Innovation and product
innovation in marketing strategy
Nagasimha Balakrishna Kanagal
Indian Institute of Management, Bangalore, India
ABSTRACT
Innovation leads to a process of change in
organizations and its market offerings, and is a key weapon that marketing
strategists use to win customers and markets, through the development of
sustainable competitive advantage. Innovations use assets and competencies of
the organization along with innovation processes to bring about new or
different market offerings, which when successful in the market bring in
immense value to the firm. However for an innovation to succeed as a
competitive advantage there should be a fructification of the innovation
advantage through appropriate competitive marketing strategies. Innovations are
often motivated by ‘innovation events’. Processes that foster transformation of
‘innovation events’ to ‘innovations’ is the new product process or the
innovation process system. Innovations also lead to the creation of assets
called intellectual property. Innovation creates and generates value and could
reflect in both co-created value and shared value. Ultimately the purpose of
innovation is for improving and increasing the delivery of superior meaning and
superior value to the customer while making it relevant, different or new and
valuable from the customer’s stand point. The study addresses the nature of
innovation, the elements of the innovation process system, types of product
innovation and assessment of innovations. An empirical desk research on
innovation aspects of Philips Corporation has been conducted, followed by a
primary interview with Philips Innovation Campus, Bangalore, India. The paper
concludes by laying out the implications for marketing strategists.
Keywords: innovation events, fructification of
innovation advantage, problem resolution, product innovation, marketing
strategy
Innovation
leads to a process of change in
organizations and its market offerings, and is a key weapon that marketing
strategists use to win customers and markets, through the development of
sustainable competitive advantage. In the words of Peter F Drucker (1954)
‘there is only one valid definition of business purpose: to create a customer’
and ‘the business enterprise has two and only two basic functions: marketing
and innovation’. Innovations use assets
and competencies (skill and knowledge in both technical systems and management
systems) of the organization along with innovation processes to bring about new
or different market offerings, which when successful in the market bring in
immense value to the firm. Innovations
also lead to the creation of assets called intellectual property; intellectual
property rights called IPRs include copyrights, patents, trademarks, trade
secrets and industrial designs. An
ongoing innovation advantage is possible if the organization focus is to build
organizational capabilities along with the co-creation of value with the
customer, with adequate adaptations to mindsets, skills, behaviors and decision
structures in an environment of global resources, flexible, efficient,
resilient business processes and focused analytics (Prahalad and Krishnan,
2009). As of the time of study, a leading automobile firm of India has designed
and developed an indigenous low cost car through frugal engineering techniques
that is now poised to be sold in developed markets such as Europe - the Tata
Nano to be sold in global markets as Nano Europa. At the same time, the world
renowned Gillette razor blade firm has studied the Indian consumer for his
shaving habits and procedures and innovated the
Gillette Guard which directly competes to substitute the traditional knife
or double edged razor blade. Around the same time, PepsiCo in India has
innovated to make Aliva – a lentil based snack that has global potential. All
the preceding three products are product innovations and all the three are
capable of reverse innovation; Tata Nano and Gillette Guard are both frugal
innovations. All the three innovations have the potential to redefine
markets.
Innovation is driven by customer and market
requirements as well as competition among suppliers to a need requirement and
shaped by the evolution of technology (Adner and Levinthal, 2001); an
illustration of innovation of this type is the Tata Ace of Tata Motors, India
(Business Today, 2014). Customer and
market requirements as of the beginning of the twenty first century indicated
the requirement of a sub-four ton four wheel light commercial vehicle to
compete with the three wheelers of Bajaj Auto, Mahindra & Mahindra and
Piaggio in terms of space and price (less than Indian Rs. 500,000). The market
feedback indicated the requirement of a small truck. The road transportation
system in India was emerging as a hub and spoke system that shifted the
requirement of trucks into heavy and small commercial vehicles. A small truck
needed a suitable engine, bigger than a single cylinder but smaller than a four
cylinder which was in use in the market at the conceptualization stage. The
firm decided to come out with an innovation of a new two cylinder engine which
cost a third of its competitors, offered optimal performance including the fuel
efficiency of a three wheeler simultaneously meeting the emission norms of
Indian BS II and BS III. The engine
became the USP of Ace and the vehicle was a resounding success with a 78%
market share within seven years of its launch in 2005.
Innovation
can also be driven as a part of a planned agenda to innovate by the firm that
is defined by the core purpose and / or the envisioned future of the business.
The capabilities of the organization and its ability to freewheel (or develop
competencies in areas where none existed earlier) define the boundaries of what
the firm can innovate and what is best for firms to accomplish. Innovations
diffuse through markets till they are adopted by the individual customers in
the market. The process of demand realization
till the adoption is complete can be termed market potential realization and
the consumer adoption process at the aggregate or market level (within a social
system) can be termed diffusion of innovations.
Theories of innovation were initially propounded by the economist Joseph
A Schumpeter, anthropologist H G Barnett and sociologist Everett M Rogers.
Joseph A Schumpeter envisioned innovation to include construction of new plant
and equipment, introduction of new firms and rise to leadership of new men.
Innovation is defined as ‘any thought, behavior or thing that is new because it
is qualitatively different from existing forms and is the basis of cultural
change’
(Barnett,
1953). The Rogers curve on the time of adoption of innovations is given as
Figure 1 (Appendix) outlining the different categories of customers on the
adoption time line as innovators, early adopters, early majority and late
majority comprising the mainstream market and lastly laggards. It has been
discussed in literature that there is a chasm between the realization of the
innovator / early adopter market and the subsequent mainstream market
characterized by the majority (Moore, 1991). It is also discussed that in
markets for product innovations, sales are initially low and as new firms enter
(firm takeoff occurs) and quality improves with prices dropping, there is a
takeoff in sales. The demand shifts during the early evolution of a new market
(product innovation) due to non-price factors (such as new firm entry) is the
key driver of a sales takeoff (Agarwal and Bayus, 2002). A growth model (Bass,
1969) for the timing of initial purchase of new products based on innovative
and imitative behavior was developed and empirically tested against data for
consumer durables; the model yielded predictions of peak of sales and the
timing of the peak of sales based on which long range forecasting could be
developed. The generalization of the
Bass model to include decision variables such as price and advertising was also
developed (Bass, Krishnan and Jain, 1994). Later studies have shown that
marketing mix in general and pricing and promotion specifically impact both the
market size of a product and the shape of the diffusion curve (Boehner and
Gold, 2012).
At the individual level (Kotler et.al,
2013) the consumer adoption process is usually postulated to pass through five
different stages of awareness, interest, evaluation, trial and adoption.
Factors influencing rate of adoption would be (i) relative advantage that the
innovation enjoys to existing comparable products or substitutes, (ii)
compatibility which is the match with the values and experiences of individuals
posited to buy the innovative product, (iii) complexity or the degree with
which the innovation is relatively difficult or easy to use, (iv) divisibility
or the ease of trial of the innovation, (v) communicability or the ease with
which the innovation is understandable and describable to others (vi) cost
(vii) the business risk the innovation poses on the outcome of its use (viii)
scientific credibility (ix) social approval.
