Introduction to Innovation and New Product

Development
Mapping Innovation:

Levers of innovation-
Business model innovation
i)Value proposition. ii)supply chain. iii) target customer
Technology innovation
i)Products & services ii)Process technologies iii)Enabling technologies

Innovation Process: Systematic Approach Metrics for Innovation in

Marketing Strategy
 Innovation Is the Power to Redefine the
Industry
For any organization, innovation represents not only the opportunity to grow and survive but also the opportunity to
significantly influence the direction of the industry.

Case-Apple Computers took the industry by surprise when it launched iTunes and iPod, not so much because these
were innovations that nobody had ever thought of before in the PC arena. Instead, it was the strategy of combining
technology change and business model change into a one-two innovation punch. And the iTunes/iPod
combination is only starting to generate new concepts; iPod special edition with U2 (the famous rock band), which
opens up rich partnership opportunities with content providers. Apple has put its mark again on the direction of the
PC industry—a mark that will be tough to erase.

Case-As innovation leaders like Apple, Toyota, Dell, Nucor Steel, Sony, and others have shown, making important
changes to key parts of the dominant business model or the essential technology can redirect the competitive
vectors of an entire industry.

Innovation provides the opportunity for a company to put its mark on the evolution of business. By setting the rules
of the game in their industries, these companies have taken a leadership position and play the game that favors them
the most.
 Innovation Is the Power to Redefine the
Industry
Innovation is not only a weapon in competitive markets; it has proven itself as an
important source to redefine philanthropy and government under the umbrella of social
innovation and social entrepreneurship.
Case-The idea of micro-credits, with Grameen Bank as the best-known example of these, has
dramatically changed the standard of living of thousands of people who were trapped in a
vicious circle where high-interest loans captured all the value from their work and kept them
in poverty. Micro-credits are very small loans, as small as $30–$40, that offer individuals the
chance to start or grow a business. Used to foster economic improvement for individuals,
families, and regions, they are commonly made available in emerging countries and
struggling economies. Micro-credit entities improve the risk profile of these loans through
careful selection, social control, and diversification. Lower risk translates into better interest
rates and the possibility for these people to significantly increase their standard of living.
 Innovation Is the Power to Redefine the
Industry
Unleashing an innovation and expecting the market to reward the
company with sustained growth and success is a common mistake.
Case- Boeing launched the highly successful 777, and established the norm for
commercial airplanes in the 21st century. However, Boeing has not been able
to maintain dominance of the industry, and Airbus has challenged its
leadership, surpassing it in sales in 2004. All companies have seen their market
advantages derived from breakthrough innovations whittled away and
eventually reversed by competitors. A block- buster innovation is not a
guarantee of success, just an opportunity.
 What to do?
It must be followed up with a successive stream of innovations, from
incremental to radical.

