1. WEEK 2 INNOVATION AND ITS MANAGEMENT

2. TOPICS What is Innovation? Categories of innovation
Sources of innovation
Innovation models
The challenges in managing innovation
Innovation and commercialization process

3. What is innovation?
Innovation is the process and outcome of creating something new, which is also of value.
Innovation involves the whole process from opportunity identification, ideation or invention to development, prototyping, production marketing and sales, while entrepreneurship only needs to involve commercialization (Schumpeter).

4. What is innovation?
Today it is said to involve the capacity to quickly adapt by adopting new innovations (products, processes, strategies, organization, etc)
Also, traditionally the focus has been on new products or processes, but recently new business models have come into focus, i.e. the way a firm delivers value and secures profits.

5. What is innovation?
Schumpeter argued that innovation comes about through new combinations made by an entrepreneur, resulting in
a new product,
a new process,
opening of new market,
new way of organizing the business
new sources of supply

6. What is innovation?
Gary Hamel argued that today’s market place is hostile to incumbents, who now needs to conduct radical business innovation:
Radically reconceiving products and services, not just developing new products and services
Redefining market space
Redrawing industry boundaries

7. Schumpeter’s distinction between ”Invention” and ”innovation”
An ’invention’ is an idea, a sketch or model for a new or improved device, product, process or system. It has not yet entered to economic system, and most inventions never do so.
An ’innovation’ is accomplished only with the first commercial transaction involving the new product, process, system or device. It is part of the economic system.

8. “Innovation is a risky process. but also a mandatory one”
“Innovation is a risky process....but also a mandatory one”. Success depends of a variety of:
Internal factors
Good management
Core competencies
Clear innovation strategy
Right technology
External factors
Links with market and suppliers
Learning from competitors
Institutional support: financing, human capital, etc

9. Drivers for innovation
Financial pressures to reduce costs, increase efficiency, do more with less, etc
Increased competition
Shorter product life cycles
Value migration
Stricter regulation
Industry and community needs for sustainable development
Increased demend for accountability
Demographic, social and maket changes
Rising customer expectations regarding service and quality
Changing economy
Greater availability of potentially useful technologies coupled with a need to exceed the competition in these technologies

10. New conditions for innovation
Small start-up entrepreneurs increasingly depend on large firms:
as suppliers or customers
for venture finance,
for exit opportunites,
for knowledge (production, markets and R&D)
and for opening new markets.

11. New conditions for innovation
Large firms increasingly depend on small start- ups
for NPD,
as suppliers of new knowledge (which they cannot develop themselves),
or organizational renewal, for experimentation with busienss models,
for opening new markets, etc

12. What do companies think about innovation?

13. Innovation and competitive advantage
Strong correlation between new products, capture and retention of market share, and increased profitability
In mature industries, not just low price, but the provision of variety of non-price factors (design, customisation, quality)
Rapid response esp. important given shortening product life cycles
Response to shifts in the socio-economic field (e.g. SuperSize Me, legislation)

15. Video Totally Amazing Technology in this house

16. Source of innovation Within the company Social environment
Unexpected success or failure of products – pharmaceutical products
Incongruities – a gap existing between expectation and reality
Process need – increase in demand
Industry and market change - consumer attitudes
Social environment
Demographic change
Perception change
Knowledge change

17. Types of innovation – joseph schumpeter (1939)
The introduction of a new product or substantial change in existing product
The introduction of new process or production functions
The introduction of a new market
The conquest of a new source of supply of new materials
The carrying out of a new organization

18. Types of innovation - Oslo Manual
Product innovation
A good or service that is new or significantly improved. This includes significant improvements in technical specifications, components and materials, software in the product, user friendliness or other functional characteristics.
Process innovation
A new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software.
Marketing innovation
A new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing.
Organisational innovation
A new organisational method in business practices, workplace organisation or external relations. 18

19. Technological innovations – based on specific technology, invention, discovery,
Social innovations – in critical historic periods more important than technological ones (mail, educational systém, social systém, health care, …)

20. CATEGORY OF INNOVATION
Incremental
Radical
Transformative

21. Incremental innovation
Improvement of existing product/services/process that enhance the performance of the existing product/services – make the product better (beauty products, machines, etc)
Duplication – replication of existing product/services/process – eg: Instance noodle, fast food, computer
Synthesis – combination of an existing product, services and process into a new formation of use (faks+telephone+photocopier)
Mature industries
High appropriability

22. Radical innovation Change the value of the product based on problems
The back-scratcher - make the product/services/process easier and simpler for people (Mobile phone)
The extreme makeover – make an ugly product attractive , find the way to prosper the product at low prices (Budget airline – Airasia, Jetstar, Virgin Blue)
High uncertainty
Possible transformation of industry and sectors

