INNOVATION

DEFINITION OF INNOVATION

The process of translating an idea or invention into a good or service that creates a value or for which customers will pay.

In business, innovation often result when ideas are applied by the company in order to further satisfy the needs and expectations of the customers.

CATEGORIES OF INNOVATION

• Evolutionary Innovation that are brought about by many incremental advances in technology or processes.

• Revolutionary Innovations which are often disruptive and new.

FIRM ORIENTED DEFINITION

A Firm oriented approach treats the newness of a product from the perspective of the company producing or marketing it. When the product is “new” to the company, it is considered new.

PRODUCT ORIENTED DEFINITION

Product oriented approach focuses on the features inherent in the product itself and on the effects these features are likely to have on consumers’ established usage pattern.

TYPES OF PRODUCT INNOVATION

• Continuous Innovation has least disruptive influence on established patterns

• Dynamically continuous Innovation is more disruptive than a continuous innovation but still does not alter established behavior patterns

Eg: Digital cameras, MP3 players, USB drives• Discontinuous Innovation to adopt new

behavior patterns.

Eg: Airplanes, Radios, TVs, Automobiles

MARKET OREIENTED DEFINITION

Market oriented approach judges the newness of a product have to the new product. Two market oriented definitions used in consumer studies:

• A product is considered new if it has been purchased by a relatively small (fixed) percentage of the market

• A product is considered new if it has been on the market for a relatively short (specified) period of time

PRODUCT CHARACTERISTICS THAT INFLUENCE DIFFUSION

Characteristics Definitions

Relative Advantage Degree to which potential customers perceive a new product as superior to existing substitutes

Compatibility Degree to which potential consumers feel a new product is consistent with their present needs, values and practices

Complexity Degree to which a new product is difficult to understand or use

Trial ability Degree to which a new product is capable of being tried on a limited basis

Observability Degree to which a product’s benefits or attributes can be observed, imagined or described to potential customers

TYPES OF INNOVATION

Receptive Innovation

Use traditional marketing and

alliance strategies

Resistant Innovation

What is the goal of diffusing the

innovation?

Industry goal why?

Consider horizontal

cooperation/ competition with other

industry players

Purely competitive

advantage for the company?

Consider vertical

cooperation with suppliers or distributors

ADOPTER CATEGORIES

• Consumer Adopter Category 1: INNOVATORS• Consumer Adopter Category 2: EARLY

ADOPTERS• Consumer Adopter Category 3: EARLY

MAJORITY• Consumer Adopter Category 4: LATE

MAJORITY • Consumer Adopter Category 5: LAAGARDS

STAGES IN ADOPTION PROCESSName of Stage What happens during this stage

Awareness Consumer is first exposed to the product innovation

Interest Consumer is interested in the product and searches for additional information

Evaluation Consumer decides whether or not to believethat this product or service will satisfy the need- a kind of “mental trial”

Trial Consumer uses the product on a limited basis

Adoption (Rejection) If trial is favorable, consumer decides to use the product on full rather than a limited basis- if unfavorable, the consumer decides to reject it

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