Innovation & Risk Management
Introduction
The dynamics of technology, competition, and markets have resulted to significant changes to
almost all sectors of the global market and one of the activities that have remained most powerful
is new product development (Ullman, 2009). Therefore, as global market continue to become
more competitive due to increased provision of high quality products and services which are
available in a wide range from numerous companies at affordable prices, adoption of new
product development on regular basis through a comprehensive innovation policy remains the
most important factor to any company a competitive edge in the international market (Bruiyan,
2011). This is attributable to the fact that companies that embrace innovativeness and creativity
continue to strongly support their processes of new product development mainly because they
make them unique in the market by using innovation and research to produce unique and high
quality products. According to Ulrich and Eppinger (2004) new product development process
involves all the steps involved in the entire process of developing and introducing new products
to the markets. Therefore, in literature new product development is widely defined as the process
through which a market opportunity is transformed into a finished product ready for sale either
tangible or intangible (Krishna and Ulrich, 2001). However, in order for a new product
development process to be successful it is always essential to have a clear understanding of
consumer wants and needs, the nature of the market as well as the competitive environment
(Kahn, 2013).
This report discusses the new product strategy at Total Energy Company in its attempts towards
building an effective international innovation strategy. The reason for choosing Total Energy
Company as the case study company for discussion in this report is motivated by the fact that the
Innovation and Risk Management
company has embraced almost all the components involved in the process of new product
development, but the report will mainly focus on two components of the process such as idea
generation and product development as the key initial stages of new product development
process.
Background of Total
Total is a French international energy company operating in over 130 countries that began in
1920’s, then engaging in oil production in the Middle East region (Total, 2014). Over the years
the company has widely expanded its operations globally together with diversification of its
operations into refining, marketing of petroleum products, as well as production and marketing
of chemicals. After almost a century of existence, Total has grown to become one of the leading
energy companies in the world based on its cutting edge of innovativeness and new product
development (Total, 2014). Total’s oil production activities began in 1924 majorly in the Middle
East region, subsequent to the beginning of the expansion of the oil exploration to other countries
in 1929 aimed at discovering and developing new resources. At the same year the company
began its refining activities. The company’s chemicals business started in the 1960’s when the
company’s retail network expansion also continued to grow eventually becoming the presently
existing global operation network (Total, 2014).
Throughout Total’s history, the company has always embraced an unwavering emphasis on
innovation whereby it discovered its first offshore fields in Gabon in the year 1961. In 1975, the
company made its initial foray into solar energy which it has continued to grow until today
(Total, 2014). The company also began its initial operations in deepwater drilling in the
Mediterranean in 1986 (Total, 2014). Apart from focusing on developing new products through
Innovation and Risk Management
innovation, the company has also embarked on making sure that its customers get value for their
money by producing high quality products at affordable prices where in 2011, for instance, the
company created the network for Total Access consisting of low-price stations throughout
France in order to make sure that its customers obtain its products conveniently and affordably
(Total, 2014).
Energy is undoubtedly the most vital factor for improvement of living standards and economic
development. This is attributable to the fact that modern day lifestyles rotate around the
availability of energy because it helps in driving progress, but to ensure this trend is sustainable
changes in the utilization and management of energy are inevitable and Total has been in the
front line to use innovation in developing new products that are more efficient and effective
(Total, 2014). Total has operations in about 130 countries and it is amongst the top international
oil companies as well as a leading natural gas operator, petrochemical producer, refiner, and
lubricant and fuel retailer (Total, 2014). Total Energy Company employees also leverage on their
acknowledged expertise across the globe towards discovery, production, refinery and distribution
of oil and gas for effective provision of products and services to the company customers globally
(Total, 2014). The company has also been using its innovation strategy in developing new
products, particularly energies that are likely to partner oil and gas. In addition to producing new
and improved products that are related to oil and gas, the company has also embarked on
producing products that are entirely new from their areas of specialization including solar energy
and biomass energy (Total, 2014).
Through its new product development strategy, the company has managed to place itself to be
among the market leaders in the global energy sector through its cutting edge exploration and
Innovation and Risk Management
production, gas and power, refining and chemicals as well as production of new and renewable
energies particularly solar and biomass (Total, 2014).
