MGT 817

STRATEGIC MANAGEMENT

Key Concepts in Innovation

WEEK 5
DR SANYA OJO, FHEA
Learning Outcomes

• Understand importance of innovation and learning

• Understand nature of organisational learning and how it can be

encouraged

• Explore how innovation can be promoted – and the risks

Concepts in innovation
• Invention: first occurrence of idea for new product or process
• Creativity: the expression of an original idea
• May be necessary precursor to...
• Innovation: implementation of a significantly new idea in a
specific context
• “Successful exploitation of new ideas”
• Knowledge spill-overs: where knowledge created by one person
or organisation leads to benefits for other, neighbouring firms
 How innovation happens?

Process Success (?)

© 2013 John Wiley & Sons Ltd. www.innovation-portal.info

© 2013 John Wiley & Sons Ltd. www.innovation-portal.info
So innovation strategy is not a
document laying out a linear plan.
What is it?
• A sense of direction (infinite resources)
• A framework within which to make decisions (a learning
process)
• Three core elements- analysis, selection, implementation
• A way of building “dynamic capabilities”
• Routines to make innovation happen
• Ways to adapt those routines as the world changes
• Ways to scan the environment to spot those changes
The innovation/entrepreneurship
space
Producers Known and well Unknown or
served customer underserved
segments customer
segments

Needs already Existing products

met and technologies

Unmet needs
The innovation/entrepreneurship
space
Producers Known and well Unknown or
served customer underserved
segments customer
segments

Needs already Existing products

met and technologies

Unmet needs
 New products and
services
New processes

Knowledge push
Producers Known and well Unknown or
Driven by organised research & served customer
segments
underserved
customer
development segments

Systematic commitment of
specialised resources
Needs already Existing products
Breakthroughs followed by met and technologies
incremental development

Unmet needs
 New products and
services
New processes

Knowledge push
Producers Known and well Unknown or
Driven by organised research & served customer
segments
underserved
customer
development segments

Systematic commitment of
specialised resources
Needs already Existing products
Breakthroughs followed by met and technologies
incremental development

Unmet needs
Types of new product

© 2013 John Wiley & Sons Ltd. www.innovation-portal.info

© 2013 John Wiley & Sons Ltd. www.innovation-portal.info
For an effective innovation strategy you
need

Leadership • Vision, direction and (sometimes) stretch

• So everyone in the organisation understands direction

Communication and can contribute
• “Line of sight”

• To new information
Culture of • To new solutions
openness • To experimentation – and possible failure
The strategic benefits of
innovativeness
• Adding superior value – and so generating above-average profits
• IF it works out!
• Differentiation and reputation
• Staff have more opportunity to achieve – and therefore greater
motivation
© 2013 John Wiley & Sons Ltd. www.innovation-portal.info
Models and Modes of Innovation
Dimensions of ‘innovation space’

Product • Changes in the things (products/services) which

an organization offers,

Process • Changes in the ways in which they are created

and delivered

Position • Changes in the context in which the

products/services are introduced

Paradigm • Changes in the underlying mental & business

models which frame what the organization does
Some related concepts
Disruptive • as response to needs of
innovation underserved segments

Open • as way of broadening scope of

innovation innovation process

Absorptive • ability to apply new

capacity knowledge - learning
 types of innovation

• Addresses
market
unattractiv
• An e to
incumbents
extreme
…
form of
• Doing • …with
radical
what we product
innovati
do, but that is
on
better “worse” or
• Changes
• Around a “too
the
basic expensive”
“game” –
“platfor in eyes of
creative
m” existing
destructi
technolo customers
on
gy or …
• About 6-
brand • …but which
10% of
becomes
innovati
mainstrea
ons
m as it gets
cheaper/be
tter over
Special

time
Discontinuous
Incremental
innovation

innovation

Disruptive
innovation
Special types of innovation
Incremental • Doing what we do, but better

innovation • Around a basic “platform” technology or brand

Discontinuous • An extreme form of radical innovation

• Changes the “game” – creative destruction
innovation • About 6-10% of innovations

