Varieties of Innovation - Video 1
Transcript:
The next thing I want to talk about is, what types of innovation are there? With the Massachusetts Institute of Technology think about technology but we also think about a lot of other things. If you have types of innovation, you can have technology but you can also have process innovations as well, you can process innovations where we change our process someone looks at something says "this can be done differently".
We also can have business model innovations. This is probably one of the most interesting areas right now because you see terrific value creation in innovative business models not just things like blockbuster or Salesforce but the underlying innovation at Google that was creating value I would argue it's the new way that they do advertising. Previously before that, there were banner ads but Google again took the idea from overture wiht Bill Gross and commercialized that to change the game for business models, how they extraected their value, they did it by Google Adwords so they were charging, they were advertising using the words as opposed to just the real estate.
Another one is very interesting when you talk about innovative business models. One of the in hindsight looking back iTunes now. One of the big breakthroughs that made iTunes successful was before them everybody was charging on a subscrition basis for the music. What Apple did was they charged 99% and you got to keep it. It turns out that's was a very good busienss model innovation as to how it price and extract value because that made it more familiar with the past, where they were buying CDs and other things alike. So, business model innovation is a very interesting one. You can also have positioning, how you position yourself and then we'll just say other because you could hard to (2:30) limit your types of innovation. Yeah when you have types of innovation I will also say that indeed we also have categories of innovation.
In this case, we have disruptive which is the word we hear so often now "this is disruptive" "this is disruptive", that can be a very good thing if you are not the entrenched player. If you're the new player in the market you want disruptive. However if you are the entreneched player you are looking for incremental innovation that this is 10% better, 20% better and the last one I'll say is that a very interesting one is what we call lateral innovation or I think Stefan Thomke at Harvard calls it general innnovation and this is something that was an innovation you saw in another industry and you just bring it back into your industry.
Now, why do I have types and categories? Because in this case you can have a technology that was disruptive innovation, you could have a technology that's incremental or you could have a technology that's already worked in another industry you bring it in. So, really what you have is a matrix where you have three different categories for each type and there could be more but my point here is. Is it as we are about to go trough these 24 steps. Innovation can be driven by a number of things. It's not just technology. Sometimes your innovation can be disruptive and sometimes it can be incremental and sometimes it can be general. All of these are good and it depends on your situation. Don't just look for disruptive technological innovations.
Retrieved from: https://www.youtube.com/watch?v=1mw_Uo5ba58
Looking Beyond Product Innovation to Other Innovation Strategies - Video 2
Transcript
The semiconductor industry has always been at the forefront of pushing science and technology to the edge in its innovation quest for even faster, smaller and more powerful chips. However today's chips provide more than enough power, memory and speed to handle most applications squeezing more from product and process is indeed are exponentially more expensive and as a result the potential market return for that incremental investment is decreasing.
How can semiconductor companies look beyond product and process innovation to other types of innovation to differentiate themselves and retain their competitive edge? Historically most semiconductor innovation is centered on the product or process.
Product and process innovation is indeed critical but the opportunity to innovate in the semiconductor industry extends to the broader of business model. The eco system and platform of the whole system or application and the nuances of the customer experience view enables:
Leading companies today are taking a hard look at their business and challenging their configuration of their profit model network structure and process. Let's look especifically at profit model innovation and consider new ways to capture revenue. The software industry recently took a new look at pricing strategies offering an alternative for customers per use subscription-based prices. In semis we are also seeing signs of this which the royalty based model from arm from micro process which is completely changing the profit and competitive dynamics of the processor market for mobile devices.
Let's look at another example. It's not surprise that semiconductor R&D is complex and expensive. This reality is only compounded as market and product lifecycle shrink and margin pressures increase, but companies don't have to go it alone, why not share in the cost and risk of R&D. Some leading semiconductor companies are setting up joint ventures with device companies and embedded markets like medical or auto. The semis combine their IC expertise with the applications expertise some market access of the systems company to bring integrated solutions to these markets while sharing in the risk of development and the revenue on the system sales. By innovating through the relationship with their network cost is reduced, risk is shared, and capabilities are combined to create compelling and unique offerings to the market.
There is also tremendous opportunity today for semiconductor companies to reinvent or recombine capabilities of their product based-system to a platform system. On the systems and applications end, imagine semiconductor companies working with ecosystem partners on tunning chip roadmaps and IP to better enable the whole end-user experience and differentiate the combined value proposition of your OEM partner. A better visualization, responsiveness, connectivity, form, etc. This innovative shift from the design into a box to design into an application holds a potential for tremendous value for n markets and consumers as a frequency of platform refresh is better managed allowing semiconductor companies to allocate more investments on the derivative products it's been off the platform.
