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The ‘Fuzzy Front End’ of Innovation

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The fast transformation of technologies into new products or processes is one of the core challenges for any technology-based enterprise. Within the innovation process, we believe, the early phases (“fuzzy front end”) to have the highest impact on the whole process and the result (Input-Output Process), since it will influence the design and total costs of the innovation extremely. However the “Fuzzy Front End” is unfortunately the least-well structured part of the innovation process, both in theory and in practice. The focus of the present chapter is on methods and tools to manage the “fuzzy front end” of the innovation process. Firstly, the activities, characteristics, and challenges of the front end are described. Secondly, a framework of the application fields for different methods and tools is presented: Since a product upgrade requires a different approach compared to radical innovation, where the market is unknown and a new technology is applied, we believe such a framework to be useful for practitioners. Thirdly, a selection of methods and tools that can be applied to the “fuzzy front end” are presented and allocated within the framework. The methods selected here address process improvements, concept generation, and concept testing.
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The „FuzzyFront End“ of Innovation Herstatt/Verworn
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The “Fuzzy Front End” of Innovation
Prof. Dr. Cornelius Herstatt
Dipl.-Ing. Birgit Verworn
August 2001
Working Paper No. 4
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The „FuzzyFront End“ of Innovation Herstatt/Verworn
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The "Fuzzy Front End" of Innovation
by
Prof. Dr. Cornelius Herstatt and Birgit Verworn
Department for Technology and Innovation Management, Technical University
of Hamburg (Harburg)
Tel: +49-40-428 78 3778
Fax: +49-40-428 78 2867
E-mail: herstatt@tu-harburg.de
Internet: www.tu-harburg.de/tim
Key-words: fuzzy front end, innovation management, stage-gate process,
frontloading, triz, dsm-matrix, lead user
ABSTRACT
The fast transformation of technologies into new products or processes is one of the
core challenges for any technology-based enterprise. Within the innovation process,
we believe, the early phases (“fuzzy front end”) to have the highest impact on the
whole process and the result (Input-Output Process), since it will influence the design
and total costs of the innovation extremely. However the “Fuzzy Front End” is
unfortunately the least-well structured part of the innovation process, both in theory
and in practice.
The focus of the present chapter is on methods and tools to manage the “fuzzy front
end” of the innovation process. Firstly, the activities, characteristics, and challenges
of the front end are described. Secondly, a framework of the application fields for
different methods and tools is presented: Since a product upgrade requires a
different approach compared to radical innovation, where the market is unknown and
a new technology is applied, we believe such a framework to be useful for
practitioners. Thirdly, a selection of methods and tools that can be applied to the
“fuzzy front end” are presented and allocated within the framework. The methods
selected here address process improvements, concept generation, and concept
testing.
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1. INTRODUCTION
Successfully launching new products, processes or services in the marketplace is
vital for the long-term survival of any enterprise. As life cycles shorten and the
technological and competitive environment are changing fast, technology-based
enterprises have to convert new technologies into innovative products and processes
as quickly as possible. In parallel, they have to make sure that customer needs are
met.
To cope with these challenges, the “fuzzy front end” of the innovation process has a
key role. It determines to a great extent which projects will be executed. Quality,
costs, and timings are mostly defined during the front end. At this early stage, the
effort to optimize is low and effects on the whole innovation process may be
extremely high. But Managers describe the front end as the greatest weakness in
product innovation (Khurana and Rosenthal 1997).
Consistently, an extensive empirical study (Cooper and Kleinschmidt 1994) showed,
that “the greatest differences between winners and losers were found in the quality of
execution of pre-development activities”. Two factors were identified to play a major
role in product success: the quality of executing the pre-development activities, and a
well defined product and project prior to the development phase (Cooper and
Kleinschmidt 1990). A study of Koen et al. (1999) identified the front end as the key-
contributing factor for large numbers of really new products introduced each year.
Yet, Cooper and Kleinschmidt (1988) found out that pre-development activities
received the least amount of attention (only 6 % of dollars and 16 % of man-days of
the total) compared to product development and commercialization stages. When
product innovation success was observed, about twice as much money and time was
spent on the front end stages compared with non-performing projects. Consequently,
high failure rates have often been related to insufficiencies, low management
attention and poor financial support during the “fuzzy front end”.
In this chapter, we describe the “fuzzy front end” of innovation in more detail. To
systematize the application fields of different methods and tools for the “fuzzy front
end”, a framework is presented in section 3. This framework differentiates innovation
projects with regard to the market and technical uncertainty implied. Based on this
differentiation, section 4 presents a selection of methods and tools suitable for the
“fuzzy front end” and the respective application fields. This selection does not claim
to cover the whole range of methods applicable to the front end. Instead, it focuses
on on the one hand basic and on the other hand relatively new methods to deliver an
insight into basics and into current discussions. The methods selected address
concept generation and concept testing. Conclusions and a brief summary are
presented in section 5.
