MAKING WAVES:

PRACTICAL IMPLEMENTATION OF INNOVATION

DR A J PURCELL FCPA, CPA AUSTRALIA

Disruption – is it Waves or Tides?

“Waves are created by energy passing … “

“Tides are very long-period waves that move through … ”

but

“Most aspects of your business depend on successful marketing”.

INNOVATION

A QUICK CHECK UP!

MAKING WAVES ………. ?

• A celebrated theory of disruptive innovations suggests that disruption

occurs when an initially inferior technology introduced by a new entrant

improves to meet the needs of the mass market.

• Books on disruption have sold hundreds of thousands of copies,

readings on disruption are among the most used in MBA classes.

• A recent Google search for disruptive innovation showed up 2,650,000

results for such in under a second. (By the way, 930,000 results for a

search on radical innovation).

• Innovation .. and especially the disruptive and digital types … has

become the buzzword term of the decade in the worlds of business

and education. Politicians on both sides, global companies,

universities and the education sector all agree that it is the key to the

future.

• The overuse and generalization of the term “innovation” has led to a

loss of understanding of what it is we need when we say we need

more innovation.

• We lose sight of the specific skills and behaviour needed to be

successfully innovative. The word has been overused to the point

that global discussion has become circular, “to be innovative, we have

to encourage innovation.”

• The term “innovation” has become the core response of executives,

politicians, and educators to the question, “What do we need to be

successful?”.

“INNOVATE OR DIE: THE STARK MESSAGE FOR BIG BUSINESS”

– WELL THAT DEPENDS!

• Big companies that fail to innovate risk extinction. That's the

stark truth in the era of "digital disruption". (BBC Article)

• Just look at the likes of Woolworths, Polaroid, AltaVista, Kodak,

Blockbuster, Borders... the list goes on. All steamrollered by strings of

ones and noughts (ie digital) and changing consumer behaviour.

• But why are so many big companies so bad at it? "Typically, big

companies are much more conservative than start-ups and won't do

anything that is untested or could risk future profits," says George

Deeb, managing partner at business consultancy Red Rocket

Ventures.

• "Innovation efforts really require a very different, more entrepreneurial

risk-taking mindset."

• Jackie Fenn, a specialist in innovation at research consultancy

Gartner, told the BBC: “ Size can add to the challenges. A strong brand

can have a fear that failure may damage its reputation.

• "But you cannot afford to stay still - business is a moving escalator.

The world is moving around you - customer expectations are

changing, competitors are always catching up and threatening to take

away your business."

• An interesting headline comment with obvious empirical evidence but

is that entirely due to “digital disruption?

• There are also 22 reasons (immutable marketing laws) to be

considered that suggest why a business may “die” (or succeed of

course!) and these are presented as “The 22 Immutable Laws of

Marketing”.

• Some of the Laws will apply some may not.

• One thing to notice – the term “disruptive” does not appear in these

Laws of Marketing.

• Today we will look at innovation from a technology versus marketing

perspective in general and question the apparent focus on “disruption”

specifically.

A FUNDAMENTAL THREE ELEMENT BUSINESS MODEL

SO - INNOVATE PEOPLE - MAYBE!

PERHAPS - INNOVATE PROCESS - YES!

CERTAINLY - INNOVATE TECHNOLOGY!

SOME MODELS AND TYPES OF INNOVATION 1

SOME MODELS AND TYPES OF INNOVATION 2

Innovations that change the

way in which the components

of a product are linked

together, while leaving the

core design concepts (and

thus the basic knowledge

underlying the components)

untouched

Many people falsely assume that companies are either innovative or not! It’s likely that most do innovate!

RADICAL INNOVATION

• Radical innovation is what we think of mostly when considering

innovation. (But do we?)

• It gives birth to new industries (or swallows existing ones) and involves

creating revolutionary technology.

• Radical innovation involves harnessing new technology and a new

business model simultaneously and as such, is very rare – only about

10% of innovations fall into this category.

• The airplane, for example, was not the first mode of transportation, but

it is revolutionary in context as it allowed mass commercialized travel

to develop and prosper.

• Look at how we now listen to music!

http://techblog.constantcontact.com/software-development/types-of-innovation/

INCREMENTAL INNOVATION

• Incremental Innovation is the most common form of innovation.

• Incremental innovations continuously advance the process of change.

• It utilises your existing technology and increases value to the customer

(features, design changes, etc.) within your existing market.

• Almost all companies engage in incremental innovation in one form or

another.

• Examples include adding new features to existing products or services

or even removing features (value through simplification).

