INNOVATION MANAGEMENT

Week # 3
Jan 18, 2019

Dr. Suresh Varadarajan

Types of Innovation
• Product vs Process Innovation
• Product innovations are embodied in the outputs of an organization – its
goods or services.
• Ericsson’s development of 3G wireless networks and network services
• Process innovations are innovations in the way an organization conducts its
business, such as in techniques of producing or marketing goods or services.
• Improving the effectiveness or efficiency of production – reducing defect rates,
increasing quantity produced in a given time
• Product innovations can enable process innovations and vice versa.

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Product Innovation-Process Innovation
Product Innovation

Process Innovation

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Product Innovation-Process Innovation
• New processes may enable the production of new products
• A new metallurgical technique enabled the development of the bicycle chain
which in turn enabled the development of multiple-gear bicycles
• New products may enable the development of new processes
• The development of advanced workstations enabled the implementation of
computer-aided-manufacturing processes that increase the speed and
efficiency of production
• What is a product innovation for one organization might be a process
innovation for another
• UPS created a new distribution service (product innovation) that enables its
customers to distribute their goods more widely or more easily (process
innovation)

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Radical vs Incremental Innovation
• The radicalness of an innovation is the degree to which it is
new and different from previously existing products and
processes.
• Radicalness is also defined in terms of risk
• 3G/4G wireless technology required
• Investment in new networking equipment and
infrastructure
• Development of new phones greater display and
memory capabilities as well as a stronger battery
and/or better power utilization
• Degree of user acceptance of the technology was
unknown

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Radical vs Incremental Innovation
• Incremental innovations may involve only a minor change
from (or adjustment to) existing practices.
• The radicalness of an innovation is relative; it may
change over time or with respect to different observers.
• digital photography a more radical innovation for
Kodak (chemical photography expertise) than for Sony
(electronics expertise).

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Competence-Enhancing vs Competence-
Destroying Innovation
• Competence-enhancing innovations build on the firm’s existing
knowledge base
• Intel’s Pentium 4 built on the technology for Pentium III.
• Competence-destroying innovations renders a firm’s existing
competencies obsolete.
• Electronic calculators rendered Keuffel & Esser’s slide rule expertise
obsolete.
• HP and TI thrived as they had existing competencies in the electronic
components needed in electronic calculators.
• Whether an innovation is competence enhancing or competence
destroying depends on the perspective of a particular firm.

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Architectural vs Component Innovation
• A component innovation (or modular innovation) entails changes to one or
more components of a product system without significantly affecting the
overall design.
• adding gel-filled material to a bicycle seat
• An architectural innovation entails changing the overall design of the
system or the way components interact.
• transition from high-wheel bicycle to safety bicycle.
• In the 1800s, the front wheel of a bicycle has a very large circumference in order to provide speed;
gears did not exist yet
• When gears and chains were invented, the bicycle took on a whole new design
• Most architectural innovations require changes in the underlying
components also.

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Cross Industry Innovation
Drawing parallels /Analogies /Practices from other
Industry to jump start your innovation Process

By transferring approaches between contexts beyond the

boundaries of your own domain/Area/Industry

It is not Copy/Paste but Copy/Adapt/Paste

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Restaurant meets Airport

Source: Not Invented Here-Cross Innovation by Raymond Villings

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Automotive Meets Gaming

Source: Not Invented Here-Cross Innovation by Raymond Villings

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Transport meets Nature

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Design Concept : Baby Pram from Landing Gear

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Other Examples of Cross Industry Innovations

• Pay as You go for Mobile Services : Financial Services

• Do not own the asset : Pay for the usage and experience (Services)
• Agile Methodology for software development

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Cross Industry Innovation: How does it happen?

• Concept : Ability to conceptualize

• Ask questions at Multiple levels
• Ask Why it happens /Occurs
• Combine : Ability to create smart combinations
• Ability to visualise potential parallels to organise a profitable meeting of
contexts
• Ask What if ?
• Create : Implementation – Make it suitable for your context
• Not survival of the fittest but rathe the best fit
• Fit/Modify/adapt
• Ask How?

