Innovation and
New Product
Development
Product Strategies
Ing. Ľubica Knošková
What is Innovation? What are
the benefits?
Spheres of Innovation
Breakthrough Radical Innovations that
Changed Our Lives
Personal Computer
Internet
Microwave Oven
Photocopier
Fax Machine
Birth Control Pill
Home VCR
Bar coding
Integrated Circuit
Navigation Systems
Answering Machine
Laser Surgery
Apollo Lunar Spacecraft
Organ Transplanting
Fiber-Optic Systems
Disposable Diaper
MS-DOS
Product Innovation Categories
(producer view)
1st – new to the world products, brand new products on the world
market
Polaroid camera, in-line skates, word-processing software
2nd - new to the company - new category entries, new range of
products that allow company to enter new market
Hewlet-Packard: mainframes, PCs
3rd - additions to product lines, new products that extend company
product portfolio
chocolate bar – frozen, nonalcoholic beer, new categories of cars
4th - product improvements, new products that are improvements of
old ones or their replacements
Windows 98,2000, yogurt drink, cars-design facelift, new generation of cars
5th - new markets for existing products
6th – price decrease – new products which fulfill old function with
lower price
Basic Principles of Innovation
Innovation appears to have its origin in Latin „Innovare“ –
– meaning to renew, to make new or to alter, new way of doing
things
Innovation characteristic:
–
–
–
–
Process from idea generation to commercialization
The adoption of change,
Radical change in traditional ways vs. incremental change,
New device or something new to society
There are many products, processes, services, organizational
structures, ideas, technologies behaviors that have been
awarded the title of „innovation“ because
–
–
–
–
They improve our quality of life
They have radical impact
They are new
They are not new, they are old things in new forms or
combinations of existing forms
Common Definitions of
Innovations
An innovation is successful implementation of a new or
significantly improved product (good or service), or
process, a new marketing method, or a new
organisational method in business practices, workplace
organisation or external relations.
A creative process in which two or more existing things
are combined in some novel way to produce unique new
thing
Successful implementation of creative ideas within
organization.
Innovation = Invention + usage, development of invention
to success in the market, product with commercial value
Everything that changes the potential of already existing
sources of wealth
Management process that requires specific tools, rules,
and discipline.
Some Common Definitions of
Innovation
A novel new device, concept based on creative idea
A complex set of activities from the conceptualization of a new idea to
its reduction to practice
The adoption of a change that is new to the organization, group, or
society
Anything that is new as it is different from the existing forms
Anything perceived by the individual or user as new
Schumpeter’s Understanding of
Innovations
The term innovation is linked to American professor of Austrian
origin Joseph A. Schumpeter
– in the beginning of 20th century he analyzed business conditions in
which the companies conduct the combination of development changes,
that he called „innovation“. In the Theory of Economic Development he
defined economic innovation.
Schumpeter defined 5 typical changes, that lead to development:
–
–
–
–
Introduction of brand new product into the market
Instalation of brand new technology, brand new processes
Utilization of brand new raw materials
Changes in organization of an industry (creation of monopoly position or
breaking up monoply position
– Opening of brand new markets
Schumpeterian view on Innovations
A Schumpeterian perspective tends to emphasise
innovation as
market experiments and to look for large, sweeping
changes that fundamentally restructure industries and
markets.
Mainstream or neoclassical economics views innovation
in terms of asset creation as well as market experiments.
In this view, innovation is an aspect of business strategy,
or part of the set of investment decisions to create
capacity for product development or to improve
efficiency
Types of Innovations
a) by character
– Technological innovations
products
processes
– technology,
– administration
– Social innovations: leasing, insurance
four types of innovations are distinguished and
measured in EU (defined in Oslo manual) :
- product innovations,
- process innovations,
- marketing innovations and
- organisational innovations.
