significant issues for the future of product innovation

56 J PROD INNOV MANAG 1984; 1:56-66

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Significant Issues for the Future of Product Innovation

Blair Little

with contributions from:

Americo Albala Professor University of Chile Technion--lsrael Institute of Technology

Robert G. Cooper Professor McMaster University

C. Merle Crawford Professor The University of Michigan

David Cullwick Professor Victoria University of Wellington

Richard N. Foster Director McKinsey & Company, Inc.

Bela Gold Professor Case Western Reserve University

K. Bradley Paxton Manager

Advanced Development Consumer Products

Kodak Apparatus Division Eastman Kodak Company

Edgar Pessemier Professor University of Virginia

Robert E. Rothberg Professor Rutgers University

Roland W. Schmitt Senior Vice President Corporate R&D General Electric Company

Address requests for reprints to Professor Blair Little, School of Busi- ness Administration, University of Western Ontario, London, Canada N6A 3K7.

© 1984 Elsevier Science Publishing Co., Inc. 0737-6782/84/$3.00

SIGNIFICANT ISSUES FOR THE FUTURE J PROD INNOV MANAG 57 1984;1:56-66

What's happening in the world of product innovation? What are the tough issues that managers are facing? And what's going to happen in the remaining years of this decade? In this article, several members of the Editorial Board of The Journal of Product Innovation Management offer their ideas about where the important problems lie. This is the fodder for a good round table discussion and through the medium of this journal we'll engage in such a discussion in this and a subse- quent issue.

For scientists and managers alike, it is hard to overstate the importance of choosing the right problems for analysis. The right problem is the one whose solution will make a critical difference in how we view our world or whether we succeed in our endeavours. In Kuhn's [1] discussion of the process of scientific discovery, he says, " A n y new interpretation of n a t u r e . . , emerges first in the mind of one or a few individuals. It is they who first learn to see science and the world different ly." Their discovery comes, Kuhn suggests, after "their attention has been focused upon the crisis- provoking problems of their f ield." They see how existing paradigms fail to serve and to deal with that failure, that crisis, they create a new paradigm. The key is to see the crisis, the important problem.

The process of change within a f'Lrm is in some re- spects not very different. Managers are typically faced with an unending list of activities of only minor importance in the overall scheme of things in the firm. Midst the morass of the existing operations someone has to recognize, before it's too late, that a significant problem exists, that continuing on the same path will lead to failure. Someone then has to construct a vision of how things might be and then pursue those activities which support that new view of the firm. Wrapp [2] found that the successful general manager knows how to give the organization a sense of direction and how to concen- trate on a limited number of significant issues. And the good manager has to know which issues are significant.

For successful product innovation, defining the significant problem is particularly important. New product projects have to anticipate future market and technology conditions; they usually involve large resource commitments and high uncertainty. Mistakes are easy

to make and they are costly. Getting started on the right problem is crucial. How many times have development projects had to be redirected because the problem definition was wrong at the start? How many feasibility studies have wound up being discarded because they aimed, sometimes eloquently, at the wrong problem? Errors in problem definition are not always easy to spot. Often it takes a long time to discover that the homework of problem definition was done super- ficially. As a consequence, too many new product portfolios hold a clutter of irrelevant projects that persist in draining off resources they don't deserve.

Of course, most people do consciously seek to address the right problems but seeking the right problems and finding them are two different matters. Problem finding in fact is generally a far more difficult task than problem solving. When the task is to define the problems that will have to be faced in the future, success is even more elusive. Yet that is the task we attempt to address in this article and in a companion article in a future issue. (Please see the accompanying box insert for an invitation to readers to contribute to a future article on this same topic.) Our purpose is to help readers to define what the important issues are likely to be during the rest of this decade for managers of product innovation.

W H A T DO YOU THINK ARE THE SIGNIFICANT ISSUES FOR THE FUTURE OF PRODUCT INNOVATION?

Are the issues raised in this article the important ones, from your perspective? Or do you see things differently? Most of the issues proposed here are ones we can see fairly easily and we need to face them now. Are there some less visible issues that are just emerging that we will have to face in the future--or that we can begin to deal with now to anticipate their impact?

