Chapter 1: Innovation - The Clever Country

Question 1

Innovation

Answer 1

The process of translating ideas into useful new products, processes or services

Question 2

Entrepreneurship

Answer 2

The powerful mixture of energy, vision, passion, commitment, judgement and risk-taking which provides the motive power behind the innovation process

Question 3

What are the 6 aspects of innovation?

Answer 3

1. Identifying or creating opportunities
2. New ways of serving existing markets
3. Growing new markets
4. Rethinking services
5. Meeting social needs
6. Improving operations

Question 4

1. Identifying or creating opportunities

Answer 4

Innovation is driven by the ability to see connections, to spot opportunities, and to take advantage of them. Sometimes this is about completely new possibilities, for example by exploiting radical breakthroughs in technology.

Question 5

2. New ways of serving existing markets

Answer 5

Innovation isn’t just about opening up new markets; it can also offer new ways of serving established and mature ones. For example, low-cost airlines are still about transportation, but the innovations firms like Southwest Airlines, easyJet and Ryanair have introduced and revolutionised air travel and grown in the market in the process

Question 6

3. Growing new markets

Answer 6

Equally important is the ability to spot where and how new markets can be created and grown. For example, Alexander Bell’s innovation of the telephone didn’t lead to an overnight revolution in communications - that depended on developing the market for person-to-person communications

Question 7

4. Rethinking services

Answer 7

In most economies, the service sector accounts for the vast majority of activity, so there is likely to be plenty of scope. And the lower capital costs often mean the opportunities for new entrance and radical change are greatest in the service sector. For example, online banking and insurance have become commonplace but they have radically transformed the efficiencies with which those sectors work and the range of services they can provide

Question 8

5. Meeting social needs

Answer 8

Innovation offers huge challenges - and opportunities - for the public sector. Pressure to deliver more and better services without increasing the tax burden is a puzzle likely to keep many civil servants awake at night, but it’s not an impossible dream as there is many innovations changing the way sectors work. For example, in healthcare, there have been major improvements in efficiencies around key targets such as waiting times

Question 9

Entrepreneurship and innovation

Answer 9

Stage in the lifecycle of an organisation: creating commercial value
Start-up: individual entrepreneur exploiting new technology or market opportunity
Growth: growing the business through adding new products/services or moving into new markets
Sustain/scale: building a portfolio of incremental and radical innovation to sustain the business and/or spread its influence into new markets
Renew: returning to the radical frame-breaking kind of innovation which began the business and enables it to move forward as something very different
Stage in the lifecycle of an organisation: creating social value
Start-up: social entrepreneur, passionately concerned to improve or change something in their immediate environment
Growth: developing the ideas and engaging others in a network for change — perhaps in a region or around a key issue
Sustain/scale: spreading the idea widely, diffusing it to other communities of social entrepreneurs, engaging links with mainstream players like public sector agencies
Renew: changing the system — and then acting as agent for the next wave of change

Question 10

Barriers to innovation

Answer 10

• Seeing innovation as ideas, not managing the whole journey
• Not recognising the need for change
• Mindset and complacency – core competence becomes core rigidity
• Closed information network, insulated from new ideas

Question 11

Sources of innovation within companies or industries

Answer 11

• Unexpected occurrences: unexpected successes and failures are productive sources of innovation because most people and business dismiss them, disregard them and even resent them
• Incongruities: these occur whenever a gap exists between expectations and reality
• Process needs: these exist whenever a demand arises for the entrepreneur to innovate as a way of answering a particular need
• Industry and market changes: there are continual shifts in the marketplace, which are caused by changes in consumer attitudes, advances in technology and industry growth

Question 12

Sources of innovation in the social environment

Answer 12

• Demographic changes: of the external sources of innovation opportunity, demographics are the most reliable
• Perceptual changes: sometimes the members of a community can change their interpretation of facts and concepts, and thereby open up new opportunities
• New knowledge: knowledge-based innovations differ from all others in the time they take, in their casualty rates, and in their predictability, as well as in the challenges they pose to entrepreneurs

