Innovation and Innovation and New Product New Product DevelopmentDevelopment

Product StrategiesProduct Strategies

Ing. Ľubica KnoškováIng. Ľubica Knošková

What is Innovation? What are What is Innovation? What are the benefits?the benefits?

Spheres of InnovationSpheres of Innovation

Breakthrough Breakthrough Radical Radical Innovations that Innovations that Changed Our LivesChanged Our Lives

Personal ComputerPersonal Computer

InternetInternet

Microwave OvenMicrowave Oven

PhotocopierPhotocopier

Fax MachineFax Machine

Birth Control PillBirth Control Pill

Home VCRHome VCR

Bar codingBar coding

Integrated CircuiIntegrated Circuitt

Navigation SystemsNavigation Systems

Answering MachineAnswering MachineLaser SurgeryLaser SurgeryApollo Lunar SpacecraftApollo Lunar SpacecraftOrgan TransplantingOrgan TransplantingFiber-Optic SystemsFiber-Optic SystemsDisposable DiaperDisposable DiaperMS-DOSMS-DOS

Product Innovation Categories Product Innovation Categories (producer view)(producer view)

11stst – new to the world products, brand new products on the world – new to the world products, brand new products on the world marketmarket

Polaroid camera, in-line skates, word-processing softwarePolaroid camera, in-line skates, word-processing software

22ndnd - - new to the company - new to the company - new category entries, new range of new category entries, new range of products that allow company to enter new marketproducts that allow company to enter new market

Hewlet-PackardHewlet-Packard:: mainframesmainframes, PCs, PCs

33rdrd - additions to product lines, new products that extend company - additions to product lines, new products that extend company product portfolio product portfolio

chocolate bar – frozen, nonalcoholic beer, chocolate bar – frozen, nonalcoholic beer, new categories of carsnew categories of cars

44thth - product improvements, new products that are improvements of - product improvements, new products that are improvements of old ones or their replacementsold ones or their replacements

Windows 98,2000, yogurt drink, cars-design facelift, new generation of carsWindows 98,2000, yogurt drink, cars-design facelift, new generation of cars

55thth - new markets for existing products - new markets for existing products66thth – price decrease – new products which fulfill old function with – price decrease – new products which fulfill old function with lower pricelower price

Basic Principles of InnovationBasic Principles of InnovationInnovation appears to have its origin in Latin Innovation appears to have its origin in Latin „Innovare“ – „Innovare“ – – meaning to renew, to make new or to alter, new way of doing meaning to renew, to make new or to alter, new way of doing

thingsthings

Innovation characteristicInnovation characteristic: : – Process from idea generation to commercializationProcess from idea generation to commercialization– The adoption of change, The adoption of change, – Radical change in traditional ways vs. incremental change, Radical change in traditional ways vs. incremental change, – New device or something new to societyNew device or something new to society

There are many products, processes, services, organizational There are many products, processes, services, organizational structures, ideas, technologies behaviors that have been structures, ideas, technologies behaviors that have been awarded the title of „awarded the title of „innovation“ innovation“ becausebecause– They improve our quality of lifeThey improve our quality of life– They have radical impactThey have radical impact– They are newThey are new– They are not new, they are old things in new forms or They are not new, they are old things in new forms or

combinations of existing formscombinations of existing forms

Common Definitions of Common Definitions of InnovationsInnovations

An innovation is successful implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations.

A creative process in which two or more existing things A creative process in which two or more existing things are combined in some novel way to produce unique new are combined in some novel way to produce unique new thingthingSuccessful implementation of creative ideas within Successful implementation of creative ideas within organization. organization.

Innovation = Invention + usage, development of invention Innovation = Invention + usage, development of invention to success in the marketto success in the market, product with commercial value, product with commercial value

Everything that changes the potential of already existing Everything that changes the potential of already existing sources of wealthsources of wealth

Management process that requires specific tools, rules, Management process that requires specific tools, rules, and discipline.and discipline.

Some Common Definitions of Some Common Definitions of InnovationInnovation

A novel new device, concept A novel new device, concept based on creative based on creative ideaidea

A complex set of activitiesA complex set of activities from the conceptualization of a new idea to from the conceptualization of a new idea to its reduction to practiceits reduction to practice

The adoption of a change that is new to the organization, group, or The adoption of a change that is new to the organization, group, or societysociety

Anything that is new as it is different from the existing formsAnything that is new as it is different from the existing forms

Anything perceived by the individual or user as newAnything perceived by the individual or user as new

SchumpeterSchumpeter’s Understanding of ’s Understanding of InnovationsInnovations

The term innovation is linked to American professor of Austrian The term innovation is linked to American professor of Austrian origin Jorigin Joseph oseph A. SchumpeterA. Schumpeter– in the beginning of 20th century he analyzed business conditions in in the beginning of 20th century he analyzed business conditions in

which the companies conduct the combination of development changes, which the companies conduct the combination of development changes, that he called „innovation“.that he called „innovation“. In the Theory of Economic Development he In the Theory of Economic Development he defined economic innovation.defined economic innovation.

Schumpeter defined 5 typical changesSchumpeter defined 5 typical changes, , that lead to that lead to development:development:– Introduction of brand new product into the marketIntroduction of brand new product into the market– Instalation of brand new technology, brand new processesInstalation of brand new technology, brand new processes– Utilization of brand new raw materialsUtilization of brand new raw materials– Changes in organization of Changes in organization of an industry (creation of monopoly position or an industry (creation of monopoly position or

breaking up monoply positionbreaking up monoply position– Opening of brand new marketsOpening of brand new markets

Schumpeterian view on InnovationsSchumpeterian view on Innovations

A Schumpeterian perspective tends to emphasise innovation asmarket experiments and to look for large, sweeping changes that fundamentally restructure industries and markets. Mainstream or neoclassical economics views innovation in terms of asset creation as well as market experiments. In this view, innovation is an aspect of business strategy,or part of the set of investment decisions to create capacity for product development or to improve efficiency

Types of InnovationsTypes of Innovations

a) a) by by charactercharacter– TTechnechnologicalological innovations innovations

productsproductsprocessesprocesses

– technology,technology,– administrationadministration

– Social innovationsSocial innovations: leasing, insurance: leasing, insurance

four types of innovations are distinguished and measured in EU (defined in Oslo manual) :

- product innovations, - process innovations, - marketing innovations and - organisational innovations.

Types of Innovations (Oslo Types of Innovations (Oslo manual of EU)manual of EU)

Product innovation is the introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses. This includes significant improvements in technical specifications, components and materials, incorporated software, user friendliness or other functional characteristics.

Process innovation is the implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques,equipment and/or software.

Marketing innovation is the implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing.

Organisational innovation is the implementation of a new organisational method in the firm’s business practices, workplace organisation or external relations.

Types of InnovationsTypes of Innovations b) by b) by motivationmotivation– means generated - means generated - technology pushtechnology push – –

innovation based on invention, arise from innovation based on invention, arise from technical capability of the company, the technical capability of the company, the company role is to find the market or create company role is to find the market or create the needthe need

– needs generated needs generated demand pulldemand pull – innovation – innovation based on solving existing customer based on solving existing customer problem, responproblem, responsse to documented need or e to documented need or demand. demand.