Send us your nominations of significant issues. Tell us what questions you think define the right problems for attention by managers of product innovation. Another article will be developed by The Journal of Product Innovation Management in the near future to extend the discussion begun here. The views of readers and other members of the Editorial Board will be presented. We invite you to be a part of the discussion.

A Diversity of Viewpoints Quite obviously there could be a longer listing of issues than the one presented here if a larger number of per- spectives were represented. Nevertheless, these views come from people who do represent rather diverse ex- periences and interests and they have each chosen a

58 J PROD INNOV MANAG B. LrI'rLE ET AL. 1984; 1:56-66

different point of departure. In any event, what is significant will be different for each reader no matter how many views are presented. This article is not intended as the last word on the important future issues but rather as a stimulant for readers to develop their own set of priorities, to define their own significant problems.

The issues discussed here were proposed by several members of the Editorial Board of The Journal of Prod- uct Innovation Management. They were not derived from empirical research or model building or any of the formal analytical methods or group processes of futures analysis. These are issues that have emerged from the current thinking of the Board members as they have reflected on their own business and academic activities. Most of the issues are not new--they have been raised before within the past few years. Some are quite clearly specified, perhaps because they are issues that managers are currently grappling with. Other issues are more speculative--they have yet to be addressed by most operating managers, at least in any explicit way. The common denominator is that these are issues that are considered important by thoughtful, experienced business practitioners and academics.

Some of the issues concern the use of certain management concepts having to do with new product development at the operating level. Others address the questions of incentives and of managing the climate for product innovation. Related issues concern the problems of coordinating the many functions within the firm arouffd the product innovation task. More general are some strategic issues for the firm and some questions about the role of firms of different size. Important questions are raised about the relationship of private and public actions to achieve success in product innovation. Still broader issues bearing on product innovation activities are the international competitiveness of different industries and, at a very broad level, the interre- lationships of the economies of developed and developing countries. Thus the range of concerns is very wide.

Managing Operations

One of the most important issues for the future, in the eyes of K. Bradley Paxton, is the application of Sys- tems Engineering in product development and design. He explains:

Systems Engineering is a broad topic and conjures up a variety of interpretations, even among its practi-

tioners. However, certain characteristics are hallmarks of the Systems Approach, such as:

quantitative definition of requirements

identification of subsystem interactions

synthesis, analysis, and optimization of alternatives

centralized decision making

good communications and documentation.

As we strive in industry to produce innovative products which are capable, convenient, reliable, low cost, and meet schedules, we will derive benefits from this more methodical approach, which tends to increase the chances of developing, designing, and manufacturing the right product the first time around.

The Incentives for Innovation

Are we learning how to manage the product innovation process for nothing? Edgar Pessemier raises the pos- sibility in the following way:

If we accept Thomas Edison as a founder of organized industrial research and recall that individuals who have been in his presence are alive today, one is forced to recognize the recent origin of this source of our rising physical standard of living. Another concrete way to dramatize this force in our lives is to examine Hewlett- Packard's 1982 annual report. This company spent Over 400 million dollars or about 10% of sales revenue on the support of R&D work, work that has given the company a line of over 5000 products. The scope and diversity of R&D work in firms like Hewlett-Packard and AT&T has converted streams of relatively unpre- dictable individual development projects into a stable, manageable economic process.

The success of advanced economies, particularly their high-technology components, has depended to a large degree on the capacity of firms to recover the large, time-consuming investments in new product development. Although development times are not a matter of public record, Hewlett-Packard has stated that two thirds of its 1982 sales came from products which were introduced during the last four years. These facts raise a question about whether development times and costs, and product margins and market lives, can be kept at profitable levels. Today national and world business climates are becoming increasingly adverse. Recent auto safety and drug testing legislation illustrate forces that increase the time and cost required to develop a product. The speed with which copies and reverse


engineered products are reaching world markets illus- trates the latter problem.

At this time in industrial development when we have learned how to efficiently manage the innovation and product development process, significant erosion appears to be occuring in the incentives required to maintain the health of this key source of economic advancement.

