INNOVATION MANAGEMENTStrategies, Implementation and Profits

Authored By: Allan Afuah

Presented By : Abhinava Chanda

Roll No : 313

From Invention to InnovationFrom Invention to Innovation

While invention depends upon creativity,

successful technological innovation requires integrating new knowledge with multiple business functions.

Innovation – What is it?Innovation – What is it?

The creation of new ideas/processes which The creation of new ideas/processes which will lead to change in an enterprise’s will lead to change in an enterprise’s economic or social potentialeconomic or social potential

[P. Drucker, ‘The Discipline of Innovation’, Harvard Business Review, Nov-Dec, 1998, 149]

The Small and Medium-Sized Enterprises (SMEs) Division of WIPO

There are several types of new products. Some are new to the market, some are new to the firm, and some are new to both. Some are minor modifications of existing products while some are completely innovative

Product Development Strategies

OldMarket

New Market

Old Product New Product

MarketPenetration

ProductDevelopment

Market Development

ProductDiversification

The Development of Technology: From Knowledge Generation to Diffusion

The Development of Technology: From Knowledge Generation to Diffusion

Basic Knowledge

Invention Innovation Diffusion

IM ITATION

ADOPTION

Supply side

Demand side

Innovation Process

• The adoption of an The adoption of an innovation by similar firmsinnovation by similar firms

• Usually leads to product or Usually leads to product or process standardizationprocess standardization

• Products based on imitation Products based on imitation often are offered at lower often are offered at lower prices but with fewer prices but with fewer featuresfeatures

InventionInvention

InnovationInnovation

ImitationImitation

Translation of a Creative Idea into Useful Application

Analytical Planning

Organizing Resources

Implementation Commercial Application

To Identify:Product DesignMarket StrategyFinancial Need

To Obtain:MaterialsTechnologyHuman ResourcesCapital

To Accomplish:OrganizationProduct DesignManufacturingServices

To Provide:Value to CustomersRewards to EmployeeRevenue to InvestorsSatisfaction of Founders

The Innovation Process

The Profitability of InnovationThe Profitability of Innovation

• Legal protection

• Complementary resources

• Ease of imitation of technology

• Lead time

Profits from

Innovation

Value of an innovation

Innovator’s ability to

appropriate value from an

innovation

Value Value Appropriation Appropriation

from from InnovationInnovation

Barriers to IntegrationBarriers to Integration

Different TimeDifferent Time

InterpersonalInterpersonal

Different GoalDifferent Goal

Formality ofFormality of

OrientationOrientation

OrientationOrientation

OrientatioOrientationn

StructureStructure

Facilitators of Facilitators of IntegrationIntegration

Shared ValuesShared Values

Leaders’ VisionLeaders’ Vision

EffectiveEffective

Budget AllocationBudget Allocation

CommunicationCommunication

Appropriating Value from Appropriating Value from InnovationInnovation

Cross-Cross-Functional Functional

Integration/Integration/Design TeamsDesign Teams

Time to Time to MarketMarket

Product Product QualityQuality

Creation of Creation of Customer Customer

ValueValue

Product Life CycleProduct Life Cycle

SalesSales

TimeTime

IntroductiIntroductionon

GrowthGrowth

MaturityMaturity

DeclineDecline

Technology Adoption – Diffusion of InnovationTechnology Adoption – Diffusion of Innovation

EarlyAdopters

InnovatorsLaggards

EarlyMajority

LateMajority

Take up Rate

Time

Innovators:Innovators: venturesome; greatest venturesome; greatest needneedEarly adopters:Early adopters: opinion leaders; opinion leaders; needs drivenneeds drivenEarly majority:Early majority: deliberatedeliberateLate majority:Late majority:skepticsskepticsLaggards:Laggards: traditionalists; traditionalists; suspicioussuspicious

New Business Models EmergeThen…

One Integrated Company

Now…

Many Distributed Companies

Product Development

Cycle

Product Developmen

t

Tool Compani

es

Testing Services

CRO’s CRM’s

New Regional Model EmergeThen…

Manufacturing

Research

Development

Trials/Testing

Services

Self-contained regional clusters

Region A

Region E

Region B

Region F

Region D

Region C

Region G

Now…

Specialized, networked regions

The Small and Medium-Sized Enterprises (SMEs) Division of WIPO

Commercialization Model• Strategic Investment is the Foundation of a

Successful Commercialization Model

Innovation, Intellectual Property and Poverty Reduction

Critical Ingredients for Innovation:

• Intellectual Capital

• Human Capital

• Financial Capital

• Proximity

• Social Network Capital

Complementary ResourcesComplementary Resources

Bargaining power of owners of complementary resources depends upon whether complementary resources are generic or specialized.