Questions to ask for evaluatingQuestions to ask for evaluatingTechnology push opportunitiesTechnology push opportunities

What is the level of technical uniqueness of the solution? Is it easy to What is the level of technical uniqueness of the solution? Is it easy to copy?copy?

Does this solution increase product value? How big is the increase?Does this solution increase product value? How big is the increase?

Can the new solution be patented? Can it be sold as licence? Can the new solution be patented? Can it be sold as licence?

Is it possible to produce the proposed solution on state-of-the-art Is it possible to produce the proposed solution on state-of-the-art technology means or it will request investment into new technology?technology means or it will request investment into new technology?

What will be the lifecycle of the product?What will be the lifecycle of the product?

Is the new technical solution risky? What is the degree of risk?Is the new technical solution risky? What is the degree of risk?

Have the employees the right skills and capabilities?Have the employees the right skills and capabilities?

Questions to ask for evaluatingQuestions to ask for evaluating Demand pull opportunitiesDemand pull opportunities

How big is the demand in the given segment of the market? Is it How big is the demand in the given segment of the market? Is it major area of our business or just marginal one?major area of our business or just marginal one?

What is the degree of unmet consumer need that the product What is the degree of unmet consumer need that the product solves? solves?

How does the product differ from the competition?How does the product differ from the competition?

To what level does the product solve present consumer needs?To what level does the product solve present consumer needs?

WilWilll it be difficult to present the product and its ben it be difficult to present the product and its benefefits to the its to the customers?customers?

How strong are our competitors?How strong are our competitors?

Have we got suitable distribution chanHave we got suitable distribution channnels?els?

Innovation degrees (whole production Innovation degrees (whole production process)process)

9 innovation degrees provide differentiation and 9 innovation degrees provide differentiation and classification of innovation from the content and classification of innovation from the content and importance point of viewimportance point of view-1-1stst degree – minus first degree innovation DE degree – minus first degree innovation DE

degeneration, degeneration, destructiondestruction

0 degree – zero degree innovation RE0 degree – zero degree innovation REregenerationregeneration

11stst degree – first degree innovation EE degree – first degree innovation EEExtensive expansion, simple quantitative changeExtensive expansion, simple quantitative change

22ndnd degree – second degree innovation RR degree – second degree innovation RRRe-arrangement, re-organization of relationshipsRe-arrangement, re-organization of relationships

33rdrd degree – third degree innovation QA degree – third degree innovation QAQuality adaptationQuality adaptation

Innovation degreesInnovation degrees

4th degree4th degree – fourth degree innovation V – fourth degree innovation VNew variantNew variant

55thth degree – fifth degree innovation G degree – fifth degree innovation GNew generationNew generation

66thth degree – degree – sixth degree innovation Ksixth degree innovation KNew kindNew kind

77thth degree degree – – seventh degree innovation P seventh degree innovation PNew principleNew principle

88thth degree degree – – eight degree innovation P eight degree innovation PNew paradigmNew paradigm

Innovation degreesInnovation degrees

Innovation degrees from the 1Innovation degrees from the 1stst to the 3 to the 3rdrd are mostly are mostly connected with the production processes connected with the production processes – Process innovationsProcess innovations

Innovation degrees from the 4Innovation degrees from the 4thth to the 7 to the 7thth grade are grade are connected mostly with productsconnected mostly with products– Product innovationsProduct innovations

Approximate time of product innovation in years Approximate time of product innovation in years 44thth degree: new variant - 1 to 5 years degree: new variant - 1 to 5 years55thth degree:new generation - 5 to 15 years degree:new generation - 5 to 15 years66thth degree:new kind - 15 to 50 years degree:new kind - 15 to 50 years77thth degree: new principle - more than 50 years degree: new principle - more than 50 years

In recent decades the dynamics In recent decades the dynamics has acceleratedhas accelerated

Innovation in 21st centuryInnovation in 21st century

– growing concentration of distribution channelsgrowing concentration of distribution channels– radically shrinking product liferadically shrinking product life cycles cycles

Key issueKey issue:: creation of creation of new value for customers, new new value for customers, new markets,markets, growth growth opportunities opportunities in long-term horizonin long-term horizon

Deep segmentation creates too small market segments Deep segmentation creates too small market segments and does not lead to profitand does not lead to profit

Economic cycles and InnovationEconomic cycles and InnovationThe business cycle or economic cycle refers to the fluctuations of The business cycle or economic cycle refers to the fluctuations of economic activity about its long term growth trend. The economic activity about its long term growth trend. The cyclecycle involves shifts over time between periods of relatively rapid growth involves shifts over time between periods of relatively rapid growth of output (recovery and prosperity), and periods of relative of output (recovery and prosperity), and periods of relative stagnation or decline (contraction or stagnation or decline (contraction or recessionrecession). These fluctuations ). These fluctuations are often measured using the are often measured using the realreal gross domestic productgross domestic product. Despite . Despite being named cycles, these fluctuations in economic growth and being named cycles, these fluctuations in economic growth and decline do not follow a purely mechanical or predictable periodic decline do not follow a purely mechanical or predictable periodic pattern.pattern.

Traditional business cycle modelsTraditional business cycle models: : enumerated by enumerated by Joseph SchumpeterJoseph Schumpeter and others in this field have been named after their discoverers or and others in this field have been named after their discoverers or proposers:proposers:

the Kitchin inventory cycle (3–5 years) — after the Kitchin inventory cycle (3–5 years) — after Joseph KitchinJoseph Kitchin,,

the Juglar the Juglar fixed investmentfixed investment cycle (7–11 years) — after cycle (7–11 years) — after Clement JuglarClement Juglar,,

the Kuznets infrastructural investment cycle (15–25 years) — after the Kuznets infrastructural investment cycle (15–25 years) — after Simon KuznetsSimon Kuznets, Nobel Laureate,, Nobel Laureate,

the the Kondratieff waveKondratieff wave or cycle (45–60 years) — after or cycle (45–60 years) — after Nikolai KondratieffNikolai Kondratieff..

the Forrester cycles (200 years) - after the Forrester cycles (200 years) - after Jay Wright ForresterJay Wright Forrester..

the Toffler civilisation cycles (1000-2000 years) - after the Toffler civilisation cycles (1000-2000 years) - after Alvin TofflerAlvin Toffler..

Kondratiev long wavesKondratiev long waves

In In heterodox economicsheterodox economics, , Kondratiev wavesKondratiev waves—also called —also called grand supercyclesgrand supercycles, surges, long waves, or K-waves—are described as , surges, long waves, or K-waves—are described as regular, sinusoidal cycles in the modern (capitalist) world economy. Fifty regular, sinusoidal cycles in the modern (capitalist) world economy. Fifty to sixty years in length, the cycles consist of alternating periods between to sixty years in length, the cycles consist of alternating periods between high sectoral growth and periods of slower growth. high sectoral growth and periods of slower growth.