While Pessemier questions incentives for the firm, the question of incentives within the firm is raised by Robert E. Rothberg. He thinks we need to know more clearly the impact of traditional techniques of financial analysis on the product innovation process. It seems clear that the use of these techniques creates a bias toward the short term, certain projects as opposed to the long term, uncertain projects. But, he wonders, what other effects are there? What incentives are provided? How do product champions see the use of such techniques and what do they do about it? What are the implications of their use on the volume and character of the innovative efforts that are pursued? It is not, he suggests, that the techniques themselves are wrong but that we need to trace their effect throughout the organization. He suspects that in too many cases, the techniques are misused and abused.

The Enabling Conditions of Product Innovation Management

Several issues were proposed by our contributors that deal with questions of organization and entrepreneurial climate. A useful framework for considering these issues was prepared by C. Merle Crawford. He argues in the balance of this section that we should look for advances in three conditions which will enable us to use better what we already know about the process of product innovation: strategy, organization, and training. In the next section, Crawford outlines his framework. In the sections which follow Crawf0rd's framework, we look more closely at strategy and organization, and in a later section, the training issue is developed further. Crawford says:

It seems to me that we do 'indeed know how to create new concepts, how to manage their technological trans- formation into saleable products, and how to design marketing plans appropriate to each. The future will hold improvement in these areas, but not break- throughs.

Consequently, the next major advance should come in what I see as the "enabling conditions" of product innovation management----decisions and actions which assure that known techniques will be used optimally. In my opinion, inadequacies in enabling conditions are the greatest cause of waste in the product innovation system today.

These conditions, comprising the milieu of innovation, consist of (1) strategy, for each operating unit, (2) organization, and (3) training. Innovation strategy is a subset of overall unit strategy, and includes decisions on the business arena of new product operations, the goals of the group endeavor, and guideline policies on innovativeness, risk, etc. Strategy is starting to gain acceptance in innovation management, but we still know far too little about how to craft it.

Organization, too, has had some attention, but from a microview, often by persons outside the direct field of new products. But we now badly need appropriate organizational devices for doing three things. First, there must be miniaturization of the corporate form, multiple innovation units within the overall unit. Second, each must somehow be managed by a product innovation manager--a full-time specialist in this demanding task. Third, there must be multifunctionality, obtained by methods other than the troublesome committee or ma- trix. Miniaturization, single leadership, and multifunctionality are elusive--we must now learn how best to get them.

The third need, education, has hardly been ap- proached. The scatter of occasional short courses and less than 100 college courses will not begin to meet the challenge. We must catch up on 20 years in just a few, suggesting a need for some creative product innovation literally within our profession.

Four myths. Achieving progress across these three broad dimensions will demand that we destroy four myths which have badly restrained us. The first myth is that a good new product concept is the key to innovation success--that it overcomes the lack of good strategy, organization, and training. Hallways resound with "The first step is to get an i d e a . . . " or, "We can handle any idea if it's good enough." This is pure hokum. There is no such thing as a generically good idea--the real value of each one is found in its organizational/market construct.

The second myth is that anybody can chair a committee and therefore should. In the first place, we need dynamic leadership, not passive bureaucrats. But mainly, we need to direct an entire operation, not just area representatives who happen to be on a committee.

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The committee is a means to reach people, but there must be better means for this.

Third, there is the myth that product innovation management is not a true discipline, that persons can move into it from any phase of a firm's operations. Unfortunately, the parallel should be with sales and sales management--some sales people make good sales managers, but many do not. Ditto innovation management, where there is absolutely no assurance that a product manager, for example, would make a good new products manager. One might, and another might not. So we need a structure of pathways whereby innovation managers can be developed.

The other myth may be the toughest to dispel--that managers with technical skills are more critical to innovation than managers with people skills. In my opinion, we know enough about how to do technical things (a survey, a financial analysis, or a chemical experiment) and we should now turn to what we do not understand: the motivation and integration of the total innovation team.

Consequences. Given the slaying of myths and the building of enabling conditions in strategy, organization, and training, what will be the consequences? One certainly will be demands on our education system, particularly at the university level, for cross-depart- ment and cross-school integration of study. Another will be the creation of what essentially are entry-level jobs in product innovation management, something we lack now. Third will be far faster decay curves on new concepts as we put more money up front to check concept against strategy.