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2. CHARACTERISTICS OF THE “FUZZY FRONT END” OF INNOVATION
In the innovation management literature, several terms are used for the description
of the front end of innovation, e. g. “pre-development” (Cooper and Kleinschmidt
1994), “pre-project activities” (Verganti 1997), “fuzzy front end” or “pre-phase 0”
(Khurana and Rosenthal 1997/1998). In general, the front end ranges from the
generation of an idea to either its approval for development or its termination (Murphy
and Kumar 1997). Figure 1 describes a model of the innovation process, highlighting
the front end and it´s activities.
Phase I
Idea Generation
and Assessment
Idea Generation
–customer
oriented
– technology
oriented
– cost oriented
Idea assessment
– attractiveness
–risk
Alignment with
existing projects
Project portfolio
update
Phase II
Concept
Development,
Product Planning
Phase III
Development
Phase IV
Prototypes,
Pilot Tests
Phase V
Production,
Market introduction
and penetration
fluent transition
Market analyses
Product concept
Product planning
–number of
pieces
– product costs
–timing
– investments
– project costs
product
specifications
product
architecture
Development
according to inputs
of phase II
Cross-functional
project teams
Design reviews
Industrial design
Building and
testing of
prototypes
Market tests
Final design
Preparation for
serial production
Start of production
Market introduction
Market penetration
Continuous product
verification
„Fuzzy front end“
Figure 1: The innovation process (own depiction)
As idea generation and concept development are typical tasks of the front end,
besides the need to systematize activities to enhance the efficiency, there has to be
sufficient room for creativity. Figure 2 shows a typical characteristic of the “fuzzy front
end”: At the beginning of the innovation process, the degree of freedom in design
and influence on project outcomes are high, whereas costs for changes are low. This
front end advantage is limited by the fact that the amount and certainty of information
is low compared to later stages of the innovation process. Hence, sound decisions
cannot be made unless necessary information is gathered during the course of the
innovation process.
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Characteristics
Innovation process (time)
“fuzzy
front end”
influence
information
costs of changes
Figure 2: Influence, cost of changes, and information during the innovation process
(according to von Hippel 1993/ modified by the authors)
In the next section we will show in more detail, what kind of information has typically
to be gathered during the front end, depending on the kind of innovation targeted at.
This determines the application fields of methods and tools.
3. A FRAMEWORK OF APPLICATION FIELDS FOR DIFFERENT METHODS AND
TOOLS FOR THE “FUZZY FRONT END”
As already outlined, the lack of information is a limiting factor for the front end.
Therefore, a differentiation for the management of the front end should be made with
regard to the newness of key activities for the enterprise. Typical questions an
enterprise has to ask itself at the beginning of an innovation project are summarized
in figure 3.
Is the technology new to our company?
Does the target market or customer differ from our previous ones?
Do we have experience with the necessary distribution channels?
Do the buying activities differ from our current practices?
Do we have information about potential suppliers?
Do we have the required production plants?
Can we execute the project within the existing organization or do we have to form a
new department or group.
Do the capital needs reach new, previously unknown heights?
Do the skills required to develop the product/process differ from currently existing skills?
Figure 3: Questions determining the degree of newness of an innovation project (own
depiction)
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Methods and tools might help to fill the gap between the amount of information
needed and already available. Different methods and tools require different kinds of
input information to gather results. Hence, the difference between the amount of
information required to perform a particular task and the amount of information
already possessed is a suitable variable for the systematization of application fields.
This difference is defined as uncertainty (Galbraith 1973).
As the multidimensional approach in figure 3 is too complex to assign methods and
tools to the respective application field characterized by a combination of these
factors, a two-dimensional framework is chosen and presented in figure 4. It focuses
on two key factors an enterprise has to consider, namely the market and the
technical uncertainty of an innovation project.
