Radical Product Innovation

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Table of Contents
Abstract.................................................................................................................................................2
1. Introduction.......................................................................................................................................2
2. Literature Review..............................................................................................................................3
3. Methodology.....................................................................................................................................4
4. Lonza Case Study: Radical Product Innovation.................................................................................4
5.1 Idea Generation/Discovery Stage.................................................................................................4
5.2 Idea Screening.............................................................................................................................5
5.3 Product Development and Testing...............................................................................................8
5.4 Market Launch.............................................................................................................................9
6. Discussion.......................................................................................................................................10
7. Conclusion.......................................................................................................................................12
References...........................................................................................................................................13
Appendix A.........................................................................................................................................15
Appendix B.........................................................................................................................................16

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Abstract
Innovation is a kind of buzzword and perceived as vital to achieve in the worldwide business
environment in the 21st century. This paper is based on a case study of Lonza Ltd that wants
to promote radical innovation and requires entering new, less competitive markets, without
losing its focus in operating business. By addressing the gap in the company, the author
designed an initiative for Lonza to develop a new implant with Polyglactine/Polypropylene
Mesh technology for hernia surgery to foster long-term radical innovation. In this regard, the
secondary data is collected from various authentic sources about management tools and
models that support radical product innovation process. The findings of the paper suggest that
to enable radical innovation, it is very important for Lonza to collaborate with other
organisations or universities to employ latest R&D facilities and tools that will allow
company to strengthen the innovative skills of engineers, scientists, and doctors working in
the company. Also, the company needs to intensify their production capabilities for
developing prototypes of their new product by employing experienced and skilled people and
scientific/engineering techniques, and timely integrate them into their production operations.
Keywords: Lonza, innovation management, radical innovation,

1. Introduction
A rapid growth and innovation in healthcare products and processes is one of the major
challenges for pharmaceutical companies today. This paper is based on a case study of Lonza
Ltd. which is a leading supplier of healthcare, life science, and pharmaceutical products
worldwide. The company can be considered customer-oriented mainly due to its
organisational structure and also due to supplying its products to giant multinational
companies. There is no doubt that company is very successful today but the case study of
Lonza reveals a major gap in the company which is the lack of focusing on long-term radical
innovation. The author found following three core reasons for this gap: (1) incentives to
middle management; (2) contract manufacturing; and (3) LIFT (Lonza Innovation for Future
Technology) initiative which is not functioning well. It is believed that above mentioned
reasons are the foremost barriers to radical innovation in the company. Furthermore, the
SWOT analysis of Lonza Ltd in appendix A highlights core strengths, weaknesses,
opportunities, and threats to the organisation.
This paper aims to design an initiative for Lonza that can strengthen incremental and
particularly radical innovation by recognising the need of new product development. In this
regard, a stage-gate product innovation model is selected to describe the stages and activities
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that enable innovation in Lonza Ltd. In addition, risk assessment through risk register and
risk probability matrix, lean manufacturing, and Porters five forces analysis are employed as
innovative management techniques.

2. Literature Review
Birkinshaw et al. (2008) define innovation management as the invention and
implementation of a management practice, process, structure, or technique that is new to the
state of the art and is intended to further organizational goals. (p. 825). Managing innovation
is a controversial debate in the management literature and experts and theorists are not agreed
on one or two practices that can allow firms to manage technological innovation effectively
(Mogee, 1993). This fact hinders organisations to recognise the issue of innovation
management that should be addressed systematically.
Managing innovation is a complex and multifaceted process and it is essential for the
management to understand different types or patterns of innovation. This understanding can
help management to choose appropriate patterns which will result in low cost, less
uncertainty, less time, and less sporadic during innovation process (Leigh, 2000). Two
different types of innovation are differentiated in table 1 on the basis of their underlying
features.
Table 1: Difference between radical innovation and incremental innovation

o
o
o
o
o

Radical
Technology-driven
High uncertainty
Discover innovative technology
Dramatic changes in existing markets or
creates new markets
Focuses on service, product, or processes
with extraordinary performance attributes

o
o
o
o
o

Incremental
Customer-driven
Low uncertainty
Exploits existing technology
Develops or improves competitiveness
within current industry or market
Focuses on cost reduction or improving
existing products, services, or processes
Source: Leigh (2000, p. 19)

It is evident in the above table that initiating radical innovation is completely different than
implementing incremental innovation. In fact, radical innovation requires lots of experiments,
dedicated development team, separated structure from the existing business model, and huge
investments (Leigh, 2000).

