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EIM REVISION NOTES (Based on exam) INNOVATION CHAPTER 1: 1 – List some sources of innovation, both from within companies or industries and in the social environment Innovation w/i a company  Peter Drucker’s 4 sources: 1. Unexpected occurrences- unexpected successes and failures are productive sourc...

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EIM REVISION NOTES (Based on exam)

INNOVATION CHAPTER 1: 1.3 – List some sources of innovation, both from within companies or industries and in the social environment Innovation w/i a company  Peter Drucker’s 4 sources: 1. Unexpected occurrences- unexpected successes and failures are productive sources of innovation because most people and businesses dismiss them, disregard them and even resent them. These are innovations that are made by accident or not planned. 2. Incongruities- these occur whenever a gap exists between expectations and reality. 3. Process needs- these exist whenever a demand arises for the entrepreneur to innovate as a way of answering a particular need. 4. Industry and market changes- these are continual shifts in the marketplace, which are caused by changes in consumer attitudes, advances in technology and industry growth. Social environment: 

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Demographic changes- of external sources of innovation opportunity, demographics is the most reliable. Census data, for instance provide a precise picture of the actual demographic structure of a country. Perceptual changes – Sometimes the members of a community can change their interpretation of facts and concepts, and thereby open up new opportunities. New knowledge – Among history- making innovations, those based on new knowledge – whether scientific, technical or social – rank high.

1.4 – Discuss different innovation types • Ideas are NOT enough for innovation!

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Innovation is a multidimensional concept, and it is not necessary to reinvent the wheel to become an entrepreneur.

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Innovation is the successful creation of value within an organisation

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Entrepreneurship can occur with little, if any, innovation

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When defined as an outcome, innovation is the tangible product , service or process that is adaptable or diffusible, meaning it can be used in various contexts by different individuals.

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Incremental innovations - improvements of existing products that enhance performance in dimensions traditionally valued by mainstream customers

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Disruptive (radical) innovation - Disruptive innovations change the value proposition. Disruptive innovations such as personal computers, underperform existing products but they are also simpler, less expensive, more convenient , adequate and easier to use.

Cost Innovation  delivered in three ways: 1. Selling high-end products at mass-market prices-for example Aravind the world’s largest eye hospital chain, based in Madurai India. Aravind’s founders used a pricing structure tiered so that wealthier patients were charged more allowing the firm o cross-subsidies care for the poorest. 2. Offering choices or customisation to value customers - Chinas goodbaby sells customers 1600 kinds of children strollers, car seats bassinets, baby walkers and high chairs - four times more than its rivals offer but at comparable prices. 3. Turning niches into mass markets – China haier capture 60 percent of the US wine -refrigerator market in less than a decade by lowering prices so much that a small under-guarded niche became a volume business. New Product Development  New Product Development – This is a crucial time for products as it is the stage at which the product benefits can be maximised and faults and problems minimised.  There are several different ways that a new product can be viewed depending on the organisation and the technology o New to the market – a new technology that has never been seen before o New to the company – a product already in the marketplace but this is the first time it has been produced by a certain company 4

o New to the product line – a product that is an extension of whatever the company currently produces o New to the product – modifications, enhancements and improvements to a specific product that will revitalise it and move it into a growth stage in the product life cycle 1.5 – Understand the key practices of successful innovators and entrepreneurs  Innovation – The successful exploitation of new ideas.  Radical innovation – a major advance in the technological state of the art  Incremental innovation – The utilisation of even small-scale changes in technological know – how. Successful innovators: - Explore and understand the dimensions of innovation - Manage innovation as a process - Develop innovation capability - Create an innovation strategy - Built dynamic capability To manage the innovation and entrepreneurship process, successful innovators/ entrepreneurs do the following: 1- Explore and understand the dimensions of innovation 

One approach to finding an answer to the question of where we could innovate is to use a kind of innovation compass exploring different possible directions. Innovation can take many form but we can map the options along four dimensions as shown below

2- Manage innovation as a process 

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Rather than the cartoon image of a light bulb flashing on above someone’s head, we need to think about innovation as an extended sequence of activities – as a process. Whether we are looking at an individual entrepreneur bringing their idea into action

or a multi-million -dollar corporation launching the latest in a stream of new products, the same basic framework applies We can break it down to the four key steps we mentioned earlier: 1 Recognising the opportunity – Innovation triggers come in all shapes and sizes and from all sorts of directions. They could take the form of new technological opportunities or changing requirements on the part of markets. 2 finding the resources- The trouble with innovation is that it is by its nature a risky business. You don’t know at the outset whether what you decide to do is going to work out or even that it will run at all. You have to commit resources to begin the process. 3 developing the idea – Having picked up relevant trigger signals , made a strategic decision to pursue some of them and found and mobilised the resources we need, the next key phase is actually turning those potential ideas into some kind of reality. 4 Capture value – Despite all our efforts in recognising opportunities, finding resources and developing the venture, there is not guarantee we will be able to capture the value from all our hard work. We also need to think about, and manage, the process to maximise our chances through protecting our intellectual property and the financial returns if we are engaged in commercial innovation or in scaling and spreading our ideas for social change. At this stage we are learning about how to build innovation capability.

