INNOVATION

CHAPTER 1- FUNDAMENTALS OF INNOVATION

CHAPTER 1- FUNDAMENTALS OF INNOVATION

1. READINGS
Chapter 1- Joe Tidd, Managing Innovation- Integrating Technological, Market and
Organizational Changes, 2021.
Chapter 1- Paul Trott, Innovation Management and New Product Development,
Pearson, 2021.
2. CONTENT
u What
u Why
u How
u When
u Where
 “Innovation distinguishes
between a leader and a follower”
WHAT
u The word ‘innovation’ comes from the Latin, innovare, and is all about
change.

u Perhaps a more helpful definition of innovation is:

‘the process of creating value from ideas’

u “Innovation is the use of new knowledge to offer a new product or service

that customers want.” Allan Afuah, Innovation Management
WHAT
u The fact is coming up with an idea is the least important part of creating
something great. The execution and delivery are what’s key. Sergey Brin,
co-founder of Google, quoted in The Guardian (2009)

u Innovation is not a single action but a total process of interrelated sub

processes. It is not just the conception of a new idea, nor the invention of
a new device, nor the development of a new market. The process is all
these things acting in an integrated fashion. Myers and Marquis (1969)

u Innovation is the management of all the activities involved in the process

of idea generation, technology development, manufacturing and marketing
of a new (or improved) product or manufacturing process or equipment.
Paul Trott, Innovation Management (2021)
WHAT
u ‘Anything that won’t sell, I don’t want to invent. Its sale is proof of utility, and
utility is success.’
‘Everything comes to him who hustles while he waits.’
‘Genius is one percent inspiration and ninety-nine percent perspiration.’
‘I never did anything by accident, nor did any of my inventions come by
accident; they came by work.’
‘Make it a practice to keep on the lookout for novel and interesting ideas that
others have used successfully. Your idea has to be original only in its adaptation to
the problem you are working on.’
Thomas Edison
u ‘To turn really interesting ideas and fledgling technologies into a company that
can continue to innovate for years, it requires a lot of disciplines.’
Steve Jobs
WHAT

Innovation is an integrated process rather than a single flash of

inspiration
WHY?
Innovation is strongly associated with growth
Growth in R&D expenditures since 2000 for Countries with the Highest Expenditure on
selected countries, 2000–2017 R&D, 2017 (in billions of current PPP dollars)

Source: Data from CRS analysis of Economic Development and cooperation

WHY? Global Innovation Index 2023
 WHY?
u Innovation is strongly
associated with
growth

Huge amount committed

to R&D in some of the
world’s most successful
businesses
 WHY?
u Innovation is strongly associated
with growth

Huge amount committed to R&D in some

of the world’s most successful businesses
 WHY? China’s
largerst
electric maker
u Innovation is
strongly associated
with growth
Tech giant:
Chip
fb, ints,
Huge amount committed maker
whatsapp
to R&D in some of the
world’s most successful
businesses Health care
 WHY?
u Innovation is strongly associated with growth

“There is no long-term correlation between the amount of money a company spends on

its innovation efforts and its overall financial performance.
Instead, what matters is how companies use that money and other resources, as well as
the quality of their talent, processes, and decision making, to create products and
services that connect with their customers’”
Boston Consulting Group, ‘The most innovative companies 2019’, Boston Consulting
Group, Boston, 2019.
WHY?

u Innovation is strongly
associated with growth

u Innovation is for survival

 CASE STUDY 1: Running Away with the Competition
WHY?
CASE STUDY.docx

u Innovation is strongly associated with

growth

u Innovation is for survival

u Innovation strengthen competitive

position
WHY?
u Innovation is for survival

u Innovation is strongly associated

with growth

u Innovation strengthen
competitive position
WHY?
u Innovation is for survival

u Innovation is strongly associated

with growth

u Innovation strengthen
competitive position
WHY?
u Innovation is for survival

u Innovation is strongly associated

with growth

u Innovation strengthen competitive

position

u Innovation makes a difference to

people and organizations of all
shapes and sizes.
A PROCESS MODEL FOR INNOVATION
SCOPE FOR INNOVATION
Dimensions of innovation – WHERE and
HOW innovation can take place?
Examples of 4P models- Product

‘Product’ Windows 7 and 8 replacing Vista and XP – New to the world software – for
essentially improving on existing software idea example the first speech recognition
– what we offer the New versions of established car models – e.g. program
world the VW Golf essentially improving on established Toyota Prius – bringing a new
car design concept – hybrid engines. Tesla –
Improved performance - incandescent light high performance electric car.
bulbs LED-based lighting, using completely
CDs replacing vinyl records – essentially different and more energy efficient
improving on the storage technology principles
Spotify and other music streaming
services – changing the pattern from
owning your own collection to
renting a vast library of music
Examples of 4P models- Process

