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MKT 490 Innovation & New Venture Growth Mishari Alnahedh
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LECTURE 3: Innovation 1
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Kuwait Stat Mishari Alnahedh
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Innovation Mishari Alnahedh Definitions Innovation: the practical implementation of an idea into a new device or process. Idea: something imagined or pictured in the mind. Creativity: the ability to produce novel and useful ideas and work.
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Creativity Mishari Alnahedh
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Where do innovations come from ?
Mishari Alnahedh Where do innovations come from ?
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Creativity Mishari Alnahedh
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Individual Creativity
Mishari Alnahedh Individual Creativity An individual’s creative ability is a function of his or her: Intellectual abilities – can you look at problems in unconventional ways? Knowledge – the impact is double-edged Style of thinking – can discriminate between important ideas and unimportant ones. Personality – self-efficacy, tolerance for ambiguity, willingness to take risks Motivation - Extrinsic or intrinsic motivation ? Environment - provide support and reward for creative ideas How can you increase your creativity as an entrepreneur? - Ditch your comfort zone ! - Great minds don’t think alike
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Translating Creativity Into Innovation
Mishari Alnahedh Translating Creativity Into Innovation The Inventor – 10-year study of inventors concludes that most successful inventors possess the following traits: They have mastered the basic tools and operations of the field in which they invent – pursuing multiple fields simultaneously. They are curious and more interested in problems that solutions They question the assumptions made in previous work They have the sense that all knowledge is unified .. They are generalists Seek global solutions rather than local solutions!
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Example: Dean Kamen Creativity
Mishari Alnahedh Example: Dean Kamen “To Kamen, the solution was not to come up with a new answer to a known problem, but to instead reformulate the problem.”
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Why Do Some Innovations Stick? Quite Simply, Because They’re Better
Mishari Alnahedh Why Do Some Innovations Stick? Quite Simply, Because They’re Better By Dylan Walsh – Insights by Stanford Business School
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Innovation Mishari Alnahedh What distinguishes Google from WebCrawler or AltaVista? Why DVDs, but not Laserdiscs? Why do some innovations succeed while others flounder? Successful inventions draw inspiration from a range of disciplines. “Research indicates that the most impactful innovations combine technologies or ideas or knowledge that people don’t typically think of as working together” – John-Paul Ferguson Gatekeepers vs. Wisdom of the crowd “For an example, consider Hollywood. If the producers who green-light movies operate from a set of financial criteria that are completely irrelevant to consumers, then there are whole sets of movies that the public never gets to evaluate and that market forces will never sort as successful or unsuccessful.”
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Research and Development by Firms
Research & Development Mishari Alnahedh Research and Development by Firms Applied research: research targeted at increasing knowledge for a specific application or need. Development: activities that apply knowledge to produce useful devices, materials, or processes.
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Research & Development
Mishari Alnahedh Science-push approach to R&D: innovation proceeded linearly from scientific discovery to commercial sales. Thus, the primary sources of innovation are discoveries in basic science that were translated into commercial applications. Demand-pull approach to R&D: innovation is driven by the perceived demand of potential users. Research staff develop new products in efforts to respond to customer problems or suggestions. Research suggests that firms that are successful innovators utilize multiple sources of information and ideas: In-house R&D Linkages to customers or potential users of innovations Linkages to an external network of firms (competitors, suppliers ..) Linkages to other sources of scientific information (universities ..)
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Research & Development
Mishari Alnahedh Absorptive Capacity: the ability of an organization to recognize, assimilate, and utilize new knowledge applying it to commercial ends.
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Innovation in Collaborative Networks
Mishari Alnahedh
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Technology Clusters Mishari Alnahedh
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Technology Clusters Mishari Alnahedh Complex Knowledge: knowledge that has many underlying components, or many interdependencies between those components, or both. Tacit Knowledge: knowledge that cannot be readily codified (documented in written form) Agglomeration Economies: the benefits firms reap by locating in close geographical proximity to each other. Technological Spillovers: a positive externality from R&D resulting from the spread of knowledge across organizational or regional boundaries. Evidence suggested that technology spillovers area a significant influence on innovative activity.