• Even small updates to user experience can add value.

• All these updates or changes, which may seem as just updates, are

actually small incremental changes focused on adding more value to

an existing product. They will prove to be incrementally innovative if

customers have a better experience with the product and are able to

schedule email campaigns much easier.

ARCHITECTURAL INNOVATION

• Architectural innovation is simply taking the lessons, skills and overall

technology and applying them within a different market.

• This innovation is amazing at increasing new customers as long as the

new market is receptive. Most of the time, the risk involved in

architectural innovation is low due to the reliance and reintroduction of

proven technology. Though most of the time it requires tweaking to

match the requirements of the new market.

• In 1966, NASA’s Ames Research Centre attempted to improve the

safety of aircraft cushions.

• They succeeded by creating a new type of foam, which reacts to the

pressure applied to it, yet magically forms back to its original shape.

• Originally it was commercially marketed as medical equipment table

pads and sports equipment, before having larger success as use in

mattresses.

• This “slow spring back foam” technology falls under architectural

innovation. It is commonly known as memory foam.

QUICK QUIZ

1. Three brands – what is name of each business, entity or concept.

2. Which brand would you consider to be innovative as a product

concept?

3. Which would you consider “disruptive” as regards innovation?

4. Which would you consider “radical” as regards innovation?

DISRUPTIVE INNOVATION

• Disruptive innovation involves applying new technology or

processes to your company’s current market. This newer

technology is often more expensive, has fewer features, is harder

to use, and is not as aesthetically pleasing.

• Often it is only after a few iterations that the newer tech surpasses

the old and disrupts all existing companies. By then, it might be

too late for the established companies to quickly compete with the

newer technology.

• There are quite a few examples of disruptive innovation, one of the

more prominent being Apple’s iPhone disruption of the mobile

phone market. Prior to the iPhone, most popular phones relied on

buttons, keypads or scroll wheels for user input.

• The iPhone was the result of a technological movement that was

years in making, mostly iterated by Palm Treo phones and personal

digital assistants (PDAs).

• Frequently you will find that it is not the first mover who ends up

disrupting the existing market.

• In order to disrupt the mobile phone market, Apple had to cobble

together an amazing touch screen that had a simple to use interface,

and provide users access to a large assortment of built-in and third-

party mobile applications.

DISRUPTIVE INNOVATION 2

• Harvard academic Clay Christensen’s theory as a

model.

• Disruptive innovation often starts out as a loser in

the market.

• It eventually overtakes "sustaining innovations"

which are subsumed by the attractiveness of the

disruptive alternative after some adoption time.

COMMENTS ON A CONTEMPORARY VIEW OF INNOVATION

AS REGARDS BUSINESS MEDIA - THE DIGITAL OBSESSION!

Contrary to current views:

1. Technologies that adopt a lower attack or “potentially disruptive technologies” are introduced as

frequently by incumbents as by entrants, are not cheaper than old technologies, and rarely

disrupt firms.

2. The hazard of disruption by incumbents is significantly higher than that by entrants.

3. Lower attack reduces the hazard of firm disruption.

Consistent with existing theory, low price of new technologies increases the hazard of disruption.

However, most new technologies, unfortunately, are not priced lower than dominant technologies at

entry.

THE LAW OF THE MIND

• “It’s better to be first in the mind than to be first

in the marketplace”

• “Thousands of would-be entrepreneurs are

tripped up every year by this law. Someone has

an idea or a concept he or she believes will

revolutionise an industry (as well it may!). The

problem is getting the idea or concept into the

prospect’s (customer) mind.”

22 IMMUTABLE LAWS OF MARKETING

1. The Law of Leadership - It is better to be first than it is to be better.

2. The Law of the Category- If you can’t be first in a category, set up a new

category you can be first in.

3. The Law of the Mind - It’s better to be first in the mind than to be first

in the marketplace.

4. The Law of Perception - Marketing is not a battle of products, it’s a

battle of perceptions.

5. The Law of Focus -The most powerful concept in marketing is owning a

word in the prospect’s mind.

6. The Law of Exclusivity -Two companies cannot own the same word in the

prospect’s mind.

7. The Law of the Ladder -The strategy to use depends on which rung you

occupy on the ladder.

8. The Law of Duality - In the long run, every market becomes a two-horse

race.

9. The Law of the Opposite - If aiming for second place, your strategy is

determined by the leader.

10. The Law of Division - Over time, a category will divide and become two or

more categories.

11. The Law of Perspective - Marketing effects take place over an extended

period of time.