Innovation requires both technical and
market capabilities (Abernathy-Clark model); requires knowledge of the
components that go into making products as well as knowledge of the linkages
between them also called architectural knowledge (Henderson-Clark model);
requires hold over the complementary assets if necessary as well as the ability
to protect its innovation through patents, copyrights, trademarks, trade
secrets, tacit knowledge, causal ambiguity (Teece model). Innovations also follow the evolution of
technology as a life cycle as well as the evolution of technology in the market
(Afuah, 2003).
RESEARCH
QUESTIONS
The study aims to outline the nature of
innovation; layout the elements of innovation process system; examine the types
of product innovation; layout aspects of assessment of innovation; conduct an
empirical study of product innovation; and draw implications for marketing
strategists
NATURE OF INNOVATION
Innovations are the creation and exploitation of value
providing or value built in
‘newness’
or ‘differences’ in products, processes, technologies, methods and business
models (from elements of other products, processes, technologies, methods and
business models or from elements of the same products, processes, technologies,
methods and business models earlier made) that are often built by the
occurrence of one or more events with ‘small / low success probabilities’ that
may require ‘high problem resolution’ and show ‘possibility effect of a
particular solution or deliverable in the native state of occurrence of the
events in the product, process, technology, method or business model’ and hence
can be called as ‘innovation events’. The intent being that the initial small /
low success probability events required for innovation be systematically raised
to high success probability events that are significant with effective and
appropriate problem resolutions and show ‘certainty effect of the particular
solution or deliverable in the design
state of occurrence of the events in the product, process, technology, method
or business model’ through the skill and knowledge systems of organizations
with the aid of the information systems and intelligences of the innovation
process system so that innovations could actually occur in products, processes,
technologies, methods or business models. The skill and knowledge systems could
be either in technical systems or management systems or both and would deploy
innovation supportive assets. The net effect is that ‘innovation events’ are
transformed to ‘innovations’.
Occurrences of events that have zero
probability in the native state of occurrence are the random process
innovations or the innovations in the econometric sense, though the occurrence
of such events separately by themselves for the purpose of ‘newness’ or ‘difference’ producing
innovation as studied in this paper is hypothetical. In a marketing sense,
innovations manifest as differentiation, though ‘all differentiation’ may not
be innovations.
‘Innovation events’ are thus embedded in
the ideation, conceptualization, technology, technology design, engineering
design, solution provision, problem solving that consequently manifest in the
design and development of products and processes. These ‘innovation events’
could be motivated by systematic processes that include elements of
‘creativity’ and / or ‘intuition’ and / or ‘ingenuity’ and / or
‘experimentation’ and/or ‘execution’.
‘Creativity’ would include building ‘newness’ and / or ‘differences’ by
extending the known to the unknown and connecting things from among the known.
‘Innovation events’ could also be an outcome of innovation art commonly
referred to as ‘genius’. ‘Innovation events’ are sometimes called ‘happy
accidents’ by practitioners (Jha and Krishnan, 2013).
Traditionally systematic processes of
innovation have been in the realm of the research and development department
more popularly called R&D. This is termed as ‘closed innovation’. With the
advent of the internet, the power of ‘open innovation’ was brought forth
smoothly, where seekers and external solvers come together; consumers also
could participate and become prosumers.
Motivations for innovations apart from systematic research and
consequent technological break-through could include identification of pain
areas of customers. ‘Innovation events’
embedded in technology can be termed ‘breakthroughs’ that could lead to
‘advancements’ in the design and development of products. Innovation events have also to be supported
by successful hypotheses generation (Jha and Krishnan, 2013).
As of the time of study, there is
considerable attention being given to Jugaad. Jugaad innovation – is a new way
of doing things – ‘yukthi’ as it is called in the Indian languages; in which
case it is some kind of a process and method innovation that uses the principle
of flexibility and leads to practical and / or effective solutions that are
affordable duly recognizing the importance and / or the scarcity of resources.
Jugaad is motivated by problems of resources and constraints. New products may
or may not flow out of the jugaad innovation. Jugaad innovation practices could
lead to reverse innovation products. Jugaad could be improvisation, though jugaad
could be more than improvisation; jugaad could be even adaptation.
Improvisation leads to improvement of products or procedures by making small
changes in design. Large changes in design would lead to ‘adaptation’. Both
improvisation and adaptation could emerge as innovation but not necessarily
so.
As such, innovation means ‘something new’
or ‘something different’ that is not seen or experienced or understood earlier
by the customer / consumer; this could possibly need new knowledge or discovery
and possibly need an invention which is the technological and engineering
aspect of innovations. In addition innovations could sometimes need imagination
(or abstract innovation) and engineering skills to be combined; this is often
called as inclusion of ‘Imagineering’.
To create ‘something new’ or ‘something different’ is by itself is not
sufficient and it is necessary that the innovation solve a customer problem or
fulfill an unmet need of the market or provide a new benefit (innovation has to
work for the customer or has to be exploited); this needs marketing
skills. Innovation could thus be the
creation of a new market or an addition or an extension / modification to the
product / process / technology in the existing market or with the creation of
new competitive space. An illustration of this is the twin spark technology
(two spark plugs instead of one) for more power and better fuel economy used in
motor cycles by Bajaj Auto, India, that created the performance segment in the
Indian two wheeler market. The
innovation has been adopted by other manufacturers in India and abroad. The
concept of the twin spark technology per se was not unique; it was already
existent in the Alfa Romeo 2000 cc engine; what was something new was the usage
of the twin spark technology in a two wheeler, where optimization work was
needed to get it work in a small engine successfully, the balance of the two
sparks was achieved through a new algorithm that Bajaj Auto developed.
For existing markets, if the addition or
extension / modification is a ‘just noticeable difference’ to the consumer /
customer or as claimed by the marketer and existing technologies is used, then
it is called ‘incremental innovation’ or ‘continuous innovation’. All
incremental or continuous innovations would be ‘kaizen’, though all ‘kaizen’
would not be continuous innovation.
Technology improvisations and adaptations also fall into this category
of continuous innovation. If the addition or extension / modification is a
‘significant difference’ to the consumer / customer or as claimed by the
marketer and builds on existing technologies, then it is called ‘evolutionary
innovation’. If the innovation demonstrates radically new technologies and the
differences are ‘just noticeable’ then it is called ‘discontinuous innovation’;
if the radically new technologies bring in differences that are ‘significant’
then it is called substitutes. The point
to note is that the ‘just noticeable difference’ or ‘significant difference’ should be ‘clear differences’ and
accepted as ‘common knowledge’ by the
customer/ consumer, the set of competitive firms in the market, the market
place (including channels) and the society and market environment at
large.