Types of Innovations (Oslo
manual of EU)
Product innovation is the introduction of a good or service that is
new or significantly improved with respect to its characteristics or
intended uses. This includes significant improvements in technical
specifications, components and materials, incorporated software, user
friendliness or other functional characteristics.
Process innovation is the implementation of a new or significantly
improved production or delivery method. This includes significant
changes in techniques,equipment and/or software.
Marketing innovation is the implementation of a new marketing
method involving significant changes in product design or packaging,
product placement, product promotion or pricing.
Organisational innovation is the implementation of a new
organisational method in the firm’s business practices, workplace
organisation or external relations.
Types of Innovations
b) by motivation
– means generated - technology push –
innovation based on invention, arise from
technical capability of the company, the
company role is to find the market or create
the need
– needs generated demand pull – innovation
based on solving existing customer
problem, response to documented need or
demand.
Questions to ask for evaluating
Technology push opportunities
What is the level of technical uniqueness of the solution? Is it easy to
copy?
Does this solution increase product value? How big is the increase?
Can the new solution be patented? Can it be sold as licence?
Is it possible to produce the proposed solution on state-of-the-art
technology means or it will request investment into new technology?
What will be the lifecycle of the product?
Is the new technical solution risky? What is the degree of risk?
Have the employees the right skills and capabilities?
Questions to ask for evaluating
Demand pull opportunities
How big is the demand in the given segment of the market? Is it
major area of our business or just marginal one?
What is the degree of unmet consumer need that the product
solves?
How does the product differ from the competition?
To what level does the product solve present consumer needs?
Will it be difficult to present the product and its benefits to the
customers?
How strong are our competitors?
Have we got suitable distribution channels?
Innovation degrees (whole production
process)
9 innovation degrees provide differentiation and
classification of innovation from the content and
importance point of view
-1st degree – minus first degree innovation DE
degeneration, destruction
0 degree – zero degree innovation RE
regeneration
1st degree – first degree innovation EE
Extensive expansion, simple quantitative change
2nd degree – second degree innovation RR
Re-arrangement, re-organization of relationships
3rd degree – third degree innovation QA
Quality adaptation
Innovation degrees
4th degree – fourth degree innovation V
New variant
5th degree – fifth degree innovation G
New generation
6th degree – sixth degree innovation K
New kind
7th degree – seventh degree innovation P
New principle
8th degree – eight degree innovation P
New paradigm
Innovation degrees
Innovation degrees from the 1st to the 3rd are mostly
connected with the production processes
– Process innovations
Innovation degrees from the 4th to the 7th grade are
connected mostly with products
– Product innovations
Approximate time of product innovation in years
4th degree: new variant - 1 to 5 years
5th degree:new generation - 5 to 15 years
6th degree:new kind - 15 to 50 years
7th degree: new principle - more than 50 years
In recent decades the dynamics
has accelerated
Innovation in 21st century
– growing concentration of distribution channels
– radically shrinking product life cycles
Key issue: creation of new value for customers, new
markets, growth opportunities in long-term horizon
Deep segmentation creates too small market segments
and does not lead to profit
Economic cycles and Innovation
The business cycle or economic cycle refers to the fluctuations of
economic activity about its long term growth trend. The cycle
involves shifts over time between periods of relatively rapid growth
of output (recovery and prosperity), and periods of relative
stagnation or decline (contraction or recession). These fluctuations
are often measured using the real gross domestic product. Despite
being named cycles, these fluctuations in economic growth and
decline do not follow a purely mechanical or predictable periodic
pattern.
Traditional business cycle models: enumerated by Joseph Schumpeter
and others in this field have been named after their discoverers or
proposers:
the Kitchin inventory cycle (3–5 years) — after Joseph Kitchin,
the Juglar fixed investment cycle (7–11 years) — after Clement Juglar,
the Kuznets infrastructural investment cycle (15–25 years) — after Simon
Kuznets, Nobel Laureate,
the Kondratieff wave or cycle (45–60 years) — after Nikolai Kondratieff.
the Forrester cycles (200 years) - after Jay Wright Forrester.
the Toffler civilisation cycles (1000-2000 years) - after Alvin Toffler.
