Innovation, Organization and Markets

What is Innovation and Types of Innovation

Course Scope and Mission

The intention of this course is to train you as potential entrepreneurs, leaders, and managers to adopt a mindset of being innovative. This will be accomplished by providing an overview of innovation history, concepts, key issues; methods for promoting creativity and innovation for oneself and for the firm; and tools for evaluating innovative opportunities.
2

Course Learning Objectives

1. 2. 3. 4. 5. 6. 7. 8. 9. Why innovate? Types of innovations Innovation trajectories and diffusion / adoption How to be creative and innovative Adopt characteristics / competencies necessary for innovation for personal self and organization Spotting opportunities and evaluating them Innovation strategies Implementing innovation and moving to market Sources of innovation

Course Outline
What is Innovation and Types of Innovation
Incremental vs Radical, Entrepreneurial vs Strategic Architectural, Component or modular, Business model innovation, Technological (product/process), Service (process), Societal, Financial, etc., e-Innovation

Innovation Trajectories and Diffusion

Technology S-Curve, Adoption Curve

Creativity and Idea Generation

Convergent vs Divergent thinking, Left vs Right brain Brainstorming, mind or concept mapping, Catchball, Delphi discussions, model-making, Personal enrichment, Organizational enrichment

Course Outline
Recognizing and Evaluating Opportunities
Opportunity identification, Decision to act or keep looking elsewhere

Innovation Strategies
First movers vs Followers, Imitation, Alliances, Technology and Innovation Strategy

Moving to Market
Idea funnel, Stage-gate systems, Financial issues

Sources of Innovation
Individual, Organizational, Market (customers) National Innovation Systems

Discussion
Entrepreneurs: Angels or Villains? Success: Social standing? Self-esteem? Artistic excellence? Financial gain? Control over ones destiny? Power / Wealth Hungry? Fame Hungry? Want to leave a mark on society? Good or bad, they make a difference
6

ENTREPRENEURSHIP : AN EVOLVING CONCEPT

Most of what you hear about entrepreneurship is all wrong. Its not magic; its not mysterious; and it has nothing to do with genes. Its a discipline and, like any discipline, it can be learned.
Peter F. Drucker
Innovation and Entrepreneurship

KNOWLEDGE-BASED ECONOMY
What does Bill Gates own ? No land, no gold, no oil, no buildings, no machines. What he does is that he controls knowledge, which makes him the wealthiest person in the world. Lester Thurow

ENTREPRENEURSHIP & INNOVATION

The key is not simply to study the highestprofile or most successful entrepreneurs. These are not presented as elite species. Famous entrepreneurs are the most visible tip of an iceberg of innovative and creative people. Responsible for Economic & Social Regeneration (e.g. Sir James Dysons bladeless fans & Nicholas Negroponte: laptop for every child). ttp://www.ted.com/talks/nicholas_negroponte_on_one_laptop_per_child.html
http://www.dyson.com/store/fans.asp

ENTREPRENEURSHIP & INNOVATION

Enterprising behavior :
Creativity => Pursuit of Opportunity => Innovation => Development (Action)

ENTERPRISE: used for large companies

ENTREPRENEURSHIP & INNOVATION

Enterprise embraces many diverse themes (Rowe & Marriott, 2006):
Entrepreneurship (classical definition), starting your own company and becoming self-employed; Intrapraneurship, being and entrepreneur in an existing organization; Being innovative in exploiting personal and organization opportunities, by adopting a particular approach to work, study or life in general; Being enterprising and becoming more independent and selfreliant throughout life, by gaining the necessary knowledge, skills and attitudes; People with enterprising behavior introduce new perspectives and have the self-confidence to back their judgment with action.
11

Meaning of Entrepreneur
French verb entreprendre means to undertake Entrepreneur: A person who habitually creates and innovates to build something of recognized value around perceived opportunities. (Bolton & Thompson,
2001)

1 2

Meaning of Entrepreneurship
Entrepreneurship is based on purposeful and systematic innovation. It includes not only the independent businessman but also company directors and managers who actually carry out innovative functions. (Schumpeter, 1939) (enterprise capability) the capacity to handle uncertainty and respond positively to change, to create and implement new ideas and ways of doing things, to make reasonable risk/reward assessments and act upon them in ones personal and working life. (Davies, 2002)
1 3

Why Entrepreneurship?
Economic Development => Per Capita Income Increase Entrepreneurship Cause => Economy Effect Classical: Labour, Land and Capital Today: Labour, Technology, and Capital

INNOVATION

1 4

Why Entrepreneurs & Innovation?

Entrepreneurship = f (Entrepreneur) 1. Individuals who make a significant difference.
People fall into three categories: 1. Those who make things happen. 2. Those who watch things happened 3. Those who are left to ask what did happen? To be

successful, you need to be a person who makes things happen.. James Lovell

2. Entrepreneurs are creative and innovative.

They disturb markets and can challenge the large established businesses.

The golden rule is that there are no rules. (Paul Barret) The best way to forecast the future is to . create it! (Peter Drucker)
1 5

Why Entrepreneurs & Innovation?

