DBT Module 14

Module 14: Innovation and Trending Topics

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Key Innovation Management Models and Theories

• Innovation management is multi-faceted; involves various models, theories, and frameworks.

• Understanding these models aids in quantifying and explaining innovation.

Types of Innovation

• Misconception: Organizations are either innovative or not.

  • Reality: Several types of innovation exist; multiple approaches available.

• Classifications are variable; this section combines the most commonly used terms.

Disruptive vs. Sustaining Innovation

• Disruptive Innovation (Clayton Christensen, 1995):

  • Creates a new value network, disrupting or forming markets.

  • Initially lower performance; targets different market segments.

  • Example: Transistor radio that displaced heavier radios as quality improved.

• Sustaining Innovation:

  • Enhances existing market products instead of disrupting.

  • Example: Incremental improvements in mainstream products like Toyota Prius.

Radical vs. Incremental Innovation

• Radical Innovation:

  • New technologies disrupt business and economies; creates new models.

  • Only about 10% are radical innovations due to execution difficulty.

  • Example: Salesforce's invention of cloud-based CRM.

• Incremental Innovation:

  • Small, ongoing improvements to maintain competitive positions.

  • Represents the majority of innovations due to lower costs and easier implementation.

The Innovation Matrix

• Classifies types of innovations within portfolios:

  • Radically Disruptive: New technology, unclear competitors.

  • Radically Sustaining: Improvement in existing products for customer value.

  • Incrementally Disruptive: Small tech improvements causing disruption.

  • Incrementally Sustaining: Cumulative changes in existing products/technologies.

Architectural vs. Modular Innovation

• Architectural Innovation:

  • Reconfigures existing technologies; changes component relationships.

  • Example: Sony Walkman utilized existing components differently.

• Modular Innovation:

  • Changes components of a product while keeping overall design intact.

  • Example: Clockwork radio powered by an internal generator.

Business Model, Technology, and Marketing Innovations

• Business Model Innovation:

  • Rethinking operations to find new revenue streams; improving existing models.

  • Steps: Analyze current model, ideate, ensure consistency, pilot and test.

• Technology Innovation:

  • New tech-driven ideas creating viable solutions; can accelerate processes.

• Marketing Innovation:

  • Identifying new markets and value propositions; strategies should evolve.

Doblin's Ten Types of Innovation

• Framework for identifying opportunities:

  • Categories:

    1. Configuration: Profit model, networks, processes.

    2. Offering: Distinct features, functionalities.

    3. Experience: Customer interaction channels, branding.

• Example: Airbnb's successful improvements across all categories.

Schumpeter's Theory of Creative Destruction

• Concept:

  • Innovations disrupt existing structures, leading to economic evolution.

  • New technologies replace old ones, emerging winners and losers.

• Principles:

  • Innovation as a driving force; intense competition leads to better products.

  • Entrepreneurship drives the process; requires capital and risk-tolerance.

Examples Across Industries

• Technology: Constant updates; self-disruption (e.g., Apple).

• Media: Streaming services disrupting cable TV.

• Retail: E-commerce overtaking traditional stores.

• Finance: Fintech startups providing innovative services.

• Energy: Rise of renewables challenging fossil fuels.

Limitations of Creative Destruction

• Job losses and unemployment as industries evolve.

• Uneven distribution of benefits; wealth can concentrate.

• Potential negative environmental impacts due to new technologies.

Why Is Creative Destruction a Good Thing?

• Drives long-term growth despite short-term challenges.

• Encourages competition and innovation; keeps markets resilient.

What Emerges From Creative Destruction?

• New industries and business models; create jobs.

• Existing products replaced with innovations.

Modern Examples

• Frequent product iterations by companies like Apple illustrate creative destruction.

Conclusion

• Understanding innovation models and theories is crucial for navigating innovation.

• Action is essential to leverage knowledge and achieve success in innovation management.