If the innovations creates markets and
simultaneously disrupts the existing market or value network and the technology
is radically new, then it is called disruptive innovation. If the innovations creates markets and
simultaneously disrupts the existing market or value network and the
technologies are similar or same, it is called successive generations of
technology. Jugaad and frugal engineering also disrupt existing markets and
create new markets without having to radically change technologies. Both
disruptive innovation and successive generations of technology would lead to
obsolescence of the earlier products / processes / technologies. Creation of new markets with existing
technologies without disruption would be an evolutionary application (as seen
with a scalloped product life cycle); creation of new markets with radically
new technology that does not disrupt existing markets, is called a
revolutionary innovation, with new to the world products. If new competitive
space is created or breakaway positioning strategies is enabled- whether the
technologies are existing or are radically new- then it is called value
innovation or blue ocean strategy. For
example (i) in the watch market, watches broke away from jewelry to alloy based
to functional quartz to fashion watches to low price watches to super fiber
watches; (ii) jewels market moved from jewelry 22 carat to costume and
imitation jewelry to fashion 18 carat jewelry.
Innovations that are built with radically
new technologies are normally called ‘out of world’ innovations. Table 1
(Appendix) illustrates the distinctive types of innovation and Table 2
(Appendix) follows with their respective examples.
ELEMENTS OF THE
INNOVATION PROCESS SYSTEM
Innovations are often motivated by
‘innovation events’. Processes that foster transformation of ‘innovation
events’ to ‘innovations’ is the new product process or the innovation process
system. Innovation process systems are cross-functional in nature and involve
new product development groups and should be supported by an effective
technology strategy. Sources of
innovation could be the firm’s value chain, society and market environment
comprising of competitors, suppliers, customers, complementary innovators,
related industries, universities and research laboratories (Affuah, 2003).
Drivers of innovation include size of the organization, open innovation
practices, country of origin, investment in R&D, organizational culture
(Tellis, 2013). It has been inferred
(Damanpour, 1992) that organizational size is more strongly related to the
implementation aspects of innovations rather than to the initiations of
innovations in organizations. The ideal culture of innovation would include the
willingness to cannibalize existing products, balanced marketing and technology
ideation, specific time spent on creative activity, embrace risk and focus on
the future; leaders of innovating organizations have to ensure that these
cultural characteristics emerge through appropriate incentives, empowerment of
innovators and encouragement of internal markets (Tellis, 2013). A mindset shift towards innovation is also
needed in the innovation process system for successful innovation (Govindarajan
and Trimble, 2012). Organizations have
to evolve mindsets that have a definite orientation of focusing either on
markets (need based R&D, need-gap analysis, market forces driven products),
organizational dynamics (operations, culture, corporate identity) or market
environment and society (clearances of technology or markets, public or society
driven motives). As such different mental
models for innovation and marketing include those based on R&D,
market focus, customer and branding, operations, culture, corporate identity,
society and market, society and technology (Tollin, 2008). An illustration of society motives playing a
role in innovations is the water purifier market; Hindustan Unilever
(subsidiary of Unilever Inc.) with its innovation of the water purifier
‘Pureit’ addressed the challenge of making safe, accessible and affordable
drinking water to India that also demonstrated the firm’s commitment to
innovations (Business Today, 2014) with society motives, as well as breeding
trust with the Indian consumer.
Broad parameters or the dashboard of an
innovation process system (Dabholkar and Krishnan, 2013) are (i) the number of
ideas or challenges in consideration for the firm or the ‘idea pipeline’ (ii)
the rate at which the ideas flow through the innovation process system or the
‘idea velocity’ (iii) the conversions rate from ideas to successful innovations
or the ‘batting average’ (iv) the number of innovators that participate in such
systems.
One method of building the ‘idea pipeline’
is by job mapping (Bettencourt and Ulwick, 2008), wherein the idea generators
break down or dissect the job to be done by the customer into a series of job
process steps and examine at each job step ‘what must be done to carry out the
job’ in addition to ‘how must the job be carried out’, in order to come out
with innovation ideas. MP3 concentrated
on customers listening to music whereas Apple reconsidered the entire job of
music management enabling customers with procurement, organization, sharing and
listening to music. Building the ‘idea
pipeline’ could also stem from discovering new questions of problems, products
and processes (Jha and Krishnan, 2013).
A strong market orientation of the firm is one of the most fertile
sources of ideas for innovation (Mohr and Sarin, 2009). Suitable idea
generation could also be effected through brainstorming, synectics, and
morphological analysis. A capture of
unmet needs is also required for strong idea generation. Techniques for
capturing unmet needs include focus groups, perceptual mapping, benefit
structure analysis, mystery shopper surveys, problem research, customer
satisfaction surveys, customer complaint analysis, environment scanning,
analysis of trends in the market environment.
To get optimal ‘idea velocity’ an
innovation process should enable ‘innovations to happen’ once the ideation is
through. This can also be called as the execution of innovation using a system
that is normally manned by a dedicated team that involves selection of the
innovative leaders or champions; selection of the best people for the job at
hand; organizing the people into a functioning whole (that includes conflict
resolution and support); planning and achieving results through appropriate
incentives, metrics and cultural values and norms. Innovation planning includes hard facts,
knowledge and assumptions and involves rigorous learning mechanisms that focus
on hypotheses generation and discovery. The culture created should enable an
organization to coexist with routine and predictable tasks and successes with
nonroutine and unpredictable experiments (Govindrajan and Trimble, 2010); it
should also engender adequate motivation levels. Support from top management, support and involvement
(or healthy partnering) from operations managers across functional areas is
needed to fructify the innovation initiative. The involvement from the
operations (also called the performance engine;
Govindarajan
and Trimble, 2010) includes task breakup and management of conflict between the
innovation team and operations; conflicts include issues of resources, task
allocation and emotions of key people.
The start-up should deliver innovation and the established organization
should deliver efficiency, effectiveness and innovation. An illustration of the success of the
‘performance engine’ is that of Narayana Health, Bangalore, India, whose
innovation is of providing quality care at affordable prices; founded by Dr.
Devi Shetty. This is an important innovation, as quality health care and
affordability do not go hand in hand. Narayana Health (Business Today, 2014) is
a 26 hospital network with 6900 beds across 16 cities employing 13000 people
and 1500 doctors performing over 100,000 cardiac surgeries and 250,000 cath lab
procedures in the last 13 years. The
health chain’s mortality rate at 1.27% and infection rate at 1% for a coronary
artery bypass graft procedure is as good as that of hospitals in USA. Incidence
of bedsores after a cardiac surgery is globally anywhere between 8% and 40%
whereas at Narayana Health it is almost zero in the last four years. The affordability is effected through
economies of scale, asset light model for infrastructure expansion with no
preference to invest in land and building; investment just in equipment;
effective use of enterprise resource planning, business intelligence model to
track efficiency; more number of surgeries on a weekly basis by doctors
compared to global indications; a mindset of frugality; acceptance of failures
and adoption of corrective measures.