12. The Law of Line Extension - There’s an irresistible pressure to extend the

equity of the brand.

13. The Law of Sacrifice - You have to give up something in order to get

something.

14. The Law of Attributes - For every attribute, there is an opposite, effective

attribute.

15. The Law of Candour - When you admit a negative, the prospect will give

you a positive.

16. The Law of Singularity - In each situation, only one move will produce

substantial results.

17. The Law of Unpredictability - Unless you write your competitor’s

plans, you can’t predict the future.

18. The Law of Success - Success often leads to arrogance, and arrogance to

failure.

19. The Law of Failure - Failure is to be expected and accepted.

20. The Law of Hype - The situation is often the opposite of the way it appears

in the press.

21. The Law of Acceleration - Successful programs are not built on fads,

they’re built on trends.

22. The Law of Resources - Without adequate funding an idea won’t get

off the ground.

BARRIERS TO SUCCESSFUL PRODUCT INNOVATION

WHY INNOVATIVE PRODUCTS CAN STILL FAIL IN THE MARKETPLACE

• It’s hard for any new product to gain marketplace acceptance: Most

studies estimate new product failure rates at 50% or more. But it’s

particularly challenging if a product is highly innovative—a “really new

product” that revolutionizes an existing product category or defines a

new category.

• Although such products may suffer from a firm’s lack of resources,

expertise, or commitment, even those that are well supported and that

offer consumers significant gains over existing alternatives are far from

certain to succeed.

• However, many firms’ ultimate success or failure depends on the

successful development and adoption of innovative products.

• How can managers increase the odds that innovative new products will

succeed?

• Author John Gourville offers a behavioural framework—called the

“curse of innovation”—to explain such failures, starting with the simple

fact that highly innovative new products tend to require consumers to

change their behaviour in some way.

• Consumers see these changes as losses, and due to “status quo bias,”

these losses loom larger in consumers’ minds than do the benefits

offered by the new innovation.

• Developers of new products, on the other hand, are biased in the other

direction—they come to regard the product they are developing as the

status quo, and they subsequently undervalue the losses consumers

must experience to adopt the innovation, leading them to overestimate

the likelihood of marketplace success.

• Managers can help innovative new products to succeed in the

marketplace by understanding the degree of behaviour change the

innovation requires and planning for it, anticipating the rate of product

adoption and tailoring marketing efforts accordingly.

• Alternatively, the product itself can be tailored to minimize the

behaviour changes consumers will have to make.

• A firm can also seek subgroups of consumers who are not currently

entrenched in any alternative or who greatly value the benefits of the

innovative product.

9X EFFECT - UNLESS THE GAINS FAR OUTWEIGH THE LOSSES,

CONSUMERS WILL NOT ADOPT A PRODUCT

• The 9x effect says that a potential user of a new

product will underweight by a factor of three the

benefits of a new product, and overweight by the

same factor the costs of giving up their current

solution.

• Human beings evaluate new things relative to the

status quo, and we are risk averse (we exaggerate

the cost of a loss in our minds).

• So if a new product is to succeed, it better be nine

times better than the current solution.

HEALTHCARE INNOVATION SUCCESS5 Ways to Drive Disruptive Innovation in Healthcare | Inc.com https://www.inc.com/soren.../5-ways-to-drive-disruptive-innovation-in-healthcar.html

Sep 18, 2017 - Most people see healthcare disruption as coming from two sources: government

taking a legislative role that reshapes the big picture business ...

5 Ways to Drive Disruptive Innovation in

Healthcare

The surprising secret to transforming healthcare once and for all.

By Soren Kaplan

Author, The Invisible Advantage@sorenkaplan

1 COMMENTS

CREDIT: Getty Images

When it comes to transforming healthcare, one thing is clear: it's a hot topic.

Most people see healthcare disruption as coming from two sources: government taking a

legislative role that reshapes the big picture business model, and grassroots startups using

technology to challenge the status quo.

We've seen government's recent struggles to help reinvent the system. Venture capitalists and

startups have also been at it, with a cumulative $15.5 billion invested in innovation since

2014 and $3.5 billion invested in the first half of 2017 alone. Despite their best efforts,

neither have truly moved the needle.

A different animal when it comes to innovation

The $3 trillion healthcare industry is vast, entrenched, and interconnected to itself and society

in a way that makes it a different animal from most other industries. This is especially true

A PRACTICAL CHANNEL TO INNOVATION!

Thank you

Dr AJ Purcell FCPA

Chief Auditor

CPA Australia