Chapter 2 - Innovation Management

Innovation management
(WBB 10202)
Prepared by : Dr. Maziar Azimzadeh Irani

CHAPTER TWO
Forms and types of innovation
1. Distinguish and describe the different forms
of innovation.
2. Describe the different types of innovation.
3. Analyze the impact of innovation types on
society, human behavior, and business.
INTRODUCTION
Innovation is about commercialization of ideas and

inventions.
Innovations vary in scope, time for completion, and

organizational and societal impacts. Categorization of
any kind usually involves areas of duplication, where
the lines between one category and another overlap.
 There are significant differences in the

complexities between what are normally considered
incremental innovations and those that include major
investment of resources, significant capital
investment, and long lead times.
INTRODUCTION
Innovation grouping is based on two

categorizations:
1. Different forms of innovation which indicates the

application of innovation
2. Based on the degree of newness or originality

associated with the innovation
INTRODUCTION
Innovation is vital for continuous economic growth
Innovative firms will be more successful compared

to competitors with minimal or without innovation
To remain competitive, firms, regions, and countries

must increase innovative activities to be on par or
higher than the innovation leaders
Forms of innovation
 Classification of the forms of innovation is
based on the areas or the fields where the
innovations are used.
 Product Innovation
The development of a novel/new product
• Using a new technology (e.g. Dyson’s ‘dual
cyclone vacuum)
• Re-configuring a technology (e.g. Sony
Walkman)
• Better at meeting consumer needs (e.g.
Workmate workbench)
• Meeting new consumer needs (e.g. JCB
excavator)
Forms of innovation
 Service Innovation
Offering a new/different service to consumers
Using a new technology (e.g. Amazon.com,
First Direct)
Better at meeting consumer needs (e.g.
EasyJet, Paypal)
Meeting new consumer needs (e.g.
Facebook)
Forms of innovation
 Process innovation
New way of making things or delivering
services
New technologies
 New methods/ organization
e.g. Toyota’s Just-in-Time production
Note
Process innovations can lead to what Schumpeter described as
‘creative destruction’ as new industries rise & old ones disappear
Forms of innovation
Forms of innovation
 Component innovation
 Creates an improvement in the capabilities of the

individual components in a system, e.g. More
powerful processors in computers.
It employs new components with different design

concepts.
The key feature of component innovation is the use

of new or different components, particularly if the new
components integrate new technology.
Forms of innovation
 Marketing innovation
Involves the implementation of new marketing method,

which results in significant changes in product design,
packaging, product placement, product promotion, or
pricing.
Marketing innovation is all about how the industry is

evolving in the fast-changing world of information,
communication, and technology.
Marketing innovation focuses on the implementation on

novel marketing concept in a firm.
Forms of innovation
Organizational innovation
It is a dynamic process of creating or modifying an idea

and developing it to produce new groups of products,
services, processes, structures, or policies.
It includes how organizations and individuals manage

work processes in areas such as customer relationship,
employee performance and retention, and knowledge
management.
Organizations that master this in a consistent manner

will position themselves to maintain continuous
competitive advantage.
Forms of innovation
 The ability of an organization to innovate is a
pre-condition for the successful utilization of inventive
resources and new technologies.
 The organization must always adapt to the environment

by focusing on how they can overcome inertia in the face
of rapid technological changes and radical changes in
environmental conditions.
 The focuses of organizational innovation, like the other

innovations is to improve a product, process, or service.
 Organizational innovation therefore requires a culture

of innovation that supports new ideas and new ways of
doing business.
Forms of innovation
 Organizational innovation is the ability to impart new
knowledge and apply said knowledge to company
employees.
 The new knowledge is vital as the basis for new ways of

thinking, creativity, and change.
 This knowledge should result in change: either in

processes, business outcomes, increased customers or
revenues; only then its value could be translated into
success.
Forms of innovation
 Social innovation
 Social innovation refers to new strategies, concepts,
ideas, and organizations that meet both social needs and
create new social relationships.
 Social innovation can take place in the government,

private, and non-profit sectors.
The social innovation theory emphasizes three key

dimensions:
1. Innovations are usually new combinations or hybrids of
existing elements, rather than being totally new.
2. The practice involves cutting across organizational and
disciplinary boundaries.
3. It develops a persuasive new relationship between
individuals and groups.
Forms of innovation
Business model innovation
 A business model must have three core elements to be

of value:
1. Unique central idea
2. Grasp of future market trends
3. Profitability from an offering that cannot be easily
copied
 Business model innovation refers to the recreation or

reinvention of a business itself. It is important tool to
capture, design, innovate, and transform the business.
Types of innovation
 Innovations are usually differentiated based on the
degree of novelty associated with them, ranging from the
highest to the smallest. This typology can be applied on
product, service, and process innovations.
 Incremental innovation
Improvement to current products,
processes, services and system:
 span a continuum from minor to major
 can be short- or long-term
 can be single or multidisciplinary
 involve technology and/or markets
 have high or low impact
Types of innovation
Incremental
The bolts and nuts kinds of

