Innovation by Prof. Vijay Tandon, Director - PGDM, Universal Business School
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Transcript of Innovation by Prof. Vijay Tandon, Director - PGDM, Universal Business School
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InnovationDisrupt or be disrupted
Vijay Tandon on Innovation @ UBS. course CMBA
Prof. Vijay TandonDirector - PGDM/PGCM/PGPMUniversal Business SchoolSubject - Innovation
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The only thing that is constant is changeThe only thing that is certain is uncertainty.
Change is driving the corporate to InnovateWhen everything is changing change everything!!!
Vijay Tandon on Innovation @ UBS
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What is Innovation???
The process of translating an idea or invention into products/services/process that creates value or for which customers will pay
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Defining Innovation - Customers perspective
How much change an Innovation causes in customers existing habits
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Defining Innovation – Customers perspective
DYNAMICALLY CONTINOUS
CONTINOUS INNOVATION
DISCONTINOUS INNOVATION
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Innovation - Customers perspective
Dynamically continuousFalls between Discont… & Contin….. Change in habits not as large as Discont & not
as negligible as continuous innovation
Continuous InnovationExisting product - Marginal change Doesn’t change customers habit in a big
way
Discontinuous InnovationNew to the world products Reshape market/competition
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Mobile phones drastically changed the way people Communicate
New to the world productsNew products are fundamentally different from existing products
Vijay Tandon on Innovation @ UBS
Discontinuous Innovation
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MANUAL TYPEWRITER ELECTRIC TYPEWRITER
DYNAMICALLY CONTINOUS INNOVATION
Progression from Manual to an electronic typewriter
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How to keep creativity going????
“ELIMINATE CREATIVE STOPPERS”
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Building an Innovative culture
Create a corporate culture - Promotes & rewards innovationWhat is the surest way to kill innovative spirit?Punish creators & pursuers of idea when they fail & reward - status quoCompanies encourage employees - take risks & have tolerant attitude - Innovate successfullyEmployees - allowed to meet people outside their industries, attend conferences & visit labsOrganization design processes to make itself receptive to new ideas
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Organization wide support
To be Innovative - Organizations must change or die
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Senior management participation - Innovation
Culture builder
Personal involvement
Facilitating cross functional communication
Provide strategic direction
Commitment to investment in R&D
Facilitate formal & informal interactions between R&D & Marketing
34
26
5
1
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How to keep creativity going??
A
CB
Vision
Enthusiasm
Commitment
Commitments Decision Action
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The most Innovative company in the world
• Makes more than 55,000 products• Employs - 88,000 people• $ 30 billion in annual sales• Invests 20% of total revenues in developing new products, moved to 30% and 40%• Staff of more than 6,000 scientists worldwide• Company's policy - Allows employees to spend 15% of their time working on PP• Launches more than 200 new products annually• 3M’s Golden step award program
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INNOVATION - Disrupt or be disrupted..
Incremental/MarginalRadical
DISRUPT OR BE
DISRUPTED
Creating breakthrough
products
Product improvement Focus – Existing product
10% True Innovations
90 % Efforts
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A disruptive innovation is an innovation that creates a new market.
Disrupts an existing market displacing established market leaders.
What is Disruptive Innovation?
