Download Operational Strategies: Innovation

Operational Strategies:
Innovation
A2 Business Studies
Aims and Objectives
Aim:
• Understand innovation as an operational strategy.
Objectives:
• Define innovation and R&D
• Describe the R&D process
• Analyse functional areas relationship to
innovation
• Evaluate functional areas relationship to
innovation
Starter
• Think of 4 products which have recently been launched
onto the market.
• How have these influenced the lives of consumers?
• How have competitors reacted to these new products?
• What process have all of these products been through?
Research and Development
• Define research and development.
Definition:
The scientific research and technological
development used to create a new product or
process.
http://www.youtube.com/watch?v=xzkaEUEFsoQ
Research and Development Process
Idea Generation
Organisations that have enterprising culture, may involve all employees in process. E.g. Google
Idea Screening
Considering the practical nature of the idea in terms of resources available and customers needs.
Concept Testing
Business forms focus groups to gauge customer reactions to the product/service and its functions.
Development of Ideas
Responses from consumers used to develop viable ideas.
Business Analysis
The business judges whether each has idea has the potential to make a
profit. Business should consider product portfolio, will it attract new
customers or just existing ones to switch products (cannibalisation).
Product Development
Developing products into working prototypes which can be tested.
Test Marketing
Launching a new product to a small target market to identify any final
adjustments. Business must be careful as competitors will see for first time.
Two Points of analysis from the data
Research and Development
• Why should businesses invest in R&D?
• What are the likely costs to a business of R&D?
Research and Development
Analysis
- Product kept at cutting
edge
- Creates a competitive
advantage
- Allows for premium pricing
- Helps maintain market
position or increase market
share
- Opportunity costs e.g.
money could be used to
retrain staff, launch
marketing campaign etc.
- Large sums of money
invested without guaranteed
success
Research and Development
Evaluation
• However effective or creative R&D is it will not
satisfy the operational objectives.
• Only when the R&D leads to a successful economic
outcome that it leads to a comp. adv.
• Successful outcomes only come from extensive
R&D and even then, product success is not
guaranteed!
Innovation
• R&D is part of the process of innovation.
• Can Microsoft still innovate using R&D to build a comp.
advantage with the rise of Apple and Sony?
• Microsoft spends $9bn (£5.5bn) a year on research and
development - and yet its rivals are often seen as more
innovative. Is this the case?
• http://www.bbc.co.uk/news/business-12582357
• http://www.bbc.co.uk/news/business-12581442
Innovation
• Define Innovation
Definition:
The launch of a new product or process onto a
market.
• Task: Brainstorm what you feel the risks and
rewards are of committing to R&D and Innovating
new products.
Risks
Rewards
If new product fails could
affect brand image
Build reputation as
innovative business
Heavy time and resources
commitment, no guarantee
of success.
Development of USP, and
competitive adv.
Potential loss of focus on
business.
Charge premium prices
Competitors reaction
Efficiency improvements in
production
Impacts of Innovation & R&D
• Round Robin
• Consider the impacts of a business embarking on a
costly R&D innovation strategy to launch a new
product on functional areas of the business.
– Marketing
– Finance
– Human Resources
Marketing
Finance
• Feedback
HR
Impacts of Innovation & R&D
on Marketing
 Marketing may help identify target market
 May gather consumer opinions
 May assist in using a market led approach
 Will design marketing mix for product
 Communicate new product to customer, so it is
vital communication is good with operations.
Impacts of Innovation & R&D
on Finance
 Finance must set budgets for R&D and
communicate these whilst monitoring them.
 Costing of new products/processes
 Work with marketing to set pricing structures
 Profit, sales, cots of new products
Impacts of Innovation & R&D
on Human Resources
 R&D is likely to have workforce planning issues as
there could be a need for new skilled workers to
manufacture a new product.
 Reduce workforce size, due to manufacturing
innovations.
Impacts of Innovation & R&D
on Functional Areas
 Vital for all functions to have an input from the
outset.
 This simultaneous development and engineering
can potentially save time, money and result in a
more efficient process.
Marketing
Finance
HR