INNOVATION AND COMMERCIALIZATION

Learning Outcomes

LO1. Explain the context for innovation and determine the difference between invention
and innovation.

LO2. Explain the different types of innovation.

LO3. Discuss the process required to commercialise innovation.

LO4. Evaluate the range of methods for protecting ideas and understand their
advantages and disadvantages
Traditional Ideas Funnel
An innovation funnel is used to describe the steps
that take place in developing a process or product.
 Innovation Funnel
• Decision Support Tool

• Innovation can be understood as a funnel of ideas

• The funnel focuses on how we manage ideas internally

- Lots of ideas enter the funnel

- A few exit as new products

- The rest are weeded out

• The aim of any product or process development project is to take an idea

from concept to reality

• This can be done by converging the idea to a specific product that can
meet a market need in an economical, manufacturable form
Interactive model of innovation- Modern Business View
Product Offering and Innovation Strategies

• Marketing contributes to and defines offering and innovation strategies in

two main ways:
- It helps the firm develop innovative offerings by collecting customer
input and forecasting customer and market trends, so that the firm can
understand the trade-offs among potential product attributes

- Marketing is responsible for launching the new offering to customers

to generate sales with acceptable profit levels

• Many good products fail to achieve their set financial objectives due to poor
product launches

• Extensive efforts go in to test marketing and understanding the factors that

will influence whether customers adopt a new offering and increase the
likelihood of a successful launch
 Developing Innovative Offerings
• Most firms rely on a stage-gate development process to increase
the speed of their offering development and enhance their
likelihood of success, while also reducing development costs

• A stage-gate model divides the development process into a series of

steps or stages

• Each project gets evaluated, on multiple dimensions, by

independent evaluators in each stage

• This method thus helps ensure effective development approaches

through several elements
Design Thinking
 What is Design Thinking?

Design Thinking is a design methodology that provides a solution-based approach to solving problems. It’s
extremely useful in tackling complex problems that are ill-defined or unknown, by understanding the human
needs involved, by re-framing the problem in human-centric ways, by creating many ideas in
brainstorming sessions, and by adopting a hands-on approach in prototyping and testing.
Understanding these five stages of Design Thinking will empower anyone to apply the Design Thinking
methods in order to solve complex problems that occur around us — in our companies, in our countries, and
even on the scale of our planet.

Design Thinking - https://www.youtube.com/watch?

v=bpVzgW8TUQ0&list=PLSbuwvHoXIcPuFJiXzIpHM3nt2QBWdaNx
 Steps to Design Thinking
Empathize - https://www.youtube.com/watch?v=q654-kmF3Pc&t=33s
Define - https://www.youtube.com/watch?v=TNAdanuvwtc
Ideate - https://www.youtube.com/watch?v=zbLxs6te5to
Prototype - https://www.youtube.com/watch?v=Q4MzT2MEDHA
Test - https://www.youtube.com/watch?v=UVEQCNM6X-A

How do you apply this in real life? Again to get perspective and simplify things
https://www.youtube.com/watch?v=jKNF-BYdG1Q
 Rise of Design Thinking in India
https://www.youtube.com/watch?v=VuedtXtyCjs

What elements of DESIGN THINKING was introduced here?

How did the person commercialize this product?
What did you understand from this presentation? How is this connected with
what you understood in your last powerpoint? Hint: “Jobs to be Done”
 Stage-Gate Design Review Process for Effective Product
Development
Concept and Definition Design and Development Validation and Production Final Audit

Initial
ideas

New Product

The concept and The design and development The audit stage consists of
definition stage consists stage consists of product and final product and product
of an initial screening of process design and development. assessments. It often
all potential ideas, Financial feasibility includes some reflection on
concept assessment, considerations also are pertinent, the previous steps.
project definition, and including testing of price points
feasibility assessment. and customer acceptance.
Example: Tata Motors (India)
• Tata Motors innovated the Nano, the cheapest car in the world, launched in 2009
at a sale price of just $2,000

• Most car manufacturers use a sedan chassis to begin building new models; Tata
challenged the conventional wisdom and started with a blueprint featuring a
scooter’s backbone

• The ultimate product cost less to build and thus was affordable in the Indian
market, but perhaps even more important, it turned out to be better suited to busy
Indian traffic patterns, which require quick and frequent maneuvering
 Managing the Innovation Funnel
Managing the innovation funnel involves
three very different tasks or challenges:

