INNOVATION MANAGEMENT Strategies, Implementation and Profits Authored By: Allan Afuah Presented By : Abhinava Chanda Roll No : 313

From Invention to Innovation While invention depends upon creativity, successful technological innovation requires integrating new knowledge with multiple business functions.

Innovation – What is it? The creation of new ideas/processes which will lead to change in an enterprise’s economic 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 Old Market New Market Old Product New Product Market Penetration Product Development Market Development Product Diversification

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 innovation by similar firmsThe adoption of an innovation by similar firms Usually leads to product or process standardizationUsually leads to product or process standardization Products based on imitation often are offered at lower prices but with fewer featuresProducts based on imitation often are offered at lower prices but with fewer features Invention Innovation Imitation

Translation of a Creative Idea into Useful Application Analytical Planning Organizing Resources Implementation Commercial Application To Identify: Product Design Market Strategy Financial Need To Obtain: Materials Technology Human Resources Capital To Accomplish: Organization Product Design Manufacturing Services To Provide: Value to Customers Rewards to Employee Revenue to Investors Satisfaction of Founders The Innovation Process

The 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 Appropriation from Innovation Barriers to Integration Different Time Interpersonal Different Goal Formality of Orientation Orientation Orientation Structure Facilitators of Integration Shared Values Leaders’ Vision Effective Budget Allocation Communication Appropriating Value from Innovation Cross- Functional Integration/ Design Teams Time to Market Product Quality Creation of Customer Value

Product Life Cycle Sales Time Introduction Growth Maturity Decline

Technology Adoption – Diffusion of Innovation Innovators:venturesome; greatest need Early adopters:opinion leaders; needs driven Early majority:deliberate Late majority:skeptics Laggards:traditionalists; suspicious

New Business Models Emerge Then… One Integrated Company Now… Many Distributed Companies Product Development Cycle Product Development Tool Companies Testing Services CRO’sCRM’s

New Regional Model Emerge Then… 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 Resources Bargaining power of owners of complementary resources depends upon whether complementary resources are generic or specialized. Manufacturing Distribution Service Complementary technologies Other Marketing Finance Core technological know-how

The Small and Medium-Sized Enterprises (SMEs) Division of WIPO Risk & Return Competing Resources Examples Licensing Outsourcing 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 & capabilities To 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 Innovation

Uncertainty & Risk Management in Tech-based Industries Sources of uncertainty Technological uncertainty Selection process for standards and dominant designs emerge is complex and difficult to predict, e.g. future of 3G Customer acceptance and adoption rates of innovations notoriously difficult to predict, e.g. PC, Xerox copier, Walkman Market uncertainty Strategies for managing 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 risk RISKS COSTS RESEARCH DEVELOPMENT COMMERCIALISATION

Mortality of New Product Ideas

TimelyTimely Difficult for competitors to imitate Difficult for competitors to imitate Commercially exploitable with present capabilities Commercially exploitable with present capabilities Innovation and Competitive Advantage CompetitiveAdvantageCompetitiveAdvantage Provides significant value to customers Provides significant value to customers

Competitive Advantage Criteria… Low cost producer Product differentiation Niche market

New Product Development BreakthroughInnovation ? Need two processes: NPD and NB(usiness)D ? Innovative New Products NewBusinesses New Business Development An opportunity driven path to market- a different business design

Protection of IP Ideas Ideas Research Research Technologies Technologies Products Products Utility models, Patents Collaborative Research Agreement Confidentiality or Nondisclosure Agreements (Trade Secrets) Technology Licensing Agreement, Branding Value adding

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