and tomorrow• That requires a person to be open to everything

new, do not stick to things that we are all used to, do not adhere to yesterday so much

• Creativity does not mean dreaming, it means productive managing of specific tasks.

• Only a creative approach to the problem solution can be successful.

Creativity in organizations• Amabile: to enhance creativity in business,

three components are needed:– Expertise (technical, procedural & intellectual

knowledge), – Creative thinking skills (how flexibly and imaginatively

people approach problems), – and Motivation (especially intrinsic motivation).

• Nonaka: creativity and knowledge creation are important to the success of organizations. In particular, he emphasized the role that tacit knowledge has to play in the creative process.

Creativity and economics• Joseph Schumpeter: creative destruction - the way in

which old ways of doing things are endogenously destroyed and replaced by the new.

• Paul Romer: the recombination of elements to produce new technologies and products and, consequently, economic growth. Creativity leads to capital, creative products are protected by intellectual property laws.

• The creative class as important driver of modern economies. Richard Florida in The Rise of the Creative Class, 2002 popularized the notion that regions with "3 T's of economic development: Technology, Talent and Tolerance" also have high concentrations of creative professionals and tend to have a higher level of economic development.

• Important aspect to understanding Entrepreneurship.

Stages of creative process• Orientation: Need identification, intention to

create• Preparation: Information collection, problem

formulation• Incubation: seeking solution, evaluation of

variants, unconscious thinking• Illumination (Eureka!): synthesis, creation of

ideas• Realization: transformation of the idea into

reality• Verification: evaluation, learning, improvement

Barriers to creativity - 1• The value of getting things right time can induce a fear of

mistakes and experimentation. • So can a blame culture where people become afraid of

making mistakes. • Managers who are not as secure as they should be can

resist or block ideas that are not their own or which they see as threatening.

• A culture that over emphasizes cost containment, processes, consistency or efficiency.

• A reward system that too exclusively celebrates getting things done fast with no mistakes.

• A general fear of risk taking, wanting to analyze everything to death, to wait and see what others do in the market before acting.

Barriers to creativity - 2• A lack of explicit funding for experimentation. • A strict requirement to demonstrate the value of an idea

before it has a chance to prove itself. • A tendency to shoot down novel ideas as a way of

scoring points. • An over allegiance to past successes, proven experience

and tried and tested methods. • A suspicion of novelty, a fear of the unproven. • A resistance to learning from mistakes or trial and error,

a tendency to blame external factors or other people for failures rather than to learn from them.

• Short termism - a drive to meet short term financial goals rather than to invest in the future.

Barriers to creativity - 3

• http://members.optusnet.com.au/~charles57/Creative/Basics/obstacles.htm

CREATIVITY STIMULATION• Keep in touch with creative people • Accommodate the effort to the targets • Evaluate and appreciate the effort• Protect creative employees• Leave them peace and time• Provide them with security • Tolerate failures • Maintain creative atmosphere • Evaluate the creative ideas quickly • Be persistent - nothing comes for free

Fostering creativity• Establishing purpose and intention • Building basic skills • Encouraging acquisitions of domain-specific

knowledge • Stimulating and rewarding curiosity and exploration • Building motivation, especially internal motivation • Encouraging confidence and a willingness to take risks • Focusing on mastery and self-competition • Promoting supportable beliefs about creativity • Providing opportunities for choice and discovery • Developing self-management (metacognitive skills) • Teaching techniques and strategies for facilitating

creative performance • Providing balance

METHODS OF CREATIVE ACTIVITY

• increasing the individual’s or team’s creative potential

• contributing to the improvement of the creative work conditions

• facilitating the problem solution

Creative Process• Problem Definition - including problem analysis,

redefinition, and all aspects associated with defining the problem clearly.

• Idea Generation - The divergent process of coming up with ideas.

• Idea Selection - The convergent process of reducing all the many ideas into realistic solutions

• Idea Implementation - Turning the refined ideas in reality.

• Processes - Schemes and techniques which look at the overall process from start to finish (or at least 3 of the above 4 areas)..

