Sources of Innovation
1. Knowledge Push - use ideas based on own research or others to create new ventures.
2. Need Pull - necessity is the mother of invention; innovation as response to a need for change.
3. Shocks to the System - events which changed the world forcing innovation to new directions.
4. Making Process Better - social need providing the pull for new products, processes, and services.
5. Crisis-driven Innovation - urgency of a need or the extent of demand.
6. Challenge of Undeserved Markets - differences among potential users; disruptive.
7. Emerging Markets - developing solutions to meet needs of a potential market.
8. Mass Customization - meet demands for variety and increasing customization.
A. Distribution - packaging, schedule, location
B. Assembly - standardized components
C. Fabrication - manufactured to order
D. Design - products do not exist until customer order initiated
9. Users as Innovators - users themselves become source of ideas.
10. Using the crowd - various people in the crowd as source of perspectives.
11. Extreme Users - users in the toughest environments satisfy their need through innovation.
12. Prototyping - boundary object; idea passed around with more ideas becomes a shared project.
A. Stepping stone in our thought processs
B. Allows plurality
C. Allows learning
D. Suggests further possibilities
13. Watching others and learning from them - benchmarking; structured comparisons with others.
14. Recombinant Innovation - transferring or combining old ideas in new contexts.
15. Design-led Innovation - design process seeking to give meaning, shape and form to products.
16. Regulation - stimulus given by changes in rules and regulations.
17. Futures and Forecasting - through imagining and exploring alternative trajectories.
18. Accidents - unexpected events as a source of discovery in innovation.
Managing Innovation Within Firms
- Innovation is increasingly viewed as an organizational activity.
Dilemma in Innovation Management
Efficiency Gains - Creativity Gains
stable and controlled environments - loose and flexible environment
stable routines - room for creativity to try out new ideas
1. Exploitation - efficiency, increasing productivity, control, certainty, variance reduction.
2. Exploration - search, discovery, autonomy, innovations, embracing variation.
3. Ambidexterity - both with other competencies, systems, incentives, processes, culture.
*In low technology sectors - dominance of incremental innovation; scarcity of disruptive innovation.
Dynamic Capabilities - capacity of an organization to purposefully create, extend or modify its resource base.
Low
Output Uncertainty
High
Managing Uncertainty
Pearson’s Uncertainty Map
3. Applications Engineering
4. Combining market
opportunities with technical
capabilities
Low
1. Exploratory/Blue Sky Research
2. Development Engineering
Process Uncertainty
High
Organizational Characteristics that facilitate the Innovation Process
1. Innovation Stimulus - leadership, people management, knowledge management, creativity management
2. Innovation Capacity - technology management, R&D management
3. Innovation Performance - product innovation, process innovation
Classification of Industrial Firms
1. Supplier-dominated Firms - housebuilding firms,agricultural firms, retail firms
2. Science-based Firms/Technology-intensive Firms - manipulation of science and technology;
pharmaceuticals, electronics, computing
3. Scale-intensive Firms - manufacturing sector; engineering, design,manufacturing
4. Specialist Equipment Suppliers
Organizational Structures and Innovation
1. Formalization - organic vs mechanistic organizational structure
2. Complexity - number of professional groups or diversity of specialists within the organization
3. Centralization - location of power within an organization
4. Organizational Size - economic and organizational resources; number of employees, scale of operation
IT Systems and their Impact on Innovation - ERP Systems - software used to manage day-to-day business
activities.