Finally, leading companies should also consider how they can innovate the entire end-user experience taking into account the services, channel, brand and customer engagement activities. Imagine a semiconductor advanced graphics and computing company partnering up with a consumer electronics company and a memory or storage company to develop an ultra high definition home media hub that can store, stream, project, distribute and capture high definition media throught the home and provides a gateway to devices to access home media content anywhere anytime.
Let's focus on chip performance alone becomes less differentiating or in some cases irrelevant innovating and tunning the chip to enhance the customer experience beyond the system they offer opportunities to increase value. It will be critical to consider how the silicon level can help better enable the things that customer experiences versus just the performance of your device alone. Innovation beyond product and process enhancements is already happening in the semiconductor industry today. Recent new stories have called the attention to partnerships between chip makers and the broader ecosystem partners. Form software developers to hardware manufacturers to service providers. It's time to step out of the R&D box characterized by having engineering investment and look for more creative forms of innovation to enable growth.
Retrieved from: https://www.youtube.com/watch?v=XKvhhqGJ80U
Types of Innovation - Video 3
Transcript:
One we set about to build a culture of insight and innovation, we committed to three types of innovation to improve how we currently do our jobs, run our systems and processes as well as creating new products, services and business models to serve our customers. We are committed to the full spectrum of innovation from continuous improvement to disruptive innovation. We will work with three types of innovation: countinuous improvement, sustaining innovation and disruptive innovation.
Innovation is not only about taking giant steps, it's about continuous improvements to what we are already doing. Continuous improvement is incremental enhancements to processes products and technology with the customer experience in mind. Continuous improvement is about not being content to what we've been able to achieve, instead it's a drive to keep getting better and while it may seem risky to change the way things are done, continuous improvement is a lower risk than sustaining and disruptive innovation and it is the calculated risk we need to take. Examples of this may include, adding new features to any of our insurance products or creating a tool at to save time within your workgroup.
Ideas sometimes require that we go a step further and to make mayor advances to leverage our investments and capabilities and reinvent the way we do business from a member perspective. That's sustaining innovation.
Creating new markets through innovation will also give us a leading edge and disruptive innovation will do that.
Disruptive innovation efforts will help us create new businesses to offset market changes. It will also provide us with growth opportunities in current and new markets. We already have self-driving cars and other market disruptors that we couldn't have imagined five years ago.Disruptive innovation will allow us to bring next generation products to market.
We understand that all three types of innovation are critical. Continuous improvement, sustaining innovation and disruptive innovation. The majority of our innovation activity wil be continuous improvement. That means that most of the responsability for creating a sustainable company is in the hands of everyone of us, thank you for being part of our team and learning more about innovation!
Retrieved from: https://www.youtube.com/watch?v=rJVUDEGV_uo
An Introduction To Innovation - Video 4
Transcript
When we talk about innovation is always quite interesting. We talk about how novel its model, so that's another way to talk about different types of innovation. This is where we roughly divide between incremental innovation in one side and radical innovation in the other side. So, incremental innovation is about doing what you are already doing but a little bit better. So, producing similar type of products with a little bit of a different functionality. Radical innovation is of course much more challenging. This is where the companies are trying to introduce totally different product concept and something that doesn't really happen very often. In the radical innovation components or individuals that are involved in the innovation process certainly experiment with technology, with the solution they are not very familiar with and they often go outside their comfortzone.
In innovation we also often use the concept of disruptive innovation. This is the innovation which usually develops somewhere in a new market and potentially can disrupt and affect the stablished technology with the severe concequences for a company that doesn't innovate. But it's very exciting with innovation of course innovation is a very dynamic process and we discuss different types of innovation and in this process, these types of innovation usually come out at different stages in the process.
The dynamics of the process can be described as an S curve. An S curve starts with a fluid phase. In the fluid phase we usually have a lot of new product innovation, maybe a lot of new business model innovation and this innovation is at this phase characterized with a high degree of technological uncertainty because technology might not be that clear or also market uncertainty because it might not be clear who is going to buy this product whether market is right. At this stage, usually we don't necessary see so much process innovation. The companies will very often experiment within some market issues and we discuss before disruptive innovation and this is where the disruptive innovation starts with these fluid phases.
