BINALONAN PANGASINAN

COLLEGE OF ACCOUNTANCY AND BUSINESS ADMINISTRATION

NEW MARKET DEVELOPMENT

TOPIC: INNOVATION
OBJECTIVES:
1. Know how to innovate the new market
2. Identify what are the source of innovative opportunities
3. Differentiate the advantages and disadvantage of the first mover.

a. Innovation in the new market development

b. Sources of innovative opportunities
c. Types of Innovation
d. Pros and Cons of first mover

 Innovation in the new market development

Innovation product development is the process of applying digital product engineering to a
business’s innovation goals, thereby transforming innovative ideas into reality. It entails all
activities involved in turning a concept for new and better user experiences into real-world
products.
Disruptive innovation is innovation that creates a new market and value network or enters at
the bottom of an existing market and eventually displaces established market-leading firms,
products, and alliances.
Disruptive innovation refers to the innovation that transforms expensive or highly sophisticated
products or services—previously accessible to a high-end or more-skilled segment of consumers
—to those that are more affordable and accessible to a broader population.

What are the business benefits of innovation product development?

The primary benefit of innovation product development is accelerating the process by which an
innovative idea transitions to effective design and development of a marketable, innovative
product. By helping move an organization from “innovation as a goal” to “innovation is
underway,” it can facilitate a shift in culture to one of sustainable, ongoing innovation.

 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.

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.

Unexpected successes and failures are such productive sources of innovation opportunities
because most businesses dismiss them, disregard them, and even resent them. The German
scientist who around 1905 synthesized novocaine, the first nonaddictive narcotic, had intended
it to be used in major surgical procedures like amputation. Surgeons, however, preferred total
anesthesia for such procedures; they still do. Instead, novocaine found a ready appeal among
dentists. Its inventor spent the remaining years of his life traveling from dental school to dental
school making speeches that forbade dentists from “misusing” his noble invention in
applications for which he had not intended it.

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.
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.

What we now call the media had its origin in two innovations developed around 1890 in
response to process needs. One was Ottmar Mergenthaler’s Linotype, which made it possible to
produce newspapers quickly and in large volume. The other was a social innovation, modern
advertising, invented by the first true newspaper publishers, Adolph Ochs of the New York
Times, Joseph Pulitzer of the New York World, and William Randolph Hearst. Advertising made it
possible for them to distribute news practically free of charge, with the profit coming from
marketing.

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.

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.

Managers have known for a long time that demographics matter, but they have always believed
that population statistics change slowly. In this century, however, they don’t. Indeed, the
innovation opportunities made possible by changes in the numbers of people—and in their age
distribution, education, occupations, and geographic location—are among the most rewarding
and least risky of entrepreneurial pursuits.

6. Changes in Perception
“The glass is half full” and “The glass is half empty” are descriptions of the same phenomenon
but have vastly different meanings. Changing a manager’s perception of a glass from half full to
half empty open’s big innovation opportunities.

All factual evidence indicates, for instance, that in the last 20 years, Americans’ health has
improved with unprecedented speed—whether measured by mortality rates for the newborn,
survival rates for the very old, the incidence of cancers (other than lung cancer), cancer cure
rates, or other factors. Even so, collective hypochondria grips the nation. Never before has there
been so much concern with or fear about health. Suddenly, everything seems to cause cancer or
degenerative heart disease or premature loss of memory. The glass is clearly half empty.

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. Then there is another long period
before this new technology appears in the marketplace in products, processes, o r services.
Overall, the lead time involved is something like 50 years, a figure that has not shortened
appreciably throughout history.

 The 8 types of innovation

Because innovation is a process of problem solving, it makes sense that it does not always look
the same. There are as many ways of solving a problem as there are problems in business, but
innovation tends to fall into four different categories.

1. Product innovation

Product innovation involves visibly improving a product's performance and updating or

upgrading its characteristics. It may include creating a new product or enhancing or adding
features to an existing one. As a product designer or manufacturing and production manager,
you may consider using product innovation to meet evolving customer requirements or help the
company to access an entirely new market. A business may adopt this form of innovation as a
preemptive measure to become more competitive or reduce costs to help maintain its current
market position and profitability.

An example of product innovation may be a manufacturer of party supplies transitioning from

offering customers plastic disposable cups and plates to offering ones made from recyclable
paper. The manufacturer may decide to do this after undertaking a customer survey and market
research and discovering that many customers prioritize shopping from businesses that offer
more environmentally friendly product choices.

2. Service innovation

As a service manager or supervisor, you can integrate service innovation into a business by
improving or launching a service concept in a new market. This may also involve delivering an
existing product or service in a more convenient, efficient and affordable way to customers or
integrating value-added services into an existing service. This form of innovation may provide a
valuable way to differentiate a business from its competitors. An example is a ride-sharing
service that offers affordable transportation, adding a delivery service option for customers to
send packages to different locations.

