Seminar in Strategic Management

SMT 910

Abeer Youssef
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 Overview
• Definition of innovation.
• Innovation as a driving force behind many things.
• Types of innovation: A product or service, process,
business model, technological innovation, social
innovation, source of supply, mergers and divestments.
• What is innovation management?
• Distinguishing innovation and invention.
• Role of innovation in strategic management.
• Innovation framework models.
• Overview of the innovation process.

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• Degree of novelty
❖ Incremental innovation (evolutionary),
❖ Radical innovation (drastic/revolutionary),
❖ Disruptive innovation.

• Innovation lifecycles.
• Case studies: Failure to continuous innovation can topple
giants.
• Innovation S-curve and adoption pattern.
• Innovation strategy.
• Company attitudes towards innovation: The innovation
strategy is determined by four different approaches within
firms, which are: Proactive, active, reactive and passive.
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• Types of innovation strategy
❖ Play-to-Win (PTW) and Play-Not-to Lose (PNTL).
❖ Innovation leadership and followership

• Innovation context in corporate-level strategies

▪ Ansoff’s product-market growth matrix

• The innovation context in business-level strategies

✓ Porter model.
✓ Red ocean strategy and blue ocean strategy

• Measuring innovation- key performance indicators (KPIs).

➢ Number of new products or services
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 ➢ Revenue from new products or services
➢ Time-to-market
➢ R&D investment ratio
➢ Idea conversion rate
➢ Comparative benchmarks
➢ Return on Innovation Investment (ROII)
➢ Intellectual Property (IP) Portfolio
➢ Market share growth

• Foster innovation
– 3M's 15% Rule
– Google's 20% Time

• Case studies: Apple, Tesla, and Amazon

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Innovation Management

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 Definition and Types of Innovation
• The term innovation means introduction of something new or a
newly introduced thing, a certain novelty.

• In the field of economics, the concept of innovation was first

commonly used in the 1960s, Schumpeter (1967) is considered
the father of innovation.

• Innovation is the process of introducing new ideas, methods,

products, or services that bring about significant change and
improvement in various aspects of life.

• Innovation often requires thinking outside the box, challenging

conventional wisdom, and embracing risk and uncertainty to
achieve breakthroughs and drive progress in various fields. 7
• The concept of innovation can be interpreted quite differently,
depending on the optionally adopted broad (sensu largo) or
narrow (sensu stricto) understanding of the term and the
material (static) or functional (dynamic) approach to
innovation.

• A narrow understanding of innovation limits its meaning to

changes in production methods and products based on new or
previously unused knowledge.

• A broad understanding of innovation means creative changes

not only in technology, but also in the social system, the
economic structure, and even in nature.

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Innovation is the driving force Types of innovation could include:
behind: ❖ A product
▪ Societal advancements, ❖ A process
▪ Economic growth, ❖ A business model
▪ Competitive advantage, ❖ Technological innovation
▪ Efficiency, and ❖ Social innovation
▪ Enables individuals, ❖ A source of supply
organisations, and societies ❖ Mergers and divestments
to adapt, evolve, and thrive
in an ever-changing world.
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❖ A product or service

➢ The development of a new product/service or of a

new quality of a product/service.

➢ It can include changes in design, features,

functionality, or performance, aiming to meet
customer needs, enhance user experience, or create
entirely new markets.

➢ Example: Introduction of smartphones.

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❖ A process
➢ An introduction of a new method of production.
➢ It focuses on improving the methods, systems, or
procedures used to produce goods or deliver
services.
➢ It aims to increase efficiency, reduce costs,
streamline operations, or improve quality by
introducing new techniques, technologies, or
organisational structures.
➢ An example of process innovation is the
implementation of lean manufacturing principles in
a factory.
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❖ A business model: Opening of a new market
➢ It involves rethinking and redesigning the
fundamental way a company creates, delivers,
and captures value.
➢ It can include changes in revenue streams,
distribution channels, customer relationships, or
cost structures, aiming to create new market
opportunities or disrupt existing industries.
➢ Example: The transformation of Netflix from a
DVD rental service to a streaming media
platform.

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❖Technological innovation
➢The development and application of new
technologies or scientific discoveries.
➢It can lead to the creation of new products, services,
or processes, and often involves advancements in
areas such as information technology, biotechnology,
nanotechnology, or renewable energy.
➢Example: The development and widespread adoption
of electric vehicles (EVs).