According to the innovation theory, these waves arise from the bunching According to the innovation theory, these waves arise from the bunching of basic of basic innovationsinnovations that launch technological revolutions that in turn that launch technological revolutions that in turn create leading industrial or commercial sectors. Kondratiev's ideas were create leading industrial or commercial sectors. Kondratiev's ideas were taken up by taken up by Joseph SchumpeterJoseph Schumpeter in the 1930s. The theory hypothesized in the 1930s. The theory hypothesized the existence of very long-run macroeconomic and price cycles, originally the existence of very long-run macroeconomic and price cycles, originally estimated to last 50-54 years.estimated to last 50-54 years.

Kondratiev long wavesKondratiev long waves

Most cycle theorists agree, however, with the "Schumpeter-Freeman-Perez" paradigm of five Most cycle theorists agree, however, with the "Schumpeter-Freeman-Perez" paradigm of five waves so far since the industrial revolution, and the sixth one to come. These five cycles arewaves so far since the industrial revolution, and the sixth one to come. These five cycles are

The Industrial Revolution--1771The Industrial Revolution--1771

The Age of Steam and Railways--1829The Age of Steam and Railways--1829

The Age of Steel, Electricity and Heavy Engineering--1875The Age of Steel, Electricity and Heavy Engineering--1875

The Age of Oil, the Automobile and Mass Production--1908The Age of Oil, the Automobile and Mass Production--1908

The Age of Information and Telecommunications--1971The Age of Information and Telecommunications--1971

According to this theory, we are currently at the turning-point of the 5th Kondratiev. According to this theory, we are currently at the turning-point of the 5th Kondratiev.

Toffler Civilization WavesToffler Civilization WavesIn his book In his book The Third WaveThe Third Wave Toffler describes three types of societies, based on the Toffler describes three types of societies, based on the concept of 'waves' - each wave pushes the older societies and cultures aside.concept of 'waves' - each wave pushes the older societies and cultures aside.

First WaveFirst Wave is the society after is the society after agrarian revolutionagrarian revolution and replaced the first and replaced the first hunter-gathererhunter-gatherer cultures. cultures.

Second WaveSecond Wave is the society during the is the society during the Industrial RevolutionIndustrial Revolution (ca. late 1600s through (ca. late 1600s through the mid-1900s). The main components of the Second Wave society are the mid-1900s). The main components of the Second Wave society are nuclear familynuclear family, , factory-type education system and the factory-type education system and the corporationcorporation. Toffler writes: "The Second Wave . Toffler writes: "The Second Wave Society is industrial and based on Society is industrial and based on mass productionmass production, , mass distributionmass distribution, , mass consumptionmass consumption, , mass educationmass education, , mass mediamass media, , mass recreationmass recreation, , mass entertainmentmass entertainment, and , and weapons of mass destructionweapons of mass destruction. You combine those things . You combine those things with with standardizationstandardization, , centralizationcentralization, concentration, and synchronization, and you wind , concentration, and synchronization, and you wind up with a style of up with a style of organizationorganization we call we call bureaucracybureaucracy."."

Third WaveThird Wave is the is the post-industrial societypost-industrial society. Toffler would also add that since late 1950s . Toffler would also add that since late 1950s most countries are moving away from a Second Wave Society into what he would call most countries are moving away from a Second Wave Society into what he would call a Third Wave Society. He coined lots of words to describe it and mentions names a Third Wave Society. He coined lots of words to describe it and mentions names invented by him (invented by him (super-industrial societysuper-industrial society) and other people (like the ) and other people (like the Information AgeInformation Age, , Space AgeSpace Age, , Electronic EraElectronic Era, , Global VillageGlobal Village, , technetronic agetechnetronic age, , scientific-technological revolutionscientific-technological revolution), which to various degrees predicted ), which to various degrees predicted demassification, diversity, knowledge-based production, and the acceleration of demassification, diversity, knowledge-based production, and the acceleration of change (one of Toffler’s key maxims is "change is non-linear and can go backwards, change (one of Toffler’s key maxims is "change is non-linear and can go backwards, forwards and sideways").forwards and sideways").

Post-industrial societyPost-industrial societyIn this In this post-industrialpost-industrial society, there is a lot of diversity in society, there is a lot of diversity in lifestyleslifestyles ("subcults"). ("subcults").

AdhocraciesAdhocracies (fluid organizations) adapt quickly to (fluid organizations) adapt quickly to changeschanges..

InformationInformation can substitute most of the material resources and becomes the can substitute most of the material resources and becomes the main material for workers (main material for workers (cognitarianscognitarians instead of instead of proletariansproletarians), who are ), who are loosely affiliated. loosely affiliated.

Mass customizationMass customization offers the possibility of cheap, personalized, production offers the possibility of cheap, personalized, production catering to small niches (see catering to small niches (see Just In TimeJust In Time production). production).

The gap between producer and consumer is bridged by technology using a The gap between producer and consumer is bridged by technology using a so called so called configuration systemconfiguration system. ". "ProsumersProsumers" can fill their own needs (see " can fill their own needs (see open sourceopen source, , assembly kitassembly kit, , freelancefreelance work). This was the notion that new work). This was the notion that new technologies are enabling the radical fusion of the producer and consumer technologies are enabling the radical fusion of the producer and consumer into the into the prosumerprosumer. In some cases . In some cases prosumingprosuming entails a “third job” where the entails a “third job” where the corporation “outsources” its labor not to other countries, but to the unpaid corporation “outsources” its labor not to other countries, but to the unpaid consumer, such as when we do our own banking through an consumer, such as when we do our own banking through an ATMATM instead of instead of a teller that the bank must employ, or trace our own postal packages on the a teller that the bank must employ, or trace our own postal packages on the internet instead of relying on a paid clerk.internet instead of relying on a paid clerk.

Post-industrial societyPost-industrial societyAging societies will be using new (medical) technologies from self-diagnosis Aging societies will be using new (medical) technologies from self-diagnosis to instant to instant toilettoilet urinalysisurinalysis to self-administered therapies delivered by to self-administered therapies delivered by nanotechnologynanotechnology to do for themselves what doctors used to do. This will to do for themselves what doctors used to do. This will change the way the whole change the way the whole health industryhealth industry works. works.this era's greatest turning point is the creation of wealth in this era's greatest turning point is the creation of wealth in outer spaceouter space. . Wealth today, Wealth today, TofflerToffler argues, is created everywhere ( argues, is created everywhere (globalisationglobalisation), nowhere ), nowhere ((cyberspacecyberspace), and out there (outer space). ), and out there (outer space). Global positioning satellitesGlobal positioning satellites are are key to synchronising precision time and data streams for everything from key to synchronising precision time and data streams for everything from cellphonecellphone calls to calls to ATMATM withdrawals. They allow withdrawals. They allow Just In TimeJust In Time productivity productivity because of precise tracking. GPS is also becoming central to air-traffic because of precise tracking. GPS is also becoming central to air-traffic control. And satellites increase agricultural productivity through tracking control. And satellites increase agricultural productivity through tracking weather, enabling more accurate forecasts.weather, enabling more accurate forecasts.