Kondratiev long waves
In heterodox economics, Kondratiev waves—also called grand
supercycles, surges, long waves, or K-waves—are described as regular,
sinusoidal cycles in the modern (capitalist) world economy. Fifty to sixty
years in length, the cycles consist of alternating periods between high
sectoral growth and periods of slower growth.
According to the innovation theory, these waves arise from the bunching
of basic innovations that launch technological revolutions that in turn
create leading industrial or commercial sectors. Kondratiev's ideas were
taken up by Joseph Schumpeter in the 1930s. The theory hypothesized
the existence of very long-run macroeconomic and price cycles, originally
estimated to last 50-54 years.
Kondratiev long waves
Most cycle theorists agree, however, with the "Schumpeter-Freeman-Perez"
paradigm of five waves so far since the industrial revolution, and the sixth one to
come. These five cycles are
The Industrial Revolution--1771
The Age of Steam and Railways--1829
The Age of Steel, Electricity and Heavy Engineering--1875
The Age of Oil, the Automobile and Mass Production--1908
The Age of Information and Telecommunications--1971
According to this theory, we are currently at the turning-point of the 5th Kondratiev.
Toffler Civilization Waves
In his book The Third Wave Toffler describes three types of societies, based on the
concept of 'waves' - each wave pushes the older societies and cultures aside.
First Wave is the society after agrarian revolution and replaced the first huntergatherer cultures.
Second Wave is the society during the Industrial Revolution (ca. late 1600s through
the mid-1900s). The main components of the Second Wave society are nuclear family,
factory-type education system and the corporation. Toffler writes: "The Second Wave
Society is industrial and based on mass production, mass distribution, mass
consumption, mass education, mass media, mass recreation, mass entertainment,
and weapons of mass destruction. You combine those things with standardization,
centralization, concentration, and synchronization, and you wind up with a style of
organization we call bureaucracy."
Third Wave is the post-industrial society. Toffler would also add that since late 1950s
most countries are moving away from a Second Wave Society into what he would call
a Third Wave Society. He coined lots of words to describe it and mentions names
invented by him (super-industrial society) and other people (like the Information Age,
Space Age, Electronic Era, Global Village, technetronic age, scientific-technological
revolution), which to various degrees predicted demassification, diversity, knowledgebased production, and the acceleration of change (one of Toffler’s key maxims is
"change is non-linear and can go backwards, forwards and sideways").
Post-industrial society
In this post-industrial society, there is a lot of diversity in lifestyles
("subcults").
Adhocracies (fluid organizations) adapt quickly to changes.
Information can substitute most of the material resources and becomes the
main material for workers (cognitarians instead of proletarians), who are
loosely affiliated.
Mass customization offers the possibility of cheap, personalized, production
catering to small niches (see Just In Time production).
The gap between producer and consumer is bridged by technology using a
so called configuration system. "Prosumers" can fill their own needs (see
open source, assembly kit, freelance work). This was the notion that new
technologies are enabling the radical fusion of the producer and consumer
into the prosumer. In some cases prosuming entails a “third job” where the
corporation “outsources” its labor not to other countries, but to the unpaid
consumer, such as when we do our own banking through an ATM instead of
a teller that the bank must employ, or trace our own postal packages on the
internet instead of relying on a paid clerk.
Post-industrial society
Aging societies will be using new (medical) technologies from self-diagnosis
to instant toilet urinalysis to self-administered therapies delivered by
nanotechnology to do for themselves what doctors used to do. This will
change the way the whole health industry works.
this era's greatest turning point is the creation of wealth in outer space.
Wealth today, Toffler argues, is created everywhere (globalisation), nowhere
(cyberspace), and out there (outer space). Global positioning satellites are
key to synchronising precision time and data streams for everything from
cellphone calls to ATM withdrawals. They allow Just In Time productivity
because of precise tracking. GPS is also becoming central to air-traffic
control. And satellites increase agricultural productivity through tracking
weather, enabling more accurate forecasts.