Innovation Management Tools and Methods
1. Knowledge and Technology Management
2. Market Intelligence
3. Cooperation and Networking
4. Human Resource and Management
5. Interface Management
6. Creativity Development
7. Process Improvement
8. Innovation Project Management
9. Design and Product Development
10. Business Creation
Innovation Audit - to uncover areas of
strength and weakness and to see how
to improve the firm’s performance
Developing New Products and Services
Development of New Products Process
1. Concept Generation - identifying opportunities
A. Market Pull
B. Technology Push
2. Project Assessment and Selection - screening and choosing projects that satisfy
certain criteria
A. Costs
a) Actual Cost
b) Opportunity Cost
B. Filtering
a) Aggregate Product Plan
i. Ensure that resources are applied to appropriate types and mix of
projects
ii. Develop a capacity plan to balance resource and demand
iii. Analyze the effect of proposed projects on capabilities to ensure
meeting of future demand
b) Development Funnel/Stage-gate System - identify, screen, review and
converge development projects as they move from idea to
commercialization; formal framework for filtering based on explicit
criteria
3. Product Development - translating selected concepts to physical products
A. All activities necessary to take the chosen concept and deliver a product for
commercialization
4. Product Commercialization - testing, launching, marketing new product
A. Customer Co-development, test marketing and use of alpha, beta and
gamma test
B. Identify factors that influence directly the process of new product
development
Agile Development - setting up a core self-managed team, drawing on different
functions and with a clear and stretching target
Lean Start-up - low waste approach
Core Elements
1. Build-Measure-Learn - design hypothesis to test an idea and adjust project based on
feedback
2. Minimum Variable Product - simple prototype to generate data
3. Validated Learning - data that provide useful information and help learning about
the venture
4. Innovation Accounting - using data to ensure resources are being well spent
5. Pivoting - test idea out on customers and adapt accordingly to feedback
A. Zoom-in Pivot - single feature in product becomes entire product
B. Zoom -out Pivot - whole product becomes a single feature in something
much larger
C. Customer Segment Pivot - product was right but customer segment isn’t
D. Customer Need Pivot - validated learning highlights a more important
customer need or problem
E. Platform Pivot - single separate application converge to become a platform
F. Business Architecture Pivot - essentially changing the underling business
model
G. Value Capture Pivot - changes involve rethinking marketing strategy, cost
structure, product and so on
H. Engine of Growth Pivot - start-up model is rethought; viral, sticky, paid
growth
I. Channel Pivot - different routes to reach the market are explored
J. Technology Pivot - alternative new technologies are used but the rest of the
business model remain the same
6. Single Unit Flow - working in small batches and completing tasks on those rather
than working in high volume
7. Line Stop/Andon Cord - ability to stop production when an error occurs
8. Continuous Improvement - keep reviewing and improving the core product and the
process delivering it
9. Kanban - system of stock management associated with JIT production
10. Five Whys - tool that helps find the root causes of problems and directs action
towards solving the those problems rather than treating symptoms
Best Criteria for Success
1. Product Advantage - delivering unique benefits to users
2. Market Knowledge - detailed market studies and business/financial analysis;
competitive analysis
3. Clear Product Definition - defining target markets , clear concept definition and
benefits to be delivered, clear and complete; use of priority list agreed before
development begins
4. Risk Assessment - appropriately addressing risk with respect to the market and the
firm’s capabilities
5. Project Organization - use of cross-functional, multidisciplinary teams carrying
responsibility for the project from beginning to end
6. Project Resource - sufficient financial and material resources and human skills
must be available
7. Proficiency for Execution - quality of technological and production activities and
all pre-commercialization business analyses and test marketing
8. Top Management Support - management must be able to create an atmosphere of
trust, coordination and control from concept to launch
Factors influencing product success/failure
-Commitment of Senior Management
-Clear and Stable Vision
-Improvisation
-Information Exchange
-Collaboration under Pressure
Developing New Services
*Great care needs to be taken when making any generalization about the service
sectors.
Fundamental Difference between Manufacturing and Service Operations
1. Tangibility - goods are tangible whereas service are mostly not
2. Simultaneity - time between production and consumption of goods allow room for
distribution, storage and sales while service are produced and almost immediately
consumed
3. Perceptions of Performance and Quality - more important in services; difference
between expectations and perceived performance
4. Tangible Aspects - appearance of facilities, equipment and staff
5. Responsiveness - prompt service and willingness to help
6. Competence - ability to perform service dependably
7. Assurance - knowledge and courtesy of staff and ability to convey trust and
confidence
8. Empathy - provision of caring, individual attention
9. Storage - services cannot usually be stored
A. Capacity Management - ability to hold stocks of services matching supply
and demand
a) Pricing - help smooth fluctuations in demand; discounts at off-peak
times
b) Outsourcing or employing part-time workers
c) Queueing
10. Customer Contact - customers have low to no contact with the operations which
produced goods whereas services demand high levels of contacts between operations
and ultimate customer
11. Location - service location is often more important than operations that produced
goods
Diffusion on Innovation
Diffusion - consumer willingness to embrace change
Adoption - considered to be the decision to acquire something
Implementation and Utilization - imply some action and adaptation
Processes on Diffusion
-Diffusion of an innovation is typically described by an S-shaped (logistic) curve
Innovators - Early Adopters - Late Majority - Laggards
1. Demand-side Factors - direct contact with adopters with different perceptions of
benefits and risk
2. Supply-side Factors - relative advantage of an innovation, availability of
information, barriers to adoption, feedback between developers and users
Characteristics of an Innovation
1. Relative Advantage - degree to which innovation is perceived as better than the
product it supersedes or competing products
2. Compatibility - degree to which innovation is perceived to be consistent with the
existing values, experience and needs of potential adopters
3. Complexity - degree to which innovation is perceived as being difficult to
understand or use
4. Trialability - degree to which innovation can be experimented with on a limited
basis
5. Observability - degree to which the results of innovation are visible to others
Innovation Networks
4 Major Arguments pushing for Greater Levels of Networking in Innovation
1. Collective Efficiency - way of getting access to different resources through a
shared exchange process
2. Collective Learning - facilitate a shared leaning process in which partners exchange
experiences, challenge models and practices, bring new insights and ideas and support
share experimentation
3. Collective Risk-Taking - permits higher levels of risk to be considered than any
single participant might be prepared to undertake
4. Intersection of Different Knowledge Sets - opens up the participating organization
to new stimuli and experiences
Network - complex interconnected group or system; involves using that arrangement
to accomplish particular tasks
Why Networks?