Now, when the product is already in the market. When the customers are already providing the feedback and where the competitors usually come with a similar product. Then, the dynamics definitively changes and this is call "transitional phase". This is the phase where companies then learn much more about the market, they learn much more about the product, the technologies, so the product becomes much more standardized, we see the emergence of so-called dominant design.
The last phase of innovation curve is specific phase. So, that's the phase where the product or service come to maturity but this is not to say that there is no innovation involved. A lot of incremental innovation happens in this phase because the companies try to sustain the product or service in the market. At that stage the companies are really also involve in a process innovation because they try to reduce the cost, cost of the products so the product can stay on the market for longer.
These S curves are also very useful to demonstrate whether radical innovation happens or where discontinuous innovation happens. We can see that innovation develops within these S curves and there is a lot of incremental innovation but what is really interesting when the one S curve is replaced by another one and this is where we see in these red circles. These red circles are really big innovation challenge. This is where the new discontinous technologies are coming in. This is where the radical technologies are coming in and this is where there are huge opportunities for new entrance or for entrepreneurial companies to change the dynamics of competition. These changes can be competent destroying so as we discussed in the disruptive technology context or the new technology can disrupt the technology of the incumbent firm or it can be competence enhancing so in this case usually the established companies introduce the discontinuous innovation, but this discontinuous innovation builds on the previous technology.
Retrieved from: https://www.youtube.com/watch?v=h5Zapw9DhmM&t=15s
Levels of Innovation - Video 5
Transcript
Incremental innovation of course if we take for example an iPod which is definitely a new product category but what we are seeing now is a different generation of iPod coming from Apple so this is a typical example of incremental innovation. Every iPod is a little bit better, a little bit better resolution, a little bit thinner but that's incremental, that's Apple doing what they are already doing and doing a little bit better and of course there are many other companies coming in with the same product improving incremental. That's a typical example of incremental innovation showing that companies are doing something that are already good at but improve incremental and companies in general are very good in incremental innovation.
Radical innovation is of course on the other extreme of the continuum and we have to understand that radical innovation doesn't happen that often, doesn't happen frequently but it does happen. Of course we can look at an example of adequate innovation like invention of Internet and introduction of Internet but I actually created almost a new revolution. So, that's a typical example of radical innovation and we can also look at other example. For example, like electric cars certainly changed the automotive industry and all the demands around the sustainability will certainly create a lot of radical innovation for example for automotive businesses. So, those are examples that illustrate the difference between incremental innovation and radical innovation where the companies have to engage in something that they are not necessarily good at. Something that is really new for them, new for industry or in some cases like internet pretty much new to the world.
A disruptive innovation is a particular type of innovation where we are more focused on consequences of innovation. The good example is Digital imaging and Kodak. We know that the invention of digital imaging which interesting enough Kodak was part of it affected Kodak core capability which was more in the film in the chemistry and they could never really switch from film to the digital imaging, but we have to be aware that such disruptive technology usually starts in a niche market at the very beginning it's not better than the existing technology and this creates challenges for innovation managers because they are inclined to ignore this technology and they can never adapt quickly enough but disruptive technologies are, if we talk about disruptive technology, we are focusing on the consequences of technological change but it not necessarily just technology is disruptive, it can be a business model can be disruptive as well and the companies have to adapt.
Retrieved from: https://www.youtube.com/watch?v=Pne2YdZuAtA
Engaging People In Innovation Process - Video 6
Transcript
We introduce innovation management as a particular blend between creativity, imagination and systematic approach to management and this is in particularly why managing innovation is so difficult because companies actually face two conflicting demands. Companies actually want to be efficient and this is how they are organized. They are organized to provide their services and products in a reliable way. They are good in implementing their ideas they already had. They are good in improving the existing services, existing products. Companies are rarely good in creating something uniquely new and this is where people at a company have to deal with uncertainty. They have to experiment. They have to take risk. They have to discover new things and there is this fundamental trade-off between being efficient and being innovative and this is why the innovation management is such a difficult managerial activity.
In companies that excel innovation we will usually see four elements: the first one is organizational creativity. The second one is intensive collaboration. The third one we will see the right roles for different individuals within the organization and we will also see the fourth one and that's so called creative climate.
Very often companies have to design organization accordingly different initiatives some of them that might be more focus on radical innovation or more incremental innovation should be often separated. Innovation managers have to be very mindful of how to structure the group so that they provide enough diversity.