But perhaps most interesting will be the evolvement of true entrepreneurial thinking within the firm. Nar- row, parochial, territorial attitudes cannot exist in an entrepreneurial environment. Team members will begin accepting the responsibility for examining enabling conditions. As it is now, most product developers accept strategy and organization as given, for them--- something an entrepreneurial team would never do.

There will also be new expectations. Innovation teams, given today's solid techniques and the future's enabling conditions, will have no reason to accept new product failure rates of 25 to 35%. Levels of around 10% would seem appropriate for all but high-risk managements.

The consequences: an exciting, demanding, dan- gerous arena for product innovation, where all fn'rns which are serious about new products know what they can do, have organized to do it, and have trained their people accordingly. They have no false boundaries

(such as the mind-crippling thesis that only two firms can get enough market share to make a profit), because a boundary exists only until innovation destroys it. Constraints and givens are all history, and entre- preneurship does not accept history.

To date we have concentrated on building technique, and we have succeeded. I feel that we will now turn to greater milieu----conditions which enable the type of innovation which technique permits but does not ensure.

Product Innovation Strategy

The economic disruptions of the past ten years and more particularly of the past three years have raised a host of questions and nearly as many answers about how to return to industrial growth and prosperity. We have clearly found that the world has changed radically in a short period of time and the old paradigms fail to provide the answers we need. At the same time as we have been wondering where success has gone, several sectors of industry have been speeding ahead with tre- mendous rates of growth as though there were no such word as recession. In the face of these discontinuities, a coherent framework for organizing issues of innovation strategy at the level of the firm hasn't so far appeared. Nevertheless a number of critical questions have been specified by our contributors. Most of them take the view from the doorstep of the larger, more traditional firm that has been well shaken by recent events.

The dilemma of the mature company with the mature product line is outlined by Robert G. Cooper:

A major challenge faces the world's largest corporations: innovate or fail to survive as a company. A review of the list of America's largest 25 corporations over the last 70 years shows how vulnerable these giants are. Indeed, G.E., U.S. Steel, and DuPont are the only non-oil-based firms consistently to remain on the list. The others have fallen prey to changing times: dynamic markets; maturing products; emerging technologies.

In many cases, the reasons underlying the relative demise of these giants has been their failure to keep pace with new technologies and introduce new products. Of 58 major innovations that occurred within the last 100 years, in 56 cases, the established or then dominant firm failed to make the necessary transition:

Gas utilities failed to capitalize on the emerging electrical utility business.


Manufacturers of mechanical calculators watched on the sidelines as electronic calculators swept the market.

Vacuum tube manufacturers refused to enter the transistor business. Instead they concentrated on making better vacuum tubes.

In spite of these lessons, managements in major corporations appear to remain unconvinced. In recent times, the U.S. auto industry has failed to keep pace technologically, with potentially disastrous results. IBM is nervously watching Japanese developments in computer mainframes, while on another front--personal computers---was slow to exploit a new market opportunity. Xerox ignored the small business copier market, only to watch Savin and others launch new products that captured major market shares. And Timex, once an innovator in watches, failed to enter the digital watch field until too late, and saw its profits dwindle to nothing by the late 1970s.

The mature product t rap. Management in many large corporations faces a crisis. Simply stated, many successful firms today are caught in a "mature product trap." A review of the product portfolios of America's major corporations shows that most are comprised of maturing products and product categories. And the management mentality, organizational structure, and methods of operation needed to run mature businesses are quite different from the requirements of an embryonic or emerging business. The result is that when an embryonic opportunity or threat emerges, the established company often is unable or unwilling to respond.

Consider some of the characteristics and modes of running a successful mature business, which render the larger firm impotent when new opportunities arise:

A focus on nonproduct variables. In mature businesses, product strategy takes a back seat to other elements, namely, advertising, promotion, sell- ing, and pricing. Product development amounts to making cosmetic changes to products---"new and improved' ' - -and to clever product position- ing. True product innovation is rarely found in such firms.

A product management organizational structure. Faced with managing a mature product portfolio, many finns opt for a product management organizational structure. Ironically, the product manager has control over almost every variable except product. At P&G, the originator of the product manager system, P.M. 's report to the V.P. Ad-

vertising. The structure leaves little room for product innovation.

