Innovation and Risk Management

Without product innovation, firms would stagnate and their market position deteriorate significantly (Shavinina 2007, 398). However, innovation does not come without risk, such as new technology and shorter product life cycles. Success in product development results in long-term dominance of the markets and elimination of competition. However, failure to execute product development may result in late market entry and failure to command a significant market share. Thus for a product to succeed in the market, managers and strategists should effectively carry out a market analysis to develop products that are reflective of the target consumer needs.
The process of developing new products involves; generation of ideas, screening, development and testing of concepts, marketing strategy and analysis, product development, testing and launch (Chaturvedi et al., 2009, 55). Product development process in energy firms is driven by the needs of consumer’s processes rather than the engineers’ own designs. Through research and design, consumers give feedback on areas and problems that need attention. Moreover, business leaders use the idea of a cross-functional team in new product development process. This approach reduces the time involved in the development of new products. Logistics and customer service professionals are involved into the team. This is also paired with financial management to bring in the financial quality and efficiency of the new product. Finance should buy the product’s projections.

Technology and innovation are essential to energy firms because the future performance of its new products depends on the development and deployment of new technologies. The technology has to be safe and environment conserving. Moreover, rising concerns in climate change may lead to additional regulatory measures that may lead to higher costs and product launch delays. This would lead to the making of environmentally friendly products that emit minimal carbon dioxide into the atmosphere (Henard and Szymanski 2001, 362-375).

A firm’s approach to global marketing of new products involves making a great product such that even the most culture-bound consumers cannot resist. This is only possible with research-intensive market analysis. Process innovations become more rewarding as innovation increases. In market analysis, emphasis changes from technical to market concerns as the new product nears its launch. The manufacturing process is refined in a bid to introduce the product, quality suppliers identified and material arrangements verified (Edgett 2011, 125). Market analysis is the dividing line between exploration and commitment. Moreover, an idea is seen as appropriate to a firm’s mission and strategy after its sales, profit projections and costs are reviewed.

Innovation is a combination of all the technological, financial, scientific, commercial, and organizational activities that go into the creation, implementation, and marketing of new products or processes (Rafinejad 2007, 25). The product cycle theory suggests that a product passes through several stages in its production, from innovation, standardization, and launch. Another theory is the path dependency whereby innovation and new product development are seen to depend on a pre-determined path as a linear phenomenon where each aspect is considered modular (Shavinina 2007, 380). Moreover, traditional theories, such as technology push and demand-pull are applied. In technology push, innovation is exogenous and driven by scientific advances, while the demand-pull takes innovation as a response to demand for new products and processes (Chaturvedi et al., 2009, 56).

Managers and product development specialists are entitled to lead in the process of new product development. However, individual employees should be encouraged to participate in the creativity process since they are consumers too. Firms should have regular opportunities to assess the creative process with discussed, clarified, and agreed criteria (Shavinina 2007, 373). Their achievements in the creative process should be recognized and rewarded. The individuals be encouraged to think for themselves to gain confidence in accountability and expression. Debates, brainstorming exercises, and thinking hats should be initiated to challenge and develop one another’s ideas in a bid to foster creativity.

New product development system involves elements which must support and reinforce each other so that new products may be generated effectively and efficiently. These elements are; strategy, process, portfolio management, understanding the market, metrics, and organization.
Having a clearly defined and communicated strategy for new product development enables an organization to focus the limited resources on the most important issues. Shavinina (2007, 374) asserts that the strategy aligns all the players on the same goal to improve productivity through reduction of stress and conflict. However, the unmet needs must be satisfied to generate profits and leverage existing assets thorough an understanding of the market. Valuable opportunities for the new product should be identified.

Portfolio management involves defining, selecting and choosing the best opportunities for a firm as defined by the product development strategy. The portfolio management process should evaluate the firm’s current and potential new product development projects that allow for comparison of the relative value of the project (Ernst 2002, 1-40). Moreover, it should support the selection of the viable projects within the available resources and reviewed on a regular basis to ensure that it is on track to deliver the strategic objectives of the organization.

Metrics determine whether the firm is on target with the new product development goals and show when to take corrective measures. They assist an organization understand how well its performance affects the return on investment. Consequently, the organization structure should provide good communication between all the departments so that new product development goals can be achieved (Edgett 2011, 124). Further, the right process involves speed and appropriate controls to pin-point and manage risks. This enables the right product to penetrate the market faster. Firms use leading-edge learn techniques to identify and reduce waste in the product development process.

