New Designs of Innovative Business Projects
For most companies, developing project design for innovation in business is neither a science nor an art, but a routine managerial task. Such generalized approach would not fit into managing all types of business projects. Although most managers can sense when their project designs are not working well, few take meaningful action, partly because they lack a practical framework to guide them. This chapter discusses several ways to identify and define qualitative attributes of a good project and describes qualitative process to carry out the innovative business projects successfully to gain competitive advantage in the marketplace. As companies begin implementing the business projects, operational process turns complex in case of new product development, information technology (IT), and many other nonconventional products or services. Under such conditions, companies tend to switch to lean management techniques to reduce costs and stay price competitive in the market. This chapter addresses basic principles of lean and interactive project management by illustrating the lean process in innovation business projects with the examples of various multinational companies engaged in consumer products segment.
Project Commercialization Attributes
Innovative and new products, when launched in the market, possess the common life cycle comprising introduction, growth, maturity, and decline in the context of market behavior. However, the attributes of commercialization of the innovative products in different stages vary from the product or organization life cycles to some extent. Innovative products cannot be determined as consumer driven in general as they differ in reference to the types of innovation and their projected growth under varied market conditions and across geodemographic segments. The drivers of commercialization for innovative products delivered by the innovation projects at the start-up enterprises level or at large commercial organizations constitute the backward and forward linkages, unique propositions, innovation value, and high investment to carry out product innovation that occur during the introduction stage of the innovation life cycle. Companies taking the challenge of commercializing innovative products foster the strategies of four A’s to strengthen the product awareness, acceptance, availability, and affordability in order to reduce the market risk and gain competitive advantage of the new product in the marketplace. As the innovative products move to the growth stage, firms put more impetus on sales by refining the marketing-mix strategies in reference to the following elements consisting of 11 P’s (Rajagopal 2012):
Product (uniqueness and associated attributes that distinguish the product from the existing products in a given marketplace),
Price (low-end or premium market pricing),
Place (developing strategies on distribution management and routes to market in reference to make the product available at the convenience of consumers),
Promotion (developing promotion packages, advertisement and communication strategies, and building product opinions among consumers and market players),
Packaging,
Pace (competitive dynamics),
People (frontline employees of an organization engaged in selling product),
Performance (product performance and consumer experience),
Psychodynamics (consumers engaged in social media to share their experience on innovative product),
Posture (corporate image), and
Proliferation (expansion into manufacturing and launching complimentary products to augment the use value of the innovation).
Innovation-led products turn sustainable as they gain desired market share and position them strategically in the market competition with long-term goals. Accordingly, both the consumer value and brand equity for the innovation-led products and services enhance. However, as the technology grows and consumer preferences for the products change over time, the products turn obsolete over the period, depending on the life cycle of the innovation, thus depleting their market share and increasing the substitution risk. Firms thus should be engaged in continuous improvement or innovation process to develop next-generation products at the edge of the mature stage and avoid falling into the decline stage. Products, which fall into the decline stage, are difficult to revive as the dynamic market forces weaken the product significance and turn them idle in the marketplace. Often, investing on the products trapped in the decline stage does not yield expected returns and turns out as sunk cost that cannot be recovered. However, the threats of value disruption due to negative word-of-mouth and competitive tactics in the market against the product are often observed by the firms that increase the risk of substitution and consumer defection. Innovation-led products are also susceptible to imitations by infringement of intellectual property rights and disruptive technologies with the increase of market competition against the innovative product. Most firms invest in building product brands to inculcate confidence among the consumers and augment their loyalty toward the product and company.
Product innovation and marketing cycles are also affected by the innovation diffusion cycle spread across the same stages as of product innovation cycle. In the introduction cycle, often the diffusion of information is low as firms do not put adequate resources in generating awareness on the innovation. Firms invite lead users in this stage to test the innovated product and influence early adopters on the usage of product. Lead users form a small group but act as powerful referral and brand carriers. Firms spend adequate resources in the growth stage to diffuse product innovation attributes through direct communication on one-on-one basis to drive intensive effect on the innovation-led products among early adopters. Consumers in this group are strong followers of lead users and stand as effective opinion leaders for influencing the early majority of consumers. Most companies deploy enormous resources in advertising, communication, and social media involvement during the late growth and maturity stage to drive customers who are less affluent, less educated, but ready to experiment the innovative products. The early majority consumer segment constitutes relatively larger segment than the previous consumer segments but is confined to niche. However, the following stage is of late majority, which is a very large segment and often represents about half of the total number of consumers in a given market area. This consumer segment exhibits high adaptability with the innovative products and derives satisfactory value for money that makes the late majority consumers frequent buyers. Consumers in this segment are price sensitive and post the threat of defection when more attractive substitute products penetrate the market. However, a small number of (about 20 percent) of consumers in each market segment are hard to drive for buying any innovative product as they are indecisive and difficult to convince. Such segment of consumers is found in all stages of growth of innovative products but is apparently huge in number during the decline stage of the product life cycle.
An individual’s choice of innovative organic products can be linked clearly to ethical stances, but ethical choices can also vary from individual to individual, from industry to industry, and among countries. Consumer purchasing motivations are revealed in a study as being self-interest-centered rather than altruistic. Hence, to enhance the scope of organic products marketing in future the firms must aim to modify perceptions and attitudes of larger consumer segments by implementing educational marketing campaigns that reinforce the ethical, environmental, and societal benefits of organic production. The key challenge for organic products marketers is to strengthen individuals’ perception of the individual benefits by adding more and stronger emotional values to green brands. Future green marketing research should extend its analysis to the emotional motivations and benefits associated with environmentally responsible consumption behavior (Hartmann and Apaolaza 2006). The green intentions of organic products significantly influence ethnocentrism, environmental concern, involvement, and attitudes. However, risk aversion has been found as major emerging variable, while involvement and environmental concern are significant in determining the consumer behavior toward organic products (Paladino 2005). Concerns related to the environment are evident in the increasingly ecologically conscious marketplace. It has been observed in one of the research studies that females, married and with at least one child living at home, are the consumers who are willing to pay more for environmentally friendly products. They place high importance on security and warm relationships with others, and they often consider ecological issues when making a purchase (Laroche, Bergeron, and Barbaro-Forleo 2001).