❖Social innovation
➢ It develops new ideas, approaches, or interventions
to address social or environmental challenges.

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 ➢ It aims to create positive social impact, promote
sustainability, or improve the well-being of individuals
or communities.

➢ Examples include initiatives related to healthcare,

education, poverty, or environmental conservation, e.g.
the microfinance movement.

❖A source of supply
➢ Conquest of a new source of supply of raw materials
of semi-finished goods.

❖ Mergers and divestments

➢ Carrying out a new organisation of any industry.

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 Innovation Management
• Innovation management is a key process in a company that
enables the creation, development, and promotion of new ideas,
and novel concepts or approaches.

• It solves existing problems, meet unmet needs or enhance

existing solutions.

• It also includes the ideas materialisation (i.e., preparation,

development, and implementation), and verification of
innovation on the market.

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• Innovation management means managing the process
that results in innovation and manage the system in
which innovation processes are implemented in a
company.

• Innovation management includes all interactions

between that process and other functional departments
in a company and interactions with the external
environment.

• That system includes all environmental, cultural, and

organisational factors that affect the course of the
innovation process.
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Distinguishing Innovation and Invention

• Innovation involves the materialisation, the practical

application, and commercialisation of an invention.

• Innovation extends beyond mere creation to

encompass the entire process of bringing ideas to
market and generating value for stakeholders.

• Invention, that has no application in real life, is not

considered innovation.

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• Examples
➢ Invention: Thomas Edison's invention of the
incandescent light bulb.
➢ Innovation: General Electric's commercialisation and
widespread adoption of electric lighting systems.

➢ Invention: Alexander Graham Bell's invention of the

telephone
➢ Innovation: Apple's innovation with the iPhone

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 Role of Innovation in Strategic
Management
• Innovation fuels strategic differentiation, competitive
advantage, and long-term sustainability.

• Organisations can set themselves apart from competitors and

attract customers by continuously developing new products,
services, or processes.

• It enables organisations to adapt to market changes, anticipate

market trends, meet changing customer needs, and stay ahead
in dynamic industries, and thus creating a unique position and
sustainable competitive advantage. 19
• Innovation is essential for driving growth and expanding
market presence. Organisations can identify new opportunities,
develop innovative business models, diversify their offerings,
and capture new customer segments through innovation.

• Innovation plays a critical role in managing disruption and

uncertainty.

• In strategic management, embracing innovation can help in:

➢ Proactively respond to industry changes, technological
advancements, and market shifts;
➢ Explore alternative strategies;
➢ Adopt new technologies;
➢ Embrace digital transformation;
➢ Help organisations stay agile; and
➢ Mitigate risks associated with changing business landscapes.
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 Innovation Framework Models
Innovation framework models – From closed models to
open models.

• The innovation process in a company can follow

different innovation framework models.

• This could include, but not limited:

➢ Closed innovation,
➢ Open innovation.

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 Closed Innovation
• It is a traditional view that says successful innovation
requires control (e.g., R & D in different companies).

• Organisations must create their own ideas and then

develop, build, market, distribute, service, finance, and
support them on their own using only internal resources.

• Examples: Apple (iphone) is a famous example of highly

successful closed innovation. Apple utilises software that
is highly coordinated and integrated, with no outside
implementations allowed.
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 Open Innovation
• Companies should develop and implement both their own
ideas and those acquired from other partners (use internal
and external ideas), as the organisation looks to advance
their technology.
• It supposes that internal ideas can also be taken to market
through external channels, outside the current businesses
of the organisation, to generate additional value.
• It emphasises on the extensive networking.
• It is based on the knowledge and wisdom of the crowd,
which takes into account communities of users and many
forms of cooperation with them. 23
Examples:
Coca-Cola and LEGO both take suggestions from their
consumers/fans.
• Coca-Cola’s Freestyle Dispenser Machines allow its
consumers globally to experiment and mix their own
flavours and suggest new flavours.
• LEGO Ideas, on its website, LEGO enthusiasts can use their
creativity to design their own LEGO sets, either with LEGO
bricks or 3D computer applications. They can start
discussions on such ideas and vote for the same (after reach
a pre-defined number of votes, LEGO considers them as
new products, while rewarding the creators with a small
portion of the revenues).
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 Innovation Process
• The innovation process is a sequence of events, starting
from the origin of an idea (invention) through its
embodiment (innovation), to its dissemination (imitation).
• This process is a creative activity that focuses on the
implementation of an idea.
• It is a continuous process that starts with noticing an
opportunity or a need to be met and ends with a decision
to implement the idea and carry it out.
• The innovation process includes a search for new
products, processes, or activities, which is done with the
involvement of knowledge, technological progress, and
changing market requirements.
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The innovation process can be divided into the following
stages:
– Development: Evaluating, modifying, and improving a
creative idea;
– Application: Using a developed idea in design,
manufacturing, or delivering of new products, services,
or processes;
– Launch: Introducing new products or services to the
market;
– Growth: Growing demand for new products and
services;
– Maturity: Rivals have access to the idea; and
– Decline: Decreasing demand for an innovation;
developing and applying substitute innovation.
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 Degree of Novelty
• It refers to the level or magnitude of novelty and
change introduced by an innovation.

