New Products - From Ideas to Markets at LMU München

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Study with flashcards and summaries for the course New Products - From Ideas to Markets at the LMU München

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Challenges of Offshoring

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Major reasons for offshoring and outsourcing

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Background to Outsourcing

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From Plan-Based to Agile Methods

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Disadvantages of Plan-based methods

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Plan-Based Methods - 4 sequential phases in rational unified processing

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The Unsolved problem of Software development

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Market Leadership across Generations: Incumbent Advantages 

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Market Leadership across Generations - Basics 

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Probit/Rank Approach: Differences and Basic explanation Approach 

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Empirical Regularities in the Diffusion of Technologies 

- Explaining Non-Simultaneous Adoption 

Exemplary flashcards for New Products - From Ideas to Markets at the LMU München on StudySmarter:

Selecting the Location of Software providers

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New Products - From Ideas to Markets

Challenges of Offshoring

Various aspects need to be managed in order to achieve the promised cost savings:

Language and Cultural barriers 

  • Cultural and linguistiy problems can lead to misunderstandings, loss of trust and a sinking work motivation 
  • But they are also applicable for nearshore organizations 
  • Cultural differences in the ways of work: e.g. power distance between manager and employees 

Solutions (relational and contractual governance): 

  • Implementation of onshore and nearshore locations with local employees 
  • Specific contracts with a narrow scope of interpretation 
  • Intercultural seminars 
  • Use of videoconferences to decrease felt distance (social interaction ties)

Time differences 

  • Problems with all forms of synchronous communication 
  • short time frame, time shift between summer and winter time 
  • Higher communication costs due to the follow-the-sun principe 

Solutions 

  • Flexible working hours 
  • proactive planning of communication 
  • clear documentation decreases need for personal communication 
  • defined processes 
  • integration of sites

Principal-Agent problems

How can the client control what the provider is doing? 

Solutions:

  • Exchange of people between client and provider (cultural liaisons) 
  • Technology can support assynchronous communication 
  • Inexperienced companies usually start with nearshoring ot the Build-operate-transfer model

New Products - From Ideas to Markets

Major reasons for offshoring and outsourcing

Costs savings 

  • Mostly due to the low cost of labor in the offshore locations 
  • But: the amount of the cost benefits is controversial -> lower wage level vs. higher coordination costs 
  • In general, however, the cost savings due to significantly lower wages are only partially offset by increased coordination costs -> therefore, an overall cost reduction of 25-35% can be expected

Higher flexibility 

  • Required services and know-how can be purchased as needed 
  • Converting fixed costs into variable ones

Concentration on core competencies

  • Reaction to higher intensity in competition -> creation of free capacities -> enhance own core competencies 
  • Highly efficient, specialized offshoring vendors –> potental economies of scale -> cost savings

Acquisition of know-how

  • High number of available, well educated professionals and high level of motivation 

Follow the Sun principle

  • Utilization of the time shift in order to extend the working time 
  • Ideal case: onshore-team assigns a task to the offshore team at the end of the office hours; work will be carried out by offshore team until th eonshore team starts working the next day

New Products - From Ideas to Markets

Background to Outsourcing

Definition: 

  • Outsourcing means contracting taks or services (e.g. IT servies) to an external provider 

Theoretical background: 

  • When comparing insourcing and outsourcing of a task transactions costs + production costst (+margin) are being compared 
  • Or the other way round: to source a task is efficient if the gain from the decrease of production costs is higher than th elosses from the increase of transaction costs

Drivers: 

  • Production costs: economies of scale 
  • Transaction costs: specifity and more (number of transactions)

New Products - From Ideas to Markets

From Plan-Based to Agile Methods

  • In the early 90s, lightweight agile methods emerge as answer to the heavy planbased methods 
  • They are just enough methods, which develop in close cooperation with the custome
  • Software tests are continously integrated in the development process in incremental, iterative development cycles
  • One of the most used agile methods is Scrum