Technology Uncertainty
Low High
Low High
Market Uncertainty
Incremental
Innovation
Radical
Innovation
Market
Innovation
Technical
Innovation
e.g. penetration
of new markets with
existing products
e.g. customized
products, products for
stable markets like
pharmaceuticals
e.g. small product
improvements,
product line
extensions
e.g. “new-to-the world”-
products,
diversification projects
Figure 4: A framework of application fields of methods and tools for the “fuzzy front
end” (according to Lynn and Akgun 1998/ modified by the authors)
The highest level of newness to a firm is implied in radical innovation with a high
market as well as technical uncertainty (upper right quadrant of figure 4). In literature,
differentiations are made between incremental and radical, “breakthrough” innovation
or continuous and discontinuous innovation (Lynn et al. 1996). There are several
definitions of “breakthrough” innovations (e. g. Rice 1999, Song and Montoya-Weiss
1998, for a detailed review see Veryzer 1998). However, a common understanding of
these terms has not emerged yet. Here, the term radical innovation is used as it is
suitable to explain that the firm has to acquire new marketing and technological skills
and cannot build on former experiences. Technology-driven innovations are the core
business of technology-based enterprises. These need not to be radical innovations
only. For instance, for pharmaceutical enterprises, the market for a new drug are the
number of people with the respective disease. The market uncertainty is low. These
“technical innovations” are shown in the lower right quadrant of figure 4.
Although the focus of the technology-based enterprise is on technical and radical
innovations, innovations which incorporate an existing technology should not be
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neglected. E.g. incremental innovations (lower left quadrant of figure 4) with a low
market and technical uncertainty like product improvements or product line
extensions could result in a considerable competitive advantage. If a technology-
based enterprise solely concentrates on the development of new technologies, it
could be leapfrogged by competitors, e.g. fast followers which add additional product
features which may be preferred highly by customers. Likewise, market innovations
with a low technological and a high market uncertainty as shown in the upper left
quadrant of figure 4 should be taken into consideration by enterprises. Turnover
could be increased significantly by finding new application fields for existing
technologies and the penetration of new markets. Examples for market innovations
are “personal copiers” or food processors for home use.
To summarize, the framework of application fields for methods and tools of the “fuzzy
front end” has to consider market and technological uncertainty. The four
combinations of these uncertainties are designated as incremental, market, technical,
and radical innovation.
In the following section we will present methods and tools supporting these types of
innovations.
4. METHODS AND TOOLS FOR THE “FUZZY FRONT END” AND THE
RESPECTIVE APPLICATION FIELDS
4.1 Process-related aspects
4.1.1 The “stage-gate” approach
One of the major advantages of a process-oriented approach is the systematization
of an often ad-hoc-development. The process is transparent for all departments, and
a common understanding can be developed. This eases communication within teams
as well as with top management.
A vast number of models to structure and systematize the innovation process is
available. These models typically divide the innovation process into distinct phases
and assign tasks and responsibilities to each of these phases.
Process models vary with regard to the degree of detailing tasks, priorities and
perspectives, e.g. market or technological. Figure 5 shows one of the most well
known models, the so called “stage-gate-process”. The “fuzzy front end”
(“predevelopment activities”) is here divided into four sub-phases from idea
generation to concept evaluation. After every stage a gate exists, deciding on
continuing or terminating the project (go or no-go).
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Idea
generation
Initial
screening
Preliminary
evaluation
Concept
evaluation
Product
development
Preliminary
technical
assessment
Preliminary
market
assessment
Concept
generation
(technical)
Concept
identification
market
studies
Concept
test
market
study
Technical/
production
activities
Market
activities
GO GO GO
NO GO NO GO NO GO
STAGE I
IDEA
STAGE II
PRELIMINARY
ASSESSMENT
STAGE III
CONCEPT
STAGE IV
DEVELOPMENT
Figure 5: The “stage-gate”-process (Cooper 1988)
The “stage-gate”-process integrates a market and technological perspective, since
activities are performed in parallel and decisions at the gates are made within cross-
functional teams.
Besides this “stage-gate”-driven process several attempts have been made to
structure the “fuzzy front end” (e.g. Murphy and Kumar 1997). The probably most
sophisticated process model is illustrated in figure 6. Khurana and Rosenthal (1998)
define the front end “to include product strategy formulation and communication,
opportunity identification and assessment, idea generation, product definition, project
planning, and executive reviews”.
Preliminary
Opportunity
Identification:
Idea
Generation,
Market &
Technology
Analysis
Product &
Portfolio
Strategy
Phase Zero:
Product
Concept
Phase One:
Feasibility
And Project
Planning
Specification
& Design
Prototype Test
& Validate
Volume
Manufacturing
Market
Launch
ONGOING Product & Portfolio Strategy Formulation and Feedback
Pre-Phase Zero
(ongoing)
Continue/No Go
Decision
Front End NPD
Execution
Figure 6: A model of the front end of the innovation process (Khurana and Rosenthal
1998)
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The Khurana and Rosenthal approach starts with an input-stream from two different
sources within the corporation into the product concept development. The first input
stream containing the steps from opportunity identification through to idea generation
and market research activities is similar to Cooper´s model. The second input stream
includes activities like product and portfolio strategy formulation, which are typically
assigned to strategic management. Khurana and Rosenthal emphasize the meaning
of foundation elements, e.g. the formulation and communication of a strategic vision,
a well-planned portfolio of new products, cross-functional sharing of responsibilities,
and an information system. A typical result of a first qualitative screening is an idea
portfolio, which has to be aligned with existing projects and the overall project
portfolio.