Among IT companies, Google stands out as an enterprise designed with the explicit goal of succeeding at rapid, profuse innovation. Much of what the company does is rooted in its legendary IT infrastructure, but technology and strategy at Google are inseparable and mutually permeable—making it hard to say whether technology is the DNA of its strategy or the other way around. Google has spent billions of dollars creating its Internet-based operating platform and developing proprietary technology that allows the company to rapidly develop and roll out new services of its own or of a business partner. As owner and operator of its innovation “ecosystem,” Google can control the platform’s evolution and claim a disproportionate percentage of the value created within it. Because every transaction is performed through the platform, the company has perfect, continuous awareness of, and access to, the by-product information and is the hub of all germinal revenue streams. In addition to technology explicitly designed and built for innovation, Google has a well-considered organizational and cultural strategy that helps the company attract the most talented people in the land—and keep them working hard. For instance, Google budgets innovation into job descriptions, eliminates friction from development processes, and cultivates a taste for failure and chaos. However, some elements of Google’s success as an innovator would be very hard and expensive (Iyer and Davenport 2008).
Consumer perceptions play a key role in the life cycle of a brand. The role varies according to the stage in the life cycle, market situation, and competitive scenario. A company should invest in appealing communication strategies for creating awareness and may need to influence the decision of consumers toward buying the brands they have not tested before. Systematically explored concepts in the field of customer-value- and market-driven approach toward new products would be beneficial for a company to derive long-term profit optimization strategy over a period. On a tactical level, managers need to consider the optimum spread of customers on a matrix of product attractiveness and market coverage. This needs careful attention and application of managerial judgment and experience to measure the customer-value-driven performance of the retail stores considering the innovative sales approaches for organic products, store layouts, product displays supported with comprehensive point-of-sales information, brand information, and other loyalty parameters of the consumers.
Customer value in terms of satisfaction, use value, retailing practices, price, quality, and media appreciation is one of the indicators for building brand value for the nonconventional products and unfamiliar brands of a firm. Customer value concepts may be applied by the firms to evaluate the product performance of an innovative product in the given market and determine the approach for gaining competitive advantage over the traditional products. In order to gain returns in the long run on the aggregate customer value, firms may need to methodically estimate the profitability associated thereof in terms of product attractiveness, volume of buying, and market share while introducing the new products in a competitive market environment. The study proposes a framework for future research in measuring the customer value in specific reference to nonconventional products.
One of the challenges for the marketing manager of a firm is to incorporate the preferences of the customer into the design of new products and services in order to maximize the customer value. An augmented and sustainable customer value builds loyalty toward the product and the brand. Hence, a comprehensive framework for estimating both the value of a customer and profit optimization needs to be developed. This needs careful attention and the application of managerial judgment and experience to measure the value-driven performance of the product of the firm. It is necessary for the managers to understand that customer value is context dependent and there exists a whole value network to measure, not just a value chain. Appropriate promotional strategies considering the economic and relational variables discussed in the study may be developed by the managers upon measuring the intensity of leisure shopping and the scope of expanding the tenure of leisure shopping in view of optimizing customer values and profit of the firm.
Customer involvement in developing new products has been widely used in American and Japanese manufacturing firms. Quality Function Deployment (QFD) is used as the most popular tool for bringing the voice of the customer into the product development process from conceptual design through manufacturing. The process of QFD begins with a matrix that links customer desires to product engineering requirements, along with competitive benchmarking information, and further matrices can be used to ultimately link this to design of the manufacturing system. Unlike other methods originally developed in the United States and transferred to Japan, the QFD methodology was born out of Total Quality Control (TQC) activities in Japan during the 1960s and has been transferred to companies in the United States. It has been observed that the companies in the United States showed a higher degree of usage, management support, cross-functional involvement, use of QFD-driven data sources, and perceived benefits from using QFD. These companies are more suitable to use newly collected customer data sources such as focus groups and methods for analyzing customer requirements. Japanese companies have been found using existing product services data such as implications of guarantee, warranty, and a broader set of matrices. The use of analytical techniques in conjunction with QFD including simulation, design of experiments, regression, mathematical target setting, and analytic hierarchy process are also considered as supporting tools for analyzing customer data (Cristiano, Liker, and White 2000). Similarly, recent studies have described how “lean” Japanese car assemblers assigned the design and development of whole modules to a group of first-tier suppliers, who in turn utilized a team of second-tier suppliers for the detailed development and engineering. Customer-involved product development strategies were also found common with the firms in different industries, including Apple, Benetton, Corning, McDonald’s, Nike, Nintendo, Sun, and Toyota. The customer firm, often a large original equipment manufacturer, perceives that its power may be cascaded throughout its supply base. At the basic level, cascading is a way for a customer to delegate responsibility to its suppliers. In practice, it has been contended that cascading more often takes the form of a more imposing style of leadership (Lamming et al. 2000). Along with the factors of QFD, companies should also develop the product innovation charter considering the following critical variables in new product development process:
Core competencies
Quality, function, delivery, infrastructure—four A’s (awareness, acceptance, availability, and affordability) and 11 P’s (including product, price, place, promotion, packaging, pace, people, performance, psychodynamics, posture, and proliferation).
Technology, product experience, customer franchise, enduse experience.
Technology drivers
Technological strengths, global competition, nonlaboratory technology, small-order-handling technology.
Market drivers
Dual-drive strategy, co-producer (customer—focus), Mass customization, Distributors.
Dual-drive combinations.
Technical driver together with a market driver.
Technology of microfilming and the market activity of education.
Global satellite technology and golf course superintendents.
Goals and objectives
Profit, growth, market status.
In the Internet age, firms are recognizing the power of the Internet as a platform for co-creating value with customers. Internet has impacted the process of collaborative innovation as a key process in value co-creation. Distinctive capabilities of the Internet as a platform for customer engagement including interactivity, enhanced reach, persistence, speed, and flexibility suggest that firms can use these capabilities to engage customers in collaborative product innovation through a variety of Internet-based mechanisms. The network mechanisms can facilitate collaborative innovation at different stages of the new product development process and for differing levels of customer involvement. Ducati, a manufacturer of motorbikes, and Eli Lilly, a multinational pharmaceutical company, are found actively engaged in encouraging customer involvement in developing new products (Sawhney, Verona, and Prandelli 2005). In pursuing growth through product innovation, companies should look at their customers as partners in creating and building value. Consumers today have near-instant access to all the information they need on virtually any product. Moreover, they are using this information to influence product development as individuals and, more importantly, through user communities and review groups (Johnson 2006). Most companies ask their customers about their needs. Customers offer solutions in the form of products or services. Companies then deliver these tangibles, and customers just do not buy. Though customers are not experts or do not possess enough information to come up with solutions, the product research and development team of the company should work with the customers to find appropriate solutions. Customers should be asked only about the final product they want to use.
