Innovation - 1 © Minder Chen, 2012-2014 Innovation in the New Economy Minder Chen Professor of MIS...

Innovation - 1 © Minder Chen, 2012-2014

Innovation in the New Economy

Minder ChenProfessor of MIS

California State University Channel [email protected]


Importance of Innovation

• “In a world of ever-accelerating change, innovation is the only insurance against irrelevance.

• In an environment of steadily decreasing friction and crumbling entry barriers, innovation is the only antidote to margin-crushing competition.

• And in a global economy where knowledge advantages dissipate ever more rapidly, innovation is the only brake on commoditization.“– Gary Hamel, “Introduction” to the Innovation to the Core


Definition of Innovation

• An innovation is the creation and application of a new or significantly improved technology, product/service, process, or business model that is accepted by markets and society. – Adapted from OECD 2005 and Wikipedia.

• Innovation applies ideas and new knowledge to the production of goods and services to improve product/service quality and process performance.– UK Design Council

http://www.designcouncil.org.uk/Documents/Documents/OurWork/Insight/DesignForInnovation/DesignForInnovation_Dec2011.pdf

http://www.youtube.com/watch?v=2NK0WR2GtFs&feature=watch-vrec


Formula for True Innovation

• America’s advantage, if it continues to have one, will be that it can produce people who are also more creative and imaginative, those who know how to stand at the intersection of the humanities and the sciences.

• That is the formula for true innovation, …true innovation, …

– Walter Isaacson is the author of “Steve Jobs.”

– http://www.nytimes.com/2011/10/30/opinion/sunday/steve-jobss-genius.html?pagewanted=all&_r=0


Innovation: Creative Destruction

• A commercialization process based on the application of new materials and their components, new technical methods, new markets and new forms of organization. – Joseph Schumpeter

• The innovation involves both technical world and business world. A change in technology only is just an "invention“.


Creativity

• Creativity is the quality or ability to create or invent something original.

• “Genius is 1% inspiration and 99% perspiration.”– Thomas Edison

• Creativity is about coming up with the big idea. Innovation is about executing the idea — converting the idea into a successful business.– Vijay Govindarajan – http://blogs.hbr.org/govindarajan/2010/08/innovation-is-not-creativity.html

• Innovation is applied creativity.


Technology Innovationhttp://www.slideshare.net/Busarovs/innovations-3833340


Does Customer Know What They Want?

• Seeing what customers have not yet imagined but will instantly desire.

• “If I had asked my customers what they wanted, they’d have said a faster horse.”

- Henry Ford


Drivers for Innovation

• Necessity is the mother of invention.

• Where there is a friction (frustration), there is an opportunity. – Zappos’ founder Nick Swinmurn

– Dropbox file sharing: Drew Houston reportedly conceived the idea for Dropbox after repeatedly forgetting his USB drive

– Chinapages.com by Jack Ma


Product & service Innovation Polaroid Camera

(Instant Camera)


Process Innovation

Moving assembly line Steal from : Meat Packing PlantHigh wage;

Model-T: a true innovation available to a wide audience. pleasure car passenger car


Business model Innovation

SouthwestZara: Fast FashionDell: Direct salesIKEA: Self-assembled furnitureApple: iPod & iTune ecosystem innovation


Architecture of Innovation

Service Innovation

Product Innovation

Consumer

End product/ service

& Component

Business

Science/Technology

Creativity & Imagination

Process Innovation

Business Model Innovation

Technology Innovation

ExperienceInnovation

Humanity/Art

Intersection & Integration


The Rate of Innovation: Product vs. Process


Key Factors at Three Phases

Fluid Transitional Specific

Product Radical, frequent

Dominant design

Incremental,

rare

Process Rare, rely on skills

General equipment

Specialised equipment

Organisation Organic Semi-structured

Hierarchical

Market Fragmented Segments Commodity

Competition Increasing, different

Decreasing, more similar

Few similar


S-Curve or thelogit function for rate of diffusion adoptation.

The cumulative distribution of innovation adopters who are characterized by the timing of their decision to accept and implement the innovation.

Innovation Diffusion

Everett M. Rogers (1931-2004), Diffusion of Innovations, 4th edition (1995)

Invent

Adopt

Persuade

Decide Reject

Accept

Implement

Abandon

The Process of Innovation Diffusion

Innovation Diffusion Function to Saturate a Market


Technology Forecasting

• “I think there is a world market for maybe five computers.” – Thomas Watson, Chairman, IBM (mainframe giant),

1943

• “This telephone has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.”– Western Union (telegraph) internal memo, 1876

• “There is no reason why anyone would want a computer in their home.”– Ken Olsen, Founder, Digital Equipment Corp.

