Logistical lifecycle and innovation theory

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Frame of reference

This chapter describes valid literature which has been studied as a theoretical framework. The literature presented has been choosen for the foundation of the empirical study and the analysis part of this conduction. The theoretical framework is split into four major parts of innovational, road transport security, transport insurance and business model for innovation theory, which will be found as the guidelines throught he whole thesis.

Logistical lifecycle and innovation theory
The lifecycle model

The dynamics of the global markets led to a higher competition for producing and logis-tical companies (Grassmann 1996). Those changes are fostered by shorter life cycles, which in turn show a higher demand for mature products in the transportation sector. Pioneer and growth phases of new products are quickly passed through and the mature phase is started. In addition to that, technological innovations only take place in niche applications (Eversheim, Baessler & Breuer 2002). Most companies find themselves in a classical price competition, since products concepts and applications are almost simi-lar to other companies (Grassmann 1996).
To focus on technology innovations and its life cycle which is, among others, described by Johnson and Scholes (2002), the classic model should be shown to picture the differ-ent phases for a high technology product:
This model is slightly modified to other models provided by, for example, Fox (1973).
The lifecycle of a new product is split into different phases. The phase of development is considered to be the phase of developing the product by just one or a few first com-panies, few actors follow and the development is leveraged. This in turn leads to the second phase, namely the growth phase. The high level of competitiveness in this phase will force some market actors to quit, since customers cannot be won and got more companies to choose from. Therefore, this phase is called the elimination phase.
After the elimination phase a market is build up, which is contemplated to be mature. This mature market will essentially lead into a saturation phase. Establishments and customers will decline, as a matter of fact, and lead to a decrease in the whole market. This decline is due to a high competitiveness. Fewer actors will share the market poten-tial (Johnson & Scholes, 2002).
The first three phases are growth phases. Market growth is recognized even if a market player does not increase its part of the market. When it comes to the last two phases the constellation changes. The market shrinks and competitors need to gain on other play-er’s losses. Hence, strategies change and companies become more competitive. (John-son & Scholes, 2002) A special niche within the area of product innovation and product development is de-scribed as high tech innovation (Johnson & Scholes, 2002). To get an overview of the new technology innovation that is described in-depth in this conduction an insight of the topic of high tech technology innovations should be provided in the following.
In the 1980´s, market success came mostly from achieving quality and cost benefits compared to other companies in the same sector. Moving on to the 1990´s, competitive market positions, came from building and dominating new markets. Within this topic the main requirement is and was core competency for creating new markets. Corporate imagination and an expeditionary marketing are seen to be the key. A highly important issue is to figure needs and functionalities, rather than marketing’s more conventional customer product grid in order to overturn traditional price and performance assump-tions. (Hamel & Prahalad, 1991) To realize potential for new innovations, companies have to create core competencies and need to have the imagination to envision markets that are not yet conquered, plus the ability to stake them out, ahead of competitors. A company’s opportunity horizon shows its collective imagination of the way in which a new high tech innovation might be harnessed to create the new chance of competitive space. The viable issue in this regard is the commitment to this opportunity horizon, which does not rest on return on investment (ROI) calculation but on a more visceral sense of benefits for customer, who in the end will appear, when the pioneer effort will prove itself successful. (Hamel & Prahalad, 1991)
The term innovation defines new and myriad ideas (Chapman, et al., 2002). When it comes to the business sector, innovative solutions can be classified into three different categories namely, technological innovation, organizational innovation and market in-novation (Tidd et al., 2001).
The broad sector of technological innovation is split into two dimensions. In the next figure it can be seen that the vertical axis means the extent of change given by the tech-nological innovation and is defined by “small-step” running innovations (process inno-vations) to a certain type of “transformational” innovations, which are considered to be far reaching and change the functioning of society. The latter one was, for example, the innovation of steam power in the Industrial Revolution (Chapman et al., 2002). In the middle of the two border points are architectural innovations, as well as, the radical in-novations to be found.
The horizontal axis shows what is changed by the innovation. The extremes of this spectrum are called product and process, although the differentiation is not always that clear. Between these two extremes the product/service mix is to be found (Chapman et al., 2002).
Additionally, innovations in the logistical sector can further be described as technologi-cal innovation or non-technological, soft, innovation. Technological innovations often create new products whereas soft innovations target on improvements of the manage-ment practice, streamline organisational structures, customise services, networking within the supply chain, improvements in the distribution channel, advancements and facilitating financial resources (Howells, 2000).
One major concern is that bolts out of the blue will always be a viable issue of doing creative high tech innovations with success, but moreover a logical process through which companies can unleash corporate imagination and identify new solutions and products to essentially consolidate control over emerging markets is seen as necessary. (Hamel & Prahalad, 1991)

Innovation in the logistical sector

Logistical firms can apply innovations to raise market performance and efficiency, as well as, essentially benefits for themselves and their customers (Hackbarth and Kettin-ger, 2000). Given the dramatic changing evident in the logistical industry of today, it is of high importance for a business to think with a new business mindset. Factors that contributed successfully in the last decade might no longer be seen as the key to com-petitive advantages. The translucency in technology let companies think about new sources in the search of innovation. Two drivers for this seek are discussed deeper in the following- technology and relationship networks:

Technology

The first driver for the innovation process in the logistical sector is technology. Particu-larly communication technology had and still has its impact on the transport business and influences the creation of innovative services. In this regards, have continuous technological innovations and its business application resulted in changes and new models within the transport sector. (Chapman et al., 2002) Within the innovation process based on technology shifts, the issue of networks and research and development is prevalent by external knowledge and cost-sharing. Interest-ing examples are, for instance, strategic alliances or purchasing groups. (Pilat, 2000).

