What is Innovation?

Value of Innovation Types (Benefits)

-Categorisation helps to show innovation are not homogenous, innovations vary, different approaches are necessary in carrying out an innovation -analysis of innovations needs degree of sophistication, isolate exactly where nature of innovation lies, careful examinations required in other words, in order for innovation to stand any chance in being a successful one -helps in understanding evolutionary process linked to tech change. Any tech change can lead to competing designs with different architecture. -Tech differ when applied to systems and individual components

Value of Innovation Types (Limitations)

-Product oriented, components configured through product architecture. This is less apparent in services, hence types cannot be applied when analyzing service innovations. -Some Products aren't assembled from components, no architecture (e.g. chemicals). Therefore not universally applicable. -technology oriented, good at differentiating degree of innovation in tech terms, but not in terms of impact in wider society.

Incremental Innovation

A change that builds on a firm's expertise in component technology within established product architecture (component linkages). Usually refinements in components rather than changes in system. Level of novelty is low, as they are improvements not major changes. Typically a product of existing practice and expertise associated with existing technology. Occurs frequently, a linear process of continuous change not autonomous in nature, like a 'light bulb' moment. -Impact on markets and Industries 1) Tends to reinforce position of incumbent firms, i.e. increase market share, portfolio of products, risk is spread among what they have, reputation is enhanced, helps to keep customers satisfied, competition is maintained, enhances further learning internally, will be able to enter new markets not exploited before etc, can further increase rate of diffusion of existing tech. 2) Favors existing players, those with established stock of knowledge and expertise in a given tech. Best placed to generate a steady stream of linear incremental innovations.

Value Creation

A series of activities that enable the user to recognise the benefit and value that he/she can gain from the invention

Modular Innovation

An innovation that changes a core design concept without changing the product's architecture (Linkage mechanism of components). Done through: -Use of new or different components -new tech can transform way in which one or more components can operate, configuration remains unchanged (various playstation gaming consoles which had been released to the gaming market) -clockwork radio example, don't need external source of power, poor countries can gain benefit from it, life span of product is extended, ability to function is self dependent, don't need aid of electricty for example. Low cost, requires less elements in terms of overall core concept design. Can be sold in isolate areas, has potential to be used by vast variety of consumers. Can be standardised, especially in areas who lack infrastructure.

Diffusion

Closely associated with Innovation, describes the rate at which consumers adopt the innovation. Can be slow or rapid. e.g. Ebay. Very Popular= rapid rate of diffusion, catches on more slowly= slow rate of diffusion (Rate of diffusion) Path of diffusion exhibits S curve. When a new product/service innovation is first introduced to a market or industry, consumers are initially unfamiliar with the product or benefits, hence would otherwise be reluctant to purchase. Sales at this stage are modest, with low rate of diffusion. Gradually a period of awareness building and gradual familiarity with innovation will begin to occur, meaning consumers will be able to influence others. A small majority of adopters, starts to surface, through learning of the innovation. Hence, sales increase and popularity rises. Same time, diffusion increases as well. (Curve rises sharply). Near the end of the tech cycle, top of curve is approached. There is a late majority in adopters of the innovation, in which isolated individuals are forced to adopt due to lack of alternatives. As a result, therefore, market becomes saturated, sales slow, levelling out occurs and rate of diffusion moderates. Here usually, incremental innovation is attempted in order to keep consumers interested, existing and new. It is said, this is where innovation has diffused. S-curve is used to analyse the effect of diffusion on innovation and consumers, in regard to willingness to adopt, due to influence of social factors: peer pressure, fashion, word-of mouth, communication and social networks. Occurs in fear of being left behind, 'bandwagon effect'. Happens usually when a certain level of threshold has been reached. Therefore, peer pressure, for example, rather than rational assessment of benefits causes adoption. Examples of this, is Facebook and Youtube, often many use as these services forseen as the norm to use in society, due to the vast majority that use it on a every day basis.

Corporate, Closed (Route to invention)

Corporate research and development facilities in form of r&d laboratories, main engine of invention. The invention takes place within a single organisation, including associated commercialisation activities. Examples, IBM, posessed massive r&d facilities, compete by doing more r&d than anybody else in industry.

Product Innovation

Development of a novel/new product. Done through: -Using a new technology (e.g. Dyson's dual cyclone vacuum, was innovative by being different from conventional cleaners -Re Configuring a technology (System change of Sony Walkman, pioneered personal audio player market) -Better at meeting consumer needs (e.g. workmate workshop) -Meeting new consumer needs (JCB hydraulic excavator)

Radical Innovation (Components/Linkages overturned)

Establishes a new dominant design, and hence a new set of core design concepts, embodied in components that are linked together in a new architecture. It brings a new set of priorities in markets and industry. High level of novelty; employ new design, new components and architecture -Apple Ipod, touch screen interface technology that revolutionized the way in which MP3 players were used, in terms of function and operation. With this new tech, it brought along new capabilities and competences for industry, was user friendly for consumers, was an instant hit, economic value was captured in a short period of time. Consumers were able to learn quickly the potential and benefits of using the product, as it was an innovation never seen before, therefore one can assume innovation tapped a new consumer need. As tech was patented, it took a bit of time for rivals to acquire and adapt knowledge of this new tech to what they had accumulated previously, rivals were reluctant to invest instantly, they wanted to judge firstly whether tech would create a shift in consumer preference and taste, which evidently Apple accomplished. However, commercialising the tech of this kind and being successful is rare, as commonly many fail due to radical innovation being difficult and risky, not everyone will take to it straight away, takes time and is a big task. Often outcome is uncertain because the fact it can't be compared to anything else on the market. -Industry Impact: arrival of new entrants, better able to marshall necessary capabilities now required, on the basis that radical innovation has effect of current technology discontinuing, within industry itself, in terms of existing dominant design, standards and regulations etc. -Market Impact: competing designs and increased competition, for example increase in r&d, change of internal strategy, financial investment, increase in personnel, has implications on manufacturing and production etc (examples are impact to a firm)