• http://www.mycoted.com/Category:Creativity_Techniques

Brain hemispheres

language: intonation/emphasis, prosody, pragmatic, contextual

language: grammar/words, pattern perception, literal

present and futurepresent and past

mathematics: perception of shapes/motions

mathematics: perception of counting/measurement

holistical algorithmic processinglinear algorithmic processing

intuitivelogical

imagisticverbal

holisticanalytical

simultaneoussequential

Right brain functionsLeft brain functions

Convergent vs. divergent thinking

• Convergent thinking involves aiming for a single, correct solution to a problem

• Divergent thinking involves creative generation of multiple answers to a set problem.

CREATIVITY TECHNIQUES• trial and error• brainstorming• Inspirational questions• psychological-cognitive, such as:

– Osborn-Parnes Creative problem solving (CPS)– Synectics; – Lateral thinking (courtesy of Edward de Bono),

• the highly-structured, such as:– TRIZ (the Theory of Inventive Problem-Solving); – ARIZ (the Algorithm of Inventive Problem-Solving), both

developed by the Russian scientist Genrich Altshuller; and – Computer-Aided Morphological analysis.

Trial and error• select a possible answer, apply it to the problem and, if

not successful, select (or generate) another possibility that is subsequently tried. The process ends when a possibility yields a solution.

• more successful with simple problems, often resorted to when no apparent rule applies.

• the approach need not be careless, for an individual can be methodical in manipulating the variables in an attempt to sort through possibilities that may result in success. Nevertheless, this method is often used by people who have little knowledge in the problem area

Trial and error - features• solution-oriented: trial and error makes no

attempt to discover why a solution works, merely that it is a solution.

• problem-specific: trial and error makes no attempt to generalise a solution to other problems.

• non-optimal: trial and error is an attempt to find asolution, not all solutions, and not the bestsolution.

• needs little knowledge: trials and error can proceed where there is little or no knowledge of the subject.

Inspirational questions - 1 • What can I substitute to make an improvement? • What if I swap this for that and see what happens? • How can I substitute the place, time, materials or people? • What materials, features, processes, people, products or

components can I combine? • Where can I build synergy? • What part of the product could I change? And in exchange for what? • What if I were to change the characteristics of a component? • What happens if I warp or exaggerate a feature or component? • What will happen if I modify the process in some way? • What other market could I use this product in? • Who or what else might be able to use it? • What if I did it the other way round? • What if I reverse the order it is done or the way it is used? • How would I achieve the opposite effect?

Inspirational questions - 2• Who else has solved this problem? • What similar area of expertise might have solved this

problem? • Is there anyone else in the company who knows how to

solve this? • What else could we use to solve the problem?• Where else might this problem have been solved? • What other companies might know how to solve this? • What similar problems have been solved, and how? • What other industries face the same problem and what

do they do about it?

Inspirational questions - 3• How would they think? • What objects and items would they be using? • Where would they be doing it? • How would they see the problem? • What action would they take? • How would they explain the problem? • How would they solve the problem? • What does your situation or your problem remind you of? • What other areas of life/work experience similar

situations? • Who does similar things but not in your area of

expertise?

Inspirational questions - 4

• What would my perfect solution be? • What effect would my ideal solution have?• What if money/morals/laws did not matter

at all? • What would I do if I had unlimited power

and resources? • What would my ideal solution look like?

Source:Wikipedia

CPS (OFPISA)• six stage process, each with a divergent and a

convergent phase.1. Objective Finding (or Mess Finding): Sensitise yourself for

issues that need to be tackled. 2. Fact Finding: Gather information about the problem. 3. Problem Finding: convert a fuzzy statement of the problem into

a broad statement more suitable for idea finding. 4. Idea Finding: generate as many ideas as possible 5. Solution finding: Generate and select obvious evaluation criteria

and develop the short-listed ideas from Idea Finding as much as possible in the light of these criteria. Then choose the best ofthese improved ideas for further development

6. Acceptance finding: How can the suggestion you have just selected be made up to standard and put into practice?

Synectics• problem solving approach that stimulates thought

processes of which the subject is generally unaware. • developed by William Gordon, • central principle: "Trust things that are alien, and alienate

things that are trusted." • Encourages• fundamental problem-analysis and, on the other hand, • the alienation of the original problem through the

creation of analogies• It is thus possible for new and surprising solutions to

emerge. • Synectics is more demanding of the subject than

brainstorming, as the many steps involved mean that the process is more complicated and requires more time and effort.

