MODULE 5

LATEST INNOVATIONS

Learning objective

• Business innovation
• Why business innovation is important
• Forms of innovation
• Types of innovation
• Barriers to innovation
• The world's most innovative companies

INTRODUCTION
Being innovative does not mean inventing; innovation can mean changing your business model
and adapting to changes in your environment to deliver better products or services. Successful
innovation should be an in-built part of your business strategy, where you create a culture of
innovation and lead the way in innovative thinking and creative problem solving.

WHAT IS BUSINESS INNOVATION?

The process of translating an idea or invention into a good or service that creates value or for
which customers will pay. To be called an innovation, an idea must be replicable at
an economical cost and must satisfy a specific need. Innovation involves deliberate application
of information, imagination and initiative in deriving greater or different values from resources,
and includes all processes by which new ideas are generated and converted into useful products.
In business, innovation often results when ideas are applied by the company in order to further
satisfy the needs and expectations of the customers.

Innovation generally refers to changing or creating more effective processes, products and ideas,
and can increase the likelihood of a business succeeding. Businesses that innovate create more
efficient work processes and have better productivity and performance.

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For businesses, this could mean implementing new ideas, creating dynamic products or
improving your existing services. Innovation can be a catalyst for the growth and success of your
business, and help you adapt and grow in the marketplace.

Fig, 1.1: While innovations need to be successful one needs to ensure that it is viable and there is
sufficient technology to support the innovation.
WHY IS BUSINESS INNOVATION IMPORTANT?
Due to globalization and outsourcing, there is an increased push to improve efficiency and
effectiveness of organizations. Organizations need more than good products to survive; they
require innovative processes and management that can drive down costs and improve
productivity. Consumer expectations also drive the amount of innovation in the market.
Customers are used to products that continually improve and make their life easier. Modern
consumers are more informed and have more options in terms of what they buy and who they
buy it from. Essentially, customers won't accept mediocrity because they know they can always
go somewhere else.
The goal of innovation is to:
• Improve quality of product and services
• Create new markets (for new and existing product)
• Extension of the product range Reduce labor cost
• Improve production process
• Reduce materials wastage

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 • Reduce environmental damage
• Replacement of products/services
• Reduce energy consumption
Conform to regulations
FORMS OF INNOVATION
Forms of innovation mean areas or fields where innovations are used. It is possible
to differentiate three principal applications for innovation
1. Products
2. Services and
3. Processes
PRODUCT INNOVATION
Product innovation is the creation and subsequent introduction of a good or service that is either
new, or an improved version of previous goods or services.
This can be categorized into main two sub-segments
• New Product Development
New product development is the initial step before the Product Life Cycle can be examined, and
plays a vital role in the manufacturing process. To prevent loss of profits or liquidation for
businesses in the long term, new products have to be created to replace the old products.
Drucker suggests in his book 'Innovation and Entrepreneurship' that both product innovation and
entrepreneurship are interconnected and must be used together in unison for a business to be
successful, and this relates to the process of new product development.
• Existing Product Development
Existing Product Development is a process of innovation where products/services are redesigned,
refurbished, improved, and manufactured which can be at a lower cost. This will provide benefits
to both the company and the consumer in different ways; for example, increased revenue
(benefits the company) cheaper costs (benefits the company and consumer) or even benefits the
environment by implementation of 'green' production methods.
Ex Curved screen television, Selfie Sticks, Google Tango and Google’s project ARA.
SERVICES INNOVATION

Service Innovation could be hard to define; one of the many helpful definitions comes
from Finland’s research agency, TEKES:

“Service innovation is a new or significantly improved service concept that is taken into practice.
It can be for example a new customer interaction channel, a distribution system or a
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technological concept or a combination of them. A service innovation always includes replicable
elements that can be identified and systematically reproduced in other cases or environments.
The replicable element can be the service outcome or the service process as such or a part of
them. A service innovation benefits both the service producer and customers and it improves its
developer’s competitive edge.
Ex. Google’s various innovations (Maps, Google Drive etc,) Amazon Prime, Underwater
restaurants etc,
PROCESSES INNOVATION
"Process innovation means the implementation of a new or significantly improved production or
delivery method (including significant changes in techniques, equipment and/or software). Minor
changes or improvements, an increase in production or service capabilities through the addition
of manufacturing or logistical systems which are very similar to those already in use, ceasing to
use a process, simple capital replacement or extension, changes resulting purely from changes in
factor prices, customization, regular seasonal and other cyclical changes, trading of new or
significantly improved products are not considered innovations."
Ex. Academic Rigor followed by various universities, Use of 3-wet paint process by
automobile companies. Etc,
Watch video: https://www.youtube.com/watch?v=tLVmXgpHdoM