Toffler explains, "Society needs people who take care of the elderly and who
know how to be compassionate and honest. Society needs people who work
in hospitals. Society needs all kinds of skill that are not just cognitive; they're
emotional, they're affectional. You can't run the society on data and
computers alone."
Toffler also states in, Rethinking the Future, that "The illiterate of the 21st
century will not be those who cannot read and write, but those who cannot
learn, unlearn, and relearn."
Science in Innovation
In industrial society the innovations started in the
laboratories and took years of concentrated development
– Until scientists came to the desired invention
– Innovation speed was much slower than it is today
– It gave us:
Cholesterol-fighting drugs
Optical fibers
LCD displays
Compact discs
From 1900 to 1950 science had no rival as a mechanism for creating
new wealth
Advertising in Innovation
In the postwar years second innovation regime was born
- It has first created and than fed off the consumer society
- Its heroes were companies like Coca-Cola, Nestlé, P&G, Unilever
who focused on sales, not on breakthroughs
- Their challenge was to get consumers to buy their brand of soap
powder or soft drink
- Similar products were launched each year distinguished by
inventive advertising
From 1950 till 1990 consumer marketing was innovation high ground.
The best and the brightest no longer wanted to be scientists, they
wanted to be brand managers
Presence of Innovation
New innovation regime is not build on the slow acceleration of
scientific knowledge nor the breathless hype of creating new
advertising campaigns but instead on leaps of human imagination
bringing new values
Traditional understanding of resources is irrelevant
New product development timescales are measured in weeks and
months instead of years
Customers are co-developers of new products
Providing real time feedback
They participate in the cycle of experiments and adaptations
The goal is not a new communication campaign but a radically new
business model, struggle against established practice (IKEA, MP3)
Information technologies are available to everybody
Challenge is in uniqness of their application that brings added value
Presence of Innovation
Linear, continuous improvement is not enough in the conditions of
new economy the company has to be able to innovate quicker than
the others and differentiate
Measure of competitiveness on the market is the unique product
value, that satisfies the customer and thrills him but also shakes the
competition
Company has to be able to innovate the products from its portfolio,
but it has to be able to innovate itself, its business strategies and the
industry it competes in
New thinking is often seen in old established companies and new
economy represents new concept of thinking, based on
– New insights, knowledge and competencies
– Using IT
– Human potential
Innovation in 21st century
Form quality and cost reduction to value creation and growth
– Quality was typical area where every employee could contribute
– Companies devoted lot of time to set right approach to quality (creating
tools and methodologies, organization)
– Companies reached cost reduction plans involving employees
Focus is changing
– productivity and cost saving are given
Growth is the differentiating value in 21st century
– We need to know how the business will evolve in future in the given
area
– Can we grow on the basis of present business and present
competencies?
– The question how is changing into what
What opportunities to pursue?
What partnerships to form?
What technologies to back?
What experiment to start?
