Lecture 5 - Innovation and New Product Development Flashcards
what are the 3 aspects of innovation
- its a process and an output
- that creates something new
- and it has value
what are different types of product features (5)
- potential
- augmented
- expected
- generic
- core
what was Schumpeters (1934) definition of innovation
‘new combinations’ of new or existing knowledge, resources, equipment
What are the 3 groups on the innovation wheel
- offering
- experience
- configuration
innovation vs invention
- invention is the discovery of new ideas and methods
- innovation occurs when an invention is commercialised by bringing it into the market
why do firms innovate? (3)
- competitive advantage
- relevance
- differentiation
vertical vs horizontal innovations
- vertical innovation is done specifically in a particular field
- horizontal innovation is something that can be adopted by everyone
what is diffusion of innovation
it explains the rate at which new ideas and tech spread
used to understand the rate at which consumers are likely to adopt a new product/service
what are the 5 adopter categories
- innovators
- early adopters
- early majority
- late majority
- laggards
what are innovators
- those who want to be the first to acquire a new product or service
- they are risk takers so can cope with high uncertainty
what are early adopters
- those who are not as risk taking as innovators and wait until the product/service receives reviews before purchasing
- they are considered as role models in their social system, and help the product reach ‘critical mass’
what is the early majority
- represent most of the market (34%)
- they aren’t risk taking and typically wait till the product/service is tested or used by a peer.
- they want to purchase things that are proven to work
what is the late majority
- represent majority of market (34%)
- deemed conservative and tech shy, cost sensitive and skeptical
- get peer pressured into buying product/service
what are laggards
- last to adopt a new product/service
- resent change and may continue to rely on traditional products/services until they are no longer available
Factors that affect the rate of innovation diffusion
- relative advantage
- compatibility
- complexity
- trialability
what is relative advantage
- the degree to which customers perceive a new product/service as superior to similar existing products determines the relative advantage
- the more radical a change, and the higher the relative advantage, the faster would be the diffusion
what is compatibility
- measures how closely it relates to needs, value systems, norms and cultures
- higher compatibility = higher diffusion
- e.g. pizzas, burgers, noodles took a long time to get diffused into the Indian society, as it contrasted heavily with the daal roti concept.
what is complexity
- the level of complexity in a product purchase all affects the diffusion process
- the easier it is to understand and use a product, the more likely it is to be accepted quickly
- Technological complexity acts as a barrier to diffusion.
what is trialability
- the ease with which a product/service can be tested and tried
- the higher the degree of trialability, the greater the rate of diffusion.
- examples of trialability are free samples, smaller than average size packs, demos.
Forms of innovation in NPD context
- product replacement and improvements (45%)
- product addition (25%)
- new product lines (20%)
- new to the world products (10%)
NPD Process
- new product strategy
- idea generation
- screening
- concept testing
- business analysis
- product development
- market testing
- commercialisation