Clayton Christensen
Category Disruptive Innovation
Market Disrupted by Innovation
Academia Wikipedia Traditional encyclopaedias
Communication Telephony Telegraphy
Computing hardware Minicomputers Mainframes
Personal computers Minicomputers, Workstations. Word processors, Lisp machines
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VENTURESOMENESS
DELIBERATE/CAUTIOUS
TRADITIONAL
KOL
Diffusion of InnovationThe spread of an Innovation is called diffusion
2.5%
13.5%
34 %
16 %
34 %
Imp to target Innovators & adoptersRadical technology difficult to understandDiffusion may be slow initially
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Diffusion of Innovation
Willing to buy a new product
Key word is venturesome
Ability to take risk is higher than the rest of the target market
Comprise more than 2/3rd of the market
More cautious & skeptical about the New product
Social pressure move them to purchase
Cannot take the risk of buying first
Feel assured someone before them has bought & used the product
Follow the lead
Comprise more than 2/3rd of the market
Deliberate & cautious
Innovators (2.5%)
Early adopters (13.5%)
Early majority (34%)
Late majority (34%)
Last category of consumers
Key word is traditional
Comprise of older, less educated
Wait till NP becomes part of accepted tradition
Laggards (16%)
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How to commercialize an innovation?Whether to go all alone in the entire process of Innovation
Involve other organizations in performing some functions
License - Innovation
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Approaches to Commercialize InnovationApproach - One of the Important factor in deciding success or failure of new product
• Company manages all stages of Innovation process
• Uses of the assets & unique capabilities of its partners
• Reduce its time to market/reduce investments
• Profit from Innovations that are not linked directly to company's core strategies
Integrators approach
Orchestrator approach
Licensing approach
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Reasons for high failure rate of InnovationsGaps between the NPD team & prospective customers
Gap - Developers fail to understand customers perspective in adopting Innovations
Customer bias to - Overvalue the benefits of existing alternatives to a new alternative
Psychological gains
Energy efficient
Lower cost of operations
Doesn’t pollute the environment
Give up size
Convenience
Cruising range
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Reasons for high failure rate of Innovations
Development team likely to develop products they themselves believe inReference point of the customer & development teams do not matchDevelopment team is involved with the NPD - considerable period of timeDuring this period – Extremely familiar & comfortable - Idea of using new productMentally developed strategies to overcome any usage obstaclesNew product itself becomes the reference pointDevelopment team credits customers - more knowledge than customer actually posses
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Reasons for high failure rate of Innovations
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Disruptive Innovation
Lead players are focussed on improving features & benefitsStage comes - Avg. Customer doesn’t need such advanced features of a product – Unnecessarily payingDisruptive Innovator - Launches a product
Slowly product gets better
Eventually vast majority of users adopt the new product
The goal of disruptive companies is to challenge the conventional market and create a new one
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Product Adoption
Diffusion theory - At least Six factors have a bearing on the Adoption Process
Relative advantage
Compatibility
Trialability/divisibility
Observability
Complexity
Price
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INNOVATION - OPEN OR CLOSE?
OPEN INNOVATION
CLOSED INNOVATION
What is the future
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Open-Market Innovations
Licensing
Joint ventures
Strategic alliances
Customers
Vendors
Competitors
Objective is to increase output from – Innovation processVijay Tandon on Innovation @ UBS
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Open Market Innovations
Tetrapak collaborated with outsiders - Created breakthrough product - Tetra Recart
Sterilized paperboard containers - soups, sauces, fruits & vegetables
Tetra Pak collaborated - polymer & paper suppliers - capable of withstanding high temperatures & humidity
Worked - another company with expertise in sterilizing hospital equipment
Learned how to sterilize the food inside the package
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Open Market Innovations
IBM - earns a huge amount of revenues in royalties from the patent
Creative people motivated
Bellsouth – A telecommunications company - sells its technologies - Competitors
Competitors are going to develop any way
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Evolutionary (continuous or dynamic evolutionary innovation) - Incremental advances in technology or processes
Revolutionary innovations (also called discontinuous innovations) - often disruptive & new.
Innovation is synonymous with risk-taking & organizations - Revolutionary products/technologies take on the greatest risk- create new markets.Imitators take less risk because they will start with an innovator's product & take a more effective approach.
Innovations are divided into two broad categories
EVOLUTIONARY REVOLUTIONARY
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When you Innovate?To be a Pioneer or a follower
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Pioneer
Defines the rules of the game
High switching costs for early adopters
Distribution advantages
Influence on consumer choice criteria & attitudesPossibility of positive network effectsEconomies of scale & experience
Follower
Positioning mistakes
Product mistakes
Marketing mistakes
Take advantage of latest technologyAdvantage of pioneers limited resources
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Holds leading share – Office application software categories
Developed & Improved product - Better performance
Superior financial resources - Aggressively promoted
Commanding share - Operating systems market
Pioneers
Lotus 123 - Leading spreadsheet, Word-perfect
Financial difficulties
Acquired by IBM
Vijay Tandon on Innovation @ UBS