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4/27/12
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What is Innovation ?
Creativity is doing something new Innovation is something new that adds value; Invention implies bringing something new into being, Innovation implies bringing something new into use. Innovation is a breakthrough approach or idea that can be completely new or an enhancement to something that already exists; it is a refreshing perspective that will challenge many who cannot see beyond what their own experience is 4/27/12
What is Innovation ?
The act of introducing a new product, device, method or material for application to commercial or practical objectives The creation of new knowledge that is applied to practical problems The new knowledge can be technological or market related
Technological knowledge of components, linkages between components, methods, processes, and techniques that go into a product or service. Market knowledge of distribution channels, product applications, customer expectations, preferences, needs, and wants.
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Why Innovation?
Today the two major challenges for businesses and for countries and local regions are:
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From producers market to buyers market (from Economy of Need to Economy of Choice) Geographical shifts in demand Shifts in production New business models Environmental regulatory changes Demographic changes affect health and consumption New regional strengths
Why Innovation ?
The Indian economy has entered a higher growth trajectory and rates of 9% and over may well become the norm. If we want to sustain growth, our companies have to reduce business cycles, time to market (quick supply) and ensure quality. Most economic growth comes from 4/27/12 new technologies and technology
Why Innovation ?
Innovation can
Result in new products that better satisfy customer needs Improve the quality of existing products Reduce costs
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Why Innovation?
In todays world, to be a leader in industry you have to be innovative. Companies must be able to look forward at the strategy and know how to bring products to market faster than their competitors. Innovation is the key. Its not just about technology; its about business strategies as well.
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Why Innovation?
Creates new industries Spurs productivity and economic growth Fuels wealth creation and profits Generates high-value, higher-paying jobs Raises standard of living
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Why Innovation?
The returns to innovation for industry have become so significant that managing innovation, especially managing technology, has become a major concern for companies. Technological innovation is the most important driver of competitive advantage in many industries The increasing importance of 4/27/12 technological innovation is due to
Creativity is the ability to generate new and useful ideas. It enables individuals and organizations to produce work that is useful and novel. Individual creativity is a function of
Creativity of individuals within the organization Social process & contextual factors that shape the way individuals interact and behave
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Most innovative ideas do not become successful new products Between 33% and 60% of all new products that reach the market fail to make a profit. Management has obligation to not only encourage new product development, but also to develop a system to ensure that technology is being used most effectively with the 4/27/12 consumer in mind.
An in-depth understanding of the dynamics of innovation A well-crafted innovation strategy A well-designed process for implementing the innovation strategy.
2.
3.
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Role of Management
Ensure that technology is being used most effectively with the consumer in mind. External Scanning
Environmental Scanning:
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Motorolas intelligence department monitors the latest technology developments introduced at scientific conferences, journals and in trade gossip.
Role of Management
to look at customers, suppliers, and distributors, for source of product and service improvements. Lead Users
Lay the foundation Determine the trends Identify lead users Develop the breakthrough
Market research : to survey current users regarding what they would like in a new product.
Role of Management
Internal Scanning
Has the company developed the resources needed to try new ideas? Do the managers allow experimentation with new products or services? Does the corporation encourage risk taking and tolerate mistakes? Are people more concerned with new ideas or with defending their turf? Is it easy to form autonomous project teams? 4/27/12
Role of Management
R&D Intensity
Spending on R&D as a percentage of sales revenue Eg. 11-13% of sales revenue are spent for R&D in computer software and drug industries.
Time from inception to profitability 60% of patented innovations are generally imitated within 4 years at 65% of the cost of
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Role of Management
Strategy Formulation:
R&D Strategy
Develop Purchase
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Sources of Innovation
Within a company
Unexpected occurrences Incongruities Process needs Industry and market changes Demographic changes Changes in perception knowledge
Outside a company
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Sources of Innovation
Unexpected occurrences
Unplanned of unanticipated successes or failures Occur when there is gap or difference between expectation and reality, what is needed and the way business is currently run Demand from the industry to innovate
Incongruities
Process needs
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Sources of Innovation
Demographic changes
Trend changes in population because of age, education, occupation, geographic location Change in consumer attitude, advancement in technology, industry growth etc. Products of new thinking, new methods,
Market changes
The unexpected success The unexpected failure The unexpected outside event
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Often the richest opportunities for successful innovation, with less risky and less arduous Yet the unexpected success is almost totally neglected The first thing is to ensure that the unexpected is being seen. It must be properly featured in the information management obtains and studies
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Source 2: Incongruities
Incongruous economic realities The incongruity between reality and the assumptions about it The incongruity between reality and the assumptions about perceived and actual customer values and expectations
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Need is a major innovative opportunity Process need exists within the process of a business, an industry, or a service It perfects a process that already exists, replaces a link that is weak, redesigns an existing old process around newly available knowledge.