For successful conversion rates from ideas
to innovation, organizations have to pay attention to both R&D and the new
product process or the new product development systems. R&D would include
fundamental research or non-specific product development activities (both basic
and advanced) and product-development oriented research. New product process
consists of concept development and testing, business analysis and marketing
strategy development, product design, prototype development and testing or
virtual reality build up and testing (including the alpha tests and beta
tests), test marketing and commercialization. Value engineering could also be
used. The stage gate systems that consist of ‘go’, ‘kill’, ‘hold’ and ‘recycle’
structure the flow of product development.
The ‘drop error’ and the ‘go error’ need to be avoided to improve the
success rate of the new product process in the market. Market research processes during the new
product development process and to continually validate project assumptions
with customers are required; information and techniques of market research
include sales feedback, surveys, conjoint analysis, Kano analysis, quality
function deployment, focus groups, voice of customers and observation
(Cotterman et. al, 2009). Innovation in organizational structures including
intrapreneurship could also improve the conversion rate. New product process
would also include planning the product portfolio for the business. An illustration of innovation with the use of
new product introduction process is also the engineering design and product
development of the two cylinder engine by Tata Motors for the Tata Ace – a four
wheeled small and light truck. The outsourcing
for product development normally in the auto industry is 60% and for Tata Ace
this was increased to 80% (Business Today, 2014). The suppliers met the cost and design targets
of Tata Motors and components such as the rear axle were not separately engineered
for this vehicle as this might made the vehicle heavier and more costly.
Further the vehicle body was wedded to the frame to form a monocoque structure
which gave weight efficiency to the vehicle. The new product introduction
process designed by Warwick manufacturing group had seven stages with a gateway
at each stage; Ace failed to pass the gateway more than once. The success of
the product development is indicated by the fact that by 2014 every fourth
truck sold is a Tata Ace and it created a new segment of a small light
commercial vehicle.
As a part of understanding the deliverables
of the new product development system, it is to be observed (Tatikinda and
Montoya-Weiss, 2001) that product development capabilities such as product
quality, unit cost and time to market are very valuable firm resources as they
in turn influence market outcomes such as customer satisfaction, and sales
relative to the sales objectives set for the new product. These capabilities are influenced by: (a)
process concurrency or simultaneous execution of different organization
functions such as manufacturing and design; (b) process formality or the degree
to which rules, policies and procedures govern the work activities of product
development (c) process adaptability or the degree to which product development
officers can have discretion during the new product development process on work
activities and decisions. Product development capabilities are affected by
technological uncertainty that includes both process task novelty and product
task novelty. Market outcomes are affected by external uncertainty that
includes market newness and environmentally caused disruption.
Successful conversion of ideas to
innovations through the combination of creativity and execution that leads to
breakthrough growth in established organizations using unproven business models
has been termed as strategic innovation (Govindrajan and Trimble, 2007). The success of Apple iPod could be regarded
as a strategic innovation as it combines characteristics of an innovative idea
(high capacity, small size digital Walkman or the iPod itself); the high price
of iPod and the low prices of songs / music through the iTunes which is the
unproven reverse razor blade model that became successful; the execution of a
product strategy and market strategy to deliver the iPod and iTunes and the
resulting breakthrough growth for Apple Inc. which is an established
organization. On similar lines technical innovations could also be defined that
are not strictly within established organizations but lead to breakthrough
growth in product and technology lifecycles as the case of emailing and social
media that expanded the scope of the personal computer market; the introduction
and rapid penetration of mobile telephony or cellular business that led to
breakthrough growth in telecommunication is another example.
Commercial success with innovations is
highly influenced by the success or failure of the execution efforts that go
into bringing the innovation into the market place. An illustration of this is
in the success of the IPL – the premier T20 cricket league in India run by the
BCCI (Board of Cricket Control in India). The IPL T20 cricket league is an
innovation in concept on two counts (i) the game was reduced from the one day
50 overs (per team) cricket to 20 overs (per team) cricket to reduce play time
and increase aggressiveness and belligerence in the game (ii) the participating
cricket teams were sponsored by famous Bollywood (Indian Film industry hub)
film stars; this was the marriage of celebrities of two iconic classes in India
– cricket and movies. The IPL league as of 2014 is BCCI’s cash cow (Business
Today, 2014) as a result of extraordinary execution by BCCI with careful
auction of franchisees that engendered
strong city loyalties among fans in cities hosting these games; IPL’s player
auctions became a television event creating match like drama with rising dollar
figures (Business Today, 2014).
The number of innovators that participate
in the system could be guided by information and intelligence systems supported
with a reward and incentives plan within the organization. The people
participating in the innovation process system should be talented with
requisite engineering expertise and include (Afuah, 2003) idea generators,
gatekeepers and boundary spanners who are conduits of information between firms
and within firms, innovation champions who take the innovation from idea to
completion, sponsors for resources / managing the organizational support and
project managers who chart out the activities involved and get things
done. The information system and
intelligence of the innovation process system could be dynamically updated just
as much Bayesian updating could be done to the events of the innovation process
system. Communities of innovation and networks could be formed to transform the
information and intelligence systems of organizations into active knowledge
systems that are required for innovation; the community of innovation for the
development of Linux – the operating system – as an open innovation is an
example. Communities and networks bring to the table (i) multiple
specializations in technical function (ii) combination of resources.
Organization design is also a theme of
consideration with regarding to the number of innovators that participate in
the system; issues include the effect of organization structure on innovation,
communication patterns in innovative activity and decision making for
innovation
(Shane
and Ulrich, 2004). Necessary reorganization of the business units to support
and encourage innovations needs to be effected and the learning process
mediates the reorganizationinnovation relationship (Karim, Samina, 2009).
TYPES OF PRODUCT
INNOVATION
A product is a combination of one or more
of (a) ingredients (b) attributes (c) benefits (d) advantages (e) features (f)
functionality (g) performance (h) business model (i) usage experience (j)
consumption experience. Innovations that manifest in products as defined are
called ‘product innovation’.
Product innovations are required by firms
to cope with competitive pressures, changing tastes and preferences, short
product life cycles, technological advancement (or contrarily technological
obsolescence), varying demand patterns, and specialized requirements of
customers. Reverse innovation of products is one emerging and high potential
area that companies are actively trying to pursue to stay ahead and profitable
in the global market. Reverse
innovation is the opposite of glocalization. A firm such as General Electric,
strong on glocalization, took up the challenge of reverse innovation with
development of ultrasound machines in China and globalizing them (Immelt,
Govindarajan and Trimble, 2009) in an
attempt to preempt emerging market manufacturers from entering the global market. Reverse innovation can be strongly aided by
local growth teams in emerging markets.
Table 3
(Appendix)
lists the major dimensions based on which product innovation could be
effected.