Synectics - steps• Analysis and definition of the problem • Spontaneous solutions • Reformulation of the problem • Creation of direct analogies • Personal analogies (identification) • Symbolic analogies (contradictions) • Direct analogies • Analysis of the direct analogies • Application to the problem • Development of possible solutions

Lateral thinking• de Bono• methods of thinking concerned with changing concepts

and perception; reasoning that is not immediately obvious, ideas that may not be obtainable by using only traditional step-by-step logic

• shifting of thinking patterns, away from entrenched or predictable thinking to new or unexpected ideas.

• A new idea that is the result of lateral thinking is not always a helpful one, but when a good idea is discovered in this way it is usually obvious in hindsight, which is a feature lateral thinking shares with a joke

• We may need to solve some problems not by removing the cause but by designing the way forward even if the cause remains in place

• http://en.wikipedia.org/wiki/Lateral_thinking

Lateral thinking vs. critical thinking

• Critical thinking is primarily concerned with judging the truth value of statements and seeking errors.

• Lateral thinking is more concerned with the movement value of statements and ideas. A person would use lateral thinking when they want to move from one known idea to creating new ideas.

• Critical thinking is like a post-mortem while lateral thinking is like diagnosis.

Lateral thinking - inspiration• Random Entry: Choose an object at random, or a noun

from a dictionary, and associate that with the area you are thinking about.

• Provocation: Declare the usual perception out of bounds, or provide some provocative alternative to the usual situation under consideration. Prefix the provocation with the term 'Po" to signal that the provocation is not a valid idea put up for judgement but a stimulus for new perception.

• Challenge: Simply challenge the way things have always been done or seen, or the way they are. This is done not to show there is anything wrong with the existing situation but simply to direct your perceptions to exploring outside the current area.

Six de Bono hats• White hat (Blank sheet): Information & reports, facts and

figures (objective) • Red hat (Fire): Intuition, opinion & emotion, feelings

(subjective) • Yellow hat (Sun): Praise, positive aspects, why it will

work (objective) • Black hat (Judge's robe): Criticism, judgment, negative

aspects, modus tollens (objective) • Green hat (Plant): Creativeness, Alternatives, new

approaches & 'everything goes', idea generation & provocations (speculative/creative)

• Blue hat (Sky): "Big Picture," "Conductor hat," "Meta hat," "thinking about thinking", overall process (overview)

Example - meeting• The meeting may start with everyone assuming the Blue

hat to discuss how the meeting will be conducted and to develop the goals and objectives.

• The discussion may then move to Red hat thinking in order to collect opinions and reactions to the problem. This phase may also be used to develop constraints for the actual solution such as who will be affected by the problem and/or solutions.

• Next the discussion may move to the (Yellow then) Green hat in order to generate ideas and possible solutions.

• Next the discussion may move between White hat thinking as part of developing information and

• Black hat thinking to develop criticisms of the solution set.

TRIZ, ARIZ

• Теория решения изобретательскихзадач” (Teoriya ResheniyaIzobretatelskikh Zadatch) = Theory ofinventive problem solving

• Inventing is the removal of a technical contradiction with the help of certain principles

TRIZ process for creative problem solving

Contradictions• Inventive problems stem from contradictions (one of the

basic TRIZ concepts) between two or more elements, such as, "If we want more acceleration, we need a larger engine; but that will increase the cost of the car," that is, more of something desirable also brings more of something less desirable, or less of something else also desirable. These are called Technical Contradictions.

• Physical or inherent contradictions: More of one thing and less of another may be needed. For instance, a higher temperature may be needed to melt a compound more rapidly, but a lower temperature may be needed to achieve a homogeneous mixture.

Matrix of Contradictions

• 40 inventive principles• rows: 39 system features that one typically

wants to improve, such as speed, weight, accuracy of measurement and so on.

• columns: typical undesired results. • matrix cell: points to principles that have

been most frequently used in patents in order to resolve the contradiction.

Morphological analysis

• designed for multi-dimensional, non-quantifiable problems where causal modeling and simulation do not function well or at all

• Fritz Zwicky (1967, 1969) - exploring all the possible solutions to a multi-dimensional, non-quantified problem complex

Morphological analysis - steps1. The problem to be solved must be very concisely

formulated. 2. All of the parameters that might be of importance for the

solution of the given problem must be localized and analyzed.

3. The morphological box or multidimensional matrix, which contains all of the potential solutions of the given problem, is constructed

4. All the solutions contained in the morphological box are closely scrutinized and evaluated with respect to the purposes that are to be achieved.