• These degrees of novelty provide a framework to

understand the extent of innovation and its potential
impact within an organisation or industry.

• Organisations may engage in a combination of

different degrees of novelty to maintain
competitiveness, drive growth, and adapt to changing
market dynamics. 27
• It is categorised based on the extent of impact,
resources required, and level of risk involved to:
➢Incremental innovation (evolutionary)
➢Radical innovation (drastic/revolutionary)
➢Disruptive innovation

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Incremental Innovation (Evolutionary)
• Incremental innovation means minor changes or small
improvements in existing products, services, process or other
activities.
• It builds upon existing knowledge and technologies, aiming to
enhance performance, efficiency, or user experience.
• It often involves iterative changes and continuous
improvement efforts within an organisation.
• Examples include software updates with new features, product
line extensions, or process optimisations to improve
efficiency: e.g., Apple and Samsung regularly release new
versions of their smartphones with incremental improvements
in features, performance, and design. 29
 Radical Innovation
(Drastic/Revolutionary)
• Radical innovation refers to producing a new product or
service that eliminate the old one and causes fundamental
changes in organisational activities.
• Radical innovation destroys the current market and value
network, creating an entirely new one.
• One example is the development of self-driving cars,
autonomous vehicles, represent a significant departure
from traditional automobiles and have the potential to
transform transportation systems and society.
• Companies, like Tesla, have been investing heavily in
R&D to create self-driving cars.
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 Disruptive Innovation
• Disruptive innovation is an idea that improves upon an
existing market by exceeding the needs of a customer base,
eventually displacing the old market.
• Firms tend to overshoot their markets with applications of new
technologies to meet the demand of their mainstream and high-
end customers.
• There are many such examples, like Honda, Samsung
Electronics, Xiaomi, Netflix, etc., which completely disrupted
the market.
• The digital streaming services, such as Netflix, is a disruptive
innovation, reshaping the entertainment industry, while the
introduction of smartphones represents radical innovation by
creating a new category of devices. 31
 Scope Radical Innovation Disruptive Innovation
Definition Introduce significant New products, services, or
changes and business models that
breakthroughs initially cater to niche
compared to existing markets or underserved
solutions (new customer segments, but
products and eventually grow to disrupt
outcomes). and replace established
market players.
Impact Drastic transformation Starts in niche markets or
in the industry or lower-end segments where
market they operate in they offer unique value (as
that disrupt existing lower cost, convenience, or
business models, simplicity). Over time, they
practices, and gain traction and disrupt
customer behaviours. traditional market leaders.
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 Scope Radical Innovation Disruptive Innovation
Degree of High degree of change, Incremental improvements over
change challenging established existing solutions, but they excel
norms and pushing in areas where established players
boundaries. overlook or underserve specific
customer needs.
Market May face resistance and Change market dynamics by
adoption slower market adoption due reshaping value chains and
to their disruptive nature and creating new ecosystems. They
the need for customers to can redefine competition,
adapt to new concepts or customer preferences, and industry
paradigms. structures.
Examples The introduction of personal The ride-sharing platforms like
computers, smartphones, Uber, digital streaming services
electric vehicles, and the like Netflix, and online
internet. These innovations marketplaces like Amazon. These
revolutionised industries and innovations disrupted traditional
had a profound impact on taxi services, DVD rentals, and
society. retail industries. 33
 Activity: Innovation Role-Play
• In groups, participate in a role-play activity where you will
make strategic decisions related to innovation within your
assigned roles.

• Choose one of the next scenarios and assign each member

of the group a specific role in a fictional company, such as
CEO, R&D manager, marketing manager, operations
manager, etc.