ASSESSMENT OF
INNOVATIONS
Product innovations is a cross functional
activity and for innovations to succeed, marketing has to be integrated with
R&D, manufacturing and finance (Mohr and Sarin, 2009). Innovations have to
be assessed on multiple dimensions to obtain its added value to the firm and
the customer / market place. First dimension is the return on marketing
investment in innovation. Innovations are assessed by the equity (brand, firm,
social), revenue, profits that accrue to the firm and the increase in the
market capitalization that the innovation could bring about relative to the
spending for innovation. One common measure is ‘percent of revenue from new
products’ (Shapiro, 2006) wherein the firm has to have a common understanding
of what constitutes ‘newness / novelty’ and what does not constitute ‘newness /
novelty’; in addition an average of annual revenue for the industry standard
needs to be evolved (or a time frame such as half the product life cycle has to
be adopted). To overcome the limitation of the measure that checks only
products, a broader measure of ‘percent of revenue’ from new platforms
(Shapiro, 2006) is used (product, technology, manufacturing, operational and
business platforms). Closely associated with return on marketing investment is
the ability to appropriate value and consequently profit in innovation
ventures. Profits from innovation to innovators relative to profits from
innovation to followers / imitators are determined by the appropriability
regime, presence of complementary assets to exploit the innovation and the
dominant design paradigm (Teece, 1986). Appropriability regime is classified as
‘tight’ when the technology is relatively easy to protect and classified as
‘weak’ when the technology is almost impossible to protect. Intellectual property
rights (IPRs) including patents, copyrights, trademarks, trade secrets,
industrial designs are some of the legal appropriability mechanisms used by
innovating firms to profit from innovations. Other mechanisms such as
exploitation of lead time in innovation with competition, learning curve
effects are also used for appropriation. The nature of technology or innovation
knowledge is also a determining factor in appropriation being ‘tight’ or
‘weak’; codified knowledge is exposed to industrial espionage while tacit
knowledge is difficult to articulate and copy. Thus suitable combinations of
legal appropriability mechanisms and tacit knowledge of innovation lends itself
to better appropriability of innovation returns to the innovator. In addition
complementary assets may be needed to exploit the innovations such as
competitive manufacturing, distribution strength, service strength and
availability of complementary technologies; if these are not available to the
innovator but present with the imitator / follower then it is quite likely that
the returns of innovation will accrue to the follower / imitator rather than to
the innovator (inventor). Innovations to be commercial successes should lead to
dominant designs and / or standards; if this does not occur then there could be
design modifications or work around to the innovation by the imitator /
follower and the returns to the innovator are likely to be weak (Teece,
1986).
Second, an assessment of an innovation
system on a competitive dimension can be done with respect to the time taken
for successful conversion rates from ideas to successful innovation for which
organizations have to pay attention to the new product process or the new
product development systems. This is also termed the development time that impacts
the timing of entry in strategic marketing decisions. Timing of entry as is
well known can spell the difference between success or failure of an innovation
in the market place and applies well to both major innovations (what is major
depends on the innovation history of the firm) and incremental innovations (one
example is new models as in automobiles).
When the innovation is major to the product category in the market, then
timing of the first firm is the first mover advantage and the subsequent timing
is the order of entry and has implications on market share. The process of bringing the innovation to the
market could be done by one or more of inventor pioneers, product pioneers and
market pioneers. Inventor pioneers such as Sony for Betamax technology format
for video recording could later become product pioneers and market
pioneers. Product pioneers such as Xerox
Corp who is not the inventor pioneer for photocopying could be market leaders. Firms which are neither inventor pioneers or
product pioneers could still be market pioneers;
Coca-Cola
was invented by John Pemeberton, a pharmacist; product developed by Asa Griggs
Candler and market pioneered through the bottling concept by Ben Franklin
Thomas and Joseph Whitehead.
Third is the impact to the firm and the
customer. Impact is measured on cost
dimension, accessibility to customers and quality improvement. Impact on
product leadership, operational excellence and customer intimacy could also be
assessed. For discontinuous innovations, their success is assessed based on its
impact in the market place or to the firm.
As such new products can be having significant differences and show an
impact or new products may show no differences in functionality / performance
but show an impact; both situations can be regarded as product
innovations. The point to note is that
the differences should be felt in the product and not just with the idea.
Sometimes firms could come up with great ideas but not so good product
innovations.
Fourth is the growth of the product category
or product line net of cannibalization. Fifth is the effectiveness of the
organization in the innovation exercise and one key metric is ‘ability to work
productively with internal partners’.
Sixth, product innovations can also be assessed
with respect to the risk and reward of the market. Table 4 (Appendix) indicates
the outcome strategic sense under low and high risk and reward conditions.
Firms need to be careful in not missing out opportunities, encourage a couple
of big bets to demonstrate commitment to innovation, foster innovation through
options and no regrets moves, and wait
for the appropriate product-market opportunity by reserving the right to
play. Opportunities could be either
market arisen or technology arisen. Market arisen opportunities could from need
gap analysis such as a stain removal detergent; changing needs, wants, tastes
and preferences such as in the ready to eat market; perceptual reality changes
such as those that occur with innovative business models, problem analysis and
solution finding; constraints on customer usage or consumption such as those
with the shampoo sachet in emerging markets. Technology arisen opportunities
could emerge from state of art advancements, successive generations of
technology, new technologies.
Organizations can even develop custom made metrics to assess the success
or impact of an innovation that include innovation appropriateness or
usefulness and novelty (Sethi et. al 2001); adherence to budget and speed to
market (Sarin and Mahajan 2001).
EMPIRICAL STUDY OF
PRODUCT INNOVATION
Innovation efforts of Philips & Co. are
studied through desk research (this section) followed by a primary interview
with the CEO of Philips Innovation Campus, Bangalore, India (section 8.0.) as the
empirical aspect of this paper.
Business Background
Royal Philips of the Netherlands is a
diversified technology company, the foundation of which was laid in 1891 with
light bulbs, by Gerard Philips and Frederik Philips at Eindhoven, the Netherlands
and within a few years was one of the largest producers of light bulbs in the
world. In 1914, Philips established its first research laboratory, with its
first innovation in x-ray and radio technology (X-ray discovery was first made
by German physicist Wilhelm Conrad Rontgen in 1895 and the radio technology
patent goes to Serbian-American scientist Nikola Tesla in 1897 and tuned
telegraphy patent to Italian physicist Guglielmo Marconi in 1898). The vision
of Royal Philips is to improve the lives of 3 billion people a year by 2025.
Their mission is to improve people’s lives through technology enabled
meaningful innovation, where mission is a journey and not a destination. The
brand promise of Philips is ‘sense and simplicity’ with innovation and people-centric
approach being the core of the company symbolized by the tagline ‘innovation
and you’ (www.philips.com ).
Philips Research
Philips Research is a global organization
that helps Philips introduces meaningful innovations that improve people’s
lives. Philips Research is part of Philips Group Innovation
(PGI)
that enables business partners and creates new business options. PGI encompasses
Philips
Research,
Philips Innovation Services, Intellectual Property and Standards, the Philips
Innovation
Campus, Healthcare Incubators as well as Philips Design (www.philips.com
).
