Sources of Innovation

Knowledge push
• Knowledge creation provides a push, creates
an ‘opportunity field’ which sets up
possibilities for innovation.
Examples of knowledge-push innovations:
microwave, photocopiers, antibiotics, medical
scanners
 Need Pull
• Another key driver of innovation is need – the
complementary pull to the knowledge push
• clear understanding of needs and finding ways to meet
those needs.
Henry Ford was able to turn the luxury plaything into
something which became ‘a car for Everyman’.
If I had asked people what they wanted, they would have
said faster horses
Procter and gamble – needs for domestic lighting
(candles)
• Understanding buyer/adopter behavior has
become a key theme in marketing studies
since it provides us with frameworks and tools
for identifying and understanding user needs.
Advertising and branding play a key role in
this process – essentially using psychology to
tune into – or even stimulate and create –
basic human needs.
• Need-pull innovation is particularly important
at mature stages in industry. Competing
depends on differentiating on the basis of
needs and attributes.
 It creates….
• Bandwagon effect: A psychological theory
where individuals will do something primarily
because other individuals are doing it,
regardless of their own beliefs, which they will
ignore
• Needs aren’t just about external market… also need pull working inside the
organization
• Model of Kaizen: Kaizen means ‘improvement’. The Kaizen strategy calls for
never-ending effort for improvement, involving everyone in the organization.
• Japanese companies, such as Toyota and Canon, a total of 60 to 70
suggestions per employee per year are written down, shared and
implemented.
• Make changes anywhere where improvements can be done… not restricted
to one area
• The Kaizen philosophy is to "do it better, make it better, improve it even if it
isn't broken, because if we don't, we can't compete with those who do."
• Innovation is not always about commercial
markets or consumer needs. There is also a
strong tradition of social needs providing the
pull for new products, processes and services.
 Micro-finance
 Whose needs
• Disruptive innovation: describes innovations
that improve a product of service in ways that
the market does not expect. Also when the
rules of the game change dramatically in the
marketplace.
• Examples
YouTube, portable memory, wireless internet
access, cellphones, mp3, low-cost airlines
• Disruptive innovation, a term of art coined by
Clayton Christensen, describes a process by
which a product or service takes root initially
in simple applications at the bottom of a
market and then relentlessly moves up
market, eventually displacing established
competitors
 Example
• In the airline industry, air carriers have added food,
baggage transfer, videos, games, drinks, and all sorts
of other services which come at a cost. Many
customers are happy to pay a price premium to
enjoy these additional services, but some customers
really just want to get from point A to point B and
would rather not pay a price premium for additional
services. 
• Therefore, this has created an opportunity for low-
cost air carriers to disrupt traditional air carriers.
 The role of ‘emerging markets’

There is a growing interest in what have been

termed ‘the bottom of the pyramid’ (BoP)
markets.
• 80% of the world’s population lived on
incomes below the poverty line
• High volume – low margin marketplace
• From 250 ml shampoo bottles to sachets
 Mass customization
• Mass customization is the ability to offer
highly configured bundles of non-price factors
configured to suit different market segments,
but to do this without incurring cost penalties
and the setting up of a trade-off of agility
versus prices.
•  
 Users as innovators

• Ideas of users + their frustrations with existing

solutions lead to experiment and prototyping
and create early versions of what eventually
become mainstream innovations.
• Lead users: importantly active and interested
users who are often well ahead of the market.
• One strategy around managing innovation is
thus to identify and engage with such lead users
to co-create innovative solutions.
• Perpetual beta: testing new software modules
across a community to get feedback and
development ideas.
 Extreme users
• An important variant that picks up on both the lead
user and the fringe needs concepts lies in the idea of
extreme environments as a source of innovation.
Users in the toughest environments may have needs
which by definition are at edge.
– Example India ATM based on biometrics in rural India
– In Kenya mobile phone is used to increase security
– Anti-lock braking system (ABS) preventing the wheels from
locking up (ceasing rotation) and avoiding uncontrolled
skidding. ABS was first developed for aircraft use 
 Watching others
• Innovation is essentially a competitive search
for new or different solutions. Imitation is a
viable and successful strategy for sourcing
innovation.
• Benchmarking: enterprises make structured
comparisons with others to try and identify
new ways of carrying out particular processes
or to explore new product of service concepts.
Southwest Airlines became most successful when it copied the pit-stop
techniques. . This reduced the turnaround times at airports.
 
 Recombinant innovation
• Recombinant innovation: transferring or
combining old ideas in new contexts.
• Edison famous invention factory
Rich innovation through: recruited teams with
diverse industrial and professional
backgrounds and thus bring very different
perspectives to the problem in hand.
• Very often original – breakthrough – ideas
come about through a process of what Artur
Koestler called bisociation – the bringing
together of apparently unrelated things which
can somehow be connected and yield an
interesting insight.
• Key message: Look to diversity to provide raw
materials which might be combined in
interesting ways – and realizing this makes the
search for unlikely bedfellows a useful
strategy.
• Nike fashionable shock-absorbing shoes-
combination of arts, health and fitness
industry
 Regulation
• Both restricts certain things and open up new
ways
– What programs we listen to
– What can or can’t be included in the ingredients
– Safety legislation
• New tax rules on cigarettes- restricts sales of
cigarettes, opens up new market of ‘fake
cigarettes’ and aids to quit smoking
• Deregulation may open up new innovation
space.
– Privatization of telecommunications led to rapid
growth in competition and high innovation rates
 Futures and forecasting
• Exploring alternatives
• Eg; Exxon and Shell exploring possibilities for
alternatives for oil and gas

