Unit-1

1.1 Introduction: Innovation: Meaning, difference between innovation and

creativity

What Is Innovation?
The Oslo Manual, an international reference guide from the OECD for collecting and
using data on innovation, defined the concept of innovation as:
“(…) a new or improved product or process (or a combination thereof) that differs
significantly from the unit’s previous products or processes and that has been made
available to potential users (product) or brought into use by the unit (process).”

What is creativity?
For human species, “creativity” is one of the most important characteristics. It is
considered to be one of the main aspects to make a person successful as individuals.
The word “creativity” means complete creation.
It is also about controlling to have the power of the mind for conceiving unique ideas,
product-plans, experiments of those thoughts, tastes, sensations, etc. For solving
problems, “creativity” can be a structure of an individual’s expression.

“Creativity” is a quality which anyone can possess. For example- in the marketing
world “creativity” is considered to be the sole ingredient. In this modern era, new
technologies are constantly evolving and developing and becoming available to us.
And because of that, companies have to contain a flexible nature and be able to keep up
to date so that their creativity will allow them to easily identify new paths in which
technology can be applied to help their businesses.

Also, with social media and other currently available interactive forms of marketing
these days, it is getting more important to be capable of being creative for companies.

If employees become more creative, it can inspire them to come up with more
interesting thoughts including the improvement of their overall output.

What is innovation?
An idea should definitely be reproduced exactly at an economical cost to get called as
an innovation, and it also must deliver the satisfaction of a specific need.
The term “innovation” contains a reflective application of facts, thoughts, and initiative
in collecting better or different values from resources including all steps by which new
ideas are delivered and conformed into useful products.
It also requires balance and formation. Innovation can happen after changing a
common or long-standing process by making it better. If one has an existing status
quo that can be developed in order to innovate.
That means creativity and innovation are two very different things even if they share
strong bonds.

In other words, by taking a newly made idea and changing them into something useful
and practical, innovation can be created. To convert any theory into action, innovation is
the process that is needed.

The most familiar kind of innovation is the evolutionary one, meaning one has to find
ways of making additional improvements to products and services.

This sort of innovation has fewer risks, as it is usually not hard to set up demand for
these improvements and to calculate the possible return on investment. Though it still
needs an important and direct approach.

Main Difference Between Creativity & Innovation:

1. When one is having dreams of new things it is called creativity, while innovation
is to make those dreams come true in reality.
2. The term “creativity” has come from the Latin word “Creo” which means “to
create”. On the other hand, the term “innovation” has come from the Latin word
“Innovationem”, meaning noun for the action of the term innovates.
3. One has to think about new things or uncommon concepts and then it can be
called “creativity”. Whereas, the process that will change these concepts into
practical usage then it is called innovation.
4. If an individual has brought a new thing into existence, it can be known as
someone who has created it. In other cases, if one has made particular
improvements to something which has been existing already then it is okay to
say that the particular individual has made an innovation.
5. There is no chance to have any risk regarding creativity, as it is just a thought yet.
In the matter of innovation, risk can occur regarding the fact that it has already
become a reality from an idea.

Comparison Table Between Creativity & Innovation:

Parameter of
Creativity Innovation
Comparison

Creativity is the capacity to make or Innovation is the exercise to create

Definition think up something uncommon or something new which already has a
original. large value to others.
Parameter of
Creativity Innovation
Comparison

Creativity acts by delivering unique Innovation acts by putting those new

Their actions
ideas. ideas in reality.

Measurable Hard to measure. Easy to measure.

Creativity doesn’t carry liability as it Innovation can cause liability as the idea
Liability
is just a thought or idea. becomes reality.

Not every creativity conforms to

Expression Every innovation is a result of creativity.
innovation.

1.2 Innovation types & Platforms

Types of Innovation

Innovation can be a confusing topic because there are so many different

kinds of innovations out there and everyone seems to use the term
differently.

Although you often hear about innovation in terms of technology and

although it’s true that technological innovation has been, and will likely
continue to be, the most obvious form of innovation, it comes in variety of
other forms too.

Innovation Matrix

One way to categorize innovation is to classify it based on two dimensions:

the technology it uses and the market it operates in. We can use
the innovation matrix to visualize the most common types of innovation:
Incremental innovation

Most innovations are incremental, gradual and continuous improvements in

the existing concepts, products or services in the existing market.

Incremental innovations are just a little better than the previous version of
the product or service and has only slight variations on an existing product
formulation or service delivery method.

Products can be made smaller, easier to use or more attractive without

changing the core functionality of it and services can be made more
efficient through constant improvement.

Although incremental innovation does not create new markets and often
does not leverage radically new technology, it can attract higher paying
customers because it fulfills the customer needs identified from their
behavior or feedback.
The product or service may also appeal to a larger, mainstream market if
you’re capable of providing the same functionalities and value at a lower
cost.

TV is a classic example of both of these scenarios as it’s constantly

improved and there are new models available while the core idea and the
components remain mostly the same. The mainstream customer can, for
example, have a 50” LED television with just a couple of hundred dollars
while the more demanding customers can easily spend thousands on a 75”
OLED TV.

Disruptive innovation

Disruptive innovation is a concept introduced by professor, academic and

business consultant Clayton Christensen first in an HBR article and later in
his book called Innovator’s Dilemma.

Disruptive innovation is a theory that refers to a concept, product, or a

service that creates a new value network either by entering an existing
market or by creating a completely new market.

In the beginning, disruptive innovations have lower performance when

measured by traditional value metrics but has different aspects that are
valued by a small segment of the market. These types of innovations are
often capable of turning non-customers into customers but do not
necessarily appeal to the needs and preferences of the mainstream
customers, at least not just yet.

What makes disruptive innovation difficult is that established organizations

are completely rational when making decisions related to their existing
business. They fail to adjust to the new competition because they’re too
focused on optimizing the existing offering or business model that has
proven to be successful in the market so far.

