Innovation

Lecturer: Agron Hajdari

IBCM, Winter semester 2020

 Types of innovation
 Innovations can be categorized in a number of different ways.
 In this chapter two of several potential methods of categorization
are used. One focuses on the form or application of the innovation
i.e. what it is used for), the other focuses on the degree of novelty
associated with
the innovation. Neither categorization is exhaustive, but the
difference between the two is illuminating and helps to shed
further light on the nature of innovation.
Forms of Innovation

 The first categorization, based on the form of innovation, distinguishes three

principal applications for innovation: products, services and processes. 
 Consumers use products and services. Products are tangible physical objects
like mobile phones, audio players or cars, which consumers acquire and then
use as part of the act of consumption.
 Services on the other hand are typically intangible things
like healthcare or education, where the consumer benefits from the service but
does not actually acquire an object. Service innovations are therefore
intangible. 
 Both product and service innovations are typically aimed at consumers. In
contrast, producers produce products and deliver service and in order to do so
they utilize processes.
 Product and service innovations will typically benefit consumers
giving them more functional products or faster and more effective
services.
 Process innovations on the other hand typically benefit the
corporate sector by improving the efficiency of their production or
service delivery processes, thereby
lowering their costs.
 Such innovations should also benefit consumers indirectly as
lower costs eventually (but not inevitably) feed through into lower
prices.
 Product innovation
 Product innovations loom large in the public imagination. Products, especially consumer
products, are probably the most obvious innovation application. The Dyson bagless
vacuum cleaner is an example of a product innovation.
 James Dyson developed what he terms "dual- cyclone" technology (Dyson, 1997) and
used it to create a new, more efficient, vacuum cleaner. As a vacuum cleaner it is a
consumer product and what makes it an innovation, i.e. what is innovative about it is
that it functions in a quite different way from a conventional vacuum cleaner. It is still a
vacuum cleaner and it does what vacuum cleaners have always done - it extracts dust
and other items of household debris from carpets and upholstery – but the innovation
lies on the way in which it functions.
 Dyson patented dual-cyclone technology to extract dust and place it in a clear plastic
container, resulting in a more effective cleaner.
 For commercial perspective the attraction of product innovation us that the novelty of a
new product will often persuade consumers to make a purchase.
 The introduction of a new technology to an existing product may similarly attract much
consumer interest.
 Service innovation
 Often overlooked, but equally important, are service innovations which
take the form of new product innovations is that they are often less
spectacular and less eye-catching.
 One reason why service innovations fail to attract as much attention as
product innovation is that they are often less spectacular and less eye-
catching.
 Service innovation involves the provision of a new or significantly
improved service to the consumer. A new service may be the result of a
new technology which makes it possible to offer the consumer a service
that has not previously been available.
 Facebook is an example of an entirely new service. Prior to the launch
of Facebook in 2004, there were few if any social networking services
available.
 The growth of the Internet has led to a sharp rise in the number of
service innovations.
 Some of these innovations have simply made existing services more
extensive and more efficient. Amazon.com is a prime example.
 Bookshops have been around a long time, but online bookshops can
offer a much greater range of books often at lower prices because they
don't pay the cost of retail premises.
 Another field in which service innovations have brought
significant benefits to consumers is air transport. The arrival of "no
frills" airlines such as easyjet and Ryanair (borrowing a model first
introduced by South West Airlines in the US), have dramatically
increased the range of destinations served as well as lowering the cost.
 Process innovation
 Process innovation has a great impact on society than product of service
innovation.
 Process innovation mean innovations in manufacturing process, although as we
have already seen it also includes innovations in service delivery process.
 Today we are in the midst of a process revolution. All sorts of organisations
from banks and insurance companies to supermarkets and cinemas are
providing facilities for consumers to carry out transactions online.
 Even government is getting in on the act as activities, such as taxing a car and
applying for a driving license, are increasingly carried out online.
 Transacting business online means greater efficiency because there are no
people to serve the customer and no papers to process. Instead the customer
inputs the data and everything else is done electronically. This is dramatically
reducing the need for paperwork and those who process paper, namely
administrators, resulting in faster and cheaper processes and greater efficiency.
 Radical innovation
 Radical innovation is normally the result of a major technological breakthrough or the
application of a new technology.
 Radical innovation is much more than improving an existing design, it understands a
whole new design.
 The flat-screen TV is an example of a radical innovation. What makes the flat-screen
