Chapter 1 Notes PDF

Preview

Summary

lecture notes on chapter 1 in EIM...

Description

Chapter 1 Notes Innovation: the clever country Innovation – to make something new or the process of successfully implementing/creating value from creative ideas. It comes from the Latin words in and novare. Entrepreneurship – the powerful mixture of energy, vision, passion, commitment, judgement and risk-taking which provides the motive power behind the innovation process. Innovation = invention x commercialisation Where could Australia innovate? Australia’s future prosperity cannot depend on repeating the past because of:  Decline in mining revenue  Elimination of manufacturing jobs  Climate-dependant uncertainties in agricultural productivity Australia’s strengths:  One of the world’s largest solar collectors  Strong record of innovation in the medical area (Gardasil, ResMed sleep mask, cochlear implants)  Diverse population, dynamic marketplace 6 aspects of innovation Six ways in which innovation can be viewed or categorised: 1. Identifying or creating opportunities e.g. mobile phones and tablets have revolutionised the way we communicate 2. New ways of serving existing markets e.g. Coles, Woolworth’s online shopping 3. Growing new markets e.g. the auction market with eBay 4. Rethinking services e.g. online banking and less queues 5. Meeting social needs e.g. Facebook and LinkedIn as social platforms 6. Improving operations e.g. using robotics in manufacturing, mining and medicine Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or service. It is capable of being presented as a discipline, capable of being learned, capable of being practiced – Peter Ducker Stage in lifecycle of an organisation Creating commercial value

Start up Individual entrepreneur exploiting new technology or market opportunity

Growth

Sustain/scale

Growing the business through adding new products/services or moving into new markets

Building a portfolio of incremental and radical innovation to sustain the business and/or spread its influence into new markets

Renew Returning to the radical framebreaking kind of innovation which began the business and enables it to move forward as something very different

Creating social value e.g. mission Australia having a café that acts as training grounds for the unemployed

Social entrepreneur, passionately concerned to improve or change something in their immediate environment

Developing the ideas and engaging other in a network for change – perhaps in a region or around a key issue.

Spreading the idea widely, diffusing it to other communities of social entrepreneurs, engaging links with mainstream players like public sector agencies

Changing the system – and then acting as agent for the next wave of change

Barriers to innovation:  Not recognising the need for change  Viewing innovation as ideas, however not managing the whole journey  Mindset and complacency  Closed information network, insulation from new ideas Sources of innovation Most innovations result from methodically analysing seven areas of opportunity, some of which lie within particular companies or industries, and some of which lie in broader social or demographic trends. Sources within companies or industries:  Unexpected occurrences – unexpected successes and failures are productive sources of innovation, many innovations are the result of unexpected successes, particularly in the pharmaceutical industry. E.g. the antibacterial effect of penicillin was discovered accidentally by Alexander Fleming in 1928.  Incongruities – these occur whenever a gap exists between expectations and reality.  Process needs – these exist whenever a demand arises for the entrepreneur to innovate as a way of answering a particular need. E.g. In the 1950s an entrepreneur named William Conner figured out how to preserve the enzyme needed to make the process of cataract surgery easier.  Industry and market changes – due to continual shifts in the marketplace, caused by changes in consumer attitudes, advances in technology and industry growth, industries and markets undergo changes in structure, design and definition. When market or industry structures change, traditional industry leaders often ignore the fastest growing market segments. Sources within the social and intellectual environment:  Demographic changes – demographics are the most reliable external sources of innovation opportunity. Census data provides a precise idea of the demographic structure of a country. E.g. in Australia and New Zealand ‘ethnic food’ is one of the fastest growing market opportunities for entrepreneurs due to the large number of migrants over the past decades.





Perceptual changes – members of a community can change their interpretation of facts and concepts, and thereby open up new opportunities. Perceptual changes can particularly affect dimensions such as acceptability, beauty, time and distance. E.g. commuters living in suburbs of big cities often perceive a 50-kilometre or one-hour journey to their workplace as acceptable, whereas residents in small towns would not. New knowledge – innovations based on new knowledge, whether scientific, technical or social, usually rank high. Knowledge-based innovations differ from all others in the time they take, their casualty rates, and in their predictability, as well as in the challenges they pose to entrepreneurs.

