Continuous Innovation Process and Knowledge

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Continuous Innovation Process and Knowledge Management
Ján Košturiak – Róbert Debnár
In the global era of hypercompetition, telecommunications and accelerated
information/knowledge sharing, the innovation process has to become a systemic property of
a company and its organization. All individuals work in and are part of some key corporate
processes; all of these processes are subject to both continuous and often discontinuous
improvement. That means that continuous (quantitative) and discontinuous (qualitative)
innovation drives must be embodied in each individual and embedded in the system of their
daily interaction and work. An effective and company-wide innovation cycle is the
prerequisite for maintaining strategic competitiveness in a fast-moving, turbulent era. The
whole company, with all its employees, whether production or service oriented, must become
an Innovation Factory.
Professor Milan Zeleny, Innovations 2005
1. Market Changes and New Business Concepts
After many years of streamlining of the business and manufacturing processes many
managers are now asking how to increase the competitiveness of their companies. Many cost
reduction strategies led in many cases only to a temporary success. The previous problems are
back and the improvement potential is decreasing. Like the Yo-Yo effect in a slimming
programme. New buzzwords, medical cures, healers and medicines are coming. BPR, BSC,
Lean, Six Sigma, TOC, and other new miraculous methods are applied. Sometimes
successfully, sometimes not. A new wave is coming in recent years – innovations and
knowledge management.
Low Customer
Orientation
Mass Production
Low Costs
Custom Made
Production
Mass
Customization
High
Customer
Orientation
High Costs
Fig.1.: Mass Customization – the engine of business development in the recent years
Henry Ford kicked off the trend when he stated customers could order their cars in "any
colour, as long it is black". His focus was to filter out variability in the production process and
increase efficiency. Product variety was limited; complexity reduced and customers were able
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to buy only the cars he produced – and, for a while, they bought them. Now, automotive
businesses around the world are being influenced by customer demands for both greater
product variety and reduced delivery lead times. This poses a dilemma for the industry
because responsive delivery is usually based on standardisation, whereas product variety
requires flexibility and innovation.
Individualization of the markets and mass customization have influenced also many projects
in the European automotive industry. Automotive companies are preparing radical changes in
the whole supply and production network - from the "stock push" and "mass production"
thinking to a stockless "build-to-order" (BTO) production strategy. This will require the reinvention of the complete automotive value stream from the material producers to the end
consumers of the cars, through a cost optimized system delivering what the customer really
wants without delay. Within the full framework of the "EU 5-Day Car Initiative", the
Integrated Project "Intelligent Logistics for Innovative Product Technologies - ILIPT" focuses
on the following:
1. Product configuration for build-to-order supply chains addressing new product
technologies with the tools and management methods.
2. New concepts in delivering flexible production networks addressing collaboration
across complete value streams and interoperability of these processes.
3. Novel methods and tools to assess and validate this radical business model for the
European automotive industry
This stockless vehicle supply system to deliver a customer ordered vehicle in 5 days is based
on a radical new concept including a tremendous level of modularity, the joining methods and
novel integration approaches. This concept aims at a groundbreaking renewal of current
thinking from the traditional concept of supply chains, toward high-added value networks
(Fig.2.).
1st step before final
assembly
Final assembly
Distribution
Companies
2nd step before final
assembly
3 – days
For production of the modules
and parts and delivery to the final assembly
1 – day
For production
1 – day
For delivery the
car to the customer
Information flow
Material flow
Fig.2. Five Day Car Concept – Project ILIPT
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Is really “the 5 Day Car Concept” so important for the customers? How many customers are
not able to wait for their car more than 5 days? A typical customer needs sometimes a few
weeks or months to make his final decision. But when he is definitely decided, he wants to
have “his” product immediately. The producers able to satisfy him, will win. But this is not
only the question of customer satisfaction. 300 billions Euro is lying in the whole supply
chain network in the automotive industry. Flexibility and short delivery times mean also
better cash flow and higher profitability for the automotive companies.
This example is not exceptional. Similar change processes are running in many other
businesses under the slogan “give your customer what he wants – but faster than your
competitors”. The essential question is – what does the customer really want? What is the
customer value?