Innovative Culture
In innovative companies it is the responsibility
of every employee to think about how to
imagine the future of the company
– Everyone can have good ideas
Innovative companies create environment and
processes that
– Stimulate personal involvement of the employees
to innovation
– Top management gives high priority to innovation
– Innovative companies understand necessity of
change, the company culture is changing,
atmosphere is open, thinking and organization is
flexible, values are changing, listening to new
voices, accepting new ideas from new sources,
working in multifunctional teams, understand the
need of personal change, respect opinions of
others, understand new role of top management,
ability to generate sources – human and financial
sources to create new ideas, experiments and
opportunities
Qualities of Innovator
by Mitchell Ditkoff
Ability to innovate is given to people
– Unlike other activities as audits or reengineering, it is not given to
formulas
– It is given to people
Restless, inspired, fascinated individuals,
With almost cellular need for change
– It can be supported by systems, but it can never be reduced to systems
– Tom Peters: „Innovation is a messy business“
Qualities of an Innovator
Innovators of new era are diverse:
– They are entrepreneurs
– Able to produce something of nothing
– They struggle against the hegemony
of established practice
they use entrepreneurial approach
– That is closer to Silicon Valley than to corporate labs or customer focus
groups
– Irrelevant whether it is old or new company
– They do not build their future on the extrapolation and achievements of past
but they build it on their imagination of future
– They can see and embrace new opportunities
– They work on their key competencies
Qualities of Innovator
by Mitchell Ditkoff
Innovator – inspired individual sees a better way and
goes for it
Challenges the status quo –dissatisfied with current reality,
questions authority and routine and confronts assumptions
Curious – actively explores the environment, investigates
new possibilities and honors the sense of awe and wonder
Self-motivated – responds to deep inner needs, proactively
initiates new projects
Vlastnosti inovátora
podľa Mitchella Ditkoffa
Visionary – highly imaginative, maintains a future orientation, thinks in mental
pictures
Entertains the fantastic – conjures outrageous scenarios, sees possibilities
within the seemingly impossible, honors dreams and daydreams
Takes risks – goes beyond the comfort zone, experimental and
nonconforming, courageously willing to „fail“
Open to change – changes work environments as needed, wanders, walks or
travels to inspire fresh thinking, given to movement and interaction
Playful/humorous – appreciates disagreement and surprise, able to appear
foolish and child-like, laughs easily and often
Self-accepting – withholds compulsive criticism of their own ideas,
understands „perfection is the enemy of the good“, unattached to „looking
good“ in the eyes of others
Vlastnosti inovátora
podľa Mitchella Ditkoffa
Flexible/adaptive – open to change, able to look for new solutions, able to
adjust „game plan“ as needed, works with multiple ideas and solutions
Makes new connections– sees relationships between seemingly
disconnected elements, syntetizes odd combinations, distils unusual ideas
down to their underlying principles
Reflective – thinks about problems and challenges, incubates them, seeks
out stages of immersion, muses, contemplates
Recognizes patterns – models – perspective and discriminating, notices
organizing principles and trends, sees and challenges the „Big Picture“
Tolerates ambiguity – comfortable with chaos, able to entertain paradox,
does not settle for the first „right idea“
Commited to learning –continually seeks knowledge, syntetizes new inputs
quickly, balances information gathering and action
Qualities of Innovator
by Mitchell Ditkoff
Balances intuition and analysis – alternates between
divergent and convergent thinking, can feel the
opportunities before analyzing them, trust their gut, uses
their head
Situationally collaborative – balances rugged
individualism with political savvy, open to coaching and
support, supports organization as needed
Formally articulate – communicates ideas effectively,
translates abstract concepts into meaningful language,
creates prototypes with ease
Flexible/resilent – bounces back from disappointment,
learns quickly from feedback, willing to try again and
again
Persevering – hardworking and persistent, champions
new ideas with tenacity, commited till the results are
evident
Qualities of an Innovator
by Mitchell Ditkoff
Some of these traits look difficult some are
easy
It is possible to develop them
Even more important: create environment,
where these traits can flourish
Special blend of inner qualities allows him or
her to succeed when others have long since
gone home
Only after having the right people it is important
to have the right tools, techniques and
models, that are very useful, but without the
right user they are merely decoration
Supportive culture for innovation