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Importance of Technical Innovation
• Technological innovation now the single most important driver of
competitive success in many industries
• Many firms earn over one-third of sales on products developed within
last five years
• Globalization has increased competitive pressure
• Product innovations help firms protect margins by offering new,
differentiated features.
• Samsung Portfolio of mobile phones
• Process innovations help make manufacturing more efficient

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Why Innovation Is Becoming More Important
• Technology is changing fast, new products come from new competitors
• Fast changing environment, product lifetimes shorter, need to replace
products sooner
• Products are increasingly difficult to differentiate
• Customers are more sophisticated, segmented and demanding, and
expect more in terms of customization, newness, quality and price
• Customers have more choice
• Apparently separate technologies come together
• Markets forming and changing fast
• With markets and technology changing fast, and good ideas quickly
copied, there is continual pressure to devise new and better products,
processes and services faster
Source: Strategic Management of Technological Innovation- Melissa Schilling

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Technology S-Curves

• In 1985, Gordon Moore, cofounder of Intel, noted that the

density of transistors on integrated circuits had doubled
every year since the IC was invented
• The rate has since slowed to doubling every 18 months but
the rate of acceleration is still very steep

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Technology S Curve
Both the rate of a technology’s improvement, and its rate of diffusion to the market typically follow an s-shaped curve.
Plot technology’s performance against the amount of effort and money invested in the technology

Technology improves slowly at first

because it is poorly understood.
Then accelerates as understanding
increases.
Then tapers off as approaches limits.

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Improvements in Intel's Transistor Density Over Time
• In 1985, Gordon Moore, cofounder of Intel, noted that the density of
transistors on integrated circuits had doubled every year since the IC
was invented
– The rate has since slowed to doubling every 18 months but the
rate of acceleration is still very steep

Types & Patterns of

Innovation
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Transistor Density versus Cumulative R&D Expenses
• However, Intel’s R&D dollars per year has also been increasing rapidly
– The big gains in transistor density have come at a big cost in terms of effort
invested

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Impact on Society
• The aggregate impact of technological innovation can be seen in
GDP (gross domestic product – the total annual output of an
economy).
• The average GDP per capita for the world has risen steadily since
1971, particularly in the developed economies
• Economist Robert Solow showed that the growth in GDP was not
solely on growth in labor and capital inputs but technological
changes as well (Nobel prize 1981)
• GDP relates to improved quality of life and thus technological
innovation has a positive impact on society
Source: Strategic Management of Technological Innovation- Melissa Schilling

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Impact on Society
• Innovation enables a wider range of goods and services to be
delivered to people worldwide
• More efficient food production, improved medical technologies, better
transportation.
• Increases Gross Domestic Product by making labor and capital more
effective and efficient
• However, may result in negative externalities,
• E.g., pollution, erosion, antibiotic-resistant bacteria

Source: Strategic Management of Technological Innovation- Melissa Schilling

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Impact on Society

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Ten Types of Innovation (Doblin)

Source: Deloitte University Press

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Ten Types of Innovation (Doblin)
• Ten Types (elements) of Innovation are split into three areas
• At the center is the Offering, which contains the core product elements, and how the product is
organized and integrated.
• To the left is Configuration, how the company is organized to make a profit
• And to the right is the Experience, how the company interacts with the customer

Source: Deloitte University Press

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Ten Types of Innovation Elements (Doblin)
1. Profit Model : How the firm translates Value into Profit (example Gillette)
2. Network : The value that is created by working with others. We are evermore connected today, and it
becomes essential for firms to work with others, to gain processes, technology, or brand credibility. (Open
Innovation)
3. Structure: Organize and manage talent and Assets within the firm
4. Process: Core operations/Execution (Toyota, Zara)
5. Product Performance: R&D Design, Quality, performance (Dyson vacuum cleaner, Corning Gorilla Glass)
6. Product System: Creation of additional value over and above the product offering,. Combination of
multiple components and products to create more value (Firefox Mozzilla, Uber eats)
7. Service : Ensuring ease of use of the product/service. Great experience
8. Channel : The value that is created by working with others. We are evermore connected today, and it
becomes essential for firms to work with others, to gain processes, technology, or brand credibility.
9. Brand: Your brand can be a powerful innovation in itself, it can represent the values you stand for, or a
simple but big idea that resonates with customers. (Virgin Atlantic, Intel )
10. Customer Engagement: How you understand and then leverage the desires and needs of your customers.
They can be hard to spot, often sitting among one of the other nine types. The question is how to interact
with your customers and delight them
Source: Deloitte University Press

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Adopting Multiple Types of Innovations

Companies which integrated Multiple types of innovation were more successful over a period of time

Stock Price X 1000

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• Class Exercise

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End of Session

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