Innovation is at times seen to be technologically or environmentally determined (Rafinejad 2007, 370). Technologically, innovation is determined by an inevitable flow. This is because technology restricts and determines the design, development, and manufacture of products. Nothing is seen to stand in the way of the development of an innovation as it is a progressing process. However, these innovation theories show why radical innovation may occur, they do not focus on the process that occurs (Henard and Szymanski 2001, 362-375).

There is an assumption that environmentally, the structure of a firm’s market defines how it develops its new products. The organizational strategies and tactics as well as new product development processes are applied according to the target market demands. The environment is thus seen to lead to a homogenization of organizational forms and practices within a market niche or the entire market. It is assumed that the firms would become isomorphic as they copy the practices of the other successful firms in their target market niche (Edgett 2011, 127). Therefore, the successful firm in a turbulent market responds to rapid changes by adopting new product development processes that are equally open to adaptation.

This is deemed as the acceptable practice in the market as a firm’s success is acknowledged and replicated by the other competing organizations. Moreover, the environmental and technological deterministic models are based on objectification so that a concept may be isolated, studied, and measured (Ernst 2002, 1-40). However, objectification requires a reified object and neutrality, innovation and its practice are contextual processes involving multiple actors. Innovation is deemed to be a means to an end and a human activity with a strategic nature. The product or profit cycle models have come under critique for being too deterministic and excessively linear. However, increased geographical reach of firms and changes in the national markets of industrialized countries erodes the applicability of the product cycle theory (Henard and Szymanski 2001, 362-375).

Further, firms are seen to use the best practice as a rational mechanism to meet the rules of their structurally determined world. This leads critics to question what it means to be innovative. The possibility that rational and irrational forces, for instance, desire, creativity, passion may affect new product development (Loch and Kavadias 2008, 19). Product development is argued to be based on a cyclic motion between the extremes of incremental and radical innovation. This means that they seek to build on, complement, and extend the existing products, resources, and processes. Thus seeks to develop a system without destroying it. Radical innovation does not build or extend what exists but seeks to overturn it. It is destructive of the skills, practices, product forms, and social relationships existing within and between organizations (Loch and Kavadias 2008, 16).

Innovation management process starts with setting the goals for the process and discussing the goals with new product development team members and the firm’s stakeholders (Rafinejad 2007, 366). A team leader responsible for the product is appointed. The team cooperates through use of online tools and brainstorming sessions. A trained business coach may be consulted. Once the ideas have been presented, they are screened, and the most viable ones are chosen.

Evaluation of innovation follows based on peer reviews (Ernst 2002, 1-40). This enables the team to identify the poorly thought-out ideas before resources can be committed on them. The ideas are then tested for better development through the creation of prototypes or test groups (Shavinina 2007, 367). This allows stakeholders to see how the product will function once produced, and changes are made where necessary. At this stage, the product should be able to generate orders.

Innovation implementation is then executed. In this stage, the ideas that pass the testing stage are further developed and changed in readiness for execution as part of the product offering. Assessment of innovation life-cycle follows as implementation needs are carefully monitored and assessed concerning the number of milestones that need setting (Chaturvedi et al., 2009, 59).

Businesses should benefit by being more analytical; this entails understanding the customers, running its operations and making sound decisions. However, analytical efforts should be targeted to areas where they will do well since resources, such as, talents are limited. The business should be differentiated to fit the needs of the consumers. Some of the differentiation strategies are; database marketing and targeted customer promotions (Henard and Szymanski 2001, 362-375). Moreover, a good target is crucial and full of opportunity as to engage the commitment of top management to create momentum. It focuses on creating insight rather than information, and is approachable and ambitious.

The analytical models should have complex decisions involving a lot of steps and variables, with consistency being either desirable or as a requirement by the law. The decisions should enable the teams to understand the connections, correlations, and their significance (Loch and Kavadias 2008, 8).
Energy companies’ operations expose workers to a vast range of safety, health, environmental, and security risks. Furthermore, a firm may be asked by the host nation to adjust its future production plan, consequently impacting on production and costs. Product development is also faced with the problem of customizing products so that they fit different markets with different cultures (Chaturvedi et al., 2009, 62).

In developing a new product, firms should give the product team project ownership right through to production, as well as recognition once the product succeeds. It is crucial for the management to encourage all the employees to work on their ideas on company time as opposed to limiting ideas to product development strategists. Moreover, employees should comment on the company’s products as they are energy consumers and are customers of the company products. Service elements of the product such as the distribution channels should be emphasized as neglect may lead to product failure.

 

 

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