Chapter 2 IM

FORMS AND TYPES OF INNOVATION
Learning Outcomes
At the end of this chapter, students should be able

to:
Distinguish and describe the different forms of
innovation.
Describe the different types of innovation.
Analyze the impact of innovation types on
society, human behaviour and business.
Innovation Management All Rights Reserved

© Oxford Fajar Sdn. Bhd. (008974-T), 2015 1– 3
Introduction
 Innovation consists of diverse activities and processes

and different people interpret innovation differently.
 to reduce this difference in innovation interpretation is
to group innovation into various groupings.
 The grouping of innovation is based on two
categorizations.
 The different forms of innovation, which indicates the
application of the said innovation
 The degree of newness or originality associated with the
innovation

Forms of Innovation

Product Innovation
 include consumer products, such as smart phones

and personal health gadgets as well as industrial
products such as machinery and equipment.
 The long-term success of a product-driven
organization depends on developing new
products.
 A product family is a set of individual products that
shares common technology and addresses a
related set of market applications.

Product innovation
Form Innovation Innovator

Product iPod Steve Jobs/Apple
Ballpoint pen Laszlo Biro
Velcro Georges de Mestral
Computer mouse Douglas Engelbart

The Invention of Velcro
In 1941 engineer George de Mestral

went on a hunting trip and when he
came back was fascinated by the burrs
that were stuck to his jacket and his
dog’s fur. He checked out the burrs in a
microscope, and noticed they had little
hooks at the end of each spike to help
them attach to the fibers in his jacket.

Service Innovation
 Most of the time, service innovation is entirely
a new business model. This new business
model will contribute to increased revenue.
 able to generate higher productivity because
these services are provided with cheaper cost
and faster delivery.
 With appropriate online computer services,
cheaper and more productive methods could
be offered to the public.

Service Innovation

Service Social networking website Mark Zuckerberg
World Wide Web Tim Berners – Lee
“No frills” airline Herb Kellner / R King

Process Innovation
 to improve the techniques or processes used by the
organization and often focuses on improving
effectiveness and efficiency.
 have a bigger influence on society compared to
product or service innovations even though innovation is
synonym with product innovations.
 grouped into two types:
– Technological - related to new types of technology
– Organizational - related to new ways to organize work.
 contributes to the bigger process, such as
reorganization of the entire industries.
Process Innovation
 Example:

Process Moving assembly line Henry Ford
Float glass Alistair Pilkingston
Hub + spoke delivery Frederick W.Smith
system

Component Innovation
 creates an improvement in the capabilities of

the individual components in a system
 does not involve a whole new design, but does
involve new or at least significantly different
components.
 either about changing the relationships that
transform the entire system or swaps out one
for another that results in an incremental
improvement.

Component Innovation
 The key feature of component innovation is the

use of new or different components integrated
with new components integrate new technology,
but the configuration remains unaffected.

Marketing Innovation
 focuses on the implementation of a novel

marketing concept in a firm.
 Involves the implementation of a new marketing
method, which results in
– significant changes in product design
– packaging
– product placement
– product promotion
– pricing.

Marketing Innovation
 objective
– to increase firm’s revenue and the purposes of
marketing innovation are to fulfill customer needs, to
develop new markets, or to position the firm’s product
on the market.
 all about how the new tools are used to get
messages out to the target market effectively.
This is to keep existing customers and at the
same time, attract new customers.

Organizational Innovation
 a dynamic process of creating or modifying an

idea and developing it to produce new groups of
products, services, processes, structures or
policies.
 It encompasses how organizations and
individuals manage work processes in areas
such as customer relationships, employee
performance and retention, and knowledge
management.

Organizational Innovation
 Continuous learning is a requirement of

organizational innovation success. The new
knowledge is essential as the basis for new
ways of thinking, creativity and change.
 requires a culture of innovation that supports
new ideas and new ways of doing business.

Social Innovation
 refers to new strategies, concepts, ideas and

organizations that meet both social needs and
create new social relationships.
 can take place in the government, private and
non-profit sectors and across the boundaries
between these sectors.

Social Innovation
 emphasizes on three key dimensions:

i. The innovations are usually new combinations or
hybrids of existing elements, rather than being
totally new.
ii. The practice involves cutting across organizational
and disciplinary boundaries.
iii. It develops a persuasive new relationship between
individuals and groups.

Business Model Innovation
 A business model must have three core

elements to be of value
1. a unique central idea that defines the business;
2. a grasp of future market trends, and
3. profitability from an offering that cannot be easily
copied.

Business Model Innovation
 refers to the recreation or reinvention of a

business itself. It is an important tool to capture,
design, innovate and transform the business.
 should be in connection with the main business
goals of the organization.
 A company with a new business model
innovation will capture new market segments.

Types of Innovation

Types of Innovation
 Incremental
– Incremental innovation improves on the design of the existing
components.
– These improvements are not radical changes to the
components but a gradual change.
– Most incremental innovations involve little technological
change rather than the creation of a totally new product.
– The product or services do not require much marketing effort
and has a lower failure risk.
– This type of innovation is the least likely to encounter
consumer resistance.

