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Chapter Twelve
McGraw-Hill/Irwin
Managing Innovation
Innovation
using new knowledge to transform organizational processes or create commercially viable products and services Latest technology, results of experiments, creative insights, competitive information
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Types of Innovation
Product innovation
Efforts to create product designs Applications of technology to develop new products for end users More common during early stages of an industrys life cycle Associated with differentiation strategies
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Types of Innovation
Process innovations
Improving efficiency of an organizational process Manufacturing systems and operations More likely to occur in later stages of an industrys life cycle Associated with cost leader strategies
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QUESTION
Radical innovations
A. Often result in quick profits B. Often represent technological breakthroughs C. Usually apply to products and processes simultaneously D. Usually cannot be patented
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Types of Innovation
Radical innovation
Fundamental changes and breakthroughs Evoke major departures from existing practices Can be highly disruptive Can transform or revolutionize a whole industry
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Types of Innovation
Incremental innovation
Enhance existing practices Small improvements in products and processes Evolutionary applications within existing paradigms
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Types of Innovation
Sustaining
innovations
extend sales in an existing market, usually by enabling new products or services to be sold at higher margins.
Disruptive
innovations
overturn markets by providing an altogether new approach to meeting customer needs.
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Challenges of Innovation
Seeds versus Weeds Experience versus Initiative Internal versus External staffing
Dilemma
Some innovation projects require considerable level of investment before merit can be determined
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Partnerships
Create dependencies and inhibit internal skills development Sharing benefits of innovation may create conflict
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Large-scale launch
Requires more resources Can effectively preempt a competitive response
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Radical innovation
Typically long term 10 years or more Often involves open-ended experimentation and timeconsuming mistakes
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Corporate Entrepreneurship
Corporate entrepreneurship
the creation of new value for a corporation, through investments that create either new sources of competitive advantage or renewal of the value proposition.
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Business Incubators
Incubators provide some or all of the
following functions
Funding Physical space Business services Mentoring Networking
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Stakeholders can
bring new ideas or venture opportunities to anyone in the organization Entrepreneurial culture, Product champions
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Entrepreneurial Culture
Culture of entrepreneurship
Search for venture opportunities permeates every part of the organization Strategic leaders and the culture generate a strong impetus to innovate, take risks and seek out new venture opportunities
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Product Champions
Product (or project) champions
Bring entrepreneurial ideas forward Identify what kind of market exists for the product or service Find resources to support the venture Promote the venture concept to upper management
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1.
2. 3.
Are the products or services offered by the venture accepted in the marketplace? Are the contributions of the venture to the corporations internal competencies and experience valuable? Is the venture able to sustain its basis of competitive advantage?
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Exit champions
individual working within a corporation who is willing to question the viability of a venture project by demanding hard evidence of venture success and challenging the belief system that carries a venture forward.
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QUESTION
On average, approximately what percentage of corporate ventures reaches profitability after six years?
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