Target Markets and
Focus Areas of Philips Research
The meaningful innovations of Philips
Research touch consumer and professional markets in three areas – healthcare,
consumer lifestyle and lighting. Global trends and challenges in these three
areas include the demand for affordable and sustainable healthcare systems,
energy efficiency imperative and people’s desire for their personal well-being.
In healthcare the patient is at the center
of everything they do and they target both developed and emerging markets with
applications in cardiology, oncology and pre-natal care. The focus areas in
healthcare include diagnostic imaging, image guided intervention and therapy,
patient care, clinical decision support, home and personal healthcare, healing
environments and services.
In the area of lighting with 19% of global
electricity consumption, they deliver innovative and energy efficient solutions
and work on alternate energy and smart technology solutions to address growing
energy needs. Focus areas in lighting include LED conversion and systems,
advanced light delivery, light and energy management, lighting services and
light for health and well-being.
In consumer lifestyle their innovative
capacity is to translate customer insights into meaningful technology and
applications that improve the quality of people’s lives enabling them to be
healthy, live well and enjoy life (http://www.philips.com).
Nature of Innovation
and Elements of the Innovation Process System at Philips Research
The innovation philosophy of Philips
research includes putting people at the center and involving them in their
research and development and scientifically validating the research to fit best
to existing needs of market. Philips is positioned at the front-end of the
innovation process ranging from spotting trends and ideation to translating
unmet needs into proof of concept and where needed first-of-a-kind product
development and technology enabled solutions. Ideas are shaped into concepts
that are field tested with partners, customers and end users from all over the
world. They work effectively across scientific and organizational boundaries in
crossdisciplinary global teams that have experts in psychology, sociology,
product technology and information technology and are a key player in today’s
innovation eco-systems. They also embrace open innovation with firms that are
complementary to Philips and share their vision by actively leveraging their
core competencies, know-how and IP to create win-win propositions. In open
innovation, they use both ‘inside-out’ innovation or making Philips research
resources available outside and ‘outside-in’ innovation where they use outside
research resources from all over the globe; they are recently also exploring
strategies like crowd-sourcing and social networking to come up with new technical
solutions (http:\\www.philips.com).
Illustrations of
Product Innovations at Philips Research
Philips
Research focus on meeting global demands
but at the same time fulfill local needs; come out with surprising and
break-through innovations that include lamps, radios, televisions to medical
equipment, electric shavers and semiconductors. A few examples of their
innovations and standards include Rotalix X-ray tube, high pressure mercury
lamp, the triple headed dry electric razor, the compact cassette, the
Brilliance 40 slice CT scanner, CD, DVD and Ambilight TV (http://
www.philips.com ).
The most recent innovation of Philips
Research includes the world’s most energy efficient LED lamp at 200 lumens per
watt – the TLED prototype lamp. The LED bulbs have two problems; first they are
less energy efficient and second they generate a very cool light. The TLED bulb
uses a different combination of LED elements (two blue and one red element) to
produce warm light of around 3,000 to 4,000 Kelvin, with more than twice lumens
per-watt as Philips' current LED bulbs.This theoretically means that a 7.5-watt TLED could generate as much light
as a 100-watt incandescent bulb. The lamp thus combines efficiency, brightness
and warmth and is to come into the market in 2015, but it'll be initially
targeted primarily for office and industrial application and is a potential
replacement for CFLs (http://www.engadget.com). Philips innovations also
include EPIQ or Philips proprietary nSIGHT imaging architecture for ultrasound
images.
Another interesting product innovation is
the woodstove; the secret to the efficiency of the stove is a long life
brushless fan that forces a controllable flow of air through the stove from
below. The fan improves the fuel to air ratio helping the stove reach cooking
temperatures in as little as a fifth of the time taken by a traditional three
stone fire.
Philips Innovation
Campus in Bangalore, India
The Bangalore innovation campus is a global
development center using local talent and eco-systems with Bangalore being a
vibrant innovative hub for all information technology and electronics related
development. The mission of the
Bangalore campus is to become the ‘Philips innovator of choice’ in India for
front-end contributions to health care and energy with around 80% of activities
in healthcare and 20% on energy topics. In health they provide end-to-end
solutions, covering requirement definition, architecture design, development,
integration and testing as well as on-site consultancy. Specific areas include
cardiology, prenatal care, oncology, women’s health. The product line includes
technologies in X-ray, ultrasound, magnetic resonance, computed tomography,
nuclear medicine, radiation oncology systems, patient monitoring and resuscitation
products. In energy they are involved in solar photovoltaic based lighting
solutions for hotels, digital power for lighting and energy investigations.
They work in multidisciplinary teams with partners inside and outside Philips
that include acclaimed research institutes, universities and hospitals in
Bangalore area and have close partnerships with the relevant business units of
Philips. They adopt a market oriented
‘outside-in’ approach to gather insights into the needs of emerging markets in
India. Their approach is laid out in the slogan ‘fueling growth through
technovative diversity’. Their research
includes automated test framework for selection of smaller test suite on
deployment of COTS (commercial off-the-shelf) upgrades; application profiling for
dynamic power management on Nexperia platforms, oral cancer screening for rural
India. On ‘Innovation day 2007’ they showcased a flexible and powerful
workstation – ‘Imalytics’, for obtaining valuable results in medical imaging
based research that allow to go from images to insights in an intuitive and
efficient way. Some of their recent innovations showcased in 2014 are (i)
Mobile Obstetrical Monitoring (MOM) a prototype scalable tele-health solution
for early high risk pregnancy detection in regions where increasing maternal
mortality is a concern (ii) Air purifiers to manage indoor air quality (iii)
ICCC delineated below (iv) Solar DC Grid a new LED based solution that realizes
an efficient link between a renewable energy source and an efficient luminaire
(v) power over ether-net connected lighting system
(http://www.newscenter.philips.com).
The Indian healthcare environment is
currently having lack of qualified critical care experts and access to quality
critical care especially for people in smaller towns and villages, since only
the most critical patients of a hospital are housed in ICUs. Although bedside
care providers are present in the ICUs, monitoring all the patients all the
time, including multiple high-acuity patients is a big challenge. The
IntelliSpace Consultative Critical Care (ICCC) solution of Philips Innovation
Campus, Bangalore, India is extremely useful for the needs of the community.
The solution focuses to empower and provide the best, specialized advice to the
onsite clinical staff and work collaboratively with all other specialists. It
is an advanced clinical decision support and documentation solution with the
command center designed to manage many more patients by critical care experts
who are miles away without having the patients to move to bigger cities. ICUs
of remote hospitals can be connected to ICUs of major hospitals in cities
through online data and real-time video images of patient conditions. ICCC thus
enables critical care access to the masses, with improved clinical and
financial outcomes. It addresses the
challenge of growing shortage of qualified physicians and nurses, while
significantly improving the quality of care.
Assessment of
Innovation at Philips Research
Philips research believes to see the impact
of their innovation in really making a difference to people and empower people
to improve their life.
