Dr. Harris Turino

harristk@gmail.com

Innovation

• Innovation is defined as socially and economically

success as a result of introducing of new ways or

new combinations of old ways to transform input

into output, so that create significant change the

relation of cost and benefit.

• Innovation falls into three broad categories:

• Technology (process, product, service)

• Market (product, price, promotion, place)

• Administrative (business model, structure & system)

Invention: Creating Ideas

Creating New Ways New Combination of Old Ways

Xerox: Inventor of copier

machine

Canon: Introduce compact

copier for personal and small company

Magnetic hard disk

Optical hard disk (smaller, but bigger capacity)

Nicholas J. Cugnot: Automotive

Ford Motor Company: Affordable Automotive

Invention: Creating Ideas

Environmental Changes

Economics condition fluctuates unpredictedly.

When declining period (crisis), many rules change.

If we stand up on our position, we are likely to die.

If we stand away, no guarantee to keep alive (success), but we have bigger opportunities to exist and grow.

• Do nothing • Use old ways or perceptions • Efficiency

“Stand away” means “do innovation”

Way of consuming, life priorities, travelling style, way of time spending, financial condition, hobby intensity etc.

Kalangan atas ngopi di

Starbucks Coffee

Kalangan menengah

ngopi di 7-Eleven

Kalangan bawah juga

nyruput kopi di

SETARBAK KOPI

SETARBAK MOBILE

New Opportunities

Unfortunately, many companies fail to perceive the crisis situation. • Crisis is temporary and everything will be recoverable

normally as before. • Crisis means consumption declining.

Situation will be normal again, but many consumer behaviors have shifted.

It creates new rules, new opportunities, new segments to be re-explored (e.g. Energy policy)

New companies arise, grow up to be giant after that, and many old ones collapse.

Innovation: Creating Value

Innovation refers value creation. It is new idea constructed from new ways or combination with old ways.

We do smart innovation if we can commercialized it to achieve economic and social success.

Innovation should be done continuously even we have not needed yet. Why?

Innovation needs learning process. It is an incremental step that the final result can not be predicted.

Innovation Traps

Value created from innovation is not perceived by consumer to be useful.

There are two common innovation traps:

Perception is very important, even sometimes it’s more important than

the reality itself

Consumers perceive no benefit, thus they do not want to consume it or spend money for it. No consumer surplus (e.g. Mie instant vs. Taranasiku).

Innovation Traps

There are two common innovation traps:

Useful value created from innovation can not be compensated by monetary price.

Producer fails to increase its financial performance or perceived useless by employee. No producer surplus (e.g. Sempati Air Ontime Guarantee).

Without consumer and producer surplus at the same time, innovation

can not be done continuously.

Examples

Walkman, iPod, Facebook, Teh Sosro, Aqua, Ford’s assembly-line, Toyota Prius Hybrid, Starbuck

They have innovated

But they fail to commercialize it

they succeed to commercialize it

They have changed the rule and succeed to commercialize it

• Mie Duo • Civic Hybrid (1997) • Vanilla Coke

• Mie Sedap • Soklin • Sabun Ekonomi

Examples

They succeed but others enjoy the sucess

patent

trademark

copyrig

ht

secre

t

technological innovation

customer relationship

service

complementary technology

marketing capabilities

strategic alliance

distribution channel

others

Complementary Assets (CA)

how easy to imitate

Commercialize to the market

Commercialize to the market

Complementary Assets

Example: Microsoft’s CA: • Market share • Strategic alliance with

Intel

Innovator Highest Bargaining

Power Party

Complementary Assets Holder

Difficult to make profit

freely available tightly held

COMPLEMENTARY ASSET Easy

Diffc

ult

HO

W E

ASY T

O I

MIT

ATE

Who Enjoy the Profit?

From Imitation to Invention

Imitation is not forgery, and not against the law

Type of Imitation: Inferior Quality Exp: Local KFC, Chinese Hand phone

Par Quality Exp: Neurobion, Nokia

Superior Quality Exp: Facebook, Blackberry, Windows

From Imitation to Invention

Innovation is similar and difficult to differentiate from Superior Quality Imitation

Example: iPod and iPad are innovation

Invention: creating something new to the world.

Example: Amlodiphine (Pfizer) Radial Tire

Speed of Imitation

Phonograph record 32 years

Chrysler minivan 9 years

CD Player 3 years

GM Mini Cooper 1 years

iPad 2 months

Viagra - 6 months

Summary

Innovation means value creation.

Innovation is smart when it achieves economic and social success.

Innovation is a cyclical process. It needs learning process in incremental step

If you can’t innovate, at least you can imitate first

Innovation is not always new ways (invention).

Innovation contributes directly to consumers’ life quality and producers’ financial performance.

Thank You