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Today companies use a variety of management techniques and conceptual models to initiate
and manage the innovation process. Some popular models and techniques include: stage-gate
framework, benchmarking practices, SMART framework, checklists, risk assessment, NPV
assessment, quality function deployment, value engineering, Gantt chart, work breakdown
structure, PERT, and CPA. These tools also help organisations to decide how good or bad
they are in managing innovation. In addition, they also enable them to improve their
performance by considering time, quality, and budget constraints (Brady, 1995).

3. Methodology
In this paper, a case study of Lonza Ltd is considered to design an initiative for the company
that wants to promote radical innovation and requires entering new, less competitive markets,
without losing its focus in operating business. In this regard, qualitative approach is adopted
to develop the initiative for Lonza that can help the company to foster long-term radical
innovation. In addition, the secondary data is collected from various management books,
journals, and authentic internet sources about management tools and models that support the
radical product innovation process.

4. Lonza Case Study: Radical Product Innovation

A stage-gate framework is used in this paper for radical product innovation for Lonza to
overcome long-term radical issues. The stage-gate framework is a project management
technique which is developed on the basis of lean manufacturing principles (Cooper, 2006). It
assists the organisations to develop new innovative products or improve current processes at
different stages, separated by gates. The product/process continuation decision is taken at
each gate by the project manager or a steering committee (Cooper, 2008). The recent research
reveals that 85% North American organisations developed a complete product innovation
system using stage-gate model in the past two decades (ibid). A typical stage-gate model is
presented in figure B1 in appendix B.

5.1 Idea Generation/Discovery Stage

This stage refers preliminary activities required to explore opportunities and a desire to
generate new product ideas (Cooper, 2006). The following discussion is based on how the
idea of new innovative product is generated for Lonza Ltd.

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Opportunity recognition: Over the past few decades, hernia patients are facing many
problems related to the growth of scar tissue due to traditional implants in hernia surgery. In
1996, a leading surgeon Professor Schumpelick developed a new implant with biocompatible
characteristics to overcome this issue (Schumpelick and Klinge, 2003). Biocompatible
implant is an innovative idea that enables optimal tissue re-growth after hernia surgery (ibid).
Need recognition: But the latest research reveals that the biocompatible implant discovered
by Schumpelick has not resulted in reducing the frequency of chronic pain in hernia patients
(Khan et al. 2010). Additionally, it also causes a higher a frequency of recurrence and
infection. Therefore, there is a strong need to develop Polyglactine/Polypropylene Mesh to
overcome issues in hernia surgery (ibid).
Initial entrepreneurial activities: In order to
address this issue, Lonza can approach
leading textile engineering companies and
research institutes to develop prototypes for
Polyglactine/Polypropylene Mesh of the new
implant. In addition, the company can
contact manufacturers producing biocompatible
materials and medical implants. In order to validate the medical relevance of this idea, Lonza
also requires a comprehensive camera system to check particular features of the abdominal
wall. It is believed that to employ above technologies Lonza may develop an innovative
implant for the hernia surgery (Lettl et al. 2008).

5.2 Idea Screening

After successfully generating innovative product idea, this stage refers to a quick and
inexpensive assessment of major risks associated with the new product development (Cooper,
2006). But before this it is the best practice to know stakeholder requirements in detail. Lonza
can conduct stakeholder analysis to build user stories by employing the power/interest grid
for stakeholder prioritization. The power/interest grid for stakeholder prioritization applied on
Lonza case study is presented in figure B3 in appendix B. Similarly, the company also require
to set interaction standards to determine how Polyglactine/Polypropylene Mesh implant will
be used in order to avoid issues of recurring pain and infection.