New Project Designs
Each innovation project is developed with a new design. Most project designs are developed with cost-effective process to optimize the deliverables and lower the risk during the various project phases. In developing new project designs, start-up enterprises focus on lowering the cost of human resources, project span, resources allocation on tasks, and the expenditure on monitoring, evaluation, and reporting that are counted as overhead costs. The experience of start-up enterprises in managing innovation projects have brought forward the cost-effective project designs in reference to project team autonomy, lean management, bottom-up project management by bringing the stakeholders as project leaders, and critical change designs in between the project phases. The new project designs in innovation management are largely focused on waste reduction and maximizing the quality of project deliverables in reference to maintaining the cost and time standards, improving competitive differentiation of project deliverables, and increasing the stakeholder value.
Developing new project designs involves explorative and experimental project focus, which pull enormous resources and time during the various phases of the project. Such efforts also demand changes in the existing organization and project management systems to help innovations grow in a newly designed project environment. The start-up enterprises are commonly energized in introducing change management in an organization to manage the innovation projects from newer perspectives. Although, it is tough to bring changes in the project management system as it demands rebuilding work culture and employee motivations for adapting to new project designs. In order to develop and introduce new project designs, innovation companies also need to consider hard factors such as the time it takes to complete a change initiative, the number of people required to execute it, cost to project, and profitability levels. The hard factors in managing new project designs are built around the DICE model in reference to the change of project duration (start and end time), integrity in performance across the revised project stages, build capabilities, and driving employee confidence on change management. The DICE framework needs to be adapted thoroughly in an organization to be able to implement the new innovation project designs and the change initiatives. Each factor of the DICE model needs to be evaluated and independent scores must be set to evaluate the performance. These scores may be high or low, according to the interactivity level with the activities of the project management. Companies can use DICE assessments to analyze causes and effects on its factors and monitor whether projects are on track with the new project charter or scope creep within the existing project plan, and to manage the new project portfolios (Sirkin, Keenan, and Jackson 2005). Other new project design models and attributes leading to lean management of projects are exhibited in Figure 2.1.
Figure 2.1 illustrates three new project design concepts comprising DICE, SMART, and STARS in reference to the innovation projects leading to cost-effective, competitive, need-based, and accessible deliverables. In the mid-20th century, commercialization of innovation had been a top-down strategy, which was emerging out of the corporate power and posture like Sony and Apple as technology-driven symbols than positioning the innovation projects as customer-centric products. Most companies carried out innovation project design that often stayed far downstream in the market, and focused on penetrating in the markets with focus on generating high profits. However, today, the innovation project designs are driven as customer-centric to make new products aesthetically attractive and enhancing brand perception through strategic, measurable, adaptable, responsive, and timely (SMART) through interactive media initiative among the customers in the market. Today, as customer-focused innovations are expanding manifold to encompass need-based and adaptive solutions, companies are asking innovation enterprises to create sustainable ideas rather than to simply redress the existing ones by making cosmetic changes. IDEO is a leading proponent of design thinking that believes in making innovations successful through meeting consumers’ needs and desires in a technologically feasible and strategically viable way with lean process. Developing new designs and managing them through lean project principles involve collaboration between frontline employees to reengineer the obsolete products and the associated insight by shifting the organizational paradigm to new innovation designs. Innovation enterprises should keep close observations of changing consumer needs, market behavior, and technological trends to prompt new designs and rapid prototyping, developing new project layouts and business models, and helping the organization in streamlining the market information across the project team, organization, and stakeholders. The emerging innovation enterprises with new project designs built around the management philosophy discussed earlier, tend to build interdisciplinary project teams to deliver new experiences to consumers, reduce the complexity and cost of conventional project management processes, and overcome the risk of project failures and cross-competition in the marketplace. Thus, the innovation project teams not only create innovative products but also develop a social brand concept as a tag to market these products. The brand tags also carry innovative stimuli to the products in reference to competitive advantage over the marketing-mix elements of existing products, perceived use value, and innovation attractiveness (Brown 2008).
Figure 2.1 New project models and associated attributes
As the consumer innovation products in electronics, health, telecommunication, engineering, automobiles, and other utility sectors are booming rapidly, consumers are regularly blitzed with thousands of marketing messages, television commercials, telephone solicitations, supermarket circulars, and Internet banner ads about the launch of new products in the market. However, yet a lot of these messages fail to generate the desired response and develop purchase intentions in the target segments. It has been very difficult for companies to always uphold the consumer preferences, largely because the growth of technology is faster than the rate of adaptation of the innovation products. As the technology changes, the innovative product turns obsolete faster and it becomes difficult for the companies to maintain the preferred products of consumers. Although marketing has always been a creative endeavor, adopting a scientific approach to it may actually make the innovation cost-effective. However, the major challenge for the companies is to target the right customers in the right markets while positioning the innovation. Experimental design in innovation project management techniques, which have long been applied in other fields, let consumers evaluate the impact of many stimuli by testing just a few of them. Marketing companies can test a few combinations of those attributes and analyze the implications of its new project design for augmenting its value of deliverables, revenues, and profitability (Almquist and Wyner 2001).
Challenged by the creeping market competition, emerging companies are continuously engaged in encouraging innovation to improve their products and develop innovative project designs to provide deliverable products of competitive advantage to the stakeholders. These efforts are integrated right from the change management perspectives in the organization, project planning and execution, manufacturing, and commercialization. Most companies today are driving operational and market effectiveness to level off the cross-cultural differences across the market regions. For example, the rate of innovation in consumer electronics has apparently increased in North America to overcome the existing supply gap in the market. Toyota’s managerial practices can be grouped into primary and secondary organizational innovation processes. The primary innovation process of the company is driven across the social factors comprising mutual adjustment of company objectives with the customer preferences, mentoring and supervision of innovation projects within the company building confidence among the employees, and integrative leadership throughout the project management, manufacturing, and marketing teams. The secondary innovation process includes different forms of standardization comprising integrating standard skills, standard work processes, and design standards throughout the project. Each of the aforementioned factors would build interactive strengths across the project steps and reinforce the new project designs, task performance, and develops coordination for commercialization of deliverables. Together, these mechanisms give Toyota a tightly linked project management and product-development system for catering to continuous innovations by synchronizing ideation, project planning, training, and standardization steps to achieve cross-functional efficiency for building global expertise. However, it is necessary to inculcate some flexibility in each innovation project to benefit from what has been learned from other projects in the past within the organization or over the competitors. Such balance in the organization system would allow the companies to achieve integration across projects and over time (Sobek, Liker, and Ward 2008).