5. The optimally suitable solutions are selected and are practically applied, provided the necessary means are available.

Example - energy conversion

nuclear - Nnuclear - Nnuclear - N

thermal – Tthermal – Tthermal – T

chemical – Cchemical – Cchemical – C

electrical – Eelectrical – Eelectrical – E

kinetic – Kkinetic – Kkinetic – K

final storagetransmissioninitial

Example - continued

• K->E->C: hydroelectric generation which is then stored in a battery.

• C->T->K: internal combustion engine (chemical energy transformed into thermal energy) leading to energy being stored in a flywheel.

• E->C->T: common refrigerator

Think outside the box

http://www.sciencenewsforkids.org/articles/20041027/PuzzleZone.asp

16 dots, 6 lines

Dots and lines - generalization

• a three-dot-by-three-dot puzzle requires four lines.

• a four-dot-by-four-dot puzzle requires six lines,

• a five-dot-by-five-dot puzzle requires eight lines, and

• an n-dot-by-n-dot puzzle requires 2(n – 1) dots.

Puzzle Archive

• http://www.sciencenewsforkids.org/pages/zonearchive.asp?type=1

Lesson 8

TEAM WORK

TEAM DEFINITION

• group of people whose individual members share a common goal

• their expert skills and personal abilities are complementary

• its members work activities and skills are purposefully and smoothly linked together.

TEAM EFFECTIVENESS• dynamic balance among

– Necessity to perform a joint task– Individual needs of team members– Necessity to maintain a team

• synergic effect: every member – contributes to performance of the mutual task– adopts specific roles necessary for the effective team

functioning.– contributes to the satisfaction of the individual needs

of other team members

Successful team characteristics• Team members identify themselves with the team• There is relaxed, non-bureaucratic atmosphere, interest

in achieving joint goals, optimistic work mood.• Tasks and goals are clear to all members and all identify

themselves with them. Differences in opinions are accepted. Disputable points are discussed and a solution is looked for.

• Communication is open, spontaneous, and fluent. Team members are sincere to each other, listen to each other. Criticism is constructive and it is not taken personally.

• Team management is of participative, eventually consulting, character. Rules are clearly defined.

Unsuccessful team characteristics

• Team members do not identify themselves with team.• Strained atmosphere, blocked communication is. Team

members hide their real feelings and opinions.• Autocratic supervision, discussion about goals and tasks

not allowed. • Diversity of opinions leads to conflicts. Disagreement is

not openly expressed; the decision is undermined.• Personal issues are settled by means of criticism.

People gossip.• The rules are not clearly defined.

Team structure and organization

• Formal: clearly visible, represents distribution of work among the team members in order to ensure performance of certain functions.

• Informal: influences procedures, in which things are actually done – prestige of people, their influence, power, seniority, ability to convince others play roles there.

TEAM DEVELOPMENT

FormingStorming Norming

PerformingDissolving

ROLES IN THE TEAM

• Initiator• Company employee• Chairman• Forming person• Operational employee• Coordinator• Resource researcher

• Observer• Team worker• Finisher• Orienting member• Energy supplier• Recorder• Harmonizer

Advantages and disadvantages of team work

• (+) Mutual cooperation and support• (?) teams often accept more risk than

individuals• (+) can produce high quality ideas by

accepting the conflict and exploring differences in the individual members’opinions

Group cohesion• (+) larger degree of cooperation, better

communication, higher resistance against frustration, lower fluctuation and absences, lower level of tolerance towards lazy people

• (-) difficult for new members, limited possibility to enforce new ideas, opposition against changes in work procedures, often overprotective against outsiders

Team forming by a manager

Independence and responsibility of people

People’s worries of responsibility

Anticipates

As necessity As a potential threat to his/ her position

Understands group unity

Opens them for team solving before they become destructive

Ignores them or solves them him- or herself

Conflicts inside or outside the team

As much as possible When they require it or need it

Communicates with team members

As natural and necessary As denial of his/ her authority, waste of time

Views the problem solving by the team

Trust, motivation climate Plan, task, control Believes inIndividuality, mutuality ConformityPrefers VisionEverything if possible Defines On the way to teamworkOn the way to rigidityManager