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One week or missing link A clear definition of objective That the specification for the solution can be defined clearly Widespread realization that there ought to be a better way. Three important caveats
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The most reliable and the most easily spotted of these indicator is rapid growth of an industry By the time an industry growing rapidly have doubled in volume, the way it perceives and services its market is likely to have become inappropriate Another development that will 4/27/12 predictably lead to sudden changes
Models of Innovation
Serendipity
Marketing Pull
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Linear model only tells what drives the downstream efforts rather than how innovation occurs Only offers an explanation of where the initial stimulus for innovation was born, where the trigger for the idea or need was initiated Simultaneous coupling model suggests that innovation is the result 4/27/12 of simultaneous coupling knowledge
Interactive Model
Links together technology push and market pull models Innovation occurs as the result of interaction of the marketplace, the science base and the organizations capabilities There is provision for feedback Linkages with science base and marketplace occur between all 4/27/12 functions
Interactive Model
Latest science and technology Advances in society Idea R& D Manufacturi ng Marketin g
TECHNOLOG Y PUSH
MARKET PULL
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N = 1, R = G
(Prof. C. K. Prahlad)
Access R Flexibility N = G to 1 resources Quality, Cost and Speed experience Scalability Complexity Innovation Customer arbitrage interfaces Collaborative Scalability networks
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Social Architectu re
Technical Architectu re
Social Architectu re
Technical Architectu re
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Product innovations are embodied in the outputs of a firm its goods and services Process innovations are often oriented toward improving the effectiveness or efficiency of producing or marketing goods or services (e.g., reducing defect rates). New product innovations and process innovations often occur in tandem:
Radical innovation
An innovation that is very new and different from existing products and processes. The most radical innovations
Are risky they embody new knowledge, producers and customers May be relative and may change over time or with respect to different observers.
Incremental innovation
An innovation that makes a relatively minor change from (or adjustment to) existing products and processes
Forms of Innovation
Radical Innovation
Incremental Innovation
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Forms of Innovation
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Incremental
Most products and processes are made up of a hierarchically nested system of components. Component 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.
To initiate and adopt an architectural innovation typically requires the architectural knowledge about how the components link and integrate to form the whole 4/27/12 system.
Product innovation Process Innovation Technology innovation Organizational innovation Management Innovation Marketing innovation Business innovation Service Innovation
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Product innovation
Technology developments that are oriented towards creation of products with higher performance, smaller size, lower price and better features Today, with the emphasis on environmental issues gaining ground, developments aimed at generation of products, which are environmentally friendly, efficient in terms of energy usage, safe to operate etc.
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Incremental innovation:
This refers to those efforts directed towards extending existing product concepts and is essential for strengthening the competitiveness of products. This form of innovation takes place continuously in any organization, has low risk and a high degree of certainty. Such innovation contributes less towards market creation, but leads to an entirely novel product based on developments in
Technical innovation:
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Application innovation:
This is development of products guided by the customer's views. Eg. Walkman and Camcorder. This involves creation of both technology and market. It involves generation of new product concepts, convincing world markets and creation of new business concepts. Examples are the television, personal computer, VCR and such others. These are high-risk innovations involving long term R&D efforts.
Radical innovation:
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Low
High
Technology Innovation
Evolutional (Incremental)
When the progress is continuous, there are significant changes in a short period of time and the efforts required towards technical innovation are considerable. The improvement in transmission loss by a factor of fifty, in 10 years, through lowtransmission-loss-optical cables is an example of such innovation. Evolutional limit pushing innovations can lead to either:
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i) explosive technology, in other words technology, which expands domains, (eg. Space research, deep-sea exploration, genetic
Technology Innovation
Revolutional (Radical)
Where the technological progress is discontinuous. These generally remain as inventions or discoveries until their potential is unsheathed. These occur quite rarely, roughly once in fifty to hundred years, and these can completely change the foundation or structure of industry and society. Eg. Penicillin, the practical application of nuclear energy and description of the structure of DNA.