Leading companies know this and have a developed portfolio of

innovations from which they can draw to sustain growth.
 How to achieve sustainability?
In the long run, the only reliable security for any company is the ability to
innovate better and longer than competitors.
Case-Nokia’s management has frequently said that its real business isn’t
phones; it’s innovation. In Nokia’s case, innovation is a capability fused to the
core of the organization; the company calls its culture of continuous inno-
vation “renewal.” The ability to innovate has taken Nokia from the equivalent
of an approximately $6 billion company in 1994 to an approximately $36
billion company in 2003. But even for Nokia, innovation has not been an easy
path; its financial performance faltered since early 2004, and it has been
challenged as the innovation leader.
 Case-Innovation at Coke
Superior innovation provides a company the opportunities to grow faster, better,
and smarter than their competitors—and ultimately to influence the direction of
their industry.
The following case study shows how the role of innovation at Coca-Cola provides
insight into the importance and challenges of harnessing innovation
In the 1990s, Coca-Cola appeared unstoppable with earnings growth of 15–20
percent per year. However, the Coke juggernaut sputtered, and from 1998–2000,
the company turned in three straight years of falling profits. It was the worst
downturn in recent memory.
There were a myriad of factors contributing to the decline, including soft demand
in some regional markets and a strong dollar weakening overseas markets. But
Coca-Cola’s major problem was that global demand for Coke was sagging.
 Case-Innovation at Coke
The beverage industry was changing, with greater value placed on
novelty. It used to be that all a beverage had to do was to refresh. New
demands emerged: keep me growing from the kids; keep me going from
the young adults; and keep me interested from the adults.
To survive and grow required the ability to systematically innovate and
deliver new products. For Coca-Cola, this meant moving away from a
single core product and becoming a total beverage company. Coca-Cola
realized that it needed new products to match new trends in beverage
tastes.
 Case-Innovation at Coke
Coca-Cola responded with a shift away from its traditional Atlanta- based
operating mentality. The company’s strategy under Doug Daft, CEO from
1999–2004, had been to catch up quickly by employing what we label as a
Play-to-Win innovation strategy—a strategy that relies heavily on a
combination of incremental and breakthrough innovation.
The company began to employ innovation on both its technology and
business models. Coca-Cola under- took the difficult task of creating an
innovative culture across the company. To support that, the company created
new organizations (referred to as innovation centers) and new innovation
processes—
 Case-Innovation at Coke
• Coke has identified 32 possible beverage occasions each day. In addition,
several new types of beverage types emerged: sports, water, teas, health, and
the mom and kids categories.
• Today The Coca-Cola Company (NYSE: KO) is a total beverage company,
offering over 500 brands in more than 200 countries and territories.
• Ex- Limca was made for India as a substitute for nibu pani
Fanta tastes different in different countries because the recipes are
actually different. In fact, even among different European countries, the
recipe is not always the same. Coca-Cola (the manufacturer of Fanta) creates
recipes for each region based on research and what it believes the local
palates will enjoy.
 Innovation
According to Peter Drucker, “Innovation is the effort to create pur-
poseful focused change in an enterprise’s economic or social poten-
tial.”
Innovation is the key element in providing aggressive top-line growth,
and for increasing bottom-line results. Companies cannot grow through
cost reduction and reengineering alone. Most of the past attempts at
diversification have been largely unsuccessful in creating the required
top-line growth. Companies turn to innovation to produce growth
when these conventional approaches fall short.
 How to Make Innovation Work?
What Apple develops would not come out of Dell or IBM. Likewise, what
Toyota produces may be copied by General Motors or Ford, but they could
not come up with Toyota’s basic innovations (the specific type of lean
manufacturing that swept the auto industry or the current hybrid
automobile technologies).
Each company creates its own type of innovation by adding its own special
touches (for example, culture, specific knowl- edge, unique rewards)—
although the basic ingredients for innovation are all the same. Less
innovative firms are that way because they chose it—either consciously or
by letting inertia decide for them. Changing the innovation results requires
proactive management.
 Levers of innovation-
Typically, when people think about innovation, they think of
techno- logical innovation. However, business model innovation is
just as important and just as powerful in driving business success
and revolu- tionizing industries.
Business models describe how the company creates, sells, and
delivers value to customers, and it includes in the description the
supply chain, targeted customer segments, and the customers’
perception of the delivered value.
 Levers of innovation-
Case-A classic example of a business model change is Dell Computer,
a company that radically changed the business model of the customer
interface in retail personal computer sales. Dell focused its efforts on
changing the business model for PCs.
The company sold directly to consumers, providing new value
proposition (such as customized PCs) and significantly changing the
supply chain and cost structure. This was an innovation of major
proportions, one that continues to influence the direction of the PC
industry.
 Types of Innovation
Incremental Innovation- Itis the most common type of innovation in most companies in general
companies spend around 80 percent of their total innovation investment. Incremental innovation
usually causes changes in one or two levers of the business model or technology change. It is the
way to obtain much value from the products or services that the firm already has without making
huge changes or important and strong investments.
It is easy to understand why the companies invest the major innovation investment in this kind of
innovation or why the companies like to work in the incremental space better than others like semi-
radical or radical space. Incremental ideas appear easily and they are safer. Also they are more
predictable. One clear example is the new generations of the smartphones line. Apple and Samsung
have famous smartphone lines, IPhone and Galaxy respectively. It is really common that between
different generations of products, they do not create new technology they present new changes just
in hardware or software, which are just improvements in the features of the last generation but
nothing totally new.
Incremental innovation in the business model is very important. The firms try to improve different
processes and techniques like the quality control techniques in order to improve the quality of the
products and services, financial analysis in order to find troubles or mistakes and move forward
from them, marker research give to the companies the possibility to determine the customers’ needs
and supply chain management in order to be more effective manufacturing and delivering the
products and services.
 Types of Innovation
Semi-Radical Innovation- The innovation gives the company a good opportunity
to improve its competitive position in the market environment which the
incremental innovation cannot. Semiradical innovation causes a change in the
business model or in the technology change, but not in both. Most of the times,
change in one dimension (business model or technology change) produces reforms
in the other dimension but that change is not dramatic or destructive, often it may be
incremental innovation.
To be successful in semi-radical innovation, both groups (business and technology)
should have the business and technology maps to always check the space in which
they compete. A common mistake in the organizations is that each group only has its
own map and they do not have information about the other map space. With this
situation, the organizations obtain errors and miss opportunities so they are not able
to produce products using semi-radical innovations in the right way. Using both
maps simultaneously provides the company the opportunity to always check the
threats, opportunities, strengths and weaknesses in order to improve the innovation
process
 Types of Innovation
Radical Innovation Radical innovations affect both the business model and the
technological dimension and provide a huge change in an industry. A
successful radical innovation redefines the rules of an industry providing new
changes in the competitive environment.
For example, in 1980, Tim Berners-Lee created a network to share
information between different computers in an easy and cheap way. Ten years
after, Marc Andreessen developed the first Web browser. Nowadays, it is
surprising to discover that the use of the internet is totally different than it was
in the beginning, when the internet was created by the U.S. military computer
department to survive a possible nuclear attack.
 Levers for change
Business Model Change