There are three fundamental business concepts focused on the customer value:
1. Lean Management
2. Theory of Constraints
3. Six Sigma (Fig.3.)
Over the last decade, many companies have tried to copy Toyota principles. They are
applying methods for waste elimination from production and business processes, they
compare benchmark indicators like value added index or working hours per product. But the
essence of Toyota’s excellence is not captured in the „common sense“ methods like 5S,
Kanban, value stream management or manufacturing cells. Toyota has been developing this
system consistently for over 50 years. Toyota has developed a system of knowledge which
creates reusable knowledge, maintains it, and leverages its use in the future. Nobody from
Toyota employees wrote a handbook of Toyota Production System, this is a business of other
management gurus. The values and principles of Toyota Production System are developed in
the minds and daily jobs of all the employees. All the knowledge gained throughout the
design or production process, what works and what doesn’t work, could be captured and
consistently applied for all future projects. Toyota doesn´t call its system “lean” , but it is lean,
Toyota doesn´t speak about knowledge management, but it does it!
Lean concept originated in Toyota is oriented on waste identification and elimination from the
whole process chain (Value Stream Management). In other words – lean focus is
maximisation of added value in all the production, logistical, administrative and development
processes (Fig. 4.). TOC (Theory of Constraints) is based on the identification and elimination
of the system´s constraints with the goal ongoing throughput improvement. The throughput is
defined as the rate at which the organisation generates money through sales. In other words
throughput is the added value in the process chain per time unit. The Six sigma philosophy
specifies the value in the eyes of the customer (Voice of the customer) and identifies and
eliminates variation from the value stream. Six Sigma, Lean and TOC continuously improve
knowledge in pursuit of perfection and involve and empower the employees. The main
problem of these most important business concepts is that they have tools to give to the
customer exactly what he wants (without waste and quickly), but they don´t have systematic
approach how to create a new value for him.
Many companies are oriented on low cost strategies. But some cost attack programmes and
transfer production facilities to the low cost countries showed that it is not the right and
strategic solution. In the recent years many West European od US manufacturing firms have
moved their production plants to the low cost countries. Over time, they recognised that they
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had lost some competitive advantages because some departments were physically separated
(e.g. product design, production engineering , production, logistics) and the communication
and co-operation between them was limited. Also many cultural differences reduced the
effects of the low cost location. Not even massive implementation of lean management, Six
Sigma or other world class concepts bring sometimes any radical improvement. Company
success is not only in optimisation of current processes (doing right things right) but first of
all in innovation (looking for new – but as fast as possible). The productivity world will be
replaced by the world of creativity, the world of the perfect planning will be replaced by the
world of the experiments and generating new ideas and opportunities. Not perfect planning of
the change but fast realisation of the change is the way towards success.
Lean
Customer
Value
Specification
Waste Reduction
Efficient
Processes
Six
Sigma
Process Variability
Reduction
Stable
Processes
TOC
Throughput
Increase
Productive
Processes
Satisfied
Customers,
Stockholders
and
Employees
Fig. 3. The main business concepts – Lean Six Sigma and TOC
Lean Production
Lean Logistics
– SCM, Partnership
– lean workplace,
visualisation, VSM, Pull,
Kaizen, TPM, SMED,
Manufacturing Cells,
Team Work, Quality in
Process, LCA
Lean Office – 5S,
Knowledge Management
and Development
of Corporate Culture
- Continuous Development
and Visualisation of Knowledge
- Non Blaming Culture
- People Involvement
- Continuous Improvement
Time and Meeting
Management,
VSM, Quality in Process,
Kaizen, Standardisation
and Visualisation,
Team Work
Fig. 4. Lean Concept
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with Suppliers, VSM,
TPM, Standardisation,
Kaizen, Quality in Process,
Logistical Network
Optimisation
Lean Product
Development
– Set Based Thinking, VSM,
DFMA, VA,Project Management,
Team Work and Simultaneous
Engineering, Quality and
Visualisation, Kaizen
2. Innovations and Customer Value
The purpose of innovation is to add value. The purpose of good innovation is to eliminate
tradeoffs (M.Zeleny, 2000).
„Innovation is back at the top of the corporate agenda. Never a fad, but always in or out of
fashion, innovation gets rediscovered as a growth enabler every half-dozen years.“, wrote R.