TV a radical innovation? Prior to its introduction, TVs and computer monitors utilized a
cathode ray tube (CRT) to display an image. Compared to a TV utilizing a CRT display,
a flat-screen TV incorporates a completely different technology, namely a liquid crystal
display (LCD).
 LCD technology, operates on entirely different principles. The LCD uses liquid
chemicals whose molecules can be aligned precisely when subjected to an
electrical current. First used for pocket calculator and wrist watch displays, LCD
technology owes nothing to CRT technology. Compared to a CRT-based TV, the system
architecture is different as are the components. Thus the flat-screen TV represents a
discontinuous change rather than a linear one. CRT displays benefited from a string of
linear innovations over many years, that improved their display characteristics, but the
introduction of the flat-screen TV represented a break with CRT technology.
 Incremental innovation
 Incremental innovation involves modest changes to existing
products/services (or processes) to exploit the potential of an
existing design. The changes are typically improvements to
components, possibly the introduction of new components, but
always within the confines of an existing design. However, it is
important to stress that these are improvements not major changes.
 In other words the level of novelty is low. Christensen (1997)
defines incremental innovation as: "a change that builds on a firm's
expertise in component technology within an established
architecture," and this highlights an important feature of
incremental innovation, namely that it is typically the product of
existing practice and expertise associated with an existing
technology rather than the introduction of a new technology.
 Incremental innovations are the commonest type of innovation.
 Gradual improvements in knowledge and materials associated
with a particular technology lead to most products and services
being enhanced over time.
 These enhancements typically take the form of
refinements in components rather than changes in the system.
 The technology is improved rather than replaced. Thus
incremental innovation is something that occurs quite frequently
to create an essentially linear process of continuous change.
 Modular innovation
 Modular innovation uses the architecture and configuration
associated with the existing system of an established product, but
employs new components with different design concepts. It does
not involve a whole new design.
 Clockwork radio
 An example of modular innovation would be the clockwork radio, developed
by Trevor Baylis.
 Radios have been around for a very long time. They operate on the basis of
electrical energy, normally provided via either an external power supply or
batteries.
 The clockwork radio is an innovation that employs a different form of power
supply, one that utilizes a spring-based clockwork mechanism.
 The other components of the radio, such as the speakers, tuner, amplifier,
receiver, etc. remain unchanged. As a radio, the clockwork radio operates in the
same way as other radios. It employs the same kind of architecture in which the
various components that make up the system are configured and linked
together in the normal way.
 However, being clockwork it does not require an external power sources and
this is a very valuable feature in those parts of the world which do not benefit
from regular uninterrupted power supplies.
 Architectural innovation
 With architectural innovation, the components and associated design concepts
remain unchanged but the configuration of the system changes as new linkages
are instituted. As Henderson and Clark (1990) point out: "the essence of an
architectural innovation is the reconfiguration of an established system to link
together existing components in a new way".
 This is not to say that there will not be some changes to components.
Manufacturers may well take the opportunity to refine and improve some
components, but essentially the changes will be minor, leaving the components
to function as they have in the past but within a new
re-designed and re-configured system.
 Sony Walkman
 The Sony Walkman provides a good example of architectural innovation. The Walkman,
when it first came out, was a highly innovative new product, but it involved little or no
new technology.
 Portable audio tape recorders that could both play and record music had been on the
market for many years. Designers at Sony started with an existing, small, audio cassette
tape recorder, the Pressman (Henry and Walker, 1991), a small lightweight tape recorder
designed for press reporters. They proceeded to remove the recording circuitry and the
speakers, and added a small stereo amplifier. A set of lightweight headphones completed
the package. Because there were no speakers the new machine needed much less power.
The absence of speakers meant it could be made much smaller, while the fact that it
needed much less power meant it could use only small batteries making it very much
lighter.
 A very different kind of system with a very different kind of architecture began to
emerge. So the Walkman was born. It was a new type of audio product. It was a personal
stereo, that enabled its young, mobile users to listen to music whenever and wherever
they wanted, and without being harassed by older generations concerned about noise.
 Questions for discussion
1. Why do product innovation tend to attract more public attention
than service or process innovations?
2. Identify two process innovations which have had a big impact on
society?
3. Choose an example of everyday household object and identify
some of the incremental innovations that has taken place?