1. Benefits of Cospecialization, sharing of joint infrastructure and standards and other
network externalities outweigh the costs of network governance and maintenance
2. Mutual knowledge and social bonds develop through repeated dealings, increasing
trust and reducing transaction costs.
3. Firms may be able to access the resources of a wide rage of other organizations
through direct and indirect relationships
Emergent Properties - the potential for the whole to be greater than the sum of its
parts
Learning Networks - shared learning can help deal with some of the barriers to
learning which individual firms might face
1. There is potential for challenge and structured critical reflection from different
perspectives. (Shared Learning)
2. Reduce perceived and actual costs and risks in trying new things. (Shared
Experimentation)
3. Provide support and open new lines of inquiry and exploration. (Shared
Experiences)
4. Explicate the system principles and seeing the pattern. (Shared Learning)
5. Provides an environment for surfacing assumptions an exploring mental models
outside normal experience of individual organizations. (Shared Learning)
Breakthrough Technology Collaborations - reduced risk and increased resource
focused on a learning and experimental process
Mobilizing Networking - happens in an informal way when people get together and
share ideas as a by-product of their social and work interactions
Types of Innovation Networks
1. Entrepreneur-based - bringing different complementary resources together to help
take an opportunity forward.
2. Internal Project Teams - like entrepreneur network but inside an established
organization
3. Internal Entrepreneur Networks - aimed at tapping into employee ideas
4. Communities of Practice - involve players inside and across different organizations
bounded by a shared concern with a particular aspect or area of knowledge
5. Spatial Clusters - formed because players are close to each other (geographical
closeness or proximity)
6. Sectoral Networks - formed because players share a common sector and often have
the purpose of shared innovation to preserve competitiveness
7. New Product or Process Development Consortium - sharing knowledge and
perspectives to create and market a new product or process concept
8. New Technology Development Consortium - sharing and learning around newly
emerging technologies
9. Emerging Standards - exploring and establishing standards around innovative
technologies
10. Supply Chain Learning - developing and sharing innovative good practice and
possibly shared product development across value chain
11. Learning Networks - groups of individuals and organizations who converge to
earn about new approaches and leverage their shared learning experience
12. Recombinant Innovation Networks - cross-sectoral groupings that allow for
networking across boundaries and the transfer of ideas
13. Managed Open Innovation Networks - “not all smart people work for us” amplify
access to ideas and resources
14. User Networks - connect to user as a source of innovation input rather than simply
as passive markets
15. Innovation Markets - broadcast innovation needs and connect to potential
solutions in a market place
16. Crowdfunding and new resource approaches - mobilization of crowd not as
sources of ideas but of resources and judgment
Networking at the Start Up
Harder Benefits - leads to customers, investors, partners, suppliers, employees, and
technical and market knowledge/information
Softer Benefits - credibility/legitimacy, advice and problem solving, confidence and
reassurance, motivation/inspiration, relaxation/interests
Networking on the Inside - giant jigsaw puzzle which only a small number of the
pieces have so far been fitted together; knowledge management
Networking on the Outside - creating and combining different knowledge sets; open
innovation
Networking into the Unknown - identifying relevant new partners and learning how to
work with them
1. Finding Prospective Partners
a) Geographical
b) Technological
c) Institutional
2. Forming Relationships with Prospective Partners
a) Ideological
b) Demographic
c) Ethnic
Challenges of Innovations Networks
1. Set Up Stage
a) Providing momentum for bringing network together and clearly defining its
purpose
b) Driven by a shared perception of opportunity
2. Operating Stage
a) Network Boundary Management - how membership is defined and
maintained
b) Decision-making - how decisions get taken at the network level
c) Conflict Resolution - how conflicts are resolved effectively
d) Information Processing - how information flows among members and is
managed
e) Motivation - how members are motivated to join/remain within the network
f) Risk/Benefit Sharing - how risks and rewards are allocated across member
g) Coordination - how the operations are integrated and coordinated
3. Closing Stage - case for sustaining the networking activities for as long as members
see benefits; periodic review and retargeting