Strategic decisions about the creation of innovative products.

Podea, Elena-Loredana ; Ispas, Constantin

1. INTRODUCTION

To stay on the market, a company needs to make investment projects during its entire existence. The actors involved in the decisional process are becoming more and more preoccupied by the company's strategic decision whether they should get involved or not into projects which draft the creation of an innovative product. The high level of potential for failure which characterizes the decisional process determines more and more companies to give up the idea of taking over projects on the creation of innovative products. Economic reality shows that, if the company adopts such a project, it has to face the risks which are specific to this type of concept, whereas, if the company does not take over any innovative concept, it cannot maintain its position on the market because of its competitors. Therefore, in order to be successful by adopting a project for the creation of an innovative product, it is of primarily importance that the company identifies the most efficient decisions for the creation of the draft strategy and also for the integration within the specific risks.

2. STRATEGY FOR INNOVATIVE PRODUCTS

The capacity to develop new products fast, with a good quality- price ratio, remains the main point of today's competition strategies (Giard & Midler, 1993). The high level of risk associated with the project of building an innovative product is due to the lack of coherence of the decision making process at strategic level (with an impact on the study of the external and internal environment of the respective company), meaning the lack of competence at the organizational level (with an impact on the creation process itself). Therefore one needs to pay a lot of attention when building the strategy for the creation of an innovative product, and also the decision making body needs to be very knowledgeable, as all the subsequent work of the company depends on the quality of this strategy. It is true that, within the structure of today's economy, the company's reaction becomes a major competitive weapon, in the same way as getting a fast and concrete response to the demand of clients is essential for getting and keeping these clients (Kaplan, 1998). All in all, out of all the elements that define the strategy, the key ones are the creation of the product tailor made to the needs of the client and the attitude vis-a-vis the competitors: focusing on the client's needs is vital seeing that the latter would accept the innovative product based on it's quality and price and on the level up to which it's needs are fulfilled, whereas the pressure imposed by the competition forces the company to always seek solutions to maintain and strengthen it's position on the market. In essence, the only element that can guarantee the best innovative product strategy is the company's positive answer to building a product which fulfills the proper purpose, an answer given as fast as possible, within the price and quality accepted by the client.

3. SUPPORT MATRIX FOR TAKING DECISIONS IN THE CREATION OF INNOVATIVE PRODUCTS

Unlike other projects that companies adopt during their existence, the project which builds an innovative product is characterized by instability during the whole process of creation. When a company adopts such a project in a competitive, ever changing environment, this imposes a risk- taking attitude which needs to be based on a detailed structured analysis of the interaction between key, value-adding factors: risks, advancement and profitability (Hitt and al., 2002). Thus, to allow it to adopt an innovative product project, the company needs to have a global view on all privileged opportunities for development. With this in mind, and in order to react to the changing expectations of its clients and to the constraints on the market, it is not enough for the company to guarantee and afterwards obtain the expected result, but the company should guarantee value and be able to take the most efficient decisions in order to be successful (Provost, 1994). In order to define the best decisions to be taken, it is very important to design the project considering the economical environment but also from the point of view of the investor, at the micro economical level.

The quality of the analysis on the external environment where the company evolves has a very powerful impact on the decision making process, strategically. Aware of the interactions on the global market and on the economical environment, the market-intelligent company continuously anticipates the evolutions of the market and of its competition, thus it pinpoints and assesses threats, as well as opportunities, in its specific field (Bulinge, 2002). Therefore, the lack of identification and management of all these threats in the external environment (how strong the competition is, the market segment lifespan, and well as the speed of it's growth, client's requirements), as well as posible threats from the interaction of existing ones, can have negative effects with a major impact on a company which adopts a project creating an innovative product. If the company doesn't pay enough attention to these elements which establish it in a global context, this can result in taking on strategies which instead of ensuring it's survival and fulfilment of associated objectives of performance, it can cause it to have to leave the business sector. At the micro economical level, the risk of taking the right strategically decision regarding the adoption of a project which creates an innovative product, is mostly the result of a basic analysis of the following aspects: which are the priorities, which are the means, which are the chances to conclude the project in good terms. Thus, to be successfully in adopting new innovative products, it is also necessary to determine and assess all the factors that set up the company's internal environment. By this we mean, on the one hand, knowing the company's potential, establishing the balance of human resources, materials, the capacity for choosing the necessary instruments, main suppliers, etc and on the other hand, we mean assessing the company's products from the point of view of clients's satisfaction. The company's financial stability is another important element in taking decisions regarding the project of creation of an innovative product. All in all, a deep assessment of the financial situation of the company (considering the spendings needed for the draft project, and the budget already in use for the company's current projects etc.) would help decide on the type of innovation. Image 1 presents a template of the decision making process on the creation of an innovative product, at the strategic level.