Moss Kanter in Harvard Business Review 11/2006.
“A focus on cost-cutting and efficiency has helped many organizations weather the downturn,
but this approach will ultimately render them obsolete. Only the constant pursuit of
innovation can ensure long-term success.”, wrote Daniel Muzyka from University of British
Columbia in Financial Times, 09.17.2004.
Multifunctional
Markets
Mass Markets
Segmented
Markets
Market
Gaps
Markets of Individual
Consumers
Competitive
Factors
n
Innovations,
Knowledge
Time
Time
Flexibility
Flexibility
Flexibility
Quality
Quality
Quality
Quality
Price/
Productivity
Price/
Productivity
Price/
Productivity
Price/
Productivity
D
Price/
Productivity
a
ics
m
a
yn
o
dC
ty
lexi
p
m
Time
Focus on
Costs
Focus on
Quality
Focus on
Flexibility
Focus on
Speed
Focus on
Innovations
Fig.5.: Changing of markets and competitive factors
The father´s world of the business has been changed radically in the recent years. The old
world of compromises (e.g. quality OR price, customisation OR delivery time) has been
replaced by the new world where the tradeoffs are not accepted. When you have two options –
take both! This is the new rule of success on the market. “The basic economic resource is no
longer capital, nor natural resources, nor labor. It is and will be knowledge.”, said Peter
Drucker.
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M. Zeleny defines innovation as the change in the hardware, software, brainware or support
network of a product, system or process that increases the value for the user or customer.
From this definition it should become clear that not every invention (a discontinuous,
qualitative change) is an innovation, and so not every improvement (a continuous, quantitative
change) is an innovation. Innovation adds value – claims Zeleny.
“To grow, companies need to break out of a vicious cycle of competitive benchmarking and
imitation.”, say the authors of Blue Ocean bestseller - W. Chan Kim and R. Mauborgne.
Customer value distinguishes the innovation from the simple change. But the innovation is
not to be only a breakthrough technical solution. Generation of technical changes on the
product or technological advatage in the producation process have not necessarily led to
success. Many companies have a perfect product, produced by an excellent technology. They
have the only limitation – the customers don´t buy them, because they don´t see any reason to
buy them. They did not find the customer value. Innovation must generate “something new”
for the customer life – simplificity, risk elimination, convenience, better price, fun, image and
emotions, style or environmental friendliness.
TRIZ
TOC
WOIS
Systematic
Innovation
Customer Benefits (Useful Functions)
Customer
=
Value
Costs + Harmful Functions
Lean
Management
Kaizen
Six
Sigma
TOC
FMEA
TQM
Customer Benefits↑ (Higher)
Costs (Constant)
Customer Benefits (Constant)
Costs ↓(Lower)
Customer Benefits ↑(Higher)
Costs ↓(Lower)
Customer Benefits ↑ ↑ (2 x Lower)
Costs ↑(Higher)
Customer Benefits ↓ (Lower)
Costs ↓ ↓ (2x Lower)
Fig.6.: Customer Value Improvement
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New Products
There are four basic areas for customer value creation.
Effect
• New Product Families
• A New Product in Family
Development of
Business Opportunities
Risk
Risk
Existing Products
Effect
• New Products Generation
• Current Product and
Process Innovation
• Cost Reduction
Effect
Risk
Effect
Risk
Development of
New Market
• Time Reduction
• Scrap Reduction
Existing Customers
New Customers
Fig.7.: Four Areas of Customer Value Creation
The new customer value can be generated by
-
New value
-
Different Value
-
Higher Value
D.Mann defines two ways of thinking regarding innovations:
Trade-Off Thinking
Breakthrough Thinking
High Quality OR Low Cost
High Quality AND Low Cost
Affordable OR Customized
Affordable AND Customized
First Cost OR Life Cycle Cost
Flexible OR Rigid
Big OR Small
Adaptor OR Innovator
A OR B
First Cost AND Life Cycle Cost
Flexible AND Rigid
Big AND Small
Adaptor AND Innovator
A AND B
All systems contain contradictions - something gets worse as something gets better (e.g.
strength versus weight). Traditional approach usually accepts a compromise or a trade-off, but
this is often not necessary. Powerful, breakthrough solutions are the ones that don’t accept the
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trade-offs. Such solutions are actively focused on contradictions and they are looking for
ways of eliminating the compromise.