Innovation Talent of the entrepreneur to turn ideas into value-added reality. Innovation: builds on creativity when something new, tangible and value-creating is developed from the ideas. is the process by which entrepreneurs convert opportunities into marketable ideas. is the means by which Entrepreneurs become catalysts for change.
16

Entrepreneur & Entrepreneurship

Entrepreneur Person Organizer Innovator Risk-bearer Motivated Creator Visualiser Leader Entrepreneurship Process Organization Innovation Risk-bearing Motivator Creation Vision Leadership
1 7

Meaning of Innovation
Latin root nova means new or innovare which means to renew, to make new, or to alter Introduction of a new thing or method or process Invention plus exploitation (Roberts of MIT) Innovation is the embodiment, combination, or synthesis of knowledge in original, relevant, valued new products, processes, or services. (HBS, 2003)

1 8

Invention is not Innovation

According to Economist Schumpeter (1883-1950, the prophet of innovation), the first to distinguish b/w invention and innovation: Invention is a new combination of pre-existing knowledge to produce an artifact while Innovation is a more subtle concept
Not just an artifact but a process of arriving at a solution to a problem Usually involves organizational or even societal change And also some degree of acceptance by consumers i.e. a change that has diffused into the economy => PROCESS and OUTPUT

Usually invention is part of the process of innovation

1 9

Invention is not innovation

It is a serious mistake to treat an innovation as if it were a well-defined, homogenous thing that could be identified as entering the economy at a precise date or becoming available at a precise point []
The fact is that most important innovations go through drastic changes in their lifetimes changes that may, and often do, totally transform their economic significance. The subsequent improvements in an invention after its first introduction may be vastly more important, economically, than the initial availability of the invention in its original form-- (Kline and Rosenberg 1986: 283)
Kline, S., and Rosenberg, N, (1986) An Overview of Innovation, in R. Landau and N. Rosenberg (eds.) The Positive Sun Strategy: Harnessing Technology for Economic Growth, National Academy Press, 275-304

Some Types of Innovation

Entrepreneurial Innovation An opportunity for solving a problem in a novel way is identified and acted upon more or less immediately.
Often high risk try it and see approach usually small firms that are capable of responding quickly to a market opportunity

2 1

Some Types of Innovation

Strategic Innovation Organizations foster continuous innovation in their products and services in a more or less formalized way.
Addresses the task of restructuring the business for change And of nurturing a culture of innovation throughout the organization. Usually try to mimic entrepreneurial firms.
2 2

Entrepreneurial Innovation
DELL Example:
Organized around direct channels to market, lowcost but effective customer service, and products built from standard components; yet offering performance enhancement in modular increments for customers who require it. Therefore, an entrepreneurial startup successfully challenged the established industry giants with standard technology and an innovative business model.

=> Dell has 4 days average inventory (compared to 40 days for industry)
2 3

Some Types of Innovation

Incremental Innovations represent
minor improvements or changes to the elements of an existing product or organizational technologies and practices.

Require little new organizational knowledge, because they are

aligned with existing organizational skills and capabilities. exploit existing forms or technologies. E.g. Pentium III, IV (Narayanan, 2003, p. 72)
2 4

Some Types of Innovation

Radical Innovations represent
Revolutionary changes that depart from existing practices and technologies Typically not aligned with the organizations skills and capabilities Require BOTH component knowledge and component configuration knowledge.

E.g. Refrigerators vs ice blocks, transistor by Bell labs, digital cameras vs film cameras, DVD vs VHS
(Narayanan, 2003, p. 72)

2 5

Some Types of Innovation

Radical Innovations upset the organizations or the industrys existing business model Displaces existing technologies and precipitates the decline of organizations whose business models are based on them. Breakthrough / discontinuous / disruptive => create new markets (CREATIVE DESTRUCTION) Period of technological ferment

26

Some Types of Innovation

Architectural Innovation Use existing organizational practices and technologies but reconfigure them in new or different ways. Requires new organizational knowledge of how existing components are to be configured into a new system. No new knowledge is required about the components themselves. E.g. Miniaturization: Tape recorder and walkman, pedestal vs table fan (primary components remain the same) (Narayanan, 2003, p. 72)
2 7

Some Types of Innovation

Component or Modular Innovation Significant changes in elements of products, organizational practices, and technologies
without significant changes to the existing configuration of the elements.