Context of success  Clear and strategic leadership and direction, plus the commitment of resources to make it happen. Innovation is about taking risks, about going into new and sometimes completely unexplored spaces  An innovative organisation in which the structure and climate enables people to deploy their creativity and share their knowledge to bring about change.  Proactive links across boundaries inside the organisation and to the many external agencies who can play a part in the innovation process: suppliers, customers. Sources of finance, skilled resources and of knowledge.

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3- Develop innovation capability  

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Successful innovation correlates with how firm selects/coordinates functions inputs Firms need to learn to manage the process for success by consciously building and developing their innovation capability  no right way, just most appropriate solution for particular circumstance Learnt overtime  developed through trial and error

4- Create innovation strategy 

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Building a capability to organise and manage innovation is a great achievement , but unless that capability is pointed in a suitable direction the organisation risk being all dressed up and nowhere to go!  need for clear direction

Three key steps for an innovation strategy: 1. Strategic analysis: what could we do?

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2. Strategic selection: what are we going to do and why? o What is a what is our overall business strategy (where we are trying to go as an organisation) and how will innovation help us to get there o Do we know anything about the direction we want to go in- does it build on something we have some competence in (or have access to) 3. Strategic implementation: how are we going to make it happen? o Having explored what we could do and decided what we are going to do, the third stage in innovation strategy development is to plan for implementation. 5- Build dynamic capability 

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Keeping the innovation going and keeping ahead of incoming competitors into the market , if an existing company doesn’t innovate fast enough they may be upstaged by a upcoming organisation. Organisations need different approaches to organising and managing innovation. If they try to use established models which work under steady – state conditions, organisations are likely to find themselves increasingly out of their depth and risk being upstaged by new and more agile players. Dynamic capability – The idea of reviewing and resetting our innovation management approaches.

CHAPTER 2: 2.2 – Understand the nature of creativity  Creativity - The use of imagination or original ideas to create something.  Important creativity skills inc: o Associating o Questioning o Observing o Experimenting o Networking  Convergent thinking - is about focus , homecoming in on a single best answer  Divergent thinking- is about making associations often exploring round the edges of a problem The Creativity Process 1. Problem recognition / preparation – recognising to true problem, the underlying issue, is an important skill in arriving at solution which works. 2. Incubation – This is the stage where we need to let go with our conscious minds and allow the brain to play around , to incubate. By doing something else like relaxing or going for a walk or run we allow the brain to go through the process of association and connecting in ways which may appear to be illogical. 3. Insight – This is known as the lightbulb moment , when the rough idea of the solution is thought of, people describing such moments are often not entirely clear about the full extent of their solution, they just know it is right and they spend time (validation), tidying up the idea and building on their initial insight .Brainstorming – writing down ideas and variations on the theme use pictures and sketches to capture the insight. 4. Validation- This is the stage which the idea, the core insight , becomes refined and developed. It involves trying the idea out – prototyping and using feedback from that to adapt and develop it. In this process entrepreneurs place strong emphasis on the idea of designing experiments around a Minimal viable product (MVP).

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Allowing idea to grow/develop  unconsciously Brainstorming technique which builds upon initial ideas Developed through prototyping (MVP)

Group – Level creativity

2.3 – Understand the components of creativity, innovation and entrepreneurship, and identify factors influencing creativity  Creativity is the process through which invention occurs  The three components of creativity: a. Creative thinking skills – how people approach problems/situations  dependent on individual personality b. Knowledge – encompasses expertise or knowledge/everything a person knows and can do c. Motivation – Motivation dictates what people do  two types of motivation. i. Extrinsic – originates from outside a person for example if someone is promised a bonus if project is done well ii. Intrinsic – a person’s internal desire to do something (eg passion and interest)

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Creativity Techniques:

Factors influencing creativity  Encouragement of creativity – Encouragement of the generation and development of ideas appears to operate at three major levels within organisations: o Organisational encouragement plays an important role, and several aspects are perceived as operating broadly across the organisation such as encouragement of risks-taking . o Encouragement from supervisors indicates that project managers or direct supervisors can promote creativity. o Encouragement of creativity can occur within a group itself , through diversity in a team members background , mutual openness to ideas , constructive challenging of ideas and shared commitment to a project.  Autonomy – Creativity is fostered when individuals and teams have relatively high autonomy in the day to day conduct of work, and a sense of ownership and control over their own work and their own ideas .  Resources- IT is generally admitter that resource allocation on a project is directly related to the projects creativity levels , apart from the practical limitation it can also limit a person physiologically by affecting their beliefs about the intrinsic value of the project they have undertaken  Pressures – Pressure can be a good thing as it can push creativity in a positive light from the urgent, intellectual , challenging nature of the problem, however it is not always a good thing as it can lead room for disaster and mistakes when rushed.