Phase zero delivers the product concept, which includes a preliminary identification
of customer needs, market segments, competitive situations, business prospects,
and an alignment with existing plans. In phase one, the business and technical
feasibility are assessed, the product is defined, and the project is planned. Primary
front-end deliverables are a clear product concept and product definition, and a
detailed project plan. If a product concept is approved, the NPD (New Product
Development) execution starts.
As Cooper’s stage-gate process model, Khurana and Rosenthal’s front end model is
a useful approach to visualize and structure front end activities, reduce the fuzziness,
and ease communication. Nevertheless, a lack of flexibility due to the sequential
approach of the process models has often criticized.
Empirical studies (e.g. Cooper 1996) show that firms using a well executed “stage-
gate” process are more successful than firms without a systematic approach and a
gate-driven system. But closer observation shows that the “stage-gate” approach has
(only) proven helpful in the case of incremental innovation. And for innovations with a
high market and/or technical uncertainty a sequential and formalized approach might
be even counterproductive. Several empirical studies confirm that in such cases a
learning-based approach is more adequate (Lynn and Akgun 1998, Lynn and Green
1998, Rice et al. 1998). Why? In the case of radical innovation, all corporate areas
and functions have to go through extensive learning-processes and sometimes years
of trial-and-errors. Example: The General Electrics’ CT scanner (Lynn and Akgun
1998). After years of learning from the development of unsuccessful breast, head,
and full body scanners, GE introduced a further full body scanner and became the
dominant CT supplier. In many cases, the first experiences with prototypes are
negative like in the CT scanner example. The emphasis is on gaining maximum
information and not on “getting it right” the first time. As radical innovations
sometimes cause high costs for years with no guarantee of success due to high
uncertainties, a short term, cost-oriented evaluation at sequential gates would not
allow for any “breakthroughs”.
To summarize, a process-oriented sequential approach with evaluation gates
enhances the effectiveness and efficiency of incremental innovation processes
leading to minor improvements (products and /or processes). For innovation projects
characterised by high uncertainty in both dimensions (market and technology), a
flexible, learning-based approach should be applied. Unfortunately, only little
experience has been documented and reported how to manage such processes.
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4.1.2 “Front-loading” problem-solving
Besides structuring the innovation process, recent research in innovation
management has concentrated on various approaches to shorten development
times, e.g. cross-project management (McGrath et al. 1992) or overlapping activities,
or adequate staffing (Smith and Reinertsen 1991). In this section, we discuss the
“front-loading” problem-solving approach and it´s impact on structuring and
enhancing the performance of the “fuzzy front end”.
“Front-loading” problem-solving is defined as “a strategy that seeks to improve
development performance by shifting the identification and solving of problems to
earlier phases of a product development process” (Thomke and Fujimoto 2000). The
focus is on lead time reduction in order to enhance the efficiency of the development
process.
To achieve this enhancement, two approaches are described by Thomke/Fujimoto:
project-to-project knowledge transfer and
rapid problem-solving.
Figure 7 illustrates the two approaches for car crash tests.
Crash-related
problems solved
time
Prototype
crashes
Crash
simulation
Prototype
crashes only
Faster
iterations
time savings from front-loading
100 %
a2
a2
a1
m2
m1
m0
T2
T1
T’
Figure 7: “Front-loading” problem solving for car crash tests (according to Thomke
and Fujimoto 2000/ modified by the authors)
Firstly, the total number of problems to be solved is reduced by transferring problem-
specific information from former projects (m0). An example are postmortem reports
which provide software developers with information on problems that occurred during
former projects. The importance of systematic learning from past experience is
supported by several studies (e. g. Verganti 1997).
Secondly, technologies and methods shall be applied to increase the speed of
problem-identification and -solving. For car crash tests, the time-consuming building
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of physical prototypes limits the rate of crash-tests and therefore problems solved
(a2). Computer-aided engineering tools enable a simulation of the crash tests with a
higher rate of problems solved (a1) at even lower costs compared to physical
prototypes. As some problems can only be solved via physical prototype crash tests
(e.g. roll-over crashes), after a time T1 of virtual crash tests, further physical prototype
crash tests are performed (T2). Figure 7 shows potential time savings from “front-
loading” compared to physical prototype crash tests only.