A complacent attitude. Mature product classes are often highly profitable, at least for a while. Posi- tive performance soon creates an attitude of invin- c ib i l i ty-an "it can't happen to us" attitude. When potential disaster does threaten, management is often blinded to the realities of the danger.

A sunk cost mentality. Successful mature businesses invariably have a major stake in maintaining the existing business. They have large investments in terms of production facilities, technologies, and market position in the mature product area. When a new opportunity or threat arrives, the reaction of the established firm often is, "we 've got so much invested or sunk in the old business---we can't change now!" Of course the appropriate question concerns not sunk costs but future costs and profits.

The large firm with a portfolio of mature products faces a challenge in the years ahead. Having learned how to successfully organize for and run a mature business, it must now break out of the "mature product trap" and learn once again how to innovate.

The questions Cooper raises are echoed in part by Roland W. Schmitt. He asks a series of questions about entrepreneurial activity, productivity, and innovation:

Can large old-line companies become entrepreneurial and if so, how?

Where do most successful entrepreneurial ventures originate from universities, from large industries, from government?

Are most U.S. products designed to be competitive in world markets?

Can there be too much competition in a new product (e.g., personal computers), so that purchasing decisions are deferred?

What productivity improvement is possible with existing technology?

What level of product innovation results in optimum improvement in productivity?

In a similar vein, Richard N. Foster asks whether it isn't time to reexamine some conventional wisdom, specifically:

Conventional wisdom asserts that market-based innovation is most successful, but I wonder if it

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leads to a sustainable competitive advantage? I suspect it does not. It is more likely that the sustainable advantage comes from a technically driv- en approach that meets a market need not yet well defined.

Are we using good measures of technology development? Present measures such as financial figures, patent counts, or new product counts seem inade- quate. Have better measures been developed? Are they being used successfully?

Organizing for Product Innovation

Is the organizational problem becoming more acute as the environment for product innovation becomes more complex? The answer from Bela Gold is that it is and that it involves the whole firm:

Product innovation is obviously one of the most in- fluential determinants of a firm's competitiveness. Ef- fective development of this leading edge of market ex- pansion efforts, however, requires that it become the organized central focus of a wider array of functional responsibilities than has yet been the case in most companies.

Product innovation efforts are still virtually the ex- clusive province of technical specialists in R&D departments (where they exist) and in engineering. Ex- cept in a few very large companies, attempts to strengthen sensitivity to market pressures and opportunities have all too seldom progressed beyond the intermittent passing on of customer complaints and requests by sales representatives. Even in the few cases of more careful efforts, the result has tended to concen- trate on essentially peripheral adjustments in existing products. But the major potentials of product innovation in the future are likely to center around substantial advances in the service capabilities of existing products and around the development of new kinds of products utilizing the emerging enhanced capabilities of materials, technological processes, and manufacturing equipment and controls.

The very breadth of such developmental horizons, combined with the heavy risks and costs as well as time commitments involved in effectively exploring many sectors of them, emphasizes that selecting prospective product/market targets must become a central compo- nent of the forward planning for companies. As such, it must elicit the active contributions of all major functions, including procurement, production manage-

ment, sales, and finance, as well as market research and technological development. For example, procurement should offer guidance on anticipated changes in the availability, price, and quality of currently used inputs, and prospective substitutes. Production management should be aware of present and expected changes in the firm's competitiveness in respect to operating processes and facilities. Properly trained sales departments should be closely attuned to shifts in customer planning and to changing competitive offerings. Finance specialists can help clarify the capital requirements and related resource constraints associated with alternative innovational choices. Only by coordinating the per- spectives of such varied but integral components of company operations can top management be assured of identifying the full range of urgencies and opportunities as well as the network of ramifications likely to be generated by resulting decisions.

But the benefits of such joint efforts are likely to be of very limited value indeed if concern with such prod~ uct innovation possibilities are treated as only a peripheral responsibility of all but selected technological specialists. To ensure more than essential fleeting and intermittent attention, it may be necessary--as in the case of other responsibilities--to make specific product innovation assignments'for all departments and to as- sess performance regularly. The most effective ar- rangements for achieving such objectives, however, may be expected to take different forms in different industries and even among the firms within any industry depending on a variety of considerations. To learn which are the relevant factors in a specific situation, we need careful empirical studies and experimentation in different environments.