Project management is a team work and everyone from top management to frontline workers should be involved in the process and commit to prevent process and operational failures during the project. While experimenting with the new project designs, the project team should not narrow the time span by underestimating how long it will take to finish a project. It is necessary for experimenting the new project designs to focus on acquiring the required information that supports to meet the new challenges. Sometimes, the project teams do not accept the new project designs or alterations in the existing project charter. It is extraordinarily difficult to rewire the human brain to undo the patterns that lead to making fewer mistakes and improve operational efficiency through non-routine ways. However, project leaders can do this by restructuring the workflow in the project by mitigating the effects of cognitive biases and low motivation on decision making. In developing and implementing the new project designs, it is important to understand the kinds of systematic errors people make and the factors that bars the project team members to adapt to the changes, define the problem to determine how behavioral issues play in carrying out the project, and diagnose the specific underlying causes thereof. The new project designs should be able to reduce or alleviate the negative impact of cognitive biases and insufficient motivation on decisions (Beshears and Gino 2015).
Transitions of innovative products to new designs or work platforms are challenging. It is commonly believed that the success of the projects with new design largely depends on the skills and strategies that have been drawn from the previous experience on project planning, execution, and commercialization of deliverables. However, it is not always true and project team members moving into handling new tasks must gain a deep understanding of the situation at hand and adapt to it considering the factors that prompted the need for turnaround, accelerated growth, realignment, and sustainability (STARS). This model outlines the challenges of launching an innovation project with an objective of serving the market with competitive differentiation and driving rapid adaptation of the innovative deliverables. New project designs need to be developed from the perspective of value enhancement more than the cost-effectiveness and reenergizing the potential commercialization strategies for the innovative deliverables. One of the safe ways for the project managers to implement the new project designs is to follow the footsteps of a highly regarded leader with a strong legacy of success with similar or relational designs. The project managers can accelerate implementation of new project designs by assigning the new roles to the team members toward administering the project within the tasks-time-risk matrix. The planning and management of new project designs demands the organizations not only to learn about the lean techniques of projects but also to know deeply about the innovation commercialization process, consumer priorities, defining strategic intent, quickly building the leadership team, and creating supportive alliances among the company, market, and stakeholders (Jenkins, Karjian, and Niederkorn 2011). However, the way those principles should be applied depends very much on the business situation, and the STARS framework can help leaders analyze. Turnarounds and realignments present especially distinct project leadership challenges that call for particular transition strategies. Regardless of the business situation, project leaders should be able to identify the chain reactions at the end point deliveries such as a jump in market share or diversification into different markets to achieve the business goals (Watkins 2009).
Standardization versus Customization
The product and business strategies of an innovation project should be developed in reference to the macroeconomic conditions of the target market. The project objectives should emerge from the business goals of the company developed in accordance with the competition indicators of the market, such as innovation life cycle, perceived use value, quality, competitive differentiation, price, availability, and product attractiveness. The new designs of projects need to be analyzed considering whether the success of project deliverable or innovative product can be positioned in a new market destination and factors that may lead the product approach in market can be explored to measure the potential success. Innovation organizations should encourage right decisions about the more appropriate project designs that support the standardization and customization attributes of project process and deliverables. Project standardization refers to offering a process of project planning, executing, monitoring, and evaluation that follow an international project management protocol instituted in project management institution or associations, while customization signifies adapting a project management process by making appropriate changes in it to match the local market or sponsor’s perspectives. The trade-off for a firm to decide how the customization or adaptation of innovation project management process largely affects the project deliverables in reference to the size of the market and profitability goals.
The customization option of the projects may be chosen over standardization in order to cater to the unique market situations. However, there are potential gains in considering project standardization option. Project managers must examine all the criteria in order to decide the extent to which the project deliverables should be customized or standardized (Aaker and Joachimsthaler 1999). If there are no new needs to be catered to make the product offering ready for any market, resulting in a significant cost saving, the firm may decide to standardize its products. The project managers may decide also on standardization for delivering the predetermined outcomes of the project. Though standardization of deliverables may turn a risky proposition in the long run, as the consumer behavior is flexible and tends to change over time. However, some multinational companies have succeeded in standardization of products for offering in many countries.
Excessive concern with local customization of project deliverables may raise complexities in managing projects. Holland’s Philips Company learned the hard lesson that it cannot afford to customize television sets for each European market separately. Hence, the company has adopted continuous innovation projects to improve the product quality following a standardized project process. The markets for innovative products are not always homogeneous, and markets in different geodemographic segments for new products hold different consumer preferences and market dynamics at the same time. This phenomenon may be explained through the product life cycle concept wherein products go through several stages over a period of time, and in each stage different marketing strategies are appropriate. The innovation projects should also be able to develop the policies for deliverables or new products in accordance with the requirements of the local markets. If the customer needs tend to be the basic and remain consistent, it would be appropriate for a firm to offer standardized deliverables from the project, which would also be cost-effective for the firm. Under such circumstances, the deliverables of the innovation projects may be divided into the expected by-product streams and the company may decide to offer a narrow range of deliverables at a local market level. For example, the deliverables of an innovative project on developing the e-commerce IT applications may be segregated into the three streams simultaneously aiming for personal computers, mobile phones, and tablets. This would help in confirming the cost-effective and high profitability product offerings in the consumer markets. However, the product adaptation to match local conditions involves cost appropriation and it is necessary for the project team to undertake the cost– benefit analysis prior to making firm decisions on deliverables policy. These costs may relate to consumer education, do-it-yourself experience, advertising and communication in reference to design, style, features, or changes in packaging, co-branding, performance guarantee, and the like. A cost–benefit analysis would help in determining the cost to customize and realizing its benefit. The results of cost–benefit analysis on product customization should be compared with the same analysis applied to standardization. The net difference indicates the relative desirability of the two strategies.
In contrast with standardized deliverables, the marketing costs stay at a minimum as it might not require rigorous expenditure on advertising, communication, and programs of customer acculturation for the project deliverables. In this process, since manufacturing technology and quality control procedures have already been established, and performance has been tested and improved, the additional costs in the project deliverables are significantly lowered. Hence, standardization brings certain cost savings. Among various cost factors, direct and indirect, it would be difficult for a firm to quantify the opportunity cost. If a product is customized, presumably it will have greater appeal to the mass market.
Managerial decision making is a more complex process than commonly thought of. Most executives realize that decision making is a singular event that occurs at a particular point in a given time and situation. However, in practice, decision making is a process fraught with power plays, politics, personal nuances, and institutional history. Some decision-making processes are far more effective than others. Most often, managers use an advocacy process, possibly the least productive way to get things done and they view decision making as a contest, arguing passionately for their preferred solutions, presenting information selectively, withholding relevant conflicting data so they can make a convincing case, and standing firm against opposition. Decision making is a job that lies at the very heart of leadership and one that requires a genius for balance: the ability to embrace the divergence that may characterize early discussions and to forge the unity needed for effective implementation (Garvin and Roberto 2001).