Types of Innovation
 Discontinuous
– Discontinuous innovation requires a significant change in
consumer behaviour.
– Consumers may want to use new technology because it
creates substantial benefits.
– Discontinuous innovations are new products perceived by
customers to be radically new and also usually require extensive
technological breakthrough.

Types of Innovation
 Architectural
– Architectural innovation requires overall reconfiguration of the
design without changing the components.
– The changes are achieved in its design through the changes in
the underlying components and the ways those components
interact.
– The influence of architectural innovation is mostly on industry
competitors and technology users, where the influence is
widespread and complex.
– As an example, the transition of a bicycle from high-wheel to the
safety bicycle was an architectural innovation.

Types of Innovation
 Systems
– Systems innovation could be viewed as massive kinds of
activities which require significant resources from many
disciplines.
– It causes complete changes in both social and technical
dimensions, as well as interrelations between the two
dimensions.
– Social dimensions include values, regulations and attitudes,
whereas technical dimensions are infrastructure, technology,
tools and production processes.
– For example, communication networks from fixed line to mobile
phone; satellite operations; and the World Wide Web.

Types of Innovation
 Radical
– Covers both the newness and the level of change in the innovation.
– Impact the most in terms of product and service commercialization
that consists of significant technological contents.
– May offering wholly new customer benefits, provides significant
changes towards positive customer expectations.
– Example: the introduction of wireless telecommunication, where
product development requires new manufacturing and service
processes.
– This type of innovation requires newness in every facet of the
innovation.

Types of Innovation
 Disruptive
– Disruptive innovation usually replaces an earlier technology.
– Usually, initial product/services introduced were inferior
compared to the existing product/services available in the
market, but simpler and convenient.
– Disruptive technologies usually are more flexible, cheaper and
applicable to bigger segments.
– Established and large companies are more accustomed to
sustaining innovations to meet the needs of high-end customers.
– These companies have to innovate, otherwise they leave the
door open for new entrants who will make advancements to their
products and ultimately compete for the high-end customers.

2.3 Product Classification

Improvement product
 A change to a product which is intended to

make it better in some way, e.g. new functions,
faster, or occasionally more compatible with
other systems.
 must be more than cosmetic.
 These improvements sustain the organization
even though all have a limited life cycle.
 provide a defined benefit to the user but not
necessarily be classified as innovative.

Novel replacement product
 A novel replacement product serves the same

purpose as a current product and may
include some enhanced features.
 A novel replacement product supersedes the
current item.
 Strategies employed
– repositioning,
– cost reductions
– marketing innovations

Novel replacement product
 Example:

Punched cards in
storage at a U.S.
Federal records
center in 1959. All
the data visible
here could fit on a
4 GB flash drive
(with minimal ZIP
compression).

New-to-the-market product
 new to the world and will create their own

market.
 Significant improvements with these products
are not born out of a major invention but offer
superior performance, hence replacing existing
products.

New-to-the-market product
Examples
 Nuclear magnetic resonance imaging (MRI
scanners)
 Industrial robots

Breakthrough product
 coming up with something new - something that

has not been achieved up until now.
– The act of doing something so different that it cannot be
compared to any existing practices or perception.
 involves both technology and markets.
 create new industries

Breakthrough product

Me-too product
 a product introduced into the market in direct

competition with one already in the
marketplace.
 It may not provide new features or advantages
but it is introduced in direct competition with an
existing product.
 Example : Dell computers.

Summary
 The innovation types and forms outlined in this chapter are not
entirely watertight and there will be some overlaps.
 Judgments are required to decide the innovation category.
 What really matters is the outcome from the process of attempting
to categorize an innovation.
 The categorization of innovation and the form of categorization
indicates that innovations are not homogeneous.
 The categorization of innovation might be the best explanation to
the different responses to the introduction of new technologies.
 Systemic linkages between knowledge and the market known as
the genesis of innovation shall be discussed in the next chapter.


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FORMS AND TYPES OF INNOVATION

At the end of this chapter, students should be able

Innovation Management All Rights Reserved

 Innovation consists of diverse activities and processes

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

 include consumer products, such as smart phones

Innovation Management All Rights Reserved

Form Innovation Innovator

Innovation Management All Rights Reserved

In 1941 engineer George de Mestral

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Form Innovation Innovator

Innovation Management All Rights Reserved

Form Innovation Innovator

Innovation Management All Rights Reserved

 creates an improvement in the capabilities of

Innovation Management All Rights Reserved

 The key feature of component innovation is the

Innovation Management All Rights Reserved

 focuses on the implementation of a novel

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

 a dynamic process of creating or modifying an

Innovation Management All Rights Reserved

 Continuous learning is a requirement of

Innovation Management All Rights Reserved

 refers to new strategies, concepts, ideas and

Innovation Management All Rights Reserved

 emphasizes on three key dimensions:

Innovation Management All Rights Reserved

 A business model must have three core

Innovation Management All Rights Reserved

 refers to the recreation or reinvention of a

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

 A change to a product which is intended to

Innovation Management All Rights Reserved

 A novel replacement product serves the same

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

 new to the world and will create their own

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

 coming up with something new - something that

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

 a product introduced into the market in direct

Innovation Management All Rights Reserved

Innovation Management All Rights Reserved

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