- by Peters and Waterman- 7S
SKILLS - the distinctive capability of key personnel
STRATEGY – long-term goals and the ways to fullfil
them, the plan leading to the allocation of resources
STRUCTURE - the characteristics of the organization
chart, communication
SHARED VALUES - the goals shared by organizational
members
STYLE - the cultural style of the organization
management
STAFF - the type of functional specialist employed
SYSTEMS - the nature of proceduralized control
processes
Motivation to innovate by
Drucker:
Motivation inside the organisation:
– 1. Unexpected events - succes, failure, competitor
– 2. Collisiton between ecomomic values
Collision between expected and achieved reality
collision between expected and real values
– 3. Innovation comming from the change in production process
– 4. Change in the industry structure
Motivation outside the organisation:
– 5. Demografic changes
– 6. New attitudes
– 7. New scientific and non-scientific knowledge
Idea Sources and Generating
ideas
Ideas can come from many sources, i.e.:
internal – R&D, suggestions from employees on modifications to
current products, quality circles
external - benchmarking, customers and suppliers, marketing
information, competitors, complaints from current customers,
scientific literature, research and education institutes
Generating ideas – ability to create ideas that are brand new or new
to the author
– Methods that support creativity and intuition:
brainstorming,
brainwriting 635,
Synectics: dandelion - parachute
Panel discussions
– Methods of systematic and analytical approach
Morphologic analysis
Functional analysis – new way of providing the function
Innovation program
Strategic plan of organization
Pipeline full with new products
Process formalized in innovation programs
Innovation program consists of:
definition of goals
Specification of major stages in progress
Allocation of sources
Time-plan
Organization outline and support of the program
Budget
Innovation programs require teamwork and they are elaborations of
several functional company strategies
product-engineering
– What products should we offer? What consumer needs and wants we will meet?
Marketing and sales
– For whom do we creat the products? What are the target groups of customers and
target markets?
production-technology
– How will we create the products? What technologies are needed?
Phases of innovation process
Phases of innovation process from macro-economy
perspective:
science
research
development
production
exploitation
Phases of innovation process from company
perspective:
1. Idea generation
2. Idea screening
3. Concept development and testing
4. Marketing strategy development
5. Business analysis
6. Product development
7. Market testing
8. Commercialization - launch
Product innovation process
PHASES IN CONSUMER PRODUCT DEVELOPMENT
Consumer Need
Company Objectives
IDEAS
SCREENING
Feasibility
Studies
Consumer
Research
Financial
Review
DEVELOPMENT
PRODUCTION
CONSUMER TRIALS
TEST MARKET
Product innovation process
The Basic New Product Dev. Process
Phase 1: Opportunity Identification/Selection
Phase 2: Concept Generation
Phase 3: Concept/Project Evaluation
Phase 4: Development
Phase 5: Launch
Opportunity matrix
Opportunity area for new products introductions
Evaluate 2 marketing aspects:
Identify the opportunity and evaluate the size of the opportunity
high
good bet
risky
Market atractivity
Do not enter
low bet
low
high
low
Company power
Product innovation process
New Product Development Process
Marketing
Strategy
Development
Concept
Development
and Testing
Idea
Screening
Idea
Generation
Business
Analysis
Product
Development
Market
Testing
Launch
Phases of innovation process
1st phase: idea generation and retrieval of primary and
secondary data to create new opportunities
What products is the company interested in?
What markets does the company want to enter?
What customers needs and wants does the offer respond to?
Sources of Ideas
internal - external
primary - secondary
Phases of Innovation Process
2nd phase: idea screening – critical selection of potential
ideas for further elaboration in line with set of criteria
Appeal for the market
Objective and resources of organization
Competences to develop new product
Ability to produce
Market size
Scoring models – set of selected criteria, points evaluation of
different ideas
Phases of Innovation Process
3rd phase: Concept design and testing
Selected ideas are worked out into the concept
Clear and detailed product description
Reflects customers needs
Aim: low cost test to identify customers benefits and primary
advantages of the product
Concept testing on target group of consumers
BASIC KINDS OF PRODUCT
BENEFITS
functional benefits describe the product
advantage in objective terms
- Product Performance
- Superior, fresher, protects, etc.
emotional and selfexpresion benefits
describe the product in subjective terms
- Personal value
- Pride, confidence, less hassle, etc.
Phase 3: Concept/Project
Evaluation
Evaluate new product concepts (as they begin to
come in) on technical, marketing, and financial
criteria.
