Innovation Theory

1. Understanding Innovation
1. Explain the difference between product, process, and service innovation

We can say that innovation relates to products, processes, and services.
Product innovation is about making beneficial changes to physical products.
Process innovation is about making beneficial changes to the processes that produce products or
services.
Service innovation is about making beneficial changes to services that customers use.
Each of the innovations just listed adds value; A key characteristic of a product, process, or service is
the degree of tangibility of the product and the degree of interaction with the end customer or
consumer. Unlike with products, the customer has a high degree of contact and interaction with
services.
Other Differences between products and services include the following:
_ Inventory: Products can be stored; services cannot.
_ Response time: Products have a longer lead time; services have a shorter lead time.
_ Resources: Products tend to be capital-intensive (e.g., machines), whereas services tend to be labor-
intensive.
2. Describe the difference between radical and incremental innovation

Radical innovation is about making major changes in something established. Incremental innovation is
less ambitious in its scope and offers less potential for returns for the organization, but consequently
the associated risks are much less.
Radical innovation has the advantage of creating a step change in growth. The disadvantage is the high
level of risk and high cost of failure. The advantages of incremental innovation are lower risk and the
possibility of achieving small degrees of growth. However, the disadvantage compared with radical
innovation is the slowness to reach growth targets before competitors, leading to a loss of competitive
advantage.

3. Explain the main causes of failure in innovation
The causes of failure have been widely researched and can vary considerably. Some causes will be
external to the organization and outside its influence of control. Others will be internal and ultimately
within the control of the organization. Internal causes of failure can be divided into causes associated
with the cultural infrastructure and causes associated with the innovation process itself. Common
causes of failure within the innovation process in most organizations can be distilled into five types:
Poor goal definition, Poor alignment of actions to goals, Poor participation in teams, Poor monitoring of
results, Poor communication and access to information.

2. Managing Innovation
Questions for exam:
1. Compare any two models of innovation
Second- Market pull model-Mid-1960searly 1970s
The implication of this second-generation model was that organizations expended resources through
their marketing departments to better understand what the customer wanted and then use this need as
a mechanism to pull appropriate innovations through the process. The eventual output of the pull
process was better alignment with specific market needs. The power also shifted from the R&D function
to the marketing function as technology was demoted to an enabler role.
Fifth- Integrated, networked model - Late 1990s
In the fifth generation greater focus is placed on networking, system integration, and agile
communication infrastructure. Todays innovation model must encompass innovation distributed across
geographically dispersed organizations and yet maintain the integration that ensures that systems
remain lean and efficient. The implications for innovation management are that routines should be
developed that nurture rather than constrain innovation development and that a balance between
structure and flexibility should be maintained.

2. List a number of barriers to innovation
Kelley and Littman (2001) identify what they call barriers: Hierarchy, Bureaucracy, Anonymity, Clean,
Experts.
Sheth and Ram (1987) outline additional barriers to innovation: expertise barriers, operation barriers,
resource barriers, regulation barriers, and market access barriers.

3. Processing Innovation
Questions for exam:
1. Show the main reasons why organizations invest in innovation
Every organization invests in innovation in order to change. Organizations put aside a proportion of
turnover to change products, processes, and services.
Goals of Innovation
1. Improved quality
2. Creation of new markets
3. Extension of the product range
4. Reduced labor costs
5. Improved production processes
6. Reduced materials
7. Reduced environmental damage
8. Replacement of products or services
9. Reduced energy consumption
10. Conformance to regulations

2. What are the key stages in the innovation process
The process of innovation can be described in terms of the interactions between four key subprocesses:
_ Idea generation
_ Opportunity recognition
_ Development
_ Realization.

3. Explain the innovation funnel
The innovation funnel provides a solution for effectively managing innovation by controlling the
interaction of goals, actions, teams, and results used in the innovation process. The funnel illustrates
how goals, actions, teams, and results interact with each other to deliver innovation in any organization.
7. Creating Ideas
Questions for exam:
1. Tools that can be used for generating ideas
The following popular tools can be used for defining problems, discovering solutions, and generating
ideas: causeeffect, brainstorming, ranking, failure mode effects analysis, and mind mapping.

2. Problem-solving techniques and innovation
FAILURE MODE EFFECTS ANALYSIS is the proactive Problem-solving method used to identify ways in
which a product, process, or service might avoid potential problems in the future. The technique
draws essential experience and information from design, marketing, production, purchasing, and
distribution in order to pinpoint the critical nature of potential problems and suggest preventive
action.