Employee participation has been identified as one of the key components of organizational decision making. There remains, however, an ongoing challenge in how to assess its role in developing right and sustainable decisions. The spidergram approach of the decision making would be helpful in structuring the managerial decisions and identifying logical interventions (Draper, Hewitt, and Rifkin 2010). Even though employees may gain prominence and authority within the organization because of personal attributes, tradition, and culture, the most appropriate way of decision making is either bottom-up or team approach. As participatory management decisions “facilitate dialogue” and can be exhibited in the spidergram by the managers to reach a consensus, this approach could be well suited for managing innovation projects. The continuum of participation and framework is based upon the spidergram of Rifkin, Muller, and Bichmann (1988), but modified in the light of the growing literature and contemporary concepts of management decision making.
Business organizations would like to capture and merge the perceptions of key individuals into an organizational memory for developing management strategies. Various cognitive mapping approaches have been used to identify and capture these perceptions. Though creation of collective cognitive maps might appear complex in many organizational situations, spidergram approach allows merging the cognitive maps of managers into a collective cognitive decision board to represent the shared perceptions to support the decision-making process (Tegarden and Sheetz 2003). In the recent past, large companies had experienced complexities in decision making due to the market uncertainties, economic recession, corporate downsizing, and resource crunch. This situation had prompted many corporate houses to move with multiple-criteria decision-making (MCDM) approach that enables the managers to look into the decision plan and implement the most appropriate strategy. The spidergram approach appeared to be complementary to MCDM as it layers off the decision and elicits cause and effects for various decision criteria (Beim and Levesque 2006).
According to the competence-based theory, firm competencies are recognized from exclusive and unique capabilities that each firm enjoys in marketplace and are tightly intertwined within different business functions throughout the company. Therefore, competence in the firm is a composite of various attributes. Among them, many intangible and tangible attributes are difficult to measure (Amiri et al. 2009). Spidergram methodology supports decision mapping and measures the impact factor of decisions in a given situation and time. The spidergram has lines on which managers can measure the impact of decisions in reference to key areas, including needs assessment, leadership, organization, resource mobilization, and management. The spidergraph analysis would help managers decide whether the decision process in each of the identified areas is broad (mark 4 or 5) or narrow (mark 1 or 2). At a later stage, the decision can be repeated to analyze whether the level of participation has changed over time and become more effective.
Technology-based start-ups operate in fast-growing business environments and develop customer-centric products and various hands-on applications for e-commerce that generate considerable market demand for the products and fasten the speed of innovation management among the companies. It is argued that characteristics of top management team (TMT) organization and TMT processes, namely, competitive advantage and trust, significantly influence the consumer choices and the speed of strategic decision making in start-ups (Talaulicar, Grundei, and Werder 2005). In the early stages of a strategy evolution, companies face the market challenges based on their performance and competitive advantage over other firms. As most emerging companies cannot make substantial improvements in strategy development and performance unless the entire value chain is housed under less than one organizational roof, it works best if companies are vertically integrated. Hence, companies should avoid spreading their decision-making processes across different subsidiaries or autonomous divisions that may cause fragmented process and create discrete loops. However, as the underlying technology improves to meet the needs of most customers, companies begin to compete on the basis of convenience, customization, price, and flexibility. Different links in the industry value chain become modular, and the chain subsequently fragments. In either stage, most of the profitability goes to the companies that own the interdependent links in the value chain, the places where everyone is still competing to satisfy their customers with ever-better product functionality. But as those products become standardized, profitability shifts to the makers of components, and as components themselves become standardized, it can shift further back in the value chain ( Christensen et al. 2006). In order to avoid discreet links in decision making and to make the decision-making process effective, managers need to consider the juxtapositions to arrive at a deep integration of the seemingly contradictory concerns. That means, they must focus not only on what they have to accomplish but also on how they have to think. While developing the complex business strategies and managing interdependent decisions, managers should consider the five tasks to perform by developing the mindset comprising managing the self, managing organizations, managing context, managing relationships, and managing change ( Gosling and Mintzberg 2003).
Abernathy–Utterback Model of Technology Evolution
This model is an advancement over the S-curve model in which the product innovation, process innovation, competitive environment, and organizational structure are assumed to be interacting and closely linked together. In the Abernathy–Utterback (AU) model, three phases of technology evolution are suggested-fluid phase, transitional phase, and specific phase. In the fluid phase, technological and market uncertainties prevail that drive a great deal of changes contemporaneously and outcomes of technology application may vary significantly at this stage. It is almost a large experimentation game in the market place. The manufacturing process relies on high-skilled labor and general purpose equipment, there is almost no process innovation, and the many small competing firms base their advantage on differentiated product features (Abernathy and Utterback 1978).
In the transitional phase, the technology application converges with the user needs. Hence, in this stage of technology evolution, standardization of technology is taken care of by the technology providers. Usually, by this time, the acceptance of the innovation starts to increase and the market starts growing, signals that are entered into the transitional phase. The convergence pattern in this phase leads to the appearance of a “dominant design,” which is a product design whose main components and underlying core attributes do not vary from one model to another. The attributes of AU model of technology evolution in the AU model are exhibited in the Table 2.1.
Table 2.1 Attributes of technology evolution in AU model
Variables |
Fluid phase |
Transitional phase |
Specific phase |
Innovation |
Product changes/ radical innovations |
Major process changes, architectural innovations |
Incremental innovations, improvements in quality |
Product |
Many different designs, customization |
Less differentiation due to mass production |
Heavy standardization in product designs |
Competitors |
Many small firms, no direct competition |
Many, but declining after the emergence of a dominant design |
Few, classic oligopoly |
Organization |
Entrepreneurial, organic structure |
More formal structure with task groups |
Traditional hierarchical organization |
Threats |
Old technology, new entrants |
Imitators and successful product breakthroughs |
New technologies and firms bringing disrupting innovations |
Process |
Flexible and inefficient |
More rigid, changes occur in large steps |
Efficient, capital intensive, and rigid |
Source: Rajagopal (2012).
In the last phase termed as specific phase in the AU model, dominant design competition shifts from differentiation to product performance and costs. Companies get a clear picture of market segments and therefore concentrate on serving specific customers. Manufacturing uses highly specialized equipment and employing high-skilled labor becomes less important since there is a commoditization taking place, which in turn indicates the increase in the bargaining power of both suppliers and consumers. In this phase, competition becomes more intense and the market moves toward an oligopoly. As a consequence, incumbents are able to secure their position through supplier relations, distribution channels, and other complementary assets that create entry barriers to new entrants (Utterback 1994).