A series of organizational questions are also raised by Roland W. Schmitt:

What is the best relationship between two components of the same organization (e.g., R&D and product development) to promote product innovation?

Is cooperative R&D (e.g., with other industrial R&D organizations) an effective process for product innovation?

What is the best way to ensure product innovation success where two very diverse organizations are involved (e.g., a government laboratory and a small company)?

The emergence of new industry sectors around new technologies prompts Robert E. Rothberg to question

SIGNIFICANT ISSUES FOR THE FUTURE J PROD INNOV MANAG 63 1984; 1:56-66

whether we understand how product innovation should be organized in different technological environments. Further, he asks, from a concern similar to Cooper's, what happens to the relationships between different departments---R&D, engineering, marketing, manufacturing, etc.--when the technological environment changes?

Organizational questions are very much bound up with questions of the size of the business. Richard N. Foster questions conventional wisdom further, this time about the effects of a firm's size and the style of its top management:

Conventional wisdom states that small companies are more effective innovators than large companies. Is this always true? I suspect small companies are better innovators of small things and big companies are better innovators of large things (e.g., computers, airplanes, long distance telephone switches, etc.). It would really be useful to see some research that shows the process of effective entrepreneurial activity in very large corporations.

Service organizations are more frequently small than large, except for the financial and transportation services. There are probably many opportunities for product innovation in service companies. Where will they appear? What will be the process?

What is the role of top management in making effective use of technology? In particular, how does the CEO's background affect the company's technological effectiveness?

Governments as Partners

The governments of most countries have been taking an increasingly active role in the business of product innovation. It is not too strong to say that the governments are the partners of many firms but not all such partner- ships are considered friendly by managers. No view of future issues in product innovation could ignore the question of the government's role and how it can best be handled. Roland W. Schmitt asks several questions that look at the government's role from several angles:

What government policies have been most effective (R&D support, venture funding, purchasing policies, etc.)?

What is the most effective level of government to support product innovation (local, state, federal)?

What is the effect of the economic climate and of government actions relative to the economy on the level and success of entrepreneurial and product innovation activity?

Should governments apply controls on exports of technology and would such controls be effective in protecting innovation in domestic industries?

What has been government's role in other countries and what can be learned by a comparative analysis?

Further questions regarding the relationship of the public and private sectors were raised by Robert E. Rothberg:

What should the R&D funding level be from government sources compared to private sources?

What are the barriers to effective use of public R&D funds by private firms? Are there special barriers for smaller firms? Do the funds wind up being applied in the way they were intended?

What is the most effective way to get spin-off ap- plications of military technology to commerci.al markets?

The government has come to be one of the key forces in a wide range of business situations so the above questions could be multiplied and refined many times over. In the following sections, we deal with some questions of the changing international business scene where the government role is again important.

Product Innovation and International Competitiveness

David Cullwick provides a broad summary of some recent developments in the internationalization of business and the consequences for the management of product innovation:

The pattern of world trade continues to change both in terms of geographical focus and the product export aspirations of developing and less developed countries. International competitiveness is a key element determining the pattern of these changes and has become of increasing importance to nations and companies as they plan their development strategies. At a program level individual countries make available incentives of a general or specific kind. The former type includes the rela-


tive exchange rate of the country's unit of currency, while the latter can include accelerated investment de- preciation in high priority industries. Companies are increasingly being forced to face the realities of international competition, either in their own market, or as they seek to develop export markets for their products and services. This means that those involved in business planning and innovation management need to understand the bases of international competition for exports in general and for specific products in particular.