[FIGURE 1 OMITTED]

4. DECISION MAKING SITUATIONS REGARDING THE CREATION OF AN INNOVATIVE PRODUCT

Decisions taken strategically are thus limited by factors of constraint identified in the analysis of elements of the external and internal context. Identifying the company's degree of flexibility, the degree of endurance towards changes which characterize the innovation process is extremely important as this facilitates the decision-making process regarding the type of innovation the company is able to adopt, namely: project for product improvement (reformulated of repositioned product) or project for the radical innovation of a product (original product) (Choffray & Dorey, 1983). Maintaining the market share where the company produces (by referring to the company's occasional clients); improving the company's image on the market (for products more and more affected by the lack of novelty in several aspects but which are important for satisfying the needs of main clients); taking over part of the market from the competition (potential clients for the company); entering new markets, etc. They all constitute a first support decision necessary in deciding on the type of project for the creation of the innovative product. The identification of the pair 'type of project for an innovative product--specific decision elements' is to be found in the following:

* Project for the improvement of the company's product--decisions to be taken: does the product proposed for improvement have a wide lifespan for the client? ; is direct competition financially very strong? Does the competition have a very high reaction capacity towards changes adopted within the company?

* Project for the improvement of competition's product--decisions to be taken: will the product proposed for improvement have a considerable amount of use in the future?; is competition able to anticipate very fast external change which will determine the market to adopt the product in the future?

* Project for radical innovation for a national and international product--decisions to be taken: is the company financially very strong to create a product in order to have monopoly on the national and international market? Will it have important clients having constant and substantial demands of products?

* Project for a radical national product (original product for national competition, but which is also present at the international level)--decisions to be taken: are costs for importing the product extremely high comparing to the costs of the market where the company is situated? ; is the company strong enough financially in to be able to create a product which will bring it the monopoly on the national market? Will it have important clients having constant and substantial demands of products?

5. CONCLUSION

Today, when faced with the process of creation of an innovative product, companies face major and inevitable risks. Decisions taken strategically drafting the result of innovation can help the company to have significant shares on the market (successful) or can lead to the lack of balance at the micro or macroeconomic level (unsuccessful). Therefore, in order to fulfill the external and internal objectives of the company, it is of main importance that the actors involved in the decisional process, at the strategic level, analyze and consider all the identified decision possibilities before the beginning of the project itself. It is only by adopting strategically reasoned decisions that the success of the project for the creation of an innovative product can be guaranteed.

6. REFERENCES

Bulinge, F. (2002). Security equity, a systematic analysis of company vulnerabilities to a application of global risk administration, No 31, Isdm No 5, december 2002, 8p ISSN 1265-499X

Choffray, J.M. & Dorey, F. (1983). The development and administration of new products: concepts, methods and application, McGraw-Hill, Paris, ISBN13 978-2-212-54332-2

Giard, V. & Midler, C. (1993) Project and companies management, Economic Publishing, Paris, ISBN 2-7178-2555-X

Hitt, M. A. et al. (2002). Creating Value - Winners in the New Business Environment, pp. 188-213, Blackwell Publishing, First Edition, London, ISBN 978-0-631-23511-8

Kaplan, R.S. & Norton, D.P. (1998). Prospective frame. Strategic management: 4 directions of success, Organization Pubishing, Paris, ISBN10 2-7081-1722-X

Provost, H. (1994). Project management, Technip, Paris, ISBN 2-7108-0672-X