Applied Topics in Marketing: Innovation 2024 PDF

Applied Topics in Marketing: INNOVATION 2024  Instructor Cátia Alves Room: 05.638, 5th floor Email: [email protected] Office hours: by appointment Research interests: creativity, consumer psychology, emotions ...

Applied Topics in Marketing: INNOVATION 2024  Instructor Cátia Alves Room: 05.638, 5th floor Email: [email protected] Office hours: by appointment Research interests: creativity, consumer psychology, emotions  Course Information 13.03.2024: 15:00 – 18:15 Session 1: Introduction and Basics of Innovation and NPD |HS15 Session 2: Success and Failure in Product Innovation & 20.03.2024: 15:00 – 18:15 NPD – Opportunity Identification, and Selection |HS15 10.04.2024: 15:00 – 18:15 Session 3: NPD – Concept Generation - Market Research|Remote Midterm: 17.04.2023 (15:00-16:30) |HS15 24.04.2024: 15:00 – 18:15 Session 4: NPD – Creativity and R&D|HS15 08.05.2024: 15:00 – 18:15 Session 5: NPD – Evaluation & Launch |HS15 Final Exam: 15.05.2024 (15:00-16:30) |HS15  Evaluation The evaluation criteria of the seminar are as follows: Participation: 10% Midterm: 45% Final Exam: 45% Participation - evaluation: Quality and frequency of students’ interventions. Students are encouraged to participate regularly and actively.  Resources Goldenberg, Jacob, Marzursky, David (2002). Creativity Crawford, Merle, Benedetto, Anthony (2014). New in Product Innovation. Cambridge University Press. Products Management. McGraw Hill Higher Education.  Photos on Moodle Upload your photo on your Moodle profile Why are you interested in this course? What do you expect?  Content Some of the topics covered: oWhat is innovation? oAre all innovations the same? oUnderstand why and when new products fail and others succeed o What are the main stages of the NPD process? oWho is involved? oWhat are the main tools that a company can use to develop new products? o How to get creative ideas? Why do we study Innovation and NPD?  Why do we study Innovation and NPD? o Importance of Innovations for the society Among all innovations, which one do you consider the most impactful/significant? 1439 (Johannes Gutenberg): Printing Press 1565 (Conrad Gessner): Pencil 1600 (Hans Lippershey): Telescope 1796 (Edward Jenner): Vaccine 1834 (Jacob Perkins): Fridge 1879 (Thomas Edison): Light bulb 1928 (Alexander Fleming): Penicillin/Antibiotics 1989 (Tim Berners Lee): World Wide Web 1995 (Charles Hull): 3D Printing  Why do we study Innovation and NPD? o New Products can be a big advantage for companies o The New Products Process is exceedingly difficult  Motivation Lighthouse of Alexandria Construction: 246-286 BC in Egypt Sponsored: General Ptolemy I Soter Stamp with his name (recognition) Architect: Sostratus of Cnidus Credit and recognition  Motivation Lighthouse of Alexandria The architect wrote the name of Ptolemy I on the exterior of the lighthouse AND Engraved his on the stone of an interior layer The forces of nature (erosion by sun/wind/salt) removed the external layer along with the name of Ptolemy I, and the architect’s name appeared in the same place. Legend says that the heirs enjoyed the idea so much that they did not efface the architect’s name.  Idea source/motivation for innovation o Need spotting – A need is identified before the new idea/product I need a chair to use on the beach → chair without legs o Solution spotting – A new idea/product is identified before the need A particular oil seems to have specific features and might be useful → vaseline o Mental invention – Someone decides that he/she wants to innovate Maybe we could create a solid shampoo → eco-friendly, travel-friendly o Market research for new products – A need is identified by marketing analysis Consumers say they want some that resemble meat without being meat → vegan option  Overview – Product Development New Products Process Product Innovation Charter (PIC) Product Portfolio Management  Overview – Product Development New Products Process Course structure Product Innovation Charter (PIC) Strategic-decisions Product Portfolio Management  New Products Process Phases: Phase 1: Opportunity Identification and Selection Phase 2: Concept Generation Phase 3: Concept/Project Evaluation Phase 4: Development Phase 5: Launch Note: Often each phase is a decision Go/No Go but it can be more flexible.  New Products Process What is the success rate after phase 5 (launching)?  New Products Process What is the success rate after phase 5 (launching)? ~ 60%  New Products Process Example Phase 1: Opportunity Identification and Selection Phase 2: Concept Generation Phase 3: Concept/Project Evaluation Phase 4: Development Phase 5: Launch  New Products Process Example Phase 1: Skim milk drinkers dislike the watered look of their beverage Phase 2: Concept Generation Phase 3: Concept/Project Evaluation Phase 4: Development Phase 5: Launch  New Products Process Example Phase 1: Skim milk drinkers dislike the watered look of their beverage Phase 2: 1) Change the color, 2) Chemical method to cloudiness of the drink Phase 3: Concept/Project Evaluation Phase 4: Development Phase 5: Launch  New Products Process Example Phase 1: Skim milk drinkers dislike the watered look