To summarize, “front-loading” problem-solving may enhance the efficiency of the
innovation process by transferring knowledge from one project to another and rapid
problem solving, e.g. by computer simulation. The principle of front-loading can
theoretically be applied to all kind of innovation projects. But it requires information to
be available early in the process and this is more likely to be the case for incremental
innovations. In addition, project-to-project knowledge transfer assumes that projects
are not completely new to a firm, which limits at least this aspect of “front-loading” to
incremental, market or technical innovation.
4.1.3 Project planning
Another success factor identified in numerous studies is the thorough planning of a
project (e.g. Maidique and Zirger 1984, Pinto and Slevin 1988, Rubenstein et al.
1976). As most innovations are developed in the form of a project, accurate project
planning can significantly increase the effectiveness and efficiency of an innovation
project. In the following, a short summary of the key elements of project planning is
given.
Project goals and project definition:
Different Studies identify a well-defined product and project prior to the development
phase as one of the success factors for new product development (e. g. Cooper and
Kleinschmidt 1990).
Goals should be complete, unequivocal, and neutral towards solutions. They should
be aligned between all parties, in particular with the client. In addition, they should be
ranked according to their importance.
Goals are part of the project definition. The project definition is a short description of
the project and basis for go/no-go-decisions. Further elements of a project definition
are listed in figure 8:
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Goals (short-term, middle-term, long-term)
Problem definition
Importance of the project (with regard to the overall project portfolio)
Analysis of the surrounding (internal/ external) and influencing factors
Main activities
Estimate of the overall timing and costs (for different solutions)
List of possible solutions
Definition of critical success factors
Figure 8: Elements of a project definition (own depection)
Work breakdown structure:
A work breakdown structure identifies all work packages required on a project. It
ensures that all tasks required to satisfy the overall projects goals are done. The
main activity is hierarchically broken down into partial activities. The smallest
activities are called work packages. Work packages should be tangible, deliverable
items. They should be sufficiently small so that each is understandable. The work
breakdown structure is the basis for time, cost and resources estimates. Figure 9
shows a work breakdown structure for a photovoltaic solar power system.
Mount subsystem
Photovoltaic
solar power system
Photovoltaic panel
subsystem
Storage
subsystem
Frame Pedestal Battery Limit circuit
Glass
cover Sealant Cells Back
seal
Back
plate
Edge
strips Leads
Figure 9: Work breakdown structure (Rosenau 1998)
Project schedule and time estimate:
The project schedule contains the durations and sometimes the sequence of single
work packages defined in the work breakdown structure. Scheduling methods are
milestone charts, which portray selected events, bar charts, which visualize activities
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as bars, and network diagrams which depict activities and their sequence and
interdependencies.
Milestone charts:
Milestones are critical events, which require approval before proceeding further or a
verification. These critical activities are depicted in a calendar bar chart.
Bar charts:
Bar charts (figure 10), sometimes called Gantt charts after H. L. Gantt, consist of bars
which represent the single activities, with their length being proportional to the time
period required to fulfill that activity.
Activity
A
B
C
D
E
F
G
H
J F M A M J J A S O N D
Figure 10: Bar chart (own depiction)
Network diagrams:
A network diagram links single activities with one another to portray
interdependencies. Many different forms of networks diagrams are used, e.g.
program evaluation and review techniques (PERT), or precedence diagramming
method (PDM). Figure 11 shows an example of a network diagram.
20
0
10
20
30
5
0
0
5
5
25
5
5
30
30 10
30
37
40
47
20
5
10
25
30 15
30
30
45
45
12
30
35
42
47
2
45
45
47
47
Start
0 0
ADF
B
C
E
G
H
End
47 47
Figure 11: Network diagram (own depiction)
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The earliest and latest time to start an activity, the duration, and the earliest and
latest time to finish an activities are included (see figure 12).
20
0
10
20
30
B
Duration
Earliest start time
Latest start time
Earliest finish time
Latest finish time
Activity
Figure 12: Detail of a network diagram (own depiction)
Latest timings are calculated by working backward from the end. This depiction
enables to identify the critical path (in dark gray), and the slack between the earliest
and latest time to start or finish an activity.
On the one hand, network diagrams contain more information than milestone and bar
charts. They display interdependencies between different activities and can provide
the critical path and slack. This is of particular use, if the diagram has to be adopted
to changes. On the other hand, milestone and bar charts are simple to construct and
easy to understand. There also exist mixtures between bar charts and network
diagrams. The scheduling method should be selected with regard to the respective
project and resources available. In practice, the easy to handle bar charts are widely
spread, whereas network diagrams are seldom used.
Cost and resources estimates:
Based on the schedule, costs and resources can be estimated. Resources are
human resources, equipment, and materials. There are several reasons to consider
resource allocation at the beginning of a project. Firstly, inconsistencies can be
avoided, e.g. the use of a particular resource on two activities at the same time.
