Innovation - 1 © Minder Chen, Innovation in the New Economy Minder Chen Professor of MIS California State University Channel Islands

Innovation - 2 © Minder Chen, Importance of Innovation “In a world of ever-accelerating change, innovation is the only insurance against irrelevance. In an environment of steadily decreasing friction and crumbling entry barriers, innovation is the only antidote to margin- crushing competition. And in a global economy where knowledge advantages dissipate ever more rapidly, innovation is the only brake on commoditization.“ –Gary Hamel, “Introduction” to the Innovation to the Core

Innovation - 3 © Minder Chen, Definition of Innovation An innovation is the creation and application of a new or significantly improved technology, product/service, process, or business model that is accepted by markets and society. –Adapted from OECD 2005 and Wikipedia. Innovation applies ideas and new knowledge to the production of goods and services to improve product/service quality and process performance. –UK Design Council

Innovation - 4 © Minder Chen, Formula for True Innovation America’s advantage, if it continues to have one, will be that it can produce people who are also more creative and imaginative, those who know how to stand at the intersection of the humanities and the sciences. true innovation, …That is the formula for true innovation, … –Walter Isaacson is the author of “Steve Jobs.”author – steve-jobss-genius.html?pagewanted=all&_r=0http:// steve-jobss-genius.html?pagewanted=all&_r=0

Innovation - 5 © Minder Chen, Innovation: Creative Destruction A commercialization process based on the application of new materials and their components, new technical methods, new markets and new forms of organization. –Joseph Schumpeter The innovation involves both technical world and business world. A change in technology only is just an "invention“.

Innovation - 6 © Minder Chen, Creativity Creativity is the quality or ability to create or invent something original. “Genius is 1% inspiration and 99% perspiration.” –Thomas Edison Creativity is about coming up with the big idea. Innovation is about executing the idea — converting the idea into a successful business. –Vijay Govindarajan – Innovation is applied creativity.

Innovation - 7 © Minder Chen, Technology Innovation

Innovation - 8 © Minder Chen, Does Customer Know What They Want? Seeing what customers have not yet imagined but will instantly desire. “If I had asked my customers what they wanted, they’d have said a faster horse.” - Henry Ford

Innovation - 9 © Minder Chen, Drivers for Innovation Necessity is the mother of invention. Where there is a friction (frustration), there is an opportunity. –Zappos’ founder Nick Swinmurn –Dropbox file sharing: Drew Houston reportedly conceived the idea for Dropbox after repeatedly forgetting his USB drive –Chinapages.com by Jack Ma

Innovation - 10 © Minder Chen, Product & service Innovation Polaroid Camera (Instant Camera)

Innovation - 11 © Minder Chen, Process Innovation Moving assembly line Steal from : Meat Packing Plant High wage; Model-T: a true innovation available to a wide audience. pleasure car  passenger car

Innovation - 12 © Minder Chen, Business model Innovation Southwest Zara: Fast Fashion Dell: Direct sales IKEA: Self-assembled furniture Apple: iPod & iTune  ecosystem innovation

Innovation - 13 © Minder Chen, Architecture of Innovation Service Innovation Product Innovation Consumer End product/ service & Component Business Science/Technology Creativity & Imagination Process Innovation Business Model Innovation Technology Innovation Experience Innovation Humanity/Art Intersection & Integration

Innovation - 14 © Minder Chen, The Rate of Innovation: Product vs. Process

Innovation - 15 © Minder Chen, Key Factors at Three Phases FluidTransitionalSpecific ProductRadical, frequent Dominant design Incremental, rare ProcessRare, rely on skills General equipment Specialised equipment OrganisationOrganicSemi- structured Hierarchical MarketFragmentedSegmentsCommodity CompetitionIncreasing, different Decreasing, more similar Few similar

Innovation - 16 © Minder Chen, S-Curve or the logit function for rate of diffusion adoptation. The cumulative distribution of innovation adopters who are characterized by the timing of their decision to accept and implement the innovation. Innovation Diffusion Everett M. Rogers ( ), Diffusion of Innovations, 4 th edition (1995) Invent Adopt Persuade Decide Reject Accept Implement Abandon The Process of Innovation Diffusion Innovation Diffusion Function to Saturate a Market

Innovation - 17 © Minder Chen, Technology Forecasting “I think there is a world market for maybe five computers.” –Thomas Watson, Chairman, IBM (mainframe giant), 1943 “This telephone has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.” –Western Union (telegraph) internal memo, 1876 “There is no reason why anyone would want a computer in their home.” –Ken Olsen, Founder, Digital Equipment Corp. (minicomputer giant) 1977

Innovation - 18 © Minder Chen, Factors of Innovation Adoption Decision (Roger) FactorDefinition Relative Advantage How improved an innovation is over the previous generation. Compatibility The level of compatibility that an innovation has to be assimilated into an individual’s life. Simplicity or Complexity If the innovation is perceived as complicated or difficult to use, an individual is unlikely to adopt it. Trialability How easily an innovation may be experimented. If a user is able to test an innovation, the individual will be more likely to adopt it. Observability The extent that an innovation is visible to others. An innovation that is more visible will drive communication among the individual’s peers and personal networks and will in turn create more positive or negative reactions.