• Navigate through innovation challenges and opportunities,

discuss, make decisions on topics, and consider the
potential impacts on the company's strategic goals.
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Scenario 1: New product development
The company wants to introduce a new product to the
market. Each group will take on a specific role (e.g., R&D
Manager, Marketing Manager, Operations Manager) and
make strategic decisions related to the product's features,
target market, pricing, and marketing strategy.

Scenario 2: Market expansion

The company wants to expand its market reach to a new
geographic region or demographic. Each group will play a
role (e.g., Sales Manager, Market Research Analyst,
Distribution Manager) and make strategic decisions on
market research, distribution channels, competitive analysis,
and marketing campaigns tailored to the new target market.
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Scenario 3: Social innovation initiative
The company aims to develop a social innovation initiative to
address a specific social or environmental challenge. Each
group will assume a role (e.g., CSR Manager, Public Relations
Manager, Project Manager) and make strategic decisions on
selecting a social cause, designing the initiative, securing
partnerships, and measuring the impact of the initiative.

Scenario 4: Strategic partnerships

The company seeks to establish strategic partnerships with
other organisations to foster innovation and gain a competitive
edge. Each group will take on a role (e.g., Business
Development Manager, Legal Counsel, Finance Manager) and
make strategic decisions on identifying potential partners,
negotiating agreements, and leveraging the partnerships for
mutual benefit.
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 Innovation Lifecycles

S-curve refers to the life cycle of ideas, technology, and

innovations from the beginning to maturity through the growth
phase leading to taking over by the next reinvention wave. 37
38
• Each of the above S curves represent a technology platform.
• Movement up an “S” curve is incremental innovation while
stepping down on a lower new “S” curve, may lead to
radical innovation, as the new “S” curve surpasses your
existing “S” curve.
• There is a risk that the lower “S” curve does not get better.
We only hear of technologies that won and we don’t
remember those that lost.
• So, trying out a new technology when you are doing great in
your current technology is scary.
• The performance is going up and cost coming down on Y
axis, as time goes on.
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• In other words, over time a particular S curve and
technology platform gets improved.
• This improvement is through factors such as experience,
techniques like 6 Sigma, more adoption by customer.
• The adoption by customer mean higher sales volumes and
costs keep going down.

Discontinuity phase
• The maturity of the current innovation S-curve is
followed by a reinvention wave, creating discontinuity
phase.
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• Sometimes managers of incumbent firms often suffer
from innovators’ dilemmas and fail to switch to new
inventions. As a result, they suffer from the burn of
disruptive innovation.
• On the one hand, these firms ultimately failed to adapt
emerging technologies, and to understand evolving
customer needs to stay competitive in dynamic industries,
despite having enormous technology capability, funds,
and many other resources.
• On the other hand, it’s a massive opportunity for new
entrants, whether firms or countries.
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Case studies: Failure to continuous innovation can
topple giants

1) Kodak
– Kodak, once a dominant player in the photography
industry, failed to embrace the shift to digital
photography.
– Despite inventing the first digital camera in the 1970s,
Kodak hesitated to invest in and fully embrace this
disruptive technology.
– The company's focus on traditional film products and
reluctance to adapt to the digital era led to its decline
and bankruptcy. 42
2) Nokia
– Nokia, a Finnish telecommunications company,
was once a leader in the mobile phone industry.
– However, it struggled to keep up with the rapid
advancements in smartphones and the rise of
operating systems like iOS and Android.
– Nokia's failure to innovate and adapt to the
touchscreen smartphone trend caused a significant
decline in its market share, eventually leading to
its acquisition by Microsoft.
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3) Blackberry
– Blackberry was once known for its innovative
smartphones with advanced messaging and email
capabilities.
– However, the company failed to keep pace with the
rise of touchscreen smartphones and the app
ecosystem.
– Blackberry's reluctance to embrace the emerging
consumer market and its focus on enterprise
customers resulted in a significant decline in market
share and loss of relevance.
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Innovation S-curve and Adoption Pattern
• There are five categories of customers:
i. Innovators,
ii. Early adopters,
iii. Early majority,
iv. Late majority, and
v. Laggards.
• Adoption of innovation by different customer categories
varies with the S-curve-like evolution.
• At the beginning of the innovation S-curve, products are
of poor quality and expensive. Customers having a
special need find them helpful.
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• Customers of primitive emergence of innovation belong
to the innovator category. In the case of hard disk,
Internet, and airplane, the military belonged to this
category (non-consumption segment).
• The advancement in quality and cost makes the
innovation attractive to the next group, early adopters.
• Further progression is needed for the innovation to
diffuse through the early and late majority segments.
• Eventually, at the maturity stage, laggards adopt the
innovation.
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47
 Innovation Strategy
• An innovation strategy is very often defined as a
guideline for innovation activity in the firm.
• Innovation strategy specifies objectives, actions or plans
that should be undertaken by the company to achieve
them and resource commitment and allocation, which
constitute structural support for innovation activity as
well as a firm’s long-term commitment and prioritisation
to innovation.
• An innovation strategy does not exist in isolation.
• It is a part of the overall business and corporate-level
strategies.
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Company attitudes towards innovation
• The innovation strategy is determined by four different
approaches within firms, which are: Proactive, active,
reactive and passive.