PRIMARY INTERVIEW AT
PHILIPS INNOVATION CAMPUS, BANGALORE, INDIA
Subsequent to the desk research, an interview was obtained
with The Chief Executive
Officer,
to elicit the opinions and judgments with regarding to the innovation processes
at Philips Innovation Campus, Bangalore, India. Laid below is a summary of the
understanding obtained.
The innovation process at Philips,
Bangalore has been quite successful in recent years with innovations to local
area problems in the Indian region, that includes the (i) Tele-ICU that has
been termed as the ICCC in the section above; (ii) the Tele-ECG which is a
first of its kind device; and (iii) the ultrasound scanner with both (ii) and
(iii) having off-the-shelf tablets as their display units. The Tele-ECG had an
idea to market time of 18 to 20 months; the Tele-ICU a bottom up innovation,
developed along with Indian customers in agile mode had a time to market of
around 8 months. All the three innovations have good potential for reverse
innovation.
The innovation process broadly consists of
two phases; the first being an ideation phase that starts with an identified
problem and works towards a prototype; the second being the product creation
process itself till the product innovation reaches business potential. The
ideation process is supported by hackathon like events one or two times a year
with around 20% to 25% of the organization engineers participating in teams who
may take a green-field approach.
The philosophy of innovation at the Philips
Innovation Campus is to work towards better products for customers with no
compromise on quality and reliability even though the cost of the product turns
out to be higher. It is an understanding that the author gained that the
company finds customers at higher prices especially for high technology
innovations; the concept of frugality is applied by boxing the product creation
process with high resource / budget constraints in addition to time to market
constraints giving freedom in engineering and technology in the innovation
attempts to solve the customer end problem.
An important aspect of the innovation
process is the mindset and culture required for innovation. Indian engineers
are smart and at Philips they show deep firm loyalty with very low attrition
levels. Consequently their knowledge and skill base within the firm and the
range of experience given to the engineers is considerable; in addition the
engineers who have a passion to innovate are taken in to the innovation teams.
Hence, an environment of innovation is created and the firm has established
relationships in the Indian eco-system especially with universities and health
care professionals who work along with the engineers in the innovation
process.
The firm assesses the success of its
innovation in the scale of ideas and required enthusiasm generated; the
Innovations in Designs and Patents filed; translation of ideas to prototypes
and to business processes and how well the product innovation is doing in the
market place. The processes of idea to prototype and the product creation
process subsequent to prototype are seen as twin processes rather than
attributing an increased weightage to any one of them keeping in mind that for
successful innovations to happen the innovation ideas should flow through. As
of the present time, market driving forces are on the increase and the business
environment is posing its own constraints that innovation processes should take
care. There is an increased understanding that innovations is just not about
product innovations, innovations in end to end solutions and business models
are also equally important for business success; second the firm needs to stay
ahead in innovations to succeed; third the innovation success is driven by how
good the user experience has been; fourth the success at Philips has also been
due to excellent response time and maintenance of high up time in customer
service of its product innovations; these could be keys to monetize
innovations. Lastly superior value delivery and value maximization to the
customer is what drives the innovation process.
IMPLICATIONS FOR
MARKETING STRATEGISTS
Innovation is a driver of competitive
advantage. Innovations are about ‘newness’ and ‘differences’ in market
offerings and / or market delivery and strongly supports the generic
competitive advantage and strategy of ‘differentiation’ as in feature rich
cameras and computing and telecommunication devices. However for an innovation
to succeed as a competitive advantage there should be a fructification of the
innovation advantage through appropriate competitive marketing strategies. Some
useful competitive marketing strategies include timely innovations, alignment
of the competitive value proposition with the innovation advantage, product
assurance through quality certifications, building extraordinary features at
bearable prices to achieve superior value, customer focus to technology
development, good after sale service to avoid customer dissatisfaction, good
price promotions to achieve competitive transaction.
Innovations could also lead a firm into the
value discipline of ‘performance superiority’ as has happened with Intel in
microprocessors. Innovations could also lead to the generic competitive
strategy of ‘cost leadership’ if innovative cost effective ways or methods or
raw materials are discovered; plastics came in as a less expensive substitute
to steel in the household utensil industry. Synergies are a possible
competitive advantage and strategy when technological innovations could spin of
multiple businesses as in the field of microelectronics that could spin off
into consumer electronics, industrial electronics, defense, computing and
communication. First mover advantages are possible with innovations as with
market pioneers such as Coca-Cola. The ‘newness’ and / or ‘differences’ have to
deliver superior benefits to firms and / or customers in a timely fashion that
is relevant to customers and / or firms to make innovation meaningful and
result in superior customer value and improved financial performance of the
firms.
Innovation
requires change as much as it leads to a process of change in organizations.
Overcoming resistance to change in organizations for purposes of innovation
includes adequate performance measurement system, willingness to collaborate
with others and an ability to tolerate failure. It can be surmised that
creativity is to the individual level as much as what innovation means to the
firm level. Obviously a unification of minds from the individual to the group
and from the group to the firm is required for creativity to transform into
successful innovation for the organization.
Marketing strategists need to obtain deep consumer insights to foster
the process of innovation to realizable customer value. Innovation strategies
need to be multi-faceted to include technology realizations, people synergies
including networks / cooperation among firms in the same value chain,
customization of organizational hierarchy for innovation. Innovations can be protected through patents,
copyrights, tacit knowledge, integration or appropriate contractual
arrangements as in franchises as deemed required.
Firms have different objectives to
innovation depending on their resource positions of capital and intellectual
capital as well as the capabilities of their firms; firms’ objectives are also
impacted by the market environment including demand patterns, technological
change and competitive pressures (Hoonsopon and Ruenrom, 2012). For innovations to be competitive, firms need
to be concerned about advantages in design, quickness to market, shortened
product development times, constant upgrading that includes flexibility in
R&D processes and technological leapfrogging. Six design innovation
strategies were identified in Taiwanese computer and electronic
enterprises(Hsu, 2011) – reducing production costs, simplifying manufacturing
and maintenance, adding product value, uplifting product quality, improving
product design and development, and enriching marketing information gathering
and responsiveness. Market orientation has been shown to be positively related
to product innovation and proactive market orientation is needed for
innovations to succeed (Han et. al, 1998; Lukas and Ferrell, 2000; Narver et.
al, 2004) and firms need to devote time to non-customers as well as customers
to be able to bring out innovation successes (Drucker, 1999). The innovator’s
dilemma (Christensen, 1997) suggests that successful companies can put too much
emphasis on customers' current needs, and fail to adopt new technology or
business models that will meet customers' unstated or future needs and such
companies will eventually fall behind; this is especially so when disruptive
technologies emerge. Customer co-creation could help in generating
break-through innovations.
Further budgeting for R&D is an
important area that needs top management attention, both in terms of the number
of projects that can be pursued by R&D simultaneously as well as the budget
per R&D project. R&D investments will have to be tuned to cater to
optimal base cost of the product from the design stage to the production stage
and optimal transfer cost from the production stage to marketing of the
product.