One of advantages for a company following the S-curve technology evolution process is that the company aims at introducing new technologies in a perennial manner that involve small changes to the existing technology, and in the intermediate period, small amount of efforts would yield large performance improvements. In this way, the company can easily move from the growth stage to the mature stage and stay long in this phase by reaping sustainable advantage on technology-linked business in a competitive marketplace. The life cycle of the technology depends on the speed of innovation/improvement in the existing technology platform, and the sustainability of the value generated by existing technology in the business and society. The innovation and technology life cycle consists of five stages:
Introductory stage
Rapid expansion
State-of-the-art
Low adaptation
Obsolete
The S-curve pattern of technology and business growth also helps in managing the diffusion of technology and adaptation of technology among the users. It is generally observed that diffusion of technology is faster than its adaptation among users due to resistance to change. The company can manage the pace of diffusion and adaptation of technology to gain advantage of technology for sustainable growth in business. However, it is difficult to predict the time span of each stage to know how the technology would move through these stages and become obsolete over a period of time. Large multinational companies often look back in crisis to resolve the situation by reviewing their previous strategies that contributed to their growth. Many firms experience competition-linked market turbulence syndrome in the following levels:
The firms trapped under competitive pressure articulate their vision,
They develop steering mechanisms to guide their future growth through change. However, such operations tend to become rigid over time, with much stronger ties to the founding vision than to the changing economic environment, and
The firms get useful signals run into the organizational defensive routines.
The key to getting out of this syndrome is driving the competitive strategies with a long-term growth (Martin 1993). Many studies reveal that competitor learning efforts may result in idiosyncratic decision loop of learning–knowing weaknesses–developing counter strategies– testing implementation–adaptation–and reviewing growth. Such decision process loop reveals that the more learning is sought after, the more complex are the strategies to implement. Accordingly, existence of certain organizational and marketplace virtues may have negative implications on strategic competitive moves. Paradoxically, at the espoused level, these two virtues can be understood as healthy signs to sustain market competition, the process of challenging marketing competition to grow may face problems of technological adaptation in the short run (e.g., Henfridsson and Soderholm 2000). Over the past decades, IT has had a profound effect on the global economy, resulting in a shift from a manufacturing to market economy. This effect, however, has also produced what may be labeled the paradox of technology and market growth. While the percentage of a firm’s budget spent on technologies continued to increase, there is increasing evidence that market failed to obtain the benefits of these expenditures within the anticipated time frame. The reason for delays in obtaining the benefits is due to management’s failure to strategically leverage the full potential of technology and their failure to overcome resistance to change.
Fundamentals of Lean Projects
Lean project management is not new to start-up innovators as they were conventionally tuned to economize the project expenditure by reducing the overhead costs, narrowing the project span, and minimizing the project waste. This practice has been followed by the innovation enterprises of small and medium enterprises in developing countries as they managed the projects within low capital and human resources, and wanted to market the project deliverables quickly to gain revenue. “Lean” approach to business has its roots in the manufacturing process. The earliest recording of “Lean” in action was in the 1780s; however, this approach rebounded in 1908, when Henry Ford introduced the standard gauging system. Ford’s production model was revolutionized by Kiichiro Toyoda in 1930, when he developed the Toyota Production System (TPS), which has been later taken as a global model of lean project management. The major difference between Ford’s production model and TPS was the shift in focus from individual machines and their operation by measuring how production flowed across each machine throughout the entire process. Using the lean project management techniques, Toyota was able to lower costs in manufacturing automobiles, increase variety of deliverables, and improve delivery, speed, and quality of predetermined project deliverables. Over the period, the lean project management, upon carrying out various refinements, has proved its worth not only to the large manufacturing organizations but also has been the key project management process for many start-up companies of small and medium capital range. In the 1980s, the world started to take notice of TPS and General Motors, among others, and recognized the superiority of the system. In 1987, the term “Lean” was set to describe Toyota’s blend of production, product development, supplier collaboration, customer support, quality, and management methods. By the mid-1990s, the Lean approach became popular from the production floor, and was being adopted by companies across the industries in the world.
The lean project management approach is regarded today as a continuous improvement methodology over the conventional manufacturing philosophy. The lean management process attempts to reduce the operational wastes and redundancies on overproduction, overprocessing, excess task dynamics by reducing the insignificant relativity or repetitions in tasks, reduce defects in parts or processes, justified logistics expenditure by lowering the unnecessary movement or handling of raw material and deliverables, lower costs through encouraging just-in-time or inventory-to-demand approach, and reduce the delay in project outcomes. The other types of operational wastes that can be controlled through the lean project management techniques in innovation projects include:
Holding lengthy, unproductive project status meetings.
Collecting redundant project data that has no scope for active analysis.
Maintaining an overly detailed schedule with less significant monitoring and evaluation checks.
Using push style status reports that tie up the project manager and team members that does not match the stakeholder interests and compel more time on administrative paperwork.
Creating documentation that is never used.
The lean approach drives the project over the constraints of time, resources, and scope. If time factor is the key driver, the project requires a higher budget and a smaller scope. The lean and conventional project management approaches are largely built on the same platforms aimed at delivering the customer value. But some lean tools and methodologies are directly applicable to project management, which include:
Value stream mapping: Large organizations and start-up enterprises following the lean innovation project management need to align themselves along value streams with focus on the customers in reference to the project deliverables and irrespective of the category of tasks to be managed during the project. The value stream is more linear than the work breakdown structure (WBS) of project management, which is typically aligned along functions and work packages.
Work packages: Lean project management advocates reconfiguring work packages or work cells according to the task and production lines in project. This process is an easy transition from one cell to another. For example, in a multiutility innovative remote control manufacturing project, if one step is to be performed on soldering a subcircuit in a motherboard of an electronic device, the next step is performed in the immediately adjacent work cell, and the final cell can be near the task of mounting the mother board on the devise cabinet. A knowledge-based innovation management enterprise can arrange a content management system such that the next cell in a value stream has immediate access to the finished task.
One-piece flow: The close proximity of the task allows project activities to be monitored relatively and carried on by adjusting minor flaws between the tasks and proceed easily to the finish check point instead of waiting for a batch of tasks to be completed. This prevents the creation of inventories between tasks and project stages and minimizes the delays between the tasks.
Kaizen: This is a structured process of continuous (kai-in Japanese) improvement (zen-in Japanese) carried out in lean management of innovation projects, which engages task-by-task process to improve the project deliverables. The principal goal of using kaizen in lean projects management is to reduce the redundancy in the tasks and improve the task performance, reduce cost, and add standardization. The complete project team is divided into the kaizen teams to go about solving a particular problem or perfecting the flow tasks in a given project area. Lean organizations empower employees to make most changes without complex approval requirements.