Toffler explains, "Society needs people who take care of the elderly and who Toffler explains, "Society needs people who take care of the elderly and who know how to be compassionate and honest. Society needs people who work know how to be compassionate and honest. Society needs people who work in hospitals. Society needs all kinds of skill that are not just cognitive; they're in hospitals. Society needs all kinds of skill that are not just cognitive; they're emotional, they're affectional. You can't run the society on data and emotional, they're affectional. You can't run the society on data and computers alone." computers alone." Toffler also states in, Rethinking the Future, that "The illiterate of the 21st Toffler also states in, Rethinking the Future, that "The illiterate of the 21st century will not be those who cannot read and write, but those who cannot century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn."learn, unlearn, and relearn."

Science in InnovationScience in Innovation

In industrial society In industrial society the innovations started in the the innovations started in the laboratories and took years of concentrated developmentlaboratories and took years of concentrated development– Until scientists came to the desired inventionUntil scientists came to the desired invention– Innovation speed was much slower than it is todayInnovation speed was much slower than it is today– It gave us:It gave us:

Cholesterol-fighting Cholesterol-fighting ddrugsrugsOpticOpticalal fibers fibersLCD displaysLCD displaysCompact discsCompact discs

From 1900 to 1950 science had no rival as a mechanism for creating From 1900 to 1950 science had no rival as a mechanism for creating new wealthnew wealth

Advertising in InnovationAdvertising in InnovationIn the postwar years In the postwar years second innovation regime was bornsecond innovation regime was born- It has first created and than fed off the consumer societyIt has first created and than fed off the consumer society

- Its heroes were companies like Coca-Cola, Nestlé, P&G, Unilever Its heroes were companies like Coca-Cola, Nestlé, P&G, Unilever who focused on sales, not on breakthroughswho focused on sales, not on breakthroughs

- Their challenge was to get consumers to buy their brand of soap Their challenge was to get consumers to buy their brand of soap powder or soft drinkpowder or soft drink

- Similar products were launched each year distinguished by Similar products were launched each year distinguished by inventive advertisinginventive advertising

From 1950 till 1990 consumer marketing was innovation high ground.From 1950 till 1990 consumer marketing was innovation high ground.The best and the brightest no longer wanted to be scientists, they The best and the brightest no longer wanted to be scientists, they wanted to be brand managerwanted to be brand managerss

Presence of InnovationPresence of InnovationNew innovation regime New innovation regime is not build on the slow acceleration of is not build on the slow acceleration of scientific knowledge nor the breathless hype of creating new scientific knowledge nor the breathless hype of creating new advertising campaigns but instead on advertising campaigns but instead on leaps of human imagination leaps of human imagination bringing new valuesbringing new valuesTraditional understanding of resources is irrelevantTraditional understanding of resources is irrelevantNew product development timescales are measured in weeks and New product development timescales are measured in weeks and months instead of yearsmonths instead of yearsCustomers are co-developers of new productsCustomers are co-developers of new products

Providing real time feedbackProviding real time feedbackThey participate in the cycle of experiments and adaptationsThey participate in the cycle of experiments and adaptations

The goal is not a new communication campaign but a radically new The goal is not a new communication campaign but a radically new business model, struggle against established practice (IKEA, MP3)business model, struggle against established practice (IKEA, MP3)Information technologies are aInformation technologies are avvailable to everybodyailable to everybody

Challenge is in uniqness of their application that brings added valueChallenge is in uniqness of their application that brings added value

Presence of InnovationPresence of InnovationLinear, continuous improvement is not enough in the conditions of Linear, continuous improvement is not enough in the conditions of new economy the company has to be able to innovatenew economy the company has to be able to innovate quicker than quicker than the others and differentiatethe others and differentiate

Measure of competitiveness on the market is Measure of competitiveness on the market is the unique product the unique product valuevalue, that satisfies the customer and thrills him but also shakes the , that satisfies the customer and thrills him but also shakes the competitioncompetition

Company has to be able to innovate the products from its portfolio, Company has to be able to innovate the products from its portfolio, but it has to be able to innovate itself, its business strategies and the but it has to be able to innovate itself, its business strategies and the industry it competes inindustry it competes inNew thinking is often seen in old established companies and new New thinking is often seen in old established companies and new economy represents new concept of thinking, based on economy represents new concept of thinking, based on – New insights, knowledge and competenciesNew insights, knowledge and competencies– Using ITUsing IT– Human potentialHuman potential

Innovation in 21Innovation in 21stst century centuryForm quality and cost reduction to value creation Form quality and cost reduction to value creation and growthand growth– Quality was typical area where every employee could contributeQuality was typical area where every employee could contribute– Companies devoted lot of time to set right approach to quality (creating Companies devoted lot of time to set right approach to quality (creating

tools and methodologies, organization)tools and methodologies, organization)– CCompanies reached cost reduction plans ompanies reached cost reduction plans iinvolving employees nvolving employees

Focus is Focus is changingchanging– productivity productivity and cost saving and cost saving are givenare given

Growth is the differentiating value in 21Growth is the differentiating value in 21stst century century– We need to know how the business will evolve in future in the given We need to know how the business will evolve in future in the given

areaarea– Can we grow on the basis of present business and present Can we grow on the basis of present business and present

competencies?competencies?– The question how is changing into whatThe question how is changing into what

What opportunities to pursue?What opportunities to pursue?What partnerships to form?What partnerships to form?What technologies to back?What technologies to back?What experiment to start?What experiment to start?

Innovative CultureInnovative CultureIn innovative companies it is the In innovative companies it is the responsibility of responsibility of every employeeevery employee to think about how to think about how to imagine the to imagine the future of the companyfuture of the company– Everyone can have good ideasEveryone can have good ideas

Innovative companies create environment and Innovative companies create environment and processes thatprocesses that– Stimulate personal involvement of the employees to Stimulate personal involvement of the employees to

innovationinnovation– Top management gives high priority to innovationTop management gives high priority to innovation– Innovative companies understand necessity of change, Innovative companies understand necessity of change,

the company culture is changing, atmosphere is open, the company culture is changing, atmosphere is open, thinking and organization is flexible, values are changing, thinking and organization is flexible, values are changing, listening to new voices, accepting new ideas from new listening to new voices, accepting new ideas from new sources, working in multifunctional teams, understand sources, working in multifunctional teams, understand the need of personal change, respect opinions of others, the need of personal change, respect opinions of others, understand new role of top management, ability to understand new role of top management, ability to generate sources – human and financial sources to create generate sources – human and financial sources to create new ideas, experiments and opportunitiesnew ideas, experiments and opportunities

Qualities of Innovator Qualities of Innovator by Mitchell Ditkoffby Mitchell Ditkoff

Ability to innovate is given to peopleAbility to innovate is given to people– Unlike other activities as audits or reengineering, it is not given to Unlike other activities as audits or reengineering, it is not given to

formulasformulas– It is given to peopleIt is given to people

Restless, inspired, fascinated individuals,Restless, inspired, fascinated individuals,With almost cellular need for changeWith almost cellular need for change

– It can be supported by systems, but it can never be reduced to systemsIt can be supported by systems, but it can never be reduced to systems– Tom Peters: „Innovation is a messy business“Tom Peters: „Innovation is a messy business“

