3.1 Basics of innovation (2)

Question 1

What are the phases of The Innovation Process + example

Answer 1

• idea generation (asia or europe vacation)
• idea prioritization (europe is cheaper)
• idea implementation (book the trip)

→ markets gets: products, processes and services

Question 2

Sources of Innovation Ideas

Answer 2

• new knowledge/ Technoligies
• Supplier (they have ideas)
• R&D departments
• Customers
• Empathetic design
• Open market for ideas: Licensing, Joint Ventures, strategic alliances

Question 3

What are the criterais for Evaluation of innovation ideas?

Answer 3

• technical competencies
• business competencies (f.e. good product, but cant distribute it)
• strategic fit

Question 4

What are th genereci strategies from Porter + examples

Answer 4

1. Cost leadership (lowest costs, efficient SC, Aldi, Lidl)
2. Differentation (different from competition → Apple, Porsche)
   
   1. Focus strategy (concentration on specificallly defined market segment → product or customer groups )

Question 5

What is the idea funnel about and how can it be used?

Answer 5

-many ideas enter a funnel but only a few end up realized

→ State Gate Process to find good ideas:

1. Stage: phase of development
   
   1. Gate: checkpoint deciding whether: (1) will not further developt; (2) will be reworked; (3) goes to next phase

Question 6

What are quantitative methods for evaluation of Innovation ideas?

Answer 6

• Net present value (NPV) method
• Discovery-Driven Planning method

Question 7

What is the NPV method and its formula?

Answer 7

NPV = Present value of net cash flows. Each cash inflow/outflow is discounted back to its Present Value (PV) and then they are summed.

→The net present value is used to evaluate the profitability of investment projects.

if NPV > 0, do the projectt

if NPV < 0, dont

Question 8

What is the S-Curve? (add picture)

Answer 8

In the Beginning a current technoligy is better than an new one

→ after time is does not improve anymore and new one surpasses it

Question 9

What are the Adoption and Diffusion of Innovation?

Answer 9

5 stages in which the society adopt to an innovation:

1. Innovators (2,5%)
2. Early Adopters (products becomes standart, 13,55%)
3. Early Adopters (largest market, 34%)
4. Late Majority (34%)
5. Laggards (16%)
   → after “the chasm” most profit is gained

Question 10

Advanteges of discount cash flow methods (DCF)

Answer 10

+ concrete financial estimates

+ Explicit consideration of timing of investment and time value of money

Question 11

Weaknesses of discount cash flow methods (DCF)

Answer 11

-Only as accurate as original estimates of cash flows

-problems of capture strategic importance of project
→ technology development is crucial, but costs money (e.g. Intel DRAM investment was a los but important for the generel development)

-

Question 12

What kind of innovations may be favored through the implementation of the NPV method?

Answer 12

→ incremental over radical innovation

1. its easier to estimate the flows of II than RI
2. green light more often given to II then to RI
3. DFC Trap: It is also often assumed that sales from existing products are continuously increasing, even if one does not invest:

Question 13

Difference between DDP and NPV?

Answer 13

-NPV problem “little is known & much is assumed”

→ DDP begins with looking at the output. Focus is on assumption behind profit. “Would customer pay 50 euros for the product?”