TYPES OF INNOVATION

1. Incremental innovation
Incremental innovation seeks to improve the systems that already exist, making them
better, faster cheaper.
Example: One of the most successful and recent examples of incremental innovation is the
iPhone. While smart phones existed before Apple entered the market, it was mostly the
incremental innovations of a larger touch screen, the app store, various ease of use and an
improved overall experience, which enabled the iPhone to be the first in making
smartphones mainstream.
2. Radical innovation
Radical innovations (sometime referred to as breakthrough, discontinuous or disruptive
innovations) provide something new to the world that we live in by uprooting industry

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conventions and by significantly changing customer expectations in a positive way.
Ultimately, they often end up replacing existing methods / technologies.
Example : Telephone 1861

Light bulb 1883

Television 1929

Computer (1st gen.) 1946

3. Frugal innovation
Frugal Innovation is about doing more with less. Entrepreneurs and innovators in emerging
markets have to devise low cost strategies to either tap or circumvent institutional complexities
and resource limitations to innovate, develop and deliver products and services to low income
users with little purchasing power. Frugal innovation responds to limitations in resources,
whether financial, material or institutional, and using a range of methods, turns these constraints
into an advantage.
Example : Tata Nano, AKash Tablet, Dr Devi Shetty's path-breaking model of
delivering affordable heart surgery at Narayana Hrundayalaya
4. Disruptive innovation
A disruptive innovation is an innovation that helps create a new market and value network,
and eventually goes on to disrupt an existing market and value network (over a few years or
decades), displacing an earlier technology.
Example: 3D display technology, Snapchat augumented reality picture app and 3D
Printing.

BARRIERS TO INNOVATION
1. Fear: The single biggest reason why most organizations and individuals do not
achieve their full potential is fear of failure. There are no guarantees that any new
idea will work. We must accept failing is an important part of learning, development and
progress.

2. Lack of leadership: Innovation must be led from the top. Often, trustees, chief executives and
directors do not support or are not in agreement as to the strategic importance of
innovation as a business driver and what it would look like for their organization. Consequently,
they continue to do what they have always done.
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3. Short term thinking: Most charities calculate on a one year return on investment. Any new
innovation is expected to have immediate impact. Under the pressure to deliver return quickly
we conduct inadequate research and rush processes, leading to failure, the
idea being ditched and innovation being perceived as not working.

4. Lack of resource/capacity: Linked to thinking in the short term, charities are apprehensive
about investing in something that does not have guaranteed return on investment
and often take a scattergun approach to innovation or under-resource it. This has a knock on
effect of it not delivering the impact that it should or could.

5. Lack of collaboration: Internal budgeting and structures don’t always facilitate collaboration
between teams. Individual income targets mean people fight over budgets and are reluctant to
‘share’ donors, even if the return for the organization could be potentially higher if teams worked
together.

6. No time: There is an understandable focus on the fundraising here and now. However, if we
don’t start to make time to take a more long-term view and develop and test new
ways to generate income, charities will struggle to survive.

7. Lack of focus: If an organization is not clear on where to focus, it can easily spend time on
activity that won’t make a difference. It’s easy to become distracted by new products and new
technology, but if it isn’t helping you achieve your mission then you should not be investing time
and resource in it.

8. Lots of ideas, no delivery to market: Having ideas is not a problem for most organizations,
but having relevant ideas and progressing them can be incredibly hard.

9. No clear process: A process is critical to filter and drive ideas forward, yet only 32% of those
surveyed have a clear process in place for innovation.