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Innovation Mishari Alnahedh
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Types of Innovation Mishari Alnahedh Incremental innovation: an innovation that makes a relatively minor change from (or adjustment to) existing practices. Radical innovation: an innovation that is very new and different from prior solutions Example: 3G wireless communication The radicalness of an innovation is relative, and may change overtime or with respect to different observers.
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Types of Innovation Mishari Alnahedh Component (or modular) innovation: an innovation to one or more components that does not significantly affect the overall configuration of the system. Architectural innovation: an innovation that changes the overall design of a system or the way its components interact with each other. Requiring changes in the underlying components and in the ways those components interact. Example: the transition from the high-wheel bicycle to the safety bicycle
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S-Curve of Technology Performance
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S-Curve of Technology Performance
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S-Curve of Technology Performance
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Evolution of the Disposable Diaper highlights Dynamics of Technology S-Curve
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S-Curve of Technology Performance
Mishari Alnahedh The Millsian (Absorbent core) diaper faced significant technological hurdles due to the tradeoff between size and absorbency … Source:
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Breaking Down the Technology S-Curve
S-Curve of Technology Performance Mishari Alnahedh Breaking Down the Technology S-Curve Source:
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Technology Diffusion Mishari Alnahedh
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Factors that influence diffusion:
Technology Diffusion Mishari Alnahedh Factors that influence diffusion: Progressive development of complimentary assets and complimentary products Classic externalities Word of mouth Process improvements Vintage effects (e.g. machine tools) Supply constraints Development of new uses for the same product General shift in the needs of the population (lifestyle effects) Progressive development of skills Pricing strategies Market diffusion curve can be the discriminatory pricing curve
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Entry Timing
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Speed of response: First-mover vs. second-mover
Entry Timing Mishari Alnahedh Speed of response: First-mover vs. second-mover Sources of first-mover advantages Economies of Scale Experience or Learning Curve Effects Brand Equity and customer loyalty “Network Externalities” Technological Leadership Preemption of Scarce Assets Exploiting Buyer Switching Costs Dominant Design
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Speed of response: First-mover vs. second-mover
Entry Timing Mishari Alnahedh Speed of response: First-mover vs. second-mover First-mover disadvantages High risk High development costs High demand uncertainty Incumbent Inertia Undeveloped Supply and Distribution Channels Immature Enabling Technologies and Complements Incumbent Inertia: the tendency for incumbents to be slow to respond to changes in the industry environment due to their large size, established routines, or prior strategic commitments to existing suppliers and customers
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Entry Timing Mishari Alnahedh
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New Bala is a successful second mover in the athletic shoe industry.
Entry Timing Mishari Alnahedh A second mover : is a (second, third, fourth, etc.) firm that responds to a first mover’s competitive action often through imitation or a move designed to counter the effects of the initial action. New Bala is a successful second mover in the athletic shoe industry.
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Speed of response: First-mover vs. second-mover
Entry Timing Mishari Alnahedh Speed of response: First-mover vs. second-mover Second-mover advantages Reduction in demand uncertainty Market research to improve satisfying customer needs Learn from the first mover’s successes and shortcomings Gaining time for R&D to develop a superior product
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First Mover Disadvantages May Lead to Second Mover Advantages
Entry Timing Mishari Alnahedh First Mover Disadvantages May Lead to Second Mover Advantages The Costs of Early Adoption The “Bleeding Edge” of Technology Changing Technology Product Technology Process Technology Changing Consumer Tastes Saturn & Chrysler Given that a second mover’s product development costs can be much lower than the first mover’s product development costs, first-mover advantages must be substantial to justify first moving as a strategy
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