Thus, the market is generally disrupted by a new entrant rather than an

incumbent.

Tesla, for example has different capabilities compared to the more

traditional car manufacturers. Its software, battery technology and the
ability to iterate quickly are capabilities that traditional car manufacturers
aren’t very good at, and which will take time and resources for them to
acquire.

Sustaining innovation

Sustaining innovation is the opposite of disruptive innovation as it exists in

the current market and instead of creating new value networks, it improves
and grows the existing ones by satisfying the needs of a customer.

Just like incremental innovation, the product performance of sustaining

innovation is made slightly better with every iteration, reducing defects. The
new improved version of the product can be more expensive and have
higher margins than the previous one if it targets more demanding, high-
end customers with better performance than what was previously available.

Traditional business methods and sustainable innovations are often

sufficient because they are the most profitable, and the risks are lower.
Disruptions, on the other hand, typically enable top-line growth: large
market share growth or the creation of an entirely new market but aren’t
typically profitable for a long time because it makes sense for disruptors to
invest heavily in growth.

Sustaining innovations, in turn, continue to grow the market slowly, but no

longer in the same proportion. At this point, the focus shifts to increasing
profits.

An example of a once disruptive, currently fully sustaining and profitable

innovation is iPhone, where the recent versions of the phone appeal to the
same customer segments and do not create new value networks. As the
criticism of lack of innovativeness of the new iPhone has increased, the
firm’s profits have grown at the same pace.

New models of the phone sustain the existing business model in the
premium segment of the market to meet the needs of a more demanding
customers who are willing to pay more for a newer, slightly better version
of the phone.

Radical innovation
Radical innovation is rare as it has similar characteristics to disruptive
innovation but is different in a way that it
simultaneously uses revolutionary technology and a new business model.

Radical innovation solves global problems and addresses needs in

completely new ways than what we’re used to and even provides solutions
to needs and problems we didn’t know we had, completely transforming
the market, or even the entire economy.

Although radical innovations are rare, there have been more and more of
them in the recent past.

Technological innovations, such as personal computer and the internet are

examples of radical innovations that have transformed the way the entire
world functions and communicates. These disruptive innovations provide
our society with a platform to build on top of, leading to highly accelerated
economic growth.

Other Types of Innovation

While the aforementioned four types of innovation in the innovation matrix

are a common way of describing the technology an innovation uses and the
impact it has on the market, it’s not the only way to categorize innovation.

Ten Types of Innovation

Doblin’s Ten Types of Innovation is a model that can be used to revisit

existing strategies to develop viable innovations across all levels of your
organization.

This framework can be used as a diagnostic tool to assess how innovation

should be approached internally and to evaluate which aspects to improve
on that aren’t solely focused on technology innovation.
Product innovation

Product innovation is probably the most common form of innovation and it

refers to improvements in performance characteristics and attributes of
the product. It can also use components that differ from previously
manufactured products.

Service innovation

Service innovation refers to a new or significantly improved service

concept, product or process in a new or existing market. It can be for
example a new customer interaction or distribution channel, a system that
improves the delivery process or new solutions in the customer interface.

Process innovation

A process combines the skills, technologies and structures that are used to
produce products or provide services.

Process innovation generally refers to the implementation of a new or

significantly improved production or delivery method. It may also be
indirectly related to the company’s products and services, for example in
the form of support function processes in HR or finance.
Technological innovation

Technology as a source of innovation can be identified as a critical success

factor for increased market competitiveness.

Technological innovation involves new or improved technology, such as

new type of machinery or alteration of some form of technology into a
product, processes or service delivery methods.

Business model innovation

In all its simplicity, the business model is how a company functions and
earns money. It consists of core values and resources, strategy, core
channels and target customers, to name a few.

Business model innovation is a fundamental change in how a company

delivers value to its customers or captures it from the market. In practice,
it often happens through the development of new pricing mechanisms,
revenue streams or distribution channels but isn’t limited to them.

Marketing innovation

For an innovation to be successful, people need to be able to find it and

then benefit from it. The main purpose of a marketing innovation is to open
up new markets or increase market share.

An innovation is typically considered to be a marketing innovation if it

brings significant changes to the “traditional” marketing mix (4Ps: Price,
Product, Promotion and Place) of the industry in question.

Architectural innovation

Architectural innovation is described as the reconfiguration of existing

product technologies that creates an improvement in the ways in which
components, some of which are not necessarily innovative together, are
combined.

Some examples of architectural innovations include networked computer

systems and flexible manufacturing systems, where the core components
of the product remain the same, but the relationship between these
components and how they link to one another, changes.

Social innovation

Social innovations are new practices or technological inventions that aim to

meet social needs in a better way than the existing solutions. These types
of innovative solutions can be provided or funded either by public or
commercial entities.

There are many reasons why social innovations are important, such as to
improve working conditions, provide more education, develop the
community or make the population healthier. Thus, it can be said that
social innovations are necessary for extending and strengthening civil
society.

Innovation Platform – Definition, Types, Benefits, and Examples

The world is rapidly changing and those that are going to survive are
companies and businesses that have been set up to change with it. This is
one of the reasons why an innovation platform is so important.

Growing your business through innovation is a good idea, but, you should
know about the platforms that can help you. Innovation. It’s on everyone’s
minds these days.

What is an innovation platform?

An innovation platform is a tool for building and growing ideas. However,

an innovation platform also refers to a technical solution where you can
build things fast and prototype tools.
Furthermore, for a business, an innovator’s growth platform means using
products, services, and technology in a new way to reach your
goals—preferably more efficient than before.

Types of Innovation Platforms

Idea Management Platform

This is an idea-sharing platform where people can come together and

share their thoughts on the idea management process.

So, the goal of an innovation management platform is to help companies

come together, gather ideas from their employees, and evaluate each idea
individually.

Then, developing good ideas for the market more quickly will allow them to
increase productivity.