Rank them and select the best two or three.
Request project proposal authorization when
have product definition, team, budget, skeleton
of development plan, and final Product
Innovation Charter
Phases of Innovation Process
4th phase: marketing strategy development
goal: prepare product launch with help of marketing tools
3 major parts:
Define target market
Prepare long-term sales and profit plan
Distribution channels strategy, price strategy, marketing
communication proposal
Phases of Innovation process
5th phase: business analysis/strategy
Work out clear and detailed project plan
Framework plan of production activities
Framework plan of marketing activities
Estimation of minimum and maximum sales
Analysis of repeated sales
Estimation of expected cost and profit
- strong cooperation of R&D, production, finance and
marketing
6th phase: product development
Product becomes physical
Versions are tested and validated
result: tested prototype or working model
Develop technical project, process flow sheet that
indicates each step in the process, conditions for each
step in the process, detailed time-plan, material flow
Phases of Innovation Management
7th phase: product testing
Complete product testing, rigorous and long to thoroughly test
the product: performance, safety, convenience of new product
Testing in own testing lab, certification
Field test: Customer perception, cost
Consumer preference test, price test, taste test, brand test
Zero production series, test sales
Return of cost, detailed value analysis
Achievability of planes
8th phase: product launch on the market commercialization
Develop marketing plan –marketing mix
4 major questions:
When the new product should be launched on the market?
Where the new product should be launched?
Who is the target group of consumers?
How should the company launch the product?
Phases of Innovation Process
8th phase: product launch – commercialization
Marketing goals:
Sales volume per year
Market share
Profitability
Starting point: situational analysis on the market
Selection of innovation strategy – targeting, positioning the
products on certain consumer segments, specify customer and
company value, define desired product features and
characteristics
Waranties, repairs, replacement parts
Product adoption process: AIDA
Individual innovation processes depend on:
Product character
Traditions and customs
Company strategies
Actual market situation
Market position of the company
Innovation Sucess factors
innovation portfolio with ideas, concepts a products of
different innovation DEGREE
speed
New products success characteristics
- by Rogers :
Relative added value vs. Former product
compatibility with existing values
Low complexity of technical solution to the
user
Possibility to test for the consumer
Visibility of innovation results
Innovation success
measurement :
ROTHWELL "the criterion for succes is comercial... a succes being
defined as an innovation which obtains a worthwhile market share
and profit and a failure being defined as an innovations which fails to
achieve this
Success criteria:
– Net financial income: profit, profitability, return on investment
– Market share
– Link with company strategy
Success criteria by Nyström and Edvardsonn
– Technology success
– Market success
– Commercial success
Innovation Strategies
There are 5 basic types of Innovation Strategies:
1. Progressive technical solution
Products are build on the basis of the latest scientific and technical
knowledge
it is risky, costly and it is difficult to predict consumer interest due to
underevaluated marketing activities
2. Balanced strategy
Balance between latest scientific and technical trends application and
marketing activities focused on finding unmet customer needs and wants
and new product launch
Brings the best results and is most sucessfull
3. Verified technical approaches
Me-too strategy, focused on easy and verified technical solutions
Nearly no resources given to R&D
Innovation Strategies
4. Conservative low budget strategy
Copy the leader, new products are in line with company skills, they
are small improvements of old ones, for well-known markets
Slightly positive results, without risks, profitable for the companies
with strong marketing skills in slowly growing industries
When dramatic change happens – unable to react quickly
5. Diversified high budgets
New products development is isolated, without coordination, costly,
without internal synergies
Absence of market understanding: respecting needs
The least sucessful from all strategies
How to enter the market with
new products
Strategy of new product market launch is based on
Market dimensions
Technical solution of new product
1. New for the world solution – never used technical solution
2. New market for the company
3. Verified technical solution
4. Verified and well-known market
Market entry strategies for the strategic products should be focused
on the areas with known market characteristics and technical
solution.