• These approaches show generic company attitudes

towards innovation.

• Firms with a proactive innovation strategy use diverse

internal and external knowledge sources to create radical
as well as incremental innovation (proactivity means
technological and market leadership).
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• An active approach characterises firms that do not
innovate first, but they quickly follow the technological
and market leaders by implementing mainly incremental
innovation.

• Firms with a reactive innovation strategy apply ‘wait and

see’ approach and slowly follow leaders with mainly
incremental innovation.

• The passive attitude characterises companies that

implement innovation occasionally by responding to the
changes in demand or pressure exerted by the dominant
companies in the market.
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 Types of Innovation Strategy
There are different classifications of innovation strategy
based on a firm’s approach to innovation.

PTW & PNTL

• Two types of innovation strategy are Play-to-Win (PTW)
and Play-Not-to Lose (PNTL).
• The firm can execute only one strategy and cannot
implement both effectively.
• PTW represents a market-leading strategy that is focused
more on radical than incremental innovation. The strategy
aims to change the technology as well as business models
in the industry and create market-disruptive innovation. 51
• PNTL focuses on incremental innovation that allows a
firm to stay in the market game. Sometimes it is
achieved by following the market leaders with caution.

• The execution of either PTW or PNTL does not mean

abandoning incremental or radical innovation
respectively but seeking the right balance between
different types of innovation in the portfolio.

Innovation leadership and followership

• A leadership strategy characterises a firm with the aim
at being the first to market. It is achieved through
technological leadership and a firm’s commitment to
creativity and risk-taking innovation activities.
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• A leadership strategy focuses on R&D activity and at
the same time responds to the needs of clients and
customers.
• The followership strategy represents firms that arrive
late to the market.
• Followers learn from the experience of the
technological leaders and launch improved innovation.
• This strategy requires commitment to learning,
competitor analysis and intelligence as well as reverse
engineering.
• Some firms may follow the market leader slowly, while
some may be called fast followers that rapidly imitate
and gain a competitive edge. 53
Innovation Context in Corporate-Level Strategies
• An innovation strategy depends on the mission and vision
of the firm as they show risk-taking, proactiveness and a
persistent commitment to innovation.
• Managers must foster organisational change and creativity
to effectively drive and facilitate innovation.
• Innovation must be embedded in corporate strategy to
achieve high performance outcomes and focus on
innovation activity and investment in R&D projects.
• One of the most popular tools to determine the direction of
the strategic development of a firm related to innovation is
Ansoff’s product-market growth matrix. 54
Ansoff’s product-market growth matrix
• The matrix answers two questions: whether to produce
existing or new products and whether to operate on
existing or on new markets.
• The combination of these two dimensions makes it
possible to identify four general strategic directions of a
firm: Market penetration, market development, product
development and diversification.
• At the same time, new products and services may be either
new to the world or new to the firm.
• Later, Ansoff (1988) updated his product-market growth
matrix indicating not two, but three dimensions: market
need, product/service technology and market geography. 55
1. Market penetration: Offer
what others are already offering
but better or in a different way
(existing product, existing
market).
2. Diversification: Try different
things since nobody knows
what works (new product, new
market).
3. Market development: Focus
on the market and how to adapt
the message to it (existing
product, new market).
4. Product development: Focus
on the product and how to
adapt it to the market (new
product, existing market).
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Case study: Coca Cola

57
The Innovation Context in Business-Level Strategies
• The main objective of a business-level strategy is to gain
and sustain a competitive advantage by answering the
question of how to win the competition (means).
• Different classifications of a competitive strategy refer
either indirectly or directly to innovation.