Examples of Platform Innovation

Ennomotive – The Hub For Engineering Innovation

Ennomotive is an open innovation platform that specializes in experts and

connecting companies of various projects and win-win partnerships.

So, this platform is perfect for organizations that are looking to solve
technical challenges and need fresh ideas from creative and talented
individuals.

Crowdspring – Design Has Done Better

Crowdspring is a platform that facilitates various design projects, such as
website logos or a book cover, for organizations and private individuals.

Hence, this platform is perfect for organizations that need a reimagined or

new design and want a very broad spectrum of ideas that can be molded
and discussed in an effortless iterative manner.

Viima – The Best Way To Develop And Collect Ideas

Viima is an idea management platform that can be used for developing and
gathering ideas into innovations within an open or chosen group of
stakeholders.

Therefore, this platform is perfect for organizations that are looking for an
effortless way of gathering ideas or thoughts. This is for smaller to larger
groups. Furthermore, then to develop them into something that can be
implemented.

Kaggle – The Place For Data Science Projects

Kaggle is a platform that hosts a community of data scientists and

machine learning engineers who together process raw data gathered and
submitted by organizations.

Furthermore, large organizations use this platform without existing data

science environments and access to raw data.
1.3 Innovation: Service Innovation, Business Model Innovation

Service innovation

Service innovation refers to a new or significantly improved service

concept, product or process in a new or existing market. It can be for
example a new customer interaction or distribution channel, a system that
improves the delivery process or new solutions in the customer interface.

The way you serve your customers is a great way to differentiate, generate
more value for them and deliver more revenue for your organization. A big
part of a successful business is the ability to make your customers lives
easier and the better you’re able to meet the needs and expectations of the
ones you serve, the brighter your future looks like.

Uber is an example of a service innovation company that has created

further growth outside its core business. With UberEATS, it has used its
strengths and unique capabilities, such as its brand to enter into adjacent
markets. The fact that they’re already in peoples’ phones and that they’re
already organizing transportation has helped them to extend their line of
offerings and provide their customers with new value.

What Is Business Model Innovation?

The term Business Model Innovation refers to successfully implemented
innovations in the business model of companies.
In comparison to product development, Business Model Innovation is
primarily concerned with the monetarization of products and services, i.e.
activities that generate new customer benefits, create innovative
distribution channels and introduce new models of monetarization.

Especially in the era of digitalization and digital strategy, business model

innovation plays an increasingly important role. Business model
innovations that are based on data are also called digital business models.
With innovative software’s, companies can quickly and easily develop,
evaluate and implement ideas for business model innovations.

Business Model Innovation as a separate type of innovation

In many companies, business innovation is equated with technical
development. With the help of innovation management and a
clear innovation process, the different stages in the development of new
products are structured and monitored through innovation measurement.
Through a technology management, potential new technologies that might
be interesting for development are evaluated.

Business Model Innovation is much more complex. It includes marketing

(the formulation of an innovative value proposition), sales and the sales
model as well as monetarization. Also the change of a monetarization (e.g.
a rental model instead of the purchase of a product) can represent a
business model innovation in certain markets.

Example of Business Model Innovation

In our daily lives, we face innovations every day that are based on Business
Model Innovation. This is explained using Car Sharing as an example.

Providers such as FreeNow were created by traditional automobile

manufacturers in order to achieve an alternative form of monetarization for
vehicles. The conventional business model consisted of manufacturing and
selling. With the help of car sharing, manufacturers try to generate income
from changes in the business model. In essence, car sharing is another
monetization option for cars. While the traditional business model served
the customer need of ownership, the added value of car sharing is achieved
by solving another customer problem: getting from point A to point B
quickly. Using a car without owning it.

1.4 Design-led innovation, Improvisation

 Design-Led Innovation

Design-led innovation has recently emerged as an approach that assists

companies to develop new capabilities to respond to changing markets.
Previous research has shown that the application of design-led innovation
to manufacturing businesses contributed to innovation across their
business model, often repositioning the business and its offerings in the
market.

Companies with prior success with technological innovation are often not
aware of new methods of gaining information about the demands for their
products and services using customer-focused methods. Design mindsets,
philosophies, and principles have been implemented through design
thinking, design-driven innovation and more recently design-led innovation.
These approaches represent a powerful way to generate, shape, and deliver
new value propositions and innovation in a range of companies.

Design and Innovation

Design-led innovation is a process that shifts the role of a designer to work

across an organization to radically change a company’s view of the value
proposition offered to customers, to co-design and to generate a unique
and sustainable competitive advantage With the relative newness of design
-led innovation, case study research into the complexities faced by
companies with the implementation and integration of this process is quite
sparse. Design-led innovation is broadly defined as a method that allows a
company to consider and evaluate radically new propositions from multiple
perspectives, typically spanning user needs, business requirements, and
technology demands. Key to this process is that design is core to a
company’s vision, strategy, culture, leadership, and development processes.
The design-led innovation framework outlined below (Figure 1), provides a
conceptual structure to assist the development of innovation through
collaboration across the entire organization; it integrates the operational
functions with the strategic vision by combining internal and external
sources.
Figure 1. The design-led innovation framework (Adapted from Bucolo et al.,
2012)

The importance and potential of thinking and working as a designer,

popularly referred to as “design thinking”, is increasingly being recognized
as a valuable process for generating new ways of working and new
solutions. Design thinking “uses the designer’s sensibility and methods to
match people’s needs with what is technically feasible and what business
strategy can convert into customer value and market opportunities” With
this widely accepted design thinking holds a customer-centric view by
utilizing human-centred design, experimentation, and concept prototyping
as ways for a design to have an impact across the innovation process.
Design thinking as a style of thought is built upon “abductive reasoning”.
Abductive reasoning is “reasoning in which explanatory hypotheses are
formed and evaluated ; it is “characteristically 'constructive' thinking…
something peculiar to design.