Question 13

Characteristics of incremental innovation

Answer 13

• Steady improvements
• Based on sustaining technologies
• Obedience to cultural routines and norms
• Can be rapidly implemented
• Immediate gains
• Develop customer loyalty

Question 14

Characteristics of disruptive (radical) innovation

Answer 14

• Fundamental rethink
• Based on disruptive technologies
• Experimentation and play/make-believe
• Need to be nurtured for long periods
• Worse initial performance, potential big gains
• Create new markets

Question 15

Types of incremental innovation: extension

Answer 15

Improvement or new use of an existing product, service or process, such as the development of desktop, notebook and laptop computers based on the mainframe

Question 16

Types of incremental innovation: duplication

Answer 16

Creative replication or adaptation of an existing product, service or concept. Duplication can take place across different markets or industries, e.g. fast-food chicken outlets such as Chicken Treat or Red Rooster in Australia were adapted from the Kentucky Fried Chicken model from the USA; or the franchise may be adapted to suit a variety of sectors such as petrol stations, cleaning and childcare, with the concept having originated in the fast-food industry

Question 17

Types of incremental innovation: synthesis

Answer 17

Combination of an existing product, service or process into a new formulation or use, such as the fax (telephone + photocopier) or the multi-purpose smartphone (telephone + camera + organiser + internet + music player + GPS)

Question 18

Disruptive approaches: the back-scratcher - scratch an unscratched itch

Answer 18

What it is: makes it easier and simpler for people to get an important job done
When it works best: when customers are frustrated by their inability to get a job done, and competitors are either fragmented or have a disability that prevents them from responding
Historical examples: Federal Express (FedEx), mobile phones
Current examples: Procter & Gamble Swiffer products, instant messaging technology

Question 19

Disruptive approaches: the extreme makeover - make an ugly business attractive

Answer 19

What it is: find a way to prosper at the low end of established markets by giving people good enough solutions at low prices
When it works best: when target customers don’t need and don’t value all the performance that can be packed into products, and when existing competitors don’t focus on low-end customers
Historical examples: Nucor’s mini-mill, backpacker accommodation
Current examples: budget airlines such as AirAsia, Jetstar Asia, Tiger Airways, Virgin Blue

Question 20

Disruptive approaches: the bottleneck buster - democratise a limited market

Answer 20

What it is: expand a market by removing a barrier to consumption
When it works best: when some customers are locked out of a market because they lack skills, access or wealth. Competitors ignore initial developments because they take place in seemingly unpromising markets
Historical examples: personal computers, Sony Walkman, eBay
Current examples: blogs, home diagnostics, social networks such as Facebook or Twitter

Question 21

Cost innovation can be delivered in 3 ways

Answer 21

• Selling high-end products at mass-market prices
• Offering choice or customisation to value customers
• Turning niches into mass markets

Question 22

New product development

Answer 22

When the organisation develops the idea, undertakes research, prepares prototypes, pre-test the product, makes modifications before the product launch

Question 23

What classifies as a new product

Answer 23

1. new to the market: a new technology that has never been seen before
2. new to the company: a product already in the marketplace but this is the first time it has been produced by a certain company
3. new to the product line: a product that is an extension of whatever the company currently produces
4. new to the product: modifications, enhancements and improvements to a specific product that will revitalise it and move it into a growth stage in the product life cycle

Question 24

Successful innovators…

Answer 24

• explore and understand the dimensions of innovation
• manage innovation as a process
• develop innovation capability
• create an innovation strategy
• build dynamic capability

Question 25

Dimensions for innovation

Answer 25

Product: changes in the things (products/services) an organisation offers
Process: changes in the ways these offerings are created and delivered
Position: changes in the context into which the products/services are introduced
Paradigm: changes in the underlying mental models which frame what the organisation does

Question 26

Steps to manage innovation as a process: recognising the opportunity

Answer 26

They could take the form of new technological opportunities or changing requirements on the part of markets. They could be the result of legislative pressure or competitor action. They could come as a result of buying in a good idea from someone outside the organisation. Or they could arise from dissatisfaction with social conditions or a desire to make the world a better place in some way

Question 27

Steps to manage innovation as a process: finding the resources

Answer 27

This stage is very much about strategic choices. Does the idea fit a business strategy, does it build on something we know about (or where we can get access to that knowledge easily) and do we have the skills and resources to take it forward? And if we don’t have those resources, which is often the case with the lone entrepreneur at start-up, how will we find and mobilise them?