Lesson 9

DECISION MAKING

DECISION PROCESS

1. Identify the problem2. Specify objectives and decision criteria3. Develop alternatives4. Analyze and compare alternatives5. Select the best alternative6. Implement the chosen alternative7. Monitor the results

REASONS FOR POOR DECISIONS

• Mistakes in the decision process– quick decisions– failure to recognize consequences– manager´s ego – unwillingness to admit mistake,

unability to make a decision

• Bounded rationality– limits – not optimum, but satisfactory solution

• Suboptimization– departmentalization

MODELS

Model: abstraction of reality, adequatelyportrays real-life phenomena

• Physical• Schematic• Mathematical• Computer

USE OF MODELS

1. The purpose of the model2. How to use model to generate results3. How results are interpreted and used4. What assumptions and limitations apply

Be aware of the assumptions andlimitations of each model

BENEFITS OF THE USE OF MODELS

1. Easy to use, less expensive2. Require to organize and quantify information, indicate

need of additional information3. Provide a systematic approach to problem solving4. Increase understanding of the problem5. Enable to ask „what if …?“6. Require users to be very specific about objectives7. Serve as a consistent tool for evaluation8. Enable to bring power of mathematics9. Provide standardized format for problem analysis

LIMITATIONS OF MODELS1. Overemphasis of quantitative over

qualitative information2. Incorrect application, misinterpretation of

results3. Highly sophisticated models in hands of

users who cannot fully comprehend theconditions and limitations of the model use

4. Model building as an end to itself

QUANTITATIVE APPROACHES

• Linear programming• Queing techniques• Inventory models• Project models (PERT, CPM, TOC)• Forecasting models• Statistical modelsQuantitative methods are typically more difficult to

understand without a fair amount of explanationand demonstration

TRADE-OFFS

List advantages and and disadvantages of opposing courses of action to gain betterunderstanding of the consequences of potential decisions.

Example – quality control

Increase in costsFewer defectivesslipping through by increasing inspections

disadvantagesadvantages

SENSITIVITY ANALYSIS

How sensitive the solution is to a changein one or more parameters

Example: Δ = (A2 – A1) / 0,5*(A2 + A1)

10,87%49B = kx + 4

0,03%40104005A = kx + 4000

Δk = 2k = 1x = 5

THE SYSTEM APPROACH

• interrelations among subsystems and/orelements

• system boundary – environment• Feedback

Consequence: evaluate „optimal“ solutionsin terms of larger framework

The whole is greater than the sum of its individual parts

DECISION ENVIRONMNENTS• CERTAINTY – relevant parameters have

known values

• RISK – certain parameters haveprobabilistic outcomes

• UNCERTAINTY – it is impossible to assess the likelihood of various possibleoutcomes

DECISION THEORY1. Identify possible future conditions – states of

nature2. Develop a list of possible alternatives3. Determine or estimate payoff associated with

each alternative for every possible state of nature

4. Estimate the likelihood of every possible stateof nature (if possible)

5. Evaluate alternatives according to decisioncriterion and select best alternative

PAYOFF TABLE

162-4Large

12127Medium

101010Small

highmoderatelow

Possible future demandAlternatives –facility size

Decision making under certainty

Choose the alternative with the highestpayoff

large16High

medium12Moderate

small10LowBest alternativeHighest payoffDemand

Decision making under uncertainty• Maximin – determine the worst possible payoff

for each alternative, and than choose thealternative with the „best worst“

• Maximax – determine the best possible payoff, and choose the alternative with this payoff

• Laplace - determine the average payoff for eachalternative, and choose the alternative with thebest average

• Minimax regret - determine the worst regret for each alternative, and than choose the alternativewith the „best worst“

• Maximin: worst payoffs are

the best is 10 - choose small facility• Maximax: the best overall payoff is 16 – choose large• Laplace:

• The best average is 10,33 - choose medium

-4710Payoff

largemediumsmallAlternative

4,6710,3310Average payoff

largemediumsmallAlternative

• Minimax regret:Opportunity loss, regret: subtract every payoff in a column from the largest positive payoff in that column

The lowest regret is 4 – choose medium

1401014Large

4403Medium

6620Small

highmoderatelow worstregrets

Alternative

Decision making under risk

• Expexted monetary value (EMV) criterion: calculate expected value (EV) for each alternativeand select one with the highest EV