Market entry strategies
Verified technical
solution
New unknown
Markets entry
Joint venture
New known
Markets entry
Internal
preparation
of market entry
Acquisition
Joint venture
Old market entry
Internal
preparation of
market entry
acquisition
Solution known, but
New to the company
New original
solution
Capital share
Capital share
Cooperation
Cooperation
Technology purchase Technology purchase
Internal cooperation
Acquisition
Licence purchase
Company R&D
Acquisition
Licence purchase
Capital share
Cooperation
Technology
purchase
New type
Joint venture
Diffussion of Innovations (Everet
Rogers)
The technology adoption lifecycle model describes the adoption or acceptance of a
new product or innovation, according to the demographic and psychological
characteristics of defined adopter groups. The process of adoption over time is
typically illustrated as a classical normal distribution or "bell curve." The model
indicates that the first group of people to use a new product is called "innovators,"
followed by "early adopters." Next come the early and late majority, and the last
group to eventually adopt a product are called "laggards."
The demographic and psychological (or "psychographic") profiles of each adoption
group were originally specified by the North Central Rural Sociology Committee,
Subcommittee for the Study of the Diffusion of Farm Practices (as cited by Beal and
Bohlen in their study above).
Diffussion of Innovations (Everet
Rogers)
The report summarised the categories as:
innovators - had larger farms, were more educated, more prosperous
and more risk-oriented
early adopters - younger, more educated, tended to be community
leaders
early majority - more conservative but open to new ideas, active in
community and influence to neighbours
late majority - older, less educated, fairly conservative and less socially
active
laggards - very conservative, had small farms and capital, oldest and
least educated
In this book, Crossing the Chasm, Geoffrey Moore proposes a variation
of the original lifecycle. He suggests that for discontinuous or disruptive
innovations, there is a gap or chasm between the first two adopter
groups (innovators/early adopters), and the early majority.
Revised technology adoption
lifecycle (Geoffrey Moore)
In Crossing the Chasm, Moore begins with the diffusion of innovations theory from
Everett Rogers, and argues there is a chasm between the early adopters of the
product (the technology enthusiasts and visionaries) and the early majority (the
pragmatists). Moore believes visionaries and pragmatists have very different
expectations, and he attempts to explore those differences and suggest techniques to
successfully cross the "chasm," including choosing a target market, understanding the
whole product concept, positioning the product, building a marketing strategy,
choosing the most appropriate distribution channel and pricing.
Revised technology adoption life cycle
Crossing the Chasm is closely related to the Technology adoption lifecycle where five
main segments are recognized; innovators, early adopters, early majority, late majority
and laggards. According to Moore, the marketer should focus on one group of
customers at a time, using each group as a base for marketing to the next group. The
most difficult step is making the transition between visionaries (early adopters) and
pragmatists (early majority). This is the chasm that he refers to. If a successful firm
can create a bandwagon effect in which the momentum builds and the product
becomes a de facto standard.
However, Moore's theories are only applicable for disruptive or discontinuous
innovations. Adoption of continuous innovations (that do not force a significant change
of behavior by the customer) are still best described by the original Technology
adoption lifecycle. Confusion between continuous and discontinuous innovation is a
leading cause of failure for high tech products.
DEFINITION of a CONCEPT
A Concept Is….
A printed or filmed representation of a product or
service. It is a promise a product makes to
resolve an unmet consumer need, the reason why
it will satisfy the need, and a description or
portrayal of any key element that will affect the
perception of the product.
Translation: “What’s in it for me, the consumer, and
why should I believe it?”
ELEMENTS ESSESTIAL to a
CONCEPT STATEMENT
Product name and clear product
description
Headline
Accepted Consumer Belief
Benefit
Reason to Believe
Concept Development & Testing
1. Develop Product Ideas into
Alternative Product Concepts
2. Concept Testing - Test the Product Concepts
with Groups of Target Customers/Prospects
3. Choose the Best One