‘Process’ Improved fixed line telephone services Skype and other VOIP systems
Extended range of stock broking services On-line share trading
- how we create and Improved auction house operations eBay
deliver that offering Improved factory operations efficiency through Toyota Production System and other
upgraded equipment ‘lean’ approaches
Improved range of banking services delivered at Online banking and now mobile
branch banks banking in Kenya, Philippines – using
Improved retailing logistics phones as an alternative to banking
systems
On line shopping
Examples of 4P models- Position

‘Position’ HaagenDazs changing the target Addressing underserved markets – for example the
market for ice cream from children Tata Nano aimed at emerging but relatively poor
– where we target to consenting adults Indian market with car priced around $2000.
that offering and Airlines segmenting service offering Low cost airlines opening up air travel to those
the story we tell for different passenger groups – previously unable to afford it – create new market and
about it Virgin Upper Class, BA Premium also disrupt existing one
Economy, etc. Variations on the ‘One laptop per child’ project – e.g.
Dell and others segmenting and Indian government $20 computer for schools
customizing computer configuration University of Phoenix and others, building large
for individual users education businesses via online approaches to reach
Online support for traditional higher different markets
education courses ‘Bottom of the pyramid’ approaches using a similar
Banking services targeted at key principle but tapping into huge and very different high
segments – students, retired people, volume/low margin markets – Aravind eye care,
etc. Cemex construction products
Examples of 4P models- Paradigm

‘Paradigm’ Bausch and Lomb – moved from ‘eye wear’ to ‘eye Grameen Bank and other microfinance
care’ as their business model, effectively letting go of models – rethinking the assumptions
– how we frame the old business of spectacles, sunglasses (Raybans) about credit and the poor
what we do and contact lenses all of which were becoming iTunes platform – a complete system of
commodity businesses. Instead they moved into personalized entertainment
newer high tech fields like laser surgery equipment, Cirque de Soleil – redefining the circus
specialist optical devices and research in artificial experience
eyesight Amazon, Google, Skype – redefining
Dyson redefining the home appliance market in industries like retailing, advertising and
terms of high performance engineered products telecoms through online models
Rolls Royce – from high quality aero engines to Uber, Airbnb, Netflix, Spotify
becoming a service company offering ‘power by the
hour’
IBM from being a machine maker to a service and
solution company – selling off its computer making
and building up its consultancy and service side.
Exercise: Mapping Innovation for a
company making garden machinery
u Install 3D design software in R&D department
u Track lead users to see what products they feel add value
u Sub-contract trimmer manufacture to firm in Czech Republic
u Build totally customized products for individual customers
u Involve customers in new product design
u Use sensor in new lawn mower
u Relaunch trimmer as environmentally friendly
u Repositioning the company’s products as female friendly
u Link gardening to home-making in advertising
Exercise: Mapping Innovation for a
company making garden machinery
Exercise: Mapping Innovation for Zara
CLASSIFICATION

u 4Ps
u Degree of novelty
u Level of Innovation
u Platforms and families of innovation
u 10 types of innovation
u Innovation life cycle
u Discontinous innovation/Disruptive innovation
 Incremental ß-à
Radical
Dimensions
Component and
of system
innovation
Architectures,
platforms and systems
Degree of Novelty

u Incremental innovation: small improvements/ product/process

improvements/ do what we do, but better
The knowledge required to offer a product builds on existing
knowledge
Small improvements but big impacts
Higher percentage à cumulative gains in efficiency is much greater
over time
Ex: three-point seat belt, lean production
u Radical innovation: Big/major innovations
Technological knowledge required to exploit it is very different from
existing knowledge, rendering existing knowledge obsolete.
Ex: steam power, ICT revolution
Level of Innovation

u Component:
Innovation at part of the system
Knowledge about components
Ex: battery pack: lithium-ion batteries
u System:
Innovation in the whole system
How knowledge about components can be put together
Ex: an electric car
Types of Innovation
Platforms and families of Innovation

u Strong/basic platform of innovation

u Extended families of innovation around that platform
Ex: Boeing’s 737 airliner- breakthrough in 1967
Many variants and improvements made over years
Still manufactured today, after 60 years
10 types of Innovation

Source: Larry Keeley, Ryan

Pikkel, Brian Quinn, Helen
Walters, 2013, 10 types of
innovation, John Wiley & Sons,
Inc., Hoboken, New Jersey.
Defining 10 types of Innovation in the
case of Coolmate

https://www.coolmate.me
INNOVATION LIFE CYCLE
Stages in the Life Cycle
DISCONTINOUS INNOVATION -
DISRUPTIVE INNOVATION
u New technology
u New market with new charateristics
and expectations
u New political rules emerge
u Running out of road
u Sea change in values and public
opinion
u Changes in regulatory context
u Fractures along ‘fault lines’
u Architectural innovation/ business
model innovation
u Unthinkable events
u Etc.