We mostly associate creativity with the individual competency. However, in the organization it's important that creativity happens within the organizational context and hence the organizations have to assure that the environment is right for innovation to florish. It's usually important for companies to support development of new initiatives. People involved in innovation have to be aware that they are allow to fail, so the risk taking has to be encouraged.
The second characteristic of innovative companies is intense collaboration between different members within the company so the company's organized cross-functional teams with the right level of diversity so that innovative and creative ideas can florish, but collaboration doesn't end within the borders of the company but also extend over the borders and companies have to be able to scan the environment, to recognize new technologies which are usually coming from universities or from other small innovative companies. Additionally, companies work with customers and suppliers in order to increase their innovation capability and increasingly also with governments to shape the innovation policy.
Different people have different roles when it comes to innovation in organizational context, not everybody has to be a technical specialist. Those individuals or small groups that are involved in technical inventions are usually called innovators. They would go and develop new products or new technologies but they would be accompanied with other individuals. Other individuals can be project managers, those who try to provide a disciplined and systematic approach to innovation processes, look for the milestone, resources available, and work plans. An interesting new role are individuals who are scanning the external environment. They are looking for new technologies, new solutions at universities, what the small entrepreneurial companies are doing and they also look at how new technologies perhaps develop in new industries but technology that can be potentially acquire and brought into support internal innovation processes.
I mentioned before that knowledge sharing is extremelily important for innovative company and gatekeepers are individuals who are uniquely placed to enable this knowledge sharing between different groups and teams, especially in big organizations it's important where the knowledge coming from who has a particular competence and how they actually, how these competences can actually come together. This is even more important now when a lot of knowledge resides outside the company and the gatekeepers can actually bring all these expertise together when needed.
Innovation again is not just about technical expertise. In the organizational context it is very important to sell a particular innovation, persuade other colleagues and other members and managers that the particular innovation has a potential. This is the role for so-called champions. They can sell their idea. They can describe the idea. They can communicate the idea to other not to customer, not necessary to customers but to other members of the organization. And at the end, the important role is of course a sponsor so that's somebody who has the authority to support the project, to support the initiative, protect the project and provide enough resources and provide the link to the top management.
The last element we will see in innovative organization is so-called creative climate. It means that organizations have to develop unique organization wide, beliefs, values, and norms that support innovation. This is what we see in many innovative companies. They argue that they are innovative, and that's something that matters, and that's something with their DNA, and I think that that goes well beyond some simple managerial techniques, pretty much affects the very core of the innovative organization.
Retrieved from: https://www.youtube.com/watch?v=YqKdlpoijKE
Innovation Management - Video 7
Transcript
In less 50 years innovation has been managed very differently. At the beginning of the 50s, R&D departments were usually quite isolated from the rest of the company. They were tasked to develop new technologies and these new technologies were then pushed to the market. In secondary generation, R&D became much more business light, much more part of the entire business but also much more focused on perceived needs of the users and customers. From a management point of view R&D at that time was pretty much run as a project management focus on cost efficiency and milestones.
In third generation of R&D management these project management tools have been a company bit more sophisticated, financial tools. Companies started to use portfolio management techniques looking at the different R&D projects and these portfolio management techniques and risk techniques enable them to be more precise in their investment decisions in different R&D projects.
In fourth generation of R&D management this, we see R&D being much integrated into the company, much more engaged with other business functions. Members of R&D teams are increasingly involved in cross-disciplinary, cross-functional projects in the company but they also collaborate and engage much closely with the customers and with suppliers and hence the challenges for innovation management became more pronounced.
If we look at innovation management. Now, innovation management is much more of system integrators when R&D is now part of the bigger innovation initiatives and especially related to collaboration. Members of R&D are now engaging with not only with customers, not only with other parts of the business, not only with suppliers but also with universities where they scan for new technologies. They search for new technology they also work if we talk about big established companies they also work with small entrepreneurial companies and at the end of the day they also engage with governments in order to shape the research policy.
We already see and we will see even more how the complexity of innovation increases especially because innovation today has to tackle grand social challenges like sustainability, energy, health, power, poverty and all these things we'll bring in in our innovation process other constituencies like I already mentioned government but also NGOs and other organized public and this is what will create new challenges to manage innovation processes for the companies that are a center of innovation activities.