Porter Model
• Porter model identified two basic strategies, cost
leadership and differentiation, that can be implemented
either in a narrow market segment or on the broad scope
of the market, in which innovation is a source of
competitive advantage in both strategies.
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Red Ocean Strategy (ROS) and Blue Ocean Strategy
(BOS)
• Another approach to a competitive strategy is the two
opposing strategies: Red Ocean Strategy (ROS) and
Blue Ocean Strategy (BOS) (Kim & Mauborgne, 2015).
• The ROS concerns by well-known market spaces, where
well-known competitors have been trying to overtake
each other in the competitive race and appropriate of the
existing demand as much as possible.
• The BOS aims at finding and creating undeveloped
market spaces (markets that do not yet exist) or expand
an existing market to a previously unknown dimension. 59
• The essence of the BOS is the use of innovation
(and especially product innovation) to build new
value for the customer. This means that a firm will
not have to compete with anyone, placing it in a
quite comfortable position.
• The BOS is beneficial when a firm not only creates
the market, but it is also the first in its development
and exploitation.

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 Measuring Innovation
• Measurement of innovation has proven to be difficult to
establish and is quite inconclusive.
• Measuring innovation using simple indicators may not
fully reflect a company’s innovation activity.
• Managers should therefore measure innovation in a more
comprehensive way using a variety of metrics.
• There are different classifications of innovation
indicators. One is related to quantitative and qualitative
indicators; one is related to direct and indirect indicators,
and one is based on innovation process.
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Metrics for Measuring Innovation (KPIs)
Key Performance Indicators (KPIs) of innovation are
specific metrics used to assess and measure the effectiveness
and success of an organisation's innovation efforts. Some
common KPIs of innovation are such as:

Number of new products or services

• This KPI measures the quantity of new products or
services that have been successfully developed and
launched within a specific timeframe.
• It reflects the organisation's ability to generate innovative
ideas and bring them to the market.
66
Revenue from new products or services
• This KPI tracks the revenue generated from newly introduced
products or services.
• It indicates the financial impact and market acceptance of the
organisation's innovations.

Time-to-market
• This KPI measures the time it takes for an innovation to go from
ideation to commercialisation.
• It reflects the organisation's efficiency in bringing innovations to
market and staying ahead of competitors.

R&D investment ratio

• This KPI assesses the proportion of the organisation's budget, or
resources allocated to research and development activities.
• It indicates the level of commitment and investment in innovation. 67
Idea conversion rate
• This KPI measures the percentage of ideas or concepts
that successfully progress through the innovation pipeline
and become implemented projects or products.
• It reflects the organisation's ability to effectively evaluate
and convert ideas into tangible outcomes.
• Innovation Pipeline is a visual representation of the
various stages of innovation projects within an
organisation. It tracks the flow of ideas from conception
to commercialisation, providing a snapshot of the
organisation's innovation portfolio and the progress of
different initiatives.
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Comparative benchmarks
• Benchmarking innovation performance against industry peers
or competitors can help organisations understand their relative
position and identify areas for improvement.
• Comparative benchmarks might include metrics like R&D
spending as a percentage of revenue or the number of new
product launches.

Return on Innovation Investment (ROII)

• This KPI evaluates the financial return generated from the
organisation's investments in innovation activities.
• It compares the costs associated with innovation efforts to the
resulting financial benefits or returns.
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Intellectual Property (IP) Portfolio
• This KPI tracks the number and quality of patents,
trademarks, or copyrights obtained by the organisation.
• It reflects the organisation's ability to protect and leverage
its innovative ideas and technologies.

Market share growth

• This KPI measures the organisation's ability to gain or
increase its market share through innovative products,
services, or business models.
• It indicates the impact of innovation on the organisation's
competitive position.
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Choosing between these KPIs can vary depending
on:
o the industry,
o organisation's goals, and
o specific innovation focus areas.

• It's important to select KPIs that align with the

organisation's innovation strategy and objectives
and regularly review and update them based on
evolving priorities.

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 Foster Innovation
There are several innovation techniques that organisations can
use to foster and manage innovation. Two notable examples
are the “3M's 15% Rule” and Google’s “20% Time.”

3M's 15% Rule

• The 3M's 15% Rule, also known as the “15% Time”, is an
innovation management technique used by the company
3M.
• The rule encourages employees to spend 15% of their
working time on projects outside of their regular
responsibilities.
• This time is to pursue innovative ideas and projects that
may not be directly related to their assigned tasks.
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• The 15% Rule aims to foster a culture of innovation, give
freedom to employees to explore with new ideas,
technologies, and products.

