Types of Innovation Types of Innovation Incremental Innovation Architectural Innovation Modular...

Types of Innovation Incremental Innovation Architectural Innovation Modular Innovation Radical/Disruptive Innovation

time

PerformPotential

emergent growth mature decline

First Mover / Follower

Characteristics Emergent Growing MatureRevenue Growth Fast (?) Moderate SlowStability Low Moderate HighUncertainty High Moderate LowIndustry Rules ?? Fluid FixedCompetitiveness Low Moderate High

Type of Industry

Advantages Disadvantages

Advantages◦ Create the standard◦ Low-cost position◦ Intellectual property◦ Tie up resources◦ Increase switching

costs for producer◦ Increase switching

costs for customer

Disadvantages◦ Advantages can be

short-lived◦ Higher development

costs◦ Competitors violate

intellectual property◦ Greater uncertainty◦ Consumer

reluctance

Pioneers gain significant sales advantages but incur larger cost disadvantages relative to a fast follower entrant

ROI pioneers < ROI fast followers First mover more likely to attain strategic

resource (Starbucks busy corner strategy)

With insufficient information early entrance can lead to large costs

Too long, firm may lose the first-mover advantage

Cas

h F

low

Innovation No Competition Low Competition Strong Competition

Window of Opportunity

First MoverFollower

Beta vs VHS Prodigy, CompuServe, AOL When is a first mover strategy called for ?

Innovation EasyMarkets Underserved

What issues would you like to see solved? Break in groups of 3 or 4

Complements to a product◦ Hot dogs & mustard◦ Starbucks and Barnes & Noble

Partnerships◦ Calyx & Corolla partners FedEx (floral delivery)◦ MicroSoft & Mac – spreadsheet & graphical apps

(allowed MicroSoft to exploit Apple’s graphical interface & create windows)

Innovation is commercialized invention 6% of independent inventions make it to

market Success rate for inventions in established

firms 4 times as high Invention to Venture can be a long road

(Chester Carlson invented photocopier in 1942. Xerox introduced first copier in 1960).

Importance Radicalness Patent Scope

Importance◦ Magnitude of economic value of invention

Radicalness◦ Market effect of the commercialized invention

(disruptive innovation) Patent Scope

◦ Breadth of intellectual property protection

Chapter 5: Figure 5.7

Disruptive or radical innovations introduce a set of attributes to a marketplace different than the ones that mainstream customers historically have valued, and the products often initially perform unfavorably along one or two dimensions of performance that are particularly important to those customers.

Current performance of the innovation

Range of performance required in the mainstream market

Expected Trajectory

Now Time

High

Performance

Low

The Expected Trajectory of a Disruptive Innovation

Innovation StrategiesInnovation Strategies

55

Technology Ventures: From Idea to Enterprise

New Technology

New Invention

CharacteristicsImportanceRadicalnessPatent Scope

Avail Resources Commercialize

New Firm

Capabilities /Knowledge of

EntrepreneurialTeam

CharacteristicsOf

Industry

No Yes

Innovation based on invention & creativity and is defined as invention that has produced economic value in the marketplace.

Innovation based on commercialization of new technology◦ Skis – Snowboards◦ Schwinn bicycles to mountain bikes

Weird Video

Lead users ◦ Product ideas but not average users◦ Sliced peanut butter

Build it & they will come (often fails)◦ Assumes customer will do what they say

(fertilizer vs organic fertilizer) Market analysis

Describe The Problem

Incubateobserve problem

Brainstorm

InsightsInventive think

Build / TestPrototype

Evaluate / TestIdeas

Start

Neither the first companies to use technology nor the companies with the best technology win

Companies with right application for the technology win

Technology Factors• Feasibility• Performance• Manufacturability

Business Factors• Vision• Target Market• Value Proposition

Strategy• Industry/Competitor Analysis• Expected Competitive Adv.

Expected Economic Results• Revenue / Profitability• Return on Capital• Time to profitability