Idea Generation
According to Cooper (1990) stage-gate model is definitely the widely used approach to
managing development of new products which consists of ideas generated from the need for
product improvement, as well as extension of product line and product launch through product
innovation. All sections at Total are involved in product development ranging from top level
management to the lowest cadre of level employees through strong leadership and integration
across the company. Idea generation through innovation and new product development not only
involves technical research, but also the total company technology, internal organization of the
company, the entire marketing, the consumers and the customers, as well as the technological
ambience which surround the company such as the physical and social environments and the
competitors presents around the company (Krishna and Ulrich, 2001).
Considering that idea generation is the most crucial step in the new product development
process, then this is the step at which the ideas developed through the research & development
(R&D) process are refined in order to ensure that they are developed to new products (Smith
and Reinertsen, 1998). In a company setting idea generation is definitely the protocol or
precursor for the subsequent steps in an idea generation process where a new product is
envisaged to be developed. At Total Company research and development (R&D) remains very
critical in determining the viable ideas and those which are not. At this stage the company should
be able to know if the market research done has provided valid and/or reliable results since the
subsequent step in the research process can not be carried out without his/her consent which is
Innovation and Risk Management
often done on the basis on the initial instructions provided by the individual person (Krishna and
Ulrich, 2001). Furthermore, the company has been able to highlight the necessary steps that
should be followed during the research and development (R&D) process in order to make sure
that the company’s production has been improved on the basis of the records kept by marketing
and supply staff (Krishna and Ulrich, 2001). This is attributable to the fact that the generated
ideas are eventually transformed into viable products that can be marketed and supplied to the
general public in order in any viable commercialization of the idea generation towards a product
generation.
Product Development
This is undoubtedly the most involving and costly step in the new product development process
since it includes prototype development, simulations and designs all the way to the eventual or
desired product. At this stage the actual product is produced prior to its commercialization and
marketing in order to make sure considerable volumes of the product are sold to ensure the
company’s competitive edge is sustained (Yan-mei, 2009). According to Kim and Wilemon
(2007) BAH model suggests that the most crucial outcome of any new product production
process is to see a finished product from the entire process of new product development where
innovation was at the center stage.
Therefore, the considered product development is vital towards making sure that the process is
effectively completed. The company has been very proactive towards implementing its industrial
property policy aimed at protecting its innovations which has made the company to be amongst
the leading energy companies in terms of patents registration. For instance, in 2012 Total in
conjunction with Peugeot developed a new car model known as the Peugeot 208 Hybrid FE
Innovation and Risk Management
Concept which had the capacity to produce very low carbon emissions. This was achieved by
levering on the cutting-edge expertise of the company staff together with that of its partners. This
vehicle is to accelerate to significant speeds within a very short period of time and emit very low
levels of carbon into the environment (Total, 2014).
Moreover, Total has been in the forefront towards making sure that its innovations and new
product development are aimed at reducing environmental. This has been necessitating the
company to make sure its petroleum products have the least negative impact to the environment.
For example, in 2009 through its innovativeness the company developed a new diesel product
that significantly improved fuel efficiency known as Excellium Diesel which acts as an
automotive diesel likely to achieve an average of 2.5% fuel efficiency improvement. This newly
developed product has been boosting engine efficiency through its enhancement with specific
additives aimed at preventing engine clogging (Total, 2014). This product was also chosen for
the Total Ecosolutions label award which the company began to identify the most innovative
services or products that offers the best environmental standards or energy performance. The
company has been very active in making sure that in the company’s R&D strategy there is a very
strong link between the idea generation and product developments stages in the new product
development process. This has ensured that Total is able to consistently produce new products
into the markets through its cutting edge innovation (Total, 2014). Therefore, by embracing
innovation and implementing an appropriate risk management strategy, the company been able
to constantly develop new products throughout its history as a mode through which it achieves
its competitive advantage against its competitors. The company policy towards innovation and
new product development has also been very critical towards ensuring that it remains a
frontrunner in the energy sector globally (Total, 2014).
Innovation and Risk Management
Conclusion
In conclusion, it is evidently clear that Total has embraced innovation as an integral part of its
day to day operations as a way of matching its solutions towards environmental and energy
challenges. Total company has inherently embraced innovation as a way of enhancing new
product development to ensure that the company maintains its cutting edge competitiveness in
the international market through production of high quality and unique products at affordable
prices. Thorough screening of new ideas likely to result to new product development has been in
the forefront towards making sure that the company maintains its vigor in innovativeness and
new product development both of which are essential in ensuring the company remains
competitive in the international market. Thus, idea generation and product development
considered in this report seems the most important components of new product development
process embraced by the company to make sure it continues to leverage on its innovativeness
and risk management for posterity and achieving more global competitiveness.
Innovation and Risk Management
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