Design thinking uses a method of prototyping to reduce the risk in a

business model concept by testing it with the marketplace; it allows for the
creative development of an idea. By taking a holistic systems perspective,
design thinking creates strong value propositions that interweave through
business model development so the value received is greater than the sum
of the parts. Design as an innovation mechanism is an iterative process
that can assist in both uncovering problems with stakeholders, analyzing
some possibilities, and then synthesizing multiple elements to form new
solutions. During this process, the practitioner moves between the
concrete and abstract worlds of understanding to build new value
propositions.

Design-led innovation builds on this theory by internally aligning the

solution with the company's strategy, resources, and brand. Design and
innovation as organizational processes work with the staff who deliver the
resultant innovation, not in isolation from organizational systems. Design-
led innovation can also align corporate ideologies to fit and potentially
leverage the company's internal capabilities, resources, and brand
(business model) in order to generate an innovative solution that creates a
competitive advantage.

Figure 2. Design-led innovation (DLI) as derived in the intersection of

fundamental business elements

Improvisation

Why improvise?

We know that leading any brainstorming session or Innovation workshop

requires the facilitator to be agile; to have the ability to take whatever may
come their way and possess the mastery to direct people’s energy
positively towards the overarching goals
Improvisation skills can help build listening skills, strengthen collaboration,
increase your agility and adaption to change, help to manage difficult
conversations , improve essential story telling skills, develop trust, rapport,
communication and confidence.

Before understanding why improvisation skills are important in innovation,

firstly, what is improvisation?

So what is improvisation?

Is it working together as a jazz band and performing improvised solos?

Children getting creative with their friends and building something
imaginative? Looking in the pantry and being able to create a remarkable
dish working with just what you have? Demonstrating resourcefulness,
knowledge and ingenuity to resolve a complex situation with something
simple in the hour of need, or being entertained by talented actors with their
quick off the wall thinking?

The principles of improvisation

Regardless of how and when you improvise there are some fundamental
principles that consistently hold strong when leading Innovation

Workshops.

BE CONFIDENT
Be courageous. There are no wrong ideas or answers – it is not about
perfection or having all the answers. Your opinion, knowledge and unique
experiences (as well as everyone else’s in the room) is as relevant and
valuable as the next person's.

Be bold, confident and courageous. Just like any sport or profession, it

takes practice so keep working to improve

COLLABORATE FOR THE GOOD OF THE TEAM

Innovation and improvisation is a team sport; we win and succeed together.

Appreciate everyone’s unique experiences and the skills that they
contribute to the team.
Have empathy and listen. Work together, be flexible, give, take others'
suggestions in a brainstorm, add a little to it and see where it goes. It’s
important to support each other and build on things together. Generosity is
critical for effective collaboration. Adam Grant, a management professor at
the University of Pennsylvania’s Wharton School gives a great interview
with McKinsey’s Rik Kirkland, why selfishness fails and how working with,
for, and through others continues to be the recipe for personal and
organizational success.

Rather than imposing yourself, its critical to complement what is happening

in the moment and allow others to have their own ‘lightbulb’ moments and
shine

LISTEN

Focus and listen to each other with no defined agenda and then react. You
don’t know where that idea is going to lead, but you can be sure if you don’t
accept the idea it’s going nowhere! A great tip is to form the habit to use
the words ‘yes and’ to start your sentence

KEEP THE MOMENTUM AND ENERGY GOING

Innovation has energy and life. Use emotion and your story telling skills to
inspire, add energy and motivate people If the energy or momentum drop,
ask open questions that can push it forward and lead to more ideas. Focus
on the wins when giving feedback as opposed to what may be wrong with
their ideas as it will shut people’s participation down. Avoid closed
questions, as these can also prematurely end or block a conversation or
idea.

CREATE SPACE

As a facilitator ensure to convey your idea or point efficiently to allow more

space for everyone to reflect, think and contribute. Resist the urge to fill the
space of silence with waffle. These moments of silence are just as
important for the process for the individual and group. If the momentum is
slowing down, recharge the discussion with an open question to move it
forward again.

1.5 Large firm Vs. Start-up innovation, Co-creation and open innovation

Large Firms Vs Small Firms Innovations

The 7 key differences between big and small companies when it comes to
innovation are:

• Speed of decision-making
• Attitude toward risk
• Allocation of resources
• Who understands the business model and who manages it:
• Processes or lack thereof
• Following rules versus breaking rules
• Differering definitions of innovation

SMEs need big companies as much as big companies need SMEs. The
trouble is that it’s a classic example of one being from Venus and the other
from Mars. Precisely because they’re different and they need each other,
they often come into conflict early in a relationship. The differences that
can cause problems when big and small companies come together for
open innovation can be stark. Let’s look at a few that impact the way the
two types of organizations approach open innovation:

• Speed of decision-making: Large corporations, with their abundance of

silos and bureaucratic levels, often require considerable time to make
decisions. Analysis paralysis is not uncommon, with decisions that seem
simple to an outsider taking ages to make. In contrast, in smaller
organizations, decision-making can be fairly rapid.

Thus, when these two types of organizations come together in open

innovation, the smaller company may find the speed of progress
frustratingly slow. At the same time, the people from the large corporation
may be troubled by the constant pleas of the smaller partner to move faster.
Both sides may be left feeling that the other side just doesn’t understand
them.

• Attitude toward risk: How large and small companies feel about risk-
taking can vary considerably. Particularly where the smaller company is a
start-up or still in a fast-growth stage, the organization at all levels may
wholly embrace risk because, at this point, the whole business is a risk.
However, in a large corporation that has been around for decades, people
may be far more vested in keeping things as they’ve always been than they
are in trying something new and potentially risky. Here again, this
difference can lead to frustration on both sides when two such
organizations engage in an open innovation partnership.
• Allocation of resources: In a small company, every penny counts.
Resources, which can be scarce, are allocated based almost solely on
whether they will boost the bottom line. This bottom line focus may not be
so distinct in a larger corporation. With more abundant resources—at least
in comparison to smaller companies—people in corporations may be
relatively free spenders, although this is certainly not always the case and
hasn’t been in recent years as the recession has taken its toll. However, the
small company may expect its larger partner to foot every bill and may not
understand that even big companies have their limits.
• Who understands the business model and who manages it:

“One of the considerations in driving innovation is who understands the

business model of the company. In a small company it is much more likely
that everyone in the company understands how the company works and
how the individual parts will combine in the business model to create and
deliver value to the customer/client.

