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Open Innovation and the Stage-Gate Process

A Revised Model for New Product Development

Dave Szabo

on 30 October 2012

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Transcript of Open Innovation and the Stage-Gate Process

A Revised Model For New Product Development Open Innovation and the Stage-Gate Process The Importance of Core Capabilities and Business Models Case Study: Vetco Gray The Open Stage Gate Model What is the GE Tollgate Process? structured and comprehensive product development model at GE
follows the same general principles of the Stage-Gate process The Traditional Stage-Gate Process What do gates contain? Open vs Closed Innovation Open Innovation a firms expertise or skills in key areas that directly lead to success and performance Who is Vetco Gray? Import,
Evolve. Closed Innovation Innovation from inside or outside the firm
Allows for projects that cannot thrive internally to find external paths to market
Promotes innovative culture through exposure to external innovators Innovation from inside the firm only
Projects that cannot thrive internally or get canceled get 'put on a shelf'
Limits innovative culture by canceling projects that do not 'fit' within the core competency of organization deliverables
closed evaluation criteria
outputs for stop/go & execution plans What does it do? provides a process to take a new product idea to launch
improve efficiency
provides discipline Are there limitations? time-consuming
can be bureaucratic
restriction of learning opportunities
does not allow for open innovation or
does not allow for re-thinking of core-capabilities or business models Core Capabilities Business Models based on creating value and capturing that value
provide the focus for development efforts and value creation Both should evolve by constant testing and evaluation General Electrics Oil & Gas Business
business model: offers customized or standardized subsea solutions to meet the needs of any drilling and production project from concept to full production
core-capabilities: engineering know-how and ability to provide reliable subsea solutions The Upstream oil and gas industry offshore drilling of oil and gas
manual installation of process equipment with limited lifespan < 50 yrs
great technological challenges
high cost of failure (BP oil spill) trying to adopt open innovation as a company Vetco Gray: Projects and NPD Process Limitations of GE Tollgate Process exporting of know-how and technology was infrequent and without process
ad-hoc process of importing technology and know-how Allows external and internal know-how and technology to enter or exit the process at any given point, not only as ideas entering the funnel at the beginning or as new products coming out Closed Evaluation Criteria vs Open Innovation Evaluation Criteria managers should continuously evaluate the potential for inbound and outbound innovation activities at all stages Development of a New Pump Overview pump corrosion is a major problem with subsea oil pumps
VG needed a solution to prevent pump corrosion Solution VG imported coating technology developed by GE Global Research Center originally created as a protective agent for helicopter engines
VG successfully imported an internal technology that was in VG's business model and used it's core capabilities
VG has not made any effort to commercialize this material therefore not successfully exporting the technology or know-how Development of Aqua-Dynamical Pipes Overview strain due to underwater sea currents is a major problem of subsea equipment
VG needed a solution to reduce this strain and wear on the equipment Solution VG designed threads to be placed on subsea equipment to reduce strain with some outsourced analysis
VG did not possess the internal knowledge to accurately interpret the analysis
Unsuccessful attempt at importing knowledge Development of a Subsea Watermill Overview VG needed a solution to generate power underwater Solution VG internally developed subsea watermill with sea currents as the driving source
project not aligned with VG's business model (subsea drilling)
project does align with core capabilities (develop applications for subsea environment)
project was cut due to lack of resources and strategic fit
imported technologies and a review of business model could have benefited project Development of a New Riser Overview VG needed a lightweight component to connect the subsea equipment with the above water platforms Solution VG collaborated with external partners on project
project was canceled due to installation problems and a lack of customers
project did not align with core VG's capabilites or business model
exporting technologies or importing know-how could have made this project successful Lessons Learned NPD projects should be aligned with the firm's core capabilities and business model
OSGM can systematically help exporting and importing knowledge and technology which can create new paths to market
OSGM helps business models and core capabilities evolve with processes when they do not align with a NPD project Idea Define
Stage Design
Stage Validate
Stage Gate 1 Gate 2 Gate3
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