• Addresses market unattractive to incumbents…

Disruptive • …with product that is “worse” or “too expensive” in
eyes of existing customers…
innovation • …but which becomes mainstream as it gets
cheaper/better over time
Cellular phones, Fixed line telephony
 types of innovation

• The first
iPhone
and iPod
• The
• Cloud • Gmail
iPhone 6
storage • Aldi and
• Internet
(Dropbox other
banking
) retailers
• The
• Peer to • Low cost
Bentley
peer airlines
and
lending • The Toyota
Jaguar
• The Tesla Prius
SUVs
electric
sports
car
Special
Discontinuous
Incremental
innovation

innovation

Disruptive
innovation
Innovation and Risk
• Risk is an integral part of innovation:
• 85% of new ideas never reach a market
• 60% of R&D projects are market failures
• 40% of consumer products & services fail
• 20% of business products & services fail
• But rate of success can be improved through better and different
management

© 2013 John Wiley & Sons Ltd.

www.innovation-portal.info
 The challenges of innovation

• Efficient
• Will manager
customer s often
• High s change less good
failure behaviou at
rate of r? “explorati
R&D Internati on”
investme onally? • Diversion
nt • Will of time,
• Long wait bandwag energy ,
for return on roll? resources
on • Availabili • Stressful
investme ty of challenge
nt (8+ complem to deeply
years) entary held
products beliefs
? and
values

Managing innovation
Unpredictable take-

alongside existing
Risk of failure

operations
up
Key components of the innovative
organization
• Shared vision, leadership and will to innovate
• Organization design that enables creativity – balance
between organic and mechanistic
• Appropriate use of teams
• High involvement innovation – focus on continuous
performance
• Creative climate – supported by relevant
motivation/performance systems
• Customer focus – internal and external
 Examples of the
4Ps model: Product
‘Product’ Windows 7 and 8 New to the world software
replacing Vista and XP – – for example the first
essentially improving on speech recognition
– what we existing software idea program
offer the Toyota Prius – bringing a
CDs replacing vinyl new concept – hybrid
world records – essentially engines. Tesla – high
65improving on the performance electric car.
storage technology LED-based lighting, using
completely different and
more energy efficient
principles

Table 2.2 of the book providing examples- incremental vs radical

 Examples of the
4Ps model: Process
‘Process’ Improved fixed line telephone Skype and other VOIP systems
services
Toyota Production System and
- how we Improved factory operations other ‘lean’ approaches
create and efficiency through upgraded
equipment Online banking and now mobile
deliver that banking in Kenya, Philippines –
offering Improved range of banking using phones as an alternative to
services delivered at branch banking systems
banks
On line shopping
Improved retailing logistics
 Examples of the
4Ps model:
Position
‘Position’ Haagen Dazs changing the target Addressing underserved markets –
market for ice cream from children for example the Tata Nano aimed at
to consenting adults emerging but relatively poor Indian
– where we market with car priced around
target that Airlines segmenting service $2000.
offering and offering for different passenger
groups – Virgin Upper Class, BA Low cost airlines opening up air
the story we Premium Economy, etc. travel to those previously unable to
tell about it afford it – create new market and
Dell and others segmenting and also disrupt existing one
customizing computer,
configuration for individual users ‘Bottom of the pyramid’ approaches
using a similar principle but tapping
into huge and very different high
volume/low margin markets –
Aravind eye care,
 Examples of the
4Ps model:
Paradigm
‘Paradigm appliance market the
Dyson redefining home iTunes platform – a complete
in terms of system of personalized
’ high performance engineered entertainment
products Amazon, Google, Skype –
Rolls Royce – from high quality redefining industries like
– how we aero engines to becoming a
service company offering
retailing, advertising and
telecoms through online models
frame ‘power by the hour’ Linux, Mozilla, Apache – moving
what we IBM from being a machine
maker to a service and solution
from passive users to active
communities of users co-creating
do company – selling off its new products and services
computer making and building
up its consultancy and service
side.
Any Questions????
SEMINAR
 How do you understand the term “Innovation”?

 Describe the 4 Ps of innovation with examples in your groups