Google's 20% Time

• Google's 20% Time is a similar concept to 3M's 15% Rule,
where employees are encouraged to allocate 20% of their
working time to work on projects of their own choosing,
rather than their assigned tasks.
• Founders Sergey Brin and Larry Page advised that workers
“spend 20% of their time working on what they think will
most benefit Google”.
• Notable many of Google products, such as Gmail and
Google News, have emerged from this 20% Time initiative.
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 Case Studies
Case Study 1: Apple Inc.
Description
• Apple is renowned for its innovative products, including the
iPhone, iPad, and MacBook. The company's commitment to
innovation is evident in its design-centric approach, user-
friendly interfaces, and ecosystem integration.

Innovation strategy
• Apple's innovation management strategies revolve around a
design-centric approach, disruptive product innovation, mostly
closed innovation process, integration of hardware and
software, pursuit of excellence in user experience, closed
ecosystem, iterative development, secrecy, vertical integration,
continuous innovation, and strategic partnerships. 74
Impact
• Apple's innovative products have transformed industries,
reshaped consumer behaviour, propelled Apple to create
iconic products, become one of the most valuable brands
globally, and maintain a strong position in the highly
competitive technology market.

Case Study 2: Tesla, Inc.

Description
• Tesla revolutionised the automotive industry with its electric
vehicles (EVs), advanced battery technology, and
autonomous driving features. The company's innovative
approach extends beyond products to include sustainable
energy solutions and vertical integration.

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Innovation strategy
• Tesla's commitment to innovation is exemplified by its
continuous iteration of EV technology, investment in battery
research, and bold vision for a sustainable future.

• This strategy also encompass

▪ Visionary leadership,
▪ A relentless focus on electric vehicle technology,
▪ Radical innovation,
▪ Vertical integration,
▪ Continuous improvement,
▪ Autonomous driving technology,
▪ Energy storage solutions, and
▪ An open-source approach.
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Impact
• Tesla's innovative initiatives have:
➢ Accelerated the adoption of EVs,
➢ Disrupted traditional automakers,
➢ Positioned the company as a leader in
sustainable transportation, energy innovation,
and EV industry,
➢ Challenged traditional automotive norms and
➢ Driving widespread innovation in sustainable
transportation.
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 Activity

Analyse Amazon.com, Inc.

Overview: Amazon is a pioneer in e-commerce, cloud
computing, and digital entertainment. The company's
relentless focus on customer-centric innovation, data-
driven decision-making, and experimentation drives its
success across diverse business segments.

In groups, discuss Amazon's innovation strategies and

its impacts on the industry and globally.

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 Recap
Definition and Types of Innovation
• Innovation is the process of introducing new ideas, methods,
products, or services that bring about significant change and
improvement in various aspects of life.
• Innovation is the driving force behind: Societal advancements,
economic growth, competitive advantage, efficiency, and
enables individuals, organisations, and societies to adapt,
evolve, and thrive in an ever-changing world.
• Types of innovation could include:
- A product or service: The development of a new
product/service or of a new quality of a product/service.
- A process: An introduction of a new method of
production.
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 - A business model: Opening of a new market.
- Technological innovation: The development and
application of new technologies or scientific discoveries.
- Social innovation: It develops new social or
environmental ideas, approaches, or interventions.
- A source of supply: Conquest of a new source of supply
of raw materials of semi-finished goods.
- Mergers and divestments: Carrying out a new
organisation of any industry.

• Innovation management: It is a key process in a company that

enables the creation, development, and promotion of new
ideas, and novel concepts or approaches. It also includes the
ideas materialisation, and verification of innovation on the
market.
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• Distinguishing Innovation and Invention: Innovation involves
the materialisation, the practical application, and
commercialisation of an invention. Invention, that has no
application in real life, is not considered innovation.

• Role of Innovation in Strategic Management: In strategic

management, embracing innovation can help in:
➢ Proactively respond to industry changes, technological
advancements, and market shifts;
➢ Explore alternative strategies;
➢ Adopt new technologies;
➢ Embrace digital transformation;
➢ Helps organisations stay agile; and
➢ Mitigate risks associated with changing business
landscapes. 84
• Innovation Framework Models
✓ Closed model: Organisations must create their own ideas and
then develop, build, market, distribute, service, finance, and
support them on their own using only internal resources
✓ Open model: Companies should develop and implement both
their own ideas and those acquired from other partners.