Larger corporations tend to be much more fractured, and thus the staff is
less likely to understand the whole. In this context innovation affecting the
whole company can be a hard, long-term task, as one has to build a
common understanding and mobilize around very different views of the
company. Innovation is more likely to occur at business or product line
level, then at a whole of company level.

A second consideration is who manages the business model. In big

corporations, people feel responsible for only their portion, or sphere, of
control. This control is manifested in being able to influence decisions or
budgets, or being able to define meaning within the context of the business.

There are only a few people who “control” the whole organization, so
innovation of the company has to be managed and driven by the senior
executives. The more “distributed” control over the key areas of decisions,
budgets, and meaning, the more difficult it is to drive innovation.”

• Processes or lack thereof: Many small companies don’t yet have defined
processes in place to drive innovation forward. This is one of the areas
where partnering with a larger company can really benefit them.
The large firms tend to be good at incremental innovation (smaller-scale
product improvements or extensions) because (1) this is their bread and
butter and so they have dedicated resources focused on this, and (2)
radical innovation is high risk and highly disruptive to a large organization
from a resource, capital, and management focus perspective.”

• Following rules versus breaking rules: Big companies preoccupy

themselves with competitors, the market, and the rules. Small companies
are more inclined to make up new rules. This relates to some of the
benefits of working with small companies as mentioned earlier. Of course,
rules should be followed, but sometimes they do need to be bend—or
perhaps even be broken—to make real progress.

Those large firms that are still strong innovators (Google, Apple, P&G, 3M,
etc.) tend to be the exceptions that have continued to foster a great culture
of innovation while also embedding strong processes that help nurture
breakthrough ideas in the challenging confines of large, bureaucratic
structures.

• Differing definitions of innovation:

There can be a real disconnect between the meaning of “innovation”

between small and large companies. Some—perhaps most—large
companies view innovation as a “super” product development team. These
are the folks who look for breakthroughs, but these so-called
“breakthroughs” are expected to slot into an existing product or project at
the company. In contrast, at a start-up the “innovation” is their whole
business, and developed wholly independently of the products and
timelines of the large company.

CO-CREATION VS OPEN INNOVATION: BENEFITS, RISKS AND

EXAMPLES
Since the turn of the current century, product developers have increasingly
looked to new processes to improve the likelihood of a successful launch.
Some of these upstream processes include market research, which taps
into everything from geographics and demographics to psychographics.
Other midstream processes include co-creation and open innovation to
spark the design of new concepts. Finally, downstream processes,
including Lean Manufacturing, Six Sigma and Kaizen, have been adopted to
reduce costs and improve efficiencies in manufacturing. The loop is then
closed with market research reappearing as a commercial process at
launch through post-launch. Of course, what happens at every stage is
important but it can be argued that what happens in the middle stages is
the most critical. Here, we will focus on co-creation vs open innovation and
highlight some benefits, risks and examples of each methodology.

What is Co-Creation? What is Open Innovation?

Co-creation is a shared process by which customers, suppliers, retailers,
designers and other relevant third-parties work together with the company
to generate ideas towards a mutually valued endpoint. Each party
represents their unique perspective in the product relationship ranging
from buyer to developer and, via the process, is encouraged to
communicate their thoughts around things that work, things that don’t,
areas of need, opportunities for improvement and more. These discussions
continue from product inception through launch. Co-creation sessions are
typically lively with each party fully engaged as each party is regarded as
equally invested and equally important. This is a hallmark of co-creation.

Open innovation, according to the founder of the movement, Henry

Chesbrough, Ph.D. and author of “Open Innovation”, is “equal parts
philosophy and process.” It is a corporate mindset that embraces external
thinking and recognizes that great ideas are not exclusively generated
internally within the company. Specifically, Professor Chesbrough, states
“Open innovation is the use of purposive inflows and outflows of
knowledge to accelerate internal innovation.” Similarly to co-creation, open
innovation as a process can be applied at any and throughout all phases of
product development.

How are Both Development Processes Used?

Co-creation can be executed as a simple process of gathering around a
table for a discussion with a group of internal and external experts,
including customers, who have an opinion on the product or product need
being discussed. Co-creation can be as elaborate as having product
designers and marketers do double-duty as furniture delivery people so that
they can go into consumers’ homes. For IKEA, this clever process allowed
them to make observations and engage homeowners to understand why
they purchased and what product they wish they could buy but can’t yet
find. In a similar fashion, Lego® encourages its customers to engage and
develop new designs and upload them to the website where customers
vote on the designs. Once a design gets 10,000 votes, Lego® brings the
design, and designer, internally through its stage-gate co-creation product
development process.

Corporations with successful product track records, such as Siemens™,

Apple®, GE®, P&G®, J&J® and so many others, apply open innovation daily,
in every aspect of product development. At J&J, the philosophy/process is
so entrenched that it is actually called out in the company’s credo which is
the essence of the brand. GE literally hangs a sign in every building
lobby professing open innovation as its manifesto, “We believe openness
leads to inventiveness and usefulness”. Today, companies
commercialize combinations of internal and external ideas together with in-
house and third-party pathways to market.

Co-Creation vs Open Innovation: Benefits, Risks & Examples

Forbes goes so far as to call co-creation the “secret sauce to
success” and “the future for all of us”. Perhaps this is due to a shared
outcome where every party is made to feel like they are an equal
contributor (as they truly are) and hence, equally invested in the outcome.
In today’s age of customer-centricity, it is tough to conceive a more
intimate way for a consumer to connect with his/her brand. Co-creation
affords companies with enormous benefits including the following.