10. Lack of urgency

Despite significant changes to the funding landscape and the economic environment, charities
are not responding with urgency to change. Perhaps they believe that if they do nothing they
will be OK, or it seems too difficult to think strategically with so many immediate day-to-day
pressures.
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 WORLD’S MOST INNOVATION COMPANIES

What differentiates the world’s most innovative companies are their creation and use of AI and
platforms with Alphabet/Google, Amazon, Apple, and Microsoft leading all others. Each of them
is actively creating and providing AI-based applications, platforms and ecosystems that enable
enterprises to improve customer experiences, creating entirely new revenue streams, business
models and competitive advantages. Alphabet/Google has defined its direction as an “AI first”
company, intentionally creating a culture of AI-driven innovation. The following is BCG’s list of
the most innovative companies of 2019:

WHY ARE THESE COMPANIES ON THIS LIST?

In 2011, Jeff Dyer and Hal Gregerson wrote “The Innovation Premium: Our Methodology” in
Forbes. Here is the complete text from that article.
Forbes use something called the Innovation Premium to compile our lists of the World’s Most
Innovative Companies. It is calculated first by projecting a company’s income (cash flows, in
this case) from existing businesses, plus anticipated growth from those businesses, and look at
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the net present value (NPV) of those cash flows. We compare the NPV of cash flows from
existing businesses with a current market capitalization: Companies with a current market cap
above the NPV of cash flows have an innovation premium built into their stock. You can read a
more detailed explanation of our work around innovative companies and leaders in our new book
The Innovators DNA (Harvard Business Press, 2011), written with Harvard Business School
professor Clayton Christensen.

1. TESLA MOTORS
Innovation Lessons from Tesla and Elon Musk
a) The best companies execute around – and faster than – patent protection

Patents, he said, shouldn’t be so important. “You want to be innovating so fast [that] you
invalidate your prior patents…If a company is truly relying on patents it means they aren’t
innovating, or not innovating fast enough…” – Elon Musk in Wall Street Journal.

b) People matter more than patents

“He says that when he proposed the open-source idea, he got some ‘wide-eyed looks’ from some
board members and managers. But he downplayed the risk of the move, saying that quick-
moving companies usually stay ahead of their own patents. Attracting top talent matters more…
Technology leadership is not defined by patents, which history has repeatedly shown to be small
protection indeed against a determined competitor, but rather by the ability of a company to
attract and motivate the world’s most talented engineers…” – Elon Musk in USA Today.
c) Open innovation and open source can be cost effective while limiting competition

Fostering an ecosystem around electric vehicles can only help Tesla: the more suppliers there
are, the lower its costs could be, and the more widespread the technology, the smaller the
incentive for innovators to work on competing technologies like fuel cells. – Quote in Quartz
This is just another sign that the ideas behind open innovation and collaboration are really taking
hold. There is no going back now.
Although Tesla Motors have been breaking innovation barriers over and over again the reason
for them being so innovative are the above factors.
Examples of Tesla Innovation
i) Tesla figured out how to bring an 85kWh battery pack to market at an affordable price point.

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ii) Tesla first gained widespread attention following their production of the Tesla Roadster, the
first fully electric sports car.
iii) Tesla manufactures equipment for home and office battery charging, and has installed a
network of high-powered Superchargers across North America, Europe and Asia.[16] The
company also operates a Destination Charging program, under which shops, restaurants and
other venues are offered fast chargers for their customers.

2. Amazon
Innovation and growth are the Amazon’s main objectives. After delivering $136 billion in sales
in fiscal 2016, an increase of 27.1% over $107 billion the previous year, it seems very attainable
that Amazon will reach $170 billion next year.
Here are some of the innovations that excite

1. Alexa – The virtual assistant is designed to give customers a better lifestyle experience. It
is a digital invention that will read, play music and obey commands. Developers are
integrating Alexa to into their products. Cincinnati Airport – The company will invest $1.5
billion to construct and operate an airport in Cincinnati with 40 cargo planes to serve
customers faster.

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2. Amazon Go – Introduced in Seattle, it is a new kind of store with no checkout
required. Customers take products and go.

3. Physical Stores -- Amazon has opened its fifth physical bookstore in Chicago and there are
five more locations. In addition, the online retailer seems to be planning some home stores.
Customers want to touch appliances or apparel before buying. Amazon is ready to serve
shoppers with their preferences.

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 4. Reduced Training Time -- AWS (Amazon Web Services) announced three artificial
intelligence (AI) services that understand natural languages, turn text into lifelike speech,
analyze images and recognize faces, etc. It can significantly reduce training time for many
applications.