Error-proofing or poka-yoke: In Lean methodology, poka yoke is altering a process so that mistakes cannot be made while performing any task. The start-up enterprises and innovation organizations should be focused on error proofing so that they can reduce the cost and time overrun in the project and improve the quality of the deliverables. For example, the projects engaged in manufacturing the innovative products, emerging as the project deliverables, may configure machinery so that a part can only fit into a machine in one way, preventing mistakes from occurring because parts were loaded improperly. Error-proofing also works to ensure that any mistakes that were made are corrected and processes are altered so these mistakes cannot be repeated. Traditional project management attempts to do so with lessons-learned documents and by retaining project documentation for future reference, but is unable to make any adjustment in the existing project process and deliverables.
System optimization: Lean methodologies support optimizing work throughout the system. This system-wide approach complements improvements in such a way that each task gets the effect of improvement and drives for overall project success.
The gemba walk: Gemba is a Japanese word meaning, conventionally may be understood as “the real place” referring to where the project or work is done. In this process, a project manager physically walks with the value stream and engages the workers in performing principal and related actions to perform a task. The manager maps the task-by-task progress in the project, identifies early problems to set appropriate intervention, and offers corrections or appreciation where appropriate. Gemba is a very healthy and socially motivated factor to manage the innovation projects, where the manager goes to the project team member or a manufacturing worker, rather than calling the worker to a meeting, which ensures that the work continues and the worker feels valued. Lean management process also helps in augmenting the personal values of the team members besides economizing the project and optimizing the profitability.
Most companies are using the lean project management approaches for managing innovations to achieve faster cycle times, reduced defect rates, and sharp gains in on-time deliveries. Lean management helps the project leaders reduce the inventory levels also across the supply chain during the project period, which prompts for cost-effective financial performance, especially because some projects of complex nature could achieve simultaneous declines in manufacturing and service costs. However, a predictable hurdle in working with the lean project management approaches is the crisis in confidence that occurs toward improving financial performance quickly. Lean transformations generally have short-term adverse impacts on the bottom line of the project and the company. Management needs to anticipate these challenges and explain them clearly to the sponsors, project team, and the project owner organization. To help managers overcome the financial hurdles on the path to lean, companies need to educate the project teams on the value-stream accounting, which could help managers plan for the short-term financial impact, monitor progress, understand the operational improvements, and develop strategies to maximize the longer-term benefit (Cooper and Maskell 2008). Effective lean transformations yield major improvements not only in productivity, but also in speed, quality, customer loyalty, employee engagement, and, most importantly, growth. The innovation project that addresses customer-centric deliverables should develop the competence considering the following project expectations:
Projecting the voice of the customer at the heart of the business to help people work together more effectively to deliver exactly what customers value.
Strengthening performance systems by involving lean project management toward reshaping management roles and ensuring effective deployment of resources to resolve root causes affecting the project performance.
Enhancing organization and skills by shifting responsibility toward the front line, and demanding new styles of leadership.
Influencing mindsets and behaviors of most innovation project teams by understanding that organizations cannot change unless their people do.
Lean management further recognizes the need to magnify the commitment of all employees to improve continuously.
Successful innovation of new products leads to customer engagement and profits. Some companies have tried investing intensively in research and development. For many companies, developing new products is hit-or-miss. But according to the author’s research, successful innovation is not magical. It comes from careful attention to a small number of important criteria. The key question is not how much a company can spend, but the ways to spend money in innovation process. The return on innovation investment concept correlates directly with organic growth and links innovation spending with financial performance in ways that can lead decision makers to generate higher, more reliable returns on innovation and R&D. To become more effective, a company needs to diagnose its innovation practices and capabilities (Kandybin 2009).
General Electric (GE) launched its Leadership, Innovation, and Growth (LIG) program in 2006 to support the corporate objective of achieving corporate growth primarily by expanding businesses and creating new ones. LIG represented a radical approach for GE’s famed management development, as it was the first effort to train all the senior members of a GE business management team as a group. Team training accelerated the pace of change by giving managers an opportunity to reach consensus on the barriers they faced and how to overcome them. LIG participants were encouraged to consider both hard (organizational) and soft (behavioral) barriers in the innovation process. The program created a common vocabulary of change across GEs businesses. Power Generations managers of the company created a now ubiquitous vision statement, beefed up the leadership in their core business, expanded regulatory staff and project teams in emerging markets, revamped product development, put up a website where any employee can submit ideas for growth, and created a growth board to consider proposals and track their progress (Prokesch 2009).
Use of organic cosmetics and toiletries (OCT) manufactured from herbs and plant extracts has been popular in many developed countries. The organic constituents in the cosmetics categorically place them as ecological products and the process of marketing such products may be explained as green marketing. Marketing organic cosmetics is a relatively recent outgrowth in the business and it is largely being encouraged by the growing environmental consciousness on the part of citizens. International companies such as The Body Shop and General Nutrition Centre (GNC) have employed green marketing strategies to build their customer base in the Mexican market.
In response to customer demand for products with natural origins and antiaging functions, some of the multinational firms in Asia have developed herbal medicinal cosmetic after years of scientific research on capturing the pharmacological essence of the ingredients used in traditional medicine (Hwang 2004). However, it has been observed that the organic cosmetics are yet not familiar in the Mexican market. An increase in customer value may be attributed mainly to an increase in the perceived values of brands in the market, while the price effect measures value change caused by adding unfamiliar brands such as GNC in OCT products to the existing brands. The customer value seemed to decrease as the prices of the familiar brands increased in a large proportion and the price increase was most pronounced among the users of OCT products. There has been little awareness among the elite customers in Latin American markets about the harmful effects of synthetic cosmetics on prolonged usage. It has been observed that such customer knowledge has generated willingness to buy OCT products with a price advantage and other benefits, compared with organic and ordinary types of foods, employing a robust experimental method. The customer preference to the organic cosmetics has been increasing as the customer fears surrounding perceived risk decrease and customer benefits are communicated (Mather, Knight, and Holdsworth 2005).
An individual’s choice of organic products can be linked clearly to ethical stances, but ethical choices can also vary from individual to individual, from industry to industry, and among countries. Consumer purchasing motivations are revealed in a study as being self-interest-centered rather than altruistic. Hence, to enhance the scope of organic products marketing in the future, firms must aim to modify perceptions and attitudes of larger consumer segments by implementing educational marketing campaigns that reinforce the ethical, environmental, and societal benefits of organic production. The key challenge for organic products marketers is to strengthen individuals’ perception of the individual benefits by adding more and stronger emotional values to green brands. Future green marketing research should extend its analysis to the emotional motivations and benefits associated with environmentally responsible consumption behavior (Hartmann and Apaolaza 2006). The green intentions of organic products significantly influence ethnocentrism, environmental concern, involvement, and attitudes. However, risk aversion has been found as a major emerging variable, while involvement and environmental concerns are significant in the determining the consumer behavior toward organic products (Paladino 2005). Concerns related to the environment are evident in the increasingly ecologically conscious marketplace. It has been observed in one of the research studies that females, married and with at least one child living at home, are the consumers who are willing to pay more for environment-friendly products. They place high importance on security and warm relationships with others, and they often consider ecological issues when making a purchase (Laroche, Bergeron, and Barbaro-Forleo 2001).
