Innovation(invention) is the process of making new and creative ideas Innovation(invention) is the process of making new and creative ideas. It can have huge changes to the world (home computer) or small upgrades to exiting products. Research and development departments are very important departments to many businesses. A business that is innovative will remain successful while copy (me too) products will many times fail after a time. Some ways of doing innovation Process innovation Discovery of new production process (mass production/online services) Successful implementation of creative ideas (email) Introduction of new products (Ipod/VCR/home computer/ Car….) Cost reducing innovation – finding cheaper ways to do things to increase supply to consumers and increase profits. Entering new markets (being the first to enter a market) has a huge innovative advantage because of a lack of competition Consumers benefit from innovation by having access to new products and services as well as lower prices.

Incremental Innovation – small improvements that are made over time to a product or process. Computers get faster every year. This tends to come from daily use of product which can lead to an improvement in the product or process. Radical innovation is when some new process or product comes around and offers something new or replaces something else. This tends to come from R & D. Film photography to Digital photography.

Costs benefits and goals of innovation Peter Drucker says that at some point all successful managers will need to make some courageous decisions if they want there business to be successful. Benefits and goals of innovation Growth opportunities – Many businesses can expand into many different areas because of innovation. Productivity gains – innovation can help business with their production process which should give them an advantage over their competitors. Job creation – when new products are developed then new opportunities for employees exist. Brand switching – getting people to not use other name brands for your innovative product is a huge advantage Social benefits – new products and processes can improve peoples lives

Limitations of innovation High costs - research and development are very expensive departments and require lots of trained employees High failure rate because of internal and external restraints. Many products do not ever become a success and many are not even tried. When a product fails it costs money and demotivates staff. Budgetary constraints – many ideas that are made are to unrealistic to consider.

Research and Development (R &D) is about continual advancement through modifications of existing products or new products. Research is about investigating the unknown (new products or process) Development refers to using research findings to commercialize those findings into improvements in processes, products or reducing costs. The research and development department will produce several prototypes which are different designs of a product. Then after testing and market research one is chosen and produced. The R&D process is expensive and time consuming so only top companies can really commit to it.

Benefits of R&D Improved performance of an industry Higher sales growth Value added to product goes up First mover advantage Sunrise industries are businesses that have high growth potential (high-tech, bio-tech, Green energy) When a business is able to be a first mover in something new then they can charge a skim price, establish market share and improve corporate image. Sunset industries are industries where the market is shrinking. Because 9 out of ten products that are developed and market tested fail when a product is successful it needs to pay off the R&D for all the other products a business tries Most businesses that spend a lot on R&D is from firms in oligopolistic markets businesses that only have a few producers that compete with each other. Businesses that continue to poor money into R&D in a recession will be the most likely to succeed during after a recession because they will have new products to sell.

Intellectual Property rights (IPR) Act as ownership claims to a certain invention. The creator has the exclusive right to produce a product. This gives them a first mover advantage in most markets.

Patent is a legal right to produce a product. The inventor can apply for a patent after they have made an invention of a product. Once a business owns a patent then they will treat it like an asset. They can sell or lease it if they feel they will not be able to use it properly. They will lose value the older they are especially when they come close to expiring. This will act as a barrier of entry so that other firms cannot enter into a market. Patents act as an incentive for businesses to spend money on research and development. Without them many businesses would not spend time or money on research for fear that their products will simply be copied. (me too products) The main drawbacks to patients is that it is very time consuming taking up to three years to be approved. Also just because someone applies for a patient does not mean it will be approved. If the patient board feels it is only a minor improvement to an existing product it will be rejected.

Copy rights work like patients for artists work (music, books and movies) They are protected from being copied by others and will carry the C symbol to let everyone know that this is a copyrighted work. Trade Marks are logos that belong to a business and are used as a below the line promotion strategy. They are protected so that other businesses can not copy them. Businesses will use the R symbol next to their trade marks to let people know that the trade mark is registered.

Today’s business world takes intellectual property rights laws very serious. Many businesses can be hurt because of different laws in different countries. Also the internet makes it harder and harder to protect copyrighted material.

Factors affecting innovation Manufacturer innovation happens when a business or person commercializes their product End-user innovation is when someone makes a new invention to help themselves. Innovation is helped by very competitive markets. When people keep wanting more and better things then the businesses need to react quickly. Because of the fast moving pace of some industries the risk of failure can go up so they may need to keep looking for new (international) markets.

Diffusion of innovation theory Everett M. Rogers’s diffusion of innovation theory (new product life cycle) is used to see when people will adapt to new products. People will move to new inventions at different rates and this can help people to understand when the products will become more and more popular. His theory has five different stages with different adoption rates.

Innovators want to always have the new product because it is new Innovators want to always have the new product because it is new. They pay a high price and usually come from a high socio-economic place. Marketing at this point is about how new it is. 2% of population. Early adopters are people who wait until a product is tested before they jump on board. Marketing is about trails and allowing people to test the product. 14% Early majority people who will buy a product because they see it’s usefulness. Marketing is less about how new it is. Economies of Scale kick in so price should drop. 34%

Late Majority – people ho wait to make sure enough people have bought the product and will try to buy the best one that is produced. Necessity or social pressure make people buy at this point. Prices should have fallen at this point. 34% Laggards – people who doubt or fear technology who wait until everyone else has one and will then be the last to buy. 15%