Innovation - 19 © Minder Chen, Service innovation is inherently multidisciplinary Science & Engineering Business Administration and Management Social Sciences Global Economy & Markets Business Innovation Technology Innovation Social-Organizational Innovation Demand Innovation SSME = Service Sciences, Management, and Engineering Knowledge sources driving “service” innovations… Grameen Bank (Bank of the poor, Micro lending) Groupon Laser, seminconductor TQM Reengineering

Innovation - 20 © Minder Chen, Three Types of Restaurants Source: Service Is Front Stage Teppanyaki-type Restaurant (i.e., Benihana) 火鍋火鍋 Hotpot

© 2005 IBM Corporation © 2009 IBM Corporation T-Shaped Talents: skills, abilities, and knowledge  Cross-disciplinary communication  Service system design, management, and modeling  Value co-creation analysis  Service lifecycle analysis (for quality assurance)  Service supply and demand management  New service development  Business project management  Business case development and analysis  Organizational change management  Marketing and sales  Creative and critical thinking  Communication skills  Leadership and collaboration skills Wendy Murphy & Bill Hefley, “What’s new in service science, management, and engineering?” Presented at Frontiers in Service Conference, October 2008 T-shaped professionals are in high demand because they have both depth and breadth They combine expert thinking (depth in one or more areas) and complex communications (breadth across many areas) complex communication expert thinking

Innovation - 22 © Minder Chen, For Innovation Opportunities Rule breaking Demographics New Perception New knowledge

Innovation - 23 © Minder Chen, Evolution of Dominant Market Demand and Firm’s Focus Time Price Quality Choice, Time of Delivery Uniqueness Market Demand Firm’s Focus Cost Efficiency Quality Flexibility & Agile Innovation Adapted from Felix Janszen, The Age of Innovation, 2000, p. 19.

Innovation - 24 © Minder Chen, Discovery, Invention, and Innovation “If an idea begat a discovery, and if a discovery begat an invention, then an innovation defined the lengthy and wholesale transformation of an idea into a technological product (or process) meant for widespread practical use. Almost by definition, a single person, or even a single group, could not alone create an innovation. The task was too variegated and involved.” – The Idea Factory, by Jon Gertner

Innovation - 25 © Minder Chen, Discovery vs. Invention lightning was a form of electricity. Applied creativity — taking clever ideas and smart designs and applying them to useful devices. – Walter Isaacson

Innovation - 26 © Minder Chen, Invention vs. Innovation iPod wasn't the first portable music device (Sony popularized the "music anywhere, anytime" concept 22 years earlier with the Walkman; MP3) What made Apple innovative was that it combined all of these elements -- design, ergonomics and ease of use -- in a single device, and then tied it directly into a platform that effortlessly kept that device updated with music. Creative CollisionApple invented nothing. Its innovation was creating an easy-to-use ecosystem (with iTune Store, iTune, ans iPod) that unified music discovery, delivery and device. And, in the process, they revolutionized the music industry.  Creative CollisionIts innovation was creating an easy-to-use ecosystem Source:

Innovation - 27 © Minder Chen, Innovation Arena: TAMO Adapted from Felix Janszen, The Age of Innovation, 2000, p. 9. New materials and components New processes New services Invention Innovation A solution looks for a problem. A problem looks for a solution.

Innovation - 28 © Minder Chen, From Ideas to Product/Service/Business Uncertainty Resource allocated Is it possible? Idea Product/Service/ Business Is it attractive? Is it do-able? Is it what our customers want? How do we implement it? Source: Felix Janszen, The Age of Innovation, 2000, p. 99. And Between the conception And the creation Between the emotion And the response Falls the Shadow - T.S. Elliot

Innovation - 29 © Minder Chen, Manage the Product/Innovation Pipeline

Innovation - 30 © Minder Chen, Innovation Arithmetic Build up the pipeline Quantity matters

Innovation - 31 © Minder Chen, Innovation Pipeline Source:

Innovation - 32 © Minder Chen,

Innovation - 33 © Minder Chen, An Innovation Process

Innovation - 34 © Minder Chen, Seven Innovation Myths 1.Innovation is risky. 2.Innovation is (only) about products. 3.Innovation is about "big" ideas. 4.Innovation can't be taught. 5.Innovation is a diversion. 6.Innovation is expensive. 7.Innovation is an exception. Source: Innovation to the core