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Process Innovation
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Market Innovation
In today's competitive situation, innovation in the marketplace is not solely dependent on inputs from any single source. It is preferable that products are developed by working together with customers to create goods that receive high acclaim. Ensure that adequate exchange of opinion and discussion takes place regarding product prices and distribution channels between R&D and Marketing units.
An integrated marketing approach in which the manufacturer, buyer and seller function in a unified manner, is more beneficial compared to 4/27/12 the conventional approach where the units
High
Functional product performance
Incremental Major process Frequent major product & process innovations required changes in innovation by rising volume product/service Undifferentiated Includes at least one Diverse often standard productsstable or dominant including custom design designs Efficient, often Becoming more rigid Flexible capital intensive & defined Experiment & & rigid change frequently
Innovation that fundamentally transforms the way a business works or drives revenue. Diversification: An organization must invest the income of existing businesses in new business development when the former is still growing steadily in its late growth period rather than be caught unawares in the mature period or beyond, when business is likely to become stagnant. Also, in order to venture into any new area it would first of all be essential to be sure of the core technology or generic technology, so that related business areas come into scope easily, and existing resources can easily adapt to the new developments. This would also enable usage of the same marketing resources for both the existing as well as new business.
High-risk, high return and low-risk, low return innovations Discrete, dynamic and continuous innovations Product/service and market innovations Short and long-to-market innovations
Innovations that employ new 4/27/12 technologies and those that employ
Business Innovation
Strategic innovation occurs when a company identifies gaps in the industry positioning map, decides to fill them, and the gaps grow to become the new mass market.
New emerging customer segment or existing customer segments that other competitors have neglected New emerging customer needs or existing customer needs not served well by other competitors
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Organizational Innovation
Eg. a new venture division, a new internal communication system, a new accounting procedure The tacit and intangible knowledge present in each individual employee becomes the collective knowledge bank of an organization only if structured and managed effectively.
A 'Learning Organization', where "people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, collective aspiration is set free and where people are continually learning how to learn together". 4/27/12
Management Innovation
Strategies like 'Kaizen', which propagates continuous improvement in all units in all areas of operation and 'continuous risk-taking are interesting variations of measures aimed at creating such an environment. It is also essential for the top management to be closely involved in such measures to ensure that concerned personnel feel sufficiently motivated and resources deployed are effectively utilized. Top management also needs to identify a vision that each employee in the organization can identify oneself with. In respect of internal organizational linkages to promote innovation, management styles need be introduced depending upon several factors like the size, history, culture, field of operation.
Importantly, integration between the various functional departments whether they relate to technology, 4/27/12 development or marketing; should be achieved.
Innovation Process
Idea Evaluati on
Will the idea work? Does the team have know-how to make it work? Does the idea represent value for customers? Is the idea congruous with company strategy? Is the idea cost effective?
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Process of Innovation
The Innovation process can be depicted as a series of funnels each getting progressively smaller. Typically sixty ideas into the top funnel only produces just one innovation. The funnels are labeled as the four phases in the process - idea generation,
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4 5
Resources + Talent + Innovation is equal parts resources, Luck talent and luck Dont just create innovative products. Create a corporate
8 9
Balance passion Designers must think like business people and and business goals create like artists. They must understand the business model, its goals, and its financial capabilities, limitations and expectations Think beyond a product or service. Envision how it lives at home, at work, in peoples minds
Organic Structures
Resources availability
Acceptance of ambiguity
Tolerance of risk
Tolerance of conflict
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Organizational requirement
Growth orientation Vigilance Commitment to technology Acceptance of risks Cross-functional cooperation Receptivity
Create a Strategic Vision Establish Innovation as a Priority Create Organizational Structures that Promote Collaboration Establish Processes to Convert Ideas to Innovations Allocate Resources Train Workforce on Creativity Tools Measure & Communicate Results Recognize 4/27/12 Creative Behavior
Positive attitude toward change Decentralized decision making Complexity Informal structure Interconnectedness Organizational slack System openness
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How to generate an overall enthusiasm for innovative behavior and risk taking?