3. Process innovation

A business process analyst or specialist can create or adopt a range of processes that help
transform a business's raw materials and use different skills, equipment and technology. A
company may consider using process innovation to improve its product or service production
and delivery to make them more efficient and cost-effective. This innovation may relate to
product manufacturing or include improving secondary or supporting business processes. A
company may facilitate process innovation by integrating innovative technologies or methods of
operation.

An example of process innovation in action is a coffee roaster selling bulk packages of roasted
coffee beans to various cafés. The roaster can integrate product and sales management software
that automatically reorders a client's usual volume of coffee every month. This innovation
doesn't directly impact the coffee's quality but affects how clients receive it by ensuring they
never run out of coffee.

4. Technological innovation

Technological innovation is relevant to business analysts, project managers or systems experts.

Integrating new and improved automated technology, software or machinery or enabling more
affordable and efficient processes can reduce product variability and improve quality.
Technological innovations may produce a more efficient or connected customer or client
experience. An example of this is a gym that installs treadmills that record a person's
performance and store the information in a cloud. The gym may also consider creating a mobile
phone application where the person can review their performance.

5. Business model innovation

Someone who oversees the operation of a business may benefit from business model innovation
to address specific challenges. Business model innovation involves changing how a business
functions and makes money and changing what customers it targets, how it targets them and
what it uses to target them. This type of innovation also involves changing how a company adds
value and what type of decisions it makes. Integrating business model innovation can involve
taking calculated risks. It's also a good way to keep up with trends, manage market saturation or
address fluctuating profit margins.

An example of this is an online makeup retailer experiencing poor sales as it faces increased
competition from other online beauty retailers. The retailer may revisit its business model and
switch to offering monthly subscription boxes of curated and themed makeup products. This
business model allows the business to better plan its product demand and helps it secure a more
stable income.

6. Marketing innovation

Marketing innovation can expose a product or service to a new market or increase current
market share by alerting more customers to what a company offers. It may help a business
better connect and engage with new customers by finding new uses for an existing product or
highlighting qualities customers might not be aware of.

An example of this is a menswear boutique that specializes in designing and creating bespoke
tuxedos for male grooms. The boutique may expand its market base by advertising its services to
women or non-binary individuals who may prefer to wear a suit to their wedding.

7. Architectural innovation

This innovation refers to how a business combines various system components to create or add
value. It can also involve revisiting these combinations to determine areas that may benefit from
improvement. This may include improving one of the core business systems, including existing
 networking, accounting, manufacturing or inventory systems. It does this without changing the
fundamental components of the system itself or altering or changing these components. A
common example of this is businesses that develop certain technologies for industrial use and
rework how these components interact to create smaller versions of the product for a retail
market.

8. Social innovation

Social innovation involves adopting or developing new practices or tools a business can use to
meet its responsibilities. Non-profit and commercial companies often rely on social innovation
and may use it to create improvements in a wide range of societal areas. Communicating these
innovations to customers can help them view the business positively and help the company
become more sustainable. An example is a business that manufactures certain products,
switching to using less energy-intensive machinery to reduce its reliance on fossil fuels and
communicating this to customers in print adverts.

 Advantages of Being a First Mover

There are several advantages to being the first business to execute a strategy.

Companies that are first movers can often:

 Establish their product as the industry standard

 Be able to tap into consumers first and make a strong impression, which can lead to brand
recognition and brand loyalty

 May be able to control resources, such as basing themselves in a strategic location, establishing a
premium contract with key suppliers, or hiring talented employees

 Can gain an advantage when there is a high switching cost for consumers to switch to later
entrants

Benefits of Being a First Mover

1. Technology leadership

First movers can make their technology/product/services harder for later entrants to replicate.
For example, if the first mover can reduce the costs of producing a product (an “experience”
curve effect), the first mover can establish an absolute cost advantage. In addition, applying for
patents can protect and establish a first-mover advantage.

2. Control of resources
 The second benefit is the ability to control strategic and/or scarce resources. For example, Wal-
Mart was able to locate its stores in small towns and prevent others from entering the market.

3. Buyer switching costs

The third benefit that first movers may enjoy is buyer switching costs. If the first business is able
to establish itself firmly, it may be inconvenient for consumers to switch to a new brand later.

Disadvantages of Being a First Mover

Being the first business in an industry may not always guarantee an advantage.

 The first mover may invest heavily in persuading consumers to try a new product. Later entrants
would benefit from these informed buyers and would not need to spend as much on educating
consumers.

 Later entrants can avoid mistakes made by the first mover.

 If the first mover is unable to capture consumers with their products, later entrants can take
advantage of this.

 Later entrants can reverse-engineer new products and make them better or cheaper.

 Later entrants can identify areas of improvement left by the first mover and take advantage of
them.