5. It wasn't until 2014 that Amazon really started to use the machines made by Kiva, the robotics
company it bought for $775 million in 2012 . Kiva makes robots that automate the picking and
packing process at large warehouses. The note says Kiva robots have cut operating expenses by
about 20%, quoting Amazon exec Dave Clark, adding that it would translate to roughly $22
million in cost savings for each fulfillment center.

Additionally, Deutsche Bank estimates Amazon could cut another $800 million in one-time
cost savings once it deploys more Kiva robots across the 110 fulfillment centers that don't have
them yet. Amazon uses Kiva robots in only 13 of its fulfillment centers currently.

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6. Amazon One, a Boeing 767, is part of a fleet of 40 cargo planes Amazon plans to roll
out over the next two years. Once a package leaves the warehouse, it may end up on a Boeing
767 with the Prime Air logo emblazoned on its side. Bezos rolled out the first in a fleet of 40
wide-bodies last summer, which will be operated in partnership with two aircraft-leasing
companies. In January, Amazon announced that the fleet would be supported by a new air hub in
Kentucky that will employ 2,000 workers—a $1.49 billion investment, according to a
spokeswoman with the Cincinnati/Northern Kentucky International Airport. The planes, like the
thousands of cargo trailers that already sport the Prime logo, make Amazon less dependent on its
partnerships with FedEx, DHL, and the United States Postal Service. And, pending FAA
approval, those fully operational Amazon delivery drones might one day cut delivery time down
to 30 minutes or less.

6. Amazon’s Fire TV streaming media player

Fire TV ($99)A slick device, but way late to a category dominated by Roku and Apple TV. It
lets you search by speaking and is surprisingly serious about gaming. Still, it’s no match for
Roku’s 1,800-channel content smorgasbord.

References
http://www.businessdictionary.com/definition/innovation.html

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http://www.lucidity.org.uk/blog/2015/09/07/the-ten-barriers-to-innovation/

http://www.forbes.com/sites/billfischer/2011/06/04/ceos-say-innovation-is-most-important-
factor-for-growth-voxy-co-nz/#1f1abce372e9

https://en.wikipedia.org/wiki/Product_innovation

https://en.wikipedia.org/wiki/Service_innovation

http://www.innoviscop.com/en/definitions/process-innovation

http://innovationexcellence.com/blog/2014/07/15/innovation-lessons-from-tesla-and-elon-
musk/

https://www.salesforce.com/blog/2016/05/3-ways-salesforce-became-a-leader-in-
innovation.html

http://news.alexionpharma.com/press-release/financial-news/alexion-highlights-innovative-
rare-disease-portfolio-investor-day-meeti

https://www.salesforce.com/blog/2016/05/3-ways-salesforce-became-a-leader-in-
innovation.html

questions

. Answer the following questions, each question carries 1 mark

1) Discontinuous or disruptive innovations is also referred as
a) Radical Innovation c) Incremental Innovation b) Frugal Innovation d) Disruptive
Innovation

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2) Academic Rigor by various Universities is an example for
a) Process Innovation c) New Product Innovation b) Service Innovation d) Existing
Product Innovation

3) _________ ranks world‘s most Innovative Comapanies

a) Fortune c) Forbes b) Guardian d) The Entrepreneur 4)

4) Alexa is an _______ latest Innovation

a) Amazon c) Tesla b) Walmart d) Boeing

5) Boeing ____________, is part of a fleet of 40 cargo planes Amazon plans to roll out over
the next two years
a) 787 c) 777 b) 767 d) 737

B. Answer the following questions, each question carries 2 marks

1) What is Business Innovation ?
2) Why Business Innovation is important ? give any two reasons.
3) What is Amazon‘s Fire TV streaming media player ?
4) What do you understand from ―just walk out shopping‖ with respect to Amazon ?
5) What is Process and Service Innovation ?

C. Answer the following questions, each question carries 5 marks

1) Explain in detail the forms of Innovation.
2) Explain in detail the types of Innovation.
3) Briefly explain latest Innovations at Amazon.
4) Explain in brief Tesla‘s Innovation lessons.
5) Write in detail the hurdles in Innovation.

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