Requires an understanding of the new components of the system. No new organizational knowledge concerning the configuration of these components is required. E.g. replace an analog device with a digital one, fuel injection vs carburator, oil vs air shocks
(Narayanan, 2003, p. 72)
2 8

Some Types of Innovation

Component Knowledge Changes

Minor

INCREMENTAL
Pentium III, IV

ARCHITECTURAL
Walkman

Novel

MODULAR
Air vs Oil

RADICAL
Transistors, Electric Cars

Existing

Novel
Narayanan, 2003, p.72 2
9

Component Configuration Changes

Some Types of Innovation

Business Model innovation involves changing the way business is done in terms of capturing value for customers (needs) and for the firm (revenue).
e.g. Compaq vs. Dell Grameen vs Citibank Starbucks vs Coffee shops

(http://www.businesspme.com/uk/articles/production/82/Types-of-innovation.html)

3 0

Some Types of Innovation

Entrepreneurial Innovations Organizational innovation involves the creation or alteration of business structures, practices, and models. Marketing innovation is the development of new marketing methods with improvement in product design or packaging, product promotion or pricing. Process innovation involves the implementation of a new or significantly improved production or delivery method.
(http://www.businesspme.com/uk/articles/production/82/Types-of-innovation.html)
3 1

Some Types of Innovation

Entrepreneurial Innovations Product innovation, involves the introduction of a new good or service that is new or substantially improved.
This might include improvements in functional characteristics, technical abilities, ease of use, or any other dimension.

Service innovation, is similar to product innovation except that the innovation relates to services rather than to products. Supply chain innovation where innovations occur in the sourcing of input products from suppliers and the delivery of output products to customers
(http://www.businesspme.com/uk/articles/production/82/Types-of-innovation.html)
3 2

Some Types of Innovation

Entrepreneurial Innovations Financial innovation occurs as new financial products and services are developed, combining basic financial attributes (risk-sharing, liquidity, credit) in innovative ways, as well as exploiting the weaknesses of tax law.
(http://www.businesspme.com/uk/articles/production/82/Types-ofinnovation.html)

3 3

Some Types of Innovation

e-Innovation is the strategically planned process for encouraging and expediting innovation in the real-time, distributed, and tightly networked marketplace. e stands for electronic/computer mediated networks to encourage distributed and collaborative innovation. Adheres to philosophy of proactively and creatively responding to continuous change. e-Innovation is about
New product development and also organization-wide change Culture and processes to develop new products and services explore new ways of marketing and new routes to market
3 4

Our Education System

Making Winners Losers; And Losers Winners!

3 5

Employers are a new phenomenon

Not enough jobs out there Why more employees than entrepreneurs?
Because Schools train young people to become employees.

Parents say: Go to school so you can get a good job. NOT Go to school to become an entrepreneur or an innovator. Employer a new phenomenon. Farmers, trades-people
e.g. Shahid Khan (Farmer), Mian Mansha (MCB), Haji Bashir (Sitara Textile), Aamir Adnan (Fashion Designer) and others
36

Employers are a new phenomenon

From Employee to Entrepreneur / Innovator clash of philosophies: Freedom vs Security Inversely Proportional.
Motivation: ??? Motivation: FEAR Of failing class Of good job Of Promotion Of Status

37

Employers are a new phenomenon

Industrial Age needed employees. Europe adopted Prussian Education. Stated purpose: Produce soldiers and employees (or workers). Successful Employees:
Need to know the right answers or else! Are specialists, i.e. know a lot about a little. Cup of knowledge must be full.

Successful Entrepreneurs / Innovators:

Are Generalists Know a little about a lot. Cup of knowledge is always empty. (Must ALWAYS be learning) A True Entrepreneur and Innovator has no Graduation day!

38

Employers are a new phenomenon

Despite being enterprising people, people do not always pursue entrepreneurship / innovation. So what prevents them from
Expressing their creativity? Following their hunches? Taking a little bit more risk? Developing enterprise skills?

Do some cultures and environments inhibit enterprise? Why?

3 9

The Well of Talent

Followers
Operational Managers

Enterprising Managers
Project Managers Leaders Entrepreneurs Inventors

4 0

Our Education System

The inventor talent is most deeply buried and least brought to the surface in Pakistan. The Pakistani traditional education produces followers. We educate people to work for somebody else and equip them to be employees rather than employers. Between the inventor and follower are the managers. As people go up the hierarchy in the organization they become managers and leaders even if they do not have the talent to do so. Unfortunately, all this time we are putting committed followers into a leadership role.
It is a never ending cycle as Pakistanis look to abroad for their solutions!
4 1

Our Education System contd.

Most innovators and entrepreneurs are up against the odds as no one is looking for them; they are literally fighting to be recognized. So, if we dig down to tap to the pool of innovators and entrepreneurs, we will get a pressure of inventors and entrepreneurial talent!

4 2

Back to our roots

It is easy to dissociate yourself from this group however, many of us are more enterprising than we realize, and this spark lies dormant just waiting for the opportunity to show itself. (Rowe & Marriott, 2006)

43

One of Your Rights

If we fail to recognize someones strengths, it becomes deflating and stressful for the individual and a waste of resources. Individually we are all capable of HIGH achievement in some area of activity. WE CAN IDENTIFY THIS ACTIVITY.

4 4

One of Your Rights contd.

The time has come to broaden our notion of the spectrum of talents. The single most important contribution education can make to a childs development is to help him towards a field where his talents best suit him and where he feels competent and satisfied. We should spend less time ranking children and more time helping them to identify their talents and then helping them to cultivate those.
(Howard Gardener, Harvard Business School , in Goleman 1996)

4 5

Conclusion
If you think you can, you can. If you think you cant, youre right.
(Henry Ford)

4 6