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The most important step in idea screen is the risk assessment of new product. In this regard,
the first step is to establish risk assessment criteria to analyse possible risks related to
Polyglactine/Polypropylene Mesh implant. Table 2 presents simple criteria for assessing
probable risks for Lonza Ltd.
Table 2 Risk assessment criteria
Risk

Probability

Rating

(P)

Almost

4
3
2
1

Certain
Likely
Possible
Unlikely
Rare

Impact (I)

Score = P x
I

Catastrophic

Very high

Major
High
Moderate
Modest
Minor
Low
Insignificant
Very low
Source: Cooper (2005)

The above assessment criteria is translated into a risk register in table 3. Risk register is
composed of several qualitative and quantitative techniques that can assist Lonza to rank each
risk according to its likelihood of occurrence and degree of impact. In table 3, total 11
possible risks in developing Polyglactine/Polypropylene Mesh implant are identified and
ranked according to their probabilities and impact. These risks are also categorised into three
significant categories such as Manufacturing Technology Risk (MTR), Product Technology
Risk (PTR), and Intellectual Property Risk (IPR).
In table 3, the risks with more than 10 score are considered as high risks for Lonza in
developing new product; and therefore require appropriate risk response strategy. According
to Chapman (2001) and Garlick (2007), risks can be treated by adopting four types of risk
response strategies such as risk avoidance, risk reduction, risk transfer, or risk acceptance. In
the risk register, top three risks are critical and require risk avoidance strategy; and due to the
severe impact of those risks, Lonza can either engage in alternative activity or otherwise can
stop the production of the new product. On the other hand, the consequence of next four risks
i.e. R4, R5, R6 and R7 can be reduced by arranging adequate resources for production, and
adopting safety and quality procedures during manufacturing, storage, and transportation. The
remaining risks can also be treated effectively if Lonza can acquire comprehensive
knowledge of the new implant development process and patent issues.

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R2

PTR

R3

PTR

R4

PTR

R5

MTR

R6

PTR

R7

MTR

R8

MTR

R9

IPR

R10 MTR
R11 IPR

Availability of desired raw material

(Polyglactine/Polypropylene)
New biocompatible implant fulfils intended
purpose
Acceptance of new biocompatible implant
in medical industry
Product stability in terms of storage,
implant, or transportation
Safety and quality requirements of
production system
Performance parity like other successful
products
Availability of production resources (e.g.
tools and equipments)
Fully known and understood product
development process
Potential of Trademark registration
All time availability of required production
capacity
Understanding of significant patent issues

MTR Manufacturing Technology Risk

PTR Product Technology Risk
IPR Intellectual Property Risk

Score = PxI

MTR

Consequence

Risk Category

R1

Risk Description

Likelihood

Rank

Table 3 Risk register for Lonza new product (Polyglactine/Polypropylene Mesh implant)

Risk Response
Strategy

20

Avoid

20

Avoid

4.5

18

Avoid

4.5

18

Reduce

16

Reduce

12

Reduce

12

Reduce

Reduce

Transfer

Reduce

2
2
4
Reduce
Source: Created by author (2012)

The risks mentioned in the risk register are also rated in the risk probability matrix in table 4
by considering the risk assessment criteria as a thumb of rule.
Furthermore, all possible risks to Lonza for developing Polyglactine/Polypropylene Mesh
implant are plotted on a risk map in figure B2 in appendix B.

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Table 4 Risk probability matrix

Almost Certain
>80% (5)

Likely
50 80% (4)

Possible
30 50% (3)

Unlikely
10 30% (2)

Rare
<10% (1)

Risk Criteria

10

15

18

25

(R3, R4)

12

16
(R5)

(R1, R2)

15

(R7)

20

12

(R8, R9)

(R6)

10

(R10)

Probability

(R11)

Insignifican
t (1)

High

Minor
(2)

Moderate
(3)

Moderate

Major
(4) or (4.5)

Catastrophi
c (5)

Low

Impact

5.3 Product Development and Testing

During this stage, Lonza needs to build a basic prototype for Polyglactine/Polypropylene
Mesh implant for the patients. Today, lean product development is gaining popularity among
medical device manufacturers in order to reduce costs by identifying and eliminating waste
from the entire development process. Miscitelli (2006) considered lean product development
as philosophy rather than a technology because it includes several disciplines and procedures.
In developing prototypes for Polyglactine/Polypropylene Mesh implant, Lonza must consider
lean manufacturing implementation for successfully completing the development process by
eliminating waste. Eliminating waste in biocompatible implant means avoiding issues that
can cause a higher frequency of recurrence of hernia pain or infection after the surgery.
Developing Polyglactine/Polypropylene Mesh implant is a sensitive project and need to cover
several aspects such as biocompatible characteristics, safety and regulatory compliance, and
miniaturisation. Lonza as a medical device manufacturer can drive more and more workflow
optimisation in order to achieve its strategic goals. In fact, the company must be demanding

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when it comes to expectations around developing prototypes for Polyglactine/Polypropylene

Mesh implant.
After developing the prototype successfully, it is inherent to verify the new products vision
with the key stakeholders. This means that the prototype will be tested by the doctors and
scientists in the lab and then on living creatures. The cost of developing prototype is low at
this stage as compared to the whole project, so Lonza can still absorb issues with the new
product without losing a large portion of developed material and sunk costs.