Manufacturing Distribution

Service

Complementarytechnologies

OtherOther

Marketing

FinanceCore

technological know-how

The Small and Medium-Sized Enterprises (SMEs) Division of WIPO

Risk & Return

CompetingResources

Examples

LicensingOutsourcing

certain functions

Strategic Alliance

Joint Venture

Internal Commercialization

Small risk, but limited returns also (unless patent position very strong

Limits investment, but dependence on suppliers & partners

Benefits of flexibility; risks of informal structure

Shares investment & risk. Risk of partner conflict & culture clash

Biggest risks & benefits. Allows complete control

Few Allows outside resources & capabilitiesTo be accessed

Permits pooling of the resources/capabilities of more than one firm

Substantial resource requirements

Konica licensing its digital camera to HP

Pixar’s movies (e.g. “Toy Story”) marketed & distributed by Disney.

Apple and Sharp build the “Newton” PDA

Microsoft and NBC formed MSNBC

TI’s development of Digital Signal Processing Chips

Alternative Strategies for Exploiting InnovationAlternative Strategies for Exploiting Innovation

Uncertainty & Risk Management in Tech-based IndustriesUncertainty & Risk Management in Tech-based Industries

Sources ofuncertainty

Technologicaluncertainty

Selection process for standards and dominant designs emerge is complex and difficult to predict, e.g. future of 3G

Customer acceptance and adoption ratesof innovations notoriously difficult to predict, e.g. PC, Xerox copier, Walkman

Marketuncertainty

Strategies formanaging risk

Cooperating with lead users early identification of customer requirements

–assistance in new product development

Flexibilility—keep options open—use speed of response to adapt quickly to new information—learn from mistakes

Limiting risk exposure—avoid major capital commitments (e.g. lease don’t buy)—outsource—alliances to access other firms’ resources & capabilities—keep debt low

Innovation riskInnovation risk

RISKSRISKS COSTSCOSTS

RESEARCHRESEARCH DEVELOPMENT DEVELOPMENT COMMERCIALISATION COMMERCIALISATION

Mortality of New Product IdeasMortality of New Product Ideas

TimelyTimelyTimelyTimely

Difficult forDifficult forcompetitors to imitatecompetitors to imitate

Difficult forDifficult forcompetitors to imitatecompetitors to imitate

Commercially exploitableCommercially exploitablewith present capabilitieswith present capabilities

Commercially exploitableCommercially exploitablewith present capabilitieswith present capabilities

Innovation and Competitive Innovation and Competitive AdvantageAdvantage

CompetitiveCompetitiveAdvantageAdvantage

CompetitiveCompetitiveAdvantageAdvantage

Provides significantProvides significantvalue to customers value to customers Provides significantProvides significantvalue to customers value to customers

Competitive AdvantageCompetitive Advantage

Criteria…Criteria…

Low cost producerLow cost producer

Product differentiationProduct differentiation

Niche marketNiche market

New Product

Development

BreakthroughBreakthroughInnovationInnovation

?

Need two processes: NPD and NB(usiness)D

?

Innovative Innovative New ProductsNew Products

NewNewBusinessesBusinesses

New Business

Development

An opportunity driven path to

market- a different

business design

Protection of IPProtection of IP

IdeasIdeas

ResearchResearch

TechnologiesTechnologies

ProductsProducts

Utility models, Patents

Collaborative ResearchAgreement

Confidentiality or Nondisclosure Agreements (Trade Secrets)

Technology LicensingAgreement, Branding

ValueValue addingadding

Thank You