New Products - From Ideas to Markets

Disadvantages of Plan-based methods

  • Large overhead (e.g. templates, specifications, designs) is produced, that does not generate visible advantage for customer 
  • Not enough attention to the human factor in software development 
  • Tests and customer involvement take place too late in the development process 
  • Not enough learning from mistakes for future projects 
  • Because of dynamic and complex market requirements plan based solutions are often out of date when the development process is finished 
  • Changes in customer´s requirements are hardly incorporable into the development process, due to its sequential nature 
  • Changes of artifacts involve high efforts and costs

New Products - From Ideas to Markets

Plan-Based Methods - 4 sequential phases in rational unified processing

Briefly: 4 phases with 1-n iterations in which you get closer to final product 

1. Inception Phase

  • Creating a vision/clear goal for all stakeholder 
  • Which problems should be adressed? 
  • Domain Model

2. Elaboration Phase

  • Architectural prototype 

3. Construction Phase

  • Core: develop a test
  • Milestone: beta version of software 

4. Transition Phase

  • Transfer and deployment of the system to the user community 
  • Software is up and running in its final environment

New Products - From Ideas to Markets

The Unsolved problem of Software development

  • Only 39% of software projects started in 2012 were completely successful 
  • 43% are challenged (cost or time overruns or nor fully meeting user´s requierements) and 18% are outright failures
  • Various failure rates for software development up to 85%
  • Reasons for failure are mostly found in combinations of technical project management and business decisions
  • However, failure rate is decreasing due to experience curve in how to deal with software development

New Products - From Ideas to Markets

Market Leadership across Generations: Incumbent Advantages 

Incumbent Advantages: 

  • Larger installed base 
    • As an indicator of consumer preferences
    • Consumers may be locked-in
  • More complementary products 
  • Brand loyalty
  • Product improvements and/or cost reductions through learning and economies of scale 
  • Strategies to maintain dominance across technological generatons
    • Licensing and Distribution policies that tie complementary goods Providers to ist Standard
    • Backward compatability 

New Products - From Ideas to Markets

Market Leadership across Generations - Basics 

  • Market Leadership common in high-tech industries, especially in the presence of Network effects
  • Early lead can translate into a competitive Advantage throughout a technological Generation 
  • Market Leadership often persists across Generations
    • Especially in Network industries
    • Dominance carried over to future Generations. But how?
      • Dynamic capabilities developed from Prior Generations that are useful in the new Generation 
        • Firms better at Managing a new Technology because they have learned how to do so in a Prior one
      • Firms utilize complementary assets acquired in a previous product Generation
        • Installed base of a complementary good as a specific form of leveraging assets from a previous technological Generation 

New Products - From Ideas to Markets

Probit/Rank Approach: Differences and Basic explanation Approach 

In Epidemic Approach/Bass Model: Information is limited and therefore critical for Adoption 

Here: Full Information and rationality: Adoption only depends on individual characteristics 

How probit/rank models try to explain different Adoption times: 

  • Individuals (or firms) differ in their choice of adopting or not
  • But based on characteristics, they make the optimal decision
  • Differences between iindividuals may be crucial to explain patterns of diffusion

New Products - From Ideas to Markets

Empirical Regularities in the Diffusion of Technologies 

- Explaining Non-Simultaneous Adoption 

Contradiction: The new Technology is clearly superior. Therefore, one would expect all potential useres to adopt the new Technology immediately. However, there is no immediate Adoption by all potential users!

Ho can we explain this contradiction? 

  • Epidemic Approach and Bass Model
  • Probit/Rank Approach

New Products - From Ideas to Markets

Selecting the Location of Software providers

Major incentives are labor costs and customer proximity 

Hard Factors

  • Closeness to supply and sales markets, transport link, labor potential, wage and salary level or local taxes 

Soft-Company related factors

  • Economic climate, business contacts, opportunities for cooperation, higher education institutions or research facilities 

Soft-Employee-Related Factors

  • Residential situation, environmental quality, schools. social infrastructures, recreatiuonal value

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