A business model is the strategy that a company uses to create, sell and deliver
value to its potential customers. Business model change is driven by the
following areas
• Value proposition: what the company sells and delivers to the market.
• Supply chain: how the product or service is created and delivered to the
market.
• Target customer: who the potential customers are, people that might be
interested in the product that the company sells.
 Levers for change
Business Model Change
Value proposition
Changes in value proposition (what the company sells and delivers to the market)
may be an entire development of a new product or service and, also, the improvement
of products or services that the company is already offering in its portfolio.
Case- automobile industries often present vehicles adding new features above the
previous models and also offering new post-sales services. In the information and
computing industry, a clear example of change of value proposition is IBM. From
1991 until 2005, the core business of IBM was technology manufacture focusing on
hardware such servers and laptops. In 2005, the company decided to move away from
the hardware business, doing a big change in the value propositions of its products
and services and it started to focus on software and consulting. According to Gartner
consulting group, IBM led the market in the areas of software and middleware in
2012. The change in the value proposition of IBM is an example of how companies
can obtain success in their business implementing changes in the value proposition of
their products or services
 Levers for change
Business Model Change
Supply chain
The second aspect of business model change is supply chain, how the product
or service is created and delivered to the market. These kinds of changes are
never visible to the final customers. During this step, the company’s goal is to
gain and develop relationships with entity organisations or partners in order to
improve manufacturing processes, distribution or sales processes.
Innovations can come from updating the contracts with the suppliers, involving
them in participating in the successes and failures of the market. Also, the
innovations may come from careful management relationships with
complementary assets.
Case- Microsoft started its business in the video game market with the Xbox
console. Microsoft needed to obtain new relationships with game developers in
order to produce these new assets, video games
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 Levers for change
Business Model Change
Target customer
Changing is the target of the potential customers of the company’s products or
services. This change usually starts when the company finds a segment of
potential customers that are not related with its marketing, sales and
distribution strategies into the market. This lever is not as common as value
proposition and supply chain but the company should not overlook this
possibility when it is looking for new opportunities to innovate because lever is
an important trait of innovation -staycation for local
 Levers for change
Business Model Change
Technology Change
Most of the time, new technologies are the result of investing money in
innovation projects. Companies focus a lot of attention in the new technologies
because these products provide the organization with the growth and
development in the market. Technological changes influence innovation in
three different ways
• Offering Product and service
• Process technologies
• Enabling technologies
 Levers for change
Business Model Change
Product and service offering
A change in the company's products or services or creating a new product or
service in the market is a kind of innovation that is really easy to detect by the
customer. With fast-changing markets, consumers expect new features from
innovative products.
For example, in fields like smartphones or tablets, the customers want new
hardware or software innovations.
Thus for the company, this is the way to make the difference compared to its
competitors' products. This type of innovation has an important influence on
the company's success but it is not the only model of technological innovation.
 Levers for change
Business Model Change
Process technologies
When talking about technology innovation, the main idea is to create a new product or
service or just to improve the products or services that the company already has in the
market. For example, in the smartphone market, one way to innovate is to improve the
hardware doing the microprocessor faster and lighter or to make sure that it consumes less
power. Also, creating new apps, making the customer's life easier is an interesting way to
innovate in this field.
The idea of creating or improving products and services is really important but it is
important not to forget other aspects such as manufacturing and the service delivery process.
These procedures are as decisive as the ideas of creating or improving new products or
services and they will determine the success of the firm. The manufacturing and delivery
processes are invisible to the customer but help the company in the competition. Through
robust processes in manufacturing and delivery, the firm could reduce the cost of
manufacturing (choosing the best material to develop the products) as well as improving the
quality of the products and services. Also, with a good delivery process, the company will
save time distributing its products and services to its customers, which means increasing the
profits
 Innovation and Strategy
The innovation strategy has to be related to the business strategy. The key
innovation aspects will be dependent on the strategy and the competitive