...Breakthrough Innovations,
Business Leadership, „Blue Ocean“
Benchmaring, Competition,
Follow up Others, „Red Ocean“
Contradiction
Fig.8.: Overcoming tradeoffs through contradictions (Linde)
The WOIS approach developed by H.Linde has been successfully used in breakthrough
product, process and business innovations in many companies (e.g. BMW, Braun, Hilti,
Vikng, etc.).
The main elements of the WOIS innovation methodology are:
1. Definition of the strategic orientation
2. Definition of contradictions. Answers to the questions -What and Why?
3.
Solution of contradiction (46 innovation principles, technical and physical
contradiction, solution maps, laws of evolution, bionics). Answers on the questions –
How?
4. Concurrent innovations in product, processes, organisation, resources and marketing.
5. Implementation and evaluation
The basic conditions and principles of successful innovation using WOIS are:
-
The innovation project starts with deep analyses - market analysis, product trends,
analysis of technological trends, process analysis, analysis of production and assembly
trends, trends in sales and service systems, analysis of the product as a system and its
environment, analysis of system functions, analysis of existing solutions (patents,
competitive solutions, solutions of other areas, generation of solution maps,
benchmarking), analysis of system generations and evolution.
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-
Integrated, team based design and development process – marketing concept,
product and process are designed by the same multifunctional team (marketing,
design, process planning, production, logistics, controlling, customer).
-
Use of the knowledge of the system evolution and system generations – strong
orientation on the past and future development trends. Not only a new products or
processes are created, but also the knowledge and strong learning effect is
generated through the innovation process.
-
Culture of creativity, acceptance of failures, space for experiments, prototypes,
testing new ideas.
New Solutions –
Contradiction
Solution Principles,
Variation and
Combination, Final
Solution
Spiral of
Evolution
Contradiction –
Development
Barrier
Orientation - Strategy,
Trend Analysis, Current
State Analysis, Evolution
Trends, Ideal Solution
Fig.9.: Contradiction based innovation strategy WOIS (Linde)
Example
Project:
Innovation of hospital bed
Project duration:
6 month
Project team:
designer, production engineer, external consultant, logistic expert,
process engineer, service, marketing, customer
Project inputs:
Target price, target markets, product life cycle, production volume
Project goals:
New product with higher customer value (new functions, better
parameters, lower costs)
Project steps:
Fig.10.
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1. Market analysis
2. Product analysis
-
Customer requirements
-
Structure
-
Competitors
-
Functions
-
Development trends
-
Parameters
-
Costs
3. Innovation process
4. Implementation
-
Product design
-
Testing
-
Production
-
Marketing/ Sales
-
Evaluation
-
Add required function
-
Eliminate not required
functions
-
Improve required parameters
-
Solve contradictions
Fig.10. Innovation project – hospital bed
Needs
Customers
Segments
Market
Segment - EU
Market
Segment 1
Segment 2
MOBILIZACE
PACIENTA
TRANSPO RT
PACIENTA
REHABILITACE
PACIENTA NA
LŮŽKU
HYGIENA
PACIENTA
KOMFORT
PACIENTA
Thomas Deck et Sa bine Ludge r T.Ha rt man Belgium Belgium International Netherlands
5
5
5
4
5
5
5
5
BEZPEČNOS T
PACIENTA
PŘÍS LUŠ ENSTVÍ
OSTATNÍ
MANIPULACE
S PACIENTEM
MANIPULACE
S LŮŽKEM
POLO HO VÁNÍ
PACIENTA
VZHLE D LŮŽKA
OVLÁDÁNÍ,