3. Explain the importance of lead users in generating new ideas
Lead Users are valuable sources of innovation because they encounter needs far in advance of the
majority of the market. Thus, lead users provide foresight into potential mass market needs and are
important for collaborative benchmarking, co-design, testing, and validation of new ideas. Many
organizations value the opinions of these lead users to the extent that they go to great trouble and expense
to solicit their views and observations.

9. Developing Products
Questions for exam:
1. Outline the key stages in the stage gate process for new product development
The stage gate process is a powerful tool for managing the new product development process (Figure 9.1;
Cooper, 2000). These stages include the ideation stage, preliminary investigation stage, detailed
investigation stage, development stage, testing and validation stage, and full production and launch
commercialization stage.
2. Define a number of ways to share investment in product development
Internal funding _company reserves built up over the years of profit and represented as an asset on the
balance sheet. Also Companies can use other ways to share Investment in product development-
External funding can originate from a number of sources, including government grants, bank loans,
business angels, venture capitalists, and strategic alliances
3. Outline a number of ways of protecting innovations
There are many mechanisms for protecting intellectual property, the four main ones are patents,
copyright, design rights, and trademarks.
4. Explain the product exploitation process
An innovation must add value to customers to make them purchase or consume the product or service or
perceive an improvement. An important part of the exploitation process is ensuring that the innovation
adequately fulfills prospective customers needs.

11. Leading Innovation
Questions for exam:
1. Explain the leadership role in the innovation process
Leadership in the innovation process is not the sole domain of the senior management team. Instead,
leaders must be present at all levels of the organization if innovation is to become systemic. A number of
critical roles where leadership is necessary to support the innovation process include gatekeeping,
sponsorship, championing, project or team leading, mentoring or coaching, and idea generation
2. Describe support roles played by individuals in the innovation process
In the process of innovation, many actions originate from the bottom up; that is, ideas are generated by
operatives, engineers, specialists, and users of a particular product, process, or service. What stimulates
this activity is often the leadership skills that determine direction, motivation, championing, and support
of the innovation process.

3. Explain how to develop an innovation culture
There are many factors necessary for developing an effective innovation culture in any organization,
including the following:
_ Goals are understood by all.
_ Risk taking is encouraged and accepted.
_ New ideas are welcomed.
_ Information exchange is open and shared.
_ Access to new knowledge is extensive and uncontrolled.
_ Good ideas are supported.
_ Innovations are recognized and rewarded.
_ People are given room to be creative.
_ There is a choice of structure.

16. Extending Innovation
Questions for exam:
1. Explain the concept of extended innovation
To be effective, innovation must take place in every area of an organization and, by association, in
organizational networks that include key suppliers, customers, and other strategic partners. Innovation is
needed to improve products and services that add value to customers. It also leads to more efficient
processes that help to keep costs competitive, enabling the capacity of more agile organizations to meet
unforeseen future challenges. Innovation in an extended enterprise may be visualized through each of the
individual funnels of pseudo-independent organizations used by the various innovation teams across the
network.
2. Describe a number of different types of innovation processes
Five types of innovation management systems can be identified: individual innovation, project
innovation, collaborative innovation, distributed innovation, and clustered innovation.
Individual innovation concentrates on the development of effective ways to enhance creative potential
from individuals. Collaborative innovation focuses on innovation at the organizational level and is
typically concerned with portfolios of projects. Distributed innovation is innovation that exists across an
extended organization. This level of innovation is defined by all of the collaborative, project, and
individual innovation funnels taking place in each of the pseudo-independent organizations within the
network. Organizations may undertake distributed innovation with suitable partners to share risk, reduce
costs, and access skilled staff or proprietary technology. Porter (1998) describes a cluster as an
interconnected geographic concentration of companies and institutions in a particular industry sector or
field. Such clusters rarely share innovation of a detailed nature across dedicated portals. Rather, they offer
information through simple Web sites and a network of relationships, mainly between individuals.
The key attributes of an innovation cluster include the following
(Smith, 2006):
_ Geographic concentration
_ A high degree of specialization
_ Large numbers of small to medium-sized enterprises
_ Ease of entry and exit
_ High rate of innovation and change
3. Describe a hierarchy of innovation management processes
They are the building blocks for all the innovation taking place in various departments and strategic
business units across an extended organization. Such a hierarchy can be extremely complex where
organizations have free rein over how they pursue their goals. On the other hand, they can be simple
where there is strong senior management direction and strict routines and protocols for structuring and
sharing innovation related information.