of their beverage Phase 2: 1) Change the color, 2) Chemical method to cloudiness of the drink Phase 3: Do consumers like our prototype? (clear define benefits/features) Phase 4: Development Phase 5: Launch  New Products Process Example Phase 1: Skim milk drinkers dislike the watered look of their beverage Phase 2: 1) Change the color, 2) Chemical method to cloudiness of the drink Phase 3: Do consumers like our prototype? (clear define benefits/features) Phase 4: Consumable (ready) product, pilot production line, field testing Phase 5: Launch  New Products Process Example Phase 1: Skim milk drinkers dislike the watered look of their beverage Phase 2: 1) Change the color, 2) Chemical method to cloudiness of the drink Phase 3: Do consumers like our prototype? (clear define benefits/features) Phase 4: Consumable (ready) product, pilot production line, field testing Phase 5: Scale up process, alignment with company’s objectives  Class 1 Basics of Innovation and New Product Development 2024  What is ‘Innovation’? “I didn’t fail ten thousand times. I successfully eliminated, ten thousand times, materials and combinations which wouldn’t work”  What is ‘Innovation’? “I didn’t fail ten thousand times. I successfully eliminated, ten thousand times, materials and combinations which wouldn’t work” Thomas Edison American inventor who, singly or jointly, held 1,093 patents. Most famous invention: light bulb.  What is ‘Innovation’? Edison‘s guests were always complaining that the gate to his house opened with great difficulty, and they were required to exert great force to open it. People laugh at him… the clever inventor cannot find a way to fix his gate. At the end of his days, he revealed: The gate was connected to a water pump, and anyone who opened the gate unknowingly pumped up water to fill Edison‘s private swimming pool. Is this an innovation? What is ‘Innovation’?  What is ‘Innovation’? Innovation is the entire process by which an organization generates creative new ideas and converts them into novel, useful, and viable commercial products, services, and business practices for potential economic gain  What is ‘Innovation’? Edison‘s guests were always complaining that the gate to his house opened with great difficulty, and they were required to exert great force to open it. People laugh at him… the clever inventor cannot find a way to fix his gate. At the end of his days, he revealed: The gate was connected to a water pump, and anyone who opened the gate unknowingly pumped up water to fill Edison‘s private swimming pool. It is an invention!  What is ‘Innovation’? Innovation is the entire process by which an organization generates creative new ideas and converts them into novel, useful, and viable commercial products, services, and business practices for potential economic gain It differs from invention. An invention is not necessarily commercialized or useful.  What can be an innovation? Can you enumerate different types?  What can be an innovation? Products/goods Services Business Models Process Complex or simple: self-driving cars, new movies, new ice-cream flavors, etc The degree/level of innovation changes  Product vs. Process Innovation Process Usually applies to functions (manufacturing or distribution process) Product Usually applies to the total operation by which a new product is created and marketed (output of an organization)  Product vs. Process Innovation Innovation: development of a more efficient distribution process. Is it a process or product innovation? Global shipping and logistics company  Product vs. Process Innovation Innovation: development of a more efficient distribution process. Is it a process or product innovation? Global shipping and Product innovation for UPS logistics company Process innovation for its customer  Product vs. Process Innovation Process Usually applies to functions (manufacturing or distribution process) Product Usually applies to the total operation by which a new product is created and marketed (output of an organization) Why is Product Innovation so important?  Why is Product Innovation so important? Replace products at the end of their life cycle Critical for the future of a company! Innovativeness as a competitive advantage (be better, be different, etc) Changing customer needs - Reaction to competitive action or changes in customer lifestyles Why is Product Innovation so important? New product development is important But difficult!  