34
 Accidents 

– Making adhesive resulted in ‘Post-it’ notes

• The secret is not so much recognizing that
such stimuli are available but rather in
creating the conditions under which they can
be noticed and acted upon.
– 9/11 provides a huge stimulus to innovate in areas
like security, fire safety and evacuation
 How to search
• In the past, internal R&D was a valuable strategic asset
• Cisco, deployed a very different strategy in its battle for
innovation leadership. Whatever technology the company
needed, it acquired from the outside, usually by partnering
or investing in promising startups (some, ironically, founded
by ex-Lucent veterans). In this way, Cisco kept up with the
R&D output of perhaps the world’s finest industrial R&D
organization, all without conducting much research of its
own.
• why is internal R&D no longer the strategic asset it once
was?
 Closed system
• In the old model of closed innovation, firms
adhered to the following philosophy: Successful
innovation requires control. In other words,
companies must generate their own ideas that
they would then develop, manufacture,
market, distribute and service themselves (see
“The Closed Innovation Model”). This approach
calls for self-reliance: If you want something
done right, you’ve got to do it yourself.
• Toward the end of the 20th century, though, a number of
factors combined to erode the underpinnings of closed
innovation.
• Perhaps chief among these factors was the dramatic rise
in the number and mobility of knowledge workers,
making it increasingly difficult for companies to control
their proprietary ideas and expertise. Another important
factor was the growing availability of private venture
capital, which has helped to finance new firms and their
efforts to commercialize ideas that have spilled outside
the silos of corporate research labs.
 Open Innovation
• In this new model of open innovation, firms
commercialize external (as well as internal)
ideas by deploying outside (as well as in-
house) pathways to the market. Specifically,
companies can commercialize internal ideas
through channels outside of their current
businesses in order to generate value for the
organization
 Example
• The classic example is Xerox and its Palo Alto Research
Center (PARC). Researchers there developed numerous
computer hardware and software technologies —
Ethernet and the graphical user interface (GUI) are two
such examples. However, these inventions were not
viewed as promising businesses for Xerox, which was
focused on high-speed copiers and printers. In other
words, the technologies were false negatives (Projects
that initially seem to lack promise but turn out to be
surprisingly valuable)
• They languished inside Xerox, only to be
commercialized by other companies that, in
the process, reaped tremendous benefits.
Apple Computer, for instance, exploited the
GUI in its Macintosh operating system while
Microsoft did the same in its Windows
operating system.
• Consider Procter & Gamble, the consumer-product
giant with a long and proud tradition of in-house
science behind its many leading brands. P&G has
recently changed its approach to innovation,
extending its internal R&D to the outside world
through the slogan “Connect & Develop.” The
company has created the position of director of
external innovation and has set a goal of sourcing
50% of its innovations from outside the company in
five years.
•  Recently, P&G scored a huge success with
SpinBrush, an electric toothbrush that runs on
batteries and sells for $5. The idea for the
product, which has quickly become the best-
selling toothbrush in the United States, came
not from P&G’s labs but from four
entrepreneurs in Cleveland.
A map of innovation search space
© 2009 John Wiley & Sons Ltd. 47
www.wileyeurope.com/college/tidd
 Zone 1
• Zone 1 is essentially the ‘exploit’ domain in
innovation literature. It presumes a stable and
shared frame – ‘business model’ / architecture
– within which adaptive and incremental
development takes place.
 Zone 2
• Zone 2 involves exploration into new territory, pushing
the frontiers of what is known by deploying different
search techniques. But this is still taking place within the
same basic cognitive frame – ‘business model as usual’.
• These first two zones represent familiar territory in
discussion of exploit/explore in innovation selection. But
arguably they take place within an accepted frame, a
cognitive scheme, a way of seeing the world which
essentially filters and shapes perceptions of what is
relevant and important.
 Zone 3
• Zone 3 is essentially associated with
reframing. It involves searching and selecting
from a space where alternative architectures
are generated, exploring different
permutations and combinations of elements
in the environment. This process – essentially
entrepreneurial – is risky and often results in
failure but can also lead to emergence of new
and powerful alternative models.
 Zone 4
• Zone 4 is where new-to-the-world innovation
takes place – and represents the ‘edge of
chaos’ complex environment where such
innovation emerges as a product of a process
of co-evolution.
• Complex systems in which there is an extensive
interaction and where what happens in one
part of the system will affect others
For Self Reading
 A framework for looking at innovation
sources
• The key challenge for innovation management
is how to make sense of the potential input
and to do so with often limited resources
• Innovations tend to resolve into vectors –
combinations of the two core principles. These
direct our attention in two complementary
directions – creating possibilities and
identifying and working with needs.
• There is a risk in focusing on either of pure
forms of push or pull sources.
• All eggs in one basket: push/pull
• We risk at being excellent inventions but
without turning our ideas into successful
innovations
Incremental or radical innovation
• Most of the time innovation is about
exploiting and elaborating, creating variations
on a theme within an established technical,
market or regulatory trajectory.
• Occasionally there is breakthrough which
creates a new trajectory
• Timing – at different stages in the product of
industry life cycle the emphasis may be more
or less on push or pull.
• Mature industries – focus on pull
• Diffusion – the adoption and elaboration of
innovation over time. Understanding diffusion
processes is important because it helps
understand where and when different kinds of
triggers are picked up.