 You are dialed into the consumer need and expectation

 You can build brand loyalty and champion from Day 1
 You can return to your audience at any time to check in.
 You have access to real-time information on demand.
  Co-creation can be readily deployed regardless of the complexity of
the product.

1.6 Developing an innovation strategy, Sources of innovation

Developing an Innovation Strategy

Innovation Strategy – What is it and how to develop one?

Strategy is about making choices between a number of feasible options to

have the best chance at “winning”, and innovation is just one of the means
to achieve your strategic goals.

Without a good one, it’s actually quite difficult to achieve long-term success
and orient your business for speed in order to secure competitive
advantage.

What’s interesting is that according to statistics, 96% of executives have

defined innovation as a strategic priority. However, the lack of clear
innovation strategy is a fundamental problem especially for established
companies when optimization of existing business becomes a priority.

While developing an innovation strategy isn’t necessarily difficult in itself,

aligning it with your overall business goals and ways of working is what
takes most of the time and effort.

Innovation strategy can be described as an explicit roadmap for desired

future.

The same goes for innovation. There’s no point of innovating just for the
sake of it, as it has to contribute to your bigger plan. So, before starting to
develop an innovation strategy, make sure you’re aware of how innovation
helps you to achieve your goals.

The Strategy Choice Cascade

Building innovation into your strategy development process starts with

making a deliberate choice of focusing on the best possible way to win as
well as justifying the reasons behind that choice.
Often, the best approach to this is to make a set of choices you’re more
capable of putting into practice compared to other players in your field.

One relatively solid framework for making those strategic choices is The
Strategy Choice Cascade.

The purpose of the strategy choice cascade is to turn strategy from a

complicated, messy and often deeply confusing and divisive chore, to a
systematic and simple exercise.

The cascade consists of five steps that can help develop and implement
sustainable strategy at any organization:

.
5 Steps for Developing Your Innovation Strategy
1. Determine objectives and strategic approach to innovation

The first step in the strategy choice cascade is to define your winning
aspiration. In other words, your innovation objectives and the why behind
your innovation strategy.

As any other strategy, the planning process of your innovation strategy

starts with defining your objectives: What do you want to achieve with
innovation?

If we take a step back, think about your long-term business goals and the
things that are most likely to drive your business forward even after some
time. As already mentioned, your innovation strategy should help
supporting your business objectives and vice versa.

2. Know Your Market: Customers and Competitors

The second step in the strategy choice cascade is defining the right playing
field, as in, the market you’re operating in and the customer segment you’re
offering value for.

To be able to innovate and to respond to your customers’ needs, you

should listen and understand what your customers really want and remove
the rest. To be able to do that, knowing what happens in the market is
essential.

However, because competitive needs are individual and often very specific,
a strategy that worked for another player in your field shouldn’t be copied
but learned from. Although defining your playing field is important, your
unique value proposition is what will make or break your innovation
strategy.

3. Define Your Value Proposition

Next, and probably the most important step is to define that unique value
proposition. How will you win? What type of innovations allows the
company to capture that value and achieve competitive advantage?
Because the purpose of innovation is to create competitive advantage, you
should focus on creating value that either saves your customers money
and time or makes them willing to pay more for your offering, provides
larger societal benefit, makes your product perform better or more
convenient to use, or becomes more durable and affordable compared to
the previous product and the ones in the market.

To be able to create a unique value proposition, the ability to identify and

exploit new uncontested markets is recommended. This can be done
through value innovation.

4. Assess and Develop Your Core Capabilities

The first three steps in the strategy choice cascade really come down to
one thing; your fundamental capabilities required for winning.

When assessing your set of capabilities that need to be in place, consider

the following:

 Culture
 R&D
 Behaviors
 Values
 Knowledge
 Skills

For example, if you want to win at delivering breakthrough technology, you

must have internal skills and knowledge to be able to build that. The ability
to connect and develop these capabilities is key to innovation.

5. Establish Your Innovation Techniques and Systems

Last but not least, to be able to execute your innovation strategy in a

scalable and integrated manner, you should find out what systems need to
be in place.

Define: which innovation techniques and systems do we need in to be able

to link our innovation infrastructure elements together? What are the most
important systems that support and help measuring the results of our
innovation strategy?
According to a recent study, Christopher Freeman defines the system of
innovation as 'the network of institutions in the public and private sectors
whose activities and interactions initiate, import, modify and diffuse new
technologies'.

This includes the following elements:

 The role of company R&D, especially in relation to technology

 The role of education and training related to innovations
 The conglomerate structure of industry
 The production, marketing and finance systems

Sources of Innovation

There are, of course, innovations that spring from a flash of genius. Most
innovations, however, especially the successful ones, result from a
conscious, purposeful search for innovation opportunities, which are found
only in a few situations. Four such areas of opportunity exist within a
company or industry: unexpected occurrences, incongruities, process
needs, and industry and market changes.

Three additional sources of opportunity exist outside a company in its

social and intellectual environment: demographic changes, changes in
perception, and new knowledge.
1. Unexpected Occurrences

Consider, first, the easiest and simplest source of innovation opportunity:

the unexpected. In the early 1930s, IBM developed the first modern
accounting machine, which was designed for banks. But banks in 1933 did
not buy new equipment. What saved the company—according to a story
that Thomas Watson, Sr., the company’s founder and long-term CEO, often
told—was its exploitation of an unexpected success: The New York Public
Library wanted to buy a machine. Unlike the banks, libraries in those early
New Deal days had money, and Watson sold more than a hundred of his
otherwise unsalable machines to libraries.
Fifteen years later, when everyone believed that computers were designed
for advanced scientific work, business unexpectedly showed an interest in
a machine that could do payroll. Univac, which had the most advanced
machine, spurned business applications. But IBM immediately realized it
faced a possible unexpected success, redesigned what was basically
Univac’s machine for such mundane applications as payroll, and within five
years became a leader in the computer industry, a position it has
maintained to this day.