Qualities of an InnovatorQualities of an InnovatorInnovators of new era are diverseInnovators of new era are diverse ::– They are entrepreneursThey are entrepreneurs– Able to produce something of nothingAble to produce something of nothing– They struggle against the hegemony They struggle against the hegemony

of established practiof established practiccee

they use entrepreneurial approachthey use entrepreneurial approach– That is closer to Silicon Valley than to corporate labs or customer focus groupsThat is closer to Silicon Valley than to corporate labs or customer focus groups– Irrelevant whether it is old or new companyIrrelevant whether it is old or new company– They do not build their future on the extrapolation and achievements of past but they build it They do not build their future on the extrapolation and achievements of past but they build it

on their imagination of futureon their imagination of future– They can see and embrace new opportunitiesThey can see and embrace new opportunities– They work on their key competenciesThey work on their key competencies

Qualities of Innovator Qualities of Innovator by Mitchell Ditkoffby Mitchell Ditkoff

Innovator – inspired individual sees a better way and Innovator – inspired individual sees a better way and goes for itgoes for it

Challenges the status quoChallenges the status quo –dissatisfied with current reality, –dissatisfied with current reality, questions authority and routine and confronts assumptionsquestions authority and routine and confronts assumptionsCuriousCurious – actively explores the environment, investigates – actively explores the environment, investigates

new possibilities and honors the sense of awe and wonder new possibilities and honors the sense of awe and wonder Self-motivatedSelf-motivated – responds to deep inner needs, proactively – responds to deep inner needs, proactively initiates new projectsinitiates new projects

Vlastnosti inovátora Vlastnosti inovátora podľa Mitchella Ditkoffapodľa Mitchella Ditkoffa

VisionaryVisionary – highly imaginative, maintains a future orientation, thinks in mental – highly imaginative, maintains a future orientation, thinks in mental picturespictures

Entertains the fantasticEntertains the fantastic – conjures outrageous scenarios, sees possibilities – conjures outrageous scenarios, sees possibilities within the seemingly impossible, honors dreams and daydreamswithin the seemingly impossible, honors dreams and daydreams

Takes risksTakes risks – goes beyond the comfort zone, experimental and – goes beyond the comfort zone, experimental and nonconforming, courageously willing to nonconforming, courageously willing to „„failfail““

Open to changeOpen to change – changes work environments as needed, wanders, walks or – changes work environments as needed, wanders, walks or travels to inspire fresh thinking, given to movement and interactiontravels to inspire fresh thinking, given to movement and interaction

Playful/humorousPlayful/humorous – appreciates disagreement and surprise, able to appear – appreciates disagreement and surprise, able to appear foolish and child-like, laughs easily and oftenfoolish and child-like, laughs easily and often

Self-acceptingSelf-accepting – withholds compulsive criticism of their own ideas, – withholds compulsive criticism of their own ideas, understands „perfection is the enemy of the good“, unattached to „looking understands „perfection is the enemy of the good“, unattached to „looking good“ in the eyes of othersgood“ in the eyes of others

Vlastnosti inovátora Vlastnosti inovátora podľa Mitchella Ditkoffapodľa Mitchella Ditkoffa

Flexible/adaptiveFlexible/adaptive – open to change, able to look for new solutions, able to adjust „game plan“ as – open to change, able to look for new solutions, able to adjust „game plan“ as needeneededd, works with multiple ideas and solutions, works with multiple ideas and solutions

Makes new connectionsMakes new connections– sees relationships between seemingly disconnected elements, syntetizes – sees relationships between seemingly disconnected elements, syntetizes odd combinations, distils unusual ideas down to their underlying principlesodd combinations, distils unusual ideas down to their underlying principles

ReflectiveReflective – thinks about problems and challenges, incubates them, seeks out stages of immersion, – thinks about problems and challenges, incubates them, seeks out stages of immersion, muses, contemplatesmuses, contemplates

Recognizes patterns – modelsRecognizes patterns – models – perspective and discriminating, notices organizing principles and – perspective and discriminating, notices organizing principles and trends, sees and challenges the „Big Picture“trends, sees and challenges the „Big Picture“

Tolerates ambiguityTolerates ambiguity – comfortable with chaos, able to entertain paradox, does not settle for the first – comfortable with chaos, able to entertain paradox, does not settle for the first „right idea“„right idea“

ComCommmited to learningited to learning –continually seeks knowledge, syntetizes new i –continually seeks knowledge, syntetizes new innputs quickly, balances puts quickly, balances information gathering and actioninformation gathering and action

Qualities of InnovatorQualities of Innovatorby Mitchell Ditkoffby Mitchell Ditkoff

Balances intuition and analysis Balances intuition and analysis – alternates between divergent and – alternates between divergent and convergent thinking, can feel the opportunities before analyzing convergent thinking, can feel the opportunities before analyzing them, trust their gut, uses their headthem, trust their gut, uses their head

Situationally collaborativeSituationally collaborative – balances rugged individualism with – balances rugged individualism with political savvy, open to coaching and support, supports political savvy, open to coaching and support, supports organization as neededorganization as needed

Formally articulateFormally articulate – communicates ideas effectively, translates – communicates ideas effectively, translates abstract concepts into meaningful language, creates prototypes with abstract concepts into meaningful language, creates prototypes with easeease

Flexible/resilentFlexible/resilent – bounces back from disappointment, learns quickly – bounces back from disappointment, learns quickly from feedback, willing to try again and againfrom feedback, willing to try again and again

PerseveringPersevering – hardworking and persistent, champions new ideas – hardworking and persistent, champions new ideas with tenacity, commited till the results are evidentwith tenacity, commited till the results are evident

Qualities of an InnovatorQualities of an Innovatorby Mitchell Ditkoffby Mitchell Ditkoff

Some of these traits look difficult some are Some of these traits look difficult some are easyeasy

It is possible to develop themIt is possible to develop them

Even more important: Even more important: create environment, create environment, where these traits can flourishwhere these traits can flourish

Special blend of inner qualities Special blend of inner qualities allows him or allows him or her to succeed when others have long since her to succeed when others have long since gone homegone home

Only after having the right people it is important Only after having the right people it is important to have the to have the right tools, techniques and right tools, techniques and modelsmodels, that are very useful, but without the , that are very useful, but without the right user they are merely decorationright user they are merely decoration

Supportive culture for innovationSupportive culture for innovation- by Peters and Waterman- - by Peters and Waterman- 7S7S

SKILLSSKILLS - the distinctive capability of key personnel - the distinctive capability of key personnelSTRATEGYSTRATEGY – long-term goals and the ways to fullfil – long-term goals and the ways to fullfil them, the plan leading to the allocation of resourcesthem, the plan leading to the allocation of resourcesSTRUCTURESTRUCTURE - the characteristics of the organization - the characteristics of the organization chart, communication chart, communication SHARED VALUESSHARED VALUES - the goals shared by organizational - the goals shared by organizational membersmembersSTYLESTYLE - the cultural style of the organization - the cultural style of the organization managementmanagementSTAFFSTAFF - the type of functional specialist employed - the type of functional specialist employedSYSTEMSSYSTEMS - the nature of proceduralized control - the nature of proceduralized control processesprocesses

Motivation to innovate by Motivation to innovate by DruckerDrucker::

Motivation inside the organisationMotivation inside the organisation::– 1. Unexpected events - succes, failure, competitor1. Unexpected events - succes, failure, competitor– 2. Collisiton between ecomomic values2. Collisiton between ecomomic values