innovation of existing products
and services:
• Modification
• Refinement
• Simplification
• Consolidation
• Enhancement
Example:
• The many version of Sony’s
Walkman
• Many new features and styles
of automobiles
Types of innovation
Discontinuous innovation
Totally stop and start new products or services with
same function. It tends to make the skills people,
technology & process obsolete.
Example:
• From horse & buggy to automobile
• From candles & gas light to
oil lamps to electric light bulbs
• From manual typewriters to
electric to word processors to
personal computer
Types of innovation
Architectural innovation
Reconfigures a system of components that constitute

a product, process or service.
Example:
• The transistors as a replacement
for vacuum tube
• Plastic replacing steel/aluminum
• Radial engine to jet engine
aircraft
Types of innovation
 Systems innovation
A massive kinds of activities require significant

resources from many disciplines
Example:
• Communication network from
fixed line to mobile phone
• Satellite operation
• WWW
Types of innovation
 Radical innovation
Introducing new product or services that develop new

businesses or industries
Example:
• Computer industry: kilobytes to
GB; desk-top to lap-top
• Banking: personalize to electronic
• The Internet: change our life
Types of innovation
 Disruptive innovation
Brings a new value proposition: new Features and

benefits. It takes time To be popular
Example:
• From silver halide film to digital
photography
• From standard retailing to internet
or on-line retailing (e-business)
Types of innovation
INNOVATION MATRIX
INNOVATION MATRIX
Service Modifications, Changes core Obsolete Dominated by Develops into Brings the user
refinements, design concept technologies, societal and major new a new value
Process simplification, to new processes and government businesses or proposition
enhancement architecture people regulation spawns an
Product industry
Component
Material
Incremental Discontinuous Architectural Systems Radical Disruptive

Types of innovation
A Simplified Classification
Incremental Incremental
Discontinuous
System
New-to-the-Market
Radical
Disruptive
Breakthrough Breakthrough
Transition from standard to simplified classification of innovation

Product classification
An Improvement to current product or
class of products
 Improvement that more than just cosmetic
 Provide a defined benefits to the users
 Sustain the business/market share
Example
Copier, Personal Computer, Automobile
Novel (new) replacement product
 Serve the same purpose as current product

 Do not occur very often; significant
improvement is always on new features
 Example: Kodak failed to introduce disk
camera as oppose to cheap 35mm cameras.
New-to-the market product
•Entrepreneurs usually enter the business with

new products, processes and services to the
marketplace
• Example:
Apple computer, MRI scanners (unclear
Magnetic Resonance Imaging)
Breakthrough product
•Product or process breakthrough seldom

occur.
•Breakthrough means coming up with
something new (cannot be compared to any
existing one)– technology & markets
•Create new industries
Example: 3M Post-it Notes, Gene technology,
Lasers, Facsimile, nylon
 A Me-too product
 A product introduced into the market in direct
competition with one already in the marketplace
(same functions)
 The product may not even have extra features; but

have better distribution system or delivery/marketing
system
 Example: Dell Computer – direct selling: sending the

computer straight to their home or customer also
could purchase online at their official website.
END OF CHPTER 2
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Innovation management

Prepared by : Dr. Maziar Azimzadeh Irani

Innovation is about commercialization of ideas and

Innovations vary in scope, time for completion, and

 There are significant differences in the

Innovation grouping is based on two

1. Different forms of innovation which indicates the

2. Based on the degree of newness or originality

Innovation is vital for continuous economic growth

Innovative firms will be more successful compared

To remain competitive, firms, regions, and countries

 Creates an improvement in the capabilities of the

It employs new components with different design

The key feature of component innovation is the use

Involves the implementation of new marketing method,

Marketing innovation is all about how the industry is

Marketing innovation focuses on the implementation on

It is a dynamic process of creating or modifying an idea

It includes how organizations and individuals manage

Organizations that master this in a consistent manner

 The organization must always adapt to the environment

 The focuses of organizational innovation, like the other

 Organizational innovation therefore requires a culture

 The new knowledge is vital as the basis for new ways of

 This knowledge should result in change: either in

 Social innovation can take place in the government,

The social innovation theory emphasizes three key

 A business model must have three core elements to be

 Business model innovation refers to the recreation or

The bolts and nuts kinds of

Reconfigures a system of components that constitute

A massive kinds of activities require significant

Introducing new product or services that develop new

Brings a new value proposition: new Features and

Incremental Discontinuous Architectural Systems Radical Disruptive

Transition from standard to simplified classification of innovation

 Serve the same purpose as current product

•Entrepreneurs usually enter the business with

•Product or process breakthrough seldom

 The product may not even have extra features; but

 Example: Dell Computer – direct selling: sending the

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