Retrieved from: https://www.youtube.com/watch?v=1S-Ux_RpCy8
Open Innovation & Crowdsourcing - Video 8
Transcript
In earlier session we looked at how innovation happens in organizations. This is continuing to evolve and what we see today is a trend with large organizations towards opening up the way they innovate. The idea of opening up the innovation process is a hot topic in many organizations today. It is based on the general idea that organizations can not longer rely solely on their own expertise and skills to develop and sustain successful innovation. Here we are going to explore this further with Christow looking at simple models and also showing some practical examples.
We have already discussed that innovation is a collective endeavor where different individuals and different organizations actually come together. This networked nature of innovation has been further popularized by the concept of open innovation. The term open innovation has been coined by Henry Chesbrough. He suggested couple of ideas that companies actually have to be mindful that the knowledge can come from outside so it's always possible to acquire the knowledge from outside in order to support internal innovation processes what is perhaps even more original in his proposal is his argument that big technology intensive organization will very likely produce more intellectual property that they can commercialize through their strategies and their business models so this is why they should think carefully how to use this intellectual property that they don't commercialize through the existing business model, and they should think about licensing IP or spinning out the companies. In a nutshell, the idea about open innovation of course is that not all smart people actually work for your company.
The concept of open innovation has had a huge impact on innovation practicioners, but what we have seen that different companies and different innovation managers interprete the concept of open innovation slightly different. A regional approach of course is that the market for intellectual property exists and the companies are challenged whether to acquire IP from external sources or to find the way to commercialize their internal IP. The companies however are very often referred to open innovation in a slightly different context. For some companies, they use open innovation is almost umbrella term for every sort of collaboration they are doing, so for example, collaboration with university, collaboration with small enterprises. Everything fits under the umbrella of open innovation. Very often and increasingly so but we see that the companies refer to open innovation projects, as those projects were in intellectual property is not that sensitive or in the project where they don't quite know where the intellectual property is going to come from. At the end of the day what is now also quite timely when we talk about open innovation are the different concepts of crowdsourcing which assume that the capacity for problem solving is widely distributed and we can access with help from information technology expertise of the crowd.
A crowdsourcing project will usually run through some characteristic phases. First, the company will actually develop a project and describe the problem, it's useful to describe the problem very clearly and the company would hope with the problem it's not too complex. They don't have to provide too much information.
The next step is choosing an open innovation platform, so the IT platform that will actually enable collection of different contributions from the crowd. The next step is to develop guidelines for community and identify the prize for the winner.
The next phase is so called online phase where people who self-select contribute submit their ideas of how the problem can be solved and the process concludes with a jury evaluatng the idea and select the winner.
As we can see we are heading towards a networked environment with many people and different players involved. Joining crowdsourcing you have seen how wide this network can become when the right technology is in place. Can you think of a example of crowdsourcing that has inspired you or you have been a part of?
Retrieved from: https://www.youtube.com/watch?v=jzjLOBsQ57k
The Innovator's Dilemma - Video 9
Transcript
The Innovator's Dilemma by Harvard Business School professor Clayton Christensen. The book explains how successful companies that dominate their industries fail in the face of disruptive innovation. It's a message of caution for leadership teams of these companies, but also a message of encouragement for competitors venturing against these Goliaths. First, we will distinguish between sustaining and disruptive innovation. Then, we will discuss why is difficult for most companies to adopt disruptive technologies, and finally, what does it all mean for both large companies and startups.
There are two types of innovation: sustaining and Disruptive. A company follows the path of sustaining innovation when it improves a product's performance based on feedback from its best and largest customers. It's usually about reducing defects and making something faster or more powerful.
In contrast, a disruptive innovation often involves lower performance in many of the key features valued for market. It often means more defects and less speed or power. A disruptive product appears as if it is doing everything wrong. A large company with sophisticated and demanding clients can adopt such a technology. Why would anyone want to focus on a disruptive innovation? The subtle but key difference is that sustaining innovation satisfies customer's current needs. Whereas disruptive technologies in business models involve to meet customers' future needs. These two types of innovation are at the core of the innovator's dilemma.
Following a sustaining innovation path makes a lot more sense in the short-term but can ultimately doom the company to failure. On the other hand, dedicating valuable resources to a niche and unproven opportunity doesn't make sense but can be the future of the company. Disruptive innovation is often born from a need that exists in a niche market that is neglected by current market offerings. That small market segment may not care about traditional performance features.