• Overview of the Innovation Process

➢ Development: Evaluating, modifying, and improving creative idea;
➢ Application: Using a developed idea in design, manufacturing, or
delivering of new products, services, or processes;
➢ Launch: Introducing new products or services to the market;
➢ Growth: Growing demand for new products and services;
➢ Maturity: Rivals have access to the idea; and
➢ Decline: Decreasing demand for an innovation; developing and
applying substitute innovation.
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• Degree of Novelty: It refers to the level or magnitude of
novelty and change introduced by an innovation. It is
categorised to:
➢ Incremental innovation means minor changes or small
improvements in existing products, services, process or
other activities.
➢ Radical innovation refers to producing a new product or
service that eliminate the old one and causes
fundamental changes in organisational activities. It
destroys the current market and value network, creating
an entirely new one.
➢ Disruptive innovation is an idea that improves upon an
existing market by exceeding the needs of a customer
base, eventually displacing the old market.
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• Innovation Lifecycles

• Case studies: Failure to continuous innovation can topple

giants: Kodak, Nokia, Blackberry
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• Innovation S-curve and adoption pattern: Adoption of
innovation by different customer categories varies with the S-
curve as follows: Innovators, early adopters, early majority,
late majority, and laggards.

• Innovation Strategy: It is a guideline for innovation activity in

the firm.

• Company attitudes towards innovation: The innovation

strategy is determined by four different approaches within
firms, which are:
➢ Firms with a proactive innovation strategy use diverse
internal and external knowledge sources to create radical
as well as incremental innovation (proactivity means
technological and market leadership).
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 ➢ An active approach characterises firms that do not innovate
first, but they quickly follow the technological and market
leader by implementing mainly incremental innovation.
➢ Firms with a reactive innovation strategy apply ‘wait and
see’ approach and slowly follow leaders with mainly
incremental innovation.
➢ The passive attitude characterises companies that
implement innovation occasionally by responding to the
changes in demand or pressure exerted by the dominant
companies in the market.

• Types of Innovation Strategy:

✓ Two types of innovation strategy are Play-to-Win (PTW)
and Play-Not-to Lose (PNTL).
✓ Innovation leadership and followership
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• Innovation Context in Corporate-Level Strategies
▪ An innovation strategy depends on the mission and vision
of the firm as they show risk-taking, proactiveness and a
persistent commitment to innovation.
▪ Ansoff’s product-market growth matrix

• The Innovation Context in Business-Level Strategies

➢ The main objective of a business-level strategy is to gain
and sustain a competitive advantage by answering the
question of how to win the competition within each
business.
➢ Porter model.
➢ Another approach to a competitive strategy is the two
opposing strategies: Red ocean strategy and blue ocean
strategy.
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• Measuring Innovation
❖ There are different classifications of innovation indicators
(KPIs).
❖ Number of new products or services: It measures the quantity
of new products or services that have been successfully
developed and launched within a specific timeframe.
❖ Revenue from new products or services: It tracks the revenue
generated from newly introduced products or services to
indicate the financial impact.
❖ Time-to-market: It measures the time it takes for an
innovation to go from ideation to commercialisation to reflect
the organisation's efficiency.
❖ R&D investment ratio: It assesses the proportion of the
organisation's budget, or resources allocated to research and
development activities.
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❖ Idea conversion rate: It measures the percentage of ideas
or concepts that successfully progress through the
innovation pipeline and become implemented projects or
products.
❖ Comparative benchmarks: It includes metrics like R&D
spending as a percentage of revenue or the number of
new product launches.
❖ Return on Innovation Investment (ROII): It evaluates the
financial return generated from the organisation's
investments in innovation activities.
❖ Intellectual Property (IP) Portfolio: It tracks the number
and quality of patents, trademarks, or copyrights
obtained by the organisation.
❖ Market share growth: It measures the organisation's
ability to gain or increase its market share through
innovative products, services, or business models. 92
• Foster Innovation
o 3M's 15% Rule: The rule encourages employees to
spend 15% of their working time on projects outside
of their regular responsibilities.
o Google's 20% Time: Employees are encouraged to
allocate 20% of their working time to work on
projects of their own choosing, rather than their
assigned tasks.

• Case Studies: Apple, Tesla, and Amazon

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Thank you

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