environment. It is vital that all people involved in the innovation process will
have a clear idea about the innovation strategy and they must understand it.
There are broadly two types of innovation strategies-
1. Play-to-Win
2. Play-Not-to-Lose Strategies
 Play-to-Win Strategy (PTW)
The most important target of Play-to-Win Strategy (PTW) is to generate
important competitive advantages and sometimes, the company's competitors
will not be able to develop them in a short time. To start to launch this kind of
strategy, the innovation investment has to provide the company with one of the
key resources of the organization competitive advantages. PTW tries to
transform the organization investing a lot of resources in new technologies
and business models in order to create new ideas or products. It also exceeds
its competitors in the incremental, semi-radical and radical innovation.
These investments are completely needed to obtain competitive success in the
organization
 Play-to-Win Strategy (PTW)
Advantages:
• Opportunity for Growth: This strategy focuses on taking risks, being innovative, and trying new
things. By doing so, businesses can discover new opportunities for growth and expansion.
• Competitive Advantage: Playing to win allows businesses to differentiate themselves from their
competitors by offering unique products or services.
• Customer Engagement: The Play to Win strategy can help businesses create excitement and
engagement with their customers by introducing new products and experiences.
Disadvantages:
• High Risk: This strategy involves taking risks, and if those risks do not pay off, it can result in
significant losses.
• Requires Investment: To play to win, businesses need to invest in research, development, and
innovation, which can be expensive.
• Limited Control: The Play to Win strategy relies on external factors such as market trends and
consumer behavior. Businesses may have limited control over these factors, which can impact their
success.
 Play-to-Win Strategy (PTW)
Clear examples of this strategy are the high-technology startups. Often, they
must be very focused on a new idea, technology or business model but the
failure rate of these kinds of companies is very high. One of the reasons for this
high failure rate is that they do not have a strong investment portfolio, which
makes the PTW pretty risky
A successful example of this kind of strategy is Amazon. In the 1990s, it created
a new business model in the book market. Previously it was not possible to buy
a single book on the internet; the books were sold by pallets. Using a new
software technology and creating a new delivering service, Amazon has been
known as for increasing the product portfolio using a PTW in the right way. [
 Play-not-to-lose (PNTL)
Play-not-to-lose (PNTL) is a strategy that uses more incremental innovation
than the PTW strategy. The most important target in this strategy is to
guarantee that the company can stay in the market, taking estimated risks
and moving close to their competitors. It is important that companies that follow
this strategy stay alert to the new improvements their competitors develop.
By doing so, these companies will be able to implement internal changes in their
processes to wear down the competitors and to look for the best moment to
change to a PTW strategy.
This strategy is a good option until an organization launches a new product
with a high semi-radical or radical innovation. When it occurs, the company
that uses PNTL does not have enough resources to compete with these
innovations. They are not able to compete with success in this environment
 Play-not-to-lose (PNTL)
Advantages:
• Security: This strategy is focused on maintaining the status quo and avoiding unnecessary
risks. This can provide a sense of security and stability for the business.
• Controlled Growth: By avoiding major risks, businesses can achieve stable, controlled
growth.
• Consistent Results: By relying on proven methods, businesses can consistently achieve
positive results.
Disadvantages:
• Lack of Innovation: The Play not to Lose strategy can result in a lack of innovation and
creativity, which can make it difficult for businesses to stand out from their competitors.
• Missed Opportunities: By avoiding risks, businesses may miss out on opportunities for
growth and expansion.
• Stagnation: Without taking risks and innovating, businesses can become stagnant and fail to
adapt to changes in the market.
 PTW vs PNTL
• Market conditions: The choice of strategy may depend on the current
market conditions. In a stable market with low competition, a Play not to
Lose strategy may be effective. However, in a highly competitive market
with rapid changes and innovation, a Play to Win strategy may be more
appropriate.
• Risk tolerance: The choice of strategy may also depend on the risk
tolerance of the company's management and shareholders. Some companies
may have a higher risk tolerance and may be willing to take significant
risks, while others may be more conservative and prefer to avoid major
risks.
• Timing: The timing of the strategy may also be crucial. For example, a
company may adopt a Play to Win strategy during a period of growth and
expansion, but switch to a Play not to Lose strategy during a period of
stability or economic downturn
 Setting future goals

5 Steps to Setting Innovation Goals

• Step 1: Understand Customer Experience Needs. Understand the
unmet customer experience needs of your target segment. ...
• Step 2: Understand Current Experience. ...
• Step 3: Identify gaps in Customer Needs. ...
• Step 4: Pick your Customer Experience Factors. ...
• Step 5: Create Goals Aligned to the Factors.