Secondly, if resources have to be shared with other projects, resource allocation
provides information for the coordination of the resource between the projects.
Further tasks which should be part of a thorough project planning are the definition of
responsibilities and a risk assessment. Project planning can be supported by a
project management software, e.g. Microsoft Project.
A thorough project planning is vital for all kinds of innovation. For radical innovations,
the time, cost, and resources estimates are of course much less accurate, whereas
incremental innovations can rely on experience with similar activities. Hence, project
planning is much easier to manage and do in the case of minor or routine innovation
as in the case of breakthrough-type innovation.
An attempt to design a project management procedure which is useful in the case of
radical innovations, Eppinger has deeloped DSM (see next chapter).
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4.1.4 Design structure matrix (DSM)
According to Eppinger, “product development needs a fundamentally different
planning tool” (Eppinger 2001), since generic project management approaches do
not help innovation managers much further. Eppinger claims that conventional
project planning methods and tools as presented in the former paragraph were
created to plan large construction projects such as building houses. These projects
are characterized by sequential or parallel tasks which need not to be reworked. The
foundation of a house is not changed after building the walls. Complex product
development products require innovation and therefore learning (feedback) loops.
Network diagrams for complex product developments could run to tens or hundreds
of pages and integrating changes is time-consuming.
Hence, an initiative at the MIT studies another approach to manage iteration
(http://web.mit.edu/dsm). The tool used, the so-called Design Structure Matrix (DSM)
encourages useful iteration and eliminates unnecessary iteration with only marginally
benefit. DSM was developed about 20 years ago, but is note widely known or used in
companies. Figure 13 shows a simple DSM. The tasks are listed in the order in which
they are carried out. They are arranged in the same order horizontally and vertically.
Across each row, tasks are marked that supply necessary information to the task in
the row. For example, task B needs information from tasks A, G, and J. All the X’s
below the dotted diagonal show information that is available, before the task that
needs that information is begun. But an X in the upper half marks an information that
is not available until the task that needs that information is already finished. That
means, considerable rework might be necessary.
A B C D E F G H I J
A
B
C
D
E
F
G
H
I
J
*
X * X X
X *
X X *
X X * X X
X *
X * X
X X * X X
X X X X X *
X X X X X *
Figure 13: The Design Structure Matrix (Eppinger 2001)
Besides making information flows in a product development process more
transparent, DSM can be used to optimize information flows. For example, the
sequence of tasks can be rearranged to reduce the number of X’s in the upper half
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and therefore minimize rework. Another example is the reduction of information
exchange by changing the content of the tasks (Eppinger 2001).
As already outlined, DSM targets at complex product development projects that
require iterations. Here, it can be a substitute for conventional planning tools like
network diagrams presented in section 3.1.3., since the effort to analyze information
flows could be very time-consuming.
4.2 Idea and Concept generation
In this section, we will not comment on conventional marketing forecasting
techniques applied during the “fuzzy front end” or “creativity techniques” as these
have been described in detail by numerous authors. Further, it has been confirmed
widely by many authors (e.g. Deszca et al. 1999, Lynn et al. 1996, Lynn and Green
1998, Balachandra and Friar 1997, Song and Montoya-Weiss 1998, Bower and
Christensen 1995) that conventional marketing approaches and even sophisticated
analytical methods are inadequate for generating radical innovations. Instead, we
present some marketing forecasting techniques, which claim to address this gap.
4.2.1 TRIZ
TRIZ is a method to systematically solve problems. During the sixties, it was
developed in Russia by Altschuller and his colleagues. It is based on the assumption,
that there are underlying principles to solve problems which are independent from a
special industry or product. TRIZ draws analogies to existing solutions. Altschuller
identified several underlying principles by analyzing numerous patents.
On the basis of such principles, fundamental technical contradictions, e. g. airplane
or car crashworthiness versus light weight to reduce mileage, are solved.
An example of how TRIZ draws analogies is to use a quick pressure drop to open
nuts, thus to make them “explode”. Similar solutions are used to remove the stalk
and seeds from sweet pepper and split diamonds along microcracks (Terninko,
Zusman, and Zlotin 1998).
During the 80ies and 90ies, TRIZ became popular in the U. S., sometimes under the
acronym TIPS (Theory of Inventive Problem Solving). It was integrated in software
solutions like Invention Machine TechOptimizer and Ideation International Innovation
WorkBench. Today, companies like General Motors, Johnson & Johnson, Ford
Motors, and Proctor & Gamble are using TRIZ.