Relationship networks

In such a competitive market as the logistical sector, the focus on customers needs let the firms develop a holistic understanding of the buyer´s entire value chain. In most cases this approach is beyond the capabilities of a single company. (Kandampully and Duddy, 1999) Demanded products or services that are not in the range of one single firm´s competen-cy, too need to be taken care of. To the benefit of the customer and finally the firm, creating horizontal and vertical strategic alliances, internal and external relationships with firms are the key (Peppers and Rogers, 1997). Further does Manuel (1996, p. 168) claim that:
“Networks are [the] fundamental stuff of which new organisations are and will be made”.
The interdependencies in business networks and interaction can shape the core survival strategy of future logistic firms. Operating in the global economy can give features and value to customers and to stakeholders in the supply chain. The logistics management shows a potential for growing a segment that is a critical issue in business trade. Recent-ly, most industries have noticed the fact that cost savings are achievable to firms which can coordinate and innovate within their logistics operations – together with internal and external partners. (Chapman et al., 2002) Since the 1970s, producing companies were challenged by competitive pressure and discerning customers. These companies were pressured to establish internal and external relationships to increase flexibility and innovativeness to be able to succeed in the busi-ness. (Chapman, et al., 2002)
According to this the concept of the value chain, initially described by Porter (1985), is connected to the idea of relationship networks. The value chain in the manufacturing business is the process of the product from raw materials to the final customer (please compare the following chapters). Observing the value chain as a whole needs a custom-er perspective and offering companies as establisher of the larger chain process and not only as manufacturers of specific components or provider of transport services. It is a subtle but significant change, but defines an improving in the overall value to the cus-tomer. But it requires a collective thinking of suppliers and manufacturers in the supply chain, as seekers of avenues for collaboration and not of continual competition.
The value-chain perspective itself stresses the dependence of firms in a value chain. A lot of intermediaries are supposed to become partners, who bring value to customers. Additionally, boundaries between organisations can become little more fluid, when inter organisational processes get integrated more. This results free information flows along the channel and inter-company relationships embrace logistics management, as well as, product development. (Ernst & Young, 1999). This process requires both intra-firm and inter-firm modelling, that stresses on the linkages among different enterprises. Logistics firms are considered to place high importance on the network. There existing crucial interactions with different firms both, up and down the supply chain and also with companies outside the supply chain. Especially inter-organisational structures are viable constraining factors for logistics innovations. A highly developed example takes place in the United Kingdom, where a lot of firms joined in partnerships both up and down the supply chain. Such an intercompany network system greatly assists innovation in logistics. Logistical companies increasingly search for supply-chain solutions rather than searching for isolated improvements. Logistical networks will certainly play a big role in the dominance of the industry. (Chapman et al., 2002)

Secure road transportation

An increasing competition in the business life has pushed firms, especially transporta-tion companies, to find new solutions to discover how to improve customer service, reduce overall costs and to increase efficiency in production and/or services offered (Bäckstrand, 2007). Fawcett, Magnan & McCarter (2008) pointed out, the road trans-port supply chain is recognized as a profitable channel to affect all the factors men-tioned above. To give a clearer picture of the road transport chain as a part of the whole supply chain, the following two definitions for supply chains, by Nahmias (2009) and Christopher (2005) are provided:
“…the entire network related to the activities of a firm that links suppliers, facto-ries, warehouses, stores and customers. It requires management of goods, mon-ey, and information among the relevant players.” (Nahmias, 2009, p. 311)
“The network of organizations that are involved through upstream and down-stream linkages, in the different processes and activities that produce value in the form of products and services in the hand of the ultimate consumer.” (Chris-topher, 2005, p. 17)

1. Innovational technology and the German road transport 
1.1. Background
1.2. Datachassi´s technology
1.3. History and development of German road transportation
1.4. Defining the problem
1.5. Specifying the purpose
1.6. Delimitations
1.7. Disposition
2. Research Methodology 
2.1. Initial research
2.2. Research approach
2.3. Data collection
2.4. Credibility of research findings
3. Frame of reference 
3.1. Logistical lifecycle and innovation theory
3.2. Secure road transportation
3.3. Transport insurance in the road carriage
3.4. The concept of a logistical business model
4. Results from empirical research 
4.1. Innovative high tech technology
4.2. German road logistics market
4.3. Road transportation security
4.4. Transport insurance underlying risk factors
4.5. German transport insurance within Europe
5. Innovational, logistical and insurance analysis 
5.1. Logistical lifecycle and innovation
5.2. Secure road transports
5.3. Cargo insurance in road transport analysis
5.4. Road transport business model analysis
6. Conclusion and Recommendation
6.1.1. Conclusions
6.1.2. Recommendations
6.1.3. Reflections on the thesis
Reference 
Reference of figures
Appendices
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Extended logistics and insurance by an innovation for the road transportation sector

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