A great example is cameras and smartphones. Smartphones started with very poor camera capabilities that served only the lowest to your customers. Initially, they were pretty useful as cameras and few people would use them but they evolve in leaps and downs and now have successfully displaced cameras from many traditional users. Similar business model and technological disruptions appeared all over the place. Wikipedia rendered encyclopedias extinct. Google maps replaced expensive navigation systems. Skype dealt a big blow to phone companies. Netflix drove large video rental retail change to bankrupcy. The Kindle is changing book publishing. Airbnb is driving hotel managers crazy. And Uber has taxi drivers up in arms. The question is, why are large well resource companies often caught asleep? Why are they at the forefront of disruptive innovation? Given the small market size and unappealing characteristics of a disruptive technology. A successful company can dedicate resources to small and unproven offerings.
What does this mean for large companies future? Even tough disruptive innovation may not make sense in the short term, they simply can't be ignored. Companies need to listen to their customers in order to continue successfully with their sustaining innovations but they need to look at niche markets and how they use their profucts in order to identify potentially disruptive innovations and embrace them. For startups is all good news. As long as their innovation has the potential to improve performance rapidily is actually a good thing that their initial market is small. This gives them more time to fine-tune their technology. Many startups have been and will continue to be suprise by their much larger competitors' indifference. The innovators' dylemma was published in 1997 but continues to be an extremely insightful approach to innovation, explaining why market leaders can't afford to ignore innovations that cater to niche markets while startps perhaps don't have to worry to much about their larger competitors. A small target market can be the start of something really big.
Retrieved from: https://www.youtube.com/watch?v=yUAtIQDllo8&list=PLb-qKHFV4I8c70uL856k-Xv0eli5xaBs1
Business Model Innovation - Video 10
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Have you ever wondered why hyper successful companies like Nokia or Kodak suddenly lose their edge? Or how could firms like Commodore Computers, Grunding, Nakamichi, Newsweek or Polaroid possibly fail? Did they not have abundant R&D resources, top emplloyees and profound knowledge of their markets? Yes, but they had another thing in common. They all missed the moment when they should have left their successful path to rethink their business model. They missed out on radical innovation because they were too busy managing daily business and serving current clients instead of envisioning future opportunities. In other words, today's success is the enemy of tomorrow's success.
The innovation cycle spends faster than ever in nearly all industries. Innovation either increases the customer value of a product or service or it lowers their costs and therefore creates a competitive advantage. Apple for instance creates a high perceived customer value with its innovative new products and Dell reduces its cost and working capital through build to order processes but even though its importance is undisputed, there are many misconceptions about innovation. Three myths are particularly pervasive.
First, innovation stands from ideas nobody has had before. Second, big success requires big resources and third, innovation breakthroughs are always based on fascinating technologies. Luckily, they are all wrong. IBM did not invent the personal computer, Apple did not invent MP3 technology and Amazon did not invent the online bookstore. Successful innovators learn and recombine whereas the piooneers get eaten by the wolves. Cisco had virtually non-existent R&D resources but out innovated the largest research lab in the world, AT&T's Bell labs. 14 of today's 25 most innovative firms have innovated their business model and not just their technology. Take firms such as Google, Amazon or Ebay, great algorithms yeah but it is the business model not just the technology that is responsible for their success. So, what exactly is a business model innovation? A business model provides answers to four questions: Who is your target customer? What do you offer to the customer? How do create the value proposition? And how do generate revenue?
Any business model innovation changes at least two of these four dimensions. In our research we have looked at all major business model innovations in the past 50 years. They have all revolutionized one or several industries. For instance, IKEA has redefined the way we buy furniture, Tom Tom has transformed the navigation business or Ebay has changed the world of trade. Yet only 10% of these business model innovations were novel and introduced new business model patterns, the other 90% merely adapted, refined or combined these patterns. For instance, innovative companies often apply creative imitation. They ask themselves, how could a business model innovation from another industry revolutionized our own industry? In total, we have identified 55 business model patterns that are responsible for all business model innovations, for example, Flatrate, Supermarket, Rent Instead of Buy, Experience Selling, Ecommerce, or the Razor and Blade pattern. Let's have a look at this one. Since 1904 Gillete has being giving away razors for next to nothing but selling its blades at obscenely high prices. Nespresso creatively imitate this pattern. Selling cheap coffee machines and expensive coffee and revolutionized the coffee industry and many other companies applied the Razor and Blade Pattern too. Remember Apple's iTunes, Amazon's Kindle or Hewlett Packard's inkjet printers?