Altschuller originally targeted at incremental and technical innovation (Terninko,
Zusman, and Zlotin 1998). Although there are some recent efforts to solve other
problems like management problems with TRIZ, incremental and technical innovation
are the main application domain of TRIZ. Although supported by software, TRIZ is
very demanding to apply and needs a lot of practice.
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4.2.2 The lead user method
An approach to address the issue that today’s customers are stuck to existing
products and are not able to envision their future needs (“functional fixedness”) is to
select qualified customers, so-called “lead users”.The “lead-user” method, originally
developed by von Hippel, allows to identify such qualified customers and to either
learn from their exptertise or to develop new product concepts based on their
insights.
The existence of innovative users who create their own solutions has been proven by
several studies. Examples are “TipEx”, which was invented by a secretary in the 50s
and converted by 3M into a commercial product, or the sports drink “Gatorade”,
which was developed by a trainer of a college football team. Urban and von Hippel
identified innovative users in the field of computer-aided design (CAD) systems for
printed circuit boards (Urban and von Hippel 1988). Herstatt proved the existence of
innovative users in low-tech fields (Herstatt 1991), Luethje for consumer goods
(Luethje 2000). A study of innovations in skateboarding, snowboarding and surfing
shows that the source for almost every basic product development were sportsman
and not the manufacturers of sporting equipment (Shah 2000).
Hence, it seems plausible for enterprises to identify and integrate such innovative
users into their innovative projects. For this purpose, MIT professor Eric von Hippel
developed an heuristic approach, the lead user method (in the 80s). According to
him, lead users can be described by two characteristics:
Lead users face needs that will be general in a marketplace – but face them
months or years before the bulk of that marketplace encounters them.
Lead users are positioned to benefit significantly by obtaining a solution to
those needs.
1
2
Figure 14: Lead user characteristics (Urban and von Hippel 1988)
The first characteristic selects qualified users that are trendsetters in the respective
marketplace and are already concerned with needs that the majority of the
marketplace will face much later. The second characteristic covers the motivational
aspect. Users only try to find solutions for issues if they can benefit significantly from
the solutions. Figure 15 illustrates the shape of the market trend. Lead users have
needs that are well ahead of the trend.
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_________________________________________________________________________________
lead users
early adopters
routine users
Market trend
time
people who need a new product
lead users
create
solutions
commercial products available
Figure 15: The lead user curve (von Hippel, Thomke, and Sonnack 1999)
Figure 16 shows the process of a typical lead user project. Firstly, the direction the
innovation should take is determined and goals are set. An interdisciplinary team with
members from technical as well as marketing functions is formed. Future trends are
determined in more detail by expert interviews and trend forecasting. As a result, a
deeper understanding of market and technological trends emerges, which enables
the team to catch first hints of lead users in the target or analogous markets. In
phase II the characteristics of the respective lead users are defined in more detail. A
sample which could be the target market or analogous markets is chosen and lead
user characteristics are studied in more detail. Lead users are identified via
interviews or mail surveys. In addition, first solutions from these lead users are
observed and collected. During the next phase, lead users and an interdisciplinary
company-internal team are brought together in a workshop that takes two to three
days. After presenting the collected solutions from lead users, rough concepts are
developed and the best are selected. The lead users are split up in smaller groups to
develop the concepts in more detail. The results are documented and tested in a
wider field in phase IV. Market studies, a technical and economical feasibility study
result in a technical concept and a business plan. This is the point were the lead user
process flows into the conventional innovation process.
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Phase I
Trend
identification
Phase II
Identification of
lead users
Phase III
Concept
development
Phase IV
Concept tests and
pre-marketing
fluent transition
Forming of
interdisciplinary
teams
Setting goals
Expert interviews
Trend forecast
Sample selection
(target and
analogous markets)
Definition of lead
user characteristics
Selection of the lead
users
Concept
optimization during
a workshop
documentation
Market tests with
further users
Technical/
economical
feasibility studies
Tasks
Deliverables Market and
technological
trends
First hints of lead
users in the target
or analogous
markets
Group of lead users
First hints of
solutions from lead
users
Input for pre-
development
Technical concept
Business plan
Data on customer
benefits and
acceptance
Figure 17: The lead-user process (own depiction)
The lead user approach has been used for industrial as well as consumer goods
(Herstatt and von Hippel 1992, von Hippel, Thomke, and Sonnack 1999, Herstatt,
Luethje, and Lettl 2001). This approach has been approven useful for all types of
innovation projects.
4.3 Concept testing
4.3.1 Information acceleration
For radical innovations, it is often not obvious who the “true” customer may be and
even if known, customers are often not able to envision their future needs (for
example the personal computer in the 19seventies (Lynn and Green 1998, Bower
and Christensen 1995). Radical innovations shift market structures, require customer
learning, and induce behavior changes (Urban et al. 1996). Hence, it is often
extremely difficult to determine the potential market or even the potential customer.