5.4 Market Launch

Market launch is the last step in a stage-gate framework which refers to the beginning of full
production and commercialisation of the product (Cooper, 2006). Market launch is a critical
step and requires deep industry analysis before commercialising the end product. Prior to full
market launch of Polyglactine/Polypropylene Mesh implant, Lonza may employ Porters five
forces framework for analysing the medical industry in terms of five governing forces such as
supplier power, barriers to entry, buyer power, substitute threat, and competitive rivalry
(Porter, 1985). A general Porter five forces analysis for Lonzas new product is presented here
mainly assuming radical innovation in implanted devices.
In the beginning, buyer power will be extremely high as the physicians are careful in instantly
adopting new innovative technology especially when they are unfamiliar with products
features and long-term consequence. In contrast, the power of buyers tends to be medium if
hospitals or other healthcare organisations will purchase in bulk on the basis of preferences of
doctors and surgeons. Lonza may have substantial negotiating power for its new innovative
product to capture the market share and owing limited market control to some extent.
Generally, medical device manufacturers buy ordinary materials and transform them into a
valuable product (Mehta, 2008). In this case the suppliers importance and power are
relatively low. But Lonza requires special materials i.e. Polyglactine/Polypropylene, modern
equipment such as camera system, and latest biocompatible technology to develop its new
product. In this regard, the power of suppliers will be high to produce specialised products
on demand. But the use of very latest equipment, technology, and materials will be major
barriers for the new firms want to enter into the industry. Similarly, the copyright issues also
cause to restrict new entrants as well as lessen the rivalry among existing firms. Therefore,
Lonza can take benefit by protecting patent rights of new product in order to establish
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temporary controls in the market (ibid). In this way, new product will be recognised until the
patent will be expired and competitors can enter into the market.

6. Discussion
Radical innovation requires many changes at structural and organisational levels particularly
in three areas of concern: skills development, production means, and business model. In this
regard, Lonza can use the idea of Capability Triad which recently emerges in the product
development domain for gaining competitive advantage. The concept is given by Best (2001)
which is based on achieving breakthrough advances in the business model, production
capabilities, and skill formation for radical innovation. The capability triad is an innovative
and comprehensive framework that highlights systemic aspects of organisational change at
production and enterprise levels. The intersecting circles in figure B4 in appendix B
demonstrate that these three areas are not separable and they are equally dependent
subsystems of a new product development process. The following discussion justifies the
questions, what Lonza requires to develop these new innovation capabilities.
Innovative Skills formation is inherent for Lonza as the company has redundancies in
innovation mainly due to lack of external networks with universities and other organisations
in the biotech industry. Also, LIFT framework of Lonza is not functioning well. Therefore, it
is appropriate for Lonza to collaborate with other organisations or universities to employ
latest R&D facilities and tools that will allow company to strengthen the innovative skills of
engineers, scientists, and doctors working in the company. In this regard, the company can
also employ a skills matrix to verify the skills, knowledge, and interest of the team members.
A sample skill matrix for Lonza team members is presented in figure B5 in appendix B where
left column contains the knowledge and skill areas and top row contains the name of the team
members. The intersection of columns and rows identifies the level of each team members
knowledge, skills, and interests.
Lonza case study also demonstrates that the company lacks in entrepreneurship thinking and
behaviour. The business model aspect of the capability triad illustrates how firms can
generate entrepreneurship thinking based on technological capabilities, product specialisation
and open system (Best, 2001). The business model of Lonza with reference to the success of
the new product requires structural changes in the organisation. In addition, the new business
model of Lonza must be based on the independent production system rather than contract
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manufacturing where opportunities for innovation are limited. Table 5 contains new roles of
key individuals in Lonza for the successful implementation of radical innovation.
At present, Lonza is extremely market-oriented company. In order to intensify their
production capabilities for developing prototypes for Polyglactine/Polypropylene Mesh of the
new implant, the company needs to access or employ experienced and skilled people and
scientific/engineering techniques, and timely integrate them into their production operations.
Also, Lonza can encourage employees to increase their production capabilities by providing
them latest equipment and conducting training programs for them. In addition, company can
provide a platform to their employees to enrich their problem solving skills.
Table 5: Key roles of individuals