Value Capture

Extracting or obtaining value from the activities undertaken by the innovator (Revenue) Inventions, discoveries and breakthroughs, only release value when consumers start buying them. Way of generating revenue is through outright sale, where consumer exchanges money in return for ownership of product or service. Other methods include: Renting, charging by transaction, advertising, subscription and charging for after-sales support (Its a key feature of business models)

Inventions

Inventions involves 'new ideas, new discoveries and new breakthroughs'. Developed via process of experimentation to arrive at a workable invention. Forms part of (or even a stage) the process of innovation, including is part of r&d. It is an inventive step that turns ideas into workable inventions. If innovation is modest, with little novelty, e.g. line extentions and re-positionings, there may be little or no experimentation. Although, considerable amount of technical work would be needed, for desired attributes to be reached.

System Knowledge (Innovation forms require this)

Knowledge about way components are integrated and linked together,for example anti brake system. Knowledge about how systems works and how various components are configured and work together (Architectural Knowledge)

Component Knowledge (Innovation forms require this)

Knowledge of each of the components that perform a well-defined function, for example Engine and Suspension of a automobile, within a broader system that makes up the product. Forms part of 'core design concepts'.

Architectural Innovation

Leaves the core technological concepts of components intact but changes the way they are designed to work together. Changes are minor, leave components to function, within a re-configured system. -Sony Walkman, changed behaviour of consumer, eventually copied by others later. Helped to promote a range of activities like jogging and walking. Change made product portable, flexible, user friendly, can be used in various situations, interactive and widely compatible, easy to access. Another example, Windows XP and Windows Vista.

Individual (Route to invention)

Lone investor toils away on his or her own, portrayed as a 'heroic' figure, battling against the odds, isolated, lacking support and short of resources. Example, Dragon's Den and Google (Rare to occur though)

Process Innovations

New way of making things or delivering services, innovations in manufacturing processes and administrative and office systems. Process innovations can lead to what Schumpeter described as, 'Creative Destruction', as new industries rise and old ones disappear -New tech (Pilkingtons 'Float Glass' process, improved efficiency in process. Involves drawing glass out across a bed of molten tin) -New methods/organisation ( F.W. Taylor's scientific management', led to big increase in productivity as activities were re-organised using Taylor principles. Another example is Ford's moving assembly line, reduced price, demand took off due to the increased quantity, line was able to produce.)

Service Innovation

Offering new/different services to consumers -using new tech, make it possible to offer consumers a service which hasn't been offered before (e.g. Amazon, First Direct) -Better at meeting consumer needs (Easyjet, Paypal) -Meeting new customer needs (Facebook)

Open Invention

Recognises invention isn't only the product of corporate research labs. Outsource responsibility to someone else, e.g. other large corporations, whom have developed new technologies but decide not to commercialise them. Having no use themselves, they license technology to others who are willing to innovate and turn technology into new products. Often inventions can derive from universities or specialised companies, who possess knowledge and expertise in narrow fields. Have capability to adapt technology to a particular, highly specialised application, including possess flexibility. Being able to produce potential commercial applications, it can then be commercialised in collaboration with large corporations.

Commercialisation

Typically includes development part of research and development (r&d), involves ensuring an invention is able to work reliably and safely, plus be produced in quantity in manufacturing context. This would also include marketing, org and finance. Required so users are made aware of invention and can gain access to it as well. Essence of commercialisation innovation, is to find an appropriate way to unlock what, Chesbrough, describes as 'Latent Value', of a technology in order to generate real value.

Business Model

is an enabling device, a tool that allows inventors to profit from their ideas and inventions. Model firstly need to identify users to whom innovation is going to be used by and then articulate the 'value proposition', so users are aware of its purpose and benefit they can expect to get. Once benefits are gained, purchase would be more likely. Chesborough identified 3 models that enable firms to convert tech potential, i.e. into economic value. Models determine who undertakes commercialisation phase and how it is conducted. 1) Incorporate the tech into the current business Examples are numerous, normal logical step to make for bringing tech into the market. Apple, for instance incorporated audio players, Ipod 2001, into existing portfolio at a period when it was not part of the company 2) License the technology to a third party (i.e. another firm) Large companies receive high income from royalties resulting from licensing of technology. Example, Dyson, commercialised invention by licensing tech to a manufacturer. But economic value was captured by creating a new venture later. 3)Launch a new venture to exploit technology in new business arenas Example, British Automotive manufacturer, Lucas Varity, developed new electric system of power steering. To market new tech to world leading manufacturers, a new venture was formed, in form of joint venture with a US based supplier TRW. Significance of business models, is that same tech will yield different amounts of value between whichever is used, something would-be innovators failed to appreciate.

Innovation

taking existing technology and resources and creating something new to meet a need. Innovations represent a subset of a much bigger set of inventions. Commercialisation process required to get an invention ready for the market is lengthy and demanding, requiring different range of capabilities so that many inventions do not make it to market and become successful innovations. (Innovation: Invention-commercialisation-diffusion)