Information acceleration is such a method that places potential customers in a virtual
future environment and measures the likelihood of purchase, perceptions, and
preferences. The future environment is multi-media based and often includes virtual
newspaper articles, advertising, or prototypes. A customer can choose the
information sources he or she would usually use to make a buying decision. This
specific approach overcomes the deficiencies of conventional techniques which do
not enable the customer to envision a future environment and present only a small
amount of information which might not be relevant for buying decisions (Rosenberger
and de Chernatony 1995).
Unfortunately, only very few examples of applications of this marketing technique are
described in the form of case studies, e.g. electric vehicles at General Motors (Urban
et al. 1996). This is not surprising as the costs for a single application of information
acceleration are very high, often exceeding $100.000 for a single application (Urban
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et al. 1996). Therefore, information acceleration is only recommended for high-risk
products requiring large capital commitments (Urban et al. 1997). For such kinds of
products the risk and development time can be reduced, and product improvements
can be identified earlier. Hence, as early prototyping described in the previous
section, information acceleration is a method that can be applied in the context of a
“front-loading” approach. Information acceleration is limited to the testing of existing
concepts. It does not enable customers to develop own ideas. From this perspective,
information acceleration may support radical innovation but will not naturally lead to
it.
4.3.2 Web-based conjoint analysis
Hauser and his colleagues at the MIT have developed further, less expensive and
time-consuming ways instead of information acceleration, using information and
communication technologies for concept testing (Dahan and Hauser 2000). Here, we
present web-based conjoint analysis as an example of how a traditional method uses
the possibilities of the World Wide Web.
Conjoint analysis is known since more than 20 years and is the most used
quantitative method for concept testing. Basically, in a conjoint analysis a product is
decomposed into features with different characteristics for each feature. The aim of a
conjoint analysis is to find out which characteristics of the features customers prefer
and how much they value the features. It is a mathematical technique to reduce the
amount of combinations of feature characteristics which have to be ranked or rated
by customers (for a detailed description of conjoint analysis see Urban and Hauser
1993).
For example, an instant camera for teens might be represented by features such as
picture quality (low, high), picture taking (1-step, 2-step), or picture removal method
(manual, automatic) (Dahan and Hauser 2000).
Virtual conjoint analysis enables concept tests without building physical prototypes.
On the one hand, as the costs for virtual prototypes are lower than for physical
prototypes, more concepts can be tested within the same market research budget.
On the other hand, there is a serious risk of sample bias from using web-based
respondents. Although studies at MIT so far indicate that virtual prototypes deliver
similar results as physical prototypes, this might strongly depend on the kind of
product. To overcome this disadvantage, the results with virtual prototypes should be
compared to a small amount of physical prototypes. As the product must be
decomposed into features and the customer must be able to grasp the concept, web-
based conjoint analysis is limited to incremental, market, and technical innovation.
For radical innovation, we believe, this method is not appropriate.
Further methods that integrate information and communication technology are
presented on a web page at the MIT (http://mitsloan.mit.edu/vc). They go beyond
porting traditional methods to the web, e. g. by enhancing the communication
between customers.
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5. SUMMARY AND CONCLUSIONS
This chapter described “fuzzy front end” of innovation, it´s vital importance for the
innovation process, processes, structures and methods supporting it´s management.
A framework was presented to systematize the application fields of such processes
and methods to support the front end. Eight methods concerned with process
improvement, concept generation, and concept testing were selected and described
in more detail. Figure 18 gives an overview of these methods and their respective
application fields. They range from “basic” methods like thorough project planning to
relatively demanding marketing techniques such as information acceleration.
X= applicable with good results for
Chapter
4.1.1
4.1.2
4.1.3
4.1.4
4.2.1
4.2.2
4.3.1
4.3.2
Method
“Stage
-
gate” approach
“Front
-
loading” problem
-
solving
Project planning
Design structure matrix (DSM)
TRIZ
Lead user approach
Information acceleration
Web
-
based conjoint analysis
Application
Incremental
innovation
X
X
X
X
X
X
Market
innovation
X
X
X
X
X
X
X
Technical
innovation
X
X
X
X
X
X
X
Radical
innovation
X
X
X
X
Area
Process
Concept
generation
Concept
testing
X= difficult to apply
Figure 18: Front end methods and their application field (own depiction)
We cannot and shall not recommend a particular method. Instead, the degree of
newness to the firm, the importance of an opportunity, and the resources of an
enterprise (e. g. depending on the size), have to be taken into consideration. In
addition, it might be useful to apply several methods to level the advantages and
disadvantages of the single methods, which are described in section 4.
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24
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