2. Incongruities

Alcon Laboratories was one of the success stories of the 1960s because
Bill Conner, the company’s cofounder, exploited an incongruity in medical
technology. The cataract operation is the world’s third or fourth most
common surgical procedure. During the past 300 years, doctors
systematized it to the point that the only “old-fashioned” step left was the
cutting of a ligament. Eye surgeons had learned to cut the ligament with
complete success, but it was so different a procedure from the rest of the
operation, and so incompatible with it, that they often dreaded it. It was
incongruous.

Doctors had known for 50 years about an enzyme that could dissolve the
ligament without cutting. All Conner did was to add a preservative to this
enzyme that gave it a few months’ shelf life. Eye surgeons immediately
accepted the new compound, and Alcon found itself with a worldwide
monopoly. Fifteen years later, Nestlé bought the company for a fancy price.

3. Process Needs

Anyone who has ever driven in Japan knows that the country has no
modern highway system. Its roads still follow the paths laid down for—or
by—oxcarts in the tenth century. What makes the system work for
automobiles and trucks is an adaptation of the reflector used on American
highways since the early 1930s. The reflector lets each car see which other
cars are approaching from any one of a half-dozen directions. This minor
invention, which enables traffic to move smoothly and with a minimum of
accidents, exploited a process need.

4. Industry and Market Changes

Managers may believe that industry structures are ordained by the good
Lord, but these structures can—and often do—change overnight. Such
change creates tremendous opportunity for innovation.

One of American business’s great success stories in recent decades is the

brokerage firm of Donaldson, Lufkin & Jenrette, recently acquired by the
Equitable Life Assurance Society. DL&J was founded in 1960 by three
young men, all graduates of the Harvard Business School, who realized that
the structure of the financial industry was changing as institutional
investors became dominant. These young men had practically no capital
and no connections. Still, within a few years, their firm had become a leader
in the move to negotiated commissions and one of Wall Street’s stellar
performers. It was the first to be incorporated and go public.

5. Demographic Changes

Of the outside sources of innovation opportunities, demographics are the

most reliable. Demographic events have known lead times; for instance,
every person who will be in the American labor force by the year 2000 has
already been born. Yet because policy makers often neglect demographics,
those who watch them and exploit them can reap great rewards.

The Japanese are ahead in robotics because they paid attention to

demographics. Everyone in the developed countries around 1970 or so
knew that there was both a baby bust and an education explosion going on;
about half or more of the young people were staying in school beyond high
school. Consequently, the number of people available for traditional blue-
collar work in manufacturing was bound to decrease and become
inadequate by 1990. Everyone knew this, but only the Japanese acted on it,
and they now have a ten-year lead in robotics.

6. Changes in Perception

A change in perception does not alter facts. It changes their meaning,

though—and very quickly. It took less than two years for the computer to
change from being perceived as a threat and as something only big
businesses would use to something one buys for doing income tax.
Economics do not necessarily dictate such a change; in fact, they may be
irrelevant. What determines whether people see a glass as half full or half
empty is mood rather than fact, and a change in mood often defies
quantification. But it is not exotic. It is concrete. It can be defined. It can be
tested. And it can be exploited for innovation opportunity.

7. New Knowledge

Among history-making innovations, those that are based on new

knowledge—whether scientific, technical, or social—rank high. They are the
super-stars of entrepreneurship; they get the publicity and the money. They
are what people usually mean when they talk of innovation, although not all
innovations based on knowledge are important.

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. Like most superstars, they can be
temperamental, capricious, and hard to direct. They have, for instance, the
longest lead time of all innovations. There is a protracted span between the
emergence of new knowledge and its distillation into usable technology.

1.7 Innovation Environment, Creative Destruction

What makes up the environment to innovation?

It is the culture, management and its people that have a mutual

dependency. Culture can enhance or inhibit the tendencies to innovate, it
certainly has a profound influence on the innovative capacity and provides
the rich nutrients to nurture innovation or kill it. Culture has always been
regarded as a primary determinant of innovation.

To foster innovation and its environment, key levels of management and

individuals must be committed to creating an environment and culture that
promotes creativity, be engaged and promote the ability to promote change
in nimble, agile and flexible ways to meet changing conditions in the
market place and with customers. It is this creativity through the
innovations that are flowing through the organization that often needs a
critical focal point to create a change that has impact.

Triggering stimuli for change

The job within any change initiative is to give stimuli in the actions,
transactions and interactions in the pursuit of innovation. These come from
changing practices but focusing on the critical interaction between people
and the situations that delivering innovation demands.

There are two climate assessments for creativity assessments that

stand out

The first is the Climate for Creativity (KEYS) developed by Terisa Amabile
and the other one is the Creative Climate questionnaire developed by Gören
Ekvall. Both came out in the late nineties but seem to have stood that
‘famous’ test of time.
Amabile’s model contained 17 factors, whereas Ekvall’s model has only ten
factors. There hves been a number of comparative studies on these two.
One argument being that less factors allows for a more open aspect but
less controversial..

Amabile’s model.

It comprises three key elements: resources, management practices and

organizational motivation. Each of these elements interacts with one
another and has an impact on the resulting level of innovation.

In Amabile’s structure the assessment breaks answers down into two

criteria of measuring current performance and seeking perceived
importance and attributed 100 points per section to gauge relative
importance using a simple Likert-type scale with anchor phrases at each
extreme.
For her Organizational Motivation section, a questionnaire is broken down
into

 1) Explicit value of creativity,

 2) Attitude to risk,

 3) Pride in Employee’s,

 4) Enthusiasm for Employee’s,

 5) Forward-facing strategy and

 6) Management systems.
Then for her Resources part:
 1) Time to innovate,
 2) Staff Expertise,
 3) Access to Funds,
 4) Material Resources,
 5) Information Resources, and
 6) Training
Then for her Management Practices it is broken down:
 1) Project autonomy,
 2) Team Selection- Skills,
 3) Definition of Goals,
 4) Supervisor Support and
 5) Team Selection - Personality.
Ekvalls model
Ekvall’s model was divided into two halves, each comprising five factors.
This also allowed Ekvall’s model to be split over two pages, with the first
entitled ‘atmosphere for work’, and the second entitled ‘attitude to work.’
Maybe this is why I like it for this defining split for deepening the
conversation.

