Innovation Management Overview

Innovation

• Innovation is the combination of invention and commercialization, creating value from ideas. A broad definition describes it as a "new or changed entity" that redistributes value.
• Disruptive innovation creates new markets or significantly changes existing ones. It often initially performs below mainstream products but finds value in overlooked segments.
• Radical innovation represents major novelty, reshaping frameworks and impacting industries or societal systems.
• Breakthrough innovation focuses on market disruption, emerging from simpler, improving technologies, while significant technological advancement is often a hallmark of breakthrough innovation; this is not always a requirement. The advancement may not necessarily disrupt markets.

### Innovation Management

• A strategy is a long-term plan for an organization to achieve its goals.
• Innovation management becomes strategic when it is integrated into a business strategy, focusing on long-term growth, competitive advantage, and value creation.

Sustainable Development Goals (SDGs)

• The 17 SDGs are a set of goals created by the UN for the year 2030. These goals address global challenges, and include: (in no specific order) poverty, hunger, health, education, gender equality, clean water, energy, decent work, economic growth, industry & infrastructure, reducing inequalities, sustainable cities & communities, responsible consumption & production, climate action, life below water, life on land, peace, justice, and strong institutions, partnerships for the goals.

Megatrends

• Global economic power shift
• Demographic change
• Urbanization
• Rise of technology
• Climate change and resource scarcity are the 5 biggest current megatrends.

Schumpeterian Creative Destruction

• Creative destruction is the process of innovation-driven economic growth. Outdated systems are replaced by new industries and technologies, which fundamentally alters market structures.

Innovation Diffusion Processes

• The "chasm" in innovation diffusion represents the critical gap between early adopters and the mainstream market. Products need to transition from niche acceptance to broad market adoption for mass market success.

New Product Development (NPD)

• Flaws of 1st and 2nd generation NPD models are that the first generation (technology push) fails to address consumer needs, resulting in low predictability and sustainability, and the second generation fails by relying only on consumer expressed needs, missing the opportunity for radical innovation.

Open Innovation

• Open innovation is a method that uses external and internal knowledge to drive innovation. It reduces risks and time to market while fostering collaboration with external partners.

Globalization Effects on Innovation

• Globalization accelerates innovation cycles. This also increases the need to balance global standardization with local customization. Wider access to resources and talent, with increasing complexity in adapting to global regulatory environments is also a key factor.

R&D Location Decisions

• R&D site selection involves balancing various trade-offs: access to skilled talent, proximity to key markets, cost considerations, geopolitical stability, and collaboration opportunities. Key factors that need consideration are the market potential, cost structures, talent availability, regulatory environment, and cultural/logistical factors.

Centralized vs. Decentralized R&D

• Centralized R&D has the benefits of easier coordination, alignment with corporate strategy, and increased economies of scale. However, it has limitations in responsiveness to local market needs and vulnerability to geopolitical risks.
• Decentralized R&D allows for quick responsiveness to regional market demands and local expertise, but coordination challenges and duplication risks are common.

Global Innovation Index (GII)

• The Global Innovation Index (GII) measures a country’s ability to innovate. It consists of two pillars: Input and Output. Input pillar considers resources invested in innovation (R&D spending, human capital)
• The output pillar considers the outcomes of innovation (patents, exports).

Digital World Challenges

• Rapid technological changes (e.g., AI, blockchain)
• Shifting customer preferences
• Market disruptions from competitors
• Evolving regulations in cybersecurity and data protection

Next-Gen Technologies

• Enhanced performance (e.g., faster processing, more efficient energy)
• Better adaptability (e.g., machine learning, AI)
• Cost reduction and scalability (e.g., cloud computing, automation)
• Advanced connectivity and integration (e.g., IoT)

Dominant Designs

• Dominant designs emerge through experimentation and selection by the market. The most viable designs based on performance and customer acceptance become industry benchmarks and undergo incremental improvement later on.
• Technological discontinuities often trigger a ferment phase of experimentation with various designs, which leads to the selection of a dominant design.

Technological Market Segmentation

• Companies use strategies like pushing towards high-end customers with cutting-edge technologies or staying with existing customers for consistent upgrades in established markets. A third strategy involves adapting to unmet customer needs, identifying new markets, and creating new categories.

Market Entry Strategies

• First-to-market isn't always the best strategy, as it comes with high risks, costs, and uncertainty. Established market strategies, adopting proven strategies, and learning from pioneers' mistakes are advantages for followers.

Business Model Typology

• Pioneers (first-to-market) are innovators who introduce new products and services.
• Early followers who imitate or improve pioneer products.
• Late entrants are those who enter the market once the risks and uncertainties are mitigated. This often centers on niche markets or price-based competitiveness.

Business Model Canvas (BMC)

• A business model canvas is a visual representation of a business's core components. It details aspects such as product, value proposition, customer relationships, customer segments, channels, key partners, key activities, key resources, cost structure, and revenue streams.

Magic Triangle of Business Models

• Value proposition: What value does the company deliver to customers?

• Value chain (How): How are the goods/services efficiently delivered?

• Revenue model: How does revenue generation occur? These elements must work together to establish a sustainable strategy.

Amit and Zott's Business Models

• Amit and Zott outline four business model design themes: innovation-focused (novelty-centered), streamlining processes (efficiency-centered), utilizing diverse resources for better value (complementarities-centered), and establishing strong customer relationships (lock-in model).

Organizational Knowledge Conversion

• Nonaka's knowledge conversion framework explains how tacit knowledge (implicit) is transformed into explicit knowledge, and vice-versa. Tacit knowledge is turned into explicit knowledge by socialization (sharing experiences), externalization (articulation), combination (integrating knowledge), and internalization (embedding knowledge).

Digital Transformation and Organizational Ambidexterity

• Digital means increasing ambidexterity by optimizing both exploration and exploitation of resources. Collaboration, agility (adaptation), and process optimization streamline the ability to respond to evolving market demands.

Embedding Innovation

• Ensuring innovation initiatives are aligned with a company's goals is essential for sustainable innovation. Key strategies include cultivating a learning environment, empowering employees, fostering internal and external collaboration, and protecting new insights.

Lean innovation framework

• The lean innovation framework is based on three principles: (1) doing the right thing (strategic priorities/customer needs), (2) doing it right (efficient/consistent execution), and (3) doing it better (continuous improvement, feedback loops, and learning routines).

Creating an Inventor Culture

• The ANIMATE model (agile implementation, nurture and stimulate creativity, inspire, motivate, align teams, transparency, empowerment) promotes an inventor culture that supports innovation.

Structural and Human Agility

• Structural agility is the ability of an organization to adapt structures, and processes. Human agility focuses on employee adaptability, learning, and innovation in responding to changes. Both are crucial for a company's optimal growth.

New Work Practices

• Implementing new work practices, like remote work, flexible hours, and digital tools, helps firms adapt, increase their agility, boost productivity, attract talent, and foster innovation in dynamic markets.

This quiz covers the concepts of innovation and its management, including types such as disruptive and radical innovation. Explore how these concepts transform markets and how businesses can strategically integrate innovation for long-term growth.