• To widen the mouth of the funnel - the

organisation must expand its knowledge
base and access to information in order to
increase the number of new product and
new process ideas

• To narrow the funnel neck - ideas

generated must be screened and resources
focused on the most attractive
opportunities

• To ensure that the selected projects deliver

on the objectives anticipated when the
project was approved
 Two Dominant Models of the Development Funnel
• These models are broad patterns showing
the kinds of choices companies have to make

• Model 1 is common in larger, technology

intensive companies who rely primarily on
their Research and Development department
to generate ideas for technologies, products
and processes

• Encouragement is given to generate many

more ideas than will be applied, and these
are then screened in various ways and at
various stages
 Forms of Innovation
• Product innovation: A product or service that is new or significantly improved. This
includes significant improvements in technical specifications, components and materials,
software in the product, user friendliness or other functional characteristics.

• Process innovation: A new or significantly improved production or delivery method. This

includes significant changes in techniques, equipment and/or software.

• Marketing innovation: A new marketing method involving significant changes in product

design or packaging, product placement, product promotion or pricing.

• Organisational innovation: A new organisational method in business practices,

workplace, organisation or external relations.

• Technological innovations : Based on specific technology, invention, or discovery…

• Social innovations: In critical historic periods more important than technological ones
(mail, educational system, social system, health care, …)
10 Types of Contemporary Innovations
 Classification of Innovation
• Incremental Innovation is the most common form
of innovation. It utilizes your existing technology
and increases value to the customer (features,
design changes, etc.) within your existing market.

• Disruptive innovation, also known as stealth

innovation, involves applying new technology or
processes to your company’s current market.

• Architectural innovation is simply taking the

lessons, skills and overall technology and applying
them within a different market.

• Radical innovation is what we think of mostly

when considering innovation. It gives birth to new
industries (or swallows existing ones) and involves
creating revolutionary technology.

Video: 4 types of innovation: https://www.youtube.com/watch?v=sl6Zp-z8NMo

Classification of Innovation Cont..
 Incremental Innovation
• Do what we do but better“ Refines and improves an existing
design, through improvements in the components

• However it is important to stress these are improvements

not changes, the components are not radically altered

• Christensen (1997) defines incremental innovation in terms

of: ‘A change that builds on a firm’s expertise in component
technology within an established architecture.’

• In the case of a washing machine, incremental innovation

would be case of offering a machine with a more powerful
motor to give faster spin speeds Incremental innovations
are the commonest

• Video: Incremental Innovation in Medicine:

https://www.youtube.com/watch?v=1K9eST2VY90
 Disruptive (Radical) Innovation
• „Do something different “Is about much more than
improvements to existing designs
Calls for a whole new design, ideally using new
components configured (i.e. integrated into the design) in a
new way

• In Henderson and Clark’s (1990) terms: ‘Radical innovation

establishes a new dominant design, and hence a new set of
core design concepts embodied in components that are
linked together in a new architecture.’

• Radical innovations are comparatively rare (about 10% of all

innovations) Radical innovation is often associated with the
introduction of a new technology

• Video: Radical Innovation Examples:

https://www.youtube.com/watch?v=7867drcOyXU
Examples of Radical Innovations
 Architectural Innovation
• Unit of Analysis: Manufactured product sold to an end user and
designed, engineered, and manufactured by a single product-
development

• Architectural innovation: Innovations that change the way in which

the components of a product are linked together, while leaving the
core design concepts (and thus the basic knowledge underlying the
components) untouched

• Architectural innovation destroys the usefulness of a firm's

architectural knowledge but preserves the usefulness of its
knowledge about the product's components

• A component is defined as a physically distinct portion of the

product that embodies a core design concept and performs a well-
defined function.
 Group Activity

• Take an example of radical innovation and analyse the impact it has had on society.
Take care to differentiate between the different groups within society that have been
affected.