Now, what do you have to do to innovate your business model? We advice you to follow four steps: initiation, ideation, integration and implementation. During iniation, you analize your current business model. Again, Who is your target customer? What do you offer to the customer? How do create the value proposition? And how do you generate revenue? During ideation you confront this business model with the 55 business model innovation patterns and develop new models. How would Nespresso conduct your business? Or is there a match between your product and the experience selling pattern? Challenge your basic assumptions and the dominant logic of your industry, but don't try to reinvent the wheel. Instead, use analogies and learn from other industries. During integration you need to check the consistency of the business model. This is important detail work where you examine all four questions regarding organizational fit. Finally, during implementation it is time to awaken the beast. But be carefull! in iterative cycles, you design a business model, build the pilot, test the pilot and return to the design phase.
It is important to not only gain qualitative and quantitative data to verify or also find your assumptions about your new business model but also not to forget about the soft factors of innovation. Thanks to incorrect management behaviour and organizational resistance more than 70% of all change initiatives fail! Therefore, keep a few rules in mind. First, only implement one business model at a time. Second, clearly communicate the new business model and the need for change. Third, don't over emphasize short term KPIs. Innovation needs time. Fourth, get top management commitment. Without the sponsorships business model innovation is doomed to fail! And finally, overcome but not invent the here syndrome.
Got that? Let's wrap it up then. Innovation is the key factor to defeat path dependency and stay competitive in today's economy, yet innovation is not necessarily about new technologies, excesive research and development or about creating completely new ideas. Most of the time, innovation is about learning from others and reinventing your business model, not just through technology, this can be done in a structured process of initiation, ideation, integration and implementation. You analize your business model, apply the 55 innovation patterns, check for inconsistencies and start implementing carefully, keeping in mind success factors and pitfalls. Are you ready then to revolutionize your own industry? Try to creatively learn from the giants whose shoulders you are standing on! Think big and think different. Steve Jobs did it so why can't you?
Retrieved from: https://www.youtube.com/watch?v=B4ZSGQW0UMI
The Explainer: Disruptive Innovation - Video 11
Transcript
How does a small young company beat an industry giant on its own turf? Through what Harvard Business School professor Clayton Christensen calls disruptive innovation. It works like this: big players focus on sustaining innovation. Upgrading existing products and services to attract higher paying customers but soon, they start to ignore all the regular customers who just want simple low-cost alternatives. That's where the entrepreneurial company jumps in with that basic offering. The big guys stay focus on more profitable customers and begin to over-serve adding bells and whistles no one wants to pay for. Meanwhile, the disruptor improves its product to appeal to more people. By the time the incumbent notices it, the disrupter has already started to take over the market. The classic example is the steel mini Mills which first produced low-quality rebar, then move to sheet steal. Stealing business from the large mills that had been dominant.
More recent disruptors include car makers like Toyota and Hyundai, which launched with economy models then added luxury features and brands. The only way for industry giants to fight back is by launching their own disruptive innovations. To succeed, they must treat the project as a separate unit with a different business model and growth expectations, ask "what job do customers need to get done?", segment customers by job not by product market size or demographics and develop a basic, low-cost waste to get the job done. That's how Procter and Gamble came out with Crest White Strips, a cheap, do-it yourself alternative to an expensive dental service.
Disruptive innovation creates new markets and reshapes the existing ones. To achieve growth in a fast changing world, you want to be a disrupter. Don't be disrupted!
Retrieved from: https://www.youtube.com/watch?v=mbPiAzzGap0
Four Ways To Think Like An Innovator - Video 12
Transcript
To innovate successfully within your company or on your own, you need to think differently than you do about other tasks. You find yourself struggling to get a project started or get stuck in the middle of one. These four guidelines should help put you in a better frame of mind.
First, keep an external focus. Adopting an external viwepoint is crucial to identify opportunities. Instead of thinking about what products your company has to sell, think about what problems your customers are trying to solve. Spend time with your target audience to understand not just what they say they want but what they actually mean and how you might help them. Inspiration comes from looking the outside your company and comfortzone. Draw from other disciplines to find new answers to old problems.
Second, learn from your mistakes. The great American philosopher Mike Tyson had it right when he say: "everyone has got a plan and so they get punched on the face". There is not such thing as a perfect plan. A new idea never survives its first contact with the market on scale. Assume your first idea is partially right and partially wrong. Go out and learn from the market and make sure that we access your approach as you learn how you are wrong.