Systems Thinking
In marketing operations, systems thinking can be determined as a tool in tracing and linking various activities in a particular function. To be competitive, companies must grow innovative new businesses; although on competitive market platforms, firms may face several operational barriers and seldom mesh smoothly with well-established systems, processes, and cultures. Nonetheless, success requires a balance of conventional and new marketing strategies to keep the competitive forces in equilibrium (Garvin and Levesque 2006). Emerging companies face change when they pursue new businesses, as well as the usual problematic responses to those challenges. Such companies, they say, must perform three balancing acts that include:
Developing strategy on trial-and-error basis narrowing potential choices, learning from small samples, using prototypes to test business models, tracking progress through financial and nonfinancial measures, and knowing how and when to pull the plug on an appropriate competitive strategy.
Searching for the best combination of integrating conventional and new operational processes by using systems thinking to know which capabilities to develop and which to acquire.
To strike the right balance of integration establishing criteria for using creative marketing strategies.
Systems thinking as an idea can be applied in various scientific fields, including planning and evaluation, education, business and management, public health, sociology and psychology, cognitive science, human development, agriculture, sustainability, environmental sciences, ecology and biology, earth sciences, and other physical sciences. Systems thinking can influence many of the existing concepts, theories, and knowledge in each of these fields (Cabrera, Colosi, and Lodbell 2008). In marketing and related business strategies, managers need to think ahead of competitors to keep moving from niche to market leader status. Changing the way we think does not automatically solve problems, issues, or crises in the business. However, systems thinking does reframe how we think about what we view as a problem in the first place, and what solutions might look like. The reasons for the scientific utility and promise of systems thinking are extensive. The rationale for systems thinking and required strategies for implementing “systems thinking” approach through the creation of a “learning environment” in a given marketing place can be seen in Table 2.2. The steps adopted in developing change—in the direction of systems thinking—have been reported in a previous work (Inelmen 2006). In a learning environment where simulations to be used in the evaluation of the strategies developed to prevent any wrongdoing and support either aggressive or defensive moves in the marketplace. The need to check the authenticity of the work is obvious. The systems thinking approach in innovation management is described in Table 2.2.
Table 2.2 Systems thinking approach in innovation management
Thinking segments |
Determinants |
Why |
Internal growth, business expansion, consumer needs, provide user solutions |
What |
Right innovation development, performance measurement, governance, and values |
Who |
Competitors and customers |
Where |
Niche market, international marketplace, business to business, virtual shops |
How |
Product, place, price, promotion, packaging, pace, people (sales), performance, psychodynamics, posture of the firm, and proliferation |
When |
Existing demand, latent demand, matching competitor’s moves, and during peak consumption season |
Which |
Sensitive variables, image portrayers, loyalty building strategies, and value generation |
Source: Rajagopal (2G12).
Systems thinking in developing marketing strategy is considered as a disciplined approach to promote competitive behavior of firms in a marketplace. Systems thinking is an approach that can provide a rational view of the situation, as well as the identification of approaches that are intended to produce the desired result. In order to develop systems thinking approach in a business organization, it requires a substantial change in the organizational culture (O’Connor 1997). This approach would be helpful in resolving the various business conflicts, some of which are stated as follows:
Multiple perspectives on a situation causing dilemma over its management,
Consumer behavior oscillates endlessly,
A previously applied strategy seems to overshoot the goal and affect related areas of operation,
Over time, there is a tendency to stay weak in negotiations,
Problems in establishing procedural standards in the business operations,
Decline in business growth over time,
Lack of efforts in developing core competencies, and
Optimize resources and their business application for augmenting growth in vital business indicators in the firm.
Systems thinking is usually driven by many smaller systems, or subsystems. For example, an organization is made up of many administrative and management functions, products, services, groups, and individuals. If one part of the system is changed, the nature of the overall system is often changed as well by definition. Systems theory has brought a new perspective for managers to interpret patterns and events in their organizations. Effective systems methodology lies at the intersection of the following four foundations of systems thinking (Gharajedaghi 2006):
Holistic thinking focuses on the systems logic and process orientation in general. Reviewing the system in totality requires understanding structure, function, process, and context at the same time. The systems approach enables connecting objects of various types to a single platform of thinking, to organize different forms of activity within the given time and space of the situation in business. One of the principal requirements of each successful system is effective communication among different actions. Effective development of the organization can be achieved when various strategies, strategic planning, team work, and principles of organizational changes are applied. Technical aspects are combined with the aspects of behavior, personal (personal mastery and intellectual models) conceptual ones.
Operational thinking, which also signifies dynamic thinking, refers to the conception of the principles of systems dynamics, that is, evaluation of the multiloop feedback systems, identification of the delay effect and barriers of growth, mapping stock and flow, etc. The conception of these principles creates an additional value for managing organization in reference to business systems that emerge as interdependent factor in decision making (Skaržauskiene 2010).
Interactivity is a design of the desirable future and a search for ways of its implementation. Interactive design is both the art of finding differences among things that seem similar and the science of finding similarities among things that seem different. The distinct outputs of interactive design may lead to defining problems, identifying the leverage point, and designing solutions—ideation process.
Interactive design is a part of critical thinking that is defined by defining a problem, gathering of information for problem solution, formulation of hypotheses, checking presumptions and correctness of findings, and making a solution. Interactive design offers a constant critical assessment, continuous learning, and understanding of mental models. This dimension of systems thinking is based on intuitive thinking that stimulates creativity and provides an organization with a conceptual foundation to create a unique competitive advantage.
In view of fast-growing market competition, more and more companies are recognizing the business opportunities that a focus on sustainability creates. Such a shift in thinking in many companies and industries where learning-organization principles are being applied to create sustainable business models has evidenced change in organizational culture and improvement in the core competencies. Simultaneously, they become inspirational, energetic places to work, where even relationships with customers and suppliers improve. However, a more integrated view will enable companies to innovate for long-term profitability and sustainability. There are three core competencies that learning organizations must master to profit from sustainability, including encouraging systemic thinking, convening strategic market players and customers toward changing conventional thinking, and taking the lead in reshaping economic, political, and societal forces that baffle change (Senge and Carstedt 2001).
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