ERGO NO MIE
HYGIENA LŮŽKA
BEZPEČNOS T
SESTRY
KOMPATIBILITA
MATRACE ,
LŮŽKA A
LŮŽKOV IN
RYCHLÝ S ERVIS,
5
4
3
3
4
5
4( 5)
4
4 ,1
9
3
3
2
2 outside of
th e bed
3
2
4
3( 3)
3
2 ,9
15
3
4
5
2
4
4
2
5
5( 5)
3
3 ,7
12
3
4
2
2
4
4
3
5
3 ,5
13
5
5
5
5
5
5
5 ha s control
over
m ove ments,
sorro udin g
5
3( 3)
5
5( 5)
5
5 ,0
1
4
3
5
3
4
4
4
4
5
4
4
5
5
5
5
4
5( 5)
5( 4)
5
5
4 ,6
3,2
5
14
5
5
4
4
5
5
5
5
5( 4)
5
4 ,8
5
4
4
4
4
5
5
4
4( 4)
5
4 ,4
6
4
4
4
4
2
4
3
5
5
4
4
5
5
4
4
5
4( 4)
3( 3)
4
4
3 ,9
4 ,2
10
8
4
4
5
4
5
5
4
3
5
4
5
4
5
5
4
5
4( 4)
4( 4)
4
5
4 ,5
4 ,3
4
7
4
3
4
3
3
4
5
4
4( 4)
4
3 ,8
11
5
5
4
4
5
4
5
4
4( 4)
5
4 ,5
4
3
Technicans
Manager
Customer Processes
Ne therlands P riem er Poradie
5
4 ,9
2
4
4
Nurse
Customer Needs,
Requirements
Kim
5( 5)
5
Processes
O1= Handling with patient
O2 = Handling with bed
O3 = Transport
O4 = Adjustment, setup
O5= Connection with environement
O6= Work wit assessories
O7= Ensuring safety
O8= Mattress handling
O9= Design-interaction with product
Fig.11. Market and customer analyses
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Patient
Doctor
O1= Handling with patient
O11 = patient examination: CT, RTG
O12 = moving patient on other bed
O13 = patient positioning
O14 = turning up patient
O15 = patient mobilisation
O16 = handling during urinate
O17 = changing clothes
O18 = patient hygiene
O19 = eating
O20 = re-dressing
O21 = changing mattress
O22 = changing bed clothes
O23 = adjusting patient positions
Different market and market segments were analysed, five important customer groups and
their requirements were identified (inteviews, analyses and observations in the hospitals) –
Fig. 11..
Y ↑ = Mobilisation=f(...)
x6 = Numnber of varialble parts
x5 = Weight
x4 = Number of mobilisation
elements
x 3= Number of wheels
x2= Number of drives
x1 = Number of componentes
From the customer requirements the design contradictions were defined and the evolution
trends and new solution alternatives were generated (Fig. 12, Fig.13., Fig. 14).
↑
Y ↑ = Safety=f(...)
Y ↑ = Handling with bed=f(...)
↑
↑
Y ↑ = Hygiene =f(...)
Y ↑ = Assessories
↑
↑
↑
↑
Y ↑ = Costs
↑
Y ↑ = Stiffness
↑
Y ↑ =Handling comfort
↑
Y ↑ =Variability
Fig.12. Design Contradiction Matrix
Level of Development
3rd generation – external elevation source hydro, electro, servo
Requirements:
↑ Y 1=Handling with bed
↑ Y2 = Elevation Safety
↑ Y3= Production costs -1
↑ Y4= Positioning
2nd generation
↑ Y5= Space utilisation
Hand mechnical elevation
↑ Y6= Transport safety
define crucial
requirements and
parameters for the
future
1st generation
without elevation
Fig.13. Evolution trend analysis
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Parameters:
↑ X1=number of drives
↑ X2=number of components
↑ X3= number of wheels
Function
Solutions
Sparta Calma
Other solutions
Terno
Function 1
moving up
loading plate
Function 2
handling with
back element
Fig.14. Solution concepts
Project results
Product sale increase:
+20%
Number of parts:
-15%
Production costs:
-30%
Production time reduction:
-40%
New functions
+10%
3. Knowledge Management and Corporate Potentials
Innovation adds value through knowledge. The knowledge management is a set of processes,
policies, and tools that link knowledge of employees to new sources of value (products,
services, processes) in order to create innovative solutions.
Some stakeholders and managers are focused only on the results, not on the analysis and
systematic measurement and improvement of the corporate potentials. The biggest
competitive advantage is not saved in the manufacturing or information technologies, but in
the ability to manage the company potentials in four areas:
1.
2.
3.
4.