(minicomputer giant) 1977


5 Factors of Innovation Adoption Decision (Roger)

Factor DefinitionRelative Advantage

How improved an innovation is over the previous generation.

CompatibilityThe level of compatibility that an innovation has to be assimilated into an individual’s life.

Simplicity orComplexity

If the innovation is perceived as complicated or difficult to use, an individual is unlikely to adopt it.

TrialabilityHow easily an innovation may be experimented. If a user is able to test an innovation, the individual will be more likely to adopt it.

Observability

The extent that an innovation is visible to others. An innovation that is more visible will drive communication among the individual’s peers and personal networks and will in turn create more positive or negative reactions.


Service innovation is inherently multidisciplinary

Science & Engineering

Business Administrationand Management

Social Sciences

Global Economy& Markets

BusinessInnovation

TechnologyInnovation

Social-OrganizationalInnovation

DemandInnovation

SSME = Service Sciences, Management, and Engineering

Knowledge sources driving “service” innovations…

Grameen Bank (Bank of the poor, Micro lending)

Groupon

Laser, seminconductor

TQMReengineering


Three Types of Restaurants

Source: Service Is Front Stage

Teppanyaki-typeRestaurant (i.e., Benihana)

火

鍋

Ho

tpo

tH

otp

ot

© 2005 IBM Corporation© 2009 IBM Corporation

T-Shaped Talents: skills, abilities, and knowledge

Cross-disciplinary communication

Service system design, management, and modeling

Value co-creation analysis

Service lifecycle analysis (for quality assurance)

Service supply and demand management

New service development

Business project management

Business case development and analysis

Organizational change management

Marketing and sales

Creative and critical thinking

Communication skills

Leadership and collaboration skills

Wendy Murphy & Bill Hefley, “What’s new in service science, management, and engineering?”Presented at Frontiers in Service Conference, October 2008

T-shaped professionals are inhigh demand because theyhave both depth and breadth

They combine expert thinking(depth in one or more areas)and complex communications(breadth across many areas)

complex communication

expert

thin

king


For Innovation Opportunities

Rule breaking

DemographicsNew PerceptionNew knowledge


Not Seeing the Opportunities

1. Cannot see at its nascent stage

2. Don’t take it seriously once seen

3. Don’t understand when it has become successful

4. Wait until it is too late

視而不見見而不屑察而不懂行已不及

先見之明人棄我取摸透產業先人一著


Evolution of Dominant Market Demand and Firm’s Focus

Time

Price

Qual

ity

Choice,

Tim

e

of Del

iver

yUniq

uenes

s

Market Demand

Firm’sFocus

Cost E

ffici

ency

Qual

ity

Flexi

bility

&Agile

Innova

tion

Adapted from Felix Janszen, The Age of Innovation, 2000, p. 19.


Discovery, Invention, and Innovation

“If an idea begat a discovery, and if a discovery begat an invention, then an innovation defined the lengthy and wholesale transformation of an idea into a technological product (or process) meant for widespread practical use. Almost by definition, a single person, or even a single group, could not alone create an innovation. The task was too variegated and involved.”

– The Idea Factory, by Jon Gertner


Discovery vs. Invention

• lightning was a form of electricity.

Applied creativity — taking clever ideas and smart designs and applying them to useful devices.

– Walter Isaacson


Invention vs. Innovation• iPod wasn't the first portable music device (Sony

popularized the "music anywhere, anytime" concept 22 years earlier with the Walkman; MP3)

• What made Apple innovative was that it combined all of these elements -- design, ergonomics and ease of use -- in a single device, and then tied it directly into a platform that effortlessly kept that device updated with music.

• Apple invented nothing. Its innovation was creating an easy-to-use ecosystem (with iTune Store, iTune, ans iPod) that unified music discovery, delivery and device. And, in the process, they revolutionized the music industry. Creative Creative CollisionCollision

Source: http://www.pbs.org/idealab/2012/03/the-difference-between-invention-and-innovation086.html


Innovation Arena: TAMO

Adapted from Felix Janszen, The Age of Innovation, 2000, p. 9.

New materials and components

New processes New services

Invention

Invention

Innovation

Innovation

A solution looks for a problem.

A problem looks for a solution.