At&T: We believe innovation is engine that keep us vital and growing. Gillette: We will invest in and master the key technologies vital to category success.
Hallmark: We believe that creativity and quality in our concept, products and services are essential to our 4/27/12
Stages of Innovativeness
1.
Background random problemsolving, occasional winners, no strategic impact Structured formal problem-solving process, training, idea management and reward system Goal-oriented bottom-line impact, formal strategic goals, measuring performance Proactive empowered staff to
2.
3.
4.
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Barriers to Innovation
Regard new ideas with suspicion Enforce cumbersome approval mechanisms Pit departments & individuals against each other Express criticism without praise Treat problem identification as a sign of failure Control everything carefully
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Its against company policy. It doesnt fit the system. It will never be approved. The timing just isnt right. Anyone else tried it? It didnt work before. Its too wild. Were not ready for that.
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Product Champion Sells new ideas to others in the organization. Acquires resources. Aggressive in championing his or her cause. Takes risks. Project Leader Provides the team with leadership and motivation. Plans and organizes the project. Ensures that administrative requirements are met. Provides necessary co-ordination among team members. Sees that the project moves forward effectively. Balances project goals with organizational needs. Provides access to power base within the organization, a senior person. Buffers project team from unnecessary organizational
Sponsor 4/27/12
Be a clear thinker
simplify strategy into specific actions, make decisions and communicate priorities
Right organizational environment can encourage people to develop & cultivate them Ensuring that workers have the FREEDOM and the INCENTIVE to be creative is one of the best ways to achieve innovation
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The leader's job is not only to be the source of ideas but to encourage and champion ideas. Leaders must tap the imagination of employees at all ranks and ask inspiring questions. They also need to help their organizations incorporate diverse perspectives, which spur creative 4/27/12 insights, and facilitate creative
The first priority of leadership is to engage the right people, at the right times, to the right degree in creative work. One of the best ways to communicate the expectation of creativity is to give employees permission to be creative
Expecting Creativity
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Encouraging Curiosity
Entrepreneurs and their employees constantly should ask what if questions and to take a maybe we could attitude Doing so breaks out the assumptions that limit creativity
Tolerance of Failure
Creativity requires chances and managers must remove employees fear 4/27/12
Every problem offers the opportunity for INNOVATION Instead of the Entrepreneur fix all the problems, let the employees take part in finding the solutions (empowerment)
Providing Support
Entrepreneurs must give employees the tools and the resources they need to be creative Entrepreneurs should remember that creativity often requires nonwork phases, and allowing employees time to daydream creativity by rewarding it
Rewarding Creativity
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Enhance diversity
Get people with different backgrounds and expertise to work together. Encourage individuals to gain diverse experiences that will increase their creativity. Open up the organization to outside creative contributors. is caught as much as it is
Corporate Entrepreneurship
Intrapreneurship
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Challenges of Innovation
Dilemma
Some innovation projects require considerable level of investment before merit can be determined
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Challenges of Innovation
Senior managers
Have Tend
Midlevel employees
May
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May
Challenges of Innovation
have greater social capital the organizations culture and routines not be able to think outside the box
Know May
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Challenges of Innovation
departments
Partner
Partnerships
Create
dependencies and inhibit internal skills development benefits of innovation may create conflict
4/27/12 Sharing
Innovation often requires collaborating with others who possess complementary knowledge and skills Partners can come from several sources
Other personnel within the department Personnel within the firm but from another department Partners outside the firm Non-business sources, including research universities and the federal government
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Open Innovation means looking outside your organization for partners, suppliers and customers for new and innovative ideas Open innovation has also been stimulated by decreasing time frames during which companies can command premium prices from proprietary technologies. As activities that relate to innovation become increasingly global and open and so draw the public and private sectors into complex networks of partnerships, these activities also tend to concentrate where the ecosystem is most supportive.
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Challenges of Innovation
Companies must manage the timing and scale of new innovation projects
Incremental launch
Less
Large-scale launch
more resources
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Incremental innovation
May May
Radical innovation
Typically Often
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