Question 28

Steps to manage innovation as a process: developing the idea

Answer 28

We have to invest time and money and find people to research and develop ideas and conduct market studies, competitor analysis, prototyping, testing, etc. in order to gradually improve our understanding of the innovation and whether it will work. Eventually, it is in a form which can be launched into its intended context — an internal or external market — and then further knowledge about its adoption (or otherwise) can be used to refine the innovation. Developing a robust business plan which takes all of this into consideration at the outset is one of the key elements in entrepreneurial success

Question 29

Steps to manage innovation as a process: capture value

Answer 29

We also need to think about, and manage, the process to maximise our chances — through protecting our intellectual property and the financial returns if we are engaged in commercial innovation or in scaling and spreading our ideas for social change so that they are sustainable and really do make a difference. We also have an opportunity at the end of an innovation project to look back and reflect on what we have learnt and how that knowledge could help us do things better next time.

Question 30

Factors that influence the context of success

Answer 30

• Clear strategic leadership and direction, plus the commitment of resources to make this happen
• An innovative organisation in which the structure and climate enables people to deploy their creativity and share their knowledge to bring about change
• Proactive links across boundaries inside the organisation and to the many external agencies who can play a part in the innovation process: suppliers, customers, sources of finance, skilled resources and of knowledge, etc

Question 31

If innovation is only seen as…

1. strong r&d capability
2. the province of specialists in white coats in the r&d laboratory
3. meeting customer needs
4. technological advances
5. the province of large firms
6. breakthrough changes
7. associated with key individuals
8. internally generated
9. externally generated

Answer 31

…The result can be

1. Technology which fails to meet user needs and may not be accepted: ‘the better mousetrap nobody wants’
2. Lack of involvement of others, and a lack of key knowledge and experience input from other perspectives
3. Lack of technical progression, leading to inability to gain competitive edge
4. Producing products the market does not want or designing processes which do not meet the needs of the user and are opposed
5. Weak small firms with too high a dependence on large customers
6. Neglect of the potential of incremental innovation. Also an inability to secure and reinforce the gains from radical change because the incremental performance ratchet is not working well
7. Failure to utilise the creativity of the remainder of employees, and to secure their inputs and perspectives to improve innovation
8. The ‘not invented here’ effect, where good ideas from outside are resisted or rejected
9. Innovation becomes simply a matter of filling a shopping list of needs from outside and there is little internal learning or development of technological competence

Question 32

Configuring the innovation process: building capacity

Answer 32

Whatever their size or sector, all organisations are trying to find ways of managing this process of growth and renewal. Every organisation needs to aim for the most appropriate solution for its particular circumstances. They develop their own particular ways of doing things and some work better than others.

Question 33

Strategic advantages through innovation

Answer 33

Mechanism: novelty in product or service offering
Strategic advantage: offering something no one else can
Examples: introducing the first (Walkman, fountain pen, camera, dishwasher, telephone bank, online retailer, etc.) to the world.
Mechanism: rewriting the rules
Strategic advantage: offering something which represents a completely new product or process concept - a different way of doing things - and makes the old ones redundant
Examples: Typewriters vs. computer word processing, ice vs. refrigerators, electric vs. gas or oil lamps
Mechanism: reconfiguring the parts of the process
Strategic advantage: rethinking the way in which bits of the system work together (e.g. building more effective networks, outsourcing and coordination of a virtual company)
Examples: Zara and Benetton in clothing, Dell in computers, Toyota in its supply chain management

Question 34

3 key steps in putting an innovation strategy together

Answer 34

1. strategic analysis - what can we do?
2. strategic selection - what are we going to do, and why?
3. strategic implementation - how are we going to make it happen?

Question 35

Dynamic capability

Answer 35

The ability to review and reset the approach which the organisation takes to managing innovation in the face of a changing environment