Collision between expected and achieved realityCollision between expected and achieved reality

collision between expected and real valuescollision between expected and real values

– 3. Innovation comming from the change in production process 3. Innovation comming from the change in production process – 4. Change in the industry structure 4. Change in the industry structure

Motivation outside the organisation:Motivation outside the organisation:– 5. Demografic changes5. Demografic changes– 6. New attitudes 6. New attitudes – 7. New scientific and non-scientific knowledge7. New scientific and non-scientific knowledge

Idea Sources and Generating Idea Sources and Generating ideasideas

Ideas can come from Ideas can come from many sourcesmany sources, i.e.:, i.e.:internalinternal – R&D, suggestions from employees on modifications to – R&D, suggestions from employees on modifications to current products, quality circlescurrent products, quality circlesexternalexternal - benchmarking, customers and suppliers, marketing - benchmarking, customers and suppliers, marketing information, information, competitorscompetitors, complaints from current customers, complaints from current customers, , scientific literature, research and education institutesscientific literature, research and education institutesGenerating ideasGenerating ideas – – ability to create ideas that are brand new or new ability to create ideas that are brand new or new to the authorto the author– Methods that support creativity and intuition: Methods that support creativity and intuition:

brainstorming, brainstorming, brainwriting 635, brainwriting 635, SynecticsSynectics: dandelion - parachute: dandelion - parachutePanel discussionsPanel discussions

– Methods of systematic and analytical approachMethods of systematic and analytical approachMorphologic analysisMorphologic analysisFunctional analysis – new way of providing the functionFunctional analysis – new way of providing the function

Innovation programInnovation programStrategic plan of organization Strategic plan of organization

Pipeline full with new productsPipeline full with new productsProcess formalized in innovation programs Process formalized in innovation programs

Innovation program consists of:Innovation program consists of:definition of goalsdefinition of goalsSpecification of major stages in progressSpecification of major stages in progressAllocation of sourcesAllocation of sourcesTimeTime--planplanOrganization outline and support of the program Organization outline and support of the program BudgetBudget

Innovation programs require teamwork and they are elaborations of Innovation programs require teamwork and they are elaborations of several functional company strategiesseveral functional company strategies

product-engineeringproduct-engineering– WhatWhat products should we offer? What consumer needs and wants we will meet? products should we offer? What consumer needs and wants we will meet?

MMarketingarketing and sales and sales– For whomFor whom do we creat the products? What are the target groups of customers do we creat the products? What are the target groups of customers

and target markets?and target markets?

production-technologyproduction-technology– HowHow will we create the products? What technologies are needed? will we create the products? What technologies are needed?

Phases of innovation processPhases of innovation process

Phases of innovation process Phases of innovation process from macro-economy from macro-economy perspectiveperspective::

sciencescienceresearchresearchdevelopmentdevelopmentproductionproductionexploitation exploitation

Phases of innovation process Phases of innovation process from company from company perspectiveperspective::

1. Idea generation1. Idea generation2. Idea screening2. Idea screening3. Concept development and testing3. Concept development and testing4. Marketing strategy development4. Marketing strategy development5. Business analysis5. Business analysis6. Product development6. Product development7. Market testing7. Market testing8. Commercialization - launch8. Commercialization - launch

PHASES IN CONSUMER PRODUCTPHASES IN CONSUMER PRODUCT DEVELOPMENTDEVELOPMENT

Consumer Need

IDEAS

Company Objectives

SCREENING

ConsumerResearch

FinancialReview

FeasibilityStudies

DEVELOPMENT

PRODUCTION

CONSUMER TRIALS

TEST MARKET

Product innovation processProduct innovation process

The Basic New Product Dev. ProcessThe Basic New Product Dev. ProcessPhase 1: Opportunity Identification/Selection

Phase 2: Concept Generation

Phase 3: Concept/Project Evaluation

Phase 4: Development

Phase 5: Launch

Product innovation processProduct innovation process

Opportunity matrixOpportunity matrix

Opportunity area for new products introductionsOpportunity area for new products introductionsEvaluate 2 marketing aspects:Evaluate 2 marketing aspects:Identify the opportunity and evaluate the size of the opportunityIdentify the opportunity and evaluate the size of the opportunity

Do not enter

risky

good bet

low bet

high

lowlow

Market atractivity

Company powerhigh

New Product Development ProcessNew Product Development Process

IdeaIdeaGenerationGeneration

ConceptConceptDevelopmentDevelopmentand Testingand Testing

MarketingMarketingStrategyStrategy

DevelopmentDevelopment

IdeaIdeaScreeningScreening

BusinessBusinessAnalysisAnalysis

ProductProductDevelopmentDevelopment

MarketMarketTestingTesting

LaunchLaunch

Product innovation processProduct innovation process

Phases of innovation processPhases of innovation process

11stst phase: idea generation and retrieval of primary and phase: idea generation and retrieval of primary and secondary data to create new opportunitiessecondary data to create new opportunities

What products is the company interested in?What products is the company interested in?WWhat markets does the company want to enter?hat markets does the company want to enter?What customers needs and wants does the offer respond to?What customers needs and wants does the offer respond to?

Sources of IdeasSources of Ideasinternal - externalinternal - externalprimary - secondaryprimary - secondary

Phases of Innovation ProcessPhases of Innovation Process

22ndnd phase: idea screening – critical selection of potential phase: idea screening – critical selection of potential ideas for further elaboration in line with set of criteriaideas for further elaboration in line with set of criteria

Appeal for the marketAppeal for the marketObjective and resources of organizationObjective and resources of organizationCompetences to develop new productCompetences to develop new productAbility to produceAbility to produceMarket sizeMarket sizeScoring models – set of selected criteria, points evaluation of Scoring models – set of selected criteria, points evaluation of different ideasdifferent ideas

Phases of Innovation ProcessPhases of Innovation Process

33rdrd phase: Concept design and testing phase: Concept design and testing

Selected ideas are worked out into the conceptSelected ideas are worked out into the conceptClear and detailed product descriptionClear and detailed product descriptionReflects customers needsReflects customers needsAim: low cost test to identify customers benefits and primary Aim: low cost test to identify customers benefits and primary advantages of the productadvantages of the productConcept testing on target group of consumers Concept testing on target group of consumers

BASIC KINDS OF BASIC KINDS OF PRODUCT PRODUCT BENEFITSBENEFITS

functional benefitsfunctional benefits describe the product describe the product advantage in objective termsadvantage in objective terms

- Product Performance- Product Performance

- Superior, fresher, protects, etc.- Superior, fresher, protects, etc.

emotional and selfexpresion benefitsemotional and selfexpresion benefits

describe the product in subjective termsdescribe the product in subjective terms

- Personal value- Personal value

- Pride, confidence, less hassle, etc.- Pride, confidence, less hassle, etc.

Phase 3: Concept/Project Phase 3: Concept/Project EvaluationEvaluation

Evaluate new product concepts (as they begin to Evaluate new product concepts (as they begin to come in) on technical, marketing, and financial come in) on technical, marketing, and financial criteria. criteria.