• Appropriate when decision maker is risk-neutral

30,20Large

10.50,50Medium

100,30Small

EVprobabilityAlternative

DECISION TREES

DECISION TREES

• Particularly useful for situations thatinvolve sequential decisions

• Nodes: – decision points– chance events

• Branches leaving– alternatives– states of nature

DECISION TREES - Example

EXPECTED VALUE OF PERFECT INFORMATION (EVPI)

• Option: postpone a decision, purchaseadditional information

• Question: is the cost of the option less than theexpected gain?

upper limit decision maker should be willing to spend to obtain perfect information

EVPI = expected payoff under certainty -expected payoff under risk

EVPI - example

• expected payoff under certainty = 0,30*10 + 0,50*12 + 0,20*16 = 12,2

• EVPI = 12,2 – 10,5 = 1,7

0,2016High

0,5012Moderate0,3010Low

probabilityBest payoffDemand

SENSITIVITY ANALYSIS

State of nature

812C216B

124A#2#1Alternative

Sensitivity Analysis

LINEAR PROGRAMMING (LP)• Objective function – maximization or

minimization• Decision variables• Constraints – feasible solution space• Parameters – fixed values

LP - ASSUMPTIONS

• Linearity (objective function &constraints)• Divisibility (non-integer values of variables

acceptable)• Certainty (values of parameters known,

constatnt• Non-negativity (negative values of

variables unacceptable)

LP – EXAMPLE 1• Decision variables: x1, x2, x3 – quantities of

products to produce• Maximize profit 5 x1 + 8 x2 + 4 x3

• Subject to constraints:– Labor 2 x1 + 4 x2 + 3 x3 ≤ 250 hours– Material 7 x1 + 6 x2 + 5 x3 ≤ 100 pounds– Product 1 x1 ≥ 10 units– Non-negativity x1, x2, x3 ≥ 0

LP – solution 1

101031001002250401

constraints90P

objective function0X3

5X2

10X1

decision variables

LP – Graphical methodFor two-variable problem, graphicalmethod can be usedExample: Minimize P = 8x + 12ySubject to 5x + 2y ≥ 20

4x + 3y ≥ 24y ≥ 2

x, y ≥ 0Solution: x = 4,5, y = 2, P = 60

LP – Graphical method

0

2

4

6

8

10

12

0 1 2 3 4 5 6 7 8 9 1 1 1

y1y2y3P

Lesson 10

CONFLICT RESOLUTION

Conflict management

• Conflict cannot always be avoided, but it can bemanaged

• Sources of conflicts:– Aggressive or conflict-prone personality– Ambiguous or conflicting roles, interdependence– Difference in objectives, values, perceptions– Inadequate authority, oppressive management– Inadequate resources– Unsatisfactory communication

Conflict consequences• Positive:

– Competition tends to enhance the general welfare, ifthe conflict level is not too high

– Loyalty increases when people unite against a common foe

– If problems are recognized, solutions may beforthcoming

• Negative:– Activities, not results, become important– Attack individual rather than problem– Blocked communication– Need of strong leaders

Two-dimensional model of a conflict

Conflict resolution styles - 1• Avoidance: no assertiveness, no cooperation –

problem solution postponed• Accommodation: no assertiveness, cooperation

– give in• Collaboration: assertiveness and cooperation -

problem solving, win-win• Competition: assertiveness, no cooperation -

win-lose, adhere to rules, do not seek to harmthe other’s self-image, impulse to change andimprove the organization

• Authoritarianism: aggression, no cooperation

Conflict resolution styles - 2

• Smoothing: low assertion, low cooperation –focus on similarities, seeks resolution, moveparties to a common goal

• Superordinate goals: increasing assertiveness, increasing cooperation – attempt to find a common set of objectives, forget the differences

• Bargaining (compromise): moderate assertion, moderate cooperation – give-and-také, bothparties satisfy some of their needs

Lesson 11

COMPANY INNOVATION CULTURE

„Successful companies address thehuman needs and give them priority“Thomas J. Peters, Robert H.Waterman

COMPANY CULTURE

• Organization culture: a pattern of ideas, opinions and attitudes that majority of people in the company understands, respects, acknowledges, adopts and relates to them.