International dimensions of product strategy include three major theoretical contributions. First, the law of comparative advantage demonstrates that a country gains by producing more of those goods in which it has factor endowments and is relatively more efficient, and by exporting these in return for goods in which its absolute advantage is least. The emphasis was on relative costs and illustrated the gains from trade and spe- cialization. Second, the international product life-cycle model cycle describes the shift in production loci over time. This model indicated that innovation occurred initially in the United States with some exports to other technologically advanced countries. Subsequently, production increased in those countries to overtake the United States based efforts and with exports on a global basis. Finally, less-developed countries became involved in import-substitution manufacturing plus exports when the product was in a mature and/or stan- dardized form. This approach emphasized implicitly an American market focus to product innovation and its management. The third theoretical contribution involved the theory of the internationalization of firms in which the investment and management focus of the firm moves from one of a home or domestic orientation to one of a foreign or host country. Subsequently, a regional or global focus may develop for the company. The business development strategy of the firm is set from an international perspective with particular product-market strategy specifying the competitive position which is sought in a given country or countries.

Shifts in leadership. The importance of integrating international competitiveness assessment with innovation management at a national and corporate level can be illustrated with several contemporary examples. Eu- rope's high-technology firms are viewed as falling be- hind their competitors in Japan and the United States. Newsweek [3] reported that:

the signs of trouble are everywhere. In Britain, 9 out of 10 shoppers looking for videotape recorders buy Ja- panese. In France, 8 out of 10 personal computers sold

have American labels, and throughout Western Europe last year, companies bought most of their semiconductors from fLrrns based overseas . . . . The widening gap threatens an estimated 2 million jobs in Western Eu- rope-and by the end of the century it could cost Euro- pean industry the ability to compete in world markets.

The reasons for the shifts in relative competitiveness are not absolute but often identified to include: a lack of trained engineers and scientists; conservative attitudes to venture and equity financing for new firms or innovative products and processes; and poor innovation management and marketing.

A second example of interest involves the changing fortunes in the global markets for watches. In the late 1940s the Swiss produced 80% of all watches compared to 22% in 1980. Business Week [4] in 1983 re- ports that the sad state of Swiss affairs can be laid on an aggressive Japanese industry, revolutionary technology, and a costlier franc. Although the Swiss pioneered developments in quartz analog watches and subsequently in digital watches, their watchmakers failed to take the latter product seriously. In 1975 the United States led in semiconductors and was expected to gain domination in the new market in digital watches. How- ever, this leadership was lost to the low-cost producers in Japan and Hong Kong, with the latter emphasizing their traditional low-cost entrepreneurial approach to capitalize on the contemporary consumer whims. The failure of American firms to maintain their position is attributed to high-technology firms being inept in learning how to sell to the consumer; to the inability of the few remaining U.S. watch companies to master a new manufacturing technology; and the impact of the op- portunistic assemblers in Hong Kong and the lower cost products from Japan.

These and other examples in such traditional industries as textiles, petrochemicals, automobiles, and steel suggest that even in advanced economies there exist complex relationships between trade patterns and the bases of international competitiveness. Clearly the view of the United States being the focal point of innovation has been challenged and this in turn challenges the location dimensions of the international product life-cycle theory. The internationalization of business is an important dimension which needs to be more ex- plicitly identified in innovation policy and management. The initiative for the international developments of large, medium, and smaller firms is determined by an interaction between government, commercial, and entrepreneur policies and practices from invention to the market place. The need is to understand more clear-


ly the patterns of the innovative and competitive behav- ior across countries in particular industry sectors.

Industrial strategies. The trade tensions between advanced countries, e.g., Japan and America, and between these and developing countries are increasingly visible and are of concern for those in international trade and marketing planning as well as for those in innovation management. Such concerns prompted President Carter's Commission on Innovation (on the apparent decline in innovation in the United States). Nevertheless there is a second viewpoint of increasing importance--that of the potential role for less advanced countries and smaller countries in innovation and associated trade on a regional or global basis. For example, France has made a long-term commitment to achieving international leadership in areas of telecommunica- tions, defense, biotechnology, underwater engineering, and aerospace. Equally Singapore has specified a priority list of high-technology industry sectors, and Finland has made rapid progress in technology associated with forestry and engineering. These and other trends suggest that some countries or regions, e.g., Scandinavia, have identified areas in which they seek internationally competitive positions for their technology, whether it be in processes, products, or services.