Rank them and select the best two or three. Rank them and select the best two or three.

Request project proposal authorization when Request project proposal authorization when have product definition, team, budget, skeleton have product definition, team, budget, skeleton of development plan, and final Pof development plan, and final Product roduct IInnovation nnovation CCharterharter

Phases of Innovation ProcessPhases of Innovation Process

44thth phase: marketing strategy development phase: marketing strategy development

goal: prepare product launch with help of marketing toolsgoal: prepare product launch with help of marketing tools3 major parts: 3 major parts: Define target marketDefine target marketPrepare long-term sales and profit plan Prepare long-term sales and profit plan Distribution channels strategy, price strategy, marketing Distribution channels strategy, price strategy, marketing communication proposalcommunication proposal

Phases of Innovation processPhases of Innovation process

55thth phase: business analysis/strategy phase: business analysis/strategyWork out clear and detailed project planWork out clear and detailed project planFramework plan of production activitiesFramework plan of production activitiesFramework plan of marketing activitiesFramework plan of marketing activitiesEstimation of minimum and maximum salesEstimation of minimum and maximum salesAnalysis of repeated salesAnalysis of repeated salesEstimation of expected cost and profitEstimation of expected cost and profit

- strong cooperation of R&D, production, finance and strong cooperation of R&D, production, finance and marketingmarketing

66thth phase: product development phase: product developmentProduct becomes physicalProduct becomes physicalVersions are tested and validatedVersions are tested and validatedresult: tested prototype or working modelresult: tested prototype or working modelDevelop technical project, process flow sheet that Develop technical project, process flow sheet that indicates each step in the process, conditions for each indicates each step in the process, conditions for each step in the process, detailed time-plan, material flowstep in the process, detailed time-plan, material flow

Phases of Innovation ManagementPhases of Innovation Management

77thth phase: product testing phase: product testingComplete product testing, rigorous and long to thoroughly test Complete product testing, rigorous and long to thoroughly test the product: performance, safety, convenience of new productthe product: performance, safety, convenience of new productTesting in own testing lab, certificationTesting in own testing lab, certificationField test: Customer perception, cost Field test: Customer perception, cost Consumer preference test, price test, taste test, brand testConsumer preference test, price test, taste test, brand testZero production series, test salesZero production series, test salesReturn of cost, detailed value analysisReturn of cost, detailed value analysisAchievability of planesAchievability of planes

88thth phase: product launch on the market - phase: product launch on the market - commercializationcommercialization

Develop marketing planDevelop marketing plan –marketing mix –marketing mix4 major questions:4 major questions:When the new product should be launched on the market?When the new product should be launched on the market?Where the new product should be launched?Where the new product should be launched?Who is the target group of consumers?Who is the target group of consumers?How should the company launch the product?How should the company launch the product?

Phases of Innovation ProcessPhases of Innovation Process

88thth phase: product launch – commercialization phase: product launch – commercializationMarketing goals:Marketing goals:Sales volume per yearSales volume per yearMarket shareMarket shareProfitabilityProfitabilityStarting point: situational analysis on the marketStarting point: situational analysis on the marketSelection of innovation strategy – targeting, positioning the Selection of innovation strategy – targeting, positioning the products on certain consumer segments, specify customer and products on certain consumer segments, specify customer and company value, define desired product features and company value, define desired product features and characteristicscharacteristicsWaranties, repairs, replacement partsWaranties, repairs, replacement partsProduct adoption process: AIDAProduct adoption process: AIDA

Individual innovationIndividual innovation processes depend on:processes depend on:Product characterProduct characterTraditions and customsTraditions and customsCompany strategiesCompany strategiesActual market situationActual market situationMarket position of the companyMarket position of the company

Innovation Sucess factorsInnovation Sucess factors

innovation portfolio with ideas, concepts a products of innovation portfolio with ideas, concepts a products of different innovation DEGREEdifferent innovation DEGREE

speedspeed

New products success characteristicsNew products success characteristics- by Rogers :- by Rogers :

Relative added valueRelative added value vs. Former product vs. Former product

compatibilitycompatibility with existing values with existing values

Low complexity of technical solutionLow complexity of technical solution to the to the useruser

Possibility to testPossibility to test for the consumer for the consumer

VisibilityVisibility of innovation results of innovation results

Innovation success Innovation success measurement :measurement :

ROTHWELL "the criterion for succes is comercial... a succes being ROTHWELL "the criterion for succes is comercial... a succes being defined as an innovation defined as an innovation wwhich obtains a worthwhile market share hich obtains a worthwhile market share and profit and a failure being defined as an innovations which fails and profit and a failure being defined as an innovations which fails to achieve thisto achieve this

Success criteriaSuccess criteria::– Net financial income: profit, profitability, return on investmentNet financial income: profit, profitability, return on investment– Market shareMarket share– Link with company strategyLink with company strategy

Success criteria by Nyström and EdvardsonnSuccess criteria by Nyström and Edvardsonn– Technology successTechnology success– Market successMarket success– Commercial successCommercial success

Innovation StrategiesInnovation StrategiesThere are 5 basic types of Innovation Strategies:There are 5 basic types of Innovation Strategies:

1. Progressive technical solution1. Progressive technical solutionProducts are build on the basis of the latest scientific and technical Products are build on the basis of the latest scientific and technical knowledgeknowledgeit is risky, costly and it is difficult to predict consumer interest due to it is risky, costly and it is difficult to predict consumer interest due to underevaluated marketing activitiesunderevaluated marketing activities

2. Balanced strategy2. Balanced strategyBalance between latest scientific and technical trends application and Balance between latest scientific and technical trends application and marketing activities focused on finding unmet customer needs and wants marketing activities focused on finding unmet customer needs and wants and new product launchand new product launchBrings the best results and is most sucessfullBrings the best results and is most sucessfull

3. Verified technical approaches3. Verified technical approachesMe-too strategy, focused on easy and verified technical solutionsMe-too strategy, focused on easy and verified technical solutionsNearly no resources given to RNearly no resources given to R&&DD

Innovation StrategiesInnovation Strategies

4. Conservative low budget strategy4. Conservative low budget strategyCopy the leader, new products are in line with company skills, they Copy the leader, new products are in line with company skills, they are small improvements of old ones, for well-known marketsare small improvements of old ones, for well-known marketsSlightly positive results, without risks, profitable for the companies Slightly positive results, without risks, profitable for the companies with strong marketing skills in slowly growing industries with strong marketing skills in slowly growing industries When dramatic change happens – unable to react quicklyWhen dramatic change happens – unable to react quickly

5. Diversified high budgets5. Diversified high budgetsNew products development is isolated, without coordination, costly, New products development is isolated, without coordination, costly, without internal synergieswithout internal synergiesAbsence of market understanding: respecting needsAbsence of market understanding: respecting needsThe least sucessful from all strategiesThe least sucessful from all strategies

How to enter the market with How to enter the market with new productsnew products

Strategy of new product market launch is based onStrategy of new product market launch is based onMarket dimensionsMarket dimensionsTechnical solution of new product Technical solution of new product

1. New for the world solution – never used technical solution1. New for the world solution – never used technical solution2. New market for the company2. New market for the company3. Verified technical solution3. Verified technical solution4. Verified and well-known market4. Verified and well-known market

Market entry strategies for the strategic products should be focused Market entry strategies for the strategic products should be focused on the areas with known market characteristics and technical on the areas with known market characteristics and technical solution.solution.