Mental – corporate strategy
Physical – processes and resources
Emotional – people development and knowledge management
Spiritual – corporate culture
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Each company has two basic functions:
1. Production and development products and services – this is the prerequisity for
earning money, making profit and growing company.
2. Self reproduction - creating knowledge and development of people – this is the
prerequisity for long term mastering of the function 1.
Mental
Potential
Spiritual
Potential
Emotional
Potential
Physical
Potential
Creating Knowledge,
Development People
Products,
Services
Company
Fig. 15. Two functions and four potentials in a company
The difference between an excellent and a good company is not in the machines, the software
or the organisational structure. The difference is in the co-ware – co-operation, creation and
dissemination of knowledge through the company (Fig.16.).
The companies should be able to solve the following important questions regarding the
knowledge management:
1. How to reach and keep the best talents and individuals?
2. How to share, communicate and develop the best corporate practices in the
organisation?
3. How to transfer knowledge between employees on the projects and actions in the
company?
4. How to increase and measure knowledge?
5. How to change knowledge into innovation as fast as possible?
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AND world of
innovations
OR world
of tradeoffs
Coware
Brainware
Software
Hardware
Management,
Control
Cooperation
Communication
Coalition
Common...
... Success
Individual Thinking
Performance
Equipment,
Assets
Fig. 16. New competitive factors in an innovation age (Linde)
Conclusion
There are some new paradigms on the beginning of the 21st century. Companies which will be
able to use these opportunities will have a higher chance to survive.
Yesterday
Productivity
Corporate strategy
Standardisation
Corporate processes
Best practices, benchmarking,
Change management
increase customer value
focus
Focus on the “empolyee´s
Employees
muscles” (peformance – physical
intelligence) and brains (kaizen –
mental intelligence)
Hardware, software
Competitive factors
No mistake and error culture
Corporate culture
Competition, fight
Intercorporate
relationships
Improvement
concepts
Innovation focus
Lean Manufacturing, Six Sigma,
TOC
Product and Process innovation
Management focus
Quality, Productivity, Flexibility
Management
principles
Management by objectives,
process and project management
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Tomorrow
Innovation
Improvement
New Practices – Blue Ocean,
create new customer value
Focus on the employee´s heart
(self motivation, emotional
intelligence) and soul (moral
and ethics – soul intelligence)
Brainware, co-ware
Culture of trials and
experiments
Co-operation, partnership
Systematic Innovation, Lean
Product Development
Business and Thinking
Innovation
Innovation and Knowledge
Management
Management by opportunities,
company as a living organism
References
1. ILIPT: The 5 Day Car Initiative. EU Research Project 2006.
2. Kennedy, M.: Set Based Thinking. Achieving the Capabilities of Toyota’s Product
Development System Targeted Convergence Corporation (TCC) 05/19/06
3. Kim, W. C., Mauborgne, R., “Value Innovation: The Strategic Logic of High
Growth,” Harvard Business Review, Jan.-Feb. 1997, 103-112.
4. Kim, W. C., Mauborgne, R., “Creating New Market Space,” Harvard Business Review,
Jan.-Feb. 1998, 83-93.
5. Liker, J.K.: The Toyota Way. McGraw Hill 2004
6. Linde,H., G.Herr, A.Rehklau: WOIS - Contradiction Oriented Innovation Strategy,
Wois Institut Coburg 2005
7. Mann,D.: Hands-On Systematic Innovation. Creax Press 2003
8. Peters, T.: Re-Imagine. Dorling Kindersley 2003
9. Zeleny,M.: The Innovation Factory: On the Relationship Between Management
Systems, Knowledge Management and Production of Innovations. Innovations 2005,
Zilina 2005
10. Zeleny, M., Human Systems Management: Essays on Knowledge, Management and
Systems, World Scientific, 2005.
11. Zeleny, M., “Knowledge of Enterprise: Knowledge Management or Knowledge
Technology?” in: Governing and Managing Knowledge in Asia, edited by T.
Menkhoff, H-D. Evers, and Y. W. Chang, World Scientific, 2005.
12. Zeleny, M., “Elimination of Tradeoffs in Modern Business and Economics,” in: New
Frontiers of Decision Making for the Information Technology Era, edited by M.
Zeleny and Y. Shi, World Scientific, 2000.
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