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Mental Blocks- Prejudice and functional fixedness are two examples of mental blocks o Prejudice stems from the preconceived ideas we had about things These preconceptions generally block us from enhancing a vision beyond what we already know or believe to be achievable, and thus inhibiting the acceptance of change and progress. o Functional fixedness – when we see an object only in terms of its name rather than in terms of what it can do

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In business, creativity can be defined as the production of new and useful ideas

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Ideas must fulfil a need in the marketplace and generate profit

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Successful, innovative companies do systematically encourage the development of ideas

2.4 – Explain the link between of creativity, innovation and entrepreneurship, and outline the steps for screening opportunities 13

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Idea generation – Creativity  raw knowledge Idea Evaluation – Innovation  further refined knowledge (feasibility test below) Idea Implementation - Entrepreneurship  embedded knowledge in good or service Common = all concerned with knowledge development

MARKETING CHAPTER 5: 5.2 – Define ‘product’, and understand product classification, product differentiation and branding  Product: can be a good, service or idea offered to the market for exchange. Without a product a marketer has nothing to offer. On the other side of the exchange, potential customers require products to satisfy functional, social and psychological needs, wants and demands.  Good: a physical (tangible) offering capable of being delivered to a customer, e.g. Fridge. The purchase of a good usually involves the transfer of ownership from marketer to customer.  Service: intangible offering that does not involve ownership, e.g. a taxi ride. As they are intangible a service cannot be touched or tasted and does not involve ownership instead you experience a service.  Idea: concept, issue or philosophy offered to the market, e.g. ‘Clean up Australia Day’ often products of community organisation. The total product concept To understand how the products value is perceived by potential customers, it is useful to describe the product in terms of its four levels: core product, expected product, augmented product and potential product.

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The total product concept is a way of viewing a product as the totality of value and benefits its provides to the customer Products are offered to the market to be an answer to the customers problem of an unsatisfied need or want.

The Core Product  The core product comprises the fundamental benefits that responds to the customers problem of an unsatisfied need or want eg for coffee it’s the satisfaction of thirst or a credit card the ongoing credit The Expected Product  The Expected product described those attributes that deliver the benefit that forms the core product. They are the attributes that fulfil the customers most basic

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expectations of the product. Eg credit card being slim piece of plastic that can easily slip into a wallet or a phone being small and having an easy to read screen. The Augmented product  At the Augmented product level, the product delivers a bundle of benefits that the buyer may not require as part of the basic fulfilment of their needs. The augmented product level enables marketers to significantly differentiate their offering from those of a competitor for mobile phone product augmented could extend to superior sound quality or the ability to use the device for virtual tickets. Potential Product  The potential product comprises all possibilities that could become part of the expected or augmented product. This includes features that are being developed planned or prototyped as well as features that have not yet been conceived. Eg how in the early days of mobile phones SMS was just a potential product feature.

Product relationship  Product item – a particular version of a product that can be differentiated from the organisations other product items by characteristics such as brand, ingredients, style or price . For bonds a product item in their men’s underwear range is bonds boxers.  Product line – A set of closely related product items. The close relationship is usually in terms of end use, target market ,technology or raw materials. Using the bonds example, the product line for bonds men’s underwear includes trunks, y-fonts, boxers and hipsters.  Product mix – The set off all products that an organisation makes available to customers. For bonds its underwear, singlets, shorts, track suits, hoodies, jackets, socks, and t shirts, as part of their men’s women’s and children’s wear.

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Product Classification  Consumer Products – are those products purchased by households and individuals for their own private consumption  It is useful to further sub classify consumer products into one or more of the following main categories: o Shopping products - are irregularly purchased items that involve moderate to high engagement with the decision. E.g. furniture o Convenience products (fast moving consumer goods)- are inexpensive, frequently purchased consumer products that are bought with the little engagement in the decision-making process.eg groceries. Can be further broken down into 3 further categories o Staple products – products that are brought and used by consumers regularly such as milk. There is not much promotion for branded staple products. o Impulse products – products that are bought with little planning, often purchased only after seeing the item at the retail store.eg chocolate or chewing gum. o Emergency products – products that are bought when the product is needed in an ‘emergency’ for example an umbrella when it is raining. o Specialty products- have unique characteristics that are highly desired by their buyers. The purchaser of a speciality product usually knows exactly what they want and they are not interested in any other alternatives. o Unsought products - are those goods or services that a consumer either: a. Knows about but doesn’t normally consider purchasing b. Doesn’t know about o Business-to-Business products- are those products purchased by individuals and organisations for use in the production of other products or for use in their daily business operations. Product Differentiation Product differentiation - the creation of products and product attributes that distinguish on product from another. Branding  Brand - refers to a collection of symbols, such as the name, logo, slogan and design, intended to create an image in the customer’s mind that differenti...