• Video: How inventions change history:

https://www.youtube.com/watch?v=0SMNYivhGsc
 Strategies for Innovations
Open strategy/innovation is a process consisting of strategic activities that are
carried out at the inter-firm level. This involves sharing of strategic resources to
develop new ideas and information that can be brought back into the firm to
improve firm-level operational and competitive strategy processes
Chesbrough and Appleyard (2007) describe two key constructs
for open strategy:

• Open invention - the use of pooled knowledge from

different contributors to generate new ideas for products
and operational activities that firms are able to use to
create value, enabling firm-level strategy processes.
Includes open R&D and innovation processes.

• Open coordination - mechanisms that enable collaboration

between firms as they carry out open invention activities.
Also ensures that the value created is captured by
individual firms involved in the overall processes.
Strategy/Innovation Process Model

• Video: 4p's of innovation:

https://www.youtube.com/w
atch?v=sQ56RxeOiao
 Innovation Strategies
• Key question: How to create
and sustain strategic
advantage through
innovation?

• Organizing Framework or
Tool: 4Ps and exploring
innovation space Includes 4
main categories:
- Product innovation
- Process innovation
- Position innovation
- Paradigm innovation
 Innovation Radar

Changing Brand Offering W

where to sell Leverage HA Changing
to customers RE Develop new T what the firm
E the brand products or offers
H into new services Platform
W Networking markets Use
Interconnections
interchangeable
as a strength
designs

Presence Solutions
Change where Provide a total
products are sold solution

Organization Value capture

Change firm Change how
structure customers pay

Experience
Supply chain Change Changing who
Change supply customer the customer
Changing
how to sell to
chain Processes Customer interactions is

HO
Change
H

Change
OW

customers
operating customers to

W
processes target

Adapted from Sawhney, M., Wolcott, R.C., & Arroniz, I. (2006), “The 12 Different Ways for Companies to
Innovate,” MIT Sloan Management Review, Vol. 47 (3), p. 75.
 Product Innovation

• Innovation which include

product or service

• New electric car with

longer service life

• Innovation scissors which

are able to shape different
patterns, etc.
 Process Innovation

• Includes ways and changes in

which products and services
are delivered or created

• It is important part of every

structure in a company

• Focusing on the customers is

one of the most important
things in business

• Offering a longer warranty

period

• Available service for 24 hours

including weekends, etc.
 Position Innovation

Position-based innovations relate to

changes in how a specific process or
product is perceived and how the
products/services are used

Jeans – were developed for manual

workers as clothing materials and
now perceived as a fashion item
 Paradigm Innovation

• Change in the basic mental models a specific

company has
 The Development of Frugal Innovation
• Is the process of reducing the complexity and cost of a good and its production
• Usually this refers to removing nonessential features from a durable good, such as a car
or phone, in order to sell it in developing countries
• The concept has gained popularity in the South Asian region, particularly in India
Example: Tata Nano
 Frugal Innovation
How is it different from a standard innovation?
• The general practice is to innovate for the top of the pyramid as there lies the greatest purchasing
power

• Most practices in western markets relies on a ‘top down’ approach, targeting first the richer clientele:

• Use traditional (archaic) business and distribution models

Rely on abundant resources (non-sustainable)
Incur costly product design and development
Result in high manufacturing costs which makes many science and technology innovations
unaffordable for the bottom of the pyramid consumers
• In contrast, frugal innovation as is practised in emerging markets
• Purposefully targets the bottom and then makes its way up to other levels to benefit all users
• Frugal innovation responds to limitations in resources, whether financial, material or institutional, and
using a range of methods, turns these constraints into an advantage
 Conclusions
• Meta capabilities of strategic insight and resource fluidity were
important in the open strategy being delivered.

• Strategic insight (Doz & Kosonen, 2010, 2008) enables managers to

assess strategic issues in non-traditional ways and to develop new and
innovative solutions to manage them. Strategic insight is
operationalized through three actions: setting challenging strategic
objectives, experimenting with new ideas (R&D) and carrying out
strategic dialogue with different managers

• Resource fluidity (Doz & Kosonen, 2010, 2008) enables flexible

allocation of capital funds and people resources to finance and conduct
open strategy activities. Firm-level strategic resources are released from
functional control within the firm to be used to prepare resource pools
that can be shared with other firms in an open strategy process
 Reading and Case Studies

https://www.researchgate.net/publication/228254
434_Characteristics_of_Innovative_Companies_
A_Case_Study_of_Companies_in_Different_Sect
ors/link/59fc613d458515d070645bcd/download