From Ideas to Product/Service/BusinessU

ncer

tain

ty

Resource allocated

Is it possible?

Idea

Product/Service/Business

Is it attractive?

Is it do-able?

Is it what our customers want?

How do we implement it?

Source: Felix Janszen, The Age of Innovation, 2000, p. 99.And http://www.artofeurope.com/eliot/eli2.htm

Between the conception And the creation Between the emotion And the response Falls the Shadow - T.S. Elliot


Manage the Product/Innovation Pipeline

http://www.keytechinc.com/blog/index.php/2009/reduce-risk-product-development/


Innovation Arithmetic

• Build up the pipeline

• Quantity matters


Innovation Pipeline

Source: http://www.cimaglobal.com/Documents/ImportedDocuments/cid_tg_innovation_management_jul07.pdf.pdf



An Innovation Process


Seven Innovation Myths

1. Innovation is risky.

2. Innovation is (only) about products.

3. Innovation is about "big" ideas.

4. Innovation can't be taught.

5. Innovation is a diversion.

6. Innovation is expensive.

7. Innovation is an exception.

Source: Innovation to the core


The Art of Innovation

• The Art of Innovation – Guy Kawasaki

https://www.youtube.com/watch?v=Mtjatz9r-Vchttp://surfthedream.com.au/writing/the-art-of-innovation-guy-kawasaki-at-gartner-barcelona/http://www.slideshare.net/GuyKawasaki/the-art-of-innovation


Key Challenges to Innovation

■ ROI is not effective in exploration mode; different innovation metrics are required.

■ People are unreliable when it comes to knowing what they want.

■ Many of your best innovators are invisible to you.

■ New ideas do not sell themselves, and the best ideas often start off looking stupid.

■ Small changes can have extraordinary effects if you know where to look.

Five Innovation Myths You've Probably Fallen For, Published: 3 September 2014Analyst(s): Mary Mesaglio, Ed Gabrys from Gartner.


Five Innovation Myths

• Myth No. 1: ROI Is the Most Important Innovation Metric – Reality: ROI doesn't work in exploration mode,

because there are too many unknowns to make an accurate prediction.

– Solution: Adopt "goal post" (range) and "time to truth" metrics and measures to manage uncertainty.

• Myth No. 2: People Know What They Want; Just Ask Them – Reality: People are unreliable at knowing what they

want.

– Solution: Determine preferences via observation, rather than direct questioning.

Five Innovation Myths You've Probably Fallen For, Published: 3 September 2014Analyst(s): Mary Mesaglio, Ed Gabrys from Gartner.


Time to truth measuresQuick Win Create a prototype of

a new idea in 48 hours or less.

Rapid prototyping creates a digital or physical manifestation of an abstract concept quickly, within hours or days. It often includes a basic interface and a basic level of interactivity (for example, by making a prototype clickable). IT teams need to create this as a repeatable capability to ensure they can respond to fuzzy initial ideas with more concretion.

Needs Moderate Work

Run a high-velocity/low-cost experiment in an area of uncertainty and importance. Aim to run the experiment in four weeks or less.

Instead of relying on experts and assumptions, high-velocity experimentation obtains direct user feedback by getting innovations quickly into beta. The goal is to experiment often and at a low cost. How fast can you create a hypothesis about what a customer or citizen might value, and test that hypothesis in a real-world setting? For example, a financial services CIO might hypothesize that customers would buy more loans if they could do so with zero queuing, complete the transaction in less than 10 minutes and do so on a tablet. How fast could you run that experiment?

Requires Commitment

A/B test a digital innovation. Aim to A/B test all customer interfaces and changes to those interfaces as a matter of course.

A/B testing is used to passively capture customer feedback to determine the impact of any changes to a design. Internet giants, such as Netflix, eBay, Google and Amazon, have used A/B testing for years to refine their digital innovations. IT teams have not used AB testing systematically, but should start to, since this capability can reduce the guesswork in hitting on a promising idea.


• Myth No. 3: You Know Who Your Best Innovators Are – Reality: Many of your best innovators are invisible to you.

– Solution: Look for innovators in unlikely places.

• Myth No. 4: The Value of a New Idea Is Self-Evident – Reality: New ideas do not sell themselves, and the best

ideas often start off looking stupid.

– Solution: To sell the value of a new idea, show, don't tell.

• Myth No. 5: Big Problems Require Big Solutions – Reality: Small changes can have extraordinary effects if

you know where to look.

– Solution: Focus on "little elephants."

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