Again to use this you attribute 100 points per section to gauge relative
importance using a simple Likert-type scale with anchor phrases at each
extreme.

The ten dimension factors from Ekvall’s creative climate questionnaire.

Attitude to Work dimensions
Idea Time: amount of time people can use (and do use) for elaborating new
ideas. In the high idea-time situation, possibilities exist to discuss and test
suggestions not included in the task assignment. There are opportunities
to take the time to explore and develop new ideas

Risk-Taking: tolerance of uncertainty and ambiguity in the workplace. In the

high risk-taking case, bold initiatives can be taken even when the outcomes
are unknown. People feel as though they can "take a gamble" on their ideas

Challenge and Involvement: degree to which people are involved in daily

operations, long-term goals, and visions. When there is a high degree of
challenge and involvement people feel motivated and committed to making
contributions. The climate is dynamic, electric, and inspiring. People find
joy and meaningfulness in their work

Freedom: independence in behaviour exerted by the people in the

organization. In a climate with much freedom, people are given the
autonomy and resources to define much of their work. They exercise
discretion in their day-to-day activities.

Idea Time Support: ways new ideas are treated. In the supportive climate,
ideas and suggestions are received in an attentive and professional way by
bosses, peers, and subordinates. People listen to each other and
encourage initiatives. Possibilities for trying out new ideas are created.

Work Atmosphere dimensions.

Conflict: presence of personal and emotional tensions in the organization.
When the level of conflict is high, groups and individuals dislike and may
even hate each other. The climate can be characterized by "interpersonal
warfare." Plots, traps, power and territory struggles are usual elements of
organizational life.

Debate: occurrence of encounters and disagreements between viewpoints,

ideas, and differing experiences and knowledge. In the debating
organization many voices are heard and people are keen on putting forward
their ideas for consideration and review. People can often be seen
discussing opposing opinions and sharing a diversity of perspectives.
Where debate is missing, people follow authoritarian patterns without
questioning them.

Playfulness/Humor: spontaneity and ease displayed within the workplace.

A professional, yet relaxed atmosphere where good-natured jokes and
laughter occur often is indicative of this dimension. People can be seen
having fun at work. The climate is seen as easy-going and light-hearted.
The opposite climate is characterized by gravity and seriousness.

Trust/Openness: emotional safety in relationships. When there is a high

degree of trust, individuals can be genuinely open and frank with one
another. People count on each other for professional and personal support.
People have a sincere respect for one another and give credit where credit
is due.

Dynamism / Liveliness: The eventfulness of life in the organization. In the

highly dynamic situation, new things are happening all the time and new
ways of thinking about and handling issues often occur. The atmosphere is
lively and full of positive energy. There is a kind of psychological turbulence
that is described by people in those organizations as “full speed”, “go,”
“breakneck,” “maelstrom,” “and the like.

CREATIVE DESTRUCTION
JOSEPH SCHUMPETER (1883–1950) coined the seemingly paradoxical term
“creative destruction,” and generations of economists have adopted it as a
shorthand description of the FREE MARKET’s messy way of delivering
progress

Schumpeter and the economists who adopt his succinct summary of the
free market’s ceaseless churning echo capitalism’s critics in
acknowledging that lost jobs, ruined companies, and vanishing industries
are inherent parts of the growth system. The saving grace comes from
recognizing the good that comes from the turmoil. Over time, societies that
allow creative destruction to operate grow more productive and richer; their
citizens see the benefits of new and better products, shorter work weeks,
better jobs, and higher living standards.
Herein lies the paradox of progress. A society cannot reap the rewards of
creative destruction without accepting that some individuals might be
worse off, not just in the short term, but perhaps forever. At the same time,
attempts to soften the harsher aspects of creative destruction by trying to
preserve jobs or protect industries will lead to stagnation and decline, short
-circuiting the march of progress.

Transportation provides a dramatic, ongoing example of creative

destruction at work. With the arrival of steam power in the nineteenth
century, railroads swept across the United States, enlarging markets,
reducing shipping costs, building new industries, and providing millions of
new productive jobs. The internal combustion engine paved the way for the
automobile early in the next century. The rush to put America on wheels
spawned new enterprises; at one point in the 1920s, the industry had
swelled to more than 260 car makers. The automobile’s ripples spilled into
oil, tourism, entertainment, retailing, and other industries. On the heels of
the automobile, the airplane flew into our world, setting off its own burst of
new businesses and jobs.

Americans benefited as horses and mules gave way to cars and airplanes,
but all this creation did not come without destruction. Each new mode of
transportation took a toll on existing jobs and industries. In 1900, the peak
year for the occupation, the country employed 109,000 carriage and
harness makers. In 1910, 238,000 Americans worked as blacksmiths.

What occurred in the transportation sector has been repeated in one

industry after another—in many cases, several times in the same industry.
Creative destruction recognizes change as the one constant in capitalism.
Sawyers, masons, and miners were among the top thirty American
occupations in 1900. A century later, they no longer rank among the top
thirty; they have been replaced by medical technicians, engineers, computer
scientists, and others.

Technology roils job markets, as Schumpeter conveyed in coining the

phrase “technological unemployment,” E-mail, word processors, answering
machines, and other modern office technology have cut the number of
secretaries but raised the ranks of programmers. The birth of
the INTERNET spawned a need for hundreds of thousands of webmasters,
an occupation that did not exist as recently as 1990.