A business’s product development efforts
should include a successful product innovation strategy coupled with a technology
strategy for the company with an effective business leadership (Cooper and
Edgett, 2010). A product innovation
strategy should be part of an overall firm’s marketing strategy with goals and
objectives emanating from the mission and vision of the organization; optimal
resource allocation and explicit project selection, a deliberate selection of
competitive advantages or strategic thrusts to be pursued, a clear product
strategy with detailed examination of end user functionality requirements, an
implementation team for the product strategy and feedback and incentive
mechanisms put in place.
Marketing strategists can also consider and
examine other types of innovation in the marketing offer. Avon demonstrated
distribution innovation with its door to door selling operations for its
cosmetics to challenge leaders such as Revlon, Estee Lauder who were well
established in retail space; it also distributed its products through the
multi-level marketing system thereby creating sales and distribution system and
not just a sales system (extension of the hawker type selling). Airlines are as
of recent times postulating and using dynamic pricing which is a kind of temporal pricing whose
argument is dynamic load factor; this is a pricing innovation (which is a kind
of preferred pricing or preferred rates as is used in the hotel industry). In
the cellular communication industry, Tata DoCoMo, India was the first in India to break the
per-minute charge for air time, by introducing the per second tariff which is a
pricing innovation; as of 2014, 40% to 60% of subscribers of most cellular
operators, now use the persecond tariff plan (Business Today, 2014). The use of
SMAC (social media, mobile, analytics and cloud computing integrated) for
marketing and retail environments is a communication innovation (this is an
extension of the earlier concepts of integrated marketing communications). In
short in such situations, the concept of innovations is to come up with
ingenious and clever combinations of existing technologies to come up with new
applications in a fast changing world.
Innovation also links itself with shared
value and co-created value. Shared value refers to an over-riding social model
that embeds a business sub-model whereas corporate social responsibility refers
to a principle business model that includes a social sub-model that could even
be a social cause. Shared value refers
to economic principles of market and socialism combined and hence is a kind of
market socialism that lies in between market capitalism and socialism. Shared
value conceptualization hinges on appropriability of value in a shared manner
between the business firm and the society, whereas co-creation hinges on the
identification and creation of value with the consumer as an active partner to
the firm. Co-creation could act as a basis of shared value business principle.
Innovation creates and generates value and could reflect in both co-created
value and shared value. Ultimately the purpose of innovation is for improving
and increasing the delivery of superior meaning and superior value to the
customer while making it relevant, different or new and valuable from the
customer’s stand point, simultaneously achieving organizational goals and
objectives.
ACKNOWLEDGMENTS
The author thanks the CEO, Philips
Innovation Campus, Bangalore, India for giving a primary interview, the inputs
of which has been recorded immediately after the empirical desk research.
APPENDIX
Innovators
Early adopters
Figure 1: Adopter categories based on relative time of
adoption of innovations
APPENDIX ….
(Continued)
Table
1: Distinctive types of
innovation
______________________________________________________________________________
Existing
technologies Radically new technologies
Creation of new markets
(newness)
Disruption of existing
markets successive generations
of disruptive
technology;
jugaad;
innovation frugal
engineering
|
No disruption
of existing markets
|
evolutionary
application revolutionary innovation
|
|
|
(scalloped
product life cycle);
|
|
Existing markets
(differences)
|
|
|
Just noticeable
differences
|
Incremental or
continuous discontinuous
innovation
|
|
|
innovation;
improvisation
|
|
|
and adaptation
innovation
|
|
Significant differences
|
Evolutionary
innovation Substitute
|
|
New Competitive space
|
------Value innovation or Blue ocean
strategy -------
|
______________________________________________________________________________
APPENDIX …. (Continued)
Table
2: Examples of distinctive types
of innovation
______________________________________________________________________________
Existing
technologies Radically new technologies
Creation of new markets
(newness)
Disruption of existing markets 8 bit microprocessor to iPod versus Walkman
64 bit microprocessor or DVD versus
VCR Jaipur leg (Jaipur foot)
No disruption of existing markets spreadsheet for project calculators vs. slide rule
management; Nylon
(scalloped product
life cycle)
Existing markets
(differences)
Just noticeable
differences Versioning; generics Synthetic engine oil; generic
innovations
Significant
differences Personal
computers to tablets Plastics
vs. steel
New Competitive space Shampoo
sachet versus bottle Digital Piano
______________________________________________________________________________
APPENDIX ….. (Continued)
Table 3: Types
of Product Innovation
______________________________________________________________________________
Dimension of
innovation Example
______________________________________________________________________________
a. Installation
& commissioning DIY
kit
b. Manufacturing
/ mass customization Color
mixer – Jenson and Nicholson
c. Servicing Maintenance
free battery
d. Repair Modular
design - Computer
e. Style Fashion
watches - Swatch
f. New
Solutions Business
Intelligence, data mining
g. Idea
Applying
thought slogan – WIPRO, India
h. Usage Disposables
– razor, diapers
i.
Packaging
Tetra
pack
j.
Form Liquid
face wash
k. Size Sachet
- shampoo
l.
Formulation
Gel
pen, Gel toothpaste, Gel shave cream
m. Business
model Apple
iPod
n. Benefit Antigravity
sleep system – restful sleep -
TempurPedic
o. Customer
responsiveness ATM / self-serving technology
p. Functionality GUI
(graphical user interface), menu driven
q. Performance Synthetic
engine oil
r.
Ingredient
New
molecule – Volcavir for Herpes
s. Material
Titan
super fiber low cost watches
t.
Technology
HDTV – high definition TV
u. Features
/ attributes Bluetooth
v. Customer
insight Gillette
Guard razor blade capable of reverse
innovation
w. Surrogate
reality Virtual
reality
x. Operational
enablement / intervention Automatic (car)
y. Mix
and match – morphological analysis Colors/paints; architecture, fast food
z. Cultural
adaptation McDonalds,
KFC, PepsiCo’s Aliva -
a lentils based snack that has global potential; capable of
reverse innovation
aa. Consumption
based Bronchial auto halers bb. Fit
and finish Melamine unbreakable
crockery cc. Building products
Generics dd. Time to prepare Ready
to eat, instant coffee ee. Service time On time arrival of aircraft
ff. Brand
Private
label, co-branding, symbiotic marketing
gg. Engineering
design Bajaj’s
Twin spark technology in two
wheeler
______________________________________________________________________________
APPENDIX …. (Continued)
Table 4: Risk
Reward matrix for innovations
Risk and Reward of the
market Strategic
Sense
|
High
risk, high reward
|
Big Bets, Shapers
|
|
High
Risk Low Reward
|
Options or no regrets move / robust
decision making
|
|
Low
Risk, High Reward
|
Opportunity
|
|
Low
Risk, Low Reward
|
Reserving the right to play
|
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