An extension of this approach involves the potential role of small and medium sized enterprises in international innovation compared with the focus on larger international or multinational corporations. For example, some medium sized New Zealand firms have established strong international positions in agricultural engineering products and systems, and in geothermal engineering. Studies on the role of firms of this size have been made by OECD, but generally their contribution in terms of international competitiveness dimensions of innovation is not well understood.

Clearly the role of state and business leadership in industrial innovation varies from country to country but there appears to be insufficient understanding of innovation from the viewpoint of eithe r small or developing countries, or from the viewpoint of medium sized internationally oriented enterprises. Emerging patterns of international trade and investment suggest increased fluidity exists in terms of where the comparative advantage of trade will exist at a specific time. Innovation is a key element in determining international competitiveness but experience indicates that it must be viewed as a means and not as an end in itself.

Americo Albala outlines some further international issues with a focus on the special product innovation challenges for developing countries:

The growing foreign trade deficit and the gigantic billion dollar foreign debt burdening many of the developing countries have made it imperative to implement severe local economic policies oriented toward closing the huge financial gap. The result has been restrictive regulations for the entry of foreign products and hesi- tant efforts directed towards export substitution and promotion of exports of locally manufactured goods enjoying comparative production advantages (availability of particular raw materials, lower labor rates, etc.). The strategy is based on the application of both original intermediate technologies and foreign technology transfer.

In particular, the export thrust based on sound practices for the transfer of technology (joint ventures instead of turn-key projects) is vital. However, its success may be seriously impaired by the lack of trained innovation managers familiar with the management of technologically oriented enterprises, where the use of modern managerial tools becomes essential.

We believe that many universities in developing countries, with long traditions of national involvement, can be the focal points for the training of innovation managers. Guidelines for the specific training programs can be derived from the characteristics of the innovation process. In addition to the conventional management subjects, the following can be imparted as courses and seminars: strategic planning, new product planning and development, project management, new product marketing, R&D management, engineering management, computer modeling, cost and quality management, etc.

The advanced universities of the free world have a unique opportunity to participate in this challenging task opening their doors for the training of the required instructors from abroad. Likewise, scientific and technical publications are admirable instruments for en- couraging badly needed research on the special ap- proaches for the advancement and management of innovation in the developing countries.

Management Development and Research There is no lack of questions about the future of product innovation management. And this is only a beginning. Not all readers will find all of the issues raised here to be significant or even relevant. For some readers, at least a few of the questions will already have currently satisfactory answers. It is curiously instructive sometimes to ponder why some people consider an issue to be significant and relevant and others don't, and why priorities are different for different people. Such pon-


dering can often lead to a reevaluation of priorities and interests.

For each reader, the discussion of issues in this article will probably produce different reactions. For many there will be a number of planning implications; for some, there could be some implications for immediate action. At the very least, the discussion has implications for management development and research.

The issues raised by Crawford and Albala include the question of management training specifically. But virtually every other issue that was identified carries the implication of some kind of training for managers as well as for others in industry and in government. In some countries there is a tradition of structuring education programs around the technology development problems of organizations. In other countries, the problems of managing the process of product innovation have received little attention or at best they have been relegated to the category of on-the-job training of technical specialists. It seems clear that careful attention has to be paid to the development of managers of product innovation by any firm or nation that expects to be competitive on a long term basis.

Good management development programs should be based on a good foundation of knowledge. From questions raised by the contributors to this article, it seems we may have a long way to go before we can be confident that we have that foundation. The questions raised here are only a sampling of what we don't know. Perhaps what we need most is guidance in defining more sharply the significant questions to attend to in the future. What is it that we don't know that will hurt us? Some of the questions raised here are addressed in other articles in this issue; more will be addressed in future issues. There is much to be done in the area by re- searchers and practitioners alike who would seek to develop new paradigms that we can use to make our economic work more effective and to raise our human condition.

References 1. Kuhn, Thomas S. The Structure of Scientific Revolutions. Chicago: The

University of Chicago Press, 1962, p. 143.

2. Wrapp, H. Edward. Good managers don't make policy decisions. Har- vard Business Review 91-99 (Sept-Oct 1967).

3. Newsweek 10 (March 28, 1983).

4. Business Week 92-103 (May 5, 1980).

significant issues for the future of product innovation

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