Third, embrace your inner Edison. Thomas Edison was the consummate innovator. He didn't approach innovation as an academic exercise. He went out and make things. The phonograph, an incandescent light bulb are just two examples: embracing your inner Edison means remembering that genious is 1% inspiration and 99% perspiration. Start sweating like any discipline innovation mastery only comes through hours of practice.
Four, resist the pull of the core. Every company individual has a set of capabilities. Those capabilities define what the company and its workforce can do and most importantly, what they can't do. strenghts define weaknesses. Einstein once defined insanity as following the same process and expecting different results. Great innovators find ways to address hidden weaknesses that inhibit success. If you don't, you will squealch innovative ideas or subtly shift them so they are closer to how your core business currently opperates. If you are tasked with innovation at work you need to adopt a new frame of mind to succeed. Get into the right one by following these four guidelines.
Retrieved from: https://www.youtube.com/watch?v=wny1PKr_nOg
Run A Discipline Innovation Experiment - Video 13
Transcript
Everyone knows that innovation is critical. The hard part is getting it right. Of course some failure is inevitable when you are trying something new, but failure isn't the real enemy of innovation. The real enemy is prolonged expensive failure, the key is to fail cheaply and quickly to make sure you are spending a little to learn a lot. This has been my advise when I work with companies like GE, Boeing and IBM, but it applies to any company of any size. Here is how to run a discipline inexpensive innovation experiment.
First, list your unknowns. Start by making a list of all the unknowns your project faces. For instance, do you understand the customer problem? Will your solution address that problem? How many units do you think customers will buy and at what price? How sure are you about your production cost? About your go-to market strategy? Who else is competing with it?
Second, rate each unknown for level of uncertainty and importance. Rate each unknown on a one to five scale. For example, you might be confident that you understand the customer problem, so you would rate that a one for uncertainty but you are less clear about the competitive threats so you may rate that a five. Then, considering importance think about how disastrous a wrong assumption about the unknown would be. If it is not critical give it a 1. If being wrong could ruin your whole innovation effort give it a 5.
Lastly, list the highest rated unknowns first. Now, add up the scores for each unknown. The ones with the highest score are the ones you should test first. They are the critical assumptions. The key principle is spend a little, learn a lot. Try to find inexpensive ways to test assumptions, you can use several techniques such as computer simulations, customer visits and focus groups to reduce the cost of experimenting. This exercise can bring more discipline to any innovation effort. This sounds simple, but a lot of managers would never think it through this systematically. The key is to test your most critical unknowns as early and as inexpensively as possible.
Retrieved from: https://www.youtube.com/watch?v=Mb8GSua9B0Q
SME & Innovation Driven Enterprises - Video 14
Transcript
So, if you are starting a business in an already established market, you are an entrepreneur. If you are starting your business in a not-well established market with innovation that's entrepreneurship again, but they are different. When you are starting your business in an already established market you are actually probably doing a copycat thing. You are starting a restaurant, you are starting a dry-cleaning service, you are starting in comfort, you are starting one of those businesses that are already in existence to earn your living. So, I would like to separate the two. Small and medium enterprises on the one side which are regular businesses and then innovation-driven enterprises on the other side which are different types of businesses and between those two, there are basically three major differences.
The first difference is that any business that you start as a market, as a store, whatever, that does not need innovation. You have the experience and you have the resources, you simply go ahead and start what other people have already donde before you.
The second difference is that small and medium enterprise usually meets a local need and runs within the family, so it's like a family business, doesn't use a lot of external resources. On the other hand, innovation-driven businesses, enterprises, they use external resources while they might be starting to meet a local need, they grow fast and they start to meet regional and all the way to global needs.
And the third difference is the revenue generation and employment rate. In small and medium enterprises revenue generation and profit, they start to happen on the very first day and it grows linearly not with a very high slope most of them and as I said, it goes linearly so there is a growth but it's a linear role. On the innovation-driven businesses however, you will have a loss in the very beginning because you will be spending money to develop a product, to develop a service, to develop a market, to try to understand better of your customer segment, etc, so it always starts with a loss, but it grows very fast, it grows exponentially and the loss that you make in the beginning is recovered very fast when the revenue starts to come in. Therefore, the revenue generation and the employment generation model between those two are quite different.
Retrieved from: https://www.youtube.com/watch?v=1aI9n7NLfto
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