Key individual

Role

Technical innovator

Lonza may hire or identify technical innovator in the organisation

who is specialised in one or two areas of concern. This will help
the Lonza in generating new innovative ideas in the future

Technical/commercial

Currently, Lonza has lack of external networks with universities

and other organisations in the biotech industry. The role of
technical/commercial scanner is critical for Lonza as he/she
acquires useful information from outside organisations often
through networking. This will help Lonza to achieve innovation by
carrying out R&D activities

scanner

Gatekeeper

Similar to a technical/commercial scanner, the role of gatekeeper is

also significant who acquires information from journals,
companies, conferences, and colleagues and serve as an
information resource for others in the organisation

Product champion

Lonza really needs new innovative ideas from idea sellers so-called
product champion.

Project leader

The role of project leader is vital in Lonza particularly for

developing new innovative products. He/she usually ensures many
requirements of the project such as administration, management,
production, resources, and fulfilment of goals and strategic
objectives

Sponsor

Finally, sponsor always plays a crucial role in providing power

based within the organisation. In case of Lonza, the sponsor can
help the company for providing legitimacy and patent basis for new
Polyglactine/Polypropylene Mesh implant
Source: Roberts and Fusheld (1981)
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7. Conclusion
In this paper, a major gap in the Lonza Limited Company i.e. lack of focusing on long-term
radical innovation, is addressed by providing a basis for radical product innovation. In this
regard, stage-gate framework is used to develop a new implant with Polyglactine/
Polypropylene Mesh technology for hernia surgery. It is found from the risk analysis at idea
screening stage that Lonza needs to adopt risk avoidance and risk mitigation strategies to
avoid the impact of probable risks.
Overall, the medical product market has high competition with low profit margin and most of
the manufacturing firms look to reduce production costs by applying lean manufacturing
techniques. In developing prototypes for Polyglactine/Polypropylene Mesh implant, Lonza
must implement lean manufacturing theory for successfully completing the development
process and also to avoid issues that can cause a higher frequency of recurrence of hernia
pain or infection after the surgery.
It is also found from the industry analysis that Lonza must be careful in securing patents for
establishing temporary controls in the market, and also to hold back new entrants and reduce
the impact of rivalry. To enable radical innovation, it is very important for Lonza to
collaborate with other organisations or universities to employ latest R&D facilities and tools
that will allow company to strengthen the innovative skills of engineers, scientists and
doctors working in the company. Also, it is found that Lonza is very market-oriented
organisation, so in order to intensify their production capabilities for developing prototypes
for Polyglactine/Polypropylene Mesh of the new implant, the company needs to access or
employ experienced and skilled people and scientific/engineering techniques, and timely
integrate them into their production operations.

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Appendix A

INTERNAL

Table A1 SWOT analysis of Lonza Ltd.

WEAKNESSES

FAVOURABLE

UNFAVOURABLE

Very good customer oriented company

Extremely market-oriented company

Supplier of big multinational

organisations
Strong organisational structure
OPPORTUNITIES

o
o

Redundancy in innovation
Lack of external networks to
universities and other organisations in
THREATS

Collaborate with universities and other

companies in biotech industry
Grow significantly in the areas of
bioproducts, biopharma, and human
health
Technological breakthrough

Customer requirements are not

innovative
Copyright issues
Lack of availability of standardised raw
material for developing innovative
products

o
o

AL RN TE EX

STRENGTHS

o
o

o
o

Focus on long-term radical innovation

without losing competence in current
business environment
Source: Created by author (2013)

Appendix B
Figure B1: Stage-gate model

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Figure B2: Risk map for Lonzas new product development

Source: created by author (2013)

Figure B3: Power/interest grid for stakeholder prioritization

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Source: Henri (2008)

Figure B4: Capability Triad

Source: Best (2001)

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Figure B5: Skills Matrix

Source: Aswathappa (2005, p. 99)

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