Different types of innovation:  Ideas are not enough for innovation  Innovation is a multidimensional concept; it is not necessary to reinvent the wheel to become an entrepreneur  Innovation is the successful creation of value within an organisation  Entrepreneurship can occur with little, if any, innovation

-

Characteristics of incremental and disruptive innovation Incremental innovation Disruptive (radical) innovation Steady improvements - Fundamental rethink Based on sustaining technologies - Based on disruptive technologies Obedience to cultural routines and - Experimentation and play/make-believe norms Can be rapidly implemented - Need to be nurtured for long periods Immediate gains - Worse initial performance, potential big gains Develop customer loyalty - Create new markets

Incremental innovation Incremental innovations are improvements of existing products that enhance performance in dimensions traditionally valued by mainstream customers. They make existing products and services better and usually come from tweaking existing designs and listening to big clients, who usually just want steady improvements that yield higher margins. Incremental innovations use established technologies and are easily and rapidly implemented. Such innovations are a strong suit for established companies that continuously improve their products. Types of incremental innovation Type of innovation Principle and example Improvement or new use of an existing product, service or process, Extension such as the development of desktop, notebook and laptop computers based on the mainframe. Creative replication or adaptation of an existing product, service or concept. Duplication can take place across different markets or Duplication industries, e.g. fast-food chicken outlets such as Chicken Treat and Red Rooster in Australia, were adapted from the Kentucky Fried Chicken model from the USA.

Synthesis

Combination of an existing product, service or process into a new formulation or use, such as the fax (telephone + photocopier) or the multi-purpose smartphone (telephone + camera + organiser + internet + music player + GPS).

Disruptive innovation Disruptive innovations, such as personal computers, underperform existing products but are simpler, less expensive, more convenient, adequate and easier to use. They cause fundamental changes in the marketplace and are based on new technologies, and often present teething problems that ruin the clients’ bottom line. E.g. uber disrupted traditional taxi services Disruptive innovation approaches: 1. The back scratcher: scratch an unscratched itch What it is: Makes it easier and simpler for people to get an important job done When it works best: When customers are frustrated by their inability to get a job done, and competitors are either fragmented or have a disability that prevents them from responding Historical examples: Federal Express, mobile phones Current examples: Procter & Gamble Swiffer products, instant messaging technology 2. The extreme makeover: make an ugly business attractive What it is: Find a way to prosper at the low end of established markets by giving people good enough solutions at low prices When it works best: When target customers don’t need and don’t value all the performance that can be packed into products, and when existing competitors don’t focus on low-end customers Historical examples: Nucor’s mini-mill, backpacker accommodation Current examples: Budget airlines such as AirAsia, Jetstar Asia, Tiger Airways, Virgin Blue 3. The bottleneck buster: democratise a limited market What it is: Expand a market by removing a barrier to consumption When it works best: When some customers are locked out of a market because they lack skills, access or wealth. Competitors ignore initial developments because they take place in seemingly unpromising markets. Historical examples: Personal computers, Sony Walkman, eBay Current examples: Blogs, home diagnostics, social networks such as Facebook or Twitter Cost innovation Cost innovation refers to innovation which considers the ‘value for money’ segment. This segment attracts people who ascribe importance to efficiency (doing the same for less), effectiveness (doing more at the same cost) or economy (doing and spending less) and is expected to grow in emerging markets and developed countries. This capability not only helps entrepreneurs establish a stronghold in their home countries, but also allows them to crack the value-for-money segments in developed markets. Cost innovation can be delivered in three ways:  Selling high end products at mass-market prices

 

Offering choice or customisation to value customers Turning niches into mass markets

What do successful innovators and entrepreneurs do? 1. Explore and understand the dimensions of innovation 2. Manage innovation as a process 3. Develop innovation capability 4. Create an innovation strategy 5. Build dynamic capability. 4Ps of Innovation Dimensions for innovation Dimension Product

Process

Position

Paradigm

Type of change Changes in things (products/services) which an organisation offers e.g. cars with GPS or auto reverse etc. Changes in the ways in which these offerings are created and delivered e.g. McDonalds create your own taste burger range Changes in the context into which the products/services are introduced e.g. Lucozade  from illness recovery to health drink Changes in the underlying mental models which frame what the organisation does e.g. easing the fears of online banking

Context to innovation success: 1. Clear strategic leadership and direction  commitment of resources 2. An innovative organisation  with a climate which enables people to deploy their creativity and share their knowledge 3. Productive links  across boundaries inside the organisation and to external agencies who play a part in the innovation process e.g. suppliers, customers, sources of finance, skilled resources of knowledge etc. Dynamic capability – the ability to review and reset the approach in which the organisation takes to managing innovation in the face of a changing environment...