• Influences the company’s economic success and competitiveness

Main elements of the company culture

• Behavior standards• Key values• Management and leadership style • Roles • Organizational structure and diversification

Influenced by:• Organization’s strategy• Organization’s system• Level of cooperation between the individual organization

structures• Employees’ abilities

Four types of company orientation

Organizations preferring• power• roles• tasks• human side of their processes and people

MANAGEMENT STYLES

shift from directive to participative style of management

4 basic management styles:• Exploiting authoritative• Benevolent authoritative• Consultative• Participative

Motivation / performance cycle(MPC)

Motivation / performance cycle (MPC)

1. Are the individuals´s needs satisfied? / Needcreation

2. Are organization and manager aware of needs? Are they willing and able to offer needsatisfiers?

3. Organization and manager offer extrinsic andintrinsic need satisfiers and rewards

4. The individual searches for alternatives, evaluate the consequences of possibleactions, makes a decision

MPC- continued

5. The individual is motivated to expendeffort and does so

6. Does the individual have appropriate training, abilities, and tools, and know the objective?

7. Performance8. Does the individual receive need

satisfier? Do the organization and manager provide need satisfier?

MPC- continued

9. Does the individual reassess thesituation?

10.Will the individual be motivated in thesame way?

Note: normal – individualitalic – organization and manager

Hierarchy of needs (A. Maslow)1. Physiological needs – immediate survival,

food, shelter, clothing, bodily needs2. Security needs – stability, protection, freedom

from fear, provisions for the future3. Social needs – acceptance, affection,

affiliation, love, interaction4. Esteem needs – self-esteem, esteem of

others, status, power, autonomy, competence, prestige, recognition

5. Self actualization – achieving one’s fullpotential, personal growth, creative fulfillment

Characteristics of peak performers

1. Vision and the ability to plan strategically2. The drive to surpass previous level of

performance3. High levels of self-confidence and self-

esteem4. A high need for responsibility and control5. Strong communication and salesmanship

skills

Characteristics of peak performers - 2

6. The habit of mentally rehearsing beforecritical events

7. Little need for outside praise orrecognition

8. A willingness to take risks9. The ability to accept feedback and make

self-corrections10.An ownership attitude toward their ideas

and products

Need satisfiers

Frederick A. Herzberg• Hygiene factors – dissatisfiers, extrinsic

(pay, supervision)• Motivators – satisfiers, intrinsic

(achievement, recognition for performance)

Working conditions, salary, peronal life

Physiological

Company policy, job securitySafety and security

Interpersonal relationsSocial

Advancement, recognition, status

Esteem

Work itself, achievement, possibility of growth, responsibility

Self-actualization

HerzbergMaslow

The management challenges

1. Recognizing needs2. The changing nature of individual needs,

expectations3. The impact of cultural diversity on a manager’s

ability to recognize needs4. Being able to choose the right satisfiers and

then being able to obtain and offer them5. Managing the process aspects of the cycle

Lesson 12

INNOVATION PROGRAMS AND EDUCATION

Paradigm shifts

• Information and knowledge society• Lifelong learning• Lean companies, networking

• Information and communicationtechnologies (ICT)– e-business, e-commerce, e-learning, e-

government, e-…, m-…

Learning organization• The education that does not follow the specific

objective and does not improve the results is a luxury the company cannot afford.

• Learning has been effective if a person knows something he has not known earlier and he can do something what he has not been able to do earlier

• The mission of the managerial education is the development of the competencies and performance of managers

• Learn by doing - follow what your more experienced colleagues (but experiment as well)

KEY COMPETENCIES• technical qualification - technical knowledge,

skill, talent and attitudes related technologic, economic, financial, structural and procedural aspects of work

• Soft skills, behavior and acting - related to work with people, influencing the communication and dealing with individuals and groups both within and outside the company.

Company training programs1. Training programs content, methods and goals

must take into account the basics of the managerial work in real situations;

2. Attention should be paid to the improvement of behavior and motivation and not only to acquisition of technical skills;

3. The active training methods should be preferred before passive ones. The abstract concepts should be rooted in the practical experience of companies.

Design of training programs

Define before the start of the training:• What we want to achieve (goals)• How we want to achieve the goals

(methodology)• How the progress will be monitored

(monitoring) • How the results will be evaluated

(evaluation)

Lesson 13

COURSE CONCLUSIONTERM PAPER PRESENTATIONS

Adapt the knowledge to your culture, localconditions, …

But at the same time, do not over-adapt, tryalso to affect your environment

Good luck