Market entry strategiesMarket entry strategies

New unknownMarkets entry

New knownMarkets entry

Verified technicalsolution

Solution known, butNew to the company

New original solution

Joint ventureCapital shareCooperationTechnology purchase

Capital shareCooperationTechnology purchase

Internal preparationof market entryAcquisitionJoint venture

Internal cooperationAcquisitionLicence purchase

Capital shareCooperationTechnology purchase

Old market entry

Internal preparation of market entry

acquisition

Company R&DAcquisitionLicence purchase

New type Joint venture

Diffussion of Innovations Diffussion of Innovations (Everet Rogers)(Everet Rogers)

The technology adoption lifecycle modelThe technology adoption lifecycle model describes the adoption or acceptance of a describes the adoption or acceptance of a new product or innovation, according to the demographic and psychological new product or innovation, according to the demographic and psychological characteristics of defined adopter groups. The process of adoption over time is characteristics of defined adopter groups. The process of adoption over time is typically illustrated as a classical normal distribution or "bell curve." The model typically illustrated as a classical normal distribution or "bell curve." The model indicates that the first group of people to use a new product is called "innovators," indicates that the first group of people to use a new product is called "innovators," followed by "early adopters." Next come the early and late majority, and the last followed by "early adopters." Next come the early and late majority, and the last group to eventually adopt a product are called "laggards."group to eventually adopt a product are called "laggards."The demographic and psychological (or "psychographic") profiles of each adoption The demographic and psychological (or "psychographic") profiles of each adoption group were originally specified by the North Central Rural Sociology Committee, group were originally specified by the North Central Rural Sociology Committee, Subcommittee for the Study of the Diffusion of Farm Practices (as cited by Beal and Subcommittee for the Study of the Diffusion of Farm Practices (as cited by Beal and Bohlen in their study above).Bohlen in their study above).

Diffussion of Innovations Diffussion of Innovations (Everet Rogers)(Everet Rogers)

The report summarised the categories as:The report summarised the categories as:innovatorsinnovators - had larger farms, were more educated, more prosperous - had larger farms, were more educated, more prosperous and more risk-oriented and more risk-oriented early adoptersearly adopters - younger, more educated, tended to be community - younger, more educated, tended to be community leaders leaders early majorityearly majority - more conservative but open to new ideas, active in - more conservative but open to new ideas, active in community and influence to neighbours community and influence to neighbours late majoritylate majority - older, less educated, fairly conservative and less socially - older, less educated, fairly conservative and less socially active active laggardslaggards - very conservative, had small farms and capital, oldest and - very conservative, had small farms and capital, oldest and least educated least educated

In this book, In this book, Crossing the ChasmCrossing the Chasm, Geoffrey Moore proposes a variation , Geoffrey Moore proposes a variation of the original lifecycle. He suggests that for discontinuous or disruptive of the original lifecycle. He suggests that for discontinuous or disruptive innovations, there is a gap or chasm between the first two adopter innovations, there is a gap or chasm between the first two adopter groups (innovators/early adopters), and the early majority. groups (innovators/early adopters), and the early majority.

Revised technology adoption Revised technology adoption lifecycle (Geoffrey Moore)lifecycle (Geoffrey Moore)

In In Crossing the ChasmCrossing the Chasm, Moore begins with the diffusion of innovations theory from , Moore begins with the diffusion of innovations theory from Everett Rogers, and argues there is a chasm between the early adopters of the Everett Rogers, and argues there is a chasm between the early adopters of the product (the technology enthusiasts and visionaries) and the early majority (the product (the technology enthusiasts and visionaries) and the early majority (the pragmatists). Moore believes visionaries and pragmatists have very different pragmatists). Moore believes visionaries and pragmatists have very different expectations, and he attempts to explore those differences and suggest techniques to expectations, and he attempts to explore those differences and suggest techniques to successfully cross the "chasm," including choosing a target market, understanding the successfully cross the "chasm," including choosing a target market, understanding the whole product concept, positioning the product, building a marketing strategy, whole product concept, positioning the product, building a marketing strategy, choosing the most appropriate distribution channel and pricing.choosing the most appropriate distribution channel and pricing.

Revised technRevised technologyology adoption life cycle adoption life cycleCrossing the ChasmCrossing the Chasm is closely related to the Technology adoption lifecycle where five is closely related to the Technology adoption lifecycle where five main segments are recognized; innovators, early adopters, early majority, late majority main segments are recognized; innovators, early adopters, early majority, late majority and laggards. According to Moore, the marketer should focus on one group of and laggards. According to Moore, the marketer should focus on one group of customers at a time, using each group as a base for marketing to the next group. The customers at a time, using each group as a base for marketing to the next group. The most difficult step is making the transition between visionaries (early adopters) and most difficult step is making the transition between visionaries (early adopters) and pragmatists (early majority). This is the chasm that he refers to. If a successful firm pragmatists (early majority). This is the chasm that he refers to. If a successful firm can create a bandwagon effect in which the momentum builds and the product can create a bandwagon effect in which the momentum builds and the product becomes a de facto standard. becomes a de facto standard. However, Moore's theories are only applicable for disruptive or discontinuous However, Moore's theories are only applicable for disruptive or discontinuous innovations. Adoption of continuous innovations (that do not force a significant change innovations. Adoption of continuous innovations (that do not force a significant change of behavior by the customer) are still best described by the original Technology of behavior by the customer) are still best described by the original Technology adoption lifecycle. Confusion between continuous and discontinuous innovation is a adoption lifecycle. Confusion between continuous and discontinuous innovation is a leading cause of failure for high tech products.leading cause of failure for high tech products.

DEFINITION of a CONCEPTDEFINITION of a CONCEPT

A A Concept Is….Concept Is….

A printed or filmed representation of a product or A printed or filmed representation of a product or service. It is a promise a product makes to service. It is a promise a product makes to resolve an unmet consumer need, the reason why resolve an unmet consumer need, the reason why it will satisfy the need, and a description or it will satisfy the need, and a description or portrayal of any key element that will affect the portrayal of any key element that will affect the perception of the product.perception of the product.

Translation: “What’s in it for me, the consumer, and Translation: “What’s in it for me, the consumer, and why should I believe it?”why should I believe it?”

ELEMENTS ESSESTIAL to a ELEMENTS ESSESTIAL to a CONCEPT STATEMENTCONCEPT STATEMENT

Product name and clear product Product name and clear product descriptiondescription

HeadlineHeadline

Accepted Consumer BeliefAccepted Consumer Belief

BenefitBenefit

Reason to BelieveReason to Believe

Concept Development & Concept Development & TestingTesting

1. Develop Product Ideas into Alternative Product Concepts

1. Develop Product Ideas into Alternative Product Concepts

2. Concept Testing - Test the Product Concepts with Groups of Target Customers/Prospects

2. Concept Testing - Test the Product Concepts with Groups of Target Customers/Prospects

3. Choose the Best One3. Choose the Best One