Barriers to innovation High costs (especially for the ‘extreme’ innovations) Long and difficult process (customer knowledge, flexibility, rigor, etc) Fear of failure 100 ideas 70 ideas – initial screening 50 ideas – concept development 30 ideas – testing 25 ideas – commercialized 60% 15 ideas – successes  Barriers to innovation No innovation incentives to employees Monopoly position Unfamiliar with the new product process (learn by doing) The Best The Rest (top 25% of firms) (bottom 75% of firms) % Successes 82% 53% % Profit from new products 49% 25% Nr of ideas per successful product 5 11 Coffee-break 20 minutes  Best companies at New Product Process More effective NPP: + time, - projects Employ formal processes for idea generation and concept development More research tools: creativity sessions, concept tests, customer insights, etc More reliance on social media and online communities Involve senior management in decision making Adopt an open-innovation approach  What is this concept? OPEN INNOVATION  Open Innovation The use of purposive inflows of knowledge to accelerate internal innovation and outflows of knowledge to expand the markets for external use of innovation (Henry Chesbrough, Berkeley)  Open Innovation The use of purposive inflows of knowledge to accelerate internal innovation and outflows of knowledge to expand the markets for external use of innovation (Henry Chesbrough, Berkeley) It involves: ‘Outside in’ (+ common): external technologies/ideas enter the company ‘Inside out’: under-utilized technologies/ideas are incorporated into others innovation processes Organizational learning The Exploration-Exploitation Paradox Organizational learning The Exploration-Exploitation Paradox Adaptive Processes: 1) Explore new possibilities 2) Exploitation of old certainties  The Exploration-Exploitation Paradox Exploration Exploitation new information existing information creativity efficiency experiment selection Balance uncertain, risky certain, predictable long-term results short-term results  Types of Product Innovation #1 INCREMENTAL INNOVATIONS RADICAL INNOVATIONS  Types of Product Innovation #1 INCREMENTAL INNOVATIONS RADICAL INNOVATIONS Minor changes to existing practice and Major changes to existing practices and behavior → feature improvement behavior → new system o Based on old technology o New technology o Dominant design unchanged o Leads to a new dominant design o Rational choice/move (necessity) o R&D or by chance  Incremental Innovations Most of the innovations are incremental innovations Radical Innovations “If I had asked people what they wanted, they would have said faster horses” (Henry Ford)  Types of Product Innovation #1 Would companies need different resources to deal with incremental and radical innovations? Why?  Types of Product Innovation #2 COMPETENCE-ENHANCING COMPETENCE-DESTROYING An innovation that builds on existing An innovation that renders obsolete knowledge and skills existing knowledge and skills  Types of Product Innovation #2 COMPETENCE-ENHANCING COMPETENCE-DESTROYING An innovation that builds on existing An innovation that renders obsolete knowledge and skills existing knowledge and skills Known for its electronic Known for its chemical competence photography competence  Types of Product Innovation #3 ARCHITECTURAL INNOVATIONS COMPONENT INNOVATIONS Changes the overall design of a Changes in one or more components but system or the way its components does not significantly affect the overall interact with each other configuration of the system How do innovations evolve? The history of Aviation  Performance Reliability, speed, altitude Effort Technological dynamics  Performance Reliability, speed, altitude Effort Technological dynamics  Technological S-Curve Physical/natural limit Reliability, speed, altitude Performance Early stage; low R&D INTRODUCTION productivity, failures, need to experiment, building up knowledge Time/Effort  Technological S-Curve Physical/natural limit Reliability, speed, altitude Performance Riding up, more firms working on it, becomes standard, narrower challenges, building on prior experience GROWTH Time/Effort  Technological S-Curve Physical/natural limit Reliability, speed, altitude Dominant design Performance A product design Riding up, more that is adopted by firms working on it, the majority of becomes standard, producers, typically narrower challenges, creating a stable building on prior architecture on experience which the industry can focus its efforts GROWTH Time/Effort  Technological S-Curve Physical/natural limit Reliability, speed, altitude More competition, same demand. The cost of MATURITY Performance each marginal improvement increases. Time/Effort  Adopter categories S-curves: explained by different categories of people that adopt the innovation at different times Both technology performance and market performance show an S-shape curve Adopter categories Who do you think has more access to financial resources?  Technological discontinuity Product Performance Third Technology Second Technology First Technology Time or Emerging Effort  The technology cycle Era of Ferment Design Competition Substitution Technological Discontinuity Dominant Design Selected Era of Incremental Change Elaboration of Dominant Design Limitations of S-curve Model as a Predictive Tool o The s-curve shape is not set in stone o Hard to predict when a technology reaches the performance peak o Firms have individual S-curves o The shape of the s-curve can be influenced by exogenous shocks o market changes (e.g., customers’ needs change) o regulation changes (e.g., emissions) PREPARATION FOR NEXT CLASS Class discussion: Please read about Kodak case  Extra readings Schilling, M. (2010). Industry Dynamics of Technological Innovation, Chapter 3, page 50-65 Christensen C. M. (1992). Exploring the limits of the technology S-Curve. Production and Operations Management, Part 1, 1 (4), 334-357. See you next week!