23. Transformation innovation
Transformation of industry and sectors
Change the basis of society

24. Innovation and its dimensions

25. Figure 1.1 Dimensions of innovation

28. Innovation to Market Challenges?
(c) 2003 VentureQuest Ltd. LLC
11/13/2018
Innovation to Market Challenges?
Too early stage
Overvaluation of opportunity
Too many features, too few benefits
Weak value proposition
Competition barriers
Unvalidated market assumptions
Over reliance on technical evaluations
Too risky
Unproven business model
Slow adoption curve
Your Challenges??
U of I, Opportunity Assessment ppt

29. (c) 2003 VentureQuest Ltd. LLC
11/13/2018
Technology Adoption Curve
Mature Saturated Market
Declining Market
Rapid Growth
Market Size
Early adopters Niche markets
New Replacement Technology
Time
U of I, Opportunity Assessment ppt

30. The innovation and commercialization management process
Evolving models of the innovation process
Can we manage innovation? Introducing the concepts of Organizational Routines or Capabilities
Specify the different phases of the innovation process
How context affects innovation

31. Simple representation of the innovation process
The innovation management process
Simple representation of the innovation process
©2005 Joe Tidd, John Bessant and Keith Pavitt

32. Table 2.2 Rothwell’s five generations of innovation models
©2005 Joe Tidd, John Bessant and Keith Pavitt

33. First and second generation models
First generation (50’s-60’s): Technology push “Linear model”
R&D
DESIGN &
ENGINEERING
MANU-
FACTURING
MARKETING
SALES
Second generation (mid 60’s-70’s): Demand pull
MARKET
NEEDS
MARKETING
DEPT.
R&D
MANU-
FACTURING
SALES

34. 3rd generation model

35. 4th generation model marketing R&D Product development Components
manufacture
Product
manufacture

36. 4th generation model marketing R&D Product development Components
manufacture
Product
manufacture
Reduced time to market

37. 5TH generation model University Financial R&T System Centres IP IP
INDUSTRY
Users
Suppliers IP
Government

38. Innovation processes – 5th generation model
Relevance of external sources of knowledge
“firms do not innovate in isolation”
Related to Innovation System concept
Focus on networking
Still strong emphasis on R&D and formal knowledge (ICT)

39. 6th generation of innovation processes
“Revolve around knowledge and learning”
Networks embrace all knowledge types, not only R&D.
Most innovative firm is the one that learns fastest
It is the use of knowledge that makes the competitive difference, and creates the advantage

40. CURRENT innovation and commercialization MANAGEMENT process
Discovery
Opportunity recognition
(idea customer need=business concept)
Protection intellectual property
(pattern, trademark, copyright, etc)
Product development
(Prototyping, technology feasibility. Alpha testing)
Business development
Developing the business
Launching the product/business
Critical decision
Critical decision
Source: Allen (2003, p. 16)

41. (c) 2003 VentureQuest Ltd. LLC
11/13/2018
Six-Step Commercialization Process
Think
1. Idea Generation
Screen
2. Pre- screening
Assess 4.
Business and Market Development
Protect
3. Idea Protection
Validate
5. Product Development and Testing
Execute
6. Commercial- ization Strategy
Scientific discovery
Opportunity discovery
Customer- driven problem solving
Laboratory notebooks
Disclosure forms
Technical evaluation
Lab prototype?
Business Concept
Seven-Step Opportunity Evaluation
Model Opportunity
Patent
Copyright
Trademark
Trade secret
Opportunity Assessment
Executive Summary
Innovation Team
Product/ Service Analysis
Market Strategy
Financial Projections
Valuation Analysis
Market validation
Experts
Competitors
Customers
Licensees
Customer prototype
Beta test
Refinement
Maturation
Commercial ization Plan
Licensing
Bartering
Work-for- hire
R&D funding
Spin-in
Business Plan
Spin-out
Joint Venture
Strategic partnership
©PEP 2005
U of I, Opportunity Assessment ppt

42. the Innovation system at USMR
Research
Development
Commercialisation
Enterprises (knowledge-based)
Research Park
(in-campus ‘industrial alliances’) D C E
(P)
Global vs Local
Innovation
-driven
© DAR2003

43. Innovation models SO, WHICH ONE IS RIGHT?
A fast food restaurant chain?
An electronic test equipment maker?
A hospital?
An insurance company?
A new entrant biotechnology firm?

44. Successful innovation
New products, processes and services account for an increasing share of sales
Lower prices
Better-performing products
